NGS agency Fitch downgraded the debt ratings of technology giants Sony and Panasonic to “junk” status, yesterday, citing weakness in their consumer electronics and TV operations and further diminishing the lustre of the once-great Japanese brands.
The cut to below investment grade, the first by a ratings firm, comes as the floundering companies face weak demand and fierce competition from Apple and Samsung.
A strong yen and bumps in China, where growth has slowed and Japanese goods have been targeted in sometimes violent protests recently, have also weighed on their earnings.
The two companies, along with Sharp, racked up combined losses of $20bn (£12.5bn) last year, leading them to axe jobs, sell assets and close facilities.
“Both Sony and Panasonic are struggling to generate operating profits, but each is restructuring and I don't envision the current situation continuing,” said Masahi Oda, the chief investment officer at Sumitomo Mitsui Trust Bank.
“A collapse of their core business would be a problem, but we are not at the point yet, and to me Fitch looks too negative,” Oda added.
Fitch downgraded Sony by three notches to BB– from BBB–, and Panasonic to BB from BBB–.