Good Article Frank, missed the following do not know how, but wow should have had a larger impact IMO. But it does explain the pick up in gold buying from the Japanese consumer.
In what is sure to be a wake-up call for the Japanese government, Standard & Poor’s cut Japan’s credit rating todayfor the first time in nine years. Japan, whose credit rating wasdowngraded from AA to AA-, faces a debt of 943 trillion yen ($11trillion) - more than double of their annual economic output. Japanjoins several other developed economies whose credit rating has recentlybeen cut, including Portugal and Spain.
In their released statement, S&Pcited deflation, Japan’s ageing population, and political inaction asfactors in their decision, and said that the government “lacks acoherent strategy to address these negative aspects of the country’sdebt dynamics”. They continued:
“The downgrade reflects our appraisal that Japan'sgovernment debt ratios--already among the highest for ratedsovereigns--will continue to rise further than we envisaged before theglobal economic recession hit the country and will peak only in themid-2020s. Specifically, we expect general government fiscal deficits tofall only modestly from an estimated 9.1% of GDP in fiscal 2010 (endingMarch 31, 2011) to 8.0% in fiscal 2013. In the medium term, we do notforecast the government achieving a primary balance before 2020 unless asignificant fiscal consolidation program is implemented beforehand.”
The cut in Japan's credit rating could increase interest rates andmake fiscal reform more difficult, as financing the country's debt couldbecome more expensive, and gives Japan the same rating as China - acountry whose rating was just updated by S&P in December.
As more nations around the globe confront increasingly serious fiscalcrises, the need to come up with a serious plan to take control of ourdebt and deficit - and act on it - becomes more apparent. We have seenthe drastic steps that must be taken when countries wait to enact fiscalreform until a crisis has taken hold (Greece, anyone?). The question is whether our government can manage to agree on a way to fix our budget, before it is too late.