TOKYO -- Standard & Poor's raised Japan's sovereign credit outlook to "positive" from "stable" on Friday. The rating agency cited healthier economic prospects as the primary reason for the revision.
"Nominal economic growth exceeding 2%, alongside negative effective real interest rates, would allow the sovereign's relative debt burden to stabilize sooner than we had previously expected," S&P said. "Tourism and healthcare spending have helped boost employment and investment," it added.
S&P also pointed out that Japan's favorable economic environment is likely to gradually benefit its fiscal performance for next three to four years.
However, the rating agency said it may revise the outlook back down to stable, "if [its] expectations of economic performance in the next two to three years are materially weaker than our current projections and cause the process of fiscal repair to slow significantly or stagnate."
Despite the changed outlook, S&P kept its actual rating of Japan's long-term credit -- both in foreign and local currency -- at A+, 5th in the entire rating scale. Other A+ countries include China, Israel, Ireland, Chile and Slovakia.
S&P lowered Japan's sovereign credit rating by one notch from AA- to A+ in September 2015. Until today's update, it has kept the outlook at "stable."