In April, the Japanese government raised the sales tax rate from 5% to 8%, which while doing nothing for the government’s ability to cover debt payments, did significant damage on the country’s growth in terms of GDP.
Clearly that didn’t work out very well, so they’re postponing the planned second increase in the sales tax.
But by doing that, the country’s credit rating was promptly downgraded by Moody’s.
While it’s astonishing that Japan’s rating is still as high as it is, the shift downwards is critical.
This is the beginning of the end. The Japanese government is running out of moves. If they raise taxes, they lose growth; if they don’t, they lose the last remaining shred of confidence from investors that they’ll ever make good on their debt.
Game over, Japan. Hara-kiri seems to be the only option at this point.