Korea's Default Risk Once Again Greater Than Japan's
The credit default swap premium for Japanese sovereign bonds, which shows a country's risk of default, has once again fallen below Korea's.
According to the Korea Center for International Finance on Monday, Japan's CDS premium -- the interest rate for a credit default swap derivative that compensates for losses in case the country or company that issued bonds goes bankrupt -- fell from 67 basis points (1bp=0.01 percent) last Tuesday to 62 bps on Wednesday.
In contrast, Korea's CDS premium fell only slightly from 65 bps to 64 bps. It was the first time in five months that Japan's CDS premium fell below Korea's.
Japan's CDS premium had long been lower than Korea's, but the order was reversed when the three major ratings firms Fitch, Moody's and Standard & Poor's all raised Korea's credit rating in the second half of last year.
The latest change has been attributed to Japanese Prime Minister Shinzo Abe’s strong economic stimulus measures, including a weak-yen policy, that has led to signs of the country's economy getting back on its feet.
