Outlook for Japan's sovereign credit score cut to 'negative'

Fears over Japan's public debt triggered a new blow from ratings agency Fitch today just as the nation showed signs of making headway in its deflation battle.

Fitch cut its outlook for Japan's sovereign credit score to "negative" amid worries over the nation's debt pile, which has now reached more than 200% of the nation's entire output.

Japan needs a deeper programme of cuts to tackle the debt, the ratings agency said. Fitch's Asia analyst Andrew Colquhoun said: "A stronger fiscal consolidation strategy is necessary to buffer the sustainability of the public finances against the adverse structural trend of population ageing."

Fitch added there was "considerable downside" risk for Japan's finances from the cost of cleaning up the Fukushima nuclear plant hit by March's tsunami.

The ratings agency may also slash growth forecasts for the nation, which has plunged back into recession following the disaster.