TOKYO (MNI) – More firms reported in September that it was easier
to issue commercial paper than three months earlier as the number of
firms that said conditions were “not so severe” rose, with fewer saying
“severe,” a followup poll to the Bank of Japan’s quarterly Tankan survey
released on Friday showed.

The percentage of firms that described short-term debt issuance as
“easy” was unchanged.

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 diffusion index showing the current CP issuing conditions among
major firms that have issued short-term debt at least once in the past
two years rose to 30 in September from 29 in June but was below a record
high of 32 in March, posting the first quarterly rise. The September
reading was the second highest on record.

The percentage of respondents saying CP issuance was “easy” stood
at 32% of 192 sample firms surveyed in September, unchanged from 32% of
194 firms polled in June, while that for those saying “not so severe”
rose to 66% from 65%. The ratio of firms reporting “severe” conditions
remained low at 2%, down from 3% 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.

Today’s results are consistent with the Tankan results released on
Wednesday.

The Tankan showed that business confidence among large Japanese
manufacturers improved in September for the sixth consecutive quarter to
its highest level in seven and a half years, as Japan’s exports and
production continued to rise on the recovering global economy.

The 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 — rose to -2 in
September from -4, improving for the seven quarters in a row.

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 September Tankan showed that the ratio of liquidity — assets
(cash, deposits and securities) divided by sales — at major firms fell
to 1.12 at the end of June (the latest period available) from 1.21 at
the end of March.

The ratio of liquidity at smaller firms at end-June stood at 2.03,
also down from 2.07 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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