Exchange traded funds (ETFs) that invest in Japanese stocks could see action Wednesday following Standard & Poor’s downgrade of is outlook on Japan’s sovereign credit rating.

“Standard & Poor’s expects costs related to the March 11, 2011, earthquake, tsunami, and nuclear power plant disaster will increase Japan’s fiscal deficits above prior estimates by a cumulative 3.7% of GDP through 2013,” S&P said.

“We revised the outlook on the long-term rating on Japan to negative to reflect the potential for a downgrade if fiscal deterioration materially exceeds these estimates in the absence of greater fiscal consolidation,” it added.

However, Japan’s stock market shook off the news Wednesday as the Nikkei climbed more than 1% in Tokyo.

The largest U.S.-listed ETF that invests in the Asian country, iShares MSCI Japan (NYSEArca: EWJ), is down about 6% year to date.

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