S&P downgrades Japan sovereign debt

Standard & Poor's has downgraded Japan's sovereign debt rating to AA- from AA as the group expects the country's fiscal deficit to remain high in the next few years.

S&P says Japan's government debt is among the highest of any rated sovereigns at just below 200% of annual GDP, and does not expect it will peak until the mid-2020s, the Wall Street Journal reports.

The Japanese government, led by the Democratic Party, lacks a coherent strategy to address the country's debt, S&P adds.

The ratings agency report states: ""Specifically, we expect general government fiscal deficits to fall only modestly from an estimated 9.1% of GDP in fiscal 2010 (ending March 31, 2011) to 8% in fiscal 2013."

The downgrade caused the yen to fall sharply against the dollar, while 10-year Japanese government bond futures also dipped.

Elsewhere, on a more positive note, Japan's exports grew for a second consecutive month in December, benefitting from China's growth.

Exports grew by 13% compared with a year earlier, up from the 9.1% growth seen in November.