Japan Cabinet Ministers Express Confidence In U.S. Debt After S&P Lowers Outlook

Japanese cabinet ministers on Tuesday moved to shore up confidence in
U.S. debt after Standard & Poor’s threatened to lower its credit
rating on the world’s largest economy due to a bulging budget deficit,
touching a nerve with one of the largest holders of Treasuries.

S&P, which assigns ratings to guide investors on the risks
involved in buying debt instruments, slapped a negative outlook on the
United States’ top-notch AAA credit rating on Monday and said there was
at least a one-in-three chance that it could eventually cut it.

Japan is the second-largest holder of Treasuries after China and its
confidence in dollar-denominated assets has been steadfast until now,
but the prospect of a ratings downgrade could test Japan’s faith in
Treasuries.

The increasing chance of a downgrade for the United States could also
draw unwanted attention to Japan’s large debt burden, which is likely
to grow larger as the government secures funding to rebuild after last
month’s devastating earthquake and tsunami.