Business and Other Risks
1. Economic and Financial Market Trends
1-1. Economic Trends in Key Markets
The Fujitsu Group provides ICT services, server and storage products, network products, as well as semiconductors and other components, to clients in corporate and public institutions, as well as consumers in Japan and every region of the globe. Hence, sales and income generated from these operations are greatly affected by economic conditions and/or sudden changes in the supply and demand balance in each respective market. The economic trends and/or sudden changes in the supply and demand balance in our key markets, namely Japan, North America, Europe, and Asia (including China), can significantly impact Fujitsu Group operations. In a bid to respond to such market changes, the Group continuously implements structural reforms. However, drastic market changes could force us to enact structural reforms on a far greater scale than initially expected, resulting in a temporary increase in related expenses.
1-2. Exchange Rates, Interest Rates, and Capital Markets
The Fujitsu Group is expanding its business outside Japan. As a result, sudden fluctuations in US dollar, euro and British pound exchange rates and other factors could have a significant impact on sales and income, resulting in such factors as the lowering of competitive pricing for the services and products that we deliver outside Japan. Sudden fluctuations in exchange rates can also affect the cost of components and materials that we import from outside Japan, as well as the various products that we export. In addition, with respect to assets held by the Group outside Japan, as well as liabilities, there is a possibility that exchange rate fluctuations could lead to depreciation of assets and/or appreciation of liabilities.
The Fujitsu Group also has interest-bearing loans which include debt directly impacted by interest rate fluctuations. Consequently, rising interest rates could increase borrowing costs.
Further, stock market trends in and outside of Japan have a substantial effect on the value of Group stockholdings in other companies and the management of pension assets. Weak stock market performance could thus force us to incur losses on the devaluation of marketable securities held or a reduction in pension assets, exposing the Group to the risk of higher valuation losses or additional pension obligations.