Japan's debt rating placed on review for May cut by Moody's

Japan's sovereign debt rating was placed on review Tuesday by Moody's Investors Service Inc. for a achievable downgrade on mounting concerns about the nation's fiscal health.

The rating agency is reviewing Japan's Aa2 nearby and foreign currency bond ratings stating that there was "heightened concern that faltering economic growth prospects as well as a weak policy response would make far more challenging the government's capacity to fashion and achieve a credible deficit reduction target."

Moody's initially assigned a negative outlook to Japan's domestic and foreign bond ratings on Feb. 22, having left its rating unchanged given that Might 18, 2009.

In the wake of the March 11 twin disasters, the cash-strapped Japanese government is floundering in its attempts to raise the monumental funds required to comprehensively address reconstruction wants and parliamentary divides are further impairing the government of Prime Minister Naoto Kan's capacity to enact vital budget-related bills.

As Kan faces the threat of a no-confidence motion becoming submitted by the major opposition Liberal Democratic Party, opposition parties have also impeded the issuance of deficit- covering bonds for the current fiscal year, meaning the gap between revenue and spending allocations could widen by as much as 40 percent, before spending on reconstruction is regarded as.

Moody's stated that without some credible intervention to curb spending or boost revenue, the nation's debt level "will rise inexorably from a level which already is nicely above that of other advanced economies."

The Organization for Economic Cooperation in its global economic outlook report released on May possibly 25 stated that Japan need to reduce its budget deficits and downgraded its forecast for the nation's gross domestic product for the second time in two months, reflecting Moody's call for the government to increase its fiscal predicament.

In its newest report the Paris-based OECD, comprising 34 of the world's richest nations, said that Japan has however to generate credible plans to stabilize its burgeoning debt and needs to specify how it'll achieve such goals.

Japan's debt burden is expected to reach 212.7 percent of GDP at the end of this year and 218.7 percent in 2012, in lieu of a viable fiscal consolidation program.

Japanese Economics Minister Kaoru Yosano told reporters Tuesday that the news from Moody's was troubling and means that global markets are urging the Japanese government to take concrete steps towards fiscal consolidation.

"The government needs to show strong-willed effort to implement a tax and social security overhaul" becoming planned for release late next month, Yosano stated.

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