Credit rating agency Moody's Investors' Service today cut Japan's rating by one notch, citing concerns about the government's ability to reduce its mountain of debt and implement long-term fiscal sustainability measures.
Moody's has now assigned a rating of Aa3 to Japan, on a par with rival agency Standard & Poor's, which rates the world's third-largest economy at AA-, the same level as China.
Hours after the downgrade, the government announced a $100-billion credit facility to help the Japanese economy ride out a spike in the yen in recent weeks amid the global market turmoil, which has battered Japan's export-led economy.
''Taking into account that there is a lopsided rise in the yen, I felt that swift measures were needed,'' Yoshihiko Noda, the finance minister, told reporters in Tokyo.
The agency warned that frequent changes in administration, weak prospects for economic growth and its recent natural and nuclear disasters made it difficult for the government to pare down its huge debt.
Even before the disasters, Japan's debt was expected to soar to almost 220 per cent of its gross domestic product next year, according to the Organisation for Economic Cooperation and Development, which would rank it as the largest debt-to-GDP ratio in the world. Japan, however, has long been able to borrow at low nominal rates because of the strong appetite by domestic investors for government debt.