S&P Downgrades Japan From AA- To A+ On Doubts Abenomics Will Work – Full Text
Who would have thought that decades of ZIRP, an aborted attempt to hike rates over a decade ago, and the annual monetization of well over 10% of sovereign debt would lead to a toxic debt spiral, regardless of how many “Abenomics” arrows one throws at it? Apparently Standard and Poors just had its a-ha subprime flashbulb moment and moments ago, a little over 4 years after it downgraded the US from its legendary AAA-rating which led to angry phone calls from Tim Geithner and a painful US government lawsuit, downgraded Japan from AA- to A+. The reason: rising doubt Abenomics is working.
Apparently S&P has never heard of the Magic Money Tree theory concocted by economists who have never traded an asset in their lives, in which “countries that print their own currency” have nothing to fear about a 250% debt/GDP ratio. In fact, the only fear is that it is not big enough.
Expect the market’s reaction to be that since Abenomics has not worked yet, some nearly three years after it was launched then Japan will be forced to do even more of it, simply because it has no choice – it is now all in, the problem of course being that the BOJ is simply running out of stuff to monetize as even the IMF warned two weeks ago…
Here is the S&P’s full downgrade.
Japan Ratings Lowered To ‘A+/A-1’; Outlook Is Stable
OVERVIEW
- Economic support for Japan’s sovereign creditworthiness has continued to weaken in the past three to four 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.
- We are lowering our sovereign credit ratings on Japan to ‘A+/A-1’ from ‘AA-/A-1+’.
- The outlook on the long-term rating is stable.
…click on the above link to read the rest of the article…
