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S Korea-Japan-CDS premium

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(Globalpost/GlobalPost)

SEOUL, March 11 (Yonhap) -- Japan's credit default risk fell below that of South Korea in March following the improved economic outlook over Tokyo's strong monetary easing, data showed Monday.

The credit default swap (CDS) premium for Japan's benchmark Treasuries came in at 62 basis points on Wednesday, compared to 64 basis points tallied for South Korea, according to data by the Korea Center for International Finance.

The spread on CDS reflects the cost of hedging credit risks on corporate or sovereign debt. A higher number indicates deterioration in the credit of the country's bonds. A basis point is 0.01 percentage point.

South Korea's credit default risk has stayed lower than that of Japan for four straight months in February, on the back of sovereign rating upgrades by global credit appraisers.

Japan's CDS surged up to 155 basis points in October 2011 due to the aftermath of an earthquake that took place in the eastern area of the country in March.

Market watchers said the recent fall in Japan's credit default risk came as Japanese Prime Minister Shinzo Abe, who took office in December 2012, has been making efforts to bolster quantitative easing by giving an extra push to the weak yen, thus adding vitality to the country's sluggish economy.

Japan's stimulus plan came as a major drag for South Korean exporters, by inflicting foreign exchange losses, making local goods more expensive overseas and damaging firms that compete with Japanese firms.

Meanwhile, Japan's stock markets also gathered ground, with the Nikkei shares rising 42.7 percent on Friday, compared to March 15, 2011. South Korea's benchmark Korea Composite Stock Price Index (KOSPI) advanced 4.3 percent over the cited period.

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