S&P cuts Japan’s credit rating - Yen moves sharply lower

Market Watch ^ | 1/27/2011 | Lisa Twaronite and Michael Kitchen

[bruinbirdman]

Standard & Poor’s on Thursday cut Japan’s long-term sovereign-credit rating, with the news sending the yen sharply lower against its major rivals.

The rating agency said it downgraded Japanese debt to AA minus from AA, but it also reaffirmed the nation’s short-term ratings at A-1 plus.

The news sent the U.S. dollar /quotes/comstock/21o!x:susdjpy (USDYEN 82.7000, +0.5400, +0.6570%) soaring against the yen, hitting ¥83.16 after having traded at ¥82.14 shortly before the announcement.

The euro also spiked against its Japanese rival, climbing to ¥113.41 for a 0.7% gain, according to FactSet.

S&P said in a statement that it “expects Japan’s fiscal deficits to remain high in the next few years, which will further reduce the government’s already weak fiscal flexibility.”

It said it sees the deficit falling “only modestly” to 8% of gross domestic product in the fiscal year beginning April 2013, compared to an estimated 9.1% for the current fiscal year, which ends March 31.

S&P also pointed to Japanese deflation and its aging population as drags on the economy.

“Falling prices have matched Japan’s growth in aggregate output since 1992, meaning the size of the economy is unchanged in nominal terms. In addition, Japan’s fast-aging population challenges both its fiscal and economic outlooks. The nation’s total social-security-related expenses now make up 31% of the government’s fiscal 2011 budget, and this ratio will rise absent reforms beyond those enacted in 2004.”

[Oldeconomybuyer]

All Japan needs is a sputnik moment. Fixes the economy in a snap. Heard it on TV.

[screaminsunshine]

They must raise taxes on the rich and invest in trains and solar power. Bigger public unions will also help. Another idea would be to ship Mexicans back in their unloaded cargo ships. They could do the jobs the Japanese won’t do. To top it off change the religion to Muslim and install Sharia Law. Tuna Sushi can be outlawed to help save the Planet.

[gogogodzilla]

Well, Japan has been desperately looking for a way to lower the value of the yen... as to make their products more competitive in the global market - and to boost their employment numbers.

Maybe this is a blessing in disguise for them?

[Waco]

A Japenese lady went in a bank to exchange some yen for dollars. The teller gave 100 dollars for her yen. She said I got 200 dollars last time I was here, why the difference? The teller shrugged his sholders and said ‘’flucations’’, she shot back fluc you white people too!!!

[Presbyterian Reporter]

I believe the reporter needs to tone down the rhetoric.

The yen HAS NOT moved sharply lower.

The yen/dollar exchange closed at 121.27 yesterday and today it is trading at 120.46.

I do not believe that change is “sharply lower”.

[Talf]

if interest rates go up too much,
Japan is in trouble