Associated Press
TOKYO — Japan's fiscal policy will not be altered in the wake of a U.S. agency's decision to downgrade the country's credit rating.
The move by Standard & Poor's to downgrade Japan's creditworthiness also was questioned by Kiichi Miyazawa, the country's finance minister, and Taro Aso, minister for economic and fiscal policy.
Standard & Poor's yesterday said it lowered its long-term credit ratings on Japan to from AAA to AA+, citing Japan's rising debt and its slow approach to structural reform.
The downgrade could reduce the value of the bonds issued by the Japanese government and could raise its financing costs — a crucial factor as Tokyo tries to spend its way out of a lengthy economic downturn.
Miyazawa said he had "absolutely no intention'' of changing fiscal policy because of the ratings decision. "However, we will, as we have been doing, continue to carefully watch over new government bond issues,'' Miyazawa told reporters.
He also took issue with the U.S. rating agency's assessment.
"Long-term interest rates are falling to levels near 1.3 percent, which means that (bond prices) are rising. I think (S&P) is mistaken,'' Miyazawa said.
Aso also said no changes were expected, and he said Japan is insulated from damage from the rating shift.
"Japanese are the buyers of Japan's government debt. It is not as though Japan is reliant on foreign countries to be able to issue debt,'' Aso told reporters.
S&P, which issued a statement from its New York headquarters, said Japan is caught between a huge government debt and the need to keep up massive spending to propel the country out of a decade-long economic slowdown.
S&P recommended shifting government spending away from "poorly targeted public-works projects,'' saying the government's commitment to structural reform "has faltered.''
Chief Cabinet Secretary Yasuo Fukuda on Friday reiterated Tokyo's commitment to recovery.
"The economy is in an extremely severe situation and financial structural reform is the task that we have to realize,'' he told reporters. "We are doing all we can so that a smooth transition from public demand to private demand will take place."
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