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Japan Debt Outlook Lowered by Moody’s

Japan’s debt rating outlook was lowered to negative from stable by Moody’s Investors Service on concern that political gridlock will constrain efforts to tackle the biggest debt burden of any nation.

Economic and fiscal policies “may not prove strong enough to achieve the government’s deficit reduction target and contain the inexorable rise in debt,” Moody’s said in a statement today. The rating is Aa2, the company’s third highest. Standard & Poor’s cut its rating last month to fourth highest.

Today’s move adds pressure on Prime Minister Naoto Kan as his public approval rating slides and he struggles to secure lawmakers’ support for measures to reduce debt, including a possible sales-tax increase. Japanese shares accelerated declines after the announcement and amid tensions in the Middle East. The Nikkei 225 Stock Average slid 2 percent as of 11:07 a.m. local time.

“Politicians will take today’s announcement as a warning sign, but their biggest priority right now isn’t Japan’s fiscal health — it’s maintaining their seats in parliament,” said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo.

Read the rest of the story: Japan Debt Outlook Lowered by Moody’s on ‘Inexorable’ Debt.