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To: Davy Crockett who wrote (79638)	11/28/2001 7:05:49 AM
From: long-gone	Respond to of 116896

Wednesday November 28, 6:56 am Eastern Time S&P Downgrades Japan's Credit Rating Standard & Poor's Downgrades Japan's Credit Rating, Puts Banks on Review By JOJI SAKURAI Associated Press Writer TOKYO (AP) -- Standard & Poor's issued a double warning Wednesday on Japan's economy, downgrading the nation's credit rating and putting its biggest banks on credit watch. The U.S. ratings agency cited doubts about Prime Minister Junichiro Koizumi's ability to implement structural reforms. S&P cut Japan's sovereign credit rating to AA from AA+. It kept its outlook on Japanese credit at ``negative,'' two months after the outlook was downgraded from ``stable.'' The banks placed on review for a possible downgrade include the four that make up the Mizuho Group, the world's largest private banking institution. Calling for ``radical action'' to put the economy on the growth track, S&P used harsh language in its assessment: ``A crippled financial sector ... A rising debt burden ... A fundamental institutional dysfunction.'' Finance Minister Masajuro Shiokawa tried to play down Standard & Poor's decision. ``I think we need to take it seriously but I have confidence in our bonds,'' he told reporters. On Monday, international credit agency Fitch Ltd. cut Japan's debt rating, noting that a series of government public-spending programs had done little but drag Japan deeper into debt. Takahira Ogawa, director of sovereign ratings at S&P Asia, said the custodians of Japan's economy are failing to grasp the magnitude of the crisis. ``One of the problems is that there doesn't appear to be a sense of urgency or crisis among key decision makers,'' he said, urging the government and the central bank to coordinate their response. The agency warned that the government will have to inject funds worth 3 percent of the nation's gross domestic product into the banking sector in order to keep it solvent. S&P said that Japan's major banks, already loaded with bad debt, risk seeing their loans further deteriorate as the nation's recession deepens. Meanwhile, the government's decision to advance a second supplementary budget worth $24.97 billion is pushing public finances further into the red, a situation that S&P called ``unsustainable.'' Japan's public debt currently stands at about $5.4 trillion, equivalent to 130 percent of GDP. S&P predicted debt would peak at 175 percent of GDP by mid-decade. The ratings agency also said the government is held hostage by special interest groups in the agriculture, construction and retailing sectors, blocking necessary reforms. ``The natural conservative nature of a bureaucracy also mitigates against reform,'' S&P said in a press release. Analysts said the downgrade could help the prime minister push through his reform agenda, which includes curbing public spending. ``It reinforces Koizumi's message that Japan needs to come to grips with its fiscal situation,'' said Matthew Poggi, an economist at Lehman Brothers in Tokyo. The S&P announcements helped push the benchmark Nikkei stock index down nearly 3 percent. But bond traders took heart that the credit assessment wasn't even worse: The price of 10-year Japanese government bond rose. The agency's moves came just weeks after the government changed its economic growth forecast to negative 0.9 percent for the fiscal year ending in March from 1.7 percent growth. Japan has been trying to emerge from a decade-long economic slump. The global downturn has hurt Japanese exports and corporate earnings. Unemployment rose to a record 5.3 percent in September. biz.yahoo.com