Earnings pressure from the UK's withdrawal from the EU, financial market turmoil and yen appreciation

「During the fiscal year, the impact of US tariff policies was more moderate than previously assumed, while growing AI demand became a factor supporting economic growth, and the global economy maintained resilient growth. Meanwhile, social divisions have deepened further amid the escalating war in Ukraine and tensions in the Middle East.」

「During the interim accounting period, the global economy maintained resilient growth even after the Trump administration’s tariff policies in the United States went into full effect. Meanwhile, social divisions have deepened further amid geopolitical tensions, including the situation in the Middle East and the war in Ukraine.」

「Uncertain factors, including the US administration’s tariff policies and geopolitical tensions, continue.」

「During the interim accounting period, the global economy maintained resilient growth, with inflation easing and real wages improving in many countries, despite concerns about a US recession. However, various uncertainties, including international tensions and conflicts, remain. In Japan’s manufacturing sector, the yen began to appreciate from July onward, but business sentiment improved on the back of resilient demand for capital investment, increased inbound demand and a recovery in personal consumption. At the same time, the environment includes uncertain factors such as higher costs due to rising raw-material prices, labor shortages and developments following the US presidential election.」

「During the cumulative third quarter, the U.S. economy remained firm, while various uncertainties persisted, including the continued weakness of the Chinese economy, a weak European economy, the prolonged Russian invasion of Ukraine and conflict between Israel and the Islamic organization Hamas. In Japan's manufacturing sector, business sentiment in the materials and processing industries improved, supported by solid capital investment demand and firm production of final products such as automobiles. Meanwhile, concerns remained about higher costs due to further yen depreciation and higher crude oil prices, as well as labor shortages.」

「During the cumulative second quarter, concerns about an economic recession persisted due to broad-based deterioration in China's economic indicators, a weak European economy, persistently high inflation, the prolonged Russian invasion of Ukraine and persistently high U.S. interest rates. In Japan's manufacturing sector, although demand recovery has caused labor shortages, operating conditions are believed to continue improving, supported by solid capital investment demand, broader wage increases to secure personnel and signs that the impact of higher raw material prices is beginning to abate. Meanwhile, concerns remain about higher costs due to further yen depreciation and higher crude oil prices.」

「During the cumulative first quarter, concerns about an economic recession persisted due to continued geopolitical fragmentation, lingering concerns about the U.S. financial system and China's weak recovery. In Japan's manufacturing sector, although demand recovery has caused labor shortages, operating conditions are believed to be continuing to improve, supported by solid capital investment demand, broader wage increases to secure personnel and signs that the impact of higher raw material prices is beginning to abate.」

「During the fiscal year, resource prices such as coal and natural gas remained high, but signs of inflation easing emerged as countries tightened monetary policy. However, by the end of the fiscal year, concerns about financial-system instability were simmering in the United States and Europe, leaving the situation unpredictable.」

「During the cumulative third quarter, resource prices, including coal and natural gas, remained high as the prolonged Russian invasion of Ukraine showed no signs of ending and increased electricity demand accompanied the post-pandemic economic recovery. In addition, the pace of U.S. policy-rate hikes to combat inflation slowed due to concerns about economic deterioration, increasing concerns about a global economic downturn. In Japan's manufacturing sector, higher import costs due to yen depreciation and persistently high electricity charges further worsened the earnings environment.」

「During the cumulative first quarter, the global economy faced significant downside risks due to the prolonged Russian invasion of Ukraine and continuing economic sanctions against Russia by the G7 countries, soaring prices for crude oil, natural gas, mineral resources and grains, and supply-chain disruptions caused by urban lockdowns under China's zero-COVID policy. In Japan's manufacturing sector, yen depreciation resulting from interest-rate hikes in Europe and the United States since early 2022, in addition to soaring resource prices, has worsened profitability.」

「The outlook for Japan's economy is clouded by concerns that Russia's invasion of Ukraine, economic sanctions against Russia by the G7 countries and yen depreciation caused by U.S. interest-rate hikes will drive up energy prices, including crude oil and natural gas, and consequently increase electricity costs.」

「However, the outlook has become increasingly uncertain due to rising resource prices, including crude oil and natural gas, the global spread of the Omicron variant of COVID-19 and a slowdown in China's domestic economy.」

「During the cumulative second quarter, economic activity was recovering as COVID-19 vaccinations progressed in various countries. Economic activity in the United States and China continued to drive the global economy. However, the outlook remained uncertain due to soaring raw material prices, including crude oil, natural gas, lumber and steel, as well as concerns about a slowdown in China's manufacturing production.」

「During the cumulative first quarter, the global economy recovered more strongly as COVID-19 vaccinations progressed, particularly in Europe and the United States, together with economic measures and monetary easing policies adopted by various countries. However, as signs of a resurgence caused by COVID-19 variants have emerged, the outlook remains uncertain.」

「The global economy deteriorated sharply during the cumulative first quarter of the fiscal year as COVID-19 spread worldwide. The company was also significantly affected in production and sales as temporary shutdowns and production adjustments at business partners reduced shipments and restrictions on going out severely limited new-business development. Subsequently, overseas economies such as China and the United States entered a recovery trend from a trough in the cumulative first quarter.」

「During the cumulative third quarter, the global economy entered a recovery trend from a trough in the first quarter as economic activity resumed in China and the United States. China's GDP for the October-December quarter increased 6.5% year on year, particularly boosting demand from China. However, uncertainty in the global economy persisted due to the resurgence of COVID-19 infections, mainly in Europe and the United States.」

「During the cumulative second quarter, economic activity resumed both in Japan and overseas while COVID-19 continued to spread globally, and the global economy showed signs of recovery. In particular, China's GDP for the July-September quarter increased 4.9% year on year, and the economy was moving toward normalization ahead of other countries. Meanwhile, uncertainty increased as tensions between the United States and China continued, with the situation following the U.S. presidential election in November and the spread of COVID-19 in Europe also contributing to uncertainty.」

「The company has also been significantly affected in production and sales, as temporary shutdowns and production adjustments at business partners reduced shipments, while restrictions on going out severely limited new-business development, making it difficult to secure the sales originally planned.」

「Japan's economy during the fiscal year deteriorated sharply as the Chinese economy stagnated due to trade friction between the United States and China, compounded by the rapid deterioration in the global economy caused by the spread of COVID-19. Final demand in China also declined in the manufacturing sector, and business sentiment deteriorated significantly as there was no clear prospect of the global COVID-19 pandemic coming to an end.」

「During the cumulative third quarter, the global economy continued to slow, centered on China, due to the impact of trade friction between the United States and China. The situation in the Middle East also remained unpredictable. Against this backdrop, although signs of improvement were visible in some industries in Japan's manufacturing sector, business sentiment was under pressure in many industries. In particular, exports remained sluggish in processing industries due to the slowdown in overseas economies, and the machinery-related industries, particularly industrial equipment, had yet to show signs of bottoming out.」

「During the cumulative second quarter, trade friction between the United States and China intensified further, and uncertainty increased amid the disruption surrounding Brexit and turmoil in the Middle East. Japan's manufacturing-sector business sentiment deteriorated for 3 consecutive quarters as the slowdown in overseas economies caused by these factors took hold.」

「During the cumulative first quarter, the global economy became increasingly unstable as trade friction between the United States and China intensified and tensions in the Middle East, centered on Iran, escalated.」

「Japan's economy during the fiscal year continued to struggle, particularly in the manufacturing sector, as the Chinese economy stagnated under the impact of trade friction between the United States and China, compounded by labor shortages and soaring material prices. The outlook for business conditions has also become increasingly unstable, with external risks remaining, including trade friction, confusion surrounding the UK's Brexit issue and turmoil in the Middle East.」

「During the cumulative third quarter, intensifying trade friction between the United States and China began to weigh even on the previously strong U.S. economy, and concerns about a slowdown in the global economy spread.」

「During the cumulative second quarter, the U.S. economy remained strong, but uncertainty in the global economy increased further due to intensifying trade-policy tensions between the United States and China and rising raw material prices, including crude oil. In Japan's manufacturing sector, disruptions to logistics networks and declining production caused by natural disasters, in addition to higher raw material prices, are beginning to weigh on corporate sentiment.」

「During the cumulative first quarter, the global economy became more uncertain due to trade friction between the United States and China and rising raw material prices. In Japan's manufacturing sector, in addition to higher raw material prices, signs have begun to emerge that growth in demand for products is slowing.」

「Although there are signs of yen appreciation and an economic slowdown in China, business conditions have generally remained stable.」

「The outlook for business conditions is not optimistic, as uncertainty over the outlook for overseas economies has increased due to doubts about President Trump's policies and political turmoil in Europe.」

「The outlook for business conditions is not optimistic, as uncertainty over the outlook for overseas economies has increased due to the election of President Trump and political turmoil in Europe. Recently, rising share prices have supported high-end consumer spending, while the rapid depreciation of the yen has significantly improved export profitability.」

「Capital investment plans also lack momentum due to concerns about yen appreciation and other factors.」

「However, there are concerns that the figures do not reflect the growing uncertainty over the outlook for the global economy following the United Kingdom's withdrawal from the European Union (EU) or the impact of financial market volatility. If the trend toward yen appreciation becomes entrenched relative to the exchange rates assumed by major companies, pressure on export-sector earnings is expected to intensify.」