Standard & Poor's said Monday the Democratic Party of Japan's stunning defeat in the Upper House election will act as a "negative factor" on Japan's sovereign ratings.
This is because a "hung" Diet is the most likely outcome, which will make it difficult for the government to implement structural reforms, including to the public pension system, as well as an increase in the consumption tax rate, S&P said.
The U.S. credit rating agency, which lowered the outlook for its rating on long-term Japanese governments from "stable" to "negative" in January, also said it may lower the sovereign ratings on Japan if there is a lack of concrete measures aimed at fiscal consolidation.
Noting that many political parties and politicians appear to lack a sense of urgency on fiscal rehabilitation, S&P said, "Generally speaking, the longer the government delays decisive action on fiscal consolidation, the greater the potential risk of losing market confidence."