Bank of Japan policy may become the most crucial element in deciding the nation’s creditworthiness, S&P Global Ratings said, suggesting the central bank’s action has the potential to trigger its first sovereign credit rating change in years.
"The risks of policy changes or no policy changes are both quite high right now,” Kim Eng Tan, primary Japan credit analyst, said in an interview. "Therefore, this is probably the most important factor that could determine the rating triggers.”
Speculation has been building that the BOJ may start to withdraw its decade-old monetary stimulus next year as the yen’s fall driven by its policy helps accelerate inflation. Debate has focused on whether the central bank should hold firm to fully eliminate the threat of deflation returning, or start to tighten the spigot to pre-empt higher price growth.