• Bloomberg


Credit rating companies issued a record number of downgrades this year as the March 11 earthquake, tsunami and nuclear crises pushed Japan’s economy into its third recession in a decade.

Standard & Poor’s lowered assessments 109 times this year, the most in at least a decade, while lifting them 14 times. The ratio of upgrades to reductions stands at 0.13, compared with 1.12 in the United States. The downgrades include the reduction in January of Japan’s sovereign credit rating to AA- from AA.

Japanese corporate creditworthiness suffered as the effect of two sovereign reductions and the March 11 quake was compounded by a stronger yen and a debt crisis in Europe. The nation’s companies received more downgrades than their Asian neighbors and South American counterparts combined, even though they benefit from the second-lowest borrowing costs in the developed world and rising cash reserves.

“Next year may not necessarily bring a recovery in business profitability, and the downward pressure on the ratings could potentially intensify,” Osamu Kobayashi, a Tokyo-based credit analyst at S&P, said Dec. 21.

Toyota had its long-term debt rating cut one step to AA- in March from AA by Standard & Poor’s, which cited “weak” profitability at the carmaker. Moody’s Investors Service lowered Toyota to Aa3 from Aa2 in June.

S&P reduced its ratings on Japan by one level Jan. 27 to AA- on rising government debt, followed by reductions on five agencies including Japan Finance Corp. and seven utilities, including Tokyo Electric Power Co., whose creditworthiness is tied to the sovereign, according to data compiled by Bloomberg.

The risk assessor cut the sovereign outlook to “negative” from “stable” on April 27, saying the March disaster “will increase Japan’s fiscal deficits above prior estimates by a cumulative 3.7 percent” of gross domestic product through 2013.

Moody’s said Japan’s large deficits and weaker growth outlook make future policy adjustments “even more challenging.” Those factors and the fact that the nation’s budget for next year needs approval by a divided legislature “place negative credit pressures on Japan,” Moody’s said in a report Tuesday.

The economy grew at a 5.6 percent annual pace in the three months through September, after two quarters of contraction. The median estimate of 11 economists surveyed by Bloomberg is for expansion of 0.42 percent this quarter. Of the 10 polled this month, five predicted GDP will shrink.

The 225 companies of the Nikkei benchmark stock index including Toyota, Mitsubishi UFJ Financial and Panasonic Corp. had ¥65.2 trillion of cash as of Sept. 30, according to data compiled by Bloomberg. That’s 12 percent more than the ¥58.5 trillion held as of March 31, 2010, the end of the previous fiscal year.

Japanese companies embarked on a record shopping spree this year, spending $172.31 billion on acquisitions.

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