Takao Yuhara told the Associated Press that losses in the gaming division for the fiscal year to March would be over the Y200 billion (EUR1.2bn) the firm had forecast.

He blamed the start-up costs for launching PS3, and admitted that price cuts were under consideration as a means to breaking even during the next fiscal year, ending March 2008.

“In the PS3 business, production was very tight, but we knew the market wouldn't wait,” said Yuhara.

“Such factors, including price cuts to some extent, are factored in [under our plan to break even in fiscal 2007/2008].”

While stressing that no decision had been made, Yuhara acknowledged that a price cut would make strategic sense in order to encourage global sales.

Costs for flying in PlayStation 3 machines to the U.S., advertising and other start-up expenses were higher than the company had anticipated.

Yuhara also defended the decision to cut the cost of PS3 before its launch in Japan last year. He said the price reduction was an effort to respond to hard-core game fans' expectations, and the move helped ensure a smooth rollout.

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