Japan faces political gridlock after the ruling party's poor showing in an election on Sunday, which could thwart efforts to curb a huge public debt and get the economy in shape, as well as putting Prime Minister Naoto Kan's job at risk.
Standard & Poor's rates Japan's long-term local and foreign currency debt AA, both with a negative outlook.
Moody's Investors Service rates its foreign currency and local debt at Aa2, with a stable outlook for both.
Fitch Ratings has the long-term foreign and local currency issuer default ratings at AA and AA-minus, respectively. The outlook on both ratings is stable.
At 883 trillion yen ($9,960 billion) as of the end of the fiscal year that ended in March, Japan's public debt pile is nearly twice the size of its economy -- the largest debt-to-GDP ratio in the industrialised world.
The following are comments by the agencies since mid-2009:
July 13, 2010 - Fitch Ratings says the ruling party's poor showing at Sunday's elections will make it more difficult for the country to push through fiscal consolidation and a delay in a credible plan beyond the year-end would increase the risk of a rating downgrade.
July 12, 2010 - Standard & Poor's says it may lower Japan's sovereign ratings if the government's fiscal position erodes further or there is a lack of concrete measures aimed at fiscal consolidation.
It said in a statement that stabilising the political environment is a key challenge for Japan to implement meaningful and sustainable fiscal consolidation.
March 30, 2010 - Fitch says it needs to see a sustained downtrend in debt ratios before considering positive rating action.
Feb. 25, 2010: Moody's says Japan's sovereign debt rating could come under pressure if the economy performs poorly and the government fails to draw up convincing fiscal plans. [ID:nTKF106864]
Feb. 22, 2010: Standard and Poor's says Japan is unlikely to suffer a credit rating downgrade this year, although it cannot be ruled out.
It warns that a premature rise in the consumption tax aimed at shoring up Japan's finances could hurt the economy, undermining budget consolidation efforts.
Jan. 26, 2010: Standard and Poor's cuts the outlook for government debt to negative from stable, citing reduced wiggle room on fiscal policy and voicing disappointment with the government's budget consolidation plans.
A weak economic performance and lack of policy initiatives that could lift medium-term growth could bring about a cut in Japan's ratings by a one notch, it says, adding that such an action could occur in the next two years.
On the other hand, policies that would help get government debt back under control would allow the ratings to remain at current levels.
Jan. 13, 2010: Moody's says fiscal policy has become more uncertain following a change in the finance minister to Naoto Kan from Hirohisa Fujii the previous week.
It says the outlook on Japan's Aa2 rating depends on whether the government can achieve stronger economic growth and a return to a gradual course of deficit reduction and debt containment in the medium term. [ID:nTOE60609M]
Jan. 5, 2009: Fitch says Japan's fiscal burden is expected to increase over the coming years but risks to its credit ratings are being offset by a strong external balance sheet.
Dec. 30, 2009: Moody's says the direction of Japan's rating largely depends on the government's efforts to consolidate its finances in the medium term and cut its deficit, warning that at some point investors will demand a risk premium to fund such large gaps.
It says that while the expansionary fiscal policy in 2010 was not surprising given entrenched deflation, the bigger concern was about government finances after 2010 than about growth prospects.
Nov 10, 2009: Fitch warns it would review its AA- rating on government bonds if there were a material increase in debt issuance above the current 44 trillion yen in the fiscal year starting in April 2010.
Sept. 3, 2009: Fitch maintains Japan's long-term foreign and local currency issuer default ratings at AA and AA minus, respectively, saying its deteriorating public finances were offset by an exceptionally strong external balance sheet.
July 1, 2009: Standard & Poor's affirms its AA rating on long-term local and foreign currency debt, saying the world's second-largest economy could withstand rising fiscal pressure from government stimulus policies.
S&P said the ratings were supported by the strong net external asset position but that Japan was suffering from a political stalemate that could harm fiscal consolidation and structural reforms.
May 18, 2009: Moody's cuts Japan's foreign currency rating by two notches to Aa2 from AAA but raises the local debt rating to Aa2 from Aa3, saying the domestic market was able to absorb new borrowing from the government.
The agency describes the upgrade on the local rating as a largely technical one but also says Japan is in a worse situation than many other governments in its top ratings bracket. ($1=88.65 Yen) (Compiled by Rie Ishiguro and Kazunori Takada; Editing by Michael Watson)