TOKYO, Nov. 28 (UPI) -- Japan's credit rating has been slashed yet again as the country continues to suffer dimmer growth prospects, with the government still in a deadlock on pushing ahead much-needed structural reform.
U.S. credit rating agency Standard and Poor's downgraded Japan's long-term debt rating to AA from AA-plus, and put the nation's biggest banks on credit watch. S&P's decision follows in the steps of Fitch, another credit rating agency, which announced earlier this week that it was downgrading Japan's government bonds to AA from AA+.
The latest S&P rating for Japan puts the country at the bottom of the credit rating ranks amongst the Group of Seven industrialized nations, with the exception of Italy, which it is now on par with.
"I am disappointed. We have to try to improve," said Finance Minister Masajuro Shiokawa. But at the same time, he tried to play down by downgrading by adding: "I think we need to take it seriously but I have confidence in our bonds."
The downgrades are, however, a severe blow to three-party coalition government led by Prime Minister Junichiro Koizumi. When he came into office in April, Koizumi vowed that he would bring an end to a decade of little or no economic growth by introducing sweeping reform. But efforts to eliminate bad loans plaguing the banking system and privatizing or eliminating inefficient public corporations have been half-baked, in part because of the political deadlock as a result of the coalition government.
Moreover, the global economic downturn has made it more difficult for Japan to introduce measures that would spur growth in the long run, but increase unemployment and bankruptcies in the short-term, given that Japan is already suffering from its highest jobless rate since the end of World War II.
S&P warned, however, that Japan's rating outlook was negative and cautioned that the country's government bond could be further downgraded if economic conditions continued to deteriorate.
