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Fitch says Korea more creditworthy than Japan or China

Fitch Ratings, one of the three major credit rating agencies along with Moody’s and Standard & Poors, gave South Korea an AA- (Stable) rating earlier this week.  This makes them ranked above Japan (A+ Negative) and China (A+ Stable).  AA- is Fitch’s fourth highest ranking, below AAA (good ole U.S. of A, Australia, Canada, Germany), AA+ (Hong Kong, Bermuda) and AA (UAE, Belgium, Kuwait), but still in the “High Grade” category.  Japan and China are in the “Upper Medium Grade” category.

Japan is still ahead of South Korea in S&P’s rankings (AA- vs. A) but dead even in Moody’s (Aa3).

Fitch cited Korea’s stable growth during and beyond the 2008 Financial Crisis as a key reason for the upgrade.  Not sure if Fitch realizes that Korea’s growth has been slowing as of late.  Also, their most recent consumer debt levels are not too hot either.

  • jkitchstk

    Japanese Economy Still Miles Ahead of Korea’s
    http://english.chosun.com/site/data/html_dir/2012/09/07/2012090701070.html
    “Japan still trounces Korea in terms of economic size and productivity. Japan’s GDP stood at US$5.87 trillion last year, more than five times Korea’s $1.12 trillion. Japan’s per-capita GDP was $44,600 last year, twice as much as Korea’s $21,500.
    Korea’s major businesses still depend on Japan for a large number of core technologies and key components. As a result, Korea still buys more products from Japan than it sells, and its trade deficit stood at $28.6 billion last year.”

  • redwhitedude

    jkitchstk,
    look at the trends. The high yen which is a manifestation of the political inability to do anything about it is causing Japan to hollow out. The only thing that will be left in japan is manufacturers of highly sophisticated machine components or other parts that can’t be made anywhere. Their debt is the developed world’s highest. Nissan just started importing their cars to Japan. The current account of Japan is steadily going to deficit. Korea may depend on Japan for parts but the high yen is going to be a significant inducement to try to source it from somewhere else or make it themselves. Korea has managed to conclude FTA with EU and USA. Japan with the trade stonewalling of the 80s with the US has left somewhat of a bad aftertaste. Who do you would you rather work with somebody to get things done or somebody who is being difficult?

  • madar

    The economy has been tanking of late. My friends have switched from talking about how Korea is an economic powerhouse in light of the world wide recession, to doom and gloom and talk of decreasing margins and profits in the last six months. These ratings are based on what has gone on in the last year and are not predictive. I don’t suspect it will last long. As an aside, I love the latest take in the newspapers, which have switch into this diatribe about how the rest of the world is trying to sabotage Korean economic success out of jealousy. Sure, an export driven economy having trouble during a world wide recession, it must be sabotage. I also love it how, whenever the stock market takes a dump here, the newspapers always report it is on foreign selling, like it is an evil plot by outsiders and Koreans would never dare dump these super wonderful stocks. But when the market goes up, foreign buyers are almost never mentioned. Or if they are it is in terms of, see we are so together, even foreigners want a piece of our awesomeness! You’d think economic analysts would be more interested in what is really driving the economy rather than playing ego or victim cards. But I guess that doesn’t move newspapers.

  • madar

    I was talking to a friend of mine last week. He has been complaining about decreasing profit margins for the last 6 months. When I asked him about his business he started in on Koreans 4 seasons and wonderful Chusok. I thought, “Damn, it’s as bad as all that!” My other business contacts have not been much rosier in the last few months.

  • http://pawikoreapics.blogspot.com/ pawikirogii 石鵝

    pisses you off, dont it, jkitsch?

    trailer trash.

  • http://www.xanga.com/wangkon936 WangKon936

    The yen is way overvalued and the won is a little undervalued. If both were valued correctly, then the real per capita GDP should be Japan $35k and Korea $27k.

  • bballi bballi Paradise

    @ pawi
    I’m confused, it pisses jkitsch off that Japan is still miles ahead, or it pisses you off pawi?

  • http://pawikoreapics.blogspot.com/ pawikirogii 石鵝

    it aint miles ahead. had a hundred years to do what korea did in 30. japan aint miles ahead. japan has four times the population. that means korea has caught up. one trillion x 4 = 4 trillion. c?

  • R. Elgin

    This does not address or disguise the ruinous spending waste of local governments here or the ever growing household debt problem or the increase in credit default and the irresponsible role banks here have played in this.

    Financial security does not begin nor end with a rating from Fitch though it might make a nice epitaph for a grave marker.

  • http://www.xanga.com/wangkon936 WangKon936

    Elgin,

    The financial ranking agencies made a big mistake when they ranked a lot of credit default swaps as AAA+. It was an expensive and painful lesson learned. However, when it comes to ranking national solvency, these rankings are graded a bit on a curve and most people in the classroom today are failing.

  • Jed

    #8
    Japan’s population is 127 000 000, what is the population of Korea?

  • jkitchstk

    # 11,
    Miles behind in everyday mathematics too.

  • redwhitedude

    Funny how discussion turned to Japan but this post also mentions china.
    Lets not overlook the fact that china with state owned enterprises in “strategic industries” nobody knows for certain what their balance books are like so it isn’t open to public debate. I’m a bit surprised that china is ranked up there with all these uncertainties and nondisclosure on the part of the chinese.

  • http://www.chinasmack.com/tag/funny/page/3 Jakgani

    China’s balance books are HUGE.

    For the last 10 years they have been pumping billions into Australia and buying all the USA bonds and before that they were pumping billions into Europe.

    At the moment China is trying to buy half of Australia – to use for farming and dairy farms – so they can send the milk and vegies back to China.

  • redwhitedude

    Japan has huge amount of assets abroad but look at them now. That doesn’t change the fact that their domestic economy has seen better days. Chinese could be earning a lot but that only masks the ineffieciencies in their economy that one day could come and bite them. I suspect a lot of their state owned enterprise because they are being coddled and protected despite WTO commitments by the chinese are bound to be close to insolvent or seriously running into the red. Not to mention the reason why chinese fishermen cause incidents by illegal fishing is due to their blatant disregard for environmental protection and overfishing.

  • redwhitedude

    Forgot to mention keeping their currency pegged within a narrow band is causing inflation because their products continue to be sold abroad at ridiculous rates. Their currency needs to appreciate so they won’t end up with inflation.

  • http://pawikoreapics.blogspot.com/ pawikirogii 石鵝

    thanks, jed. i couldnt remember so i just made the shit up. thanks.

  • iMe

    “AA- is Fitch’s fourth highest ranking, below AAA (good ole U.S. of A…”

    There goes Fitch’s credibility.

  • TheKorean2

    “Japan still trounces Korea in terms of economic size and productivity. ”
    Sure, its South Korea, a divided Korea. As for economic size, Japan has a larger economy than South Korea but the technological level is the same. If South Korea produces much more, then Japan won’t be any larger.

    In the end, we don’t need few Japan’s parts, we can get cheaper and better than someplace else. That’s all.

  • http://askakorean.blogspot.com thekorean

    As an aside, I love the latest take in the newspapers, which have switch into this diatribe about how the rest of the world is trying to sabotage Korean economic success out of jealousy.

    Considering I read several Korean newspapers every day, would love to see this “latest take” that I never noticed.

  • redwhitedude

    Well it looks like Japan’s position is slipping. Their debt is over 230% of GDP and their current account is going negative. How will they finance their debt if there is a net outflow of capital? It looks like we are headed to a sovereign debt crisis that will the current EU crisis child’s play.

  • H.Schmidt

    http://english.yonhapnews.co.kr/business/2012/09/09/69/0503000000AEN20120909001300320F.HTML

    Korea’s national debt falls to lowest level among OECD nations.

    Japan’s national debt is the highest (211.7%) among OECD nations.

    Looks like Japan has borrowed so much money that it might not even have the chance to pay back its debts.

  • H.Schmidt

    Also who cares if Japan’s economy is larger when Japan is an island full of earthquakes, tsunamis and nuclear disasters? From a living standard point of view, Japan is far below Korea.

    I would rather live in a suitable economy, good living standards and good environmental conditions rather than a bigger economy, bad living standards and unhealthy environmental conditions.

    So this economic argument is useless. Korea has good living conditions and very healthy environment and Koreans should be proud of this.

  • http://www.chinasmack.com/tag/funny/page/3 Jakgani

    China is a strange country – (A+ Stable)

    and yet kids still have to take their own desks and chairs into filthy classrooms to study in some places of China –

    http://dok.do/Kiz8AN

  • cm

    The gap is not as big as it appears on paper, as the Chosun Ilbo’s lip service article posted by jkitchstk suggests, since Japan’s Yen is highly over valued, and any drastic fall in the value of the Yen will reveal this distortion.

    In terms of Purchase Power Parity GDP per person, South Korea has already surpassed Japan last year (read link below). And by 2017, the IMF is predicting that South Korea will surpass Japan even in the nominal per capita GDP per person figure.

    http://news.chosun.com/site/data/html_dir/2012/09/08/2012090800190.html

    If these IMF predictions do happen in five years, it will be remarkable achievement for a former colonial subject and a divided country competing in the market place with one hand tied behind its back.

  • http://www.xanga.com/wangkon936 WangKon936

    Japan is a nation that is still strong, but is declining and has its long-term (and short-term) issues. Its apologists, if they truly care about the country, would best serve that nation if they would honestly acknowledge it.

  • http://www.xanga.com/wangkon936 WangKon936

    “In the end, we don’t need few Japan’s parts, we can get cheaper and better than someplace else. That’s all.”

    Beg to disagree:

    http://english.donga.com/srv/service.php3?biid=2011112209598

    http://www.jri.co.jp/MediaLibrary/file/english/periodical/rim/2012/43.pdf

    There isn’t one major finished product Korea makes, but it a car, ship, cell phone or TV that can’t be completed without Japanese subcomponents and/or capital equipment. These subcomponents and capex are not commodity items. Due to the high price of the yen, they can’t be commodities. Thus, because Korean companies literally have to overpay for them, they must really need them to make that finished product.

    The long-term solution to reducing the deficit is for Korea to foster its own medium sized component manufacturers and/or capital equipment product manufacturers.

  • TheKorean2

    WangKon, that is why we can get it somewhere else but for a cheaper price.

  • http://www.xanga.com/wangkon936 WangKon936

    TK2,

    If so, then why does Korea have a $30B trade deficit with Japan (if we could get it somewhere else cheaper)?

    I don’t think you’re understanding the math.

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