TOKYO (dpa-AFX) - Fitch Ratings maintained the sovereign ratings of Japan at 'A' with a 'negative' outlook on Wednesday.
The agency said the ratings balance the strengths of an advanced and wealthy economy, with correspondingly robust governance standards and public institutions, against weak medium-term growth prospects and very high public debt.
Fitch retained a 'negative' outlook, given uncertainty about the medium-term macroeconomic and fiscal outlook from the continuing pandemic.
Fitch expects the economy to grow 2.5 percent this year and 3.0 percent in 2022, as Japan recovers from a 4.6 percent contraction in 2020. The recovery has been delayed by weak domestic demand owing to coronavirus containment measures.
Risks to forecasts are to the downside, however, as an ongoing fifth Covid-19 wave and a state of emergency in several prefectures may further delay the recovery, Fitch said.
Inflation is expected to remain subdued, averaging 0.3 percent in 2021 and 0.7 percent in 2022, given muted wage dynamics and entrenched low inflation expectations.
The rating agency expects the Bank of Japan to maintain its current monetary policy settings over the next few years, with a policy rate of -0.10 percent, yield curve control (with a 0 percent target for the 10-year yield), and quantitative and qualitative easing through large-scale asset purchases.
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