Japans PM says country must tackle debt to avoid rate cut

Japan’s prime minister, attempting to build support for painful fiscal reforms, said Saturday that the country should be alarmed by ratings cuts in Europe and must tackle its massive public debts to avoid becoming the next target.

Japan’s debt is more than twice its gross domestic product, higher than any of the struggling European economies whose fiscal problems have set off a eurozone crisis that has reverberated in markets around the world. Japan’s credit rating was downgraded last year, and Prime Minister Yoshihiko Noda said it could be further harmed if the country is seen as dragging its feet on reforms.

Noda commented during a live TV talk show following ratings agency Standard & Poor’s downgrade of nine European countries, including France, one of the strongest economies in the eurozone.

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Japan Debt Outlook Lowered by Moody’s

Japan’s debt rating outlook was lowered to negative from stable by Moody’s Investors Service on concern that political gridlock will constrain efforts to tackle the biggest debt burden of any nation.

Economic and fiscal policies “may not prove strong enough to achieve the government’s deficit reduction target and contain the inexorable rise in debt,” Moody’s said in a statement today. The rating is Aa2, the company’s third highest. Standard & Poor’s cut its rating last month to fourth highest.

Today’s move adds pressure on Prime Minister Naoto Kan as his public approval rating slides and he struggles to secure lawmakers’ support for measures to reduce debt, including a possible sales-tax increase. Japanese shares accelerated declines after the announcement and amid tensions in the Middle East. The Nikkei 225 Stock Average slid 2 percent as of 11:07 a.m. local time.

“Politicians will take today’s announcement as a warning sign, but their biggest priority right now isn’t Japan’s fiscal health — it’s maintaining their seats in parliament,” said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo.

Read the rest of the story: Japan Debt Outlook Lowered by Moody’s on ‘Inexorable’ Debt.