A challenging business environment due to the global economic slowdown, yen appreciation and rising construction labor costs, among other factors

「During the consolidated accounting year, Japan's economy maintained a gradual recovery trend, supported by improvements in employment and income conditions and the effects of various policies. However, the outlook remained uncertain because of continued yen depreciation and higher prices, a review of the low-interest-rate policy, the impact of US trade policy, concerns about a slowdown in the Chinese economy and rising geopolitical risks, including heightened tensions in the Middle East as well as Eastern Europe.」

「・米国を中心に底堅さはみられるものの、通商政策の影響や中東情勢（イランを巡る緊張）を含む 地政学リスクの高まりを背景に、不確実性が増大」

「During the interim consolidated accounting period, Japan's economy maintained a gradual recovery trend, supported by improvements in employment and income conditions and steady inbound demand. At the same time, signs of weakness emerged in some areas of the economy against a backdrop of continued yen depreciation, persistently high prices, the impact of US trade policy, concerns about a slowdown in the Chinese economy and rising geopolitical risks, and the outlook remained uncertain.」

「During the consolidated accounting year, Japan's economy continued to recover gradually, mainly due to improvements in employment and income conditions and the recovery in inbound demand. However, the outlook remained uncertain because of higher prices, a review of the low-interest-rate policy, unstable exchange rates amid continued yen depreciation, concerns about a slowdown in the Chinese economy, policies of the new US administration and rising geopolitical risks.」

「During the interim consolidated accounting period, Japan's economy continued to recover gradually, mainly due to improving income conditions and the recovery in inbound demand. However, the outlook remained uncertain because of restrained spending and weaker purchasing appetite resulting from higher prices, the impact of a review of monetary policy, volatile exchange rates, concerns about a downturn in overseas economies and rising geopolitical risks.」

「During the current consolidated fiscal year, the Japanese economy remained on a moderate recovery trend as economic and social activity normalized following the reclassification of COVID-19 to Category 5. However, uncertainty persisted due to soaring energy and raw material prices resulting from the prolonged situation in Ukraine, inflation caused by the weaker yen, growing tensions in the Middle East, and the effects of shifts in monetary policy in Japan and the United States.」

「During the cumulative third quarter of the current consolidated fiscal year, the Japanese economy remained on a moderate recovery trend as economic and social activity normalized following the reclassification of COVID-19 to Category 5. However, uncertainty persisted due to soaring energy and raw material prices resulting from the prolonged situation in Ukraine, inflation caused by the weaker yen, growing tensions in the Middle East, and expectations regarding shifts in monetary policy in Japan, the United States and Europe.」

「During the cumulative second quarter of the current consolidated fiscal year, the Japanese economy remained on a moderate recovery trend as economic and social activity normalized, including the reclassification of COVID-19 to Category 5. However, uncertainty persisted due to soaring energy and raw material prices resulting from the prolonged situation in Ukraine, inflation caused by the weaker yen, concerns that monetary tightening in Europe and the United States would slow the global economy, and growing tensions in the Middle East.」

「During the cumulative first quarter of the current consolidated fiscal year, the Japanese economy remained on a moderate recovery trend as economic and social activity normalized, including the reclassification of COVID-19 to Category 5. However, uncertainty persisted due to soaring energy and raw material prices resulting from the prolonged situation in Ukraine, monetary tightening in Europe and the United States becoming apparent as a risk to a slowdown in the global economy, and inflation caused by the weaker yen.」

「The Japanese economy remained on a moderate recovery trend as economic and social activity progressed toward coexistence with COVID-19 measures, supported in part by various policies such as nationwide travel assistance and eased border controls. However, downside risks remained, including soaring energy and raw material prices, inflation caused by the weaker yen, and concerns about an economic downturn due to monetary tightening in Europe and the United States, and uncertainty about the outlook is expected to persist.」

「During the cumulative third quarter of the current consolidated fiscal year, the Japanese economy showed signs of a gradual recovery, supported in part by the effects of various policies, including nationwide travel assistance and the easing of border controls, as economic and social activity progressed toward coexistence with COVID-19 measures. However, the outlook became increasingly uncertain due to soaring energy and raw material prices resulting from the prolonged situation in Ukraine, inflation caused by the rapid depreciation of the yen, and concerns about a shift toward recession in Europe and the United States as a result of monetary tightening.」

「During the cumulative second quarter of the current consolidated fiscal year, the Japanese economy showed signs of recovery as efforts progressed to balance COVID-19 measures with economic and social activity. However, the economy faced challenging conditions, with concerns about weak personal consumption and deteriorating corporate earnings due to soaring energy and raw material prices resulting from the prolonged situation in Ukraine and the rapid depreciation of the yen. Together with concerns about an economic downturn in Europe and the United States due to monetary tightening, this left the economic outlook uncertain.」

「During the cumulative first quarter of the current consolidated fiscal year, the Japanese economy showed signs of recovery as restrictions on activities associated with COVID-19 were eased and efforts progressed to balance infection control with economic and social activity. However, the economic outlook became unpredictable due to higher resource and energy prices resulting from the prolonged situation in Ukraine, upward pressure on prices from the sharp depreciation of the yen, and supply-side constraints caused by China's restrictions on economic activity.」

「Although the Japanese economy is expected to move toward a gradual recovery as restrictions on economic activity associated with COVID-19 are eased, concerns remain about the impact on the global economy of the risk of renewed infections caused by COVID-19 variants, global shortages of semiconductors and other components, soaring raw material prices including crude oil, and geopolitical risks such as the situation in Ukraine. The economic outlook is therefore expected to remain uncertain.」

「However, in addition to the effects of semiconductor shortages on various industries and soaring resource prices, including crude oil, the emergence of highly transmissible COVID-19 variants and other factors made the economic outlook unpredictable once again.」

「During the cumulative second quarter of the current consolidated fiscal year, social activity remained restricted and economic conditions continued to be challenging due to a state of emergency and priority preventive measures associated with the resurgence of COVID-19. However, some signs of recovery emerged, supported by increased exports accompanying the recovery in overseas economies.」

「During the cumulative first quarter of the current consolidated fiscal year, social activity remained restricted and economic conditions continued to be challenging due to a state of emergency and priority preventive measures associated with the resurgence of COVID-19. However, some positive signs emerged in the economy, including increased exports against a backdrop of recovery in overseas economies.」

「Looking at the environment surrounding the Group, the Japanese economy deteriorated as economic activity was severely restricted worldwide due to the spread of COVID-19, with the Japanese economy also being significantly affected, particularly in specific industries.」

「Although signs of an economic recovery emerged following the gradual resumption of economic activity after the state of emergency was lifted in May, infections subsequently began to spread again, and the economic outlook remained unpredictable.」

「During the cumulative second quarter of the current consolidated fiscal year, the Japanese economy faced extremely challenging conditions due to the rapid stagnation of social and economic activity caused by the spread of COVID-19. Although signs of an economic recovery emerged recently as economic activity gradually resumed following the lifting of the state of emergency, the recovery had not reached pre-pandemic levels, and the economic outlook remained unpredictable due to concerns that the pandemic could continue for an extended period and infections could spread again.」

「During the cumulative first quarter of the current consolidated fiscal year, the Japanese economy faced extremely challenging conditions as the spread of COVID-19 led to the issuance of a state of emergency and rapid stagnation in social and economic activity.」

「During the current consolidated fiscal year, the Japanese economy remained on a moderate recovery trend, with increased capital investment and a recovery in personal consumption against a backdrop of improving corporate earnings and employment and income conditions. However, in addition to intensifying US-China trade friction and unstable international conditions, the effects of the COVID-19 pandemic expanded toward the end of the fiscal year, causing the economy to rapidly deteriorate.」

「During the cumulative third quarter of the current consolidated fiscal year, the Japanese economy remained on a moderate recovery trend, with increased capital investment and a recovery in personal consumption against a backdrop of improving corporate earnings and employment and income conditions. However, the economic outlook remained uncertain due to the intensification of US-China trade friction and unstable international conditions.」

「During the cumulative second quarter of the current consolidated fiscal year, the Japanese economy showed a stronger sense of stagnation. Personal consumption gradually recovered against a backdrop of favorable employment and income conditions, and capital investment remained firm amid strong corporate earnings, but exports declined due to the slowdown in overseas economies and other factors.」

「During the cumulative first quarter of the current consolidated fiscal year, the Japanese economy showed a stronger sense of stagnation. Personal consumption gradually recovered against a backdrop of favorable employment and income conditions, and capital investment remained firm amid strong corporate earnings, but exports declined due to the slowdown in overseas economies and other factors.」

「During the cumulative third quarter of the current consolidated fiscal year, the Japanese economy continued to recover, as personal consumption gradually picked up against a backdrop of favorable employment and income conditions and capital investment increased amid strong corporate earnings, following the fading of the effects of natural disasters.」

「During the cumulative second quarter of the current consolidated fiscal year, the Japanese economy continued to recover, as personal consumption gradually picked up on the back of improving employment and income conditions and capital investment increased amid strong corporate earnings. In the construction-related industry in which the Group operates, capital investment remained firm, supported by accelerating machinery investment. However, public works weakened as the boost from the implementation of the supplementary budget for fiscal 2016 ran its course, while residential investment was on a declining trend, mainly because rental housing investment had peaked out following the reaction to the use of such investment for inheritance-tax planning. In addition, soaring labor costs and construction material prices resulted in a challenging business environment.」

「In the construction-related industry in which our group operates, for-sale housing increased as new condominium starts rose, but owner-occupied housing remained weak and rental housing also declined as demand waned. Residential investment therefore remained weak. Meanwhile, public investment showed signs of recovery, and capital investment increased, mainly in maintenance and replacement, rationalization and labor-saving investment, against a backdrop of high corporate earnings, resulting in generally firm construction investment.」

「The environment surrounding the Group is expected to remain supportive of an ongoing economic recovery, as exports maintain an upward trend supported by the recovery in overseas economies, while increased capital investment driven by high corporate earnings will also provide an impetus.」

「In the construction-related industry in which our group operates, capital investment remained strong against a backdrop of demand for labor-saving and information technology investment. However, public works declined as the boost from implementation of the 2016 supplementary budget faded, and residential investment was also on a downward trend following a peak in rental housing demand. Rising construction labor costs further contributed to a challenging operating environment.」

「Capital investment remained strong, driven by improved corporate earnings and labor-saving investment to address labor shortages, and public works also increased as implementation of the 2016 supplementary budget gathered pace. However, residential investment declined as rental housing demand waned after the peak in demand for inheritance-tax planning, and rising construction labor costs also contributed to a challenging operating environment.」

「During the first quarter of the current consolidated fiscal year, there were no new matters among those relating to the business and accounting conditions described in this quarterly securities report that could materially affect investors' decisions, nor any material changes to the business and other risks described in the securities report for the previous fiscal year.」

「Regarding the future business environment, demand is expected to expand for commercial construction and central-city redevelopment, supported by increased public and private investment in metropolitan areas, including investment related to the Tokyo Olympic and Paralympic Games to be held in 2020. However, as construction labor costs have continued to rise amid a pronounced shortage of construction workers, we expect the challenging business environment to continue.」

「Public works increased as reconstruction and recovery demand following the earthquake was supplemented by implementation of the second FY2017 supplementary budget, while residential investment remained firm, particularly in rental housing, amid low mortgage rates. However, capital investment increased only slightly as companies remained cautious about new investment against a backdrop of uncertainty in the domestic and overseas economies. Construction labor costs also continued to rise amid a persistent sense of labor shortages, resulting in a challenging operating environment.」

「Public works increased following the implementation of the FY2015 supplementary budget and the FY2016 supplementary budget related to earthquake recovery and reconstruction, while residential investment remained at a high level despite a pause in its growth following the postponement of the consumption-tax increase. However, capital investment remained weak due to sluggish exports, and construction labor costs also rose, resulting in a challenging operating environment.」

「In addition to weak personal consumption, exports remained sluggish against a backdrop of the global economic slowdown, particularly in emerging economies, and yen appreciation associated with the UK's decision to leave the EU, resulting in a strong sense of stagnation in the economy.」