Credit Ratings firm Moody's in a shock decision downgraded Japan's credit rating from Aa3 to A1 on Monday. Japan's rating was last slashed in August 2011 and is now lower than Korea's.
Monday’s single-notch downgrade to the fifth-highest rating, "represents the first reaction by a big credit rating agency to the decision last month by Prime Minister Shinzo Abe to call a snap election to push back a second scheduled increase in sales taxes," according the Financial Times.
Moody's remains skeptical about Abenomics. One of the reasons that it cited was rising uncertainty over the achievability of Abe's goal to reduce fiscal deficit and effectiveness of growth enhancing policy measures.
The Japanese government has been trying to revive the economy by keeping the currency weak to benefit exporters for nearly two years. But various indicators remain rather pessimistic.
Japan has had negative growth rate for two quarters in a row, real GDP decreased for two consecutive quarters, and the trade deficit from April to September was at an all-time high of 5.43 trillion yen. Sovereign debt is more than double the nation's GDP and keeps growing.
The national debt, which was 997 trillion yen when Abe came into power has now ballooned to 1.04 quadrillion yen.
