Japan’s Debt Rating Trimmed By S

Standard & Poor’s Corp. became the second major rating agency in a week to downgrade Japan’s credit rating, citing Prime Minister Junichiro Koizumi’s slow progress on reforms.

But the one-notch cut in Japan’s long-term local and foreign currency debt ratings, to AA, was smaller than markets had expected, nudging the yen up on relief that S&P; decided against following up on a warning to cut Japan by a steeper two notches.

S&P; kept its credit outlook for Japan on negative and warned of a possible further downgrade if the government failed to rein in debt, saying the Japanese government’s deficits at more than 5% of gross domestic product since 1995 were unsustainable.

The downgrade came two days after the rating agency Fitch lowered Japan’s rating to AA from AA plus.