TOKYO: “Moodys Analyst Urges Japan Reform as BOJ Delays Rate Hike”, Moody’s Japan sovereign analyst stated on Monday that the credit-rating firm is unlikely to downgrade Japan, even if the government misses its primary budget-balancing target next fiscal year.
The analyst emphasized that the target should be seen as a pledge to fiscal reform rather than an immediate risk trigger for ratings action.
Christian de Guzman, a senior analyst at Moody’s, indicated that he does not anticipate Japan to meet its fiscal 2025 budget target. Despite this expectation, de Guzman clarified that Moody’s does not intend to initiate a negative rating action solely based on this shortfall. He emphasized Moody’s perspective that the target serves more as a marker for Japan’s commitment to fiscal reforms rather than an immediate determinant of credit ratings.
Christian de Guzman of Moody’s remarked that if Japan were to abandon its fiscal reform commitment and this resulted in actual deterioration, particularly a significant increase in the fiscal deficit leading to substantially higher debt levels, Moody’s would reassess the fundamental factors underpinning Japan’s credit rating. This underscores Moody’s cautious stance on Japan’s fiscal policies and their potential impact on its creditworthiness.
“We expect the Bank of Japan (BOJ) to take a very gradual approach to normalisation,” de Guzman told Reuters in an interview on Monday.
“That means they (the government) have some time to adjust their fiscal settings to prepare for a time when interest rates at some point could rise even higher,” de Guzman said. “We don’t see that happening in let’s say one to two years.”
