Moody's takes a closer look at Japan

Moody's Investors Service says that it will closely monitor the implications of the policies of the Democratic Party of Japan (DPJ) -- after its win in Sunday's election over the Liberal Democratic Party (LDP) -- for Japanese issuers, from corporates to financials to regional governments.

"At this early stage, we have only the DPJ's party platform to indicate any possible near-, medium-, or long-term credit impact by category of debt, so Moody's position is essentially one of wait-and-see," says Tadashi Usui, a Moody's senior analyst.

The DPJ's platform would, for example, make the credit link between Japan's major highway system and the government stronger, and affect the credit quality of some other government-related entities, Usui says. The effect on the credit quality of regional governments would be neutral, he adds.

The DPJ's landslide win on Sunday was only the second time that the LDP has lost power in 53 years.

Moody's further notes that to eliminate waste and help fund ambitious social-spending programmes, the DPJ has called for a complete review of the civil service, bureaucratic structure, and the independent administrative agencies owned by the government.  

"The aim is one of privatising, nationalising, eliminating, or transferring some or all of their operations," Usui says.

Moody's expects the new government to submit by end-2009 a new, comprehensive bill on decentralisation, based on three recommendations put forward by a committee on the subject. Moody's will monitor the potential impact of developments on these fronts in our credit assessments of the regional government issuers.