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Moody's lowers Japan's gov't debt rating

(Xinhua)

13:57, August 24, 2011

TOKYO, Aug. 24 (Xinhua) -- Moody's Investors Service on Wednesday downgraded the government of Japan's rating to Aa3 from Aa2, citing large budget deficits and the build-up in the Japanese government debt since the 2009 global recession.

"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 ratings agency said.

It also said the twin disasters in March and the ongoing crisis at the Fukushima Daiichi Nuclear Power plant have delayed recovery from the 2009 global recession and added to deflationary conditions.

The cut in government debt rating came at a time when Japan is preparing its sixth prime minister in five years. Prime Minister Naoto Kan said on Tuesday that he expected to see the next leader on Aug. 30. Earlier this month, the Japanese government downgraded its economic growth forecast for fiscal 2011 to 0.5 percent, one percentage point less than its previous forecast, due to the adverse affects of the March 11 double disasters.

The Cabinet Office had originally predicted the economy would grow 1.5 percent in actual terms for the current fiscal year ending next March.

However, Moody's said the outlook for the country is stable. "Support for the stable outlook comes from the undiminished home bias of Japanese investors and their preference for government bonds, which allows the government's fiscal deficits to be funded at the lowest nominal rates globally," it said.

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