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Thursday, 25th August 2011
In Business In Japan,

Japan's credit rating downgraded by Moody's

Japan had its credit rating downgraded by Moody's, one of the top ratings agencies in the world, on Tuesday (August 23rd).

The economy of the country was changed from AAA to AA3, just weeks after the same ratings company decided to keep the United States of America's rating at the top level.

In a statement, Moody's noted the reasons for downgrading the Asian nation's credit rating: "Over the past five years, frequent changes in administrations have prevented the government from implementing long-term economic and fiscal strategies into effective and durable policies."

"The rating downgrade is prompted by the large budget deficits and the build-up in Japanese government debt since the 2009 global recession. The March earthquake also undermined Japan’s recovery."

Despite the explanations, some experts have criticised the decision. Todd Elmer, who is the currency strategist for Citi in Singapore, told the Daily Mail that the ratings agency have got its decision wrong.

"The scheme treats the symptoms not the underlying cause," he said.

"So it's not going to have any impact whatsoever in supporting dollar [or] yen, and given that there have been some expectations for stronger measures I wouldn't be surprised if dollar [and] yen traded lower on the day."

However, Anthony Michael, a director on the Asia Pacific desk at Aberdeen Asset Management, told the news provider that Japan's downgrading will not be unique and that it is "unlikely to be the last among … developed market countries".

Written by Susan Ballion