In the guessing game of which Asian sovereign credit will be downgraded next, after the United States this weekend, Japan is almost everyone's top pick, and not simply because its debt burden and messy politics are as bad if not worse than America's.
Standard & Poor’s historic downgrade of the US AAA rating has changed the ratings landscape in some ways, one being to put the spotlight squarely and closely on the political climate in countries with massive debts.
This time, it is the purely the ability to deal with either a full-blown financial crisis spawned by Europe's debt woes or a protracted global economic downturn that has ratings agencies focusing on the how deep the fiscal pockets are.
The obvious losers in such a scenario would be governments like Japan's with no means to either defend their markets or stimulate their economies without getting deeper in debt.
S&P was quick to point out on Monday, as stock markets tumbled in reaction to the US losing its top-tier rating, that the implications for Asia’s creditworthiness would be more negative than in the past.
“The fiscal capacities of Japan, India, Malaysia, Taiwan, and New Zealand have shrunk relative to pre-2008 levels,” S&P said in a statement. “If a renewed slowdown comes, it would likely create a deeper and more prolonged impact than the last one.”
With gross government debt at twice its $5 trillion economy, Japan is pretty much on every rating agency’s radar even though most of the debt is owned and funded by Japanese investors.