Strangely, Standard & Poor's yesterday put Japan on a creditwatch negative because of uncertainty about the amount of spending and borrowing for the reconstruction of the damage caused by the March 11 quake and tsunami and the impact of the Fukushima nuclear crisis.

I say strangely, because the cut in its outlook to negative is well ahead of any outline of how the government will pay for the rebuilding, and if that bill will include some sort of guarantee for the struggling owner of Fukushima, Tokyo Electric Power Co.

The Tokyo market ignored the S&P move and rose 1.4% yesterday, with most of the rise coming after the ratings group announced its downgrade.

And we don't yet have a good idea of the impact on the overall economy, although the Bank of Japan produces its updated forecasts later today.

Tokyo reports say they will be negative for this quarter and probably the next, with the annual forecast probably around 0.8%.

Already economists at leading brokers and banks have cut their forecasts.

The latest was JPMorgan in Tokyo which now sees growth contracting by an annual 1% for the June quarter and 3.5% for the September three months.

In its surprise statement, S&P said it cut the outlook to reflect the potential for a downgrade if the fiscal deterioration exceeds estimates.

S&P said it expects costs related to the March 11 disaster to increase Japan's fiscal deficits above prior estimates by a cumulative 3.7% of gross domestic product through 2013.

The credit ratings agency said the cost of rebuilding could range from 20 trillion yen to 50 trillion yen ($245 billion to $612 billion).

But then it said "Japan's sovereign ratings are supported at the 'AA-' level by the country's ample net external asset position, relatively strong financial system, and diversified economy" and it added that its financial system "appears sound".

That sounds awfully like S&P is trying to give the impression that it's being proactive, but having a bet each way.

It may have waited several months to get through the fog of the initial cost to the economy of the disasters, which is starting to take shape with data releases yesterday and more today.

Moody's told newsagencies yesterday that it had no plans to change the negative outlook for its Aa2 grade, the third highest, on Japan's sovereign rating. The company had cut the outlook from "stable" in February, citing concern that political gridlock would constrain efforts to tackle borrowing.

Figures released yesterday in Tokyo by the country's Industry Ministry revealed retail sales fell 8.5% in March from a year earlier.

That was the biggest fall in 13 years.

Confidence among both merchants and households fell the most on record last month, a sign consumers may continue to cut back in the months ahead.

And as large as that was, it was mainly due to the already reported big falls in car sales in March.

Auto sales fell 32.8% from a year earlier in March, with most of that posted after March 11.

Clothes sales and machinery sales also fell significantly. Fuel sales, however, rose 5.1% from a year earlier.

Sales at large-scale retailers fell 7.7% on year, after adjustment for the change in the number of stores.

And, the ministry also said that Japan's trade balance in early April fell into the red, the first trade deficit for the first 10-day period in two months, as exports of cars and electronic devices plunged in the wake of the earthquake and tsunami.

The weak car sales will continue for a while yet, with Nissan estimating that domestic production in April will be just above 40% of the actual volume of a year earlier.

While it aims to lift the rate to more than 50% and to produce more vehicles in the following month, it is uncertain how quickly this can be done because of the continuing shortage of parts.