JAPAN RATING AGENCIES IN BATTLE WITH U.S. GIANTS
Three Japanese credit rating agencies are
entering into fierce competition with <Moody's Japan K.K.> and
<Standard and Poor's Asia Inc>, the local branches of the two
U.S. Giants, as the Japanese credit market opens up to
foreigners, Japanese rating agency managers said.
    Standard and Poor's recent triple-A rating of <Chiyoda Fire
and Marine Insurance Co Ltd's> claims-paying ability caused the
Japanese agencies, which had rated Chiyoda's convertible bond
only A-plus, to come under some criticism for being too
conservative, they said.
    Chiyoda is Japan's eighth largest non-life insurer.
    Standard and Poor's Corp has been in the business for more
than a century while <Moody's Investors Service Inc> was
founded more than 80 years ago. Each has rated some 20,000 to
30,000 U.S. And about 100 Japanese issues.
    With Japanese insurers eager to issue more bonds through
overseas financing companies, Chiyoda's rating will stimulate
their interest in using the U.S. Agencies, the analysts said.
    Standard and Poor's said Chiyoda's rating was based on its
strong capitalisation, stable performance and high levels of
unrealised appreciation, particularly in its stock portfolio.
    The U.S. Agency also emphasised the favourable regulatory
environment in which Japan's non-life insurers operate.
    Japanese agencies were shocked by the earlier AAA ratings
on the claims-paying ability of <Sumitomo Life Insurance Co>
and <Dai-Ichi Mutual Life Insurance Co> by Standard and Poor's,
the first ratings given to Japanese life insurers.
    Strong Japanese insurers can accumulate cash to ward off
shocks from any foreign investment, Standard and Poor's said.
    A month ago <Nippon Investors Service Inc> (NIS) assigned
an AAA rating to <Financial Securities Assurance Inc>, a U.S.
Firm that gives financial guarantees on corporate securities.
     "NIS has assigned rates on a U.S. Firm for the first time in
Japan, which was the first step into the U.S. Rating market,"
Kazuya Kumura, general manager of NIS, said.
    Kyosuke Yoshida, managing director of Japan Bond Research
Institute (JBRI), said, "Agencies should be more actively used
to respond better to growing overseas investor interest."
    Takeshi Watanabe, president of Japan Credit Rating Agency
Ltd (JCRA), said, "(Our) advantages are that we have a deeper
understanding of business practices in Japan, other Asian
nations and Japanese investor behaviour and are also more alert
and quick to react to domestic news."
     JBRI, with 12 years' experience, is Japan's largest agency.
The other two have been in business for two years.
    Finance Ministry approval of yen commercial paper issues by
Japanese residents, which is expected soon, will stimulate
local agencies to grow quickly, securities analysts said.
    The Finance Ministry is encouraging more use of agencies by
gradually abolishing limits on corporate debt creation.
    In December it allowed non-residents holding at least an
A-rating from one of the agencies to issue samurai, shogun and
euroyen bonds without first meeting the normal stringent
financial criteria.
     But local companies, regardless of the rating obtained for
a planned bond, must meet the tough financial criteria set by
commissioned banks and underwriters, which includes minimum net
asset requirements and capitalisation, local agency managers
said.
    Commissioned banks are responsible for protecting
bondholders and conducting principal and coupon payments.
    Investors' risk in corporate default has been checked by
the very system that is slowing the smooth growth of Japanese
credit rating agencies, the managers said.
     "The idea of rating in Japan has been woven into
prerequisites for an issuer company to satisfy financial
criteria," JCRA's Watanabe said.
    The Finance Ministry, commissioned banks and securities
houses agreed in January to lower the eligibility ceiling for
companies wanting to issue non-collateral straight bonds.
    "An internationally comprehensive market system is needed to
lure more overseas investors into the Japanese market," JBRI's
Yoshida said.
 REUTER
