Question

In: Finance

what are the differnces in country risk between the united states and japan?

what are the differnces in country risk between the united states and japan?

Solutions

Expert Solution

The following are differences between country risk between USA AND JAPAN

Country risk comparison

Paramteres

USA

JAPAN

Risk Tier

USA falls under CRT -1 Tier , signifying that usa has very low country specific risk

Japan falls under CRT 2 category , signifying Low but significant amount of country risk

Pillars of country risk

Economic risk is very Low

Economic risk in japan is very Low

Political II

Political Risk is very Low with a score of around 2.

Political Risk is Low with a score of around 3. ( Score 1 to 5, where 1 is better and 5 is worst )

Financial III

Financial system risk is very low

Financial system risk is low

Inflation based parameters

Inflation was moderate with 1.8 % considering country specific risk

Inflation was low at 0.6% signifying lower amount of forex based risk

GDP based economic growth

GDP growth parameters were high at 2.7% signifying higher stability in the system

GDP growth at 0.7% with lower stability in the economic system

Fiscal and monetary stimulus

Banks have adopted aggressive stabilization policy in the monetary system in order to further stabilize the risk parameters

Have adopted fiscal and monetary stimulus in order to stabilize the economic downturn

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