S&P demotes Japanese credit ratings
On April 24 S&P Global Ratings changed its credit rating for the three largest Japanese banking conglomerates from positive to stable. The global pandemic increases the strain on lending mechanisms and negates the earnings.
S&P stated that the revision has been caused by the expectations of long influence of the pandemic on banks. The update impacts the subsidiaries of Mizuho, Sumitomo Mitsui and Mitsubishi UFJ. S&P claims that the stability and efficiency of the institutions are under stress of the rising costs of credits, as well as fluctuations on the securities market.
The government of Japan has recently revealed new stimulus measures and encouraged the financial institutions to provide credit to small businesses impacted by the pandemic at almost zero interest rates. The effort adds a threat of large risky loans to an already big pile of problems of the financial institutions.
On April 21 the Bank of Japan issued an official note, warning that if the longer scenario of the pandemic’s development takes place, a loop of negative feedback might arise, where a suffering economy might begin to gradually destroy the stability of the national finances.