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Despite growing debt problems in the United States, Japan is standing up and voicing its support for the country.
On April 19, Standard and Poor’s (S&P), the world’s biggest rating agency, reaffirmed the U.S.’s credit rating at AAA, however at the same time they lowered the country’s long-term credit outlook to negative from stable.
Japan was one of the first countries to come out and support the United States. Yoshihiko Noda, Japanese finance minister, was quoted in a Reuter’s article saying that U.S. is taking steps to resolve their debt problems, and for that reason, treasuries are still an attractive product for them. Japan is America’s second-biggest customer because the government has a reserve of about $1.2 trillion (U.S.) in U.S. treasury bonds. China is the biggest hold of U.S. debt, with a reserve of more than $3.3 trillion (U.S.).
The United States isn’t the only country that has debt problems, and the negative outlook from S&P could draw attention to Japan’s difficulties. The Japanese government is expected to release a supplemental budget in the next few weeks to cover the costs of reconstruction after the March 11 earthquake and tsunami. The budget could be as high as ¥ 4 trillion. In January S&P cut Japan’s sovereign debt rating to AA- but they are not expected to lower that rating in the near-term. [RT]