RTTNews - Wednesday, rating agency Moody's said in a report that the declining number of corporate bankruptcies in Japan and the recovery of its equity market are encouraging signs for the longer-term stabilization of the country's bank ratings.
The rating agency noted that since fiscal year 2008, a majority of Japan's large banks experienced net annual losses for the first time since 2004, because of decreasing fees from mutual funds sales, rising credit expenses, and substantial impairment losses associated with their holdings of Japanese equities. This year, however, banks expect limited downward pressures from impairment losses due to a recovery in the equity market, it said.
The bank rating already incorporate major risks associated with credit and market risks, with ratings of several banks particularly vulnerable to such risks having already been adjusted downwards.
At the same time, a majority of regional banks are also well positioned with regard to their capital strength and strong liquidity bases, though the ratings of a few banks are under review for possible downgrade, reflecting their increased investments in businesses that have been largely divested by large US financial institutions, Moody's said.
Regarding the Japanese economic outlook, the rating agency said some economic indicators suggest that the economy has bottomed out during the final quarter of the 2008 fiscal year, while the first quarter results of the 2009 fiscal year are expected to be less volatile than the last two quarters. Normal functioning of the capital markets for top prime credits has also recovered.
On a cautious note, Moody's said the recovery is from a low level and may not be sustainable as risk of deteriorating macroeconomic factors remains.
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