A prominent U.S. credit rating agency has defended its recent downgrading of Japan's debt rating. Also, two major Japanese steel makers plan to merge.
Executives from Moody's Investors Service made an unprecedented appearance in Japan's Parliament Wednesday. They were questioned about Moody's recent decision to cut Japan's long-term local debt rating.
Moody's cut Tokyo's debt rating two notches, putting Japan at the bottom ranking among major industrialized nations.
Japanese officials have strongly complained that the move, putting the country on par with Cyprus and Latvia, is unfair.
Thomas Byrne, Moody's vice president and senior credit officer, was one of the executives appearing before Parliament. "The Japanese government's current and anticipated economic policies will be insufficient to prevent continued deterioration in Japan's domestic debt position," he said. "Japan's general government indebtedness, however measured, will approach levels unprecedented in the post-war era in the developed world."
Despite the rating cut, the country's economy is showing signs of recovery. According to the Finance Ministry, Japan's current account surplus rose nearly 22 percent to $8.7 billion in April from a year earlier. That marks the seventh straight month of gains.
The figure underscores the improvement in exports, which helped end Japan's recession in the first quarter of this year. Shipments of steel products to other Asian nations were particularly strong. The current account measures the difference between Japan's income from foreign sources and the foreign obligations it owes.
Despite the economic improvement, there are new signs of corporate consolidation in Japan. Nippon Steel, Japan's largest steel maker, and smaller rival Sumitomo Metal have agreed to merge their stainless-steel businesses next year. The two companies say the alliance will create a more competitive company out of two unprofitable operations.
The stainless-steel industry is under pressure to reorganize and boost profits due to weak domestic demand and falling prices. Last year, other steel companies unveiled a similar plan.