Business Environment Risks from Yen Appreciation, Falling Stock Prices and Negative Interest Rates

「However, following attacks on Iran by the United States and Israel toward the end of the fiscal year, the situation in the Middle East became rapidly more tense, and concerns over oil supplies led to a rapid increase in market risk aversion.」

「During the six-month consolidated accounting period, the global economy showed increasing signs of slowing against the backdrop of previous monetary tightening and U.S. tariff measures. Meanwhile, share prices rose worldwide in financial markets on expectations for the development of generative AI. The dollar-yen exchange rate remained generally between ¥140 and ¥150.」

「Concerns over U.S. President Trump's tariff policies have particularly affected market sentiment, having a significant impact on the automotive and semiconductor industries and putting downward pressure on share prices in Japan and the United States. In Japan, the Bank of Japan raised interest rates twice in the fiscal year ending March 2025 in response to rising wages and prices. Against expectations of further rate hikes, long-term interest rates reached above 1.5% in March 2025.」

「In financial markets, share prices rose against the backdrop of growing expectations that monetary tightening would end and heightened expectations for generative AI. In the dollar-yen exchange rate, the yen strengthened toward the end of the period as attention focused on the narrowing U.S.-Japan interest-rate differential.」

「Although many countries were adopting tight monetary policies, global equity markets remained firm as the downturn in the U.S. economy was less severe than markets had anticipated and expectations for new technologies, including AI, increased. In foreign-exchange markets, the yen weakened against the dollar amid expectations that FRB monetary tightening would continue for longer.」

「During the six-month period ended ..., the global economy slowed against the backdrop of soaring prices, the resulting monetary tightening by central banks, and inventory adjustments in manufacturing, including semiconductors. In financial markets, share prices fell toward the end of the period as expectations grew that monetary tightening would continue for longer than anticipated.」

「During the three-month period ended ..., the global economy slowed in many countries due to soaring prices and monetary tightening by central banks. Meanwhile, share prices rose in financial markets against the backdrop of improving corporate earnings and expectations that high inflation would subside.」

「During the nine-month period ended ..., the global economy slowed in many countries amid persistently high inflation and monetary tightening by central banks. In financial markets, share prices fell amid global monetary tightening. In foreign-exchange markets, the yen weakened sharply against the dollar in October, temporarily exceeding ¥150 to the dollar, but subsequently strengthened as expectations grew that the pace of monetary tightening in the United States would moderate. In Japan's domestic bond market, long-term interest rates rose after the Bank of Japan raised the upper limit of its long-term interest-rate control target from 0.25% to 0.5% in December.」

「During the six-month period ended ..., the global economy slowed in many countries as central banks tightened monetary policy in response to persistently high inflation, as well as against the backdrop of Russia's invasion of Ukraine. In financial markets, share prices fell amid accelerated monetary tightening led by the United States, while in foreign-exchange markets the dollar strengthened against the yen.」

「During the three-month period ended ..., the global economy slowed in many countries due to soaring prices, central-bank monetary tightening and lockdowns in China. In financial markets, share prices fell amid concerns over a future global economic downturn and the onset of stagflation.」

「Social anxiety is spreading due to the turmoil in the international situation stemming from Russia's invasion of Ukraine and the decline in human interaction caused by the prolonged spread of COVID-19, among other factors.」

「During the nine-month period ended ..., the global economy continued to normalize, led by the United States and Europe. However, the prolonged supply constraints weighed on the recovery, while inflation accelerated in the United States and elsewhere amid tight supply and demand. In financial markets, share prices became volatile as the FRB adopted a stronger stance focused on containing inflation. In Japan, the economy began to recover, led by personal consumption, after the state of emergency was lifted at the end of September. However, the spread of the Omicron variant in Japan toward the end of 2021 heightened uncertainty over the economic outlook.」

「During the six months ended the second quarter, the global economy, particularly in the US and Europe, continued to normalize. However, the pace of recovery slowed as supply chains stagnated across various sectors, including energy, components and transportation. In financial markets, share prices became unstable at times against the backdrop of expectations that the Federal Reserve would bring forward interest rate hikes and management problems at a major Chinese property company.」

「During the three months ended the first quarter, the global economy saw a recovery in economic activity, particularly in face-to-face service industries, as COVID-19 vaccinations progressed mainly in the US and Europe. In financial markets, share prices remained firm as expectations for economic normalization grew while large-scale fiscal and monetary policies continued in various countries. By contrast, the Japanese economy remained sluggish, partly due to the impact of the third state of emergency declared in April.」

「In financial markets, share prices remained firm against the backdrop of large-scale fiscal and monetary policies implemented by governments and expectations for improved performance by IT-related companies. However, infections spread again during the winter, adversely affecting economic activity in various countries.」

「Toward the end of the interim period, these restrictions were eased gradually and the economy bottomed out, but recovery remained modest.」

「During this period, financial markets were unstable at times amid concerns over the spread of the novel coronavirus, but share prices followed an upward trend, partly due to the effects of large-scale fiscal and monetary policies implemented by governments.」

「Beginning in 2020, the spread of the novel coronavirus forced countries to implement measures including entry restrictions, factory shutdowns and stay-at-home orders, and economic activity deteriorated rapidly.」

「During the nine months ended the third quarter, the global economy showed resilience in the United States, while signs of a slowdown intensified in many countries against the backdrop of weak manufacturing activity. In financial markets, share prices rose globally toward year-end amid expectations of easing tensions over the US-China trade policy dispute.」

「During this period, financial markets were somewhat unstable at times amid the protectionist trade policies announced by the United States.」

「Against this economic backdrop, the domestic equity market moved mainly in the ¥21,000 range, affected by growing concerns over the US-China trade war and expectations for US monetary policy. Domestic long-term interest rates declined as overseas central banks adopted more accommodative stances, moving at around negative 0.1%. In the foreign exchange market, the dollar-yen exchange rate remained around ¥110.」

「Meanwhile, growth in economies such as Europe and China slowed, and the global economy showed signs of deceleration. During this period, financial markets were unstable at times amid the intensifying US-China trade war and negotiations over the UK's withdrawal from the EU.」

「During this period, financial markets were unstable at times amid the protectionist trade policies announced by the United States, but their impact on the real economy during the six months ended the second quarter was limited, and the economy remained resilient.」

「The domestic equity market moved broadly in the ¥22,000 range as concerns over the US-China trade war and political risks in various countries drove alternating gains and losses. Domestic long-term interest rates remained broadly flat at around 0% against the backdrop of the Bank of Japan's accommodative monetary policy. In the foreign exchange market, the dollar-yen exchange rate moved broadly around ¥110, affected by concerns over the US-China trade war and political risks in various countries.」

「The domestic equity market rose against the backdrop of the economic recovery despite moves toward reduced monetary easing in the US and Europe and geopolitical risks. After the Nikkei Stock Average recovered to the ¥20,000 range in June, its upward trend continued, and it remained strong, reaching ¥22,764 at year-end, its first year-end close above ¥20,000 since 1991. Domestic long-term interest rates remained stable at around 0% for the 10-year Japanese government bond yield against the backdrop of the Bank of Japan's accommodative monetary policy. In the foreign exchange market, downward pressure on the yen from differences in monetary policy direction and interest rates versus the US and Europe was balanced by upward pressure from geopolitical risks, leaving the dollar-yen exchange rate broadly flat, centered on the low ¥110 range.」

「The domestic equity market rose against the backdrop of the economic recovery despite moves toward reduced monetary easing in the US and Europe and geopolitical risks. The Nikkei Stock Average recovered to the ¥20,000 range in June for the first time since 2015 and remained firm, reaching a new year-to-date high in September. Domestic long-term interest rates remained stable at around 0% for the 10-year Japanese government bond yield against the backdrop of the Bank of Japan's accommodative monetary policy. In the foreign exchange market, downward pressure on the yen from differences in monetary policy direction and interest rates versus the US and Europe was balanced by upward pressure from geopolitical risks, leaving the dollar-yen exchange rate broadly flat around ¥110.」

「Although the domestic equity market was affected by geopolitical risks and political risks in various countries, it followed a gradual recovery trend against the backdrop of the economic recovery, with the Nikkei Stock Average returning in June to the ¥20,000 range for the first time since 2015. Domestic long-term interest rates fluctuated at times on expectations of reduced monetary easing in the US and Europe, but remained broadly flat at around 0% against the backdrop of the Bank of Japan's accommodative monetary policy. Although the foreign exchange market was affected by geopolitical risks and monetary policy trends in the US and Europe, it remained stable overall, with the dollar-yen exchange rate generally moving in the low ¥110 range.」

「However, in light of the expected prolonged domestic low-interest-rate environment and the increasingly uncertain financial and economic environment, the Group changed its key management targets under “D-Ambitious.”」

「However, as the yen weakened on growing expectations of an expansion in the US economy following the outcome of the US presidential election in November, share prices rose to above ¥19,000. Domestic long-term interest rates continued to move in negative territory against the backdrop of the negative interest rate policy introduced by the Bank of Japan in January 2016. Long-term interest rates rose slightly after the November US presidential election, driven by higher US interest rates, but the 10-year Japanese government bond yield remained near zero against the backdrop of yield curve control under the quantitative and qualitative monetary easing with yield curve control adopted by the Bank of Japan in September.」

「The market recovered from the sharp decline following the UK's move to leave the EU at the end of June 2016, but the yen's appreciation and other factors subsequently weighed on the market, and the Nikkei Stock Average remained in the ¥16,000 range. Domestic long-term interest rates remained in negative territory after the Bank of Japan decided to introduce a negative interest rate policy in January 2016, while strong downward pressure continued on ultra-long-term rates, including 20- and 30-year rates.」

「At the end of June, once the result of the referendum on the UK's withdrawal from the EU became known, share prices fell sharply, and the Nikkei Stock Average temporarily fell below ¥15,000. Domestic long-term interest rates have continued to move in negative territory following the Bank of Japan's adoption of a negative interest rate policy in January.」