NEW YORK (
Moody's Investors Service
lowered the credit rating on Japan a notch on Tuesday, going to Aa3 from Aa2 and putting the outlook at stable.
The move, which concludes a review announced on May 31, was
"large budget deficits and the build-up in Japanese government debt since the 2009 global recession."
Moody's also noted political divisions in Japanese government, a sentiment that echoes criticism of the United States by
Standard & Poor's
when it recently lowered its rating on the federal government debt to AA from AAA, the first such cut in America's history. The impact of the devastating earthquake and tsunami in early March was also a factor.
"Over the past five years, frequent changes in administrations have prevented the government from implementing long-term economic and fiscal strategies into effective and durable policies," Moody's said. "The March 11 earthquake and tsunami, and the subsequent disaster at the Fukushima Daiichi Nuclear Power Station, have delayed recovery from the 2009 global recession and aggravated deflationary conditions."
Japan is the third largest economy in the world, behind the United States and China, but Moody's believes growth will be difficult to come by.
"Prospects for economic growth are weak, making it more difficult for the government to achieve deficit reduction targets and implement its Comprehensive Tax and Social Security Reform plan," Moody's said.
An upgrade would be in order if Japan is able to show "well-established" progress toward fiscal consolidation targets and the economy kicked into gear, Moody's said, while a delay in implementing the reform plan or continued sputtering by the economy could precipitate another downgrade.
Written by Michael Baron in New York.
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