Explanatory Note Regarding
Non-Registered Ratings

Registration rules have been introduced for credit rating agencies under the Financial Instruments and Exchange Law of Japan (hereinafter, “FIEL”), in order to ensure market fairness and transparency.

Due to this new rule, when Financial Instrument Firms solicit using ratings provided by Non-Registered Rating Agencies, they must let clients know that it is a Non-Registered Rating and items such as the significance of registration, etc. under the FIEL.

This letter covers information regarding the following rating agencies:

  • S&P Global Ratings, ratings of which are stated likely to be expressed as “AA/A-1” (only S&P Ratings Japan K.K. and S&P Global SF Japan Inc. are registered)
  • Moody's Investors Service, ratings of which are stated likely to be expressed as “Aa/P-1” (only Moody's Japan K.K. and Moody's SF Japan K.K are registered)
  • Fitch Ratings (only Fitch Ratings Japan K.K. is registered)

Unless otherwise specified as "Registered”, any solicitation done is based on ratings provided by Non-Registered Agencies.  Please refer to the following explanations.

Please also note that we do not solicit using ratings provided by Non-Registered Rating Agencies which are not covered by this document.  If you find such ratings in any of our communications with you, please kindly disregard since it is not our intention to use them.

Significance of Registration

Credit rating agencies with registration must observe i) the fiduciary duty, ii) the obligation to have operational control systems in place to ensure issues such as prevention of conflicts of interest and fairness in rating, etc., iii) the prohibition to provide ratings regarding securities currently owned by the rating agency, iv) the obligation to create and keep publicly available disclosure documents such as Rating Policies and Explanatory Letters, etc., as well as be under the regulatory supervision of the Financial Services Agency of Japan (hereinafter, “FSA”), and will be subject to reporting obligations, on-site inspections, business amendment orders etc. as may be issued by the FSA.  However, Non-Registered Rating Agencies are not subject to such regulatory supervision.

S&P Global Ratings

Name, etc. of the Rating Agency group

Name of the Rating Agency group:

S&P Global Ratings  

Name and registration number of the credit rating agency within the group:

S&P Rating Japan K.K. (Commissioner of the Financial Services Agency (Ratings) No. 5)

S&P Global SF Japan Inc. (Commissioner of the Financial Services Agency (Ratings) No. 8)

How to obtain information on a summary of the Rating Policy, method to providing credit rating

Please see “Information on Non-Registered Ratings” (http://www.standardandpoors.co.jp/unregistered) in “Library, Regulation issues” in the upper half of the homepage of S&P Rating Japan K.K. and S&P Global SF Japan Inc. (http://www.standardandpoors.co.jp).

Assumptions, Significance and Limitation of Credit Ratings

Credit ratings assigned by S&P Global Ratings are statements of opinion on the future credit quality of specific issuers or issues as of the date they are expressed and do not indicate the statistical probability of specific issuers or issues falling into default, nor do they guarantee creditworthiness. Credit ratings are not a recommendation to purchase, sell or hold any securities, or a statement of market liquidity or prices in the secondary market of any issues.

Credit ratings may change depending on various factors, including issuers' performance, changes in external environment, performance of underlying assets, creditworthiness of counterparties and others. S&P Global Ratings conducts rating analysis based on information received from sources it believes to be reliable and assigns a credit rating only if it believes it possesses information of a quality and quantity sufficient to reach an opinion regarding the rating. However, S&P Global Ratings does not perform an audit, due diligence or independent verification of any information it receives from issuers or other third parties, nor does it guarantee the accuracy, completeness or timeliness of any information used to provide ratings or of the results obtained from using such information. It should also be noted that there may be potential risks associated with certain credit ratings as a result of limited availability of historical data.     

This information is based on information received from sources it believes to be reliable, but it does not guarantee accuracy or completeness of the information. For details, please refer to their website at http://www.standardandpoors.co.jp.

Moody's Investors Service

Name, etc. of the Rating Agency group

Name of the Rating Agency group:

Moody's Investors Service

Name and registration number of the credit rating agency within the group:

Moody’s Japan K.K. (Commissioner of the Financial Services Agency (Ratings) No. 2)

Moody’s SF Japan K.K. (Commissioner of the Financial Services Agency (Ratings) No. 3)

How to obtain information on a summary of the Rating Policy, method to providing credit rating

Please see “Explanation relating to Non-Registered Ratings” in “Use of Ratings provided by Non-registered Agencies” (in the page shown after you click on “Credit Rating Business” in the homepage of Moody’s Japan K.K. and Moody’s SF Japan K.K. (Moody’s Japanese HP: https://www.moodys.com/pages/default_ja.aspx).

Assumptions, Significance and Limitation of Credit Ratings

Credit ratings are Moody's Investors Service's (hereinafter, "Moody’s") current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. Moody’s defines credit risk as the risk that an entity may not meet its contractual, financial obligations as they come due and any estimated financial loss in the event of default.  Credit ratings do not address any other risk, including but not limited to: liquidity risk, market value risk, or price volatility. Credit ratings do not constitute investment or financial advice, and credit ratings are not recommendations to purchase, sell, or hold particular securities. No warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such rating or other opinion or information is given or made by Moody’s in any form or manner whatsoever.

Based on the information received from issuers or from public sources, the credit risks of the issuers or obligations are assessed. Moody’s adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody’s considers to be reliable. However, Moody’s is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

This information is based on information received from sources it believes to be reliable, but it does not guarantee accuracy or completeness of the information. For details, please refer to the homepage of Moody’s Japan K.K. and Moody’s SF Japan K.K as referred to above.

Fitch Ratings

Name, etc. of the Rating Agency

Name of the Rating Agency group:

Fitch Ratings (hereinafter, “Fitch”)

Name and registration number of the credit rating agency within the group:

Fitch Ratings Japan K.K. (Commissioner of the Financial Services Agency (Ratings) No.7)

How to obtain information on a summary of the Rating Policy, method to providing credit rating

Please see “Ratings Policy, etc.” under “Regulations Related” Section in Fitch Ratings’ homepage (https://www.fitchratings.com/site/japan).

Assumptions, Significance and Limitation of Credit Ratings

Ratings assigned by Fitch are opinions based on established criteria and methodologies. Ratings are not facts, and therefore cannot be described as being "accurate" or "inaccurate". Credit ratings do not directly address any risk other than credit risk. Credit ratings do not comment on the adequacy of market price or market liquidity for rated instruments. Ratings are relative measures of risk; as a result, the assignment of ratings in the same category to entities and obligations may not fully reflect small differences in the degrees of risk. Credit ratings, as opinions on relative ranking of vulnerability to default, do not imply or convey a specific statistical probability of default.

In issuing and maintaining its ratings, Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The assignment of a rating to any issuer or any security should not be viewed as a guarantee of the accuracy, completeness, or timeliness of the information relied on in connection with the rating or the results obtained from the use of such information. If any such information should turn out to contain misrepresentations or to be otherwise misleading, the rating associated with that information may not be appropriate.  Despite any verification of current facts, ratings can be affected by future events or conditions that were not anticipated at the time a rating was issued or affirmed. 

For a detailed explanation of the assumptions, significance and limitation of credit ratings, please refer to the definitions relating to ratings and other forms of opinion on Fitch’s Japanese-language website.   

The foregoing information is prepared from a source considered credible. However, we cannot guarantee its accuracy nor completeness. For detail please visit the Fitch Ratings website indicated above.