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11 Dec 2014
Fitch expects to downgrade Japan early next year
FXStreet (Mumbai) - Rating agency Fitch has said it may downgrade Japan’s credit rating sometime in early next year as fiscal concerns increased, especially after the nation delayed a sales tax hike.
The Rating agency awaits the Japanese budget for next fiscal year, but has little hopes that the spending curbs would be enough to offset the revenue lost from the delay in the sales tax hike. Moreover, the decision to delay sales tax hike may have eased growth concerns, but it surely did eliminate any chance of meeting the government's deficit reduction targets.
"We don't think the environment is conducive for submitting a budget that offsets the delay to the sales tax hike," Andrew Colquhoun, head of Asia-Pacific sovereigns at Fitch, said in a conference call. He further added, "Our expectation is the rating will come down."
Fitch's rating on Japan is A plus, which is four notches below the top AAA rating. Fitch is unlikely to consider a downgrade of more than one notch, Colquhoun said. Moody's Investors Service also took the tax hike delay negatively, when it downgraded Japan last week to A1, which is the same level as Fitch's rating.
The Rating agency awaits the Japanese budget for next fiscal year, but has little hopes that the spending curbs would be enough to offset the revenue lost from the delay in the sales tax hike. Moreover, the decision to delay sales tax hike may have eased growth concerns, but it surely did eliminate any chance of meeting the government's deficit reduction targets.
"We don't think the environment is conducive for submitting a budget that offsets the delay to the sales tax hike," Andrew Colquhoun, head of Asia-Pacific sovereigns at Fitch, said in a conference call. He further added, "Our expectation is the rating will come down."
Fitch's rating on Japan is A plus, which is four notches below the top AAA rating. Fitch is unlikely to consider a downgrade of more than one notch, Colquhoun said. Moody's Investors Service also took the tax hike delay negatively, when it downgraded Japan last week to A1, which is the same level as Fitch's rating.