Risks of Foreign-Exchange Fluctuations, Political Upheaval and Institutional Changes Associated with Overseas Transactions

「• Negative effects of exchange-rate fluctuations, including higher procurement costs due to yen depreciation and lower sales proceeds due to yen appreciation • Political, economic and other instability • Conflicts, political upheaval and coups d’état • Higher logistics costs, including marine transport costs • Unexpected enactment, amendment or abolition of laws and regulations」

「However, in addition to the prolonged Russian invasion of Ukraine and the increasingly complex situation in the Middle East, the risk of an economic downturn arising from the impact of U.S. trade policy has increased.」

「However, overseas factors, including prolonged conditions in Ukraine and the Middle East that have caused raw-material and consumer prices to rise and remain high, continued high interest rates in Europe and the United States, and the impact of stagnation in China's property market, pose downside risks to Japan's economy.」

「During the cumulative third quarter under review (1 June 2023–29 February 2024), the Japanese economy showed signs of recovery as economic activity normalized following the easing of restrictions on activities related to COVID-19. However, the outlook remained uncertain, as the recovery in personal consumption stalled amid inflation caused by geopolitical risks and soaring raw material and energy prices.」

「Meanwhile, persistently high raw material and energy prices resulting from Russia’s invasion of Ukraine and other factors continued to cast a shadow over corporate activity and household finances.」

「Meanwhile, uncertainty continued, as the prolonged Russian invasion of Ukraine and inflation caused by yen depreciation and higher resource prices exerted downward pressure on the economy.」

「Some of these overseas transactions entail the following risks. If they materialize, the Group’s performance may be adversely affected. • Negative effects of exchange-rate fluctuations, including higher procurement costs due to yen depreciation and lower sales proceeds due to yen appreciation • Political, economic and other instability • Conflicts, political upheaval and coups d’état • Higher logistics costs, including marine transport costs • Unexpected enactment, amendment or abolition of laws and regulations」

「During the cumulative third quarter under review (1 June 2022–28 February 2023), the Japanese economy remained uncertain. Although easing restrictions on activities was a positive factor supporting the normalization of social and economic activity amid the continuing impact of COVID-19, soaring raw material and utility costs and inflation exerted downward pressure on the economy.」

「During the cumulative second quarter under review (1 June 2022–30 November 2022), the Japanese economy was in an extremely difficult situation. Although economic activity showed signs of normalizing as restrictions on activities were eased amid the continuing impact of COVID-19, soaring global resource prices resulting from the situation in Ukraine and yen depreciation caused a sharp rise in prices.」

「During the cumulative first quarter under review (1 June 2022–31 August 2022), the Japanese economy was in an extremely difficult situation. Although economic activity showed signs of normalizing as restrictions on activities were eased amid the continuing impact of COVID-19, global resource price increases, soaring logistics costs and yen depreciation caused a sharp rise in prices.」

「In addition, Russia’s invasion of Ukraine caused prices of various resources, including crude oil, and grains to surge, while distribution disruptions led to higher prices and food supply shortages, casting a shadow over Japan and the rest of the world. In addition, the weaker yen raised procurement prices from overseas, further accelerating cost increases and creating an extremely difficult situation.」

「In addition, Russia’s invasion of Ukraine cast a major shadow over both the political and economic spheres.」

「However, as infections continued to spread in some regions worldwide, production activity was disrupted. Shortages of semiconductors led to production adjustments by automakers, while global container shortages caused logistics disruptions and higher freight rates. Higher crude oil prices also pushed up prices, and disruption continued.」

「Employment and income conditions continued to improve, and there were positive factors, including a decline in concerns over U.S.-China trade friction and the risk of a no-deal Brexit. However, concerns continued to mount, including weakening corporate earnings, particularly in manufacturing, weaker consumer sentiment following the consumption tax rate increase, and the negative impact of COVID-19 on the economy.」

「During the cumulative second quarter under review (1 June 2019–30 November 2019), employment and income conditions in Japan continued to improve. However, concerns arose over the negative impact on the Japanese economy of overseas factors such as U.S.-China trade friction and the United Kingdom’s withdrawal from the EU, as well as weakening consumer sentiment following the consumption tax rate increase in Japan.」

「During the cumulative first quarter under review (1 June 2019–31 August 2019), employment and income conditions in Japan continued to improve and corporate earnings remained at high levels. However, concerns over U.S.-China trade friction and the outlook for China’s economy cast a shadow, and corporate business sentiment became increasingly cautious, particularly in the manufacturing sector.」

「Some of these overseas transactions entail the following risks. If they materialize, the Group’s performance may be adversely affected. • Negative effects of exchange-rate fluctuations, including higher procurement costs due to yen depreciation and lower sales proceeds due to yen appreciation • Political, economic and other instability • Political upheaval and coups d’état • Unexpected enactment, amendment or abolition of laws and regulations」

「During the cumulative third quarter under review (1 June 2018–28 February 2019), the Japanese economy was said to be experiencing its longest postwar expansion, supported by improving employment and income conditions and an upward trend in capital investment. However, the recovery was not strongly felt, and concerns arose over the impact on the Japanese economy of the increasingly apparent slowdown in China’s economy and the United Kingdom’s withdrawal from the EU, which had again attracted attention.」

「During the cumulative second quarter under review (1 June 2018–30 November 2018), the Japanese economy continued to show positive signs, including improving employment and income conditions and firm corporate earnings. However, concerns arose over the negative impact on the Japanese economy of U.S.-China trade friction and uncertainty in overseas economies.」

「During the cumulative first quarter under review (1 June 2018–31 August 2018), the Japanese economy continued to show positive signs, including improving employment and income conditions and firm corporate earnings. However, it was in a situation where it was unavoidable that the intensifying U.S.-China trade friction would have a negative impact on the global and Japanese economies.」

「The impact of overseas conditions on the domestic economy remains uncertain, amid the still unpredictable situation surrounding North Korea and concerns over trade friction arising from measures by the U.S. Trump administration, including plans to impose high tariffs on steel products.」

「During the cumulative third quarter under review, the Japanese economy showed signs of resilience, including improving employment and income conditions, but continued to face numerous concerns, including uncertainty in overseas economies, developments in U.S. monetary policy and geopolitical risks.」

「During the cumulative second quarter under review, the Japanese economy was said to be experiencing its second-longest postwar recovery, supported by improving employment and income conditions, better corporate performance and firm exports. However, the recovery was not strongly felt, and the economy continued to face concerns including downturns in emerging economies and heightened geopolitical risks.」

「Although economic expansion is said to be continuing, with employment conditions improving, including the emergence of labor shortages in some areas, and corporate earnings remaining firm, personal consumption lacks strength. The outlook remains uncertain amid concerns over the effects on the Japanese economy of such negative factors as downturns in emerging economies and heightened geopolitical risks.」

「During the cumulative third quarter under review, the Japanese economy remained on a moderate recovery trend. Although there were concerns over the effects of uncertainty in overseas economies, including concerns over an economic slowdown in China and the emergence of protectionist tendencies led by the United States, employment and income conditions improved and corporate earnings remained firm.」

「During the cumulative second quarter under review, the Japanese economy benefited from such positive factors as improving employment and income conditions and expectations of higher earnings at export-related companies due to the weaker yen. However, economic recovery remained stalled amid concerns over an economic slowdown in China and the failure to achieve the Bank of Japan’s 2% price stability target.」

「The negative effects of economic downturns in emerging Asian economies, including China, and resource-rich countries have continued. In addition, the issue of the United Kingdom’s withdrawal from the EU has further increased uncertainty surrounding the Japanese economy.」

「Some of these overseas transactions entail the following risks. If they materialize, the Group’s performance may be adversely affected.」