Tokyo, November 29, 2012 -- Moody's Japan K.K. says that the overall credit quality of all consumer asset classes in Japan's asset-backed securities (ABS) market has improved and which will ensure the stability of the market even in the face of severe unemployment and a decline in income levels.
Moody's observations are detailed in a new report titled "Japanese ABS Performance Indices."
Moody's notes that the default rate for Japan's ABS asset classes is generally stable. In late 2011 and in 2012, the default rates of card cash advances and consumer finance loans touched their lowest level in 10 years.
This is mainly because credit quality has improved significantly in card cash advances and consumer loans owing to the following factors: 1) originators have tightened their lending policies in accordance with the revised Money Lending Business Law that came into effect in 2010, 2) originators have agreed to provide more favorable terms for loans and have repurchased these amended receivables from securitized pools, 3) obligors with weak credit profiles have already defaulted and left the pool, and 4) some transactions that were weak are no longer part of the index.
On the other hand, the improvement in credit quality will gradually slow. Therefore, the default rates are unlikely to decline substantially from current levels.
Credit quality is also improving in other asset classes such as auto loans and installment sales loans, as new ABS are now backed by loans that were screened more strictly. Following the revision of regulations and because of the financial problems of originators in 2007-08, originators tightened their credit policies in those asset classes.
The composition of the asset pool underlying the index has changed gradually in accordance with new ABS issuance and the withdrawal of existing ABS. This transition has therefore lowered the index's default rate, but is now nearly completed.
Moody's updates and publishes its performance indices for Japanese ABS semi-annually, and has been doing so since April 2004. Moody's provides data for five asset classes, auto loans, installment sales loans, credit card shopping, card cashing advances and consumer finance loans.
The report (available only in Japanese) can be found at www.moodys.co.jp. In addition, Moody's publishes a global collateral performance review monthly available to all registered users of our website, at www.moodys.com.
Takako Tokinaga Asst Vice President - Analyst Structured Finance Group Moody's SF Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: (03) 5408-4220 SUBSCRIBERS: (03) 5408-4210 Koji Kumamaru MD - Structured Finance Structured Finance Group JOURNALISTS: (03) 5408-4110 SUBSCRIBERS: (03) 5408-4100 Releasing Office: Moody's Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: (03) 5408-4110 SUBSCRIBERS: (03) 5408-4100 Copyright 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ARE MOODY'S JAPAN K. K.'S ("MJKK") CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MJKK DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS DO NOT CONSTITUTE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS ARE NOT RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. CREDIT RATINGS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MJKK ISSUES ITS CREDIT RATINGS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information.
The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of Moody's Corporation(MCO). MJKK is a credit rating agency registered with the Japan Financial Services Agency and its registration number is FSA Commissioner (Ratings) No. 2.
MJKK hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK have, prior to assignment of any rating, agreed to pay to MJKK for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000. MCO and MJKK also maintain policies and procedures to address the independence of MJKK's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MJKK and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy."
Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.
This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.