Moody's Investors Service on Thursday said it had raised the rating outlook for both Honda and Nissan Motor, citing a range of factors, including Honda engines' fuel economy and Nissan's profit margin.

Kyodo News said Moody's changed to positive from stable the outlook on Honda's A1 senior unsecured and issuer ratings, while doing the same for the outlook on Nissan's Baa1 senior unsecured rating.

The upgrades reportedly were also applied to key arms of the two companies, including American Honda Finance Corp., Honda Canada Finance Inc., Nissan Capital of America Inc. and Nissan International Finance (Netherlands) BV.

According to Kyodo News, the rating agency said, ''[Honda]'s gasoline engines have top-class mileage among global peers, and it has developed its own hybrid and diesel engines.

''(Honda) is likely to strengthen its competitiveness in the global markets and improve profitability over the intermediate term, backed by its strong ability to develop products that meet changing demand."

The agency reportedly said Nissan's successful model introduction programme and cautious attitude toward sales incentives have contributed to the recovery of the Nissan and Infiniti brands, and supported the company's strong operating performance.

''The 9.6% operating profit margin that the automobile segment recorded in fiscal 2004, while lower than the previous year's 10.8%, was the highest among Moody's-rated automobile businesses,'' it added, according to Kyodo News.