Fitch Ratings has assigned Japan-based Mitsubishi UFJ Financial Group, Inc.'s (MUFG, A-/Stable) EUR0.5 billion eight-year (callable) senior unsecured notes a rating of 'A-'.

The notes will count towards MUFG's total loss-absorbing capacity (TLAC) requirements, as they will be structurally subordinated to the senior liabilities of its subsidiaries. MUFG met the 18% minimum total external TLAC capital ratio requirement, which excludes buffers for global systemically important banks, capital conservation and countercyclical capital, as of end-March 2023.

We expect the company to continue to issue TLAC-eligible debt, including to refinance maturing debt, and to meet the requirement with a buffer.

Key Rating Drivers

The rating on the notes is aligned with MUFG's Long-Term Issuer Default Rating (IDR), despite the notes' structural subordination features. Fitch aligns MUFG's holding-company senior debt ratings and IDRs with the IDRs of its operating companies.

This reflects Fitch's view of consolidated supervision and that the holding company's failure and senior-level default risk are similar to that of the wholly owned operating banks, with all entities being eligible for pre-emptive state support. It also takes into account the group's interconnectedness and low holding-company double leverage.

See Fitch Affirms Ratings on Mitsubishi UFJ Financial Group and Affiliates at 'A-'; Outlook Stable for commentary on MUFG's key rating drivers and sensitivities.

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

The rating on the notes will be downgraded if MUFG's Long-Term IDR is downgraded.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

The rating on the notes will be upgraded if MUFG's Long-Term IDR is upgraded.

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579

Summary of Financial Adjustments

Total assets and total liabilities exclude acceptances and guarantees from Japan's generally accepted accounting principles balance sheet to be globally comparable.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

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