Fitch downgraded Japan’s long-term foreign and local currency issuer default ratings (IDRs) to A from A+. The country’s ceiling was also downgraded to 'AA' from 'AA+'. However, the outlooks on the long-term IDRs are stable.
“The downgrade reflects the fact that the Japanese government did not include sufficient structural fiscal measures in its budget for the fiscal year April 2015-March 2016 (FY15) to replace a deferred consumption tax increase,” the rating agency’s official report reads.
After Japan’s government refused to raise consumption tax, which is an important part of the mid-term budget consolidation program, the agency decided to review the ratings. The Japanese ratings were already put under review on December 9, 2014.
It was also noted that if there are no alternative measures to substitute rejected tax hike, Japan’s ratings will be downgraded.
