UPDATE 1-Fitch affirms Japan debt rating, outlook stable

By Masayuki Kitano

TOKYO, Dec 14 (Reuters) - Fitch Ratings affirmed Japan's sovereign debt ratings on Friday, citing Japan's exceptionally strong external balance sheet, balanced against pronounced weaknesses in its public finances.

Fitch's affirmation contrasted with recent decisions by Moody's Investors Service and Standard & Poor's, both of which raised Japan's sovereign debt ratings earlier this year.

Fitch said it had affirmed Japan's long-term foreign and local currency issuer default ratings at AA and AA-minus, respectively. Fitch also affirmed Japan's short-term IDR at F1-plus and the country ceiling at AAA. It said the outlook on the ratings remained stable.

"Large current account surpluses contribute to the ongoing accumulation of external assets, supporting the strongest net external credit position of any rated sovereign," James McCormack, head of Fitch's Asia sovereign ratings group, said in a statement.

Japanese government bonds showed little reaction to Fitch's announcement, traders and analysts said.

March 10-year JGB futures trimmed some losses on Friday afternoon as Tokyo share prices edged lower and stood at 136.51 2JGBv1 as of 0418 GMT, down 0.23 point on the day but above the day's low of 136.30.

Although Fitch kept its outlook for Japan stable, it said an expected slowdown in Japanese growth next year would have slightly negative fiscal implications, adding it was not optimistic there will be any meaningful fiscal reform in the short term.

"In fact, there is a risk that either counter-cyclical fiscal measures will be introduced to combat weaker growth, or politically motivated spending programmes will emerge as the government struggles to assert its economic leadership over a more aggressive opposition," McCormack said.