sees challenges ahead for Japan’s export-related issuers

Tokyo, August 20, 2009 -- Moody's Investors Service says fiscal-year, 
first-quarter results for Japan's export-related issuers show signs of
stabilization but that challenges remain.

A recently published comment by Moody's notes that FY 1Q09 results
through June for Japan's major automakers, consumer-electronics firms, 
steel producers, and chemical companies are broadly in line with the 
rating agency's expectations of a significant decline in sales and 
profitability on a yearly basis. However, the report points to 
improvements from the previous quarter.

Shinsuke Tanimoto, the lead author of the publication and a Senior Vice 
President at Moody's, says, "Better quarterly results come mainly from 
cost reductions, lower prices for raw materials, improved capacity 
utilization, and a slightly depreciated Japanese yen." He adds, "The 
government's incentive programs have helped domestic demand recover for 
retail products such as automobiles and consumer electronics."

Tanimoto says, "Exporters of cars and consumer electronics reduced their 
production in the second half of the fiscal year ending March 2009 to 
draw down inventories on hand and at distributors." He adds, "Domestic 
steel and chemical manufacturers, which supply part of their output to 
such exporters, have also experienced decreased demand."

Nevertheless, the report notes a recent, incipient recovery and explains 
that, since the deep trough earlier this year, inventory levels have 
risen, and thereby contributed to a recovery in capacity utilization at 
manufacturing plants.

Tanimoto says, "While the fiscal year's first quarter showed an 
improvement in companies' financial profiles—or at least a reduction in 
earlier, sharp declines—we remain cautious about the likelihood of 
sustained improvements in profitability and a consequent stabilization of 
ratings."

He concludes, "Any positive movement in our ratings will require evidence 
of at least several of the following factors: (1) a sustained recovery in 
global consumption--not just from demand generated by governments' 
initiatives; (2) improvements in the competitive climate, (3) 
implementation of restructuring measures that appropriately recalibrate 
production to lower demand, (4) restoration of impaired balance sheets, 
and (5) a favorable trend in Japan's foreign-exchange rate.

The new report, entitled, "FY 1Q09 Results for Japan's Export-Related 
Issuers: Still a long way to go" is available at www.moodys.com.

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