Standard & Poor’s warned on Monday it could lower Japan’s sovereign rating if the economy expands less than expected or if public debt continues to grow, as the country’s unpopular government struggles to win support for higher taxes.
The ratings agency affirmed its AA- rating on Japan with a negative outlook, but also warned that higher taxes wouldn’t solve the structural problems that push up Japan’s welfare spending and increasingly pressure state coffers.
Japan’s debt burden is the worst among industrialized economies, and it may not be able to postpone drastic spending cuts and aggressive tax hikes much longer as Europe’s debt crisis threatens the global economy.
S&P and Fitch both rate Japan AA – with a negative outlook. Moody’s Investors Service ranks Japan at the same level, at Aa3, but has a stable outlook.
All three agencies rate Japan three notches below the top AAA rating.