Fitch Downgrades Japan’s Major Bank Groups due to Government’s Weakened Financials

Fitch Ratings has downgraded the long-term foreign and local currency issuer default ratings (IDR) of the major Japanese banking groups Mitsubishi UFJ Financial Group (MUFG), Mizuho Financial Group (MHFG), Sumitomo Mitsui Financial Group (SMFG) and their subsidiaries, and Sumitomo Mitsui Trust Bank (SMTB) to A- from A, as a result of their support rating floors (SRF) having been revised to A- from A. The ratings have now been removed from rating watch negative (RWN). The outlooks are stable. The banks’ short-term IDRs have been affirmed at F1.

Fitch said that the downgrade of the long-term IDRs and SRFs reflects the government’s weakened financial ability to support the banking system, as indicated by the downgrade of Japan sovereign’s foreign currency IDR to A+/outlook negative from AA in May 2012. The outlooks on the banks’ long-term IDRs are stable on the basis that even if the sovereign’s ratings were downgraded by a further notch, Fitch does not expect the banks’ SRFs to be downgraded. This is based on Fitch’s belief that the government’s propensity to support the major banks, if necessary, remains intact, while the notching between the SRFs of systemically important banks and their sovereign ratings tends to narrow as the latter fall to lower rating categories.

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