Japan's bond sales may surpass 50 trillion yen in the year starting April 2013, the Finance Ministry said yesterday. That suggests Kan may not meet a pledge of capping sales at 44.3 trillion yen. Public debt will probably increase 5.8 percent to 997.7 trillion yen in the year starting April 1, from a projected 943.1 trillion yen this year, the ministry said.

Losing Credibility

Finance Minister Yoshihiko Noda said Jan. 24 the debt burden has risen to a point where Japan can't rely on bond sales to cover revenue shortfalls. Economy Minister Yosano warned the same day that such a reliance on such sales could lead to a jump in borrowing costs.

"If we continue relying on bond sales to make up for spending that exceeds revenue, we could see long-term interest rates increase or a deterioration in our debt ratio, causing Japan to lose credibility globally," Yosano told parliament.

The Bank of Japan this week kept its benchmark interest rate near zero even as it raised its growth forecast for the year ending March to 3.3 percent from an October estimate of 2.1 percent.

Higher commodity costs will spur a 0.3 percent increase in consumer prices in the year starting April, the central bank said. A gain of that amount would be less than the 1 percent it regards as stable.

'Within Expectations'

Today's rating downgrade "was within expectations given the situation with the GDP and outstanding debt," said Yoshimitsu Goto, general manager at Softbank Corp., Japan's third-largest wireless carrier. "It won't hinder our financial operations."

Moody's Investors Service today affirmed its Aa2 rank for Japan, the third-highest grade, with a stable outlook. Fitch said it's "supporting" its local AA- and foreign currency Aa ratings for the nation.

Japan's borrowing costs are among the lowest in the industrialized world, helping it fund its debt load. The yield on the benchmark 10-year bond slipped 1 basis point to 1.23 percent as of 10:47 p.m. in Tokyo. It touched 1.26 percent in Jan. 19, the highest since Dec. 16.

As a consequence of today's downgrade, S&P lowered ratings on other entities including four insurers and six government- related institutions including Japan Finance Corp., Japan International Cooperation Agency and Japan Finance Organization for Municipalities, according to a separate statement. All institutions are now graded AA- at the company.


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