Fitch cuts outlook on Japan over sales-tax delay

The company said it was changing its view to negative from stable but left Japan’s “A” credit rating unchanged, after downgrading the heavily indebted country last year.

Delaying the tax rise undermined Japan’s commitment to paying a debt mountain that has grown to more than twice the size of an economy, Fitch said.

“The outlook revision primarily reflects Fitch’s decreased confidence in the Japanese authorities’ commitment to fiscal consolidation,” it said June 13.

“The consumption tax increase was an important element in the government’s” budget plans.

Fitch also said Tokyo had not supplied details about how it would make up for revenue lost by not boosting the tax rate to 10 percent from the current eight percent.

However, the agency noted that stable, wealthy Japan still had plenty of funding options.

Much of the country’s debt is held domestically at low interest rates which have allowed the country to avoid a Greek-style cash crunch.     

But a loss of confidence in Tokyo’s ability to pay its debts could send interest rates soaring and increase the risk of a bankruptcy.