A Credit Downgrade for Japan, but Some Signs of Hope

25 August 2011

This is the VOA Special English Economics Report.

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 Aa3.

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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 economy.

Moody’s said another reason was Japan’s political situation. Japan has had five prime ministers since two thousand six. The current prime minister, Naoto Kan, is expected to resign soon.

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 carmaker.

Yet the report on the economy was good news. Economists had expected a bigger decrease following the disasters and the nuclear crisis that followed.