Japanese car makers' ratings may be cut: Standard & Poors to monitor Toyota, Honda and Nissan as trading conditions look set to deteriorate further

THE CREDIT ratings of three of Japan's biggest car makers, suffering from the effects of a soaring yen, may be downgraded because of fears that depressed trading conditions will deteriorate further.

Toyota, Honda, and Nissan have been placed on credit watch with what is termed negative implications by Standard & Poors, the New York ratings agency.

The move comes less than a week after Toyota - the third-biggest car maker in the world - warned it may lose money this year and Honda reported a 55 per cent profits slump. Last month Nissan decided to close a factory near Tokyo after losing Y108bn (pounds 692m) in the year to March.

Further evidence of the pressure on Japanese automotive exports was also provided yesterday by figures for July, showing a 13.9 per cent decline in vehicle shipments from a year earlier to 404,178.

Standard said its rating action reflected the 'dramatic worsening of already difficult auto industry conditions', noting that the share price of all three had fallen due to renewed competitiveness by American producers.

'The unexepected appreciation of the yen by 17 per cent in the last few months will further erode the earnings of the Japanese auto companies as well as erode their competitiveness if they continue to raise prices to offset the falling yen,' the agency warned.

According to recent research by DRI/McGraw-Hill, the consultancy group, every one yen increase in the strength of the Japanese currency costs Toyota dollars 50m ( pounds 33m).

Honda, which relies more heavily on exports than Toyota or Nissan, has already taken action to try to counter problems caused by the strong yen by raising prices in the US and cutting margins earned by dealers in the UK.

Japanese car workers, who have become accustomed to a jobs-for-life culture, have not yet had to face the prospect of redundancy.

However, many have lost the traditional 20 per cent overtime part of wage packets as companies have tried to cut costs.

Standard added that an additional problem facing the Japanese motor companies 'is that weak domestic demand is proving to be persistent. The European market, too, remains weak.'

Its credit watch covers the triple-A long-term rating of Toyota and its financial subsidiaries in the US, the Netherlands, Australia and Canada.

Also affected are the single-A long-term and A-1 short-term ratings of Nissan and the A-1 short-term rating of Honda for both parent companies as well as two subsidiaries each in the US and one each in the Netherlands.

Standard will meet the three companies before Christmas to review trends in earnings and their plans to cope with the stronger yen, to reduce costs and strengthen balance sheets.

The Japanese July automobile export figures mark the fourth consecutive month of year-on-year declines.

Car exports bore the brunt of the fall in July, dropping by 14.3 per cent to 311,839. Shipments of trucks fell by 13.4 per cent to 86,305, although buses edged up by 0.7 per cent to 6,034.

Exports to the European Community decreased for the sixth straight month, and markets in the Middle East, North and South America and Africa also declined.

The dual problems with currency and falling domestic demand are also hitting the steel industry.

Nippon Steel, the biggest producer in Japan, yesterday warned it was likely to incur a pre-tax loss in the year to March - its first in seven years.

Steel industry observers in Japan reckon that Nippon could lose as much as Y10bn in the six months to September, more than double previous estimates.

That would compare with the Y14.1bn profit the company made in the same period last year.

In 1987, the company lost Y12.6bn, principally due to the Japanese currency's surge against the dollar.

Life and Style
A teenager boy wakes up.
Life and Style
It is believed that historically rising rates of alcohol consumption have contributed to the increase
food + drink
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
Arts and Entertainment
Critics say Kipling showed loathing for India's primitive villagers in The Jungle Book
filmChristopher Walken, Bill Murray, Scarlett Johanssen Idris Elba, Andy Serkis, Benedict Cumberbatch, Cate Blanchett and Christian Bale
Life and Style
Playing to win: for Tanith Carey, pictured with Lily, right, and Clio, even simple games had to have an educational purpose
lifeTanith Carey explains what made her take her foot off the gas
Arts and Entertainment
The White Sails Hospital and Spa is to be built in the new Tunisia Economic City.
architectureRussian billionaire designs boat-shaped hospital for new Dubai-style Tunisia Economic City
Arts and Entertainment
You could be in the Glastonbury crowd next summer if you follow our tips for bagging tickets this week
Husain Abdullah returns an interception off Tom Brady for a touchdown
nflLeague has rules against 'sliding to ground on knees'
Life and Style
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
food + drink
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
Arts and Entertainment
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

SQL Developer (Stored Procedures) - Hertfordshire/Middlesex

£300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...

Day In a Page

Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style