Risk of Profitability Pressure from Soaring Crude Oil and Raw Material Prices

「Companies appeared cautious about capital investment due to persistently high material and energy prices. In addition, higher procurement costs and personnel expenses resulting from rising prices have continued to affect corporate earnings.」

「Material prices also remain elevated, and the outlook continues to be uncertain because of the conflict in Ukraine, heightened tensions in the Middle East and preparations for reciprocal US tariffs.」

「Although the pace of price increases slowed toward the second half of the fiscal year and real wages showed signs of improvement, despite the effects of crude oil price trends and the weaker yen, higher material prices and personnel costs continued to affect corporate earnings.」

「Meanwhile, the rise in import prices caused by the weaker yen affected prices of daily necessities, and consumer sentiment showed some caution. Material prices also remain high, while uncertainty about the outlook continues amid the increasingly tense situation in Ukraine and the Middle East and preparations for reciprocal US tariffs.」

「The environment surrounding our group is as follows. In Japan, some industries made active capital investments, but concerns have spread over the implementation of reciprocal US tariffs, creating major uncertainties about the outlook, particularly for export-related industries such as automobiles and construction machinery. In addition, concerns about an economic slowdown continue because of higher resource and raw-material prices resulting from the destabilization of international affairs, symbolized by the US-China confrontation and the conflicts in Ukraine and Palestine.」

「In the East, the semiconductor market continues to be sluggish. Although other manufacturers also intend to move toward increased production, capital investment remains weak, partly because of recent price inflation.」

「Meanwhile, concerns about an overseas-led economic slowdown continue amid the destabilisation of the international situation symbolised by tensions between the United States and China and the conflicts in Ukraine and Palestine, the impact of the weaker yen resulting from the widening Japan-US interest rate differential following US rate hikes, and the global surge in resource and raw material prices.」

「In the East, earnings have been significantly pressured by higher crude oil prices and other energy-related costs, and signs of weakening investment appetite have begun to emerge. In the steel-related sector, the outlook for infrastructure and construction-related businesses has become uncertain due to higher input costs, while in the semiconductor-related sector, upstream companies have stagnated because of weak sales of personal computers and mobile phones.」

「Meanwhile, the prolonged conflict in Ukraine and economic sanctions against Russia, the impact of the weaker yen resulting from the widening Japan-US interest rate differential, the global surge in resource and raw material prices, and concerns about an overseas-led economic slowdown resulting from lower production due to supply constraints and logistics disruptions, although somewhat abated, continue.」

「Higher prices for crude oil, LNG and other raw materials resulting from the prolonged invasion of Ukraine by Russia, together with yen depreciation, have prolonged difficult economic conditions. The outlook for industrial production and capital investment by companies affecting our performance is also expected to remain uncertain.」

「Meanwhile, concerns over an overseas-led economic slowdown have continued due to the prolonged conflict in Ukraine and economic sanctions against Russia, the impact of a weaker yen resulting from the widening interest-rate differential between Japan and the United States, globally higher resource and raw material prices, and lower production activity resulting from supply constraints and logistics disruptions.」

「The sharp depreciation of the yen against the US dollar, driven by the widening US-Japan interest-rate differential, together with higher resource prices resulting from the overseas factors described above, is having a significant impact on the domestic economy, particularly corporate prices and consumption. Difficult economic conditions are expected to continue, and the outlook for industrial production and capital investment by companies affecting our performance is expected to remain unpredictable.」

「The impact has continued from the prolonged conflict in Ukraine and economic sanctions against Russia and China's “zero-COVID” policy, including globally higher resource and raw material prices and lower production activity resulting from supply constraints and logistics disruptions.」

「In addition, higher prices for crude oil, LNG and other raw materials following Russia's invasion of Ukraine, together with yen depreciation, have prolonged difficult economic conditions. The outlook for industrial production and capital investment by companies affecting our performance is also expected to remain uncertain.」

「Meanwhile, signs of stagnation were observed mainly in manufacturing as a result of higher resource and raw-material prices and the impact of supply constraints on parts and other items, particularly semiconductors.」

「Manufacturing companies' business performance has remained weak, against a backdrop of weak external demand due to domestic labor shortages, higher resource and raw material costs, escalating trade friction between the United States and China, heightened tensions in the Middle East and other uncertainties in overseas political and economic developments.」

「Manufacturing companies' business performance has remained weak, against a backdrop of weak external demand due to domestic labor shortages, higher resource and raw material costs, escalating trade friction between the United States and China, heightened tensions in the Middle East and other uncertainties in overseas political and economic developments.」

「In addition to domestic labor shortages and higher resource and raw material costs, uncertainty over overseas political and economic developments, including escalating trade friction between the United States and China and heightened tensions in the Middle East, including Iran, emerged as a major risk factor.」

「Although domestic labor shortages, higher resource and raw material costs, volatility in equity and foreign exchange markets reflecting uncertainty over overseas political and economic developments, including trade friction between the United States and China, and the potential slump in domestic consumption following the consumption tax increase scheduled for October present domestic and overseas risks to the outlook, economic conditions are expected to remain on a recovery trend for the time being.」

「Although there are some concerns about labor shortages in Japan, higher resource and raw-material prices, trade friction between the United States and China and elsewhere, and other factors, we expect stable economic expansion to continue for the time being.」

「Meanwhile, crude oil and raw-material prices have recently begun to rise sharply and are beginning to pressure companies' earnings. Although there are uncertainties regarding the outlook, conditions overall remained firm.」