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Japan credit rating downgraded by Moodys, debt cited
The ratings agency said it cut Japan's rating by one notch to A1 from Aa3, after the economy sank into recession during the third quarter. Tokyo raised the sales levy in April - to 8 percent from 5 percent - for the first time in 17 years, in a bid to generate more revenue to pay down an eye-watering national debt. Japan has one of the heaviest debt burdens among rich nations, at more than twice the size of the economy. The increase slammed the brakes on growth just as the economy, plagued by years of deflation, appeared to be turning a corner. "The first driver for the downgrade of the Japan government's debt rating to A1 is the rising uncertainty over whether the government's medium-term deficit reduction goal is achievable, and whether policy makers can overcome the tensions inherent in promoting growth while simultaneously stabilising and reversing the rising debt trajectory," Moody's said in a statement. Holding off the fresh tax hike, initially planned for late 2015, "Poses risks to fiscal consolidation and, over the longer-term, to debt affordability and sustainability". "Japan's deficits and debt remain very high, and fiscal consolidation will become increasingly difficult to achieve as time passes given rising government spending, particularly for social programs associated with a rapidly ageing population," the ratings agency added. Preliminary GDP data last month showed Japan's economy shrank 0.4 percent, or at an annualised rate of 1.6 percent, in the July-September quarter, following a 1.9 percent contraction in the April-June quarter - or 7.3 percent at an annualised rate.

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