In a not so surprising move, Fitch Ratings Agency announced a reduction in Japan’s sovereign credit rating today.  Behind the decision to cut the world’s third largest economy’s credit rating was a ballooning public debt load and the recent inability of the government to reign in spending.  Estimates are for the Japanese public debt load to reach well over 220% of gross domestic product by the end of this year.

While maintaining a negative outlook on the Japanese economy, Fitch analysts reduced Japan’s local currency rating one notch to A+, while reducing the the foreign currency rating aspect two steps to a similar A+.  Both reduction are seen as negative for the country that is likely to see further considerations in the near term by global credit agencies.

Incidentally, the ratings downgrades by Fitch come almost a year after Moody’s and Standard and Poor’s issued their own round of reductions in credit quality for the country.  Moody’s reduced the country’s rating back in August of last year, while S&P cut their ratings outlook in January – while issuing a warning for a short term reassessment.

All in all, the announcement underlines the severity of the current global fiscal position as Europe’s financial woes continue in earnest.  The next such consideration is likely towards the end of the year as US politicians are likely to be embroiled in a battle for budget deficit reductions on a $16.4 trillion debt ceiling.

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