Standard & Poor cut Japan’s sovereign-rating outlook to “negative” from “stable” after the reconstruction needs that resulted from the earthquake last month will add to their already large load of debt. The local currency debt rating sits at AA-, which is the fourth highest, and was reduced by S&P by one step in January, making it the first cut the nation has seen in its debt rating since 2002.

The decision to cut their status was made today and puts even more pressure on Prime Minister Naoto Kan to outline how the government will pay for the rebuilding process and how they will deal with long-term debts.

“Japan has repeatedly suffered under poor leadership, but this disaster has made that point even clearer”, said economist Noriaki Matsuoka of Daiwa Asset Management in Tokyo. “The government needs to decide how it’s going to fund its next reconstruction package”.

Sakihito Ozawa, who used to work as environment minister for Kan’s Democratic Party of Japan, said that it wouldn’t be a good idea for the government to raise taxes due to the macroeconomic standpoint on the situation. Instead, he said that the Bank of Japan should obtain bonds in purchase operations in an effort to raise cash to fund their rebuilding.