Moody’s Investor Service may soon downgrade the...

Moody’s Investor Service may soon downgrade the credit ratings of several major Japanese banks because of their huge exposure to real estate loans.

“Moody’s remains concerned that rapidly rising interest rates or a credit crunch could pop the real estate bubble,” said a report from the rating agency.

A Moody’s Japan official cautioned: “This will not be an across-the-board downgrading of Japanese banks.”

New York-based Moody’s is one of the world’s prime rating agencies for judging the credit-worthiness of companies and governments.

The official declined to comment on the names or the number of banks involved or when Moody’s decision would be announced.

But he said the chances that the ratings of at least some banks would be downgraded were fairly high. Most major Japanese banks are double-A rated or higher. Moody’s highest rating is triple A.

“Real estate lending decisions have often been premised on repayment from capital gains realized from future land price increases, not from the projected cash flows of a project,” Moody’s said in its recent report on Japanese bank ratings.

Moody’s downgraded three Japanese trust banks in February for the same reasons.