The Economic Situation and Business Climate in Japan
Nearly all of the Kokuyo Group's revenues are derived from markets within Japan. Consequently, changes in the Japanese business climate may impact operating results.
Increases in Raw Material Prices
The main raw materials used by the Kokuyo Group include base paper, plastics and steel products. The Kokuyo Group purchases its raw materials from manufacturers in Japan and overseas. Therefore, there is a risk that higher raw materials prices resulting from sharp increases in crude oil prices, rapidly increasing demand in China, and other factors could affect the Group's operating results.
Development of New Products
In its development of products and services the Kokuyo Group aims to create new products, services and businesses in both established and new business domains. However, it is not always possible to accurately predict which new products and technologies will be popular in such markets. If sales of such products are unsuccessful, there is a possibility that future growth and profitability may decline, with a negative impact on operating results.
Businesses such as the Kokuyo Group's office supply mail order business depend on communications networks linking computer systems. There is a risk therefore, that a natural disaster or other unforeseen event could cause the networks to cease functioning, making it impossible to process product orders.
In addition, there is a risk that Kokuyo's internal computer system could be infiltrated by unauthorized means, and information on the Website altered or important data fraudulently obtained. Infection by a computer virus could also lead to the loss of important data. If such a situation occurs, there is a risk of a negative impact on operating results.
Protection of Personal Information
Kokuyo takes all possible measures in the management of personal information, but there is a risk that information could leak due to unforeseen circumstances. Such an eventuality could result in a decline in the Group's brand value and give rise to significant financial liability
In the event of a natural disaster such as an earthquake or typhoon, there is a risk that the Kokuyo Group's production, retail and logistics bases could sustain heavy damage.
There is a risk that defects could occur in the products or services provided by the Kokuyo Group. In the event of product liability compensation, product recalls or other similar situations arising, a decline in the Group's brand equity and significant financial liability could result.
Significant Changes in Overseas Economies
The Kokuyo Group sells, manufactures and procures certain products internationally, particularly in Asia. There is a risk that changes in the political, economic or social situation in any of these regions or changes in local regulations could have a detrimental impact on operating results.
Fluctuations in Foreign Exchange Levels
Some of the Kokuyo Group's exports and imports of products and imports of raw materials are denominated in foreign currencies. The Kokuyo Group also owns foreign currency-denominated assets. Consequently, large fluctuations in foreign exchange markets could impact operating results and other items in the financial statements.
Fluctuations in the Value of Marketable Securities
The Kokuyo Group holds securities for investment purposes. There is therefore, a risk that a downturn in the securities markets could result in revaluation losses being incurred for such securities.
The Kokuyo Group is subject to a number of statutory environmental regulations with regard to the various types of waste generated during production processes and emission thereof into the atmosphere and water. The Group has historically undertaken a range of activities aimed at environmental preservation, including compliance with such statutory environmental regulations. However, should additional obligations for compliance with environmental laws and contribution to environmental reform give rise to additional expenses, such expenses could impact on operating results.