S&P Global Ratings revised its outlook on Japan to stable from positive citing increased uncertainty around debt stabilization.
The agency on Tuesday affirmed the sovereign ratings at ‘A+’.
S&P said the revision reflects increased uncertainty that Japan’s general government debt could stabilize against nominal GDP in the next one to two years as fiscal performance deteriorates.
Although the coronavirus, or Covid-19, outbreak has set back Japan’s fiscal stabilization process, S&P expects that to get back on track in the next two to three years as the economy recovers.
The agency estimates the net government debt level to rise substantially this fiscal year ending March 2021 to 171 percent of GDP, from 151 percent in fiscal 2019.
However, in 2021-2023, fiscal deficits are expected to fall sharply from the level in fiscal 2020 as one-off spending related to the Covid-19 pandemic expires.