TOKYO (MNI) – More firms reported in December that it was easier to
issue commercial paper than three months ago as the number of firms that
said conditions were “severe” fell, a followup poll to the Bank of
Japan’s quarterly Tankan survey released on Friday showed.

The diffusion index (“easy” minus “severe”) showing the current CP
issuing conditions among major firms that have issued short-term debt at
least once in the past two years posted the second straight y/y rise,
rising to 31 in December from 30 in September.

It was close to a record high of 32 marked in March 2010.

This indicates that corporate funding, at least for firms that are
large enough to be able to issue debt, might have already recovered to a
“normal” level from the difficult times over a year ago and that there
was limited room for further improvement.

The percentage of respondents saying CP issuance was “easy” stood
at 32% of 182 sample firms surveyed in December, compared with 32% of
192 firms polled in September, while that for those saying “not so
severe” rose to 67% from 66%.

The ratio of firms reporting “severe” conditions fell to 1% from 2%
in the previous survey.

In the diffusion index, March’s 32 was the highest level since
March 2008, when the BOJ began compiling CP issuance data to see a
clearer trend among those that were actually issuing debt as part of the
overall Tankan survey.

The index has already recovered sharply from a record low of -55
posted in December 2008, when market functions were paralyzed by the
global financial crisis following the failure of Lehman Brothers.

On overall corporate financing, the December Tankan released on
Wednesday had shown that the financial position among borrowers and the
lending attitude among financial institutions improved for the seventh
straight quarter.

The Tankan survey also showed that the diffusion index for CP
issuance — the percentage of all firms polled (regardless of whether
they had issued short-term debt) saying the environment for issuing CP
is easy minus the percentage of those saying it is difficult — stood at
-2 in December, unchanged from the level in the previous Tankan after
improving for the eight quarters in a row.

The BOJ has decided to buy CP and corporate bonds under its new Y5
trillion asset-buying program.

Meanwhile, companies in general appear to have necessary cash for
their daily operations and thus their demand for raising funds via CP
issuance may not be so strong.

The December Tankan showed that the ratio of liquidity — assets
(cash, deposits and securities) divided by sales — at major firms rose
to 1.17 at the end of September (the latest period available) from 1.12
at the end of June.

The ratio of liquidity at smaller firms at end-September stood at
2.08, also up from 2.03 three months earlier.

Those levels are still high, indicating that companies have
sufficient funds on hand as they remain reluctant to make large-scale
capital investment.

Effective the March 2010 Tankan, the BOJ began releasing a separate
piece of data on conditions for CP issuance by companies that have
actually used this short-term funding tool in recent years. It is
released two business days after the Tankan comes out.

In the Tankan, the BOJ asks all reporting firms to answer the
conditions for CP issuance, regardless of whether they have actually
issued CP in the past.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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