TOKYO, May 31 (UPI) -- Japan's Aa2-rated debt was placed under review Tuesday for a possible downgrade, Moody's Investors Service said.
"The review has been prompted by heightened concern that faltering economic growth prospects and a weak policy response would make more challenging the government's ability to fashion and achieve a credible deficit reduction target," Moody's said on its Web site. "Without an effective strategy, government debt will rise inexorably from a level which already is well above that of other advanced economies."
The announcement came on the same day Japan, reeling under the impact of the March 11 earthquake and tsunami, reported its jobless rate for April rose to 4.7 percent from 4.6 percent in March. It had previously been reported Japan's economy contracted at an annual rate of 3.7 percent in the first quarter, but was expected to pick up when reconstruction gained speed.
Moody's said the March 11 disaster had dealt much larger than initially expected economic and fiscal costs, which are magnifying the adverse effects of the global financial crisis "from which Japan's economy has not completely recovered."
It said a financing crisis is unlikely in the immediate term, but such pressure could "build up over the longer term."