Japan ranks 24th, one place above South Korea, with both Asian sovereigns overtaking Malta and Slovenia as confidence in the eurozone periphery dissipates.
However, the score gap between the two has narrowed to just 0.2 points.
Japan has seen its economic, political and structural-assessment scores all decline during the past six months. Confidence among ECR’s contributors in its government finances and economic-GNP outlook has nevertheless improved, along with two other sub-factors: government stability and hard infrastructure.
South Korea has also seen improved scores for government finances, government stability and hard infrastructure, as well as information access/transparency and demographics.
The higher score for Korea’s government finances is justified according to Asiaweek, which states that: “Analysts believe that foreign investors will continue to plough their investments into Asia’s most developed bond markets, especially [South] Korea, in hopes of receiving higher returns.”
South Korea’s economic outlook is also stronger than Japan’s, according to the International Monetary Fund, which foresees 3.5% real GDP growth in 2012 for South Korea, rising to 4% in 2013, compared with 2% and 1.7% for Japan.
However, Japan still scores much higher (has a far lower risk) than South Korea for bank stability, government payments/non-repatriation, regulatory/policymaking and its soft infrastructure, highlighting how a narrow focus on economic forecasts paints only a partial picture of sovereign risk and explaining why Japan is still – just – keeping above South Korea in the ECR global risk table.