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The international ratings agency has lowered Japan's credit rating outlook amid worries over the country's huge mountain of debt Tokyo will find increasingly difficult to reduce after delaying a planned sales tax hike.
Fitch said on Monday it was changing its outlook on Japan's creditworthiness from stable to negative, adding, however, that the country's "A" rating would be maintained.
The downgrade came after the government of prime minister Shinzo Abe postponed a planned sales tax hike early this month, seen by Fitch as essential in paying down Japan's massive debt.
In 2015, Japan accumulated sovereign debt totaling about 229 percent of the country's annual gross domestic product (GDP) - more than twice the size of the Japanese economy and one of the world's biggest national debts.
Fitch noted that the consumption tax increase was an important element of the government's budget plans. "The outlook revision primarily reflects Fitch's decreased confidence in the Japanese authorities' commitment to fiscal consolidation," the agency said in a statement.
Fitch also said Tokyo had not supplied details about how it would make up for revenue lost by not boosting the tax rate to 10 percent from the current eight percent.
However, the agency noted that stable, wealthy Japan still had plenty of funding options. Moreover, much of the country's debt was held domestically at low interest rates, allowing the country to avoid a Greek-style cash crunch.
Nevertheless, a loss of confidence in Tokyo's ability to pay its debts could send interest rates soaring and increase the risk of a bankruptcy, the report added.
PM Shinzo Abe said earlier this month that the tax hike, planned for 2017, would be pushed back by more than two years to late 2019, when he is likely no longer in office.
Abe insisted that postponing the rise would give him some room to breathe new life into his faltering economic policy - known as Abenomics and marked by big government spending, monetary easing and economic reforms.
A first sales tax hike, implemented in April 2014, was blamed for pushing the country back into a brief recession last year. Fears had been mounting that a new increase would hit weak growth of 0.5 percent recorded in the first quarter of 2016.
uhe/jd (AFP, Fitch Ratings)