Improved growth prospects and a high-income economy underpin Japan's resilience. Tourism and healthcare spending have helped boost employment and investment. The policy environment is encumbered by sometimes slow decision-making. The free-floating yen's reserve currency status supports Japan's credit quality. Japan's extremely strong external financial metrics are likely to be augmented by current account surpluses in the next three to four years. Fiscal performance is likely to improve only gradually, with the general government deficit averaging below 4% of GDP over much of the next four years. The positive outlook on the long-term sovereign credit rating on Japan reflects our view that nominal economic growth exceeding 2%, alongside negative effective real interest rates, would allow the sovereign's relative debt burden to
