S&P cuts rating on Sharp to junk status

Business Sep. 01, 2012 - 02:54PM JST ( 45 )

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45 Comments

3

gaijinfoSep. 01, 2012 - 07:08AM JST

Japan Inc. better take notice. They aren't far behind.
1

CrazyJoeSep. 01, 2012 - 07:26AM JST

Sharp is the company that made the patented シャープペンシル (sharp pencil) l back in 1915.
2

paulinusaSep. 01, 2012 - 08:00AM JST

198 yen per share. That's pretty shocking.
0

kwattSep. 01, 2012 - 08:13AM JST

I just wonder why strong yen stays for many years and still? On the other hand, US dollar still stays falling in value for many years. Strong appreciation is killing companies. They wish one dollar around 120 yen. Why do not S Korean and Chinese money go up in value though they are selling much more than Japan?
-3

saidaniSep. 01, 2012 - 08:30AM JST

I just wonder why strong yen stays for many years and still? On the other hand, US dollar still stays falling in value for many years. Strong appreciation is killing companies. They wish one dollar around 120 yen. Why do not S Korean and Chinese money go up in value though they are selling much more than Japan?

Because Japan is the world's patsy in the global beggar-thy-neighbor currency race to the bottom. But this is nothing new between the close allies, Japan and America. The same thing happened in 1985 via the Plaza Accord.

Take note that Japan has to ask permission to take steps to weaken the Yen. Of course, the US doesn't ask Japan's permission to do the same.
4

TattooVampireSep. 01, 2012 - 08:58AM JST

Standard & Poors (S&P) = Junk

The same hoodlums who whored themselves for GS and the rest of the banksters
-1

TattooVampireSep. 01, 2012 - 09:12AM JST

"Take note that Japan has to ask permission to take steps to weaken the Yen. Of course, the US doesn't ask Japan's permission to do the same."

Yen is still in a cyclical bull market (since mid-2007, when the financial crisis started to fester). And China and a few other nations want to see to it that it remains in such. What better way to inflict pain on Japan.

The U.S. equity and commodity markets actually benefit from a weaker yen via the "carry trade". But right now some of the USD selling is being funneled into the yen, which is keeping the latter below 80.

The USD index is basically pegged now and not necessarily weak, with the high around 83-84 and the low around 75-76. But the recent weakness is due to the Euro rebounding.

If you're a gaijin earning yen, not sure why one would complain. Me and other gaijin did pretty well on the currency trade back in 1995.
-7

DogSep. 01, 2012 - 09:13AM JST

saidaniSep. 01, 2012 - 08:30AM JST

Because Japan is the world's patsy in the global beggar-thy-neighbor currency race to the bottom. But this is nothing new between the close allies, Japan and America. The same thing happened in 1985 via the Plaza Accord.

Not really, Japan is running a current account surplus and has very little foreign debt. By the natural laws of economics it is only natural that Japan's currency would be high and should remain so until either of the previously mentioned variables change.

Sharp's problems have very little to do with the yen exchange rate and a lot to do with their supermarket approach to producing too many products, which are mediocre at best. They had a good run on Aquos and took a gamble on solar panels. Aquos is nearly past its sell by date, although I'm still happy with mine, and the solar panel drive has not worked out.

They were always really an Osakan company who tried to act big, but didn't have the mindset to see the act through. They carried on manufacturing in Japan and the worldwide subsidaries wouldn't say boo without the say so of Japan.
6

jam_sandwichSep. 01, 2012 - 10:10AM JST

Oh how the mighty have fallen. Japanese electronics makers are eating Samung's dust.
Most Japanese electronics companies squandered their reputation and brand name by giving customers over-priced mediocre products.
If you're gonna do mediocre, you gotta be cheap!
1

saidaniSep. 01, 2012 - 10:19AM JST

TattooVampire Sep. 01, 2012 - 09:12AM JST

Dog Sep. 01, 2012 - 09:13AM JST

Yes the weakness in the EURO has put a damper in the US plans. One can not dismiss the Obama pledge to double exports in his first term which promise is best achieved by trashing the USD. About the only thing that Noda and the incompetent Azumi have gotten right is that the level of the Yen does not reflect the declining conditions in Japan, even if they are loathe to tell the Japanese public how bad it is for political reasons.

The natural laws of currency exchange are out the window when one reaches the level of debt Japan has achieved, regardless who owns the debt. Especially when Central banks (including the BOJ, but at levels that are far below the Fed and the ECB) are flooding banks and asset markets with cash, a portion of which is no doubt buying Yen. Return to the Plaza Accord in which the Yen and Deutschmark were "revalued" to accommodate the US (it did not help the US but did help cause Japan's asset bubble). And note that the Chinese response to US complaints about the soft peg on the Yuan was that Chins wasn't willing to trash its own economy for the benefit of the US like Japan did in the 1980s.

Everyone is a currency manipulator for their own purposes. Only Japan sucks at it for whatever reason and bears the pain of its inability to compete. One would have to go all the way back to Bretton Woods and Nixon to unwind the real problems with fiat currencies.

Dog, I was not implying that the Yen had anything to do with Sharps many problems. I was responding to a question about the currency imbalance.
1

DisillusionedSep. 01, 2012 - 10:33AM JST

So, how many Japanese companies is that now? Panasonic, Toyota, Sony, JAL, just to name a few. It is time Japan reviewed its economic policies and started acknowledging they are in deep doo doo!
4

GWSep. 01, 2012 - 10:50AM JST

Folks the current high yen IS NOT the bane of J-electronics companies, but what it is doing is merely speeding up the inevitable decline, Japan has ignored its competitive issues for far far to long but its coming home to roost bigtime & everyone seems like they barely saw it coming,..............sad state of affairs to be sure
0

TattooVampireSep. 01, 2012 - 11:22AM JST

"Everyone is a currency manipulator for their own purposes. Only Japan sucks at it for whatever reason and bears the pain of its inability to compete."

Well said. Actually, the CHF got quite strong too (2011) and consequently the SNB "fixed" their problem, leaving only Japan with a currency at painful levels.
-6

DogSep. 01, 2012 - 11:59AM JST

TattooVampireSep. 01, 2012 - 11:22AM JST

Well said. Actually, the CHF got quite strong too (2011) and consequently the SNB "fixed" their problem, leaving only Japan with a currency at painful levels.

Peoiple keep using Switzerland and its currency as a model for Japan's currency.

Switzerland is some cuckoo mountainous kingdom whose economy is something like the 19th biggest in the world, mainly built on financial services.

Japan's is the 3rd biggest in the world largely built on syphoning money out of other countries through mercantilism.

Can we stop with the comparison?
2

chucky3176Sep. 01, 2012 - 12:07PM JST

That's what happens when you have protected electronics market. Sharp is having quality issues with their panels so they cannot deliver to Apple's specifications until they fix the issues. LG has taken up the pace and is doing their best to pick up Sharp while Sharp try to figure out the quality problems.
3

kwattSep. 01, 2012 - 12:07PM JST

I don't know much about (global) economy as I didn't study much. It sounds like very strong currency keeps to make domestic business bad but Japan and companies can buy many foreign things very very cheaply such as, crude oil, gas, food, minerals, factories, companies, whatever they are and can invest foreign companies. I think that currency appreciation is probably not always bad for Japan and companies.
0

Thomas AndersonSep. 01, 2012 - 12:08PM JST

WOW Junk status! The Korean and Chinese companies are going to eat them alive. The more the Japanese try to come up with excuses, the faster they fall. The Japanese are their own worst enemy.
-1

TattooVampireSep. 01, 2012 - 12:22PM JST

"...Peoiple keep using Switzerland and its currency as a model for Japan's currency."

"Can we stop with the comparison?"

In my world (trading), both were seen as "safe haven" currencies in 2010/2011, in response to the Eurozone issues. Hence the comparison. And you cannot ignore the fact that both had nearly identical strong upmoves from summer 2010 (post U.S. flash-crash). Despite the fundamental differences.

Also, from what I read, Switzerland is also largely dependent on tourism, of which a strong CHF causes this industry to slow down.
0

TattooVampireSep. 01, 2012 - 12:31PM JST

@kwatt,

Generally speaking:

Weak currency = good for exporters, not so good for imports, good for bringing in tourists, not so good for citizens wanting to travel outside

Strong currency = not good for exporters, good for importers, good for citizens wanting to travel outside, not so good for bringing in tourists

Japan can buy commodities (priced in USD) to their advantage, with a strong yen; the problem is that, right now, grains (corn, soybeans, and wheat) are at/near record high prices (soybeans at a historically high +$17 a bushel). Perhaps a good amount of rain in the U.S. farmbelt should chase long speculators out of these markets. But look at platinum, which Japanese automakers depend heavily on - trading at around $1540 (well off its 2011 and 2008 highs). You'd think they can be stockpiling, but it depends on whether we enter a recession next year, in which case prices would likely come down more.
0

saidaniSep. 01, 2012 - 12:36PM JST

but it depends on whether we enter a recession next year, in which case prices would likely come down more.

Is there really any doubt about a recession in 2013? What do you see that is a strong enough positive to keep the economy from collapsing?
-6

DogSep. 01, 2012 - 12:44PM JST

TattooVampireSep. 01, 2012 - 12:22PM JST

In my world (trading), both were seen as "safe haven" currencies in 2010/2011, in response to the Eurozone issues. Hence the comparison. And you cannot ignore the fact that both had nearly identical strong upmoves from summer 2010 (post U.S. flash-crash). Despite the fundamental differences.

Also, from what I read, Switzerland is also largely dependent on tourism, of which a strong CHF causes this industry to slow down.

Get a grip. Switzerland's exports are a total of just over 17 billion dollars a year. Switzerland imports just over 14 billion dollars a year.

Japan's exports nearly 600 billion dollars a year and although the gap between its imports and exports are narrowing, Japan runs a trade surplus with the US of 38 billion dollars .

**Think of the world outcry that would follow if Japan started to play its currency, the way the Swiss have. **

We would be back to the tarrif wars of 1933 within a month.
3

saidaniSep. 01, 2012 - 12:45PM JST

I think that currency appreciation is probably not always bad for Japan and companies.

A strong currency could be beneficial for the average family, but the Japanese economy is rife with price controls, subsidies, and restrictions on distribution so that much of the benefits never trickle down to the consumer. Such policies are sold as creating a stable price structure, but for the most part, it covers for failed economic management.
2

herefornowSep. 01, 2012 - 12:47PM JST

"That's what happens when you have protected electronics market."

"The Japanese are their own worst enemy."

chucky and Thomas -- agree. The model that propelled Japan Inc. to its position of strength has now become a huge albatros around its neck. Protecting the home market gave companies like Sharp a solid, profitable and predictable base from which to build the capabilities and size needed to compete globally. But they became too internally focused as a result, and, since the Japanese market was not representative of any other markets it was impossible for the Japanese-based executives to get a grasp on what the competition was doing elsewhere. They had no way of truly understanding what they faced in a Best Buy or Walmart in the U.S. for example. And while Japanese brands mean something in Japan, because of their cutural importance and the tons of money they spend on advertising and promotion there, LG or Samsung are just as strong to many Amercians as Sharp or Panasonic.
Japan Inc. truly is its worst enemy right now, as it cannot seem to get out of its own way.
0

TattooVampireSep. 01, 2012 - 12:51PM JST

"Is there really any doubt about a recession in 2013? What do you see that is a strong enough positive to keep the economy from collapsing?"

You got me, chief. I'm sure you have a better argument that I do.

U.S. equity market performance and economic fundamentals are out of whack, so I cannot really say. I trade S&P 500 futures (ES) and can't seem to get any traction on the short side, based on my bearish view. yesterday OK, today, tried to get run in. U.S. was about to enter a bear market in 2011 but the FRB (BS Bernanke) nipped it in the bud last fall. Probably the same thing going into November. Nothing like "QE" on the brain to keep equities propped up.

I guess we'll have to hear what BHP CEO Kloppers says during their 2012/Q3 earnings announcement, about whether conditions in China and globally continue to deteriorate.
1

kwattSep. 01, 2012 - 12:55PM JST

Japan can buy commodities (priced in USD) to their advantage, with a strong yen; the problem is that, right now, grains (corn, soybeans, and wheat) are at/near record high prices (soybeans at a historically high +$17 a bushel). Perhaps a good amount of rain in the U.S. farmbelt should chase long speculators out of these markets. But look at platinum, which Japanese automakers depend heavily on - trading at around $1540 (well off its 2011 and 2008 highs). You'd think they can be stockpiling, but it depends on whether we enter a recession next year, in which case prices would likely come down more.

Thanks for the information. Such grains high prices seem to be for almost all countries, not only Japan. Grains get very expensive now, but Japan can buy them more cheaply than other countries having weak currency. Foreign automakers seem to depend more heavily on it with weak currency, maybe except US. I think all importer countries are same.
-5

DogSep. 01, 2012 - 01:04PM JST

saidaniSep. 01, 2012 - 12:45PM JST

A strong currency could be beneficial for the average family, but the Japanese economy is rife with price controls, subsidies, and restrictions on distribution so that much of the benefits never trickle down to the consumer.

This is exactly the problem, this and high rental prices for very limited living space. In theory the Japanese should have a much higher disposable income and that income should be able to be spent on some sort of price parity to Europe and the USA.
1

TattooVampireSep. 01, 2012 - 01:05PM JST

"Get a grip. Switzerland's exports are a total of just over 17 billion dollars a year. Switzerland imports just over 14 billion dollars a year."

Great, first you make a case for Swiss being a two-bit economy, then show they are running a surplus. So what is your point? Which is it? Again, my only comparison regarding JPY and CHF is as stated - "safe haven" currencies.

The SNB got fed up - and they felt they weren't going to be the last ones holding the bag. So they made the BOJ do the honor.

Japan may have the surplus with the U.S. but overall they are running a deficit now. The surplus w/ the U.S. should come as no surprise. U.S. energy companies will be more than happy to sell NG to Japan, some of which will have been brought to market by SINOPEC (in TX). I'm sure the Chinese are having a good laugh at this one.
0

saidaniSep. 01, 2012 - 01:07PM JST

I'm sure you have a better argument that I do.

I wish. I've been bearish, too. Still am. November seems to be the pivotal time frame. Maybe, I'll buy some puts during the Obama rally.

Anyway, thanks for the informative discussion. And good luck.
0

saidaniSep. 01, 2012 - 01:13PM JST

Dog Sep. 01, 2012 - 01:04PM JST

What seems evident to the thoughtful observer escapes the tortured minds in the Japanese government who have likely never had an original thought outside the narrow window of their conditioning.
2

kwattSep. 01, 2012 - 01:14PM JST

This is exactly the problem, this and high rental prices for very limited living space. In theory the Japanese should have a much higher disposable income and that income should be able to be spent on some sort of price parity to Europe and the USA.

Most average Japanese do not want to spend a lot of money. They prefer to save money as much as they can because in case of some kind of crisis coming in the future. Money is everything. No money you would die like a homeless dog.
2

saidaniSep. 01, 2012 - 01:19PM JST

They prefer to save money as much as they can because in case of some kind of crisis coming in the future. Money is everything. No money you would die like a homeless dog.

While it is admirable for anyone to live within their means and "save for a rainy day," common sense stewardship and not fear should be the prime motivator. Fearful people can be controlled by those in power; bosses, bureaucrats, politicians, and even family members. This is hardly the way to live one's life.
1

UtrackSep. 01, 2012 - 01:21PM JST

kwatt

Nissian and US automaker GM depend on weak currency to boost profits too. They both signed 100's of billion won contracts with a Auto components manufacturer Mando Corp. 210 billion won from Nissian for having all their electric power steering systems made for every Nissian vehicle starting with all 2013 models. The deal with GM worth 340 billion won calls for Mando to supply electric parking brakes to new cars that the U.S. firm plans to produce starting in 2015.

Moody's rating for SK went up from A1 to Aa3.
-6

DogSep. 01, 2012 - 01:23PM JST

TattooVampireSep. 01, 2012 - 01:05PM JST

Great, first you make a case for Swiss being a two-bit economy, then show they are running a surplus. So what is your point?

My point is that Japan is one of the big players in the manufactuing market and her current account surplus in a week is bigger than Swtzerland's in a year. What piffy little Switzerland does with currency, nobody but the cucko clock manfacterers and cheese makers care about. Japan is a different case completely. All of the developed world does not want Japan to start playing 'begger thy neighbour' because unlike Switzerland.,who might begger their neighbour's clock or cheese industry, the Japanese will truelly begger thy neighbour's economy.

Japan may have the surplus with the U.S. but overall they are running a deficit now.

I wish people would distinguish between a trade and current account. Japan may well be running a trade deficit, because of impoting fuel, but Japan still has the 4th biggest current account surplus.

Japan's problems are not taxation, yen strength or balance of payments. They are problems with government expenditure, who spend like we're still living in the bubble.

The BOJ knows this and that is why they won't take the easy option of weakening the Yen.
0

saidaniSep. 01, 2012 - 01:27PM JST

DogSep. 01, 2012 - 01:23PM JST

TattooVampireSep. 01, 2012 - 01:05PM JST

We should all go have a beer and discuss this. We would probably agree more than disagree about most things. You guys are great to have these discussions with. I always learn something.
0

TattooVampireSep. 01, 2012 - 01:42PM JST

"What piffy little Switzerland does with currency, nobody but the cucko clock manfacterers and cheese makers care about."

Boy, the SNB just begs to differ. CHF long speculators were seen as more evil than WTIC long speculators at the NYMEX

"Japan's problems are not taxation, yen strength or balance of payments."

Just how is yen strength NOT a problem for Japan, a "big player in the manufacturing market"...? Maybe the Japanese-made Scion I own, it got put on the Yusen vessel by mistake.

"The BOJ knows this and that is why they won't take the easy option of weakening the Yen."

This I see. And also the fact that the last two major interventions (2011 and early this year) are now deemed ineffective.
1

kwattSep. 01, 2012 - 02:32PM JST

Utrack

I can't say much about it. As far as I know there are Toyota (USA) assembling factories for a long time and NIssan and Honda factories in America and also all over the world. They are now getting as many auto parts as they can from local auto suppliers in America, Mexico, or Canada. They used to import all parts from Japan but not any more but except some parts, because sure you know the reason: Japanese currency appreciation for a long time. So Japanese auto companies more likely go out of Japan and electric companies and factories as well. Japanese companies can not make cheaper products in Japan any more and hardly export products with low prices overseas, because of rapid currency appreciation.
0

SunnysideUpSep. 01, 2012 - 02:44PM JST

Thought Sharp was already long gone. Japan's stranglehold on high tech and electronics is slowly but surely melting away...
0

billyshearsSep. 01, 2012 - 02:51PM JST

bring back the gold standard!
0

ohayo206Sep. 01, 2012 - 03:24PM JST

Might be a good time to buy low though. I wouldn't count out Japan Inc companies, especially if they continue to collaborate and adapt towards future market trends. Good companies will survive this and can still be surprisingly resilient.
0

tokyokawasakiSep. 01, 2012 - 06:07PM JST

Japan's reverse evolution continues...
0

HinikuSep. 01, 2012 - 09:54PM JST

Because Taiwan, S. Korea and China have commoditized many electronic components (hardware), a new dawn has come. Google's Android, Apple's iOS and Microsoft to a small extent are now sitting in a very strong position. Gone are the days of the DVD, CD, MiniDisc, CRT, VHS, and cassette... gone. And my advice is just plain don't buy BlueRay because video on demand is here. When Apple first introduced the iPhone in 2007.... Japanese cell phones were the most advanced in the world but Nokia far outsold them because Japanese companies put too much energy into the domestic market only. Now... smartphones by Apple and Samsung are destroying Japanese cellphone makers. As is mentioned previously.... Japanese companies enjoyed a large domestic market where they competed against each other... slicing up the pie, drinking in Ginza and vacationing in Karuizawa. Now they're scrambling.... still hungover from the party... they need to identify core businesses and cut the rest quickly.
-1

chucky3176Sep. 01, 2012 - 10:31PM JST

I wish people would distinguish between a trade and current account. Japan may well be running a trade deficit, because of impoting fuel, but Japan still has the 4th biggest current account surplus.

I suggest you catch up and look at the latest numbers on Japan. It may actually shock you into rethinking that comment. Trade deficits will continue to grow, but the account surpluses are continuing to shrink down quickly as well since Japan's investment accounts are heavily exposed to Europe. Japan heavily depends on the account surpluses to fuel their budget deficits and purchase Japanese debt.
-1

globalwatcherSep. 02, 2012 - 05:52AM JST

And many more will be down graded to junk. Bye, bye Japan.
-6

DogSep. 02, 2012 - 09:48AM JST

chucky3176Sep. 01, 2012 - 10:31PM JST

but the account surpluses are continuing to shrink down quickly

I suggest you go look at the figures. The current account ******surplus ******may be shrinking - not quickly as you invented - but it is a surplus
0

asahinaSep. 04, 2012 - 06:46PM JST

As a consumer from a certain southeast Asian countries, it has been awhile since the last time i saw a Sharp product in a supermarket or a electronics store. All i can see now is either Samsung or Sony and when consumers have to decide which brand they want to choose, Sharp is just not appealing enough comparing to the other two.

Still, i will have to admit that products from Sharp are of high quality. My company used old monitors (we have changed to use LCDs right now) are Sharp and they still working perfectly even though we bought them almost a decade before. The reason we replace it is because they are already too bulky and the color is not bright enough for our work.

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