Moody's warns Japan on delay in sales tax bill

TOKYO: Moody's Investors Service said on Friday a delay in Japan's plan to double its 5 percent sales tax would be a negative development and prompt the agency to reassess the country's credit rating.

Moody's has an Aa3 rating on Japan with a stable outlook, and it said it is unlikely to change the outlook in the near future, partly because the country's current account surplus helps offset its large public debt.

But the ratings agency warned that policy formation is "weak" under the ruling Democratic Party as a split parliament slows the passage of bills needed to curb the country's debt burden and improve its economy.

"If there were a delay in consumption tax legislation, that would be a credit negative event," senior vice president and regional credit officer Tom Byrne told reporters.

"We would reassess the situation and look at the balance of factors."

Moody's Aa3 rating of Japan is on the same level as those of Standard & Poor's and Fitch, who both rate Japan AA- with a negative outlook. All three agencies rate Japan three notches below the top AAA rating.