Downside Risks to the Global Economy from Natural Disasters and Trade Frictions

「Overseas, uncertainty about the outlook continued amid changes in US trade policy and heightened tensions in the Middle East, while in Japan consumer prices rose due to yen depreciation and higher crude oil prices.」

「The Group primarily operates a wholesale business selling equipment, supplies and consumables. It also provides an outsourced web-based procurement service, but segment information has been omitted because the business is not material.」

「Corporate earnings varied amid higher prices caused by exchange-rate movements and labor shortages, rising interest rates and other international developments, and uncertainty about the outlook continued.」

「Meanwhile, uncertainty about the outlook continued due to higher prices caused by exchange-rate movements and labor shortages, rising interest rates, a slowdown in the Chinese economy and turmoil in the situation in the Middle East and the Russia-Ukraine situation.」

「During the cumulative third-quarter period under review (1 April 2023 to 31 December 2023, hereinafter the "third quarter"), the Japanese economy experienced a gradual recovery, supported by rising wages, particularly at large companies, the recovery in the flow of people following the change in the legal classification of COVID-19, and increased inbound demand. However, conditions remained unpredictable due to yen depreciation, rising consumer prices associated with labor shortages, turbulence in the Chinese economy and geopolitical risks.」

「During the first six months of the fiscal year, Japan's economy saw signs of a recovery in personal consumption and capital investment as economic activity resumed, supported by progress in wage increases, particularly at large companies, and the change in the legal classification of COVID-19. Meanwhile, the yen continued to weaken and the Chinese economy showed signs of deterioration. The outlook remains uncertain due to interest rate trends and geopolitical risks, among other factors.」

「During the cumulative first-quarter period under review, economic activity in Japan resumed as wage increases progressed, particularly at large companies, and the legal classification of COVID-19 was relaxed, with signs of recovery in personal consumption and capital investment. Meanwhile, exchange-rate movements, soaring resource and materials prices and persistently high energy prices continued, and uncertainty about the outlook remained.」

「In addition to higher prices in Europe and the US and higher resource prices associated with the Russia-Ukraine situation, procurement costs for products, parts and raw materials and energy costs rose as a result of rapid exchange-rate movements and other factors, feeding through to higher domestic consumer prices.」

「During the cumulative third-quarter period under review (1 April 2022 to 31 December 2022, hereinafter the "third quarter"), the Japanese economy began with the end of the sixth wave of COVID-19 and continued to experience the seventh and eighth waves, but economic activity proceeded toward normalization. Meanwhile, amid higher prices in Europe and the US, higher resource prices associated with the Russia-Ukraine situation and rapid exchange-rate movements, procurement costs for products, parts and raw materials and energy costs rose, feeding through to domestic consumer prices. As a result, prices followed an inflationary trend, although the increase was smaller than in Europe and the US.」

「Consolidated net sales for the second quarter were ¥42,597 million, up 5.3% year on year. Factors contributing to the increase included continued strong demand from research and production sites, the company's main markets, and expanded sales of long-tail products through synergies with its e-commerce channel, which aligns with the trend toward digital transformation in corporate procurement, as the number of products available online increased by approximately 1.8 million from the end of the same quarter of the previous year to 7.3 million. Flexible pricing in response to higher procurement costs across the supply chain also contributed to the increase in sales, as did higher demand for infection-control products such as medical gowns and aprons during the seventh wave of COVID-19, when the number of positive cases reached a record level.」

「Consolidated net sales for the first quarter were ¥20,471 million, up 2.0% year on year.」

「While progress in COVID-19 vaccinations raised expectations for an economic recovery, concerns remained over repeated waves of variant infections, global supply constraints caused by semiconductor shortages and higher resource prices, and cost-push inflation, and conditions remained volatile.」

「In addition to repeated declarations of a state of emergency due to the spread of the Delta variant, semiconductor shortages and supply chain disruptions caused by the spread of infections in Southeast Asia led to production restrictions and other measures in the manufacturing sector, and conditions remained volatile.」

「Meanwhile, conditions remained uneven amid domestic developments, including the implementation of states of emergency and priority preventive measures in urban areas and certain regions, as well as an uncertain global situation affected by slowing vaccination rates in advanced economies and the spread of mutant viruses.」

「Although efforts were gradually made to normalize economic activity after the declaration was lifted, successive waves of expansion, including the second and third waves, arrived intermittently, and uncertainty about the outlook continued.」

「Consolidated net sales for the second quarter were ¥35,289 million, up 8.3% year on year. This was attributable to increased demand across all fields, not only from medical institutions, for products needed during the COVID-19 pandemic and under the new normal, including infection-control supplies such as disposable wear and non-contact thermometers, as well as hygiene and testing-related products such as ATP measuring instruments, despite periods of temporary stagnation in production and research activities under the state of emergency.」

「During the cumulative first-quarter period under review (1 April 2020 to 30 June 2020), the Japanese economy was forced to restrict economic activity following the government's declaration of a state of emergency in response to the spread of COVID-19.」

「Toward the end of the fiscal year, economic activity in Japan and overseas began to be restricted by the COVID-19 pandemic, resulting in a situation where the outlook could not be predicted with confidence.」

「In addition, exports from Japan to regions including Asia outside China were partly affected by the slowdown in overseas economies.」

「Although exports from Japan to regions including Asia outside China were showing signs of recovery, they were partly affected by the slowdown in overseas economies.」

「Against this backdrop, consolidated net sales for the first quarter were ¥15,640 million, up 1.7% year on year.」

「Meanwhile, toward the second half of the fiscal year, concerns including downside risks to the economy arising from trade friction and a slowdown in the Chinese economy began to emerge in some areas, and uncertainty about the outlook continued.」

「Consolidated net sales for the third quarter were ¥47,749 million, up 10.5% year on year. Factors included growth in e-commerce-style centralized purchasing and sales to internet retailers. Additional contributors to growth in conventional sales included the consolidation of sales from Triumph 21, which became a subsidiary in March 2018, the contribution from offering more than 3 million products online, and increased use of the AXEL Shop, which allows users to purchase products online.」

「Despite concerns including an increase in natural disasters such as record heavy rainfall, typhoons, and earthquakes, and heightened downside risks to the global economy from trade friction, the economy continued on a moderate recovery track, supported by solid corporate earnings and employment conditions.」