Japan Debt Surge Prompts Rating Revision

Darlington Musarurwa
27 Jan, 2010
New York City

Japan debt in the fiscal year beginning April 1 is expected to surge to two times its gross domestic product prompting worries of higher rates later in the year. Exports increased 12.1% to 5.41 trillion yen in December. Bank of Japan leaves economic assessment for January unchanged.

[R]5:00 AM New York, 7:00 PM Tokyo – Japan debt in the fiscal year beginning April 1 is expected to surge to two times its gross domestic product prompting worries of higher rates later in the year. Exports increased 12.1% to 5.41 trillion yen in December. Bank of Japan leaves economic assessment for January unchanged.[/R]

Stocks in Japan dropped after ratings agency Standard & Poor downgraded the country’s economic outlook a day after the government projected debt to surge nearly two times its gross domestic product.

The government said that public debt is expected to reach 973 trillion yen in the fiscal year starting April 1. The government has pledged to keep sales tax firm at 5% for the next four years but tracked back on its election promise to abolish gasoline tax.

Ten year bond yields at the close of trading hovered near 1.325%.

Bank of Japan also left its economic assessment for the month of January unchanged.

Exporters were also affected by a rising yen, which increased to 89.25 against the dollar from 89.65.

In Tokyo trading Nikkei 225 Stock Average fell 0.7% or 73.2 to 10,252.08, and the broader Topix Index decreased 1% to 907.67.

In the first section of the Tokyo Stock Exchange 19 billion shares worth 1.5 trillion yen were traded and in the second section 279 million shares worth 2.5 billion yen changed hands.

Of the Nikkei 225 index stocks, 43 rose, 166 dropped, and 16 were unchanged. Kao Corp. led gainers in the index shares with a rise of 5% followed by Seven & I Holdings jumping 3.1%.

Exports Rise 12.1% to 5.41 trillion in Dec

Japan’s ministry of finance reported that the country’s exports gained 12.1% to 5.41 trillion yen in December, rising for the first time in fifteen months, while imports dropped 5.5% to 4.86 trillion yen.

The trade surplus rose to 545.3 billion yen in the period.

On the overall, the trade surplus gained 36.1% to 2.8 trillion yen in 2009 as exports decreased 33.1% to 54.12 trillion yen and imports fell 34.9% to 51.37 trillion yen.

According to the report, exports to U.S. contracted 38.5% to 8.7 trillion yen and to China shipments dropped 20.9% to 10.239 trillion yen.

S&P Lowers Japan Credit Rating

Associated Press reported today that ratings agency Standard & Poor affirmed the country’s “AA” long-term debt rating but reviewed its outlook to “negative” from “stable.”

The ratings agency noted that the policies of the new government are likely to lead a slower pace of fiscal consolidation than had been previously expected.

“The outlook change reflects our view that the Japanese government’s diminishing economic policy flexibility may lead to a downgrade unless measures can be taken to stem fiscal and deflationary pressures,” explained S&P.

BoJ Leaves Assessment Unchanged in January

Bank of Japan said in its monthly report of recent economic and financial development although economic conditions will continue improving, the pace of improvements will remain moderate for the time being.

Business fixed investment is likely to “remain more or less unchanged”, while public investment is envisaged to decrease gradually.

Onishi Picked as JAL President

Nikkei News reported that Japan Airlines announced today executive director Masaru Onishi will become president on February 1.

Nikkei Movers

Tokyo Dome Corporation led the decliners in the Nikkei 225 Stock Average with a loss of 4.9% followed by losses in NSK Ltd of 4.6%, in Tosoh Corporation of 4.4%, in Toyota Motor Corporation 4.2% and in Casio Computer Co Ltd 4.2%.

Kao Corporation led gainers in the Nikkei 225 Stock Average with a rise of 4.9% followed by gains in Seven & i Holdings Co., Ltd 3.1%, in NTT Data Corp of 2.8% and in Japan Tobacco Inc of 2.7%.

Other Movers

Canon Inc decreased 2.8% to ¥3,615.00 after the camera maker was downgraded to “market perform” from “outperform” at Mitsubishi UFJ Financial Group Inc.

NSK Ltd declined 4.6% to ¥664.00 after the bearing maker was downgraded to “equalweight” from “overweight” at Morgan Stanley.

Obic Co increased 6.8% to ¥16,620.00 after the computer-system service provider was upgraded to “buy” from “neutral” at Nomura Holdings Inc.

Shin-Kobe Electric Machinery Co., Ltd climbed 6.1% to ¥938.00 after the storage battery maker was upgraded to “overweight” from “neutral” at JPMorgan Chase & Co.

Tosoh Corporation dropped 4.4% to ¥235.00 after the maker of vinyl chloride resin was downgraded to “neutral” from “outperform” at Mizuho Securities Co.

USS Co fell 4.9% to ¥5,420.00 after the manager of used-car auctions was downgraded to “neutral” from “buy” at Merrill Lynch & Co.

Yamazaki Baking Co rose 1.3% to ¥1,059.00 after the producer of bread and cakes announced that it has raised its year-end dividend forecast from ¥12 per share, which was announced on February 12, 2009, to ¥14 per share, for the fiscal year ended December 2009.