Moody’s Investors Service stripped the Japanese government of its last AAA foreign currency credit rating on Monday, citing the level of debt, the expansion of government spending and the crumbling economy as reasons for its new rating. Japan’s credit profile is now Aa2. What makes this move interesting is the fact that Japan has almost no foreign currency debt exposure. So today’s action revives speculation about the creditworthiness of other rich nations, including the U. S. (outstanding U.S. Treasury debt was $5.9 Trillion at end of fiscal ’08)
From Reuters: “We know there are challenges in Japan. That’s why we don’t think Japan is an Aaa,” said Thomas Byrne, senior vice president for Moody’s in Singapore.
“We think that the two-notch differential between the triple-As such as the U.S., France and Germany are warranted,” he told a news conference in Tokyo.
Moody’s was the last of the three international ratings agencies to lower Japan of its triple-A rating. Fitch Ratings and S&P’s both rate Japan’s foreign debt at AA, the third highest level.