A credit rating agency is a firm that provide its assesment and measurement on the creditworthiness of an entity or company and other financial obligations issued by an enity. Credit rating is important, no only for help the investors to sort out risk in japanese capital martkets but also it can be assessment from foreign investors. So, the japanese companies can borrow fund from oversea markets. In this section we will discuss about domestic credit rating in Japan there are as a follow: first, Japan Credit Rating Agency, Ltd., second is Rating & Investment Information (R&I), and the last is Mikuni & Co., Ltd. So, to know more deeply about the major players in credit rating agency will be discuss in the following.
4.1 Japan Credit Rating Agency, Ltd.
Japan Credit Rating Agency, Ltd. (JCR) was established in April 1985. JCR is designated as Nationally Recognized Statistical Rating Organization (NRSRO) by the United States Securities and Exchange Commission because credit rating agencies registered in SEC are known as NRSRO. There are ten firms currently registered as NRSROs, one of them is JCR. As we know Japan Credit rating main business areas are rating of long and short term debts, including medium-term note programs and asset backed securities, beside that JCR also focus on Research on domestic and foreign financial market and on industry trends, research on foreign political and economic conditions, the last as Publication and information service relating to ratings and research activities.
At the end of the year in2003, JCR have rated about 590 japanese firms or about 64.4%. if we compare between JCR and R&I, JCR is more active to rate the foreign firms. So, because of its, it has promoted business with foriegn rating agencies such as SCI in korea and the DCR-VIS in pakistan. JCR also compete with foreign agencies firm especially in U.S. agencies. So, JCR examines and monitors japanes firm more carefully and cooperatively than U.S agencies due to compete with foreign agencies, so JCR can survive until now, and tries to describe japanese firms more comprehensively than foreign analysts.
JCR have its own selected regulatory guidence using Credit rating in Japan there are as a follows: on financial statements, companies allowed to disclosed rating if from approved agency; simplification of securities issuance procedures if rated above certain level; eligiability requirement for CP issuance; Capital requirements for securities firms depends on the ratings of the securities held; securitiy company can lead manage issue of parent if it is rated; Management guidelines for local and national public pension investments; standards for yen-denominated foreign bonds to be posted as a collateral at the Bank of Japan; Used in the prompt corrective action assessment of asset quality by FSA and the last is about minimum rating criteria (Baa3/BBB-) for bond issuance (abolished 1996)
4.2 Rating & Investment Information (R&I)
R&I is the result of the merger of two seperate rating agencies, Japan Bond rating Institute (JBRI) and Nippon Investor’s Service (NIS) in 1998. R&I employ 49 analysts to work on ratings of japanese companies.
The long history before R&I was established. In March 1975, R&I oroginates from the institute of Public and Corporate Bonds established within Nihon keizai Shinbun. Inc that focuse on business newpaper. The first published rating trough the newspaper and tentatively started rating new CBs. And after that the rating operation were transferred from an in house sector of the newspaper company to become a private organization in April 1985, and known as Japan Bonds Research Institute (JBRI). And in another side, in april 1985, Nipon Investor Service (NIS), inc was established. NIS published the first issue in February 1986. In april 1998, R&I was established through the merger between two that firm, JBRI and NIS. And the larger stock holder from this firm is Nihon Keizai Shinbun, Inc and its subsidiaries, they hold about 56% of the stock of R&I and the rest are hold by other financial institution.
And now, R&I have rated 705 firms at the end of october 2002. And it has also developed international relationship with foreign rating agency such as Fitch ratings and NICS. And the last, we hope that R&I can still survive in the rating industry that can extend its rating services to more depply such as to academic institutions, local governments, public corporations and give good result for Japan development as a catalyst to give spirit for all corporation to still keep fight in its industries.
4.3 Mikuni & Co., Ltd.
Mikuni & Co., Ltd before became a credit rating agencies Mikuni beginning its business as a firm that supplied information about japanese firms that issuing bonds in foreign countries to foreign investors. Mikuni & Co., Ltd is diferrent with other rating agency, because Mikuni is rating agency without the designation of the MOF. Mikuni was established in 1975, and began offering financial analyses. And then the first mikuni began issuing credit rating in 1983. Until now mikuni have rated about 1500 japaneses firms.
The main characteristic of Mikuni is that mikuni has no business tie-up with any outsiders, and is the most important things that make it different are no direction and regulation by the government to the mikuni. So, mukini can free to take actions and express its opinion so, they can survive in this industry.
And other characteristic that make it different are as follows. The first is, mikuni give the information to the investors, and then the investor must pay to mikuni to get that information. This charges only to investor not to the issuer that issue the financial instruments. And second, Mikuni has strong commitment. Mikuni does not want to change its ratings easily when unexpected events happened.
