(MENAFN- AFP) Fitch Ratings on Tuesday placed Japan's sovereign credit on Rating Watch Negative, warning that the delay in raising consumption tax would put the government's objective of reducing the national debt at risk.
The warning came a week after Moody's downgraded Japan's credit rating, citing "rising uncertainty" over the debt situation and Prime Minister Shinzo Abe's faltering efforts to kickstart the world's number three economy.
Fitch said it has placed Japan's A+ long-term sovereign credit rating on negative watch.
"The Japanese government's decision to delay a consumption tax increase ... will meet a negative sensitivity identified in Fitch's May 2014 sovereign credit review of Japan, unless broadly equivalent and permanent fiscal measures are announced in the forthcoming budget," it said in a statement.
The ratings firm said it considers such fiscal measures will be "unlikely".
In the wake of poor growth figures, Abe announced last month that a planned sales tax rise set for next year would be delayed.
He called a snap election for December 14 which he described as a referendum on his "Abenomics" growth blitz.
"The delay implies it will be almost impossible to achieve the government's previously-stated objective of reducing the primary budget deficit to 3.3 percent of GDP" by March 2016, Fitch said.
Tokyo raised the sales levy in April -- to 8 percent from 5 percent -- for the first time in 17 years, in a bid to generate more revenue to pay down its eye-watering national debt.
Japan has one of the heaviest debt burdens among rich nations, at more than twice the size of the economy.
But the increase slammed the brakes on growth just as the economy, plagued by years of deflation, appeared to be turning a corner.
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