Japan hit by downgrade

 
Julian Harris
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RATINGS agency Moody’s downgraded the Japanese government this morning, painting a gloomy picture for the troubled Asian economy.

Yet investors shrugged off the news, with the Nikkei rising 0.6 per cent in early trading today.

The upbeat start followed a strong day of trading in New York yesterday, during which the Dow Jones grew three per cent.

Nonetheless, Japan’s rating with Moody’s is now Aa3, down from Aa2, with a stable outlook.

“The rating downgrade is prompted by large budget deficits and the build-up in Japanese government debt since the 2009 global recession,” Moody’s said.

“Several factors make it difficult for Japan to slow the growth of debt-to-GDP and thus drive this rating action.”

Political changes to the government have prevented “effective and durable policies” from being implemented, Moody’s said.

Japan is set to elect its sixth prime minister in five years, following the resignation of current head Naoto Kan.

Moody’s also attributed some economic setback to the horrific earthquake and tsunami that hit the country in March.