Japan credit rating agency upgrades RP

The Japan Credit Rating Agency (JCRA) has upgraded its outlook on the country’s credit rating from “stable” to “positive,” indicating the possibility of a credit rating upgrade.

Usually the most upbeat of the four major credit rating agencies, JCRA said it would start considering upgrading the country’s credit rating when it could reaffirm that its macroeconomic performance would continue.

JCRA warned, however, that it is necessary for the Arroyo administration to strengthen its tax collection capability while ensuring that economic performance would lead to an expansion of tax revenues.

JCRA noted that the Arroyo administration had survived two political crises in 2005 and 2006 without bloodshed while the midterm elections in May proved orderly and relatively uneventful.

Beyond politics, JCRA said the dollar remittances from overseas Filipino workers (OFWs) have been maintaining solid growth in support of the country’s balance of payments (BOP) and private consumption.

After posting a 6.9-percent growth in gross domestic product (GDP) during the first quarter, the agency said a six percent growth is expected to be within reach in 2007.

JCRA chief analyst Yoshihiko Tamura said in a statement that international confidence has also been improving, leading to the appreciation of the peso against the dollar.

Tamura said the inflow of investment funds from overseas including foreign direct investments had increased in addition to the increase of the current account surplus.

“This has resulted in expanding the balance of payments surplus, allowing the foreign exchange reserves to build up,” Tamura said.

As a result, Tamura said the country’s currency liquidity position has been kept at sound levels.

Finance Secretary Margarito B. Teves said he was pleased that the JCRA recognized that the focus on the economy was finally producing “sustainable results.”

“At the start of our reform program, we made a decision not to sacrifice long-term gains for short-term political expediency,” Teves said.