​Japan's woes earn a credit rating downgrade

TOKYO - Standard & Poor's lowered Japan's sovereign credit rating on Wednesday and said that "despite showing initial promise," it doesn't expect Prime Minister Shinzo Abe's economic revival strategy, called Abenomics, to reverse deteriorating government finances within the next three years.

The credit rating agency lowered Japan's long-term credit rating to A+ from AA- and said its outlook was stable, meaning further changes to the rating are unlikely in the near to medium term.

A credit rating downgrade can raise the cost of borrowing overseas for governments, but Japan is largely insulated because most state debt is in local hands.

"We believe the likelihood of an economic recovery in Japan strong enough to restore economic support for sovereign creditworthiness commensurate with our previous assessment has diminished," S&P said in its downgrade announcement.

Average income has declined to $36,000 from $47,000 between 2011 and 2014, which reflects the falling value of the yen versus the dollar and weak economic growth.

Japan's government debt relative to the size of its economy is among the highest for developed countries.

The economic blows of the 2008 global financial crisis and the 2011 earthquake have depressed government revenue, but spending has continued to increase, partly because of an aging population, S&P said.

It projects general government debt to increase by the equivalent of 5 percent of gross domestic product each year from 2015 to 2018.

S&P said Japan's fiscal weakness is balanced by the country's political stability, relatively prosperous economy, stable financial system and net creditor status in relation to foreign countries.

It also noted Japan's "generally effective checks and balances in the government, strong respect for the rule of law, and free flow of information facilitate policymaking." According to S&P, "This has helped achieve popular acceptance of challenging policy changes such as the 2014 increase in the sales tax rate. However, we see slow decision-making among policy institutions somewhat impairing policy implementation."