Japan reacts to downgraded credit

Associated Press

TOKYO — Japan's economy minister said yesterday that the downgrading of Japan's sovereign ratings by Standard & Poor's is a message the nation should move ahead with economic reforms.

It underlines Japan's "risk factors," such as towering problem loans at the country's banks, Heizo Takenaka told reporters.

Standard & Poor's blamed its downgrading on lack of progress in government-led reforms.

The world's second-biggest economy hasn't done enough to counter problems in its banking industry and reduce the amount of budget debt, the agency said.

S&P lowered the country's long-term local and foreign currency sovereign credit ratings from AA to AA- and kept it on a negative outlook. The agency last downgraded Japan in November.

Moody's Investors Service put its credit rating of Aa3 for Japan on review for a possible downgrade in February.

"It is a message that we should reform more, and will do so," Takenaka said.

He did not elaborate on what the government specifically planned to do to strengthen international confidence in Japanese banks.

Japan is stuck in a decade-long slowdown. The administration of Prime Minister Junichiro Koizumi is promising widespread reforms, such as privatizing parts of the public sector and easing government regulations to help money flow from inefficient old-style businesses to new ones.

Japanese Finance Minister Masajuro Shiokawa said Japan would do all it could to fix problems in the banking sector. But he said the government cannot force banks to take in public money to shore up their capital base.