Korea's Credit Rating Now Safer Than Japan's

      September 07, 2012 09:25

      Korea's sovereign credit rating has risen above Japan's for the first time. Fitch, one of the top three largest credit rating firms, upgraded Korea's rating by one notch from A+ to AA-, it said Thursday.

      The upgrade came 10 days after fellow ratings firm Moody's raised Korea's rating to Aa3, the highest the country has had so far. AA-, is the fourth-highest credit rating out of Fitch's 21 and on a par with Moody's Aa3.

      Now Korea ranks one notch above Japan's and China's A+.

      Japan, the world's third-largest economy, stood at AAA, the highest rating, until the late 1990s but dropped by four notches to A+ due to the long-term impact of the recession.

      In contrast, Korea's rating fell to B- under speculative-grade ratings right after the Asian financial crisis hit in the late 1990s but rose 12 notches over the next 14 years and eight months.

      Fitch cited Korea's financial stability and the government's fiscal discipline in an unstable external environment, such as the eurozone debt crisis. Korea could be upgraded further and avoid the financial burden of aging population if it maintains a sound financial structure and reduces its national debt, it added.

      "Fitch said that risks posed by North Korea [are] a relevant factor in South Korea's rating but 'remain remote,'" Reuters reported.

      "It's exceptional for two rating agencies to upgrade Korea's credit rating, especially when major countries' ratings have been downgraded," said Choi Jong-ku at the Ministry of Strategy and Finance. "The upgrade means Korea has been recognized as an economically advanced nation."

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