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Panasonic and Sony debt ratings downgraded to 'junk'

Japanese consumer electronics giants Panasonic and Sony were hit by more bad news after a tricky recent period after credit rating agency Fitch downgraded the companies' debt ratings to 'junk'.

Fitch cited weakness in their consumer electronics and TV operations and an inability to compete with the likes of LG and Samsung. A strong yen and production issues have also affected the Japanese companies' earnings.

Share prices for both Panasonic and Sony hit all-time lows last week, though reaction to the news was subdued with prices falling before rallying to similar levels to before the announcement.

Panasonic forecasts it will lose close to $10 billion in the year to March, while Sony is set to make a full-year profit of $1.63 billion thanks to the sale of a non-core chemicals business.

Fellow Japanese giant Sharp has already made drastic cuts in the face of similarly tough financial conditions.

Together the three Japanese companies racked up losses of $20 billion last year.

Reuters reports that Fitch downgraded Sony by three notches to BB-minus from BBB-minus, saying meaningful recovery will be slow.

"Fitch believes that continuing weakness in the home entertainment and sound and mobile products and communications segments will offset the relatively stable music and pictures segments and improvement in the devices segment which makes semiconductors and components," it said in a statement.

In a separate statement, Fitch cut Panasonic to BB from BBB-minus, a two-notch downgrade. It has a negative outlook on both companies.

Sony and Panasonic recently announced they would work together on future TV development, specifically OLED TVs, in an effort to counter the slump in sales and tough competition from South Korea.

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Joe is Content Director for Specialist Tech at Future and was previously the Global Editor-in-Chief of What Hi-Fi?. He has worked on What Hi-Fi? across print and online for more than 15 years, writing news, reviews and features. He has covered product launch events across the world, from Apple to Technics, Sony and Samsung, reported from CES, the Bristol Show and Munich High End for many years, and provided comment for sites such as the BBC and the Guardian. In his spare time he enjoys playing records and cycling (not at the same time).