"Japan's sovereign creditworthiness (is) at risk from rising government debt," which has ballooned to 200 percent of gross domestic product (GDP), the agency said in a report published Thursday.

In "the absence of sustained economic recovery and fiscal consolidation, public debt will continue to grow, providing incentives to lower the ratings over the medium term," the agency warned.

Last year Fitch gave Japan's long-term debt an "AA" rating, third on a scale of 22. Analysts say the world's second-largest economy is walking a fiscal tightrope with one of the biggest public debts among industrialized nations.

The debt has soared as the government spends its way out of the economic doldrums amid plummeting tax revenues and soaring welfare costs for its ageing population.

Based on fiscal 2010's nominal GDP of 475 trillion yen ($5.1 trillion), Japan's debt is estimated to reach 950 trillion yen, or about 7.5 million yen per person, in the next year.

With around 90 percent of the debt held by domestic investors, Japan has enjoyed low interest on its borrowing with the backing of private sector savings keeping it afloat since its stock market crash of 1990.

But Fitch warned a slow drop in the savings rate could "undercut the sovereign's ability to fund itself" at low rates.

Standard & Poor's in January warned that it might cut its rating on Japanese government bonds, which could raise Japan's borrowing costs.

Japan's huge public debt is a legacy of massive stimulus spending during the economic "lost decade" of the 1990s, as well as a series of pump-priming packages to tackle the recession which began in 2008.

It crawled out of a severe year-long recession in 2009 but a recovery in the world's second largest economy remains fragile with deflation, high public debt and weak domestic demand all concerns for policymakers.

Fitch's latest warning follows reports that Tokyo is mulling new targets to reduce its public debt, including budget reduction plans as part of a fiscal reform bill being prepared under Finance Minister Naoto Kan's leadership.

The Wall Street Journal said Thursday that a bill, due by the end of June, will aim to improve the fiscal health of the economy in the medium to long-term.

One idea being considered is a pledge to halve the primary deficit, a gauge of how much a nation borrows for policy programs, by fiscal 2015, and to turn it into a surplus by 2020, the report said.

Meanwhile, Japan's exports fell at a record pace last year as the economic crisis hit global trade, but the blow was softened by strong Asian demand supporting the economy's recovery, data showed Thursday.

And although overall exports plunged year-on-year, overseas shipments surged in March on-year for the fourth straight month of gains, illustrating overseas demand is firmly supporting the Japanese economy.

Japan's exports are crucial to what the International Monetary Fund has called its "tentative" recovery from the effects of the global downturn, as weak domestic demand and persistent deflation threaten growth.

Asia's biggest economy has been stuck in a deflationary spiral since its bubble burst in the early 1990s, and consumer spending has never fully recovered to become a major driver of growth.

It was hit hard as global trade deteriorated last year. Exports plummeted a record 17.1 percent to 59.01 trillion yen ($634 billion) in 2009, the biggest fall in 30 years, the Ministry of Finance said.

Exports to Europe tumbled 27.5 percent while those to the United States shrank 22.7 percent to 9.3 trillion yen, the ministry said.

Shipments to China, however, fell only 3.8 percent to 11.3 trillion yen in the last fiscal year as the Asian powerhouse overtook the United States to become Japan's top export destination.

Exports to Asia also saw a less-severe drop, down 8.3 percent over the year at 32.6 trillion yen, the ministry said.

Japan still managed a trade surplus of 5.23 trillion yen in 2009 - rebounding from the previous year's first deficit since 1980 - with imports falling as companies cut spending and slashed jobs amid the downturn.

Imports for the year were down 25.2 percent at 53.78 trillion yen.