Fitch Ratings downgraded Japan’s sovereign credit rating yesterday. Despite the negative news, the Japanese yen is trying to rally against the US dollar today. Against other major currencies, like the euro and the Great Britain pound, the yen is weak.
Fitch slashed the nation’s credit grade by one notch from A+ to A. The agency cited among reasons for the decision following consideration:
Fitch’s downgrade reflects the fact that the Japanese government did not include sufficient structural fiscal measures in its budget for the fiscal year April 2015-March 2016 (FY15) to replace a deferred consumption tax increase.
Fitch also voiced concern about the rising level of the government debt. At the same time, the report noted:
The Japanese sovereign’s exceptionally strong financing flexibility supports the ratings, despite weaknesses and vulnerabilities elsewhere in the public finances.
The outlook for the rating is stable as “upside and downside risks to the ratings are currently broadly balanced”.
USD/JPY ticked from 119.02 down to 118.86 as of 11:03 GMT today. Meanwhile, EUR/JPY edged higher from 129.62 to 130.02. GBP/JPY rose from 181.25 to 181.64, trading near the highest level since March 11.
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