David Beers at S and P knows better and should be ashamed of himself and his organization for not making it crystal clear that ‘ability to pay’ is not in question, and that downgrading Japan has to be based solely on their assessment of ‘willingness to pay.’
Also note that even with repeated downgrades the term structure of risk free rates remains a function of market perceptions of where the BOJ will set rates down the road, along with a few ‘technicals’ of supply and demand.
S&P Cuts Japan Debt Rating to AA Minus
Published: Thursday, 27 Jan 2011 | 4:02 AM ET
Ratings agency Standard & Poor’s cut Japan’s sovereign debt rating to AA minus from AA on Thursday, warning that Japan’s government debt ratio would continue to rise more than it had previously expected.
The agency said it expects Japan’s fiscal deficits to remain high in the next few years, which would further reduce the government’s already weak fiscal flexibility.
The outlook on the long-term rating was stable, it said, reflecting its view that Japan’s strong external balance sheet and monetary flexibility partially offset the pressures stemming from the fiscal side.