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S&P: Ratings On Japan's JFM Affirmed Despite Lending Expansion PlanTOKYO (Standard & Poor's) Dec. 12, 2008--Standard & Poor's Ratings Services today affirmed its 'AA'
long-term and 'A-1+' short-term credit ratings on the new Japan Finance Organization for Municipal Enterprises(JFM), despite the announcement of a plan to increase JFM's lending volume. At the same time, Standard &Poor's affirmed its 'AA' ratings on JFM's senior secured debt. The outlook on the long-term rating is stable.
The Local Financial System Council, an advisory body within the Ministry of Internal Affairs andCommunications, published a report on Dec. 10 detailing plans to expand the business scope of JFM. JFM
currently provides long-term financing for fee-based services such as water and sewage operated by local andregional governments (LRGs) in Japan, collectively called "municipal enterprises". The report recommends a
new loan scheme whereby JFM would increase its lending volume by initiating loans for non-fee administrative
services in the LRG general account, but without fortifying its capitalization. The central government is unlikely
to extend its financial guarantees to help increase debt financing by JFM to this end. Fundamentally, however,
JFM's asset quality should remain unchanged, as it is only capable of lending to LRGs, including loans to covermunicipal enterprises' obligations. Standard & Poor's assumes that the volume of loan expansion would notendanger the current business and financial profiles of JFM.
In terms of potential movement in the ratings on JFM, there are various uncertainties that will be explored in ouranalysis, such as the precise volume of loan expansion. We are scrutinizing the decision-making process toassess whether the loan expansion policy is in JFM's own economic interests, and whether central and local
government support for JFM will remain at current levels. Currently, Standard & Poor's incorporates support
from both the central and local governments into the ratings on JFM as a positive factor. However, the current
level of support may be insufficient to maintain the ratings if the lending volume increase outweighs thissupport. The rating might come under downward pressure if this were to be the case.
A Japanese-language version of this media release is available on Standard & Poor's Research Online atwww.researchonline.jp, or via CreditWire Japan on Bloomberg Professional at SPCJ <GO>. Complete ratings
information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's
credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action
can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in theleft navigation bar, select Find a Rating, then Credit Ratings Search.
Ratings ListRatings Affirmed
Japan Finance Organization for Municipal Enterprises
Issuer Credit Rating
AA/Stable/A-1+
Senior Secured (78 issues)
AAAnalytical Contact:
Kumiko Kakimoto, Tokyo(81) 3-4550-8705
kumiko_kakimoto@standardandpoors.com

Media Contact:
Kyota Narimatsu(81) 3-4550-8411tokyo_pressroom@standardandpoors.com

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