This report does not constitute a rating action. Japanese auto loan asset-backed securities (ABS) issuance is growing as expectations of rising interest rates boost investment demand for securitized instruments with short economic life. Default rates for the underlying auto loan receivables remain low and show resilience to economic stress. Credit risk and commingling risk in auto loan ABS are typically mitigated by senior-subordinated structure. ABS backed auto loan receivables are a major asset class in Japan, as they are globally. We see rising issuance as investors seek short-duration securitized instruments amid higher interest rates. Despite a moderate increase since 2021, default rates for rated Japanese auto loan ABS remain low. ABS issuance in Japan totaled approximately ¥2.2 trillion in the
