Yen Appreciation, Stagnation in Overseas Economies, and Instability in International Affairs

「During the first quarter of the current consolidated cumulative period (from 1 April 2026 to 30 June 2026), foreign exchange rates and energy prices remained volatile against a backdrop of heightened geopolitical risks, including the situation in the Middle East.」

「Inbound demand remained firm, but as the situations in Ukraine and the Middle East dragged on, U.S. interference in Iran further aggravated conditions, causing crude oil prices to surge, and an even more uncertain situation continued.」

「During the interim consolidated accounting period (from 1 April 2025 to 30 September 2025), Japan’s economy recovered gradually, supported by continued strength in inbound demand, including for dining and travel, and a pickup in private consumption. However, uncertainty continued to remain due to the ongoing yen depreciation trend in the foreign exchange market, U.S. trade policy and other factors.」

「While the strength of services consumption, including dining and travel, and inbound demand continued, the yen remained on a strongly depreciating trend in the foreign exchange market, and uncertainty continued to remain due in part to the prolonged situation in Ukraine.」

「Following the reclassification of COVID-19 as a Class 5 infectious disease, services consumption, including dining and travel, continued to recover. At the same time, uncertainty has continued to remain due to yen depreciation resulting from the interest-rate differential between Japan and the United States, the prolonged situations in Ukraine and the Middle East, and other factors.」

「During the six-month period ended 30 September 2023 (from 1 April 2023 to 30 September 2023), Japan’s economy saw continued recovery in services consumption, including dining and travel, and in inbound demand following the reclassification of COVID-19 as a Class 5 infectious disease. At the same time, various risks, including yen depreciation resulting from the interest-rate differential between Japan and the United States and the prolonged situation in Ukraine, have not been dispelled, and uncertainty has continued to remain.」

「Japan experienced its first major holiday period in 3 years without restrictions on activities, and services consumption such as dining and travel and inbound demand recovered after COVID-19 was reclassified as a Class 5 disease on 8 May. However, yen depreciation again strengthened in the foreign-exchange market, and the economic outlook remained uncertain amid concerns over the impact on the global economy of geopolitical risks related to the situation in Ukraine.」

「As economic and social activity continued to normalize after the COVID-19 pandemic, a moderate recovery continued, including in services consumption such as dining and travel. At the same time, conditions surrounding Japan became increasingly challenging amid surging global energy and food prices and concerns over a global economic recession caused by monetary tightening in Europe and the US.」

「During the cumulative second quarter of the fiscal year, Japan's economy saw services consumption such as dining and travel recover as economic and social activity normalized following the end of the priority preventive measures. However, the economic outlook remained uncertain amid concerns over the impact on the global economy of yen depreciation, surging raw-material prices and geopolitical risks related to the situation in Ukraine.」

「In addition to the risk of a resurgence of infections caused by COVID-19 variants, concerns remain over the impact on the global economy of sharply higher yen depreciation, surging raw-material prices and geopolitical risks related to the situation in Ukraine, and the economic outlook is expected to remain uncertain.」

「During the cumulative third quarter of the fiscal year, signs of an economic recovery emerged as restrictions on activities, including the state of emergency declared to address COVID-19, were lifted at the end of September, leading to a recovery in services consumption such as dining and travel. However, the economic outlook is expected to remain uncertain amid concerns over overseas infections, supply shortages of raw materials due to natural disasters, and tighter supply and demand for soybeans, a key raw material for edible oil, due to reduced production caused by dry weather in North America and competition with food demand resulting from expanded biofuel production. Concerns also remain over a sharp rise in prices and downside economic risks caused by a significant increase in resource prices.」

「Although a resurgence of infections remains a concern, the economic outlook is expected to follow a moderate recovery trend as vaccinations progress and restrictions on activities are lifted gradually.」

「During the cumulative first quarter of the fiscal year from 1 April 2021 to 30 June 2021, Japan's economy saw its pace of recovery remain moderate as the third state of emergency was declared due to the resurgence of COVID-19 and people refrained from going out. Although progress with vaccinations raised expectations for economic normalization, conditions remained uncertain as surging prices for resources such as crude oil put pressure on corporate earnings and household finances.」

「Although signs of recovery emerged in early autumn, supported in part by government measures for the tourism and restaurant industries, infections began increasing again in November, the state of emergency was reimposed in January, and economic activity stagnated again.」

「However, economic activity stagnated again as infections began increasing from November, prompting people to refrain from outings, gatherings and other activities, and uncertainty surrounding the economic outlook increased.」

「During the cumulative second quarter of the fiscal year from 1 April 2020 to 30 September 2020, Japan's economy had begun to resume economic activity after the state of emergency declared due to the spread of COVID-19 was lifted on 25 May, but stagnated again as infections began increasing from July. The pace of economic recovery was expected to remain moderate as the impact of COVID-19 persisted.」

「During the cumulative first quarter of the fiscal year from 1 April 2020 to 30 June 2020, Japan's economy stagnated and deteriorated sharply as requests to suspend operations by retailers, restaurants and other businesses and restrictions on domestic and international travel were imposed to prevent the spread of COVID-19. Economic activity resumed after the state of emergency was lifted on 25 May, but the pace of economic recovery was expected to remain moderate as the impact of COVID-19 persisted.」

「During the fiscal year, Japan's economy experienced a rapid downturn as personal consumption declined following the consumption tax increase in October, while economic activity stagnated from February onward due to a sharp decline in visitors to Japan, travel and outing restrictions, event cancellations and other effects of the COVID-19 pandemic.」

「During the cumulative third quarter of the fiscal year from 1 April 2019 to 31 December 2019, exports remained sluggish due to the impact of US-China trade friction and worsening Japan-South Korea relations. Capital investment for streamlining and labor saving to address the labor shortage remained firm. However, personal consumption declined from October onward as the consumption tax increase resulted in a backlash from front-loaded demand, and the economy continued to stall.」

「During the cumulative second quarter of the fiscal year from 1 April 2019 to 30 September 2019, Japan's economy saw sluggish exports and a downturn in inbound demand due to the impact of US-China trade friction and worsening Japan-South Korea relations. Although employment and income conditions remained favorable, personal consumption also remained weak due to adverse weather during the summer, and the economy continued to stall.」

「As overseas economies slowed due in part to US-China trade friction, export growth, which had driven the economy, decelerated. In addition, signs emerged of companies reviewing their investment plans, particularly in manufacturing, and the economy showed increasing signs of stagnation.」

「Although employment and income conditions remained favorable, including a lower unemployment rate, the domestic economy stalled somewhat as overseas economies showed signs of slowing, including amid US-China trade friction, leading to weak exports.」

「During the cumulative third quarter of the fiscal year, Japan's economy faced a challenging external environment, including natural disasters such as earthquakes and typhoons, and higher labor and logistics costs resulting from the labor shortage. Although exports were sluggish due to the slowdown in the Chinese economy, the domestic economy continued to recover moderately, supported by favorable employment and income conditions, including a lower unemployment rate, and firm capital investment reflecting strong corporate earnings.」

「Although concerns remain over rising labor costs caused by the worsening labor shortage and the impact of protectionist US trade policies, exports and capital investment remain firm, and corporate earnings remain at record-high levels, indicating that the economy continues to recover moderately.」

「During the six-month cumulative period, there were no new business or other risks, nor any material changes to the business or other risks described in the securities report for the previous fiscal year.」

「Although overseas conditions remain highly uncertain due to political developments in the US and Europe and various geopolitical risks, exports, primarily to emerging markets such as those in Asia, have remained firm.」

「Overseas conditions have been marked by the rise of protectionist movements, including the UK's decision to leave the EU and the birth of a new US administration, and exports have remained flat as a result.」

「Overseas conditions are expected to become increasingly uncertain as immigration issues and protectionism gain prominence, following the UK's decision to leave the EU and the outcome of the US presidential election.」

「During the cumulative second quarter of the fiscal year, Japan's economy remained sluggish as inbound demand from visitors to Japan, which had driven consumption, showed signs of reaching a plateau and adverse weather had a negative impact. Exports and corporate capital investment also remained weak amid deteriorating conditions overseas and yen appreciation. The outlook for the economy is expected to remain uncertain.」

「In light of these severe economic conditions, the decision was made to postpone the consumption tax increase, which was expected to mitigate further downside risks. However, new sources of instability also emerged, including a global stock-market decline triggered by the UK's withdrawal from the EU and the rise of protectionism, and the economic outlook is expected to remain uncertain.」