Government bonds issued by Japan – the world’s second biggest economy – have been downgraded to the same status as those from Latvia and Poland, the BBC reported on its website.
The BBC said ratings agency Moody’s Investors Service blamed the two-notch downgrade on concerns over the government’s ability to solve Japan’s economic malaise.
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“The Japan government’s current and anticipated economic policies will be insufficient to prevent continued deterioration in Japan’s domestic problems,” Moody’s said, according to the BBC.
Levels of debt run up by the Japanese government, after years of attempting to revitalise the economy through large infrastructure projects, meant it was testing new economic frontiers, the BBC cited the report as saying.
According to the website, the report added: “Japan’s general government indebtedness… will approach levels unprecedented in the post-war era in the developed world, and that as such Japan will be entering ‘uncharted territory’.”
The news came as official data showed that the number of unemployed Japanese workers hit 3.75 million last month, up 270,000 from a year before, the BBC said.
The figure represented the 13th successive monthly rise in unemployment, and defied a more optimistic outlook by many analysts, including those at the Bank of Japan, over the country’s economic prospects, the website report added.
The BBC noted that many economists emphasised that they expected an export-led recovery to ease unemployment problems.
“We believe in general the Japanese economy hit the bottom in the first quarter of this year,” Junichi Makino, senior economist at the Daiwa Institute of Research, told the BBC.
“It usually takes three to four quarters for unemployment rate to come down after the overall economy bottoms out. We believe, by the end of this year, we will start seeing clear signs of the unemployment rate coming down,” he added, according to the BBC website.
