Mid-term Business Strategy

 We have identified the following factors behind the deterioration of our business results:

 The first is the bursting of the IT-bubble economy. The IT industry, which had been especially robust in the U.S., plunged into recession from the second half of 2000, and the global IT industry has yet to recover from the aftermath.

And as an added blow, the September 11 terrorist attacks triggered an unprecedented concurrent recession in all four focal economic zones (i.e. Japan, the Americas, Europe and Asia), which is still gripping the world.
Meanwhile, the industrialization of former communist countries such as China and the eastern European nations, is prompting manufacturers to transfer their production sites to these areas, not only from Japan but from the U.S. and western Europe. This has accelerated the hollowing-out of domestic industries and prompted a dramatic change in the industrial structure of our country, as well as calling-on deflation of our economy.

 These changes have had a great impact on our business foundations, and what were once our strengths have now turned into our weaknesses.

 For instance, cross-holdings of shares that used to produce massive hidden gains that strengthened and stabilized our financial position are now producing hidden losses due to the weak stock market.

 Also, Japan's stable employment and unified salary system have caused our labor systems to lose flexibility as well as inflating labor costs to the highest level in the world, causing our competitiveness to deteriorate.
Furthermore, in regards to our European business, where our production facilities are centered in the U.K., our cost competitiveness continues to be affected by the weak euro.