Business and Other Risks - Economic and Financial Market Trends

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. While the Group is collecting information on exchange rate fluctuations and sharing them within the Group, there is a risk that rapid exchange rate fluctuations will affect sales and profit or loss of overseas businesses, leading to a decline in the price competitiveness of products and services provided overseas and have a major impact on the import of parts and materials from overseas and on the export of products and services. 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.

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