Slowing growth in the Chinese economy and policy uncertainty following a change of administration in the United States

「The China group has continued to face financial difficulties, including cash-flow constraints, as performance declined due to the effects of the zero-COVID policy and the rapid spread of infections after the policy was lifted. Because the Company needed to normalize transactions with financial institutions at an early stage, it acted to eliminate negative risks associated with expanding its China business.」

「The China Group's performance deteriorated under the zero-COVID policy and the rapid spread of infections after its removal, and financially difficult conditions, including cash-flow constraints, have continued. Because the company needs to normalize its relationships with financial institutions as soon as possible, it decided to transfer the shares of its Hong Kong subsidiary to eliminate negative risks from its China business, including the impact on earnings from temporary closures and poor performance, and to increase the amount available for future debt repayments.」

「China's economic recovery from COVID-19 has been delayed, and revenue has not returned to pre-pandemic levels.」

「Based on the Chinese government's zero-COVID policy, the 3 directly operated locations in Changchun and Shanghai that had been temporarily closed in the previous fiscal year successively resumed operations from June through July 2022. However, strict infection-control measures, including restrictions on movement, continued to be implemented through around December 2022.」

「China's performance in the third quarter (October to December) resulted in a segment loss, as revenue declined from the previous period. The 3 directly operated locations repeatedly closed under the Chinese government's strict zero-COVID policy, and the spread of infections after the policy was lifted in early December also affected customer numbers.」

「China's performance during the first 2 quarters of the current consolidated fiscal year resulted in a segment loss. Based on the Chinese government's zero-COVID policy, the 3 directly operated locations in Changchun and Shanghai that had been temporarily closed since March 2022 successively resumed operations from June through July, but continued strict infection-control measures, including restrictions on movement, and the operating losses caused by all locations being temporarily closed in the first quarter had a significant impact.」

「Based on the Chinese government's zero-COVID policy, 3 directly operated locations in Changchun and Shanghai were successively temporarily closed from March 2022, resulting in a significant decline. Although the lockdowns in various parts of China were lifted after approximately 2 months, the 2 Shanghai locations were not permitted to resume operations until the end of June. In addition, strict restrictions on movement, including requirements to obtain negative test certificates, led to a substantial decrease in revenue and a segment loss.」

「As COVID-19 cases increased in various areas from the beginning of 2022, areas were placed under lockdown, and Shanghai underwent a lockdown lasting several months. Even after the lockdown in Shanghai was lifted, strict nationwide controls based on the zero-COVID policy continued, and the outlook remained uncertain as the effects extended beyond China to the rest of the world.」

「During the third quarter of the current consolidated fiscal year, Japan's economy showed signs of recovery as restrictions on economic activity were gradually eased. However, COVID-19 infections were rapidly expanding again, and the situation remained unpredictable.」

「During the first quarter of the current consolidated fiscal year, a recovery in personal consumption was expected following the nationwide start of COVID-19 vaccinations. However, the spread of highly transmissible variants led to repeated requests in various regions to restrict activities that would reduce the movement of people under states of emergency and priority preventive measures, among others, and the difficult economic environment continued.」

「During the first quarter of the current consolidated fiscal year, Japan's economy remained in an uncertain situation. As the global spread of the novel coronavirus led to calls for people to refrain from going out, restrictions on travel to and from overseas, and the adoption of social distancing in daily life, personal consumption fell sharply and business activity across a broad range of industries continued to be affected. An economic downturn worse than that during the Lehman shock was expected.」

「However, as widely reported since late January 2020, the spread of the novel coronavirus showed no sign of abating. Its effects spread beyond China from Asia, including Japan, to the rest of the world, and the outlook remained uncertain amid expectations of a downturn in the global economy.」

「Concerns about uncertainty overseas, including developments in US-China trade relations and the UK's withdrawal from the EU, remain elevated, and conditions with an uncertain outlook continue.」

「During the first quarter of the current consolidated fiscal year, Japan's economy was on a gradual recovery trend, supported by solid corporate earnings and improvements in employment and income conditions. However, concerns over uncertainty in overseas economies, including the prolonged U.S.-China trade friction, increased, and the outlook remained uncertain.」

「The economic outlook remains uncertain due to the effects of trade friction resulting from U.S. trade policy and geopolitical risks, among other factors.」

「The outlook for the economy remains uncertain because of the expansion of geopolitical risks overseas, including U.S. policy developments and the situation in North Korea, and the impact of uncertainty in overseas economies arising from policy developments in the United States and Europe.」

「Against a backdrop that included slower economic growth in emerging markets, particularly China, uncertainty over U.S. economic and trade policy following a change of administration, and concerns such as the United Kingdom's withdrawal from the EU, uncertainty about the outlook has increased further.」