Japan’s economic growth likely to slip from 2.0% to 1.6% in 2013

Australia’s likely to suffer the same fate.

According to Standard and Poor’s, economic growth is expected to slow from 3.0% in 2012 to 2.8% in 2013 in Australia and from 2.0% in 2012 to 1.6% in 2013 in Japan. However, in Australia and Japan they do not expect a significant increase in unemployment, which is a key contributor to borrower defaults. This, it said, bodes well for the continued stable performance of the collateral underlying most structured finance securities.

Here’s more from Standard and & Poor’s:

Low noninvestment-grade Japanese commercial mortgage-backed securities (CMBS) are an exception to our outlook for stable performance; we expect them to continue facing downward pressure in 2013 due to the realization of losses during the ongoing process of collections from defaulted commercial real-estate loans. The performance of synthetic structured credits is likely to continue to reflect the credit quality of the underlying reference entities.

Among the potential threats to our stable outlook are a greater-than-expected slowdown in China, contagion from the unresolved European debt crisis, a double-dip recession in the U.S., and, while currently remote, an oil-price shock. In these less-likely cases, we believe ratings on most senior-ranking structured finance securities are likely to remain stable due to their significant build-up of credit support available in percentage terms. The subordinated classes of Australian prime RMBS that have a high dependency on lenders' mortgage insurance (LMI) are likely to be sensitive to any changes in the financial strength rating of LMI providers.

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