Japan public debt spinning out of control

It has reached 225% of GDP as of end-2011 and slow fiscal consolidation has forced Fitch to issue credit downgrades.

"Japan's sovereign credit profile is under pressure from high and rising government indebtedness, while current fiscal consolidation plans are slow even relative to other fiscally-challenged high-income sovereigns," said Andrew Colquhoun, Head of Asia-Pacific Sovereigns at Fitch.

"Japan's general government debt / GDP ratio reached 225% at end-2011. A close look at available data suggests a figure more comparable to other sovereigns would be about 204% of GDP. The main difference arises from consolidating out the general government's holdings of its own debt," said Fitch in a release accompanying its special report, "Japan's Public Finances."

"Moreover, Japan's public indebtedness is less of an outlier against high-income peers when the Japanese sovereign's large stockpile of financial assets is taken into account. Nonetheless, statistical issues do not change the central conclusion that Japan's public indebtedness is high and rising briskly," it said.

"Debt dynamics analysis illustrates the fragility of Japan's public debt path even to modest changes in economic or financial assumptions. Japan's revolving-door governments have been unable, so far, to respond convincingly to the fiscal challenge. This adds to negative pressure on the ratings," it added.