S&P Global Ratings maintained Japan's sovereign ratings with 'stable' outlook on Wednesday.
The rating was affirmed at 'A+' citing the country's exceptional external position, prosperous and diversified economy, political stability, and savings-rich financial system.
Nonetheless, Japan has very weak public finances. In the next one to two fiscal years, the negative impact of the COVID-19 pandemic will put additional burden on fiscal performance and lead to a significant increase in government indebtedness, the agency observed.
The 'stable' outlook suggested that, until fiscal 2024, relatively large fiscal deficits will continue to keep upward pressure on the general government debt-to-GDP ratio.
S&P expects Japan's average nominal GDP growth to be unexceptional among high-income economies, at about 1.8 percent annually.
The budget deficit is estimated to be close to 5 percent of GDP over fiscals 2021-2024 without expenditure related to the pandemic.