Moody's Don't Miss A Shot

Following all the stick that they have taken over the sub prime scandal, one should now expect the ratings agencies to use the vocabulary of "strong vigilance" in connection with those sovereign debts whose scale defy the limits of credulity, especially Italy and Japan. Hence, with all the uncertainty surrounding policy direction following Abe's departure (and see the last post for some indication of the spending pressures which are going to come from the ageing electorate). Moody's have not been slow to react:

Moody’s Investors Service, the ratings agency, on Thursday warned about the danger of policy drift amid the uncertainty. Thomas Byrne, vice-president, said the Japanese economy’s 1.2 per cent contraction in the second quarter of this year remained of concern. “If policy slippage were to allow such trends to go unchecked, the government’s goal of restoring primary fiscal balance by 2011...would be jeopardised.”

This is, I think, what we can increasingly expect from here on in.