Japanese Finance Minister Yoshihiko Noda says confidence in the country's economy “will not be shaken” by an international credit agency's downgrade of Japanese debt.

Bond markets were stable after the downgrade earlier Wednesday, and traders said the action was not a surprise.

International agency Moody's said it was downgrading Japan's debt rating by one notch, from AA2 to AA3, because of the nation's continuing high budget deficits and political instability that is creating doubts about its ability to deal with the problem.

Prime Minister Naoto Kan has said he will step down to make way for a successor to be chosen early next week. The next prime minister will be Japan's sixth in five years.

Moody's said the frequent changes in government have prevented Japan from implementing effective long-term policies to get its debt under control. The decision comes in spite of a recent announcement that Japan will double its consumption tax to 10 percent.

The agency also cited the economic effects of the March 11 earthquake and tsunami, which has slowed the country's economic growth.

Japan's has the highest ratio of debt to gross domestic product of any country in the developed world.