Rating Agencies Attempt To Calm Fears About Japan’s Sovereign Debt

September 8, 2011 by · Leave a Comment
Filed under: S&P, The Rating Agencies 

The Financial News reports that Moody’s Investors Services senior vice president Thomas Byrne wrote, “the shock from Friday’s earthquake does not make a fiscal crisis in Japan imminent. The country’s deep and liquid government debt market will likely continue to fund government deficits, even a larger deficit as a result of the earthquake, at an exceptionally low cost.”

Mr. Byrne also mentioned that The Bank of Japan had provided Y55bn ($670m) of emergency liquidity to 13 banks.

Similarly Standard and Poor’s assured that although the country had suffered “significant” fiscal and economic shock, Japan’s AA- sovereign rating was not at risk. However the Financial News quoted Standard and Poor’s as cautioning that the problems with the nuclear reactors were troubling, “Whether the macroeconomic damage is short-term or more prolonged depends on the outcome of the situation with the nuclear reactors, an event that is still unfolding, and time needed to recover the output of electricity sufficient to cover demand.

The global head of sovereign ratings at Fitch Rating Fitch, David Riley, was reported to have emailed that, “It’s too early to estimate the economic impact of these tragic events.”

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