Moody's downgrades major Japanese banks

Ratings agency Moodys on Wednesday downgraded most Japanese banks after it cut Japans rating on concerns about its ability to address the industrialised worlds biggest debt.Moodys revised its assessment of Mizuho Bank, Mizuho Corporate Bank, Bank of Tokyo Mitsubishi-UFJ and Sumitomo Mitsui Banking Corporation following its downgrade of Japan.It said the average downgrade was one notch, in reflection of the impact of the change in its rating on the government of Japan, with most Japanese banks having large government bond holdings.The rating downgrades primarily reflect the combined impact of the change in the rating of the government of Japan, as a supporting entity, and Moodys reduced assumptions for government support to the banking system in a stress scenario, it said.It added that the rating was a reflection of Moodys concern that notwithstanding continued strong government willingness to support the banking system, there is an increasing risk that the governments capacity to provide support to banks in a future crisis has diminished.The agency downgraded by one notch The Bank of Tokyo-Mitsubishi UFJ, Ltd, and Sumitomo Mitsui Banking Corporation from Aa2 to Aa3 and Mizuho Bank, Ltd. to Aa3 to A1.Almost all other banks were downgraded by one notch on average, with companies and local governments receiving similar treatment following its move on Japans rating.Some banking shares were lower in Tokyo trade following the ratings cut, with Mitsubishi UFJ Financial Group (MUFG) down 1.75 percent and Sumitomo Mitsui Financial Group off 0.72 percent.Moodys earlier downgraded Japans sovereign debt for the first time in nine years amid concerns the government lacks a strategy to ease the industrialised worlds largest debt.Moodys cut the government bond rating to Aa3 from Aa2, citing large budget deficits and the build-up in Japanese government debt since the 2009 global recession compounded by weak post-quake growth prospects.The new rating puts Japan on a par with China.Moodys said frequent leadership changes prevented Japan from setting long-term debt reduction strategies, days before the nation was due to see its sixth new leader in five years with Prime Minister Naoto Kan set to resign amid discontent over his handling of the March 11 disasters.The March 11 earthquake and tsunami, and the subsequent disaster at the Fukushima Daiichi nuclear power station, have delayed recovery from the 2009 global recession and aggravated deflationary conditions, it said.