The euro climbed to a 8-day high against the Japanese yen, after Standard & Poor's cut its outlook for Japan's sovereign debt rating to ‘negative’ from stable.

EUR/JPY rose more than 1 pct on the day to around 120.70 yen hitting its highest since April 15.

The rating agency cited huge reconstruction costs of damage from quake and nuclear crisis as reasons behind the downgrade. The agency estimated the reconstruction costs at 20 trillion yen to 50 trillion yen.
S&P also said that the cost of disasters will escalate the nation’s fiscal deficits above prior estimates by a cumulative 3.7 pct of GDP through 2013.

“Much will depend on Japan’s political leadership and its ability to forge a political consensus on how to offset fiscal measures in the future,” S&P said. “A downgrade is possible if Japan’s public finances weaken further over the next two years in the absence of fiscal consolidation.”

 Elsewhere, the dollar traded higher against the yen, with USD/JPY climbing more than 1 percent to 82.29.