Standard & Poor’s has revised the outlook to negative for a number of Japanese banks, insurers and power companies, plus several public institutions and local governments after it revised the country’s sovereign rating outlook to negative.
- Standard & Poor’s expects costs related to the March 11, 2011, earthquake, tsunami, and nuclear power plant disaster will increase Japan’s fiscal deficits above prior estimates by a cumulative 3.7% of GDP through 2013.
- We revised the outlook on the long-term rating on Japan to negative to reflect the potential for a downgrade if fiscal deterioration materially exceeds these estimates in the absence of greater fiscal consolidation.
- We affirmed our long- and short-term sovereign credit ratings on Japan at ‘AA-’ and ‘A-1+’, respectively.
The negative outlook signals that a downgrade is possible if Japan’s public finances weaken further over the next two years in the absence of fiscal consolidation to offset them. We believe that uncertainty over the country’s fiscal and economic outlook will lessen over the next six to 24 months.
If the government’s debt trajectory remains on its current course or begins to erode the nation’s external position, the long- and short-term ratings could be lowered.
If reconstruction costs place less burden on public finances than we expect–either because of lower outlays or increased revenues to cover them–and the government makes progress in strengthening Japan’s fiscal profile, we could revise the outlook back to stable.
S&P revised to negative from stable the outlooks on the long-term issuer credit ratings on Japan Finance Corp. (JFC), Japan International Cooperation Agency (JICA), Japan Expressway Holding and Debt Repayment Agency (JEHDRA), Japan Housing Finance Agency (JHF), Japan Finance Organization for Municipalities (JFM), and Narita International Airport (NAA).