Moody's joins in Japan bashing

JAPAN, the world's second-biggest economy, suffered the ignominy of having its creditworthiness slashed to below that of Botswana.

Rating agency giant Moody's Investor Service lowered Japan's rating two notches from Aa3 to A2 - a bigger downgrade than markets had expected.

It puts the nation on a par with Cyprus, Greece, Israel, South Africa, Latvia and Poland. It is now ranked lower than Botswana, a country to which Japan donates millions of dollars of aid.

The move comes a month after Standard & Poor's cut Japan's rating by one notch to AA-minus. The new Moody's rating is two notches below S&P's rating. Moody's said the Japanese government's policies were insufficient to prevent further deterioration in the economy.

'Japan's general government indebtedness will approach levels unprecedented in the post-war era in the developed world and, as such, Japan will be entering uncharted territory,' it said.

Finance minister Masajuro Shiokawa retorted: 'Just because they do such things we won't change our policies.'

The downgrade briefly knocked the yen, but it soon resumed its rise, prompting the Bank of Japan to intervene in foreign exchange markets for a third time in 10 days. The yen dived from a high of 123.02 yen to the dollar before the intervention to 124 yen after. The BoJ is concerned that a strong yen will hinder hopes of economic recovery.