Debt-burdened Japan shoots the messenger

Reviewed By Hitoshi URABE

Article:
"Debt-burdened Japan shoots the messenger"
http://straitstimes.asia1.com.sg/asia/story/0,1870,126948,00.html?
The Straits Times

Comments:
When the media persistently reports on an event, it is an indication that the issue is very important, or it is because the incident is somewhat out of line of common sense and needs further probing.

The downgrade by Moody's Investor Service of Yen denominated Japanese Government Bond is typical of these cases. At the end of May, Moody's lowered the rating of Japan's Government Debt two notches to A2, a notch lower than such country as Botswana.

It has invited fierce response from the Japanese Government, denouncing the rating agencies' behaviors. The Ministry of Finance accused Moody's that the rating is based on subjective and biased method rather than objective and logical criteria. Government officials then set out to campaign the fault of the rating agency, telling people the indecency of the present rating, often citing the fact that it is now lower than Botswana, one of the poorest countries in Africa relying on, among others, Japan's aid to survive. Most recently, Finance Minister Shiokawa expressed his objection to the rating in the anniversary issue of weekly "Koizumi Cabinet e-Mail Magazine", in Japanese, which boasts some two million readers.

The article introduced above reports that Trade Minister Mr Hiranuma has apologized for his recent remark that "half the population of Botswana are AIDS sufferers." It was certainly an impolite comment, but it does show their frustration.

There are very few reports in foreign media that deal directly with the aptness of the rating itself, as they have customarily avoided taking any positions in these matters. But commentaries keep popping up in various publications, as if when a commentator realizes the new rating of Japan, he or she feels obliged to make a statement. There is an apparent assumption for such a behavior, that people should be surprised to see the credibility of the world's second largest economy fall below that of Chile or Botswana.

It is fairly evident, therefore, that A2 rating which Moody's has attached to Japan is generally perceived as somewhat out of line with the common sense.

As for Japan's domestic media, while none really believes the real situation is worse than that of Botswana, there has been a variety of stances expressed toward the rating and the rating agencies. On the mild side, there are those who calmly accept the assessment, with the explanation of the seriousness of the level of Japan's public debt, while on the other end, there are those who respond adversely, with radical comments such as; "what is at stake is not of Japan but the credibility of rating agencies."

There is, however, no serious-minded comment domestically that Japan's public debt issue could be left the way it is, even by those who expresses distaste for the actions of the rating companies. In fact, practically every comment that deals with the rating, whether they acknowledge the level or denounce it, ends with a phrase in one way or another warning that "something needs to be done to tame the ever increasing Government debt."