ANKARA

Japan's economic activity is expected to reach its pre-pandemic level next year, according to global rating agency Moody's.

"Moody's expects Japan's real GDP growth to accelerate over the next few quarters," the agency said in a statement late Friday. "The recovery will be further aided by ongoing fiscal and monetary support, as well as the continued healthy demand for Japan's merchandise exports."

The rating agency said it expects Japan's GDP growth to stabilize at just below 1% in the medium term, noting that it contracted 4.6% in 2020 due to the coronavirus pandemic.

Due to the large fiscal response to the pandemic, the agency forecasts Japan's government debt to approach 230% of its GDP for the fiscal year ending in March 2021, from around 200% the previous fiscal year.

"Moody's expects a gradual narrowing of the deficit, largely based on a tapering of pandemic-related spending and recovery in revenue with economic activity," it said.

Noting that participation rates for both female and senior workers have almost fully recovered to the historic peaks reached in 2019, the agency said unemployment has remained low through the pandemic shock.

Moody's also affirmed Japan's credit rating at 'A1' and maintained its stable outlook.