国債の格下げ 財政再建の前進で信認回復を

The Yomiuri Shimbun (Jan. 30, 2011)
Bond downgrade a call to reform
国債の格下げ 財政再建の前進で信認回復を(1月29日付・読売社説)

The U.S. rating agency Standard & Poor's on Thursday downgraded long-term Japanese government bonds by one notch, from AA to AA minus.

Of course, we do not have to react with undue joy or alarm to ups and downs in the rating, as it is merely an evaluation a private company has made based on its own analysis.

However, the current value of government bonds might drop and their interest rate might go up after the lowering of the rating, which is considered an indicator of creditworthiness. The government has to keep an eye on market trends.

Prime Minister Naoto Kan's government is planning to draft by June a plan to reform both social security and the tax system in an integrated manner. As the first step toward sound public finance, the government must stipulate a hike in the consumption tax rate in the draft plan to secure a stable revenue source.

We believe it is the only way to restore the credibility of the government bonds.


Details of diagnosis

S&P explained that it decided to downgrade the Japanese government bonds because the nation's fiscal debts are the worst among advanced economies and there seems to be no easy way to reduce them. The agency also cited prolonged deflation as another factor making elimination of the budget deficit difficult.

Furthermore, it said that the Democratic Party of Japan-led administration lacks a consistent strategy on the debt problem.

S&P announced a year ago that it was likely to lower the rating of the government bonds. The company apparently has watched the actions of the government since then and concluded that it was neither sufficiently serious about nor capable of taking measures toward fiscal rehabilitation.

In fact, though tax revenues are 41 trillion yen, the issuance of government bonds amounts to 44 trillion yen in the fiscal 2011 budget. This abnormal situation of debt issuance exceeding tax revenues has continued since fiscal 2010.

Total long-term debts of the central and local governments will reach 892 trillion yen by the end of fiscal 2011. This is more than 1.8 times the gross domestic product, ensuring that Japan will maintain its status among the world's advanced economies as the one in the worst fiscal condition.


Taxes must rise

To defuse the situation, the Kan Cabinet must launch drastic measures to increase tax revenues.

The downgrade could be interpreted as a prompt for the administration to carry out such measures swiftly and surely.

Japanese government bonds are now rated lower than those of Spain--which faces its own fiscal uncertainty--and at the same level as those of Kuwait and China. However, Japan's situation is different from those of Greece and Ireland, where downgrades have fueled economic confusion.

A calm response is required in the case of Japanese government bonds because 95 percent of them are stably absorbed domestically.

The prime minister was criticized for saying, "I don't know much about this kind of thing" in reference to the downgrade. He later said he simply meant he had not received detailed briefings on the issue.

In any case, however, we have to say that Kan's remarks were indiscreet coming from the prime minister, who should take the lead in fiscal rehabilitation.

(From The Yomiuri Shimbun, Jan. 29, 2011)
(2011年1月29日02時04分 読売新聞)

by kiyoshimat | 2011-01-30 06:53 | 英字新聞

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