Jan. 28 (Bloomberg) -- Asian stocks fell, dragging a regional benchmark index down for the first time this week, as Japanese banks dropped after Standard & Poor's cut the nation's credit rating, and commodity shares declined. Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., Japan's two biggest publicly traded banks, sank more than 1.5 percent in Tokyo. BHP Billiton Ltd. declined 1.1 percent in Sydney. Cnooc Ltd., China's No. 1 offshore oil producer, slumped 5.8 percent in Hong Kong after forecasting production growth will slow this year. Canon Inc., the world's biggest camera maker, slid 3.1 percent in Tokyo after reporting lower-than-forecast operating profit. The MSCI Asia Pacific Index fell 0.6 percent to 137.43 as of 3:12 p.m. in Tokyo, with more than three times as many stocks declining as advancing. Eight of 10 industry groups retreated. "I would tend to see it as an overreaction because it's very hard to see Japan running into anything like the troubles various European countries have run into," said Shane Oliver, head of investment strategy in Sydney at AMP Capital Ltd., which manages about $93 billion. "Monetary tightening to combat inflation is weighing on Asian shares and making them relatively more vulnerable." The MSCI gauge had its first weekly drop in 1 1/2 months last week amid concern faster-than-expected economic growth in China will add pressure on policy makers to accelerate efforts to tame inflation. The MSCI index is on course for a 0.7 percent gain this week, and a 0.2 percent decrease this year. Indexes Decline Japan's Nikkei 225 Stock Average lost 1.1 percent today, the biggest decline among major equity benchmarks in the Asia- Pacific region. Hong Kong's Hang Seng Index and South Korea's Kospi Index declined 0.3 percent. Australia's S&P/ASX 200 Index fell 0.7 percent. Futures on the Standard & Poor's 500 Index dropped 0.2 percent today. The index gained 0.2 percent yesterday in New York, rising for a fifth straight day, as home sales and Qualcomm Inc.'s forecast beat projections by economists and analysts, offsetting higher-than-estimated jobless claims. Mitsubishi UFJ sank 2.7 percent to 434 yen in Tokyo. Sumitomo Mitsui, Japan's second-biggest publicly traded bank, lost 1.6 percent to 2,870 yen and Mizuho Financial Group Inc., the No. 3, retreated 1.2 percent to 162 yen. Japan's credit rating was cut yesterday for the first time in nine years by Standard & Poor's as persistent deflation and political gridlock undermine efforts to reduce a 943 trillion yen ($11 trillion) debt burden. Rating Downgrade Japan, the world's most indebted nation, had its rating cut to AA-, the fourth-highest level, putting the country on a par with China, which likely passed Japan last year to become the second-largest economy. The government lacks a "coherent strategy" to address the nation's debt, S&P said yesterday in a statement. The outlook for the rating is stable, S&P said. Japan's rating cut "is negative for banks that hold government bonds," said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. Separately, reports showed Japan's consumer prices excluding fresh food declined 0.4 percent in December from a year earlier, the statistics bureau said today, while the unemployment rate fell to 4.9 percent from 5.1 percent. Energy and material stocks fell the most among the MSCI index's industry groups after crude oil tumbled $1.69 to $85.64 a barrel yesterday in New York, the lowest settlement price since Nov. 30, and gold futures fell 1.1 percent to settle at $1,319.80 an ounce.

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