Moody's downgrades Japan credit rating after delay to sales tax increase

TOKYO – Moody's downgraded the Japanese government's credit rating Monday in the wake of the Prime Minister Shinzo Abe's decision to delay an increase in sales tax.

The ratings agency said the debt rating was lowered by one notch. Its statement cited "heightened uncertainty" about the government's ability to meet its debt reduction goals and uncertainty about the timing and effectiveness of measures to boost economic growth.

Japan, the world's third-largest economy, has the heaviest debt burden among developing nations.

Japan raised its sales tax in April and planned another increase next year as part of efforts to repair government finances. But Abe decided last month to delay the second tax increase after the economy slipped into recession in the third quarter.

The downgrade lowers Japan's rating to Aa3 from A1. The outlook for the rating is "stable," meaning it's unlikely to be changed in the near to medium term.

A lower credit rating can increase borrowing costs for governments in overseas markets. Most of Japan's government debt, however, is owned by local banks and funds.