Economic Conditions and Demand Fluctuations in Major Markets

「The outlook risks for the global economy have emerged abruptly, starting with disruptions to crude oil and gas supplies caused by U.S. and Israeli military attacks on Iran that began at the end of February this year, followed by a sharp rise in energy prices and concerns over supplies of petrochemical products.」

「現状の不透明な社会・経済情勢の影響を受け、欧州を中心に収益改善が遅れております。」

「During the fiscal year under review, economic uncertainty increased and concerns about a downturn intensified sharply owing to the lack of a clear direction in U.S. trade policy and rising geopolitical risks, particularly in the Middle East.」

「During the interim consolidated accounting period under review, some front-loaded production in anticipation of tariff implementation was observed in connection with the tariff policies of the Trump administration, which took office in January 2025. However, business sentiment deteriorated as uncertainty about the outlook for U.S. trade policy increased. Consumer sentiment also began to show signs of deterioration against this backdrop.」

「In the United States, the economy remained resilient, recording positive growth for 9 consecutive quarters through the July–September 2024 quarter, supported by strong private consumption, capital investment, government spending and exports, among other factors. In Europe, ... the economy has still been unable to emerge from a period of low growth, while in China, ... the pace of growth has slowed.」

「During the cumulative second quarter under review, inflation rates had slowed, but all countries and regions maintained high-interest-rate policies. Rising real interest rates weighed on demand, the recovery in consumer sentiment remained slow, and the economy continued to follow a gradual deceleration trend.」

「Although inflation in the United States and Europe is considered to be approaching its peak, it remains high, and policy rates also remain elevated. In addition, the slowdown in the Chinese economy and heightened tensions in the Middle East have slowed the pace of economic expansion.」

「During the fiscal year under review, the global economy was weighed down by intermittent policy rate hikes aimed at curbing historically high inflation, amid the prolonged conflict in Ukraine and increasingly pronounced confrontation between Western countries and Russia and China.」

「However, uncertainty about the outlook for the global economy has emerged as financial concerns spread following persistently high inflation and bank failures in the United States. In Europe, the economic slowdown has become increasingly evident, albeit still gradual, with production and orders declining and business sentiment continuing to deteriorate, particularly in the manufacturing sector, which continues to weigh on the economy as a whole. In China, the lifting of the zero-COVID policy led to a rebound from the lockdowns, but the recovery in goods consumption and the growth in retail sales have both slowed. Rebound consumption of both goods and services has therefore already lost momentum, and the economy is slowing sharply.」

「However, the outlook for the global economy has again become increasingly uncertain as financial concerns spread following persistently high inflation and a series of bank failures in the United States in March, and risks are considered to have shifted sharply toward the downside.」

「During the cumulative first quarter under review, the global economy was supported by capital investment and private consumption, although monetary tightening continued, particularly in the United States and Europe, against a backdrop of historically high inflation.」

「The prolonged Russian invasion of Ukraine and the cycle of economic sanctions and retaliation have intertwined concerns over historically high inflation, uncertainty over energy supplies, supply chain disruptions and a rapid tightening of monetary policy, increasing uncertainty about the economic outlook.」

「In Europe, various costs have risen substantially more than expected as the prolonged Russian invasion of Ukraine has added pressure to reduce dependence on Russian energy. The outlook for the European economy is therefore facing increasing downside risk.」

「During the cumulative second quarter under review, the global economy continued to grow at a relatively high rate, despite mounting price pressures, as countries made progress in balancing COVID-19 containment with economic activity. However, uncertainty increased sharply after Russia invaded Ukraine, with natural resource prices, including crude oil, natural gas and nickel, surging.」

「During the cumulative first quarter under review, the global economy was on a recovery trend, although concerns about inflation persisted as the rapid spread of the Omicron variant led many countries to reimpose movement restrictions and supply disruptions continued amid labor shortages and other factors.」

「During the fiscal year, the global economy remained significantly affected by COVID-19, although economic conditions varied widely by country and region due to differences in infection levels, vaccination rates and economic measures. Changes also occurred in economic activity and market structures in various countries.」

「During the cumulative third quarter of the fiscal year, restrictions on economic activity continued in countries worldwide due to the global spread of COVID-19. In the United States, employment conditions and consumer sentiment improved against a backdrop of eased restrictions on economic activity as vaccination became widespread, and changes in consumer behaviour associated with the transition to a post-COVID environment began to emerge. In Europe, business sentiment in the services sector recovered as vaccination became widespread, despite concerns over the spread of variants. In Japan, although business sentiment deteriorated in accommodation and food services and consumer services, exports to China, where exports of electronic components and devices remained solid against a backdrop of recovering global semiconductor demand, as well as exports to Europe and the United States, where restrictions on activity were being eased, were on an upward trend.」

「During the cumulative second quarter of the fiscal year, restrictions on economic activity continued in countries worldwide due to the global spread of COVID-19. In the United States, employment conditions and consumer sentiment continued to improve against a backdrop of expectations for a prolonged economic recovery supported by widespread vaccination and additional economic measures. In Europe, consumption remained weak due to prolonged restrictions on activity, but business sentiment, particularly in manufacturing, remained solid as overseas economies such as China recovered. In Japan, business sentiment deteriorated in accommodation and food services and consumer services following the reissuance of a state of emergency, but exports of electronic components and other products to Asia, particularly China, remained solid against a backdrop of a recovery in global semiconductor demand.」

「During the cumulative first quarter of the fiscal year, the global economy remained stagnant as countries restricted economic activity due to the global spread of COVID-19. In the United States, although infections continued to spread, stock prices continued to rise due to increased demand for certain goods amid the pandemic and the continuation of a zero-interest-rate policy. In Europe, restrictions on movement and services consumption were extended and tightened in various countries due to a renewed spread of infections from COVID-19 variants. In Japan, exports, particularly to Europe and China, showed signs of recovery, but views of the outlook became more cautious due to the renewed spread of COVID-19 infections and other factors.」

「During the cumulative third quarter of the fiscal year, the global economy remained extremely uncertain, as the spread of COVID-19 continued. Although some countries had begun gradually easing travel bans, stay-at-home restrictions and other measures, economic activity remained stagnant. In Europe, economic activity was gradually resuming against a backdrop of the phased easing of restrictions, but business sentiment was deteriorating due to declines in personal consumption and exports. In the United States, the spread of COVID-19 and deterioration in U.S.-China relations continued, and exports and capital investment declined sharply. In Japan, exports to China, where economic activity was returning to normal, showed signs of recovery, while employment conditions deteriorated due to declining domestic and overseas demand.」

「During the cumulative second quarter of the fiscal year, the global economy slowed sharply as the spread of COVID-19 expanded from Asia to the rest of the world and countries implemented travel bans, stay-at-home restrictions and other measures, resulting in stagnant economic activity.」

「During the cumulative first quarter of the fiscal year, the global economy faced a decreasing risk of further slowdown, as the U.S.-China trade war was moving toward a temporary truce and domestic demand in major countries remained firm against a backdrop of favourable employment conditions in each country.」

「Concern is growing over increasing uncertainty, typified by worsening trade friction between the United States and China. In Europe, personal consumption and capital investment in the United Kingdom remain sluggish due to concerns surrounding Brexit. In the euro area, personal consumption remains firm against a backdrop of improving income conditions, but vigilance is increasing over downside risks to the economy arising from trade friction and political factors, including the recurrence of fiscal problems in Italy. In Japan, capital investment, including factory construction, continues to be solid against a backdrop of labour shortages and responses to work-style reforms, but corporate business sentiment is deteriorating due to the outlook for U.S. protectionist trade policies and overseas conditions.」

「During the cumulative second quarter of the fiscal year, the global economy remained subject to the following conditions. In the United States, personal consumption remained solid, but capital investment became more cautious due to the reduced demand boost from fiscal policy, U.S.-China trade friction and the renegotiation of NAFTA. In Europe, disruption surrounding Brexit persisted in the United Kingdom, accelerating efforts to build inventories in preparation for economic disruption. In the euro area, personal consumption remained firm, but overseas manufacturing orders in Germany continued to be sluggish and exports slowed markedly. In Japan, business sentiment deteriorated due to overseas conditions, including a slowdown in the Chinese economy and political uncertainty in Europe, despite continued favourable employment and income conditions.」

「However, against a backdrop of uncertainty over the outcome of Brexit and developments in trade friction between the United States and China, uncertainty over the outlook for the global economy is increasing, and corporate business sentiment is deteriorating.」

「In the United States, personal consumption and strong exports continue against a backdrop of favourable employment and income conditions and income tax cuts implemented by the Trump administration. At the same time, the intensification of trade friction between the United States and China, and the impact of falling stock prices and weaker currencies in emerging markets due to higher interest rates, are risk factors for the global economy.」

「In the United States, personal consumption and strong exports continue against a backdrop of favourable employment and income conditions and income tax cuts implemented by the Trump administration. At the same time, trade friction between the United States and China is intensifying due to the implementation of protectionist policies. Europe is also facing concerns over the impact of trade friction with the United States.」

「During the cumulative second quarter of the fiscal year, the global economy remained subject to uncertainty in the United States due to the implementation of protectionist policies, although exports continued to perform solidly against a backdrop of strong demand and a weaker dollar. In Europe, concerns over trade friction with the United States have emerged, but orders remain strong and business sentiment remains at a high level.」

「In Europe, corporate investment remained sluggish because of uncertainty over the outlook for Brexit, but the economy continues to expand overall, supported by robust personal consumption and increases in exports and investment. In Japan, solid external demand, personal consumption and capital investment continue.」

「Uncertainty is increasing further against a backdrop of mounting global protectionist policy pressure and geopolitical tensions in North Korea, the Middle East and elsewhere.」

「In the United States, although real GDP growth in the April–June quarter showed an increase, there is a possibility that policy implementation risks under the Trump administration may weigh on the real economy. In China, the economy appears to have shifted toward recovery, supported by solid exports, fixed-asset investment and public investment, although some view the Xi Jinping administration as seeking to sustain relatively high growth ahead of the Chinese Communist Party Congress this autumn. Continued attention is therefore required regarding future developments.」

「Demand for the Group’s products is affected by economic conditions in the countries and regions where the products are sold. If economic conditions and the resulting demand fluctuations in the Group’s major markets, Japan, the United States, Europe and Asia, fluctuate beyond expectations, this may affect the Group’s financial position and operating results.」