Fitch cuts Japan’s credit rating on debt concerns
23 May 2012
Global credit rating agency Fitch Ratings yesterday downgraded Japan on concerns of the nation's rising debt profile, awarding it the lowest sovereign credit status by a global agency.
Fitch cut Japan's long-term foreign currency ratings by two notches to 'A+' from 'AA' and the local currency ratings by one level to 'A'+ from 'AA-', both with a negative outlook, but still in the middle of investment grade.
The country ceiling, which reflects the risk of state controls that would prevent private sector's ability to convert and transfer local currency, is also changed to 'AA+' from 'AAA'.
"The downgrades and negative outlooks reflect growing risks for Japan's sovereign credit profile as a result of high and rising public debt ratios," Andrew Colquhoun, head of Asia-Pacific Sovereigns at Fitch said in a news release.
"The country's fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk," he said.
Japan's rating cut comes as a further warning to other European countries that have spiraling debt burden. Credit ratings of many euro zone nations have been cut recently following the credit crisis.
