Standard & Poor's Corp. cut Japan's long-term local and foreign currency sovereign credit ratings by one notch Monday from AA to AA-minus with a negative outlook, putting Japan at the bottom of the credit-rating league in the Group of Seven leading economies.
As reasons for the downgrade, S&P cited the falling popularity of Prime Minister Junichiro Koizumi, political scandals, delays in structural reforms, and the disappointing results of the Financial Services Agency's inspections of major banks' nonperforming loans.
It said prompt measures are needed, including further capital injection into banks and more monetary easing.
In November, S&P lowered Japan's sovereign credit ratings to bring it level with Italy, which had been the agency's lowest-rated G7 member. Monday's cut put Japan firmly at the bottom. The continued negative outlook indicates Japan's ratings could be downgraded further.