Maybank FX Flash - JPY: Fitch Cuts Japan’s Credit Rating to ‘A’ - 27 Apr 2015

JPY: Fitch Cuts Japan’s Credit Rating to ‘A’

§  The sovereign credit rating of Japan was downgraded one notch to ‘A’ from ‘A+’ by Fitch Ratings, underpinned by  the Japanese government’s lack of commitment to fiscal consolidation.

§  The announcement caught the market unprepared, though the reaction was short-lived. The USD/JPY spiked to 119.42 from 119.15 following the announcement, but as the shock wore off, the pair eased back to around the 119.10-levels. A similar reaction was seen in the JPY/SGD and JPY/MYR.

§  The rating cut was not surprising given the state of affairs in Japan currently. The Abe government’s main priority remains reflating the economy and to ensure sustainable economic growth, helped by the BOJ. Thus, we do not expect the Fitch downgrade to have a significant impact on the USD/JPY.