Moody’s downgrades Norinchukin Bank to Aa3; outlook is stable

Tokyo, June 29, 2009 -- Moody's Investors Service downgraded The 
Norinchukin Bank's (Norinchukin) bank financial strength rating (BFSR) to 
C- from C, Baseline Credit Assessment (BCA) to Baa1 from A3, long-term 
ratings to Aa3 from Aa2, and ratings on the Subordinated Euro Medium Term 
Note Programme of its subsidiary Norinchukin Finance (Cayman) Limited to 
A1 from Aa3. The bank's P-1 short-term deposit rating was unaffected. The 
outlook for the ratings is stable.

The downgrade of Norinchukin's BFSR and BCA reflects Moody's opinion that
Norinchukin's capital base and business model are vulnerable to a more 
stressed macroeconomic scenario. The bank's business model with its 
investment strategy focus on an international diversified portfolio with 
a variety of domestic and overseas risk assets that are based on the 
significant funds upstreamed from its JAs and shinnorens in the form of 
deposits. Accordingly, Norinchukin's capital would remain under further 
downward pressure from its balance sheet in the medium term, with weaker 
earnings cushion to deal with additional losses. Continuing long-term 
challenges to its business model preventing the generation of stable and 
solid revenue in Moody's view is also factored in the downgrade.

Norinchukin's long-term ratings of Aa3 reflect Moody's assessment that 
the systemic support probability for Norinchukin is very high, based on 
the bank's systemic importance as the central institution for Japan's 
agricultural, forestry, and fishery cooperatives.

The stable outlook reflects Moody's view that Norinchukin's large 
recapitalization of JPY1.9 trillion (including its Tier I of JPY1.4 
trillion) at end-March 2009 did restore its Tier I capital ratio to 9.61% 
(March 2009), allowing for greater flexibility in managing its regulatory 
capital and maintaining adequate financial and capital fundamentals as a 
C- BFSR institution. However, business model of Norinchukin and its 
demonstrated capital volatility should require higher level of capital 
relative to other commercial banks scored in the same range of BFSR.

The downgrade reflects Moody's concerns with regard to the following 
issues. First, despite the somewhat improving market environment, the 
bank's investment securities portfolio is still subject to possible
market deterioration, particularly with regard to its large overseas
securitization portfolio holdings, including CLO and CDO. An additional 
downward pressure in the CLO markets (including CDOs) could affect the 
value of large portfolio. 

Second, Norinchukin's ability to recover strong preprovision earnings
will be hampered by its changed investment strategy with focus on lower
volatility and higher liquidity. Its commitment to downstream large
revenue to its member will also reduce the retention of earnings at 
Norinchukin level.

When assessing Norinchukin's ability to absorb future losses, Moody's
incorporates factors in addition to the bank's current capital position.
These include the following:

1) Norinchukin's strong liquidity, which allows it to sustain its
fundamental investment operations,

2) the downward pressure on the bank's historical pre-provisioning
earnings for next year or two,

3) the likelihood of Japan's equity market (Nikkei index) declining to
JPY7000,

4) additional stress on its securitization portfolio, including its CLO, 
CDO and CMBS, and

5) the low likelihood of significant credit stress on its loan portfolio
stemming from its large domestic corporate holdings.

Today's rating actions are consistent with Moody's recent announcement
that it is recalibrating some of the weights and relative importance 
attached to certain rating factors in its current bank rating 
methodologies. In the current environment, capital adequacy, in 
particular, has taken on greater importance in determining the BFSR. 
Meanwhile, debt and deposit ratings will reflect Moody's expectation that 
its support assumptions will continue to rise for systemically important 
institutions during this global financial crisis. (Please see Moody's 
special comment, "Calibrating Bank Ratings in the Context of the Global
Financial Crisis").

Upward rating pressure could emerge if the bank can 1) maintain its 
current Tier I ratio over the medium term, 2) reduce earnings volatility
and unrealised losses in its investment portfolio (or securitization 
exposure without suffering further impairment losses and losses on sale).

Downward pressure could emerge if 1) its investment securities portfolio
were to further deteriorate, pushing its Tier I capital ratio to below 
8%, or 2) if it fails to record stable generation of earnings as per the 
"Business Renewal Plan".

The following ratings were downgraded:

The Norinchukin Bank

Bank financial strength rating: to C- from C

Baseline Credit Assessment: to Baa1 from A3

Long-term deposit rating: to Aa3 from Aa2

Long-term senior unsecured debt rating: to Aa3 from Aa2

Long-term issuer rating: to Aa3 from Aa2

Norinchukin Finance (Cayman) Limited

Backed subordinate MTN: to A1 from Aa3

Backed junior subordinate MTN: to A1 from Aa3

Backed subordinate: to A1 from Aa3