Traders Debate Threat of Japan Rating Cut as Debt Risks Rise

Japan’s mounting debt burden and an election that risks making it worse are fueling debate on whether the nation’s sovereign credit rating may be cut sooner rather than later.

Talk of a downgrade is gaining traction in the market, as promises of cash handouts and a lower sales tax dominate the headlines before the July 20 vote. Official data show that Japan’s ratio of interest payments to revenue may rise to an eight-year high in the fiscal year ending March 2026, adding to concerns over the outlook for the nation’s credit rating.