The Japanese unit of Standard & Poor’s (S&P) Ratings Services was rebuked by the financial regulator on Friday due to mistakes in setting and publishing of credit ratings on complex financial derivatives.
Japan’s Financial Services Agency (FSA) has ordered Standard & Poor’s Ratings Japan to improve its ratings and operations after finding it had failed to account for losses on underlying assets referenced in so-called synthetic collateralized debt obligations (CDO).
The FSA said that S&P also published press releases with unreliable an incorrect information on ratings, that includes one in which it mistakenly assigned to one of the companies under its coverage the short-term rating of that company’s affiliate.
Standard & Poor’s Ratings Japan said in a statement it has already prepared preventive measures to strengthen its compliance.
“We take this matter very seriously and sincerely apologize to clients and market participants for the issues that led to the recommendation and order,” S&P Japan said.
Synthetic CDOs are complex derivatives composed of a portfolio of credit default swaps and have been blamed for exacerbating the 2008 global financial crisis.
On the other hand, the Japanese Yen extended its losses versus other major currencies in Asian trading this Friday for variety of reasons, which are the likelihood of a big opposition victory in Japan’s general elections Sunday, a solid batch of economic data from China, and easing fears about the US fiscal cliff, according to some analysts.
This Sunday’s election on Japan is expected to bring a change of leadership, thus bringing to power the opposition Liberal Democratic Party, which has so far indicated that it’s going to take a much more aggressive stance on battling deflation.
However, in an interview with Kuniyuki Hirai, foreign-exchange trading manager at Bank of Tokyo-Mitsubishi UFJ, he said “Multiple factors are pointing to a weaker yen.”
Mr. Hirai cited strong expectations for an aggressive stance on monetary and fiscal policy by key opposition leader Shinzo Abe, whose party is expected to win a major victory. An upbeat economic report from China and reduced concerns over the U.S. fiscal cliff were also factors behind the yen-selling, he said.
At 0450 GMT, the dollar was at ¥83.86 from ¥83.65 in late New York Thursday. It earlier rose as high as ¥83.95 in Asia. The euro rose as high as ¥109.84, the highest April 2, before it pulled back to ¥109.75.
(Ref: Yahoo Finance, WSJ)