Japan credit rating downgraded from AA to AA-

Well this will impact the stock market... the Japanese one... and probably the US bond market since Japan buys a lot of US bonds...

That means : weaker yen = more yens needed to buy US bonds = less bonds bought

S&P cuts Japan's long-term sovereign rating

Standard & Poor's on Thursday said it cut Japan's long-term sovereign credit rating to AA minus from AA, and reaffirmed the short-term ratings at A-1 plus. It said in a statement that it "expects Japan's fiscal deficits to remain high in the next few years, which will further reduce the government's already weak fiscal flexibility."

Still no words why the US credit rating still at AAA with US deficit for 2011 likely to be over 2 trillion $.

I dont know who is more untrustworthy, the government of Japan or the rating agencies...
All kidding aside, though, this move is hardly unexpected, what with Japan's debt to GNP ratio hovering near the surreal figure of 200%. They have been able to squirm by year after year due to their "captive audience" of domestic bond buyers, but soon they will have to take their show on the road and seek international funding, which is when things will really get funky for poor old Nippon. Actually the Chinese have quietly stepped up their purchases of Japanese debt, which could make for some interesting diplomacy down the road. In the meantime, a falling yen could be helpful for Japan, at least temporarily, because the yen is comically overvalued at the moment, and Japan has been crippled by deflation for the last two decades. But the bigger picture is far from rosy.

Originally posted by Vitchilo
Well this will impact the stock market... the Japanese one... and probably the US bond market since Japan buys a lot of US bonds...
.

Or not...

Japan’s Debt Downgrade: Economists Wail, Markets Shrug

Slight slide in the yen, which will probably be made up by the end of next week. It dropped against the greenback from 83.18 to 82.2, and it's already up to 82.68 as I type this. Nikkei dropped less than 1%.

The thing is, something in the area of 95% of Japan's debt is domestic, and there is no foreseeable danger of not being able to service that debt. There are over a trillion dollars - far more than Japan's current external debt - sitting in the foreign reserves kitty (and growing) that can be drawn on to service the debt if needed.

In a lot of ways, Japan's debt is like your mortgage. It's not uncommon to have a mortgage debt double or triple you annual salary. But it's not a problem as long as you can cover your monthly payments. I assume that there will be a tax increase in the fairly near future, maybe an additional 1% on our sales tax to increase revenues, followed by an increased investment in foreign reserves while the yen remains strong - and the combination of the two will be enough to balance the debt management for the duration. Might be looking at a sales tax increase of 2 per cent over the next 15 years as people start to retire - but that's not early enough to negatively impact the economy.