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2 Dec 2014
S&P doubts Japan’s fiscal consolidation plan
FXStreet (Mumbai) - The rating agency Standard & Poor's cast doubts on Japan’s ability to repair its finances today, after Moody’s downgraded the Japanese debt rating yesterday.
As per Takahira Ogawa, director of sovereign ratings at S&P, “Abe's decision to delay a sales tax increase by 18 months may help the economy in the short term, but there is still no guarantee taxes will rise because the political dynamic could change after the election.” Mr. Ogawa further added, “"I might be wrong, but judging by history I'm not optimistic about getting a detailed fiscal plan.” However, Ogawa declined to confirm whether S&P was reviewing Japan’s current rating for a possible downgrade.
Moreover, economists believe, Abe’s decision to delay sales tax hike erases any possibility of eliminating the primary budget deficit in fiscal 2020, which is an important fiscal consolidation goal.
As per Takahira Ogawa, director of sovereign ratings at S&P, “Abe's decision to delay a sales tax increase by 18 months may help the economy in the short term, but there is still no guarantee taxes will rise because the political dynamic could change after the election.” Mr. Ogawa further added, “"I might be wrong, but judging by history I'm not optimistic about getting a detailed fiscal plan.” However, Ogawa declined to confirm whether S&P was reviewing Japan’s current rating for a possible downgrade.
Moreover, economists believe, Abe’s decision to delay sales tax hike erases any possibility of eliminating the primary budget deficit in fiscal 2020, which is an important fiscal consolidation goal.