Exposure to Overseas Political and Economic Conditions and Exchange-Rate Fluctuations

「However, the rise in geopolitical risks, including the impact of U.S. trade policies and heightened tensions in the Middle East, has raised concerns about sharp increases in raw material and energy prices and entails downside risks.」

「The global economy is showing solid growth, supported by front-loading of production and trade ahead of additional U.S. tariffs and active investment related to artificial intelligence (AI), but expanding geopolitical risks, prolonged uncertainty and the spread of protectionism could hinder growth.」

「As for the future economic outlook, the foreign exchange market is expected to see some correction toward yen appreciation, but material costs, delivery costs and labor costs are expected to continue rising. Although wages are increasing, there are concerns that consumer sentiment is beginning to weaken due to higher interest rates and rising prices, particularly for fresh food. Meanwhile, the outlook for the global economy, including Japan, has become increasingly uncertain, as tariff policies following the change in the U.S. administration are causing significant disruption to prices, foreign exchange rates and interest rates, while geopolitical risks continue in various regions.」

「However, the international economic environment contains a wide range of uncertainties, including concerns about major changes in U.S. economic and trade policies following the U.S. presidential election, geopolitical risks in Ukraine, the Middle East and Asia, and the possibility of major shifts in key economic policy directions.」

「The global economy faces concerns that economic recovery will slow as monetary tightening, particularly in Europe and the United States, addresses inflation, while in China there are concerns about further deterioration in employment and a deeper economic downturn stemming from the real estate problem. In addition, geopolitical risks, including the prolonged Russian invasion of Ukraine and heightened tensions in the Middle East, could have a significant impact on economic trends.」

「Russia’s invasion of Ukraine, with no end in sight, and military conflict in the Middle East are also increasing economic uncertainty.」

「Although conditions vary by country and region, overseas contact lens markets are showing signs of recovery against a backdrop of growing post-COVID demand and an increasing myopic population, and steady market expansion is expected to continue.」

「In the Chinese market, social activity is gradually returning to normal following the lifting of strict movement restrictions on the flow of people and goods under the zero-COVID policy. However, a full recovery will require more time, and contact lens sales activities were significantly affected.」

「The outlook for the global economy also remains uncertain due to the impact on economic activity of the explosive spread of the infectious disease following China’s shift away from its “zero-COVID policy,” the prolonged situation in Ukraine, and concerns about a transition from a period of global inflation to an economic downturn.」

「In the Chinese market, logistics functions were impaired and contact lens retail activities were significantly disrupted by the lockdown in Shanghai from mid-March to mid-June. Although a policy to lift the lockdown was announced in mid-May, raising expectations for an economic recovery, strict movement restrictions under the “zero-COVID” policy remained in place, raising concerns about the negative impact of sluggish personal consumption on contact lens consumption.」

「In the Chinese market, logistics functions were impaired and contact lens retail activities were significantly disrupted after lockdowns were imposed from mid-March to mid-June as a measure against the infectious disease.」

「The rapid spread of the Omicron variant since the beginning of the year impaired logistics functions through lockdowns in Shanghai and elsewhere under the “zero-COVID policy,” causing significant disruption to retail activities for contact lenses.」

「However, the outlook remains uncertain due to factors including the spread of the highly transmissible Omicron variant since the end of the year and the deterioration in consumer sentiment caused by rising prices amid higher resource prices and yen depreciation.」

「Although the Chinese economy is showing steady growth, retail businesses, including optical stores, in European countries, Southeast Asian countries, India, Australia, and other markets where the company operates have been forced to close or reduce their operating hours.」

「In overseas markets, economic activity remains restricted by the spread of the infection in some parts of Southeast Asia, India, and Europe, where the Group operates, while the Chinese market recovered quickly and continues to grow steadily.」

「Although the Chinese market was quick to enter a recovery trend, economic activity in Southeast Asia, India and Europe, where the Group operates, was severely restricted by the spread of the infection, and contact lens sales remained sluggish.」

「During this period, subsidiaries in Malaysia, Vietnam, Singapore, Australia, the United Kingdom, Germany, and Switzerland were forced to suspend operations entirely or partially due to orders or requests from local administrative authorities.」

「Although domestic and overseas demand declined due to the spread of COVID-19, sales increased, led by the core contact lens business, and the acquisition of a company in Europe also contributed.」

「During the cumulative third quarter of the fiscal year, Japan's economy continued to show improvement in employment and income conditions, but remained on a course that carried the risk of losing momentum in its economic recovery due to the decline in front-loaded demand following the consumption tax increase, the slowdown in the Chinese economy resulting from U.S.-China trade friction, and the disruption caused by the novel coronavirus, reported since December 2019.」

「During the cumulative second quarter of the fiscal year, Japan's economy was showing signs of front-loaded demand ahead of the consumption tax increase as employment and income conditions continued to improve, but its recovery was becoming slower due in part to weakness in the Chinese economy resulting from U.S.-China trade friction and turmoil surrounding Brexit.」

「During the cumulative first quarter of the fiscal year, Japan's economy remained on a moderate recovery trend in employment and personal income conditions, but that recovery was becoming slower due in part to the impact of slower growth in the Chinese economy resulting from U.S.-China trade friction and turmoil surrounding Brexit.」

「In Europe, if political factors such as Brexit affect certification systems, this could affect the supply system.」

「During the cumulative third quarter of the fiscal year, Japan's economy remained in an uncertain environment, despite a moderate recovery trend in employment and personal income conditions, due in part to the impact of U.S.-China trade friction on the global economy and political risks in Europe.」

「During the cumulative second quarter of the fiscal year, Japan's economy remained on a moderate recovery trend as employment and personal income conditions improved, although concerns remained about the impact of U.S.-China trade friction on the global economy.」

「There were no newly arising business or other risks during the cumulative consolidated period for the first quarter. Nor were there any material changes to the business or other risks described in the securities report for the previous fiscal year.」

「There were no newly arising business or other risks during the cumulative consolidated period for the third quarter. Nor were there any material changes to the business or other risks described in the securities report for the previous fiscal year.」

「During the six-month period ended the second quarter of the current consolidated fiscal year, there were no new business risks or material changes to the business risks described in the previous fiscal year's Annual Securities Report.」

「During the first quarter of the current consolidated fiscal year, there were no newly arising business or other risks, and no material changes to the business or other risks described in the securities report for the previous fiscal year.」

「Uncertainty about the outlook for the economy as a whole, including foreign exchange trends, is increasing due to slower growth in China and emerging Asian economies, the impact of the U.S. Trump administration's economic policies, and Brexit-related developments that are beginning to unfold in earnest.」

「Concerns over slower growth in China and emerging Asian economies and sharp fluctuations in foreign exchange rates and share prices resulting from Brexit have become evident in the form of a slowdown in corporate earnings and personal consumption, increasing uncertainty.」

「Unexpected changes in political, economic, and social conditions in these regions, as well as legal regulations imposed by government authorities, may have a material impact on the Group's operating results and financial position.」