Global Credit Research
Rating Action
18 MAY 2009

Rating Action: Japan Finance Organization for Municipal Ent.

Moody's unifies Japan's government ratings at Aa2
26 government-related issuers and regional & local governments on review for possible
downgrade

Tokyo, May 18, 2009 -- Moody's Investors Service unified the government of Japan's local and foreign
currency bond ratings at Aa2, increasing its domestic currency bond rating (the JGB rating) from Aa3 andlowering its foreign currency bond rating from Aaa. The outlook for the government's ratings is stable.
Japan's foreign and domestic currency long-term bond ceilings and deposit ceilings remain unchanged atAaa, and its short-term ceilings remain at Prime-1.
In addition, the ratings of 26 Aaa-rated and Aa1-rated government-related issuers (GRIs), regional
governments, and local governments were placed under review for possible downgrade. Moody's notes thatthe reviews are unlikely to lead to ratings for any of these entities below the government's rating of Aa2.
Moody's explained that its prior ratings reflected the view that Japan was more likely to meet its foreign
obligations than its domestic obligations. Over the recent period of global financial distress, however,
Moody's has observed that the payment priorities of various governments have proven very hard to predict.
As a result, Moody's has unified its ratings on Japan's various obligations at the level of its overall credit
profile, which is Aa2.
Japan's credit profile is Aa2
The unified rating of Aa2 reflects Japan's considerable strengths. These include Japan's large domestic
savings, a strong home bias on the part of its domestic financial institutions and institutional investors,
relatively low holdings of government debt by foreign investors, and Japan's $1 trillion of official foreignexchange holdings. Moody's believes the domestic market will absorb the record level of bond issuance thisyear to fund the government's economic stimulus program.
However, the rating also reflects the risks of Japan's high level of debt, which leaves the country's fiscal
position vulnerable to shocks or imbalances that would cause a sharp rise in interest rates. The ratings also
reflect the sizable but temporary increase in the government's budget deficit caused by the severe effects ofthe global collapse in trade and recession on the Japan's economy. Further, Japan's large foreign exchange
reserves, although large compared to those of most other countries, are only a small fraction of its liabilities
and could not alone eliminate refinancing risk at a time of severe stress.
For the government's bond rating to move higher, Japan's economy would need a sustained recovery andthe government would need to shrink its budget deficit and lower its debt trajectory. Conversely, the bondrating would be under pressure if the trend in debt increases continues, which could result from demographicpressures on social welfare and pension expenditures, or if the market loses enthusiasm for thegovernment's new debt issuances.
Ratings unification adjusts assumptions on priority of payment
The unification of the government bond ratings at the Aa2 level was prompted by a reassessment of thepriority of the payment the government might choose to assign to its various obligations were it to someday
be unable to finance them all on a timely basis. Moody's now believes, based on recent experience in othercountries, that it is too conjectural to presume that the government would be more likely to meet its foreign
currency obligations than its local currency obligations. Accordingly, Moody's is assigning the same rating forboth the government of Japan's domestic obligations in yen and its indirect, external euroyen obligations,which are guarantees on public agency's overseas borrowings.
Ratings of government-related issuers, regional governments, and local governments placed under review
for possible downgrade
The 26 entities under review relate to 13 GRIs and 13 regional and local governments (see list below), which
are currently rated above the government of Japan's rating. The review results from Moody's belief that
default risk for the government of Japan and its related entities is highly correlated. Thus, it may not beappropriate for a related entity's rating to exceed that of the central government. However, the outcome of thereviews is unlikely to lead to ratings below Aa2 given the strong institutional and financial support provided by
the national government to the public sector entities subject to the review.
The rating reviews will focus on these entities' stand-alone financial strengths, the scope of their institutionaland financial linkages with the central government, and their systemic importance to the broad economy,
which could influence the willingness of the central government to protect their finances while possibly
endangering its own.
Moody's intends to conclude these reviews within three months.
Implications for ratings on structured finance securities and banks
The adjustment of the government's bond ratings and the reviews of related entities may affect the ratings ofcertain structured finance issues. These include government bond repackaging transactions, residential
mortgage-backed securities, and CDOs of small- and medium-sized enterprises. Moody's will announce any
rating actions through separate press releases.
Japanese bank ratings are not affected by the rating actions discussed in this press release. Moody's Special
Comment titled "Financial Crisis More Closely Aligns Bank Credit Risk and Government Ratings in Non-AaaCountries," dated May 2009, explains the relationship between a bank and government ratings.
Methodologies used to rate the national government, government-related issuers, and regional and localgovernments
The principal methodology used in rating the government of Japan is "Sovereign Bond Ratings." Theprincipal methodologies used in rating the Japanese RLGs are "Regional and Local Governments Outside
the US" and "Application of JDA to Japanese Prefectures and Cities" The principal rating methodology usedin rating the 13 government-related issuers is "The Application of Joint Default Analysis to Government
Related Issuers."
These methodologies can be found at www.moodys.com in the Credit Policy & Methodologies directory, in
the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in
the process of rating these issuers can also be found in the Credit Policy & Methodologies directory on
Moody's website.
The last rating action with respect to Japan was on June 30, 2008 when Moody's raised the Japanese
government's rating for domestic debt securities (JGBs) to Aa3 from A1 and maintained a stable outlook. At
the same time, Moody's left unchanged Japan's Aaa rating for government guaranteed internationally issued
bonds (including euroyen).
Below is a list of those entities whose ratings have been placed on review for possible downgrade.
Zaito Agencies
Central Nippon Expressway Company Limited
Aaa domestic currency issuer rating
Aaa non-guaranteed domestic currency debt ratings
Development Bank of Japan Inc.
Aaa domestic currency issuer rating
Aaa non-guaranteed domestic and foreign currency debt ratings
Aaa government guaranteed domestic and foreign currency debt ratings
East Nippon Expressway Company Limited
Aaa domestic currency issuer rating
Aaa non-guaranteed domestic currency debt ratings
Japan Expressway Holding and Debt Repayment Agency

Aaa non-guaranteed domestic currency debt ratings
Aaa government guaranteed foreign currency debt ratings
Japan Finance Corporation
Aaa domestic and foreign currency issuer ratings
Aaa non-guaranteed domestic currency debt rating
Aaa government guaranteed domestic and foreign currency debt ratings
Japan Finance Organization for Municipal Enterprises
Aaa domestic and foreign currency issuer ratings
Aaa non-guaranteed domestic currency debt ratings
Aaa government guaranteed domestic and foreign currency debt ratings
Japan Housing Finance Agency
Aaa domestic currency issuer rating
Japan Railway Construction, Transport and Technology Agency
Aaa non-guaranteed domestic currency debt ratings
Kansai International Airport Company Limited
Aaa domestic currency issuer rating
Aaa non-guaranteed domestic currency debt ratings
Metropolitan Expressway Company Limited
Aaa domestic currency issuer rating
Aaa non-guaranteed domestic currency debt ratings
Shoko Chukin Bank, Ltd.
Aaa domestic and foreign currency long-term deposit ratings
Aaa non-guaranteed domestic currency debt rating
Urban Renaissance Agency
Aaa domestic currency issuer rating
Aaa non-guaranteed domestic currency debt ratings
Aaa government guaranteed domestic currency debt ratingsWest Nippon Expressway Company Limited
Aaa domestic currency issuer rating
Aaa non-guaranteed domestic currency debt ratings
Regional and local governments

Fukuoka City
Aaa foreign currency issuer rating
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Fukuoka Prefecture
Aaa foreign currency issuer rating
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Hamamatsu City
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Hiroshima Prefecture
Aaa foreign currency issuer rating
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Kyoto, City of
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Nagoya, City of
Aaa foreign currency issuer rating
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Niigata Prefecture
Aaa foreign currency issuer rating
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Osaka City Government
Aaa foreign currency issuer rating
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Sakai CityAa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Sapporo, City of
Aaa foreign currency issuer rating
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Shizuoka City
Aaa foreign currency issuer rating
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Shizuoka Prefecture
Aaa foreign currency issuer rating
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Tokyo, Metropolis of
Aaa foreign currency issuer rating
Aaa non-guaranteed foreign currency debt ratings
Aaa guaranteed foreign currency debt ratings
Aa1 domestic currency issuer rating
Aa1 non-guaranteed domestic currency debt ratings
Singapore
Thomas J. Byrne
Senior Vice President - Regional Credit Officer
Sovereign Risk Group
Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (65) 6398-8308
LondonPierre Cailleteau
Managing Director
Sovereign Risk Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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