July 13 (Reuters) – Japan’s ruling party’s poor showing at Sunday’s elections will make it more difficult for the country to push through fiscal consolidation and a delay in a credible plan beyond the year-end would increase the risk of a rating downgrade, Fitch ratings said on Tuesday.
Prime Minister Naoto Kan’s ruling coalition suffered a major blow in Sunday’s upper house election, putting his policies to deal with the country’s massive debt at risk. [ID:nTOE66B066]
“If we don’t see a credible plan come through by the end of the year, it will send a negative signal for its rating, adding pressure to the credit rating,” Andrew Colquhoun, Fitch’s sovereign analyst for Japan, told Reuters.
However, Colquhoun said he was not pessimistic about the government’s ability to draw up such a plan.
“The election will make it more difficult for the government to draw up and implement such a plan, but I am not too pessimistic as I do not read the election results as a rejection of fiscal consolidation,” he said.
Fitch has rated Japan’s foreign currency debt AA and its local currency debt at AA-minus, both with a stable outlook. (Reporting by Umesh Desai; Editing by Jacqueline Wong)