Moody's Investors Service said Monday it expects to see the credit standings of Japanese companies improve this year, noting they turned in stronger performances in terms of profitability and cash flow in 2006 by revamping their operations.
Considering that major mergers-and-acquisitions deals announced by Japanese companies last year are likely to have only a minimal, negative impact on their finances, the agency significantly downgraded the credit standings of few companies because of their M&A deals, Moody's added.
Government entities would be allowed to report short-term debt investments at amortized cost provided that their fair value was not affected by changes in the interest rates, credit standings
or other factors, according to the GASB.
These loans are often quite large, entail extensions of credit to several borrowers with different credit standings, and exhibit complicated structures that may include public and private sector involvement on several different levels.
These institutions, having experienced substantial loan-quality problems - which stemmed from nearly a decade of aggressive lending often on terms more liberal than warranted by the credit standing of their borrowers - significantly tightened their lending standards in the late 1980s and early years of this decade.
Addressing expectations that the BOJ will terminate its zero-interest-rate policy in the near future, S&P downplayed the negative consequences for banks' credit standings.
S&P does not expect these challenges will significantly damage the credit standings of the banks," it said, but added that "risk remains high" due to the banks' weak financial conditions.