This week, Moody’s Investors Service lowered its credit rating for Japanese
government debt. The credit rating agency downgraded Japan one step from Aa2 to
Finance Minster Yoshihiko Noda said trust in the economy "will not be shaken"
by Wednesday's action.
Moody’s said it acted because of Japan’s large budget deficits and buildup in
government debt since the two thousand nine global recession. Japan's public
debt is twice the size of its economy. Japan has the world’s third-largest
Moody’s said another reason was Japan’s political situation. Japan has
already had five prime ministers since two thousand six. Prime Minister Naoto
Kan announced his resignation Friday.
Japan struggled more than many other countries after the worldwide financial
crisis. This month, Japan said its economy shrank at an annual rate of 1.3
percent from April through June. It was the third quarter of shrinkage in a row.
The earthquake and tsunami in March hurt manufacturing. Shortages of parts
led to a big drop in sales and profit for Toyota, the world's top selling
Yet the report on the economy was good news. Economists had expected a bigger
decrease following the disasters and the nuclear crisis that followed.
But there is concern that a rise in the yen could hurt growth. A high
exchange value makes Japanese exports costlier and less competitive. This week,
Japan announced a program of one hundred billion dollars in loans to support
business spending. The goal is to help weaken the yen and lift economic growth.
Bond traders said Moody's downgrade of Japan was not a surprise. The action
had the expected effect of raising borrowing costs for the Japanese government.
Still, at about one percent, Japan enjoys the lowest borrowing costs of any
major developed nation.
Earlier this month, another credit rating agency downgraded United States
government debt for the first time. Standard and Poor's blamed the political
fight over the nation's debt.
Foreigners hold much of the public debt of the United States and some other
countries. But ninety-five percent of Japan's debt securities are held by
Japanese, mostly banks and retirement funds.
On Tuesday, Prime Minister Kan met with American Vice President Joe Biden. Mr.
Biden visited Japan at the end of a trip to Asia.
And that's the VOA Special English Economics Report. For more business news
and to learn English, go to voaspecialenglish.com. I'm Mario Ritter.