The credit rating agency Fitch downgraded Japan's credit rating by two notches on Tuesday, saying the country's plans to cut down on its public debt weren't strong enough.
Japan's long-term foreign currency rating was lowered two grades from 'AA' to 'A+' on Tuesday by the Fitch ratings agency, which also lowered Japan's Local Currency Issuer Default Ratings from AA to A-.
"The downgrades … reflect growing risks for Japan's sovereign credit profile as a result of high and rising public debt ratios," said Andrew Colquhoun, head of Fitch's Asia-Pacific department, in a statement on the agency's website. "The country's fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk."
According to Fitch, Japan's gross general government debt is projected to hit 239 percent of its gross domestic product by the end of the year - the highest of any country rated by Fitch. Under Japan's current fiscal management strategy, this ratio is not expected to decline until 2021.
"Fitch regards this as a slow pace of consolidation given the scale of Japan's debt," Fitch's statement said.
Further downgrades could come, Fitch said, if there was a lack of new fiscal policy measures aimed at stabilizing public finances and counterattacking the continued rise in government debt ratios.
Author: Matt Zuvela
Editor: Mark Hallam