Japan's embattled electronics sector suffered another blow on Thursday as ratings agency Fitch downgraded industry titans Sony and Panasonic to junk status for the first time.

The agency slapped a speculative rating on each firm, pointing to their weak balance sheets and declining position in the global electronics sector as they come up against stiff competition from overseas.

Fitch said it cut Panasonic by two notches to BB, while it slashed Sony's rating by three notches to BB-, with both firms given a negative outlook -- meaning their debt was no longer considered a safe investment.

Earlier this month Fitch slashed rival electronics giant Sharp's rating to junk, which followed a similar decision by Standard & Poor's.

Japan's electronics sector has suffered from myriad problems including a high yen, slowing demand in key export markets, fierce overseas competition and strategic mistakes that left their finances in ruins.

Panasonic has warned it is on track for a $9.6 billion annual loss, while Sony expects to eke out a small profit, after four years in the red.

The television business has been a major money loser owing to falling prices as Japanese firms try to compete with lower-cost South Korean and Taiwanese rivals.

In the wake of huge losses, Panasonic, Sony and Sharp have announced massive corporate overhauls that include tens of thousands of job cuts as their shares plunged in value.

On Thursday, Fitch said its downgrade of Panasonic was due to its "weakened competitiveness in its core businesses, particularly in TVs and panels, as well as weak cash generation from operations".

"It also reflects the agency's view that the company's financial profile is not likely to show a material improvement in the short to medium term," it added in statement.

Panasonic's huge restructuring "will help gradually improve operating margins", Fitch said, but warned over the pace of any recovery.

It also cast doubt on Sony's prospects, saying a "meaningful recovery will be slow, given the company's loss of technology leadership in key products, high competition, weak economic conditions in developed markets and the strong yen".

The strong yen makes Japanese firms' products less competitive overseas, while high labor costs at home have also made it tough for the nation's electronics companies to compete globally.

Since September, a diplomatic row over an East China Sea island chain claimed by Tokyo and Beijing has seen many Chinese consumers boycott Japan-branded exports, also digging into manufacturers' results. (AFP)