Decline in customer IT investment due to business-cycle fluctuations and financial conditions

「Events that negatively affect corporate investment activity continue to occur, and customer companies of the Group were also seen selecting investment projects.」

「Several developments occurred that could pose challenges to maintaining and enhancing the Group's corporate value, including concerns that generative AI could replace existing services, referred to as the “Anthropic shock” and the “death of SaaS,” which sharply depressed share prices across the IT and software industries. Nevertheless, demand among the Group's customer companies for system investment aimed at upgrading existing systems and improving productivity remains solid, and inquiries for technical support in adopting generative AI are also firm. Accordingly, the Group believes that its orders have not been materially affected.」

「During the interim consolidated accounting period from 1 April 2025 to 30 September 2025, the United States' announcement of protectionist trade policies prompted Japanese companies to actively review export prices, control costs and restructure their supply chains. In the IT industry to which the Group belongs, there were also cases of development and investment projects being cancelled or postponed.」

「In fiscal 2024, the operating environment continued to be characterized by a weaker yen and higher prices, as in the previous fiscal year, with rising procurement costs significantly depressing the profits of the Group. At the same time, capital investment in Japan increased substantially during the fiscal year, driven particularly by investment related to semiconductors, electrification investment including EVs, and digitalization investment. The Group benefited from the increase in capital investment and secured more orders than in the previous fiscal year.」

「During the six-month interim consolidated accounting period from 1 April 2024 to 30 September 2024, domestic companies faced further cost increases due to elevated price levels, while real wages continued to trend downward. In addition, heightened caution regarding monetary policy in Japan and the United States and the impact of a change in Japan's prime minister caused substantial exchange-rate volatility, making corporate earnings markedly more unstable.」

「In the IT industry to which the Company's group belongs, attention is increasingly focused on the impact of generative AI on companies' responses to labor shortages and productivity improvements, while threats from cyberattacks are becoming increasingly prominent. The Company therefore judges that companies' appetite for IT investment will increase further.」

「In the IT industry to which the Company's corporate group belongs, attention is increasingly focused on the impact of generative AI on companies' responses to labor shortages and productivity improvements, while threats from cyberattacks are becoming increasingly prominent. The Company therefore judges that companies' appetite for IT investment will increase further.」

「As the classification of COVID-19 under the Infectious Diseases Control Law was changed, foot traffic recovered and efforts to adapt to the new normal accelerated. Meanwhile, the renewed depreciation of the yen further heightened concerns about rising costs for companies and households.」

「Although some of the Company's corporate customers have been selectively approving, postponing or reducing the scale of IT investment, demand for IT investment aimed at renewing existing systems and improving productivity through DX remains strong, and orders for the Company's corporate group are progressing steadily.」

「Although some of the Company's corporate customers have been selectively approving, postponing or reducing the scale of IT investment, demand for IT investment aimed at renewing existing systems and improving productivity through DX remains strong, and orders for the Company's corporate group are progressing steadily.」

「During the first three months of fiscal 2022, from 1 April 2022 to 30 June 2022, the threat from COVID-19 subsided somewhat and signs of recovering demand emerged in industries including food service, leisure, tourism, air transport and land transport. At the same time, multiple events occurred that could adversely affect household and corporate consumption, including inflation stemming from the Russia-Ukraine conflict, upward pressure on labor costs and the rapid depreciation of the yen.」

「During the first nine months of fiscal 2021, from 1 April 2021 to 31 December 2021, business sentiment improved across a broad range of industries while the COVID-19 pandemic continued, although the degree of improvement varied by industry, and the overall improvement trend continued. Following the full lifting of the state of emergency and the priority preventive measures, concerns arose about the spread of the Omicron variant, but its impact was limited and moves toward the normalization of economic activity were gaining momentum. However, vigilance regarding the emergence and spread of new variants and the downside risk to the economy resulting from another state of emergency or the reintroduction of priority preventive measures remained. In addition, rising fuel and raw material costs had become a new concern that could affect prices and the economy, leaving the outlook far from optimistic.」

「The market returned to positive growth in fiscal 2021, initiatives in DX accelerated, including preparations for cloud environments based on living with and after COVID-19 and labor-saving and automation measures using AI and RPA, and order trends generally began to recover.」

「Although the COVID-19 pandemic is unlikely to end for the time being, its impact is limited and it is not significantly disrupting the business.」

「In the second half of fiscal 2020, companies' initiatives, including preparations for cloud environments based on living with and after COVID-19, including business continuity planning, and labor-saving and automation measures using AI and RPA, gradually accelerated, and order trends generally began to recover.」

「After the start of the third quarter, companies accelerated the execution of their IT strategies, but uncertainty about the outlook remained due to downside risks to domestic and overseas economies and the economy from the third wave, and activity did not regain its previous momentum.」

「The forward-looking business conditions diffusion index (DI) in the Bank of Japan's September 2020 Tankan survey improved by 7 points from the previous survey in June to minus 27 for all industries and company sizes. However, as efforts continued to prevent the spread of COVID-19 while maintaining economic activity, the economic recovery was expected to remain gradual. Although positive growth was expected to continue in the second half of the fiscal year, major think tanks forecast that real GDP growth for fiscal 2020 would post a larger decline.」

「The business conditions diffusion index (DI) in the Bank of Japan's June 2020 Tankan survey deteriorated to minus 34 due to the impact of the COVID-19 pandemic, reaching its lowest level since the June 2009 survey, when it was minus 48 after the Lehman shock. Uncertainty about the outlook has increased further.」

「However, after the start of the fourth quarter, uncertainty about the outlook deepened due to the impact of the COVID-19 pandemic, and the global increase in infections led to the postponement of the Tokyo Olympics scheduled for 2020 and calls for people to refrain from traveling and going out. Infrastructure development related to the Tokyo Olympics and the expansion of inbound demand had also supported IT investment, and the Company's corporate group saw some impact on orders.」

「During the first nine months of the fiscal year, there were numerous concerns, including the impact of US-China economic friction, Japan-South Korea relations and conditions in the Middle East, which increased signs of economic stagnation. However, in addition to infrastructure development related to the Tokyo Olympics held that year and expanding inbound demand, resilient domestic demand supported IT investment, and the operating environment remained solid.」

「During the first six months of the fiscal year, there were concerns including the impact of US-China economic friction, Japan-South Korea relations and conditions in the Middle East, which increased signs of economic stagnation. However, supported by infrastructure development related to the Tokyo Olympics scheduled for 2020, expanding inbound demand and resilient domestic demand, the operating environment remained solid.」

「During the first quarter of the fiscal year, there were concerns including economic uncertainty stemming from overseas economic trends and anxiety about conditions in the Middle East. However, supported by a gradual expansion in inbound demand, resilient domestic demand and a recovery in exports, the operating environment continued to expand.」

「Although concerns remained regarding US-China economic friction, the UK's departure from the European Union (EU), and economic slowdowns in China and Europe, it forecast that capital investment, including investment in information systems, would continue overall at the momentum seen since the previous year in fiscal 2019.」

「During the first nine months of fiscal 2018, from 1 April 2018 to 31 December 2018, there were numerous concerns, including economic uncertainty stemming from overseas conditions, exchange-rate and stock-market trends, and natural disasters. However, supported by a recovery in personal consumption, resilient inbound demand and improved corporate profitability, the operating environment remained on a recovery trend.」

「During the first six months of fiscal 2018, from 1 April 2018 to 30 September 2018, there were numerous concerns, including economic uncertainty stemming from overseas conditions and trends in exchange rates and the stock market. However, supported by a recovery in personal consumption, strong inbound demand and improved corporate profitability, the operating environment remained on a recovery trend.」

「The economic outlook for fiscal 2018 remained clouded by uncertainty about the future, including geopolitical risks and US-China economic policies, but the underlying trend was expansionary, and business sentiment continued to improve, as shown by the Bank of Japan's March 2018 Tankan survey.」

「During the first nine months of the fiscal year, although uncertainty remained regarding overseas conditions, including rising tensions on the Korean Peninsula, the operating environment continued to improve against a backdrop of better corporate earnings and employment conditions and expanding domestic demand.」

「During the first quarter of the fiscal year, although uncertainty remained regarding overseas conditions, the operating environment continued to improve against a backdrop of a gradual recovery in the global economy, a recovery in consumer sentiment and inbound demand.」

「Although concerns including the Kumamoto Earthquake, the UK's Brexit issue, negative interest rates, the US presidential election, and fluctuations in exchange rates and share prices continued to arise, companies' investment appetite tended to expand and the operating environment gradually recovered.」

「A succession of adverse factors at home and abroad, including the Kumamoto Earthquake, the UK's Brexit issue and exchange-rate trends, increased downside risks as companies adopted a more cautious investment stance amid heightened uncertainty about the outlook.」

「If the Japanese economy stagnates or deteriorates, customer investment in information technology may decline, potentially affecting the operating performance and other results of the Company's corporate group.」