• Kyodo

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The Abe administration will closely watch movements in bond markets after Moody’s Investors Service Inc. cut its credit rating on Japanese sovereign bonds amid uncertainty over Japan’s ability to restore its fiscal health, a spokesman said Tuesday.

“We will watch market movements closely, and carry out appropriate debt management policies,” Deputy Chief Cabinet Secretary Hiroshige Seko told reporters.

Seko refrained from giving his evaluation of the rating cut itself as it was a decision made by a private company but said the administration will aim for both economic growth and fiscal rehabilitation.

Moody’s reduced the rating on Japan’s sovereign bonds by one notch to A1 from Aa3 with stable outlook, a day before official campaigning started Tuesday for the Lower House election on Dec. 14.

The downgrade came after Prime Minister Shinzo Abe decided to put off the consumption tax hike to 10 percent from the planned October 2015 to April 2017, casting further doubt over exactly when Japan can achieve fiscal rehabilitation.

Japan’s fiscal health is the worst among major industrialized economies with public debt at more than 200 percent of its gross domestic product.

Abe has said his administration will halve the ratio of the primary balance deficit to GDP by fiscal 2015 from the fiscal 2010 level, and turn the balance into a surplus by fiscal 2020.

A deficit in the balance means the country can’t finance government spending other than debt-servicing costs without issuing new bonds. The additional tax hike, following the increase to 8 percent on April 1, is viewed as a critical step to achieve the fiscal reform goals.

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