Ratings agency Standard & Poor’s today downgraded its sovereign credit rating on Japan by one notch, saying the country was unlikely to revive economic growth and end deflation within the next few years.
“Despite showing initial promise, the government’s strategy to revive economic growth and end deflation appears unlikely to reverse this deterioration in the next two to three years,” the agency said in a statement.
The agency said it was lowering the sovereign ratings on Japan to A+ from AA-.
Japan’s economy remains in the doldrums more than two years after Prime Minister Shinzo Abe launched his “Abenomics” policy blitz to kickstart the economy and conquer deflation.
Abe’s programme called for big government spending, massive Bank of Japan monetary easing and reforms to cut red tape in the highly regulated economy.
Those reforms have stalled, however.
“We believe the likelihood of an economic recovery in Japan strong enough to restore economic support for sovereign creditworthiness commensurate with our previous assessment has diminished,” S&P said.
“Japan’s very weak fiscal attributes are an important weakness in its credit metrics,” it said, projecting the national debt will reach 135 percent of GDP in fiscal 2018.
The downgrade came a day after the Japanese central bank held fire on expanding its monetary easing programme, while economists warned more stimulus could be needed to boost the sagging economy.