Stagnant Corporate Earnings and Consumer Sentiment Due to Global Economic Uncertainty and the Stronger Yen

「In the travel and tourism market in which the Group is primarily involved, the depreciation of the yen, higher airfares, accommodation costs and other travel expenses affected both travel demand and the earnings environment for operators.」

「The business environment surrounding the Group has become increasingly uncertain. Prices, particularly for energy and food, have continued to rise due to the prolonged geopolitical risks in Ukraine and the Middle East and the continued historic depreciation of the yen against a backdrop of divergence in the monetary policies of various countries.」

「The period proceeded amid downside risks in the external environment, including volatility in foreign exchange markets resulting from uncertainty over U.S. trade policy and differences in the direction of global monetary policy, as well as persistently high resource and energy prices due to ongoing geopolitical risks.」

「Although overseas economies continued to recover gradually, the overall recovery trend was maintained despite the effects of external factors, including heightened uncertainty, persistently high geopolitical risks related to Ukraine and the Middle East, and a shift in US trade policy, namely the so-called Trump tariffs.」

「In the travel and tourism market, in which the Group is primarily involved, the market maintained its overall recovery trend, albeit at a slower pace than in the previous fiscal year, when a rapid recovery followed the reclassification of COVID-19 as a Class 5 disease. For cross-border travel, the inbound market expanded rapidly, supported by the historic depreciation of the yen, and the annual number of foreign visitors to Japan reached approximately 37 million in 2024, setting a new record. However, overtourism at major tourist destinations and rising prices, including accommodation costs, became apparent, raising concerns about the impact on local residents' living conditions and the possibility of discouraging domestic travel by Japanese nationals. Meanwhile, recovery in the outbound market remained limited, and cautious activity continued due to exchange rates and prices.」

「However, capital investment increased only gradually amid companies' cautious stance. In the household sector, although wage increases continued, real wages were on a declining trend and private consumption remained generally sluggish because the prolonged Russian invasion of Ukraine was compounded by new geopolitical risks in the Middle East, while the historic depreciation of the yen and high prices continued. In the travel and tourism market, in which the Group is primarily involved, recovery continued, albeit at a slower pace than the rapid recovery seen last year following the reclassification of COVID-19 as a Class 5 disease.」

「In addition to differences in domestic and overseas monetary policies, new geopolitical risks in the Middle East have contributed to a historic depreciation of the yen. As a result, the inbound market expanded rapidly in cross-border travel, with the number of foreign visitors to Japan exceeding 3 million in March 2024 to reach a record high. In contrast, recovery in the outbound market remained sluggish.」

「The travel and tourism market and the accommodation and food service-related markets, in which the Group's principal businesses operate, continued to recover steadily, supported in part by the extension of the National Travel Discount program. Meanwhile, global inflation resulting from economic normalization and heightened geopolitical risks spread to Japan, and continued price increases became a new concern. On the other hand, large companies and others were expected to implement substantial wage increases in 2024, as they had the previous year, raising expectations that a virtuous cycle of prices and wages could begin and that Japan might finally emerge from deflation, which had long impeded the healthy growth of the Japanese economy.」

「The travel and tourism market and the accommodation and food service-related markets, in which the Group's principal businesses operate, continued to recover steadily, supported in part by the extension of the National Travel Discount program. However, global inflation resulting from economic normalization and geopolitical risks spread to Japan, and continued price increases became a new concern as they dampened consumer activity. For cross-border travel, the inbound market as a whole recovered rapidly, excluding visitors from China, where normalization of overseas travel was delayed by the impact of its zero-COVID policy, as the historic depreciation of the yen continued mainly due to differences in domestic and overseas monetary policies. In contrast, recovery in the outbound market remained subdued.」

「As a result, the travel and tourism market and the accommodation and food service-related markets, in which the Group's principal businesses operate, recovered steadily. For cross-border travel, the inbound market recovered rapidly, supported by the easing of border-control measures and the continued historic depreciation of the yen, mainly due to differences in domestic and overseas monetary policies. In contrast, recovery in the outbound market remained sluggish.」

「The seventh wave of the pandemic caused by the Omicron variant occurred during summer, followed from autumn by the eighth wave, the largest to date, placing pressure on the healthcare system. However, movement restrictions were not imposed by the national or local governments, and demand stimulus measures such as the Prefectural Travel Discount and National Travel Discount provided support. Tourist destinations were crowded throughout the period, making the economic recovery visible in the travel and tourism industry, the Group's principal business. As entry restrictions were eased in countries and regions for cross-border travel, Japan experienced a rapid and historic depreciation of the yen due to differences in domestic and overseas monetary policies and soaring energy prices stemming from Russia's invasion of Ukraine. This raised concerns about recovery in the outbound market, while significant expectations were placed on recovery in the inbound market.」

「Although the seventh wave of the pandemic, the largest to date and caused by the Omicron BA.5 variant, placed pressure on the healthcare system during summer, restrictions on people's movement were not imposed by the national or local governments. This resulted in the first major holiday and summer vacation season in 3 years without movement restrictions, and tourist destinations became crowded, making the economic recovery visible in the travel and tourism industry, the Group's principal business. As entry restrictions were eased in countries and regions for cross-border travel, Japan experienced a rapid and historic depreciation of the yen due to differences in domestic and overseas monetary policies and soaring energy prices stemming from Russia's invasion of Ukraine. This raised concerns about recovery in the outbound market, while significant expectations were placed on recovery in the inbound market, and border-control measures that had been eased in stages were scheduled for a comprehensive review.」

「Although signs of recovery had begun to emerge in the travel and tourism industry, the Group's principal business, as the impact of the pandemic gradually diminished, a return to pre-pandemic conditions was still expected to take some time. Meanwhile, many countries and regions continued to maintain entry restrictions on cross-border travel, and the timing of a full recovery in the outbound and inbound industries remained unclear.」

「As economic activity began to recover, inflation progressed worldwide due to the effects of supply constraints caused by the pandemic and soaring prices of crude oil and other commodities. In addition, Russia's military invasion of Ukraine near the end of the fiscal year sharply increased geopolitical risks, leaving the economic environment surrounding Japan unstable once again.」

「In addition, restrictions such as border-control measures were further tightened for cross-border travel due to concerns over the spread of the Omicron variant, which was newly reported overseas in early winter. As a result, the situation remained one in which the future outlook for the outbound and inbound industries could not yet be determined.」

「The fourth wave of the pandemic, which expanded around Golden Week, was followed from around the summer holidays by the fifth wave, which rapidly expanded as the highly infectious coronavirus variant known as the Delta variant became dominant. As a result, the state of emergency declared nationwide was extended repeatedly」

「As the state of emergency was repeatedly declared, particularly in major metropolitan areas, whenever the number of new infections rebounded, the travel, food service, accommodation, passenger transport and tourism-related industries continued to face periods of substantial stagnation. In addition, cross-border travel remained restricted, leaving the outbound and inbound industries in a situation where their future outlook remained unclear.」

「The pandemic continued to expand in successive waves, and with no decisive measures to contain it other than waiting for widespread vaccination, a full recovery in the domestic economy was expected to take a considerable amount of time.」

「The second wave of the pandemic expanded from summer onward, followed by the third wave from autumn, which reached the largest scale to date. As the need for strict vigilance continued worldwide, a full recovery in the domestic economy was expected to take a considerable amount of time.」

「Although signs of a partial recovery appeared after the first wave of the pandemic subsided, the second wave expanded from summer onward and the need for continued vigilance persisted. As a result, a full recovery in the domestic economy was expected to take a considerable amount of time.」

「The novel coronavirus disease identified from this winter spread rapidly, eventually becoming a pandemic, and the global economy slowed sharply. As a result, exports and industrial production fell substantially, corporate earnings deteriorated significantly, employment and income conditions became extremely severe, and private consumption contracted sharply, particularly in the food service and accommodation industries.」

「Exports remained weak as overseas economies continued to slow, while corporate earnings generally remained at favorable levels and capital investment continued to increase. Private consumption temporarily slowed due to the consumption tax rate increase and the effects of typhoons and other natural disasters, but continued to increase gradually against a backdrop of steady improvements in employment and income conditions.」

「During the cumulative second quarter of the fiscal year (1 April 2019 to 30 September 2019), Japan's economy saw exports weaken as overseas economies continued to slow. However, corporate earnings generally remained at favorable levels, capital investment was on an upward trend, and private consumption also continued to increase gradually, albeit unevenly, against a backdrop of steady improvements in employment and income conditions.」

「During the fiscal year, Japan's economy was affected by the slowdown in overseas economies resulting from recent protectionist trade policies, particularly in exports and production. In domestic demand, capital investment continued to increase while corporate earnings and business sentiment generally remained at favorable levels, and private consumption increased gradually, albeit unevenly, against a backdrop of steady improvements in employment and income conditions.」

「During the cumulative third quarter of the fiscal year (1 April 2018 to 31 December 2018), Japan's economy needed to be monitored for the effects of uncertainty in overseas economies caused by recent protectionist trade policies and volatility in financial and capital markets. As overseas economies continued to grow steadily, exports were on an upward trend. In domestic demand, capital investment continued to increase while corporate earnings remained at a high level, and private consumption also increased gradually, albeit unevenly, against a backdrop of steady improvements in employment and income conditions.」

「During the cumulative second quarter of the fiscal year (1 April 2018 to 30 September 2018), Japan's economy continued to recover gradually, albeit unevenly, amid the need to monitor the effects of uncertainty in overseas economies caused by recent protectionist trade policies and volatility in financial and capital markets. Against a backdrop of steady growth in overseas economies, exports were trending upward, while private consumption also continued to recover gradually, albeit unevenly, as corporate earnings maintained their improving trend and employment and income conditions steadily improved.」

「During the cumulative first quarter of the fiscal year (1 April 2018 to 30 June 2018), Japan's economy continued to recover gradually, albeit unevenly, against a backdrop of steady improvements in corporate earnings and employment and income conditions, amid the need to monitor the effects of uncertainty in overseas economies caused by recent protectionist trade policies and volatility in financial and capital markets.」

「During the fiscal year (1 April 2017 to 31 March 2018), Japan's economy was on a gradual recovery path, as private consumption improved with employment and income conditions remaining firm. Supported by growth in overseas economies, the economic expansion broadened across a wide range of economic entities rather than remaining limited to specific industries or regions.」

「During the cumulative third quarter of the fiscal year (1 April 2017 to 31 December 2017), Japan's economy was on a gradual recovery path, as private consumption also improved with employment and income conditions remaining firm.」

「During the cumulative second quarter of the fiscal year (1 April 2017 to 30 September 2017), Japan's economy was on a gradual recovery path, as private consumption also improved with employment and income conditions remaining firm.」

「During the cumulative first quarter of the fiscal year (1 April 2017 to 30 June 2017), Japan's economy was on a gradual recovery path, as private consumption also improved with employment and income conditions remaining firm.」

「During the fiscal year (1 April 2016 to 31 March 2017), Japan's economy was on a gradual recovery path, although private consumption remained weak, and uncertainty about the outlook continued due to concerns over slower growth in emerging Asian economies and the impact of policy trends following the US presidential election result, among other factors.」

「During the cumulative third quarter of the fiscal year (1 April 2016 to 31 December 2016), Japan's economy was on a gradual recovery path, but uncertainty about the outlook continued due to concerns over slower growth in emerging Asian economies and the impact of the US presidential election result, among other factors.」

「During the cumulative second quarter of the fiscal year (1 April 2016 to 30 September 2016), Japan's economy was on a gradual recovery path, with employment and income conditions remaining firm, although consumer sentiment continued to stagnate.」

「Amid uncertainty over the global economy and continued yen appreciation, corporate earnings and consumer sentiment remained stagnant.」