Downside Risk to Economic Activity from Slowing Emerging-Market Economies, Yen Appreciation, Falling Stock Prices and the UK's Withdrawal from the EU

「Although the economy showed signs of recovery, led by domestic demand as Japan emerged from its longstanding deflation, the uncertain situation continued because of its susceptibility to external conditions, including U.S. tariff policies and the global economic slowdown.」

「While crude oil and LNG prices were trending downward due to the global economic slowdown, including in China, raw material and energy prices remained elevated because of foreign exchange effects. The outlook remained uncertain due to U.S. tariff policies and conditions in the Middle East and Ukraine.」

「Meanwhile, prices have continued to rise due to soaring energy and raw material prices against the backdrop of the prolonged situations in Ukraine and the Middle East, while fluctuations in exchange rates and stock prices have also continued to affect conditions. The outlook therefore remains uncertain.」

「In the housing industry, which has close ties to our company, sentiment toward home purchases declined as housing prices rose due to persistently high material prices and rising wages, compounded by higher mortgage rates, particularly fixed rates.」

「Meanwhile, the yen has continued to depreciate sharply due to differences in monetary policy between Japan and Western countries, concerns over a slowdown in overseas economies remain, and uncertainty surrounding the situations in Ukraine and the Middle East, together with measures taken by oil-producing countries, has kept energy and material prices elevated. The outlook remains uncertain.」

「Meanwhile, the yen has continued to depreciate due to differences in monetary policy between Japan and other countries, concerns over a slowdown in overseas economies remain, and energy and material prices have stayed elevated against the backdrop of the situation in Ukraine and continued production cuts by oil-producing countries. The outlook remains uncertain.」

「During the cumulative first-quarter period, socioeconomic activity moved further toward normalization as restrictions on activity related to COVID-19 were eased, and Japan’s domestic economic activity entered a recovery trend. Meanwhile, the yen continued to weaken amid differences in monetary policy between Japan and Western countries, concerns over a slowdown in overseas economies persisted, and energy and material prices remained elevated against the backdrop of the prolonged situation in Ukraine. The outlook therefore remained uncertain.」

「During the fiscal year, Japan’s economy showed signs of recovery as the impact of the spread of COVID-19 gradually diminished. However, the situation remained highly uncertain due to soaring raw material and energy costs resulting from the prolonged Russia-Ukraine situation and other disruptions in the international community, as well as interest rate fluctuations caused by monetary policies in countries around the world.」

「During the cumulative nine-month period, Japan’s economy gradually became less affected by COVID-19, and socioeconomic activity continued to normalize. However, the end of COVID-19 infections in Japan and overseas remains unforeseeable. The prolonged Russia-Ukraine situation and other disruptions in the international community have driven up raw material and energy costs, while interest rates have fluctuated as a result of monetary policies in countries around the world. Consequently, the outlook remains uncertain.」

「During the cumulative second quarter, Japan's economy moved toward normalization of socioeconomic activity as restrictions related to COVID-19 were gradually eased. However, in addition to the impact of a resurgence in infections caused by new variants, disruptions in the international community, including the prolonged situation between Russia and Ukraine, drove up raw material and energy costs, while the widening interest-rate differential between Japan and the United States led to a sharp depreciation of the yen.」

「In addition to the acceleration in resource and raw material price increases amid the protracted situation in Ukraine, the rapid depreciation of the yen resulting from the widening interest-rate differential between Japan and the United States caused inflation to advance more than expected, and the outlook for the economy remained uncertain.」

「The global disruption to logistics caused by the spread of COVID-19, soaring energy, raw material and wood-based material prices resulting from Russia’s invasion of Ukraine, and the deterioration in consumer sentiment caused by globally concerning stagflation are expected to weigh on the number of new housing starts.」

「During the nine months ended 31 December, Japan’s economy showed signs of recovery following the easing of restrictions on economic activity and improvements in consumer sentiment, despite a slowdown in China’s previously steady recovery in the third quarter and large-scale automotive production cuts caused by semiconductor shortages.」

「During the six months ended 30 September, manufacturing remained resilient as exports increased with the economic recoveries in the US and China, and the Tokyo Olympic and Paralympic Games were held in Japan. However, the extension of the state of emergency and priority preventive measures significantly constrained economic activity in non-manufacturing industries, including services, pushing down overall domestic consumer sentiment. Although sentiment was recovering as a trend, it remained weak.」

「During the three months ended 30 June, Japan’s economy saw manufacturing remain resilient against a backdrop of increasing exports accompanying the economic recoveries in the US and China. However, the extension of the state of emergency and the priority preventive measures placed significant constraints on economic activity in non-manufacturing industries, including services, pushing down overall domestic consumer sentiment, which remained weak.」

「The wood shortage in Japan caused by the rapid economic recoveries in the US and China, known as the “wood shock,” could lead to a decline in new housing starts.」

「During the nine months ended 31 December, although the outlook for the global economy remained uncertain due to the spread of COVID-19, exports turned upward as economic activity resumed in various countries, led by China, and domestic consumer sentiment also showed some signs of recovery.」

「During the six months ended 30 September, Japan’s economy suffered a substantial downturn due to the spread of COVID-19, declining inbound demand and the global downturn. Although signs of recovery emerged from June after the lifting of the state of emergency, supported by the easing of restrictions on going out, domestic consumer sentiment remained low.」

「During the first quarter of the fiscal year under review, Japan’s economy suffered a substantial downturn due to the spread of COVID-19. In addition to declining inbound demand and a sharp fall in exports resulting from the global downturn, employment and income conditions deteriorated as domestic infections increased, and companies postponed capital investment.」

「During the fiscal year under review, Japan’s economy became increasingly stagnant as the global economy slowed due to US-China trade friction, the deterioration in the trade balance resulting from worsening Japan-South Korea relations, the decline in demand following the consumption tax increase from October and substantial restrictions on economic activity beginning in the new year to prevent the spread of COVID-19. The Nikkei Stock Average fell sharply.」

「During the nine months ended 31 December, domestic demand remained firm and capital investment continued to increase against a backdrop of high corporate earnings. However, domestic production activity remained sluggish due to a decline in demand following the consumption tax increase and lower exports resulting from US-China trade friction, leaving the economy stagnant.」

「During the six months ended 30 September, Japan’s economy saw domestic demand remain firm and personal consumption recover moderately on the back of favorable employment conditions and improving income conditions. However, domestic production activity remained sluggish against a backdrop of declining exports due to US-China trade friction, leaving the economy stagnant.」

「During the first quarter of the fiscal year under review, Japan’s economy remained stagnant. Although employment and income conditions continued to improve, domestic production activity weakened against a backdrop of declining exports due to US-China trade friction, while personal consumption lacked momentum because of weak share prices and lower consumer sentiment.」

「During the fiscal year under review, flooring materials remained strong due to the use of domestically produced base panels, while sales volumes of structural products increased from the second half following the revision of the Building Standards Act in June of the previous year.」

「During the nine months ended 31 December, Japan’s economy saw exports increase against a backdrop of a solid global economy, despite uncertainty including US-China trade friction, and the Nikkei Stock Average remained generally at high levels. The domestic economy experienced a temporary downturn from July to September due to the impact of natural disasters, but personal consumption recovered as employment and income conditions improved, and the economy entered a moderate recovery phase.」

「Meanwhile, depending on developments including US-China trade friction and monetary policy in the US and Europe, downside risks to the economy remained a concern, and uncertainty over the outlook continued.」

「During the nine months ended 31 December, Japan’s economy remained on a moderate recovery path, supported by continued improvements in corporate earnings and capital investment and favorable employment conditions. However, uncertainty over the outlook continued due to developments in US economic and monetary policy, a slowdown in the Chinese economy and concerns over the situation on the Korean Peninsula.」

「During the six months ended 30 September, Japan’s economy remained on a moderate recovery path, supported by continued improvements in corporate earnings and capital investment and favorable employment conditions. However, uncertainty over the outlook continued due to developments in US economic and monetary policy, a slowdown in the Chinese economy and concerns over the situation on the Korean Peninsula.」

「During the first quarter of the fiscal year under review, Japan’s economy saw exports increase amid expectations of higher interest rates accompanying the recovery in the US economy, despite uncertainty over the outlook for the global economy, including the US and Europe. The Nikkei Stock Average also remained at high levels.」

「During the fiscal year under review, Japan’s economy remained largely stagnant amid persistent pressure for a stronger yen and weak equity markets, reflecting uncertainty over the outlook for the global economy, including China, the US and Europe. However, the trend in foreign exchange shifted from a stronger yen to a weaker yen, driven by expectations for the economic policies of President-elect Trump following the US presidential election in November 2016, reduced concerns about a slowdown in the Chinese economy and a recovery in crude oil prices following the OPEC production-cut agreement. Corporate earnings generally remained at high levels, and the economy overall showed solid performance.」

「During the cumulative third quarter, there were no material changes in matters concerning the business and financial conditions described in this quarterly securities report that could have a material impact on investors' decisions, nor in the risks associated with the business and other matters described in the securities report for the previous fiscal year.」

「Meanwhile, the impact of monetary policy in various countries and uncertainty surrounding the EU on the global economy remained unclear, and concerns about downside risks to the economy continued.」

「The domestic economy remained stagnant as the slowdown in emerging-market economies, including China, and the plunge in resource prices, together with the stronger yen and falling share prices, slowed the growth of corporate earnings and left capital investment flat. In addition, the impact of the UK's withdrawal from the EU on the global economy was uncertain, raising concerns about downside risks to the economy.」