Are you concerned about the future of Japan with the downgrading of government bonds by Fitch and Moody’s?
UTSUMI: Fundamentally, no. I think that the rating of sovereign bonds and the rating of corporate bonds should be fundamentally distinguished. Corporations can disappear, but countries or nations cannot disappear. This is because at a time of crises, nations, but especially their people, are determined to take care of themselves. So the downgrading effected by these rating agencies do not affect the market at all. If you take, for example, the downgrading of the United States, or of France, nothing happens. So the downgrading of Japan is totally neglected by the market.
What are the underlying reasons for the Japan Credit Rating Agency to retain the AAA rating for Japanese government bonds?
UTSUMI: Japan, after the modernization of the country in the 1860s, has had so many difficulties, such as war and so on. However, Japan has never defaulted. The Japanese are living in a very confused situation at the moment. However, every time there has been a crisis in Japan in the past, the Japanese have always shown their determination to overcome it. Therefore, I am sure that Japan will do the same.
Do you think we should do away with government bond ratings completely?
UTSUMI: I meant that there is a need for determination on the part of both politicians and the people. Once the decision of the government to increase consumption tax, from 5% to 8%, and subsequently to 10%, was agreed upon by some major official parties, the situation started to improve. So if it had not worked, we would have been nervous when rating Japan’s performance. However, the government started to implement more discipline in fiscal policy. I strongly hope this will continue and we shall review our ratings only if this trend ceases to continue.
How can deflation be curbed and growth spurred while maintaining fiscal discipline?
UTSUMI: Although growth is slow, it is important to ensure a sustainable recovery with a sound budget. Without a sound budget, there is no confidence, and without confidence there is no sustainable growth. In the past, we made huge mistakes. For instance, after the crisis in the 1990s, our government continued to make an effort to stimulate the economy by increasing the expenditure for infrastructure without an adequate backup. This was due to a lack of confidence among the people, the investors, the companies, and the individual consumers. Though the growth rate is very low, eventually near zero or negative, it is important to fix the budget in order to regain confidence.
I think that the rating of sovereign bonds and the rating of corporate bonds should be fundamentally distinguished. Corporations can disappear, but countries or nations cannot disappear.
What is your general economic outlook for Japan?
UTSUMI: I think that in the next 2 to 3 years, U.S. growth will be a maximum of 2% and the Euro zone nearly 0%. In this situation, we do not expect our growth to be any higher. Probably our growth rate will be around 1% or 1.5%. This is because our economy is supported by the reconstruction activities, which followed the Tsunami. Our economy and society will not register a high rate of growth. Individual consumption will not register a dramatic increase, but it will remain stable and I think that stability is the strength of our economy.