JAPAN: Fitch Affirms Japan at A Outlook Revised to Negative

Monday June 13 2016

Fitch Ratings has affirmed Japan`s Long-Term Foreign- and Local-Currency Issuer Default Ratings at `A` and revised the Outlooks to Negative. The issue ratings on Japan`s senior unsecured local-currency bonds are also affirmed at `A`. The Country Ceiling is affirmed at `AA` and the Short-Term Foreign-Currency IDR at `F1`.

The revision of the Outlooks on Japan`s IDRs to Negative from Stable reflects the following key rating drivers:-

• The delay in scheduled increase in the consumption tax from April 2017 to October 2019 without identifying any specific offsetting measures;
• The consumption tax increase was an important element in the government`s fiscal consolidation strategy, which aims to bring the primary deficit of the general account of the central and local governments into balance by the fiscal year from April 2020 to March 2021 (FY20), against a 3.3% deficit in FY15;
• Fitch no longer expects the consumption tax to rise in its base case; and
• The government indicated that its primary reason for delaying the tax increase was to shore up growth and boost the prospects of escaping deflation.

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