Fitch Sees Pressure on Japan Credit Rating as Public Debt Burden Swells

Japan’s creditworthiness is under pressure as the government’s debt burden swells and households save less, Fitch Ratings analyst Andrew Colquhoun said.

“On any measure, Japan is the most indebted sovereign rated by Fitch,” Colquhoun, Hong Kong-based director at the company’s Asia-Pacific sovereign group, said in a conference call today.

“In the medium term, the Japanese sovereign’s ability to go on funding itself cheaply may come under pressure from the declining savings rate, although in the near term, weak credit demand in the economy supports government funding prospects,” Colquhoun said.

He spoke a day after Fitch released a report saying Japan’s debt burden will keep rising in the absence of a sustained economic recovery and fiscal consolidation. Colquhoun said today that the outlook on Japan’s AA- credit rating, the fourth highest, remains stable.

The yield on Japan’s 10-year bond was unchanged at 1.315 percent as of 1:22 p.m. in Tokyo.

Finance Minister Naoto Kan said yesterday after Fitch released the report that the government’s plans to unveil a fiscal strategy by June should help allay concerns about the country’s debt.

Achievement of a budget surplus by 2020 is one of the goals being considered as part of the plan, a government official familiar with the matter said this week.

When asked about the discussions, Colquhoun said he will need to see more details before he views such goals as a “credible plan.”

To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.