Japan's AA- debt rating is at risk after Standard and Poor's warned that a downgrade is likely if medium-term growth prospects weaken.

The ranking is supported by an “ample net external asset position, relatively strong financial system, and diversified economy,” S&P said in a statement today, also citing the yen’s role as a “key international reserve currency”.

“We would also consider lowering the long- and short-term ratings if the government’s debt trajectory remains on its current course or begins to erode the nation’s external position,” it added.

Forex news reports show that S&P has cut the ratings of European nations including France and Italy this year, along with reducing both the U.S. and Japan last year.

“S&P’s rating decision will be put off further into the future, possibly until it will see whether the nation’s consumption tax bill will gain support at the parliament or not,” said Soichi Okuda, chief economist at Sumitomo Shoji Research Institute in Tokyo.

A number of tax increases are currently planned by the ruling Democratic Party (headed by Yoshihiko Noda), with the 5% consumption tax due to increase to 8% in April 2014 and up to 10% in October 2015. But S +P economists warn that even with such increases, there will be structural problems left to deal with including a “mismatch between the social security system and an aging population and current low macroeconomic growth.

“No matter how high the sales tax is raised, there’s no point unless the government does something with the social- welfare system,” S&P’s Ogawa said in an interview with forex news reporters last month.