Global Economic Fluctuations and Foreign Exchange Risk

「Including a ¥8.7 billion foreign exchange impact and a negative ¥2.0 billion impact from the situation in the Middle East Full-year operating profit forecast revised upward to ¥200 billion, including a ¥10.0 billion impact from the situation in the Middle East*」

「During the fiscal year, a series of U.S. tariff measures caused disruption to economies and trade policies worldwide, while moves to support economic activity through monetary and fiscal policies were seen in major countries. In addition, the business environment became increasingly uncertain as the situation in the Middle East rapidly intensified toward the end of the fiscal year.」

「In the global economy during fiscal 2027, from 1 April 2026 to 31 March 2027, the escalating situation in the Middle East is expected to lead to higher energy prices, increased logistics costs, and supply chain disruptions. The impact will need to be assessed carefully.」

「During the six-month period ended the second quarter (1 April 2025 to 30 September 2025), a series of tariff measures by U.S. President Trump caused disruption to economic and trade policies worldwide, but uncertainty about the outlook has gradually eased as progress was made toward a degree of agreement among major countries. The average exchange rate against the U.S. dollar during the six-month period ended the second quarter was ¥146.4 per dollar, representing 4.7% more yen appreciation than in the corresponding period of the previous fiscal year, and the yen's appreciation reduced operating profit by ¥10.5 billion.」

「In addition, exchange rates exceeding expectations, market volatility in equities, interest rates and other areas, concerns about the financial system, the rise of protectionism including U.S. tariff policies, and trade restrictions for national security reasons may affect the performance of the Group.」

「During the six-month period ended the second quarter (1 April 2024 to 30 September 2024), economic conditions reached a major turning point as global inflation, which had continued to rise, slowed and central banks in Europe and the United States successively cut policy rates. In the United States, inflation declined and the unemployment rate rose slightly, but historically stable employment supported personal consumption and expectations for a soft landing increased. In Europe, the economy also showed signs of recovery as personal consumption improved due to higher real incomes. In China, exports of IT-related equipment and electric vehicles (EVs) were strong, but domestic demand remained sluggish and the economy slowed due to the prolonged property downturn and difficult employment conditions. In Japan, the economy recovered moderately as personal consumption improved due to wage growth exceeding inflation, while strong corporate earnings supported capital investment. In the foreign exchange market, the yen appreciated rapidly from the historically weak levels seen in the three-month period ended the first quarter, as the Bank of Japan raised interest rates amid expectations that the Federal Reserve Board (FRB) would cut rates.」

「During the fiscal year, the global economy slowed despite differences in strength between regions, due to continued monetary tightening in response to inflation, the Russia-Ukraine war and heightened geopolitical risks following the outbreak of conflict in the Middle East.」

「During the nine-month period ended the third quarter (1 April 2023 to 31 December 2023), new geopolitical risks emerged, including the prolonged Russia-Ukraine war and the outbreak of conflict in the Middle East, increasing uncertainty about the economic outlook. In the United States, inflation declined as the effects of monetary tightening emerged. Although personal consumption had remained firm against a backdrop of favorable employment conditions, it began to lose momentum, and the Federal Reserve Board (FRB) kept interest rates unchanged for three consecutive meetings. In China, personal consumption remained sluggish against a backdrop of the prolonged property downturn. Moves by companies to review their supply chains in response to U.S.-China trade friction also weighed on the economic recovery. In Japan, the economy recovered moderately due to increased exports, particularly automobiles, and inbound demand. In the foreign exchange market, the trend toward rapid yen depreciation that had continued since the beginning of the year changed as expectations grew toward year-end that the United States would cut interest rates and the Bank of Japan would revise its policy. The average exchange rate against the U.S. dollar during the nine-month period ended the third quarter was ¥143 per dollar, representing 5.7% more yen depreciation than in the corresponding period of the previous fiscal year. The impact of the yen's depreciation increased operating profit by ¥14.5 billion.」

「During the six-month period ended the second quarter, inflation remained high in Europe and the United States, and monetary tightening progressed further. In China, the recovery in domestic demand, particularly personal consumption, fell short of expectations due to the sluggish property market and other factors. Uncertainty about the economic outlook increased as growth in the trade balance slowed partly because of U.S.-China trade friction. The yen depreciated further as the interest rate differential between Japan and the United States widened. The average exchange rate against the U.S. dollar during the six-month period ended the second quarter was ¥139.4 per dollar, representing 6.2% more yen depreciation than in the corresponding period of the previous fiscal year. The impact of the yen's depreciation increased operating profit by ¥9.3 billion.」

「The average exchange rate against the U.S. dollar during the three-month period ended the first quarter was ¥135.1 per dollar, representing 7.2% more yen depreciation than in the corresponding period of the previous fiscal year. The impact of the yen's depreciation increased operating profit by ¥4.5 billion.」

「During the fiscal year, energy and primary commodity prices rose following Russia's invasion of Ukraine. In addition, monetary tightening aimed at curbing inflation, led by the United States, caused some banks to fail and financial concerns to spread.」

「The average exchange rate against the U.S. dollar during the nine-month period ended the third quarter was ¥135.3 per dollar, representing 22.0% more yen depreciation than in the corresponding period of the previous fiscal year. The impact of the yen's depreciation increased operating profit by ¥59.5 billion.」

「During the six-month period ended the second quarter, the yen depreciated more than expected, particularly against the U.S. dollar, as countries and regions outside Japan shifted their monetary policies from easing to tightening in response to global inflation. Uncertainty about the economic outlook increased further due to stagnant economic activity in China under its zero-COVID policy and the prolonged Russian invasion of Ukraine. The average exchange rate against the U.S. dollar during the six-month period ended the second quarter was ¥131.3 per dollar, representing 19.8% more yen depreciation than in the corresponding period of the previous fiscal year. The impact of the yen's depreciation increased operating profit by ¥38.5 billion.」

「During the three-month period ended the first quarter (1 April 2022 to 30 June 2022), prices of energy, primary commodities and other goods rose further following Russia's invasion of Ukraine, accelerating inflation worldwide. The United States, which was ahead in responding to inflation, accelerated the pace of monetary tightening, widening the interest rate differential between Japan and the United States and causing the yen to depreciate more than expected. In China, strict measures to contain the spread of COVID-19, including urban lockdowns, temporarily halted economic activity. The global economy also slowed rapidly, increasing uncertainty about the outlook.」

「More recently, uncertainty in the global economy has increased further, with raw material prices rising further due to Russia's invasion of Ukraine, supply chains disrupted and the yen depreciating sharply.」

「During the nine-month period ended the third quarter (1 April 2021 to 31 December 2021), the recovery from the impact of COVID-19 progressed, while the yen remained weaker in the foreign exchange market than initially expected. At the same time, shortages of semiconductor materials and surging raw material prices were observed. More recently, uncertainty about the economic outlook has increased due to the spread of variants and concerns about persistently high inflation in the United States.」

「During the six-month period ended the second quarter, economic activity resumed as COVID-19 vaccines became more widely available. At the same time, the spread of variants, shortages of semiconductor materials and surging raw material prices were observed, and uncertainty about the outlook continued.」

「During the three-month period ended the first quarter (1 April 2021 to 30 June 2021), the global economy continued to recover, although the pace differed between countries, due to the wider availability of vaccines against COVID-19 and the expansion of economic support measures.」

「During the nine-month period ended the third quarter, economic conditions were temporarily and significantly affected by the spread of COVID-19. The number of COVID-19 cases worldwide declined during the summer, but began increasing significantly again in winter, and the situation remained unpredictable.」

「During the six-month period ended the second quarter (1 April 2020 to 30 September 2020), economic conditions were significantly affected by the spread of COVID-19. Although a recovery was seen in the latter half, its pace was moderate and uncertainty about the outlook continued.」

「During the three-month period ended the first quarter (1 April 2020 to 30 June 2020), economic conditions deteriorated rapidly and significantly due to the global spread of COVID-19.」

「During the fiscal year, uncertainty about the economic outlook increased, not only because of U.S.-China trade friction, and had a negative impact on the global economy as a whole.」

「During the nine-month period ended the third quarter, China's GDP growth rate continued to slow under the impact of the U.S.-China trade dispute. Concerns about the economic impact of the United Kingdom's withdrawal from the EU and tensions between the United States and Iran also emerged. In Japan, industrial production was soft and exports remained sluggish. Against this backdrop, the yen traded slightly stronger than in the same period of the previous year.」

「During the six-month period ended the second quarter, U.S.-China trade friction continued and the Chinese economy slowed. Economic weakness was also seen in South Korea and parts of Europe. In Japan, exports to Asia and Europe were soft. Against this economic backdrop, the yen continued to appreciate in the foreign exchange market.」

「During the three-month period ended the first quarter, economic conditions in China showed increasingly clear signs of stagnation in production and consumption growth as U.S.-China trade negotiations were prolonged. In addition, the United States imposed export restrictions on high-tech products, creating uncertainty about future demand in industries such as communications equipment and semiconductors. In Japan, exports and production also remained weak. As expectations grew that the United States would continue cutting interest rates, the yen appreciated moderately in the foreign exchange market.」

「During the fiscal year, economic conditions became increasingly uncertain against the backdrop of U.S.-China trade friction and other factors, while signs of a slowdown in the Chinese economy became apparent from the second half onward. Concerns about future economic trends also increased, reflecting U.S. trade policies and the United Kingdom's withdrawal from the European Union.」

「During the nine-month period ended the third quarter, economic conditions continued to recover moderately both overseas and in Japan. At the same time, concerns about an economic slowdown in various countries widened due to the trade policies of the United States and China. Crude oil prices entered a declining phase, while the yen appreciated in the foreign exchange markets, partly reflecting the impact of U.S. monetary policy.」

「Meanwhile, concerns arose over economic slowdowns in various countries due to the impact of US trade and monetary policies. There was also an impact from persistently high crude oil prices, rising raw material prices due to environmental regulations and other factors, and rising labor costs in various countries.」

「Meanwhile, some impact from destabilizing factors was observed, including US trade policy, signs of economic slowdown in China and emerging markets, and rising raw material prices.」

「However, in 2018, developed-country equity markets, which had performed strongly, underwent a sharp correction from high levels amid concerns that favorable employment conditions in the United States would accelerate the rise in US dollar interest rates. Caution was also growing over protectionist moves by the United States, China and others.」

「During the nine-month consolidated period under review, it was confirmed that economic growth led by developed countries was gaining further momentum on a global scale.」

「During the six-month consolidated period under review, the economic environment remained stable, with a moderate recovery continuing in developed countries as a result of monetary easing. While developed countries in Europe and the United States were moving away from monetary easing, emerging economies with room to cut interest rates also experienced economic expansion, resulting in positive growth worldwide on the back of the economic recovery. In Japan, heightened tensions surrounding North Korea temporarily unsettled financial markets and other areas, but following the dissolution of the House of Representatives and the general election, expectations that the existing administration and economic policies would remain largely unchanged and that strong corporate earnings would continue supported synchronized global economic growth.」

「Although political instability persisted, including reduced expectations for the US administration, terrorism in Europe and repeated missile launches by North Korea, it had not significantly affected the real economy, and financial markets generally remained firm.」

「The group's performance could also be affected by a sudden change in the global economy, including terrorism, war or coups arising from dramatic political changes, market stagnation resulting from the rise of protectionist policies, foreign exchange rate movements beyond expectations and financial instability.」

「Financial markets welcomed the victory of candidate Trump, who had been viewed as trailing, in the closely watched US presidential election, and the dollar has subsequently remained on an appreciating trend. The United States also raised interest rates in December for the first time in a year. Although the US economy is believed to remain on an expansionary trend, uncertainty remains regarding the impact of the new president's economic policies on the global economy, including emerging markets. In Japan, the recovery trend is expected to continue, albeit moderately, alongside a weaker yen and rising share prices, with corporate earnings expected to improve and personal consumption to recover.」

「The impact of the UK's withdrawal from the European Union was limited in Europe, while concerns arose over financial risks in Germany. In Japan, sharp foreign exchange movements slowed the improvement in corporate earnings, and the recovery in personal consumption remained weak, leaving the overall economy stagnant.」

「Uncertainty remains over the outlook, including concerns about political systems in the United States and the United Kingdom and rising geopolitical risks stemming from countries in the Middle East. In Japan, the sharp appreciation of the yen dampened personal consumption.」

「The environment was marked by pronounced stagnation, including US interest rate hikes, a slowdown in the Chinese economy and falling resource prices. In Japan, although capital investment increased moderately and employment conditions improved, the sharp appreciation of the yen after the start of the year affected corporate earnings.」