Nikkei lifted by U.S. gains, shrugs off downgrade

* US stimulus hope offsets Moody's downgrade on Japan debt

* Investors may gradually back to consider fundamentals -
analyst

By Ayai Tomisawa

TOKYO, Aug 24 (Reuters) - The Nikkei average rose on
Wednesday after U.S. stocks rallied on speculation of more
easing by the Federal Reserve, and shrugged off Moody's cut in
Japan's sovereign debt rating.

Moody's Investors Service cut its rating on Japan's
government debt by one notch to Aa3 on Wednesday, blaming large
budget deficits and a buildup of debt since the 2009 global
recession.

"It's been a while since Japan lost its triple A status, so
it is unlikely that Japan's interest rates will rise sharply,"
said Fumiyuki Takahashi, managing director at Barclays Capital,
adding that stock market investors were shrugging off the
downgrade.

The benchmark Nikkei rose 0.9 percent to 8,814.89,
while the broader Topix gained 1.1 percent to 758.86.

On Tuesday, U.S. stocks surged 3 percent on speculation that
Federal Reserve Chairman Ben Bernanke will signal new help for
the economy this week.

Bernanke's speech on Aug. 26 at the central bank's annual
gathering in Jackson Hole, Wyoming, remains a key focus for
investors, as they look for clues on any further U.S. easing.

The meeting is widely expected to end with a controversial
decision to buy hundreds of billions of dollars in U.S.
government debt to try to foster a stronger recovery.

Barclays' Takahashi said investors will likely gradually
take fundamentals into consideration, after panic selling of
Japanese stocks dented the Tokyo market due to U.S. debt worries
earlier this month.

LIMITED IMPACT FROM MOODY'S CUT

Moody's had warned in May that it might downgrade Japan's
Aa2 rating due to heightened concerns about its faltering growth
prospects and a weak policy response to deal with bulging public
debt, now twice the size of its $5 trillion economy.

"Stock market investors had somewhat expected that it could
happen because Moody's had warned it might downgrade Japan's
sovereign debt earlier," said Norihiro Fujito, senior investment
strategist at Mitsubishi UFJ Morgan Stanley Securities.

Unpopular Prime Minister Naoto Kan confirmed on Tuesday he
would step down as head of the ruling party within the week.

"We have major developments on the political front, and
while most people in the market believe (former foreign minister
Seiji) Maehara is very likely to win the (ruling party
leadership) election, a swift policy response on debt problems
is unlikely to come out soon," said Fujito.

Oil-related stocks outperformed, with Inpex rising
3.0 percent to 483,500 yen and Japan Petroleum Exploration
soaring 3.0 percent to 3,090 yen after oil rose on Tuesday on
views that the Federal Reserve might indicate fresh stimulus
measures later this week, with oil also drawing
support from fighting in Libya and disrupted Nigerian exports.

Shares of Mitsubishi UFJ Financial Group shed 0.6
percent after the lender lost $1.8 billion from its common stock
investment in Morgan Stanley so far, at least on paper,
according to a regulatory filing on Tuesday.

(Editing by Michael Watson)