Fitch Maintains Japan’s Credit Rating at A Amid Fiscal Pressure from Tax Cut Pledge

Fitch Ratings affirmed Japan’s sovereign credit rating at A with a stable outlook on January 20, 2026, stating the government is expected to keep fiscal deficits within manageable levels despite Prime Minister Sanae Takaichi’s pledge to suspend a food levy for two years ahead of the upcoming lower house election. The move triggered a sell-off in Japanese government bonds, pushing the benchmark 10-year yield to a 27-year high on January 21, 2026. Jeremy Zook, Fitch’s Asia-Pacific sovereign ratings director, said the current fiscal forecasts already reflect anticipated expansionary policies, including the consumption tax suspension. He noted that while fiscal overreach remains a risk, recent bond market pressure and stronger nominal growth have provided fiscal headroom. Japan’s public debt-to-GDP ratio remains the highest among developed economies, exceeding 230%.