TOKYO: Fitch cut its credit rating on heavily indebted Japan by one notch on Monday, saying it has not done enough to plug a budget gap left by its decision to delay a sales tax rise.

The move saw Japan’s rating trimmed to “A” from “A+”, several months after rival credit agency Moody’s also downgraded Japan’s credit rating.

Moody’s cited “rising un­­certainty” over the national debt and Prime Minister Shinzo Abe’s faltering efforts to kickstart the world’s number three economy.

Tokyo raised its sales levy in April 2014 — to 8 per cent from 5pc — for the first time in 17 years, in a bid to generate more revenue to pay down an eye-watering national debt.

But the increase slammed the brakes on growth and pushed Japan into a brief recession just as the economy, plagued by years of deflation, appeared to be turning a corner.

The downturn prompted Abe to put off a second sales tax rise to 10pc, which was initially scheduled for later this year.

“Fitch’s downgrade re­­f­lects the fact that the Japa­nese government did not include sufficient structural fiscal measures in its budget for the fiscal year April 2015-March 2016 (fiscal year 2015) to replace a deferred consumption tax increase,” the ratings agency said.

“The government is set to unveil a new fiscal strategy in the summer of 2015. The details of the strategy will be important, but the strength of the government’s commitment to implement it will be even more important and will only become clearer over time.”

Fitch’s downgrade adds to growing calls for Tokyo to get the nation’s debt under control.

Published in Dawn, April 28th, 2015

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