Sharp Admits Material Doubt On Survival

The case of Sharp in the following article over Financial Times reflects some critical points discussed on this blog.  The Asian mercantilist model is flawed and can't escape the inevitable run in with the brick wall since it is at the mercy of external forces beyond their control.  When the Asian mercantilist countries employed its currency strategy in conjunction with the U.S., it benefited its big businesses.  As they lost the advantage of currency/wage arbitrage, it hurt them.  As long as the U.S. Fed continues to dilute the USD, there is very little the mercantilist countries can do about it.  Moreover, global aggregate demand is dwindling as the sovereign debt crisis intensifies, so their export-dependent economy is headed for a rough ride.

The reason the case of Japan and their corporations concerns us  is that Korea and China seem to be on a similar trajectory: rapid growth, bubbles formed and bursting, kicking the can approach, etc.  Whether some of their big businesses survive or not, the price for the failed policy falls heaviest on the general public.

From Naked Capitalism:

Tonight’s Financial Times has a eye-popping story, that the survival of Sharp, one of Japan’s top consumer products manufacturers, is in doubt:

Sharp has admitted there is “material doubt” about its ability to stay in business as it warned of a second year of record losses, deepening the gloom surrounding Japan’s once dominant consumer electronics industry…
The warning came a day after Panasonic stunned investors by projecting a second consecutive $10bn loss. Panasonic’s share price dropped a further 19 per cent on Thursday.
Sharp and Panasonic, along with Sony, are the most consumer-focused of Japan’s large technology companies. All three have suffered as prices for flatscreen televisions and other household items plunged globally.
A strong yen and competition from lower-cost manufacturers elsewhere in Asia have turned the products that once underpinned their success into financial millstones. Last year, the three groups suffered a combined net loss of Y1.6tn – a figure that Sharp and Panasonic will come close to matching between them this year.

http://www.nakedcapitalism.com/2012/11/has-chinese-currency-manipulation-succeeded-in-breaking-japanese-manufacturers.html