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.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
ebooksA celebration of British elections
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
A voter placing a ballot paper in the box at a polling station
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
  • Get to the point
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

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power