TOKYO, Jan 27 (Reuters) - Fitch Ratings said Japan's sovereign ratings were supported by its ability to fund itself at low yields but that a failure to make progress on fiscal consolidation would put downward pressure on its ratings.
Andrew Colquhoun, head of Asia Pacific sovereigns at Fitch, said Japan's ageing population and a drawdown of savings by households to fund retirement posed a threat to funding conditions in the medium term.
"Our view is that Japan needs a fiscal consolidation strategy to offset those negative pressures. Therefore, our focus in 2011 is whether the political situation will permit meaningful progress on fiscal consolidation. Signs that fiscal strategy was drifting would put downwards pressure on the ratings," he said in an emailed comment to Reuters.
Earlier on Thursday ratings agency Standard & Poor's cut Japan's sovereign debt rating to AA minus from AA, warning that Japan's government debt ratio would continue to rise more than it had previously expected.
Fitch has a local currency rating for Japan of AA minus and a foreign currency rating of AA. The outlook is stable. (Reporting by Hiroyasu Hoshi; Writing by Nathan Layne; Editing by Edwina Gibbs)