Moody's Investors Service has downgraded Japan's sovereign debt rating citing concerns about the country's budget deficit and growing government debt.

The rating was cut by one notch Wednesday to Aa3 from Aa2. That is three notches below Moody's top rating.

Japan has been trying to recover since the global economic crisis in 2009. But after the March earthquake and tsunami, the cost of rebuilding is hampering growth and burdening state finances.

Japan's economy shrank again in the second quarter of this year.

The downgrade comes less than a week before Japan is to select a new prime minister to become the nation's sixth leader in the past five years.