Moody’s Sees Japan’s Economic Recovery Gaining Strength

• Moody’s sees Japan’s recovery gaining strength, with inflation expectations anchored around 2%, but fiscal and demographic risks threaten its durability.
• Japan retains an A1 sovereign rating with a stable outlook, unchanged since its downgrade from Aa3 in 2014.
• Proposed food sales tax cuts pose little immediate credit risk, provided the government offsets lost revenue.
• Record initial spending requests of 143 trillion yen do not signal a meaningful departure from recent fiscal consolidation, according to Moody’s.
• The proposed 370 trillion yen public-private investment initiative faces tests over private capital participation and productivity gains needed to counter demographic pressures.

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