Japan Addresses Threat of Lower Bond Ratings

November 12, 2010 by · Leave a Comment
Filed under: Financial Crisis, The Rating Agencies 

In response to rating agency warnings of lower bond ratings, among other pressures, Japan’s budget strategists announced a 10% across-the-board spending cut for all ministries and agencies. They also said that this was only the first step in an all-encompassing budget overhaul.

Their goal is to cut more than 1 trillion yen ($11.42 billion) from the new fiscal budget that takes effect in April while still making more funding available for stimulus programs without going over their self-imposed 71 trillion-yen annual policy-spending limit.

Japan’s debt is the world’s highest among developed industrialized nations. If left unchecked, the debt could easily breach 200% of GDP. Yet the worldwide recession has created a difficult challenge for Japan with competing policy needs: to both significantly cut debt while maintaining stimulus for a delicate economic recovery.

The anticipated cuts will likely not impact grants to local governments and social security payments. The government will be holding open debates to decide how to allocate funds.

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