TOKYO (AFP) ― Fitch cut Japan’s credit rating by two notches on Tuesday, citing its “leisurely” efforts at shrinking a massive public debt, as Tokyo struggles to kick-start the world’s third-largest economy.

The global agency downgraded Japan’s long-term foreign currency rating to “A+” from “AA,” with a negative outlook, noting “growing risks for Japan’s sovereign credit profile as a result of high and rising public debt ratios”.

The move follows similar downgrades by rival agencies Moody’s and Standard & Poor’s in the past year and a half.

Japan has an eye-watering national debt that amounts to more than twice its gross domestic product ― the highest among industrialized nations and a problem that would usually mean paying a high premium to borrow funds.

But its bonds are mostly held by domestic investors, with Japan paying low interest rates on its debt while being less vulnerable to criticism from foreign buyers over its fiscal management ― a fate that has befallen Greece.

However, Fitch said Japan’s debt load was projected to hit 239 percent of output by year’s end, “by far the highest for any Fitch-rated sovereign” debt, outpacing Spain, Italy and even beleaguered Athens.

Billions of dollars in reconstruction spending following last year’s quake-tsunami disaster is expected to add to the debt mountain.

“(Japan’s) fiscal consolidation plan looks leisurely relative even to other fiscally challenged high-income countries, and implementation is subject to political risk,” the ratings agency said in a statement.

Fitch also warned that a further downgrade was possible given “a lack of new fiscal policy measures aimed at stabilizing public finances.”

Finance Minister Jun Azumi said Tuesday that Tokyo would keep hacking away at the national debt, but declined to comment directly on Fitch’s downgrade.

“I’d like to move ahead with fiscal reform, while making efforts to enact the tax and social security reform bills,” Azumi told reporters.

Prime Minister Yoshihiko Noda is trying to double Japan’s consumption tax to 10.0 percent, an unpopular cornerstone of a bid to stem the national debt as the costs of a rapidly ageing population heap pressure on public coffers.

Fitch noted that Japan has “exceptional financing flexibility” owing to low yields on its government bonds, with the rate on a 10-year Japan government paper hitting a near decade-low of 0.815 percent last week ― lower than Europe’s top economy Germany.

Analysts largely shrugged off the downgrade, saying it was not unexpected, while the yen weakened slightly against the euro and dollar.

“Japan is not Greece and is unlikely to share in a similar fate,” David Rea, a Japan economist for Capital Economics, said in a note.

Japan has a high personal savings rate, while the yen is a global reserve currency that has emerged as a safe haven unit, Fitch said, amid worries over Europe’s economy and a slow recovery in the United States.

Japan has “fundamental structural strengths including one of the world’s most advanced high-income economies and strong public institutions,” it said.

“However, its demographic profile is a structural weakness,” Fitch added.

With a chronically low birth rate, nearly one in four of Japan’s 128 million people is older than 65, threatening growth and its ability to finance an increasingly expensive social security system.

The Fitch downgrade comes just days after Tokyo upgraded its view of the economy for the first time in nine months, after better-than-expected growth figures and thanks to a pickup in exports and consumer spending.

Japan’s economy grew 1.0 percent in the three months to March, offering a glimmer of hope for a nation hampered by years of deflation and stuttering growth.

The moribund economy was also hammered last year by the quake-tsunami disaster and severe flooding in Thailand, which hurt manufacturers with plants there.