Fitch Ratings trimmed Japan's credit ratings on Tuesday, citing growing risks to credit profile as a result of high and increasing public debt ratios.

The long-term foreign and local currency Issuer Default Ratings were lowered to 'A+' from 'AA' and 'AA-' respectively. The outlooks on both ratings are Negative.

"The country's fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk," Andrew Colquhoun, Head of Asia-Pacific Sovereigns at Fitch.

According to Fitch, gross general government debt of Japan is likely to reach 239 percent of GDP by end-2012, the highest for any Fitch-rated sovereign. Moreover, Japan's Fiscal Management Strategy envisages declines in the government debt/GDP ratio only from FY21.

Meanwhile, the factor that supports the rating is the ability to retain exceptional financing flexibility, it said.

Further, Fitch considers that this private sector savings behaviour may itself contribute to the economy's persistent deflationary equilibrium. The economy experienced deflation since 2001 and real GDP growth lags high-income peers. Strong private savings contribute to the country's persistent current account surpluses.

The agency warned that a lack of new fiscal policy measures aimed at stabilizing public finances amid continued rises in government debt ratios could lead to a further downgrade.

RTTNews