The credit rating agency Moody's has downgraded Japan's sovereign debt from Aa2 to Aa3, weeks after Standard & Poor's downgraded the US debt from the top AAA rating.
Japan, whose manufacturing and energy sectors have been struggling in the wake of the Tōhoku tsunami and earthquake, has the third largest economy in the world, relying primarily on exports to other developed nations.
However, because of infrastructure damage and reduced output from power plants in the wake of the tsunami and Fukushima nuclear meltdown, exports have suffered. Reduced demand from other developed nations whose economies are also suffering, as well as the rising price of the yen, have further damaged the Japanese export market.
Japan has the highest level of public debt of all developed economies, and is currently in recession.
Moody's also blamed political instability in Japan for the credit downgrading. The Japanese Prime Minister, Naoto Kan, today announced that he will resign. This means Japan will have had seven leaders in six years.