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Will Japanese Companies Achieve a Full-Fledged Recovery?

-- Evaluating the financial improvement of the companies using the estimated equation for forecasting credit ratings --

February 2004
Sohei Kaihatsu

The Economic Commentary series is edited and published by the Bank of Japan's Research and Statistics Department to provide material to deepen understanding on economic developments, mid-term economic themes, and economic indicators and statistics. The views expressed in the report are those of the authors and do not necessarily reflect the views of the Bank of Japan. The English version of this series is translated by our staff based on the Japanese original.

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Abstract

The creditworthiness of companies, and also their profitability and financial condition, are one way to measure whether the improvement in the risk-taking behavior of companies, such as business fixed investment, is becoming full-scale. In this paper, we use "credit ratings," a major indicator showing the creditworthiness of companies, to verify whether the profitability and the state of balance sheets of companies have reached the stage where they are consistent with positive improvement of credit ratings.