Bangkok--16 Sep--Standard & Poor's
Standard & Poor's Ratings Services said today that the outcome of the ruling Democratic Party of Japan's (DPJ) leadership election does not have significant implications for the sovereign ratings on Japan (AA/Negative/A-1+). Standard & Poor's does not expect any significant change in fiscal policy compared with prior to the election, and our expectation remains that there will be only gradual improvement in the government's fiscal position.
On Sept. 14, 2010, Prime Minister Naoto Kan staved off a challenge by Ichiro Ozawa in the DPJ's presidential election, retaining his position as head of the party. The Kan government, however, still faces significant hurdles. Politically, the government's minority position in the upper house of parliament and its less than two-thirds majority in the lower house remains unchanged. This will make it very difficult for the next government to deal with parliament. Internally, the DPJ faces having to heal the wounds brought on by the leadership challenge. At the same time, the macro economy is fragile, and structural issues relating to the national pension fund and old age expenditures remain. The budget for these issues will increase unless the government implements measures to control them. A burgeoning fiscal deficit and deflationary pressure also remain key issues for the government.
Kan survived this election despite the challenge by a strong contender. However, there is no guarantee that he will hang on to power longer than many of his predecessors, given the current political and economic environment. Standard & Poor's believes that a strong and stable policy base is needed for Japan to implement meaningful and sustainable fiscal consolidation, and that the latter would be an important factor in keeping the 'AA' rating on the country.
A Japanese-language version of this media release is available on Standard & Poor's Research Online at www.researchonline.jp, or via CreditWire Japan on Bloomberg Professional at SPCJ.
Media Contact:
David Wargin, New York (1) 212.438.1579,
[email protected]
Analyst Contact:
Takahira Ogawa, Singapore (65) 6239-6342