Nikkei falls 1.78% on Middle East turmoil, Moody's downgrade (3)

21:01, February 22, 2011      

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"The rating action was prompted by heightened concern that economic and fiscal policies may not prove strong enough to achieve the government's deficit reduction target and contain the inexorable rise in debt, which already is well above levels in other advanced economies," Moody's said.

Brokers said Moody's assessment had an immediate affect on Japanese financial issues due to the level of their sovereign bond holdings and Sumitomo Mitsui Financial Group plunged 4.5 percent to 3,050 yen and top-lender Mitsubishi UFJ Financial Group retreated 3.6 percent to 453 yen. Mizuho Financial Group, meanwhile, dropped 4.0 percent to close at 166 yen.

On the upside, some market analysts suggested that due to the financial sector's recent run of gains, Tuesday's disproportionate drop following the downgrade would not have a significant bearing on the overall market.

However, contributing to the market's decline was a strong yen which pressured Japan's exporter shares and investors cashing in on high-performing blue-chips also weighed on the market.

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