Sony hikes prices as yen value soars

Sony is planning big price rises in the UK because of the strength of the yen against sterling, in a move that threatens to put extra pressure on Britain's embattled retail sector.

The Japanese electronics giant said it had informed trade customers in the past 48 hours of the price increases in Britain and Ireland driven by the yen's rise against the pound and the euro.

"The precise level of price increases has not yet been agreed, but it is likely that the vast majority of products affected will see increases of less than 33 per cent," Sony said in a statement. "As these testing trading conditions continue, Sony does not believe that it will be alone in taking this form of action."

Sony's move comes as retailers slash prices ahead of what is expected to be the worst Christmas shopping season since the early 1980s as fearful consumers rein in spending to prepare for a sharp recession. Groups such as Marks & Spencer and Debenhams have held one-off sales to try to kick-start spending amid the deepening gloom.

A spokeswoman for Sony declined to comment on when the price rises would take effect, and whether they could impact retailers before Christmas. Sony's big products include PlayStation games consoles, Bravia high-definition televisions and Blu-ray second generation DVD players.

A spokesman for the British Retail Consortium said: "Retailers realise that conditions are very tough for consumers so they would be very loath to pass that on to consumers and are more likely to take a hit on their margins. This is not going to help because retailers are already feeling the squeeze from other rising costs. It will be another pressure for them to contend with."

The yen has surged in recent months as investors have unwound carry trades that saw them borrow yen cheaply to buy higher yielding assets in other currencies. G7 finance ministers said last month that they were concerned about the effect on economic stability of the yen's massive gains.

Sam Hart, an analyst at Charles Stanley & Co, said price rises from Asian suppliers would not be limited to Japanese companies. "This is a major issue that is affecting the whole retail sector at the moment," he said. "A very significant proportion of goods these days come from Asia, where a significant number of currencies are linked to the US dollar."

Mr Hart said market observers had been relatively relaxed about the short-term impact of volatile currencies because big retailers hedge their currency exposure on purchases from Asia, but he added that a straight price hike by Sony's UK operation could be a different matter.

Sony is under pressure to maintain growth as economic conditions add to existing problems in its core consumer electronics business. Last month, the company cut its operating profit forecast by 57 per cent, blaming the strong yen, falling stock markets and the slowing world economy. Even successful products such as Blu-ray players were failing to meet the electronics giant's sales expectations, while prices continued to soften.