JAPAN FIRMS' DEBT HIT WITH FEWER DOWNGRADES IN JULY-SEPT

Debt issued by Japanese companies was downgraded 41 times by five major credit-rating agencies in the July-September period, down 24 from the previous quarter and indicating that corporate earnings have bottomed out now that the worst of the global recession has passed.

A slew of ratings cuts were announced starting last December as the economy clearly lost steam. Credit downgrades exceeded 60 in both the January-March and April-June quarters, according to data compiled by Mizuho Securities Co. Even top-performing firms were not immune, with Toyota Motor Corp. (TSE:7203) debt getting two downgrades by Standard & Poor's.

But as corporate profits bounced back after the January-March quarter, ratings cuts due to deteriorating earnings began decreasing in number, leading to a 37 per cent decline in the three months through Sept. 30.

While business conditions remain harsh for consumer lending and certain other industries, "Japanese companies as a whole will likely continue to see fewer credit downgrades," says Yasunobu Katsuki, chief credit analyst at Mizuho Securities.

Yet ratings upgrades were still rare in the July-September period. They numbered only three and affected two firms: Megmilk Snow Brand Co. (TSE:2270) unit Snow Brand Milk Products Co. and Suntory Holdings Ltd.

(Nikkei)lm

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