Recent Japan downgrade ‘no surprise' but yen fears persist

Moody's downgrade of Japan's credit rating last week came as no shock to markets, while economists warned the appreciation of the yen is a more crucial issue for the country.

Moody’s said one reason for the downgrade was the inconsistency of the Japan’s political backdrop and the lack of a clear fiscal strategy, which was vindicated late last week when Prime Minster Naoto Kan resigned, paving the way for the nation’s sixth premier in five years. Kan had come under fierce criticism for his response to the tsunami and nuclear crisis and barely survived a no-confidence vote in June, but kept his pledge to step down as soon as a new budget bill was passed. Several commentators said although the downgrade will probably have a minor impact on investments in the...