A world in economic crisis

Standard and Poor downgrade Japan rating

In the wake of the disaster of the 9.0 earthquake and the tsunami that followed, as well as the nuclear reactor accident at Fukushima that was a result of the tsunami, Standard and Poor have downgraded the outlook for Japan in being able to pay back its debt. This downgrading must be a very big blow to the Japanese economy, especially when Japan needs to rebuild after the devastating events.

Here are the reasons being given for the poor outlook with regard to the Japanese economy:

According to S&P, the cost of rebuilding could go as high as 50 trillion yen ($612bn; £372bn).

Japan has the highest public debt among the industrialised countries.

The agency also warned that if Japan’s debt levels continue to rise it could take further action.

“We revised the outlook on the long-term rating on Japan to negative, to reflect the potential for a downgrade, if fiscal deterioration materially exceeds these estimates in the absence of greater fiscal consolidation,” S&P said in a statement.

Japan’s reconstruction bill has been increasing as the full extent of the damage caused by the earthquake and tsunami becomes clear.

The government initially estimated that it will cost 25tn yen ($306bn) to rebuild the infrastructure in the affected areas.

However, S&P has indicated that the cost could be almost double that amount.

Please read the whole report on why Stanadard and Poor outlook is negative.

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