articles Ratings /ratings/en/research/articles/230327-default-transition-and-recovery-2022-annual-japanese-corporate-and-public-finance-default-and-rating-trans-12661261 content esgSubNav
In This List
COMMENTS

Default, Transition, and Recovery: 2022 Annual Japanese Corporate And Public Finance Default And Rating Transition Study

COMMENTS

Credit FAQ: S&P Global Ratings' Evolving View Of Ontario's Regulatory Construct

COMMENTS

Credit FAQ: Panelists Debate Risks And Opportunities Along The EV Value Chain

COMMENTS

Credit FAQ: What Declining Commercial Real Estate Values Could Mean For U.S. Banks

COMMENTS

Credit FAQ: Hot Retail And Restaurant Topics In A Cooling Economy


Default, Transition, and Recovery: 2022 Annual Japanese Corporate And Public Finance Default And Rating Transition Study

Our study found a strong negative correlation between Japanese issuer credit rating levels and the frequency of defaults over the 42 years through 2022. Moreover, higher ratings have generally been more stable than lower ratings.

In 2022, there were no defaults among Japanese issuers rated by S&P Global Ratings--the seventh year in a row with no defaults--and the percentage of issuers with unchanged ratings rose.

This study involves 506 Japanese entities that have, or previously had, S&P Global Ratings long-term issuer credit ratings. The entities are industrial corporates (316), financial institutions (122), insurers (50), and public finance entities (18). In this article, the term "financials" refers to the financial institutions and insurance sectors combined. This study covers both public and confidential ratings from 1981 to 2022.

Correlation Between Ratings And Default Rates

Despite the small number of rated entities, the metrics in the study show a negative correlation between rating levels and the occurrence of default. In other words, the higher the credit rating, the lower the historical default rate, and vice versa (see tables 1-4).

Table 1

Average Cumulative Default Rates: Japanese Industrials And Financials (1981-2022) (%)
Rating M12 M24 M36 M48 M60 M72 M84 M96 M108 M120
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04 0.16 0.29
A 0.00 0.00 0.00 0.03 0.12 0.23 0.40 0.56 0.69 0.82
BBB 0.13 0.43 0.89 1.36 1.61 1.84 1.84 1.84 1.84 1.84
BB 0.56 1.22 1.90 3.14 4.46 5.50 6.23 6.45 6.45 6.45
B 6.89 11.45 14.84 18.54 19.98 20.61 22.54 23.86 25.21 26.62
CCC/C 18.61 19.67 19.67 19.67 19.67 19.67 19.67 19.67 19.67 19.67
Investment grade 0.03 0.09 0.19 0.31 0.41 0.51 0.60 0.68 0.77 0.86
Speculative grade 2.58 4.05 5.26 6.97 8.26 9.18 10.14 10.58 10.86 11.16
All rated 0.24 0.42 0.61 0.87 1.08 1.25 1.41 1.53 1.64 1.75
Note: One-month marginal default rates are used to calculate cumulative default rates. Source: S&P Global Ratings Credit Research & Insights.

Table 2

Average Cumulative Default Rates: Japanese Public Finance (1981-2022) (%)
Rating M12 M24 M36 M48 M60 M72 M84 M96 M108 M120
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
CCC/C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Investment grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Speculative grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
All rated 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Note: One-month marginal default rates are used to calculate cumulative default rates. Source: S&P Global Ratings Credit Research & Insights.

Table 3

Average Cumulative Default Rates: Japanese Industrials (1981-2022) (%)
Rating M12 M24 M36 M48 M60 M72 M84 M96 M108 M120
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.07 0.19 0.31 0.43 0.57 0.71 0.85
BBB 0.00 0.00 0.03 0.09 0.09 0.09 0.09 0.09 0.09 0.09
BB 0.00 0.00 0.25 1.11 2.03 2.90 3.36 3.43 3.43 3.43
B 3.53 6.36 8.86 10.30 10.42 10.42 11.80 13.33 14.90 16.55
CCC/C 14.40 14.40 14.40 14.40 14.40 14.40 14.40 14.40 14.40 14.40
Investment grade 0.00 0.00 0.01 0.06 0.11 0.16 0.21 0.27 0.33 0.39
Speculative grade 1.24 1.85 2.59 3.55 4.26 4.90 5.56 5.97 6.33 6.70
All rated 0.16 0.24 0.34 0.51 0.65 0.78 0.91 1.02 1.12 1.22
Note: One-month marginal default rates are used to calculate cumulative default rates. Source: S&P Global Ratings Credit Research & Insights.

Table 4

Average Cumulative Default Rates: Japanese Financials (1981-2022) (%)
Rating M12 M24 M36 M48 M60 M72 M84 M96 M108 M120
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.09 0.38 0.67
A 0.00 0.00 0.00 0.00 0.07 0.16 0.37 0.55 0.67 0.80
BBB 0.32 1.06 2.13 3.18 3.79 4.32 4.32 4.32 4.32 4.32
BB 3.01 6.46 8.90 11.62 14.49 16.21 17.93 18.65 18.65 18.65
B 27.74 43.07 51.82 69.34 78.83 83.21 88.32 88.32 88.32 88.32
CCC/C 27.27 30.30 30.30 30.30 30.30 30.30 30.30 30.30 30.30 30.30
Investment grade 0.06 0.19 0.37 0.57 0.72 0.87 0.98 1.10 1.22 1.35
Speculative grade 8.56 13.78 17.00 21.78 25.44 27.44 29.56 30.11 30.11 30.11
All rated 0.33 0.63 0.92 1.27 1.56 1.78 1.97 2.11 2.23 2.35
Note: One-month marginal default rates are used to calculate cumulative default rates. Source: S&P Global Ratings Credit Research & Insights.

Table 5

Japan Gini Ratios (%)
12-month 36-month 60-month
All corporates 94.85 88.32 82.42
Industrials 97.34 94.18 81.18
Financials 97.24 92.64 89.91
Note: Static pools are monthly. Source: S&P Global Ratings Credit Research & Insights.

Some rating categories have smaller sample sizes than others, which can result in transition rates that seem counterintuitive (see tables 6-9). But these transition rates do not imply that 'AAA' rated companies are riskier than 'A' rated companies, for example, but rather that both are highly unlikely to default (see "S&P Global Ratings Definitions"). (In tables 6-9, the 'AA' rating category combines the three rating levels within this category: 'AA+', 'AA', and 'AA-'. This is also the case for rating categories 'A', 'BBB', and 'BB', and 'B', while 'AAA' represents only one rating level. The 'CCC+', 'CCC', 'CCC-', 'CC', and 'C' ratings are combined into the 'CCC'/'C' segment.)

Table 6

Average 12-Month Rating Transition Matrix, Japanese Industrials And Financials (1981-2022) (%)
From/to AAA AA A BBB BB B CCC/C D NR
AAA 86.11 12.34 0.28 0.00 0.00 0.00 0.00 0.00 1.27
AA 0.32 87.75 8.36 0.01 0.00 0.09 0.00 0.00 3.48
A 0.00 0.78 91.20 2.69 0.06 0.01 0.00 0.00 5.26
BBB 0.00 0.00 7.67 77.38 2.32 0.19 0.03 0.13 12.28
BB 0.00 0.00 0.00 10.85 67.38 2.66 0.33 0.57 18.21
B 0.00 0.00 0.00 0.00 17.33 52.58 4.76 6.89 18.44
CCC/C 0.00 0.00 0.00 0.00 7.65 21.43 20.92 19.39 30.61
D--Default. NR--Not rated. Source: S&P Global Ratings Credit Research & Insights.

Table 7

Average 12-Month Rating Transition Matrix, Japanese Public Finance (1981-2022) (%)
From/to AAA AA A BBB BB B CCC/C D NR
AAA 84.52 7.74 0.00 0.00 0.00 0.00 0.00 0.00 7.74
AA 0.00 84.85 10.02 0.00 0.00 0.00 0.00 0.00 5.13
A 0.00 0.65 92.93 0.00 0.00 0.00 0.00 0.00 6.41
BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
CCC/C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D--Default. NR--Not rated. Source: S&P Global Ratings Credit Research & Insights.

Table 8

Average 36-Month Rating Transition Matrix, Japanese Industrials And Financials (1981-2022) (%)
From/to AAA AA A BBB BB B CCC/C D NR
AAA 63.12 31.68 3.14 0.00 0.00 0.00 0.00 0.00 2.06
AA 0.61 67.03 21.47 0.33 0.00 0.31 0.00 0.00 10.25
A 0.00 1.84 74.89 6.86 0.14 0.11 0.01 0.00 16.15
BBB 0.00 0.00 17.82 41.33 3.72 0.51 0.18 0.91 35.52
BB 0.00 0.00 0.65 15.74 25.93 2.78 1.39 1.96 51.55
B 0.00 0.00 0.00 4.62 15.91 20.12 1.44 14.99 42.92
CCC/C 0.00 0.00 0.00 0.00 28.04 10.58 0.00 21.16 40.21
D--Default. NR--Not rated. Source: S&P Global Ratings Credit Research & Insights.

Table 9

Average 36-Month Rating Transition Matrix, Japanese Public Finance (1981-2022) (%)
From/to AAA AA A BBB BB B CCC/C D NR
AAA 53.55 23.23 0.00 0.00 0.00 0.00 0.00 0.00 23.23
AA 0.00 57.24 26.18 0.00 0.00 0.00 0.00 0.00 16.58
A 0.00 0.82 77.88 0.00 0.00 0.00 0.00 0.00 21.29
BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
CCC/C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D--Default. NR--Not rated. Source: S&P Global Ratings Credit Research & Insights.

Table 10

2022 Japanese Industrials And Financials Rating Transitions
From/to Issuer count AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C D NR
AAA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
AA+ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
AA 1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
AA- 5 0 0 0 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
A+ 36 0 0 0 0 36 0 0 0 0 0 0 0 0 0 0 0 0 0 0
A 39 0 0 0 0 1 37 0 0 0 0 0 0 0 0 0 0 0 0 1
A- 30 0 0 0 0 0 2 26 1 0 0 0 0 0 0 0 0 0 0 1
BBB+ 11 0 0 0 0 0 0 0 10 1 0 0 0 0 0 0 0 0 0 0
BBB 10 0 0 0 0 0 0 0 1 9 0 0 0 0 0 0 0 0 0 0
BBB- 3 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0 0 0 0 0
BB+ 5 0 0 0 0 0 0 0 0 0 0 4 1 0 0 0 0 0 0 0
BB 2 0 0 0 0 0 0 0 0 0 0 0 2 0 0 0 0 0 0 0
BB- 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0
B+ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
B 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
B- 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
CCC/C 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0
Total 144 0 0 1 5 37 39 26 12 10 3 4 3 1 0 0 0 1 0 2
D--Default. NR--Not rated. Source: S&P Global Ratings Credit Research & Insights.

Table 11

2022 Japanese Public Finance Rating Transitions
From/to Total AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C D NR
AAA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
AA+ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
AA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
AA- 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
A+ 8 0 0 0 0 8 0 0 0 0 0 0 0 0 0 0 0 0 0 0
A 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
A- 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
BBB+ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
BBB 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
BBB- 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
BB+ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
BB 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
BB- 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
B+ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
B 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
B- 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
CCC/C 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total 8 0 0 0 0 8 0 0 0 0 0 0 0 0 0 0 0 0 0 0
D--Default. NR--Not rated. Source: S&P Global Ratings Credit Research & Insights.

By broad rating category, there were zero upgrades for industrial and financial issuers in 2022, down from 0.7% upgrades (as a proportion of total rated issuers) in 2021. The proportion of issuers downgraded fell to 0.7% in 2022 from 4.1% in 2021 (see table 12). The percentage of unchanged ratings in 2022 rose to 97.9% from 91.8% in 2021.

We also looked at rating transitions including the rating modifier--the plus (+) or minus (-)--following the rating. When including rating modifiers, upgrades rose to 2.8% in 2022 from 2.7% in 2021, and downgrades fell to 2.1% from 4.8%. The percentage of issuers with stable ratings rose to 93.8% in 2022 from 89.0% in 2021.

Table 12

Summary Of Annual Japanese Industrials And Financials Rating Changes (%)*
--Category based-- --With modifiers
Issuers as of Jan. 1 Upgrades Downgrades§ Unchanged ratings Downgrade / upgrade ratio Defaults Withdrawn ratings Upgrades Downgrades§ Unchanged ratings Downgrade / upgrade ratio Defaults Withdrawn ratings
1/1/1981 5 0.00 0.00 100.00 0.00 0.00 0.00 20.00 0.00 80.00 0.00 0.00 0.00
1/1/1982 6 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1983 8 0.00 0.00 100.00 0.00 0.00 0.00 12.50 0.00 87.50 0.00 0.00 0.00
1/1/1984 12 16.67 8.33 75.00 0.50 0.00 0.00 16.67 8.33 75.00 0.50 0.00 0.00
1/1/1985 15 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1986 18 5.56 0.00 94.44 0.00 0.00 0.00 5.56 0.00 94.44 0.00 0.00 0.00
1/1/1987 20 0.00 10.00 90.00 0.00 0.00 0.00 0.00 10.00 90.00 0.00 0.00 0.00
1/1/1988 31 0.00 3.23 93.55 0.00 0.00 3.23 0.00 3.23 93.55 0.00 0.00 3.23
1/1/1989 39 2.56 2.56 94.87 1.00 0.00 0.00 5.13 5.13 89.74 1.00 0.00 0.00
1/1/1990 44 4.55 0.00 95.45 0.00 0.00 0.00 4.55 0.00 95.45 0.00 0.00 0.00
1/1/1991 47 0.00 19.15 80.85 0.00 0.00 0.00 0.00 31.91 68.09 0.00 0.00 0.00
1/1/1992 52 0.00 13.46 82.69 0.00 0.00 3.85 0.00 28.85 67.31 0.00 0.00 3.85
1/1/1993 54 0.00 9.26 88.89 0.00 0.00 1.85 0.00 29.63 68.52 0.00 0.00 1.85
1/1/1994 57 0.00 19.30 80.70 0.00 0.00 0.00 0.00 26.32 73.68 0.00 0.00 0.00
1/1/1995 61 0.00 6.56 93.44 0.00 0.00 0.00 0.00 22.95 77.05 0.00 0.00 0.00
1/1/1996 64 0.00 3.13 95.31 0.00 0.00 1.56 1.56 7.81 89.06 5.00 0.00 1.56
1/1/1997 71 1.41 5.63 90.14 4.00 0.00 2.82 1.41 12.68 83.10 9.00 0.00 2.82
1/1/1998 76 0.00 31.58 64.47 0.00 1.32 2.63 3.95 59.21 32.89 15.00 1.32 2.63
1/1/1999 90 0.00 13.33 84.44 0.00 0.00 2.22 0.00 30.00 67.78 0.00 0.00 2.22
1/1/2000 101 0.00 1.98 90.10 0.00 0.99 6.93 9.90 3.96 78.22 0.40 0.99 6.93
1/1/2001 106 0.00 9.43 83.96 0.00 0.00 6.60 2.83 24.53 66.04 8.67 0.00 6.60
1/1/2002 122 1.64 7.38 81.97 4.50 0.00 9.02 3.28 26.23 61.48 8.00 0.00 9.02
1/1/2003 126 1.59 3.17 89.68 2.00 0.79 4.76 5.56 4.76 84.13 0.86 0.79 4.76
1/1/2004 296 8.45 0.68 87.50 0.08 0.68 2.70 20.61 2.36 73.65 0.11 0.68 2.70
1/1/2005 348 12.07 1.15 80.17 0.10 0.29 6.32 26.72 1.72 64.94 0.06 0.29 6.32
1/1/2006 339 4.13 0.88 92.04 0.21 0.00 2.95 12.39 2.06 82.60 0.17 0.00 2.95
1/1/2007 347 5.19 0.86 60.23 0.17 0.00 33.72 26.22 2.02 38.04 0.08 0.00 33.72
1/1/2008 238 1.68 2.52 89.92 1.50 0.00 5.88 7.14 4.62 82.35 0.65 0.00 5.88
1/1/2009 233 0.43 3.86 64.38 9.00 2.15 29.18 0.86 11.59 56.22 13.50 2.15 29.18
1/1/2010 164 3.05 0.61 88.41 0.20 0.61 7.32 6.71 4.27 81.10 0.64 0.61 7.32
1/1/2011 156 2.56 7.05 87.82 2.75 0.00 2.56 7.69 16.67 73.08 2.17 0.00 2.56
1/1/2012 158 0.00 6.33 89.87 0.00 0.00 3.80 0.63 12.03 83.54 19.00 0.00 3.80
1/1/2013 158 3.16 2.53 92.41 0.80 0.00 1.90 4.43 5.06 88.61 1.14 0.00 1.90
1/1/2014 159 3.14 1.89 91.19 0.60 0.00 3.77 7.55 2.52 86.16 0.33 0.00 3.77
1/1/2015 161 2.48 8.07 81.99 3.25 0.62 6.83 6.21 24.22 62.11 3.90 0.62 6.83
1/1/2016 158 1.90 0.63 94.30 0.33 0.00 3.16 8.86 4.43 83.54 0.50 0.00 3.16
1/1/2017 157 0.64 0.64 96.82 1.00 0.00 1.91 4.46 5.73 87.90 1.29 0.00 1.91
1/1/2018 156 1.92 0.64 92.95 0.33 0.00 4.49 6.41 3.21 85.90 0.50 0.00 4.49
1/1/2019 154 1.30 3.25 90.91 2.50 0.00 4.55 4.55 8.44 82.47 1.86 0.00 4.55
1/1/2020 149 0.00 8.05 88.59 0.00 0.00 3.36 0.00 16.78 79.87 0.00 0.00 3.36
1/1/2021 146 0.68 4.11 91.78 6.00 0.00 3.42 2.74 4.79 89.04 1.75 0.00 3.42
1/1/2022 144 0.00 0.69 97.92 0.00 0.00 1.39 2.78 2.08 93.75 0.75 0.00 1.39
*This table compares the net change in ratings from the first to the last day of each year. All intermediate ratings are disregarded. §Excludes downgrades to 'D', shown separately in the default column. Source: S&P Global Ratings Credit Research & Insights.

Table 13

Summary Of Annual Japanese Public Finance Rating Changes (%)*
--Category based-- --With modifiers--
Issuers as of Jan. 1 Upgrades Downgrades§ Unchanged ratings Downgrade / upgrade ratio Defaults Withdrawn ratings Upgrades Downgrades§ Unchanged ratings Downgrade / upgrade ratio Defaults Withdrawn ratings
1/1/1981 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/1/1982 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/1/1983 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/1/1984 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/1/1985 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/1/1986 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/1/1987 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/1/1988 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1989 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1990 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1991 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1992 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1993 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1994 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1995 1 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00
1/1/1996 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/1/1997 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1998 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/1999 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2000 1 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2001 1 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00
1/1/2002 2 0.00 50.00 50.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00
1/1/2003 2 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2004 2 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2005 2 0.00 0.00 50.00 0.00 0.00 50.00 0.00 0.00 50.00 0.00 0.00 50.00
1/1/2006 3 33.33 0.00 66.67 0.00 0.00 0.00 33.33 0.00 66.67 0.00 0.00 0.00
1/1/2007 4 0.00 0.00 100.00 0.00 0.00 0.00 75.00 0.00 25.00 0.00 0.00 0.00
1/1/2008 7 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2009 14 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2010 14 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2011 16 0.00 0.00 100.00 0.00 0.00 0.00 0.00 56.25 43.75 0.00 0.00 0.00
1/1/2012 16 0.00 0.00 87.50 0.00 0.00 12.50 0.00 0.00 87.50 0.00 0.00 12.50
1/1/2013 15 0.00 0.00 93.33 0.00 0.00 6.67 0.00 0.00 93.33 0.00 0.00 6.67
1/1/2014 14 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2015 14 0.00 71.43 0.00 0.00 0.00 28.57 0.00 71.43 0.00 0.00 0.00 28.57
1/1/2016 10 0.00 0.00 80.00 0.00 0.00 20.00 0.00 0.00 80.00 0.00 0.00 20.00
1/1/2017 8 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2018 8 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2019 8 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2020 8 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2021 8 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
1/1/2022 8 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
*This table compares the net change in ratings from the first to the last day of each year. All intermediate ratings are disregarded. §Excludes downgrades to 'D', shown separately in the default column. Source: S&P Global Ratings Credit Research & Insights.

Table 14

Publicly Rated Japanese Defaulters
Company Year of default Type of default
Sharp Corp. 2015 Debt-for-equity swap
Elpida Memory Inc. 2012 Corporate reorganization
Takefuji Corp. 2010 Corporate reorganization
Takefuji Corp. 2009 Distressed exchange
Japan Airlines Corp. 2009 Default under ADR
NIS Group Co. Ltd. 2009 Distressed exchange
CSK Holding Corp. 2009 Debt-for-equity swaps
Aiful Corp. 2009 Default under ADR
Mitsubishi Motors Corp. 2005 Debt-for-equity swaps
Sojitz Corp. 2004 Debt-for-equity swaps
Mitsubishi Motors Corp. 2004 Debt-for-equity swaps
Hazama Corp. 2004 Debt-for-equity swaps
Kyoei Life Insurance Co.* 2000 Corporate reorganization
Yamaichi Securities Co. Ltd. 1999 Liquidation
Note: Defaulters with confidential ratings are excluded. *Kyoei Life Insurance was acquired by Prudential group after its failure and renamed The Gibraltar Life Insurance Co. (see https://www.prudential.com/links/about/worldwide-locations/japan). ADR--Alternative dispute resolution. Source: S&P Global Ratings Credit Research & Insights.

Table 15  |  View Expanded Table

Japanese Industrials And Financials Ratings Distribution
1/1/2023 1/1/2022 1/1/2021 1/1/2020 1/1/2019 1/1/2018 1/1/2017 1/1/2016 1/1/2015 1/1/2014 1/1/2013 1/1/2012 1/1/2011 1/1/2010
No. of companies
AAA 0 0 0 0 0 0 0 0 0 0 0 0 0 0
AA 6 6 8 16 16 16 16 16 27 27 26 31 37 37
A 103 105 107 107 116 121 121 117 104 102 103 98 94 95
BBB 27 24 24 19 16 13 14 18 21 18 19 19 19 23
BB 8 8 6 7 6 4 4 6 6 8 7 8 4 4
B 0 0 1 0 0 1 2 0 3 4 3 2 2 2
CCC/C 1 1 0 0 0 1 0 1 0 0 0 0 0 3
Investment grade 136 135 139 142 148 150 151 151 152 147 148 148 150 155
Speculative grade 9 9 7 7 6 6 6 7 9 12 10 10 6 9
Totals 145 144 146 149 154 156 157 158 161 159 158 158 156 164
%
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 4.14 4.17 5.48 10.74 10.39 10.26 10.19 10.13 16.77 16.98 16.46 19.62 23.72 22.56
A 71.03 72.92 73.29 71.81 75.32 77.56 77.07 74.05 64.60 64.15 65.19 62.03 60.26 57.93
BBB 18.62 16.67 16.44 12.75 10.39 8.33 8.92 11.39 13.04 11.32 12.03 12.03 12.18 14.02
BB 5.52 5.56 4.11 4.70 3.90 2.56 2.55 3.80 3.73 5.03 4.43 5.06 2.56 2.44
B 0.00 0.00 0.68 0.00 0.00 0.64 1.27 0.00 1.86 2.52 1.90 1.27 1.28 1.22
CCC/C 0.69 0.69 0.00 0.00 0.00 0.64 0.00 0.63 0.00 0.00 0.00 0.00 0.00 1.83
Investment grade 93.79 93.75 95.21 95.30 96.10 96.15 96.18 95.57 94.41 92.45 93.67 93.67 96.15 94.51
Speculative grade 6.21 6.25 4.79 4.70 3.90 3.85 3.82 4.43 5.59 7.55 6.33 6.33 3.85 5.49
Totals 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Source: S&P Global Ratings Credit Research & Insights.

Appendix: Data Methodology And Updates

This article constitutes a part of the Explanatory Document disclosed by S&P Global Ratings Japan Inc. pursuant to Article 66-39 of Financial Instruments and Exchange Act and Article 318. The data scope and methodology used for this article are generally consistent with those used for S&P Global Ratings' global corporate and global international public finance default and rating transition studies (see "2021 Annual Global Corporate Default And Rating Transition Study," published on April 13, 2022, for a detailed explanation). However, because of local regulatory considerations, and others, the following methodological differences exist.

Scope of issuers

Global and non-Japanese corporate default and rating transition studies include industrials, utilities, financial institutions, and insurance companies. This article covers these sectors as well as local governments.

Default rate calculation

While our global study calculates default rates on an annual basis, this study calculates default rates on a monthly basis. This means that we formed static pools by grouping issuers by rating category as of the beginning of each month instead of each year. We then calculated the marginal default rates for one month for each static pool and used these one-month marginal default rates to calculate cumulative default rates (see "2021 Annual Global Corporate Default And Rating Transition Study" for details on conditional marginal default rates and cumulative default rates).

Definition of default

Regarding the treatment of 'R' ratings (an obligor rated 'R' is under regulatory supervision owing to its financial condition), this study counts an 'R' rating as a default only if there was a default under S&P Global Ratings' definition. There is one entity in this dataset whose rating was changed to 'R' but that did not default. The rating on Shinsei Bank Ltd. was changed to 'R' from 'NR' in January 1999 (when the bank's name was Long-Term Credit Bank of Japan Ltd.) upon its nationalization, but this study does not recognize that event as a default because the bank did not default. Because our global studies do not separate out 'R' ratings, we have included Shinsei Bank Ltd.'s rating history after the 'R' rating only within this report, while this issuer is not included in the global studies.

Like our global default studies, S&P Global Ratings' ongoing enhancement of the database used to generate this study could lead to outcomes that differ to some degree from those reported in previous studies. However, these enhancements pose no continuity problem because each study is self-contained and effectively supersedes all previous versions.

Effect of mergers and acquisitions on rating histories

If an entity experiences a merger or acquisition, or, in the case of TEPCO, a consolidation into a holding company, the original entity in our study will be moved to an NR rating, and we will include the new entity in the study going forward. Ratings histories associated with the previous entity will not be associated with the new entity going forward.

Comparing Default Rates

The comparison of default studies by different rating agencies requires extreme caution because any differences in the study methodology can result in a significant gap in default rate numbers (see "Japanese Corporate Default And Rating Transitions Study 2008," published on April 1, 2009, for descriptions of some of these differences). Also notable is whether a rating agency considers a bond exchange (including bond repurchase) to be a default. We counted two defaults in 2009 due to distressed bond exchanges by the issuers (see table 14).

Related Research

The use of the term "methodology" in this article refers to data aggregation and calculation methods used in conducting the research. It does not relate to S&P Global Ratings' methodologies, which are publicly available criteria used to determine credit ratings.

This report does not constitute a rating action.

Credit Research & Insights:Nick W Kraemer, FRM, New York + 1 (212) 438 1698;
nick.kraemer@spglobal.com
Zev R Gurwitz, New York + 1 (212) 438 7128;
zev.gurwitz@spglobal.com
Research Contributor:Nivritti Mishra Richhariya, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai

No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.


Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back