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S&P Affirms Japan's Sovereign Ratings

S&P Global Ratings affirmed sovereign ratings of Japan as the fallout from economic shocks are expected to be temporary.

The rating agency said the coronavirus or covid-19 outbreak has set back Japan's fiscal stabilization process but it is expected to get back on track in the next one to two years as the economy recovers.

The rating agency said the 'A+' rating reflects Japan's exceptional external position, prosperous and diversified economy, political stability, and savings-rich financial system.

The positive outlook indicates that Japan will return to a fiscal trajectory that stabilizes or improves its government debt level relative to GDP.

Due to the sales tax hike in October 2019 and covid-19 outbreak, the economy is set to see marginal contraction in two consecutive fiscal years.

Although the real GDP growth will rebound in fiscal 2021 to above 2 percent, the ongoing slowdown will take some wind out of current robust labor market conditions, S&P said.

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