TOKYO-- Moody's Investors Service downgraded Japan's government
debt rating on Monday by one notch, the first downgrade by a major
rating firm since 2012.
Citing "heightened uncertainty over the achievability of fiscal
deficit reduction," Moody's downgraded Japan's government debt to
A1 from Aa3.
Moody's said Prime Minister Shinzo Abe's decision to postpone
another sales-tax increase by 18 months "poses risks to fiscal
consolidation and, over the longer term, to debt affordability and
sustainability."
Some economists have also endorsed the view that implementing
the sales tax increase was necessary to curb the nation's debt.
Moody's, which last downgraded Japan's debt in 2011, said
"fiscal consolidation will be increasingly difficult to achieve as
time passes." It also cited uncertainty over the timing and
effectiveness of debt-reduction measures as posing a risk to
Japan's growth, and of a rise in Japanese government bond
yields.
Japan is the developed world's most indebted country, with debt
more than two times the size of its gross domestic product.
The Japanese government has said it will try to achieve a
primary government balance--meaning tax revenue matches spending,
excluding interest payments on government debt--by 2020.
Prime Minister Shinzo Abe said at a debate earlier Monday that
his administration would work to develop a concrete plan to achieve
that goal.
The yen fell to a fresh-seven year low of 119.15 after the
downgrade.
Write to Eleanor Warnock at eleanor.warnock@wsj.com
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