Japan joins the downgrade club

Japanese sovereign debt has been downgraded by Moody’s, less than a month after Standard & Poor’s downgraded US sovereign debt.

Moody’s cited similar reasons to Standard & Poor’s for their credit rating downgrade, with weak political leadership the main rationale for this downgrade.

It sees Japanese sovereign debt downgraded one notch from Aa3 to Aa2 and follows a warning from Moody’s back in May that a downgrade could take place. They continue to have a stable outlook.

In addition to weak political leadership, Moody’s is concerned about prospects for economic growth and a weak policy response to dealing with public debt.

Unlike the recent US credit downgrade, markets did not respond dramatically to news of this credit rating downgrade.

The Nikkei 225 index of leading company shares in Japan closed down around 1% following the news.

Photo credit: Flickr/Marc Veraart