Moody's lowered Toyota Motor Corp.’s credit rating by one notch earlier this week. Moody’s said further that Toyota will remain on review for the possibility of a further downgrade, stating that it will take Toyota some time before its earnings become stable again.
Amid concerns related to global competition, Moody's Investors Service had lowered its senior unsecured rating on Toyota to Aa3 from Aa2.
The yen's strength and high raw materials costs are expected to affect Toyota’s profits through the next financial year.
Last April, Moody’s placed Toyota on review because of the impact that the March 11 Japan disaster had on the supply chain of the company.
In a statement, Moody’s said that Toyota's profit recovery for the period of its financial year to March 2013 won’t be as strong as preferred because of its declining market share in many regions, the strong yen (which is currently 80-85 yen per dollar) and high raw material prices.
In early June, Toyota had released its prediction, stating that it will get a bigger-than-forecasted 35% drop in annual profit for the current financial year to March 2012.
As a result of this downgrade, the borrowing fees for Toyota and its subsidiaries will increase. As of the end of March, Toyota and its units had posted almost 6 trillion yen ($74 billion) in short-term debt and payments for long-term debt.
It also has 1 trillion yen set to be redeemed in bonds in 2011, and 1.5 trillion yen for the subsequent year.