FX.co ★ Japan Shares Slip on Moody’s US Downgrade

The Nikkei 225 experienced a decline of 247 points, or 0.9%, settling at 37,595 during Monday morning's trading session. Similarly, the broader Topix index decreased by 0.3% to 2,733. This downturn tracked a significant drop in U.S. futures following Moody's decision on Friday to downgrade the U.S. credit rating from Aaa to Aa1. Moody's cited a worsening fiscal outlook and a "lack of effective policy action" to manage deficits as reasons for this action. Investor sentiment was further dampened by a warning from Treasury Secretary Bessent, who stated that trade partners would be subjected to maximum tariffs if they did not engage in fair negotiations with the U.S. Furthermore, Japan's GDP for the first quarter of 2025 contracted by 0.2% quarter-on-quarter, surpassing the anticipated 0.1% decrease, marking the first contraction in a year. This reflected the impact of U.S. trade policies and weak external demand, particularly from China. As investors awaited crucial Chinese data for April — including figures on industrial production and retail sales due later in the day — most sectors saw declines. Early significant losers included Japan Post Holdings, which fell by 2.6%, Sompo Holdings by 1.3%, Tokyo Electron by 1.0%, and Sony Group by 0.8%.