Moody's Corporate Credit Downgrades Still Higher Than Upgrades

Moody's third quarter rating revisions indicate some weakness in the corporate sector and the financial sector in Japan despite the overall improvement in the macroeconomic conditions since the second half of 2002.

Moody's downgrades of Japanese corporate credit ratings during third quarter continued to outnumber upgrades. With market-oriented reform and deregulation underway, it remains to be seen how Japanese companies will reinvent themselves in light of fiercer competition. Third quarter results show that a few companies have been able to manage their risks, recapitalize, and implement conservative budgeting to emerge stronger, but many continue to struggle.

(TT's Take) Despite perceptions of progress in corporate restructuring, record low effective interest rates, and bank loan forgiveness, Moody's credit downgrades continue to exceed upgrades by a significant margin. Those getting downgraded as investor perceptions brighten are likely to be the losers among the "winners vs losers" polarization that is likely to continue within and amongst industries in Japan for the foreseeable future.


Reuters Article