Uncertainty in the Global Economy, Yen Appreciation, and Weak Private Consumption

「Prices have risen due to higher raw-material and resource prices, while personal consumption has remained sluggish as inflation has reduced real wages.」

「In addition to uncertainty over US policy developments and the prolonged war between Russia and Ukraine, geopolitical risks have been rising daily due to the further escalation of tensions in the Middle East and disputes concerning the Strait of Hormuz, and uncertainty about the outlook continues.」

「Meanwhile, consumer sentiment was affected by developments in US tariff measures, the situation in the Middle East and Ukraine, China's economic slowdown, exchange rate fluctuations and inflation, and uncertainty about the outlook continued. The business environment also remained difficult due to higher raw material prices, personnel expenses, logistics costs and financial expenses accompanying the rise in market interest rates.」

「Meanwhile, concerns remain about the impact on the economy of US policy developments, the prolonged situation in the Middle East and Ukraine, exchange rate fluctuations, and inflation caused by surging resource and raw material prices, and uncertainty about the outlook continues.」

「Meanwhile, in addition to rising geopolitical risk due to the prolonged situation between Ukraine and Russia and the outbreak of conflict in the Middle East, the outlook for the business environment remained uncertain due to higher market interest rates following the Bank of Japan's adjustment of monetary easing, the rapid depreciation of the yen and inflation caused by surging raw material prices and utility costs.」

「Meanwhile, in addition to rising geopolitical risk due to the prolonged situation between Ukraine and Russia and the outbreak of conflict in the Middle East, the outlook for the business environment remained uncertain due to the rapid depreciation of the yen and inflation caused by surging raw material prices and utility costs.」

「Activity restrictions were eased, including the reclassification of COVID-19 from Category 2 to Category 5 under the Infectious Diseases Control Law, supporting the normalization of economic activity and a recovery in commercial distribution. However, the business environment remained difficult due to the impact of higher energy prices stemming from the situation between Russia and Ukraine on raw material prices, the yen's depreciation trend and higher personnel expenses caused by labor shortages. Concerns also remained that a global economic downturn, including overseas financial institution failures amid continued global monetary tightening, could affect Japan's economy, leaving the outlook uncertain.」

「During the cumulative second quarter of the consolidated fiscal year (1 October 2022 to 31 March 2023), restrictions on activities related to COVID-19 were eased, economic activity normalized and commercial distribution began to recover. However, the business environment remained difficult due to higher raw material prices accompanying rising energy prices amid the situation between Russia and Ukraine, as well as higher personnel expenses caused by labor shortages. Concerns also grew that the impact of a global economic downturn, including overseas financial institution failures amid continued global monetary tightening, could weigh on Japan's economy, leaving the outlook uncertain.」

「However, new concerns emerged as factors weighing on consumption activity accumulated, including the prolonged situation between Ukraine and Russia, the rapid depreciation of the yen and inflation caused by surging raw material prices and utility costs, creating an environment with a significant impact on corporate management.」

「Restrictions on economic activity related to COVID-19 were eased gradually, and the economy showed signs of a gradual recovery. However, the business environment remained uncertain as a global semiconductor shortage and surging resource prices accompanying Russia's invasion of Ukraine were compounded by a rapid depreciation of the yen driven partly by the widening US-Japan interest rate differential.」

「During the cumulative third quarter of the consolidated fiscal year (1 October 2021 to 30 June 2022), Japan's economy saw consumption activity gradually normalize as infection numbers began to come under control and restrictions on activities were eased. However, the economic outlook remained uncertain due to the rapid depreciation of the yen in foreign exchange markets and surging resource prices stemming from the situation between Russia and Ukraine.」

「During the cumulative second quarter of the consolidated fiscal year, Japan's economy was affected by the ongoing global COVID-19 pandemic and Russia's invasion of Ukraine. The lifting of priority preventive measures supported companies benefiting from a recovery led by personal consumption. However, the simultaneous rise in resource prices and depreciation of the yen has left the outlook for corporate performance uncertain.」

「However, the lifting of the state of emergency and other measures at the end of September last year eased restrictions on activities, and some areas showed signs of recovery. More recently, concern about a sharp increase in domestic infections caused by a new variant has grown, leaving the outlook for personal consumption unforeseeable.」

「The impact of COVID-19 in Japan and overseas continued to severely restrict social and economic activity, including through a third state of emergency and priority preventive measures to prevent the spread of disease. More recently, Tokyo issued a fourth state of emergency in July. Although vaccinations, particularly among older people, were progressing, the situation remained difficult for society as a whole.」

「Personal consumption has shown signs of recovery as consumer behavior shifted from face-to-face to contactless, generating stay-at-home demand, increasing needs related to COVID-19 countermeasures and driving a shift from physical stores to e-commerce as businesses adapted to the "new normal." However, the timing of the pandemic's containment remains unforeseeable, and uncertainty about the outlook continues.」

「Although the number of infections remained high from summer onward even after the state of emergency was lifted, the difficult situation continued, with infections beginning to rise again from November. As a result, personal consumption remained sluggish overall and under downward pressure, except in some business categories that captured stay-at-home demand.」

「Following the global spread of COVID-19 from the beginning of the year, governments in various countries issued states of emergency, imposing measures prohibiting people from going out and overseas travel, while restricting the operation of retail and other stores. As a result, economic activity contracted sharply and economies deteriorated rapidly worldwide.」

「The suspension of in-store operations by many business partners restricted our sales activities. In addition, the spread of COVID-19 in China, our main source of product supply, temporarily disrupted product procurement and had other effects.」

「However, as the consumption tax rate increase implemented in October continued to depress consumer sentiment, the economy deteriorated rapidly from January 2020 due to the spread of the novel coronavirus disease that originated in Wuhan, China. As infections increased domestically, the government and local authorities called on people to refrain from going out, causing economic activity overall to stagnate and personal consumption to remain under severe pressure.」

「During the consolidated fiscal year, Japan's domestic economy remained on a gradual recovery path, while overseas, unstable political and economic conditions persisted due to US-China trade friction, the UK's withdrawal from the EU, the deterioration in Japan-South Korea relations and other factors. Personal consumption was sluggish as the boost from demand brought forward ahead of the consumption tax rate increase implemented in October unwound, compounded by unsettled weather and natural disasters.」

「Domestic personal consumption continued to lack strength as diversified consumer needs and unsettled weather were compounded by thrift driven by concerns about the future, including the consumption tax increase scheduled for October.」

「During the cumulative third quarter of the consolidated fiscal year (1 October 2018 to 30 June 2019), Japan's economy remained on a gradual recovery path, supported by improvements in corporate earnings and employment conditions. Overseas, however, uncertainty about the political and economic outlook intensified due to issues including US-China trade friction and the UK's withdrawal from the EU.」

「Overseas, the Chinese economy stagnated due to US-China trade friction, while the UK's withdrawal from the EU and other factors contributed to continued uncertainty about the political and economic outlook. Against this backdrop, personal consumption lacked strength as consumer needs diversified due to changes in consumer behavior, compounded by unsettled weather and other factors.」

「During the consolidated fiscal year, Japan's economy remained on a gradual recovery path, with improvements in corporate earnings and employment conditions supporting the domestic economy. Overseas, however, political and economic uncertainty increased due to issues including US-China trade friction and the UK's withdrawal from the EU, creating unstable conditions globally, including a sharp decline in share prices toward year-end. Against this backdrop, personal consumption lacked strength as consumer needs diversified due to changes in consumer behavior, compounded by unsettled weather and other factors.」

「Meanwhile, overseas, instability persisted as political and economic uncertainty increased and concerns over trade friction grew. Against this backdrop, personal consumption remained characterized by a low rate of real wage growth, continued thrift and selective spending driven by concerns about the future, although some sectors saw solid demand due to the wealth effect and an increase in visitors to Japan. However, record heat this summer, repeated typhoons and an earthquake in Hokkaido had a negative impact on the retail industry, which is among our customers, through the end of the fiscal year.」

「Overseas, unstable conditions continued as political and economic uncertainty increased and concerns about trade friction emerged.」

「Overseas, conditions were unstable as political and economic uncertainty increased and geopolitical risks came to the fore.」

「During the fiscal year, Japan’s domestic economy was relatively stable, supported by government measures such as continued monetary easing. Overseas, however, global conditions remained unstable due to continued political turmoil in Europe and the United States, the situation surrounding North Korea and terrorism.」

「During the nine months ended 30 June 2017 (1 October 2016 to 30 June 2017), Japan’s domestic economy was relatively stable, supported by government measures such as continued monetary easing. Overseas, however, global conditions remained unstable due to political turmoil in Europe and the United States, the situation surrounding North Korea and the rise of terrorism.」

「During the six months ended 31 March 2017 (1 October 2016 to 31 March 2017), Japan’s domestic economy was relatively stable, supported by government measures such as continued monetary easing. However, the outlook remained extremely difficult due to external uncertainty, including sharp currency movements caused by political instability overseas and slower economic growth in emerging markets, particularly China.」

「Overseas, currencies fluctuated substantially amid political instability, including the United Kingdom’s withdrawal from the EU and the decision for Mr. Trump to become president of the United States. The outlook remained extremely difficult due to external uncertainty, including slower economic growth in emerging markets. Personal consumption also remained in a difficult environment, with saving and selective spending continuing and the “bulk-buying” boom among visitors to Japan showing signs of running its course.」

「The shift to yen appreciation led to more downward revisions to companies’ performance forecasts, particularly among exporters, heightening concern about corporate performance. Although inbound consumption by foreign visitors provided support, consumers’ entrenched preference for saving meant that personal consumption remained generally weak.」

「Concerns about a downturn in emerging-market economies and the rise of terrorism increased uncertainty about the global economic outlook. In particular, the trend shifted from yen depreciation to yen appreciation during the period, heightening concern about the outlook for exporters’ performance, while personal consumption remained generally weak despite support from inbound consumption by foreign visitors.」