Sovereign downgrade? Been there, done that?.?.?.?Such is likely to be the response of any investor in Japan to the news that Standard & Poor’s has removed its triple A rating on US debt.

Japanese government bonds lost their stamp of premium quality in 2002. Early this year S&P took a second shot, with another downgrade to double A minus. The result? In last week’s turmoil the yield on Japan’s 10-year bond briefly dipped below 1 per cent. If Sidney Homer’s classic History of Interest Rates is any guide, this represents the lowest level of interest rates anywhere since Babylonian times.

This is no aberration. For the past decade the Japanese bond market has been making monkeys out of not just the credit rating agencies, but also academics, trigger-happy short sellers and politicians and bureaucrats who see fiscal austerity as a virtue in its own right. All have been proclaiming that out-of-control public debt had set Japan on the road to fiscal perdition.