Moody's Japan K.K. says that in 2017 the performance of assets backing outstanding consumer-related Japanese asset-backed securities (ABS) and residential mortgage-backed securities (RMBS) will be stable, with defaults and delinquencies to remain low.
Moody's conclusions are contained in its recently released report "ABS and RMBS - Japan, 2017 Outlook - Strong Job Market Will Underpin Stable Asset Performance".
ABS: Low unemployment will support performance of assets backing outstanding ABS
Moody's view on the performance of assets backing outstanding consumer-related Japanese ABS deals is stable.
In particular, we expect default rates for auto loans, installment sales receivables and credit card receivables backing Japanese ABS to remain at around current low levels in 2017, supported by strong job market conditions and moderate economic growth.
Furthermore, the credit quality and performance of loans baking new consumer-related Japanese ABS issued in 2017 will be strong.
Japan's strong job market conditions, moderate economic growth and the good underwriting standards of lenders will support the credit quality as well as performance of the loans backing new consumer-related Japanese ABS in 2017.
RMBS: Strong job market will underpin low delinquencies and defaults, while prepayments will remain high
Moody's view on the performance of the mortgages backing outstanding Japanese RMBS is stable. We expect delinquencies and defaults to hold at around current low levels in 2017, supported by Japan's strong job market conditions and the strong credit quality of underlying loans. Prepayment rates will remain high, which is credit positive for outstanding Japanese RMBS.
At the same time, the credit quality of mortgages backing new Japanese RMBS issued in 2017 will be strong, owing to the strict underwriting standards employed by lenders and historically low mortgage interest rates. These positive factors will mitigate the effect of high housing prices, which will be negative for new mortgages backing RMBS issued in 2017.


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