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Fitch says expects to downgrade Japan after next fiscal year's budget

Fitch Ratings expects to downgrade Japan's credit rating sometime early next year as the government is unlikely to compile a budget for next fiscal year that offsets a delay in increasing the sales tax, a senior official from the agency said on Thursday.

Andrew Colquhoun, head of Asia-Pacific sovereigns at Fitch, said in a conference call that Japan's government is also planning to lower the corporate tax, which shows a decreasing chance of lowering the budget deficit.

Read MoreJapan threatened with credit rating downgrade

YOSHIKAZU TSUNO | AFP | Getty Images

Fitch is unlikely to consider a downgrade of more than one notch, he said.

Fitch's rating on Japan is A plus, which is four notches below the top AAA rating. Fitch has Japan on ratings watch negative, meaning a downgrade is possible. Fitch has said it wants to resolve its negative outlook during the first half of next year.

Read MoreWhy investors are brushing off Moody's Japan downgrade

Moody's Investors Service downgraded Japan last week to A1 due to a delay in the sales tax increase, which is the same level as Fitch's rating.