News Releases in 2008

January 7, 2008

I wish you all a very Happy New Year!

Hoping that all of you greeted the New Year with renewed vigor, I would like to take this occasion to say a few words at the outset of this year's business.

The year 2008 corresponds to the first of the 12 signs in the Chinese zodiac. The essential meaning of the Chinese character for this sign is said to be the "state of a new life emerging in a seed." Therefore, I think that this New Year's is quite fitting for marking the fresh start of business.

2. Review of the Situation in the World and Japan

First of all, as we start the new year, I would like to refer to the circumstances surrounding us.

This year, a number of important political events are scheduled. Presidential elections will take place in Taiwan and Russia, and Americans will elect a new president in November.

Japan's political situation, meanwhile, is marked by the so-called "twisted Diet." That is, the ruling coalition lacks a majority in the Upper House (the House of Councilors), which means that a Lower House (the House of Representatives) election could be held at any time.

As we are all dependent on the global economic situation, we also need to keep close tabs on the major currents of politics.

Turning to the world economy, financial problems arising from the subprime-mortgage crisis are affecting the U.S. economy, a prime mover of the world economy, as frequently reported by mass media. It is said that the U.S. economy will continue to decelerate at least in the first half of this year. The Japanese economy, meanwhile, is moving smoothly at present, but it is feared that surges in crude oil prices - as it is said on the news this morning that they have exceeded $100 per barrel in New York - might have negative impacts on capital investment and personal consumption.
On the other hand, smooth economic growth continues in the European Union (EU), which is expanding the favorable effects of economic integration.

As for the BRICs - Brazil, Russia, India, and China - the Chinese economy in particular continues to grow at a rapid annual pace of about 10%, which may well be described as overheating. At present, China is pushing ahead with nationwide preparations for the Beijing Olympic Games, scheduled to start August 8 this year. Various major projects have been launched in India as well. It is projected the economies of the four nations will continue to grow steadily even if that of the U.S. slows down.

All in all, the world economy is expected to keep growing smoothly on the whole even though the U.S. economy is not without cause for concern.

3. Current State of the NYK Group

Next, turning to the current state of our NYK Group, business results for the midterm period ending in September last year turned out to be favorable, chalking up all-time records in revenues and profits. For the full fiscal year ending in March this year, we also expect record revenues and profits. These remarkable achievements have been made possible by the support of our customers and business partners in their dealings with the NYK Group, as well as by the great efforts from all of you who work for the NYK Group. I am deeply grateful to everyone.

As for the 2008 fiscal year starting in April, the global demand for transport will continue to be robust against the background of a smoothly growing world economy, especially as it involves BRICs. Nevertheless, we cannot afford to be overly happy with the booming market for marine transport. As our many predecessors have persistently noted, we need to prepare for the next leap forward at this very time when we are enjoying favorable business results. It is my earnest hope that for the NYK Group bent on operating as a logistics integrator, this year will mark the start of a further advance especially in the areas of overland logistics and airfreight transport.

The NYK Group's ongoing medium-term management plan, New Horizon 2007, will come to a close in March this year, and a new medium-term management plan now in the making will get under way from April. For all of us, this plan will point the new way the NYK Group should go from fiscal 2008. We are now preparing to announce the new plan at the end of March.

Next, I would like to take up several problems the NYK Group needs to address this year.

4. Problem 1: Fuel Expenses

First of all, I must naturally take up measures to cope with soaring bunker-oil prices. The bunker-oil price was set at US$164 per ton in the NYK Group's business results for the fiscal year ending in March 2003, five years ago. By contrast, for the second half of the current fiscal year 2007, the bunker-oil price was originally projected at US$430 per ton. But the price of bunker oil in Japan and Singapore has climbed close to US$500. And now that the fuel-oil price has reached the never-expected US$500 level, I think we must consider managing the NYK Group with the recognition that we have entered an age of such high fuel-oil prices.

The NYK Group is expected to purchase about 6 million tons of fuel oil during fiscal 2007. If the present price of US$500 is simply compared with the US$164 price of five years ago, while ignoring a difference in purchase volume, a tentative estimate shows a rise of about 230 billion yen in fuel-oil expenses. It is also estimated that 2007 fuel-oil expenses will increase about 80 billion yen over the previous year.

In the "Save Bunker Plus" campaign to reduce fuel-oil expenses, which was further stepped up last year, we went so far as to reexamine sailing schedules and ship-operation expenses in an effort to pare down related costs in addition to the even more elaborate management of fuel consumption for fuel-cost reduction. Group members have even been asked to wring cleaning cloth dry in a bid to recover fuel oil.

At the same time, closer shore - sea communication has been requested in this campaign in an effort to simultaneously ensure safety and cost reduction. The efforts of everyone concerned for the promotion of this campaign on a company-wide scale are highly appreciated, and I do hope that this campaign will be reinforced further this year by incorporating additional innovations.

Moreover, I would particularly like to reemphasize that the systems so far maintained no longer suffice to enable containerships consuming massive quantities of fuel to continue operating at a profit. If a single containership daily consumes 200 tons of fuel costing US$500 per ton, its fuel cost will reach as high as US$100,000 in just a day. This means that a drastic change is occurring in the traditional business model of marine transport.

Therefore, all of you, in full awareness of this drastic change, are requested to make every effort for bold technological innovations such as the development of the new types of engines and ships.

Moreover, considering environmental protection, which I will address shortly, I would ask all of you to strive for rationalization, say, in making the slowdown of voyage speed prevail. A 10% slowdown of voyage speed will produce more than a 25% saving of fuel oil and reduction of CO2 emissions. In addition to these measures, steady efforts are also called for to improve business patterns, efforts such as reviewing the freight-rate structure while obtaining customers' understanding.

5. Problem 2: Environmental Protection

The second problem is the need to continue addressing the issue of protecting the environment. Over the years, we have worked hard to ensure both safety and environmental protection as the very basis for the fulfillment of our corporate social responsibility (CSR).

Reportedly, the issue of environmental protection will be a main topic on the agenda at the Group of Eight summit meeting scheduled for this year at Lake Toya in Hokkaido. As symbolized by the awarding of the 2007 Nobel Peace Prize to both former U.S. vice president Al Gore - also winner of an Academy Award for An Inconvenient Truth, a highly influential documentary film on global warming - and the United Nations' Intergovernmental Panel on Climate Change, the efforts of nations and corporations to curb global warming are progressing faster than expected.

In Japan as well, we see that some corporations have begun to announce targets for environmental protection alongside financial targets as part of their management plans.

In view of such moves, the NYK Group needs to squarely face up to the environmental problem without lagging behind. Last August, NYK set up a management strategy committee for environmental protection. The environmental problem is by no means a simple technological problem. All members of the NYK Group are called upon to deal with the environmental problem with a renewed awareness that it is also the biggest economic issue for group management.

6. Problem 3: CSR

Third, as regards the CSR of our NYK Group I have consistently emphasized that all group members are requested to recognize afresh the importance of CSR.

CSR covers an extensive range of matters. But the problem the NYK Group needs to address first is the guarantee of safety, which is a perpetual top-priority task. The provision of safe and reliable logistics services free from accidents constitutes the very basis of the operations and existence of the entire NYK Group. All group members are called upon to reconfirm their safety measures.

In Japan, meanwhile, scandals and acts of falsification have been disclosed in some corporate and governmental quarters. The NYK Group has so far stepped up efforts to ensure compliance with laws and regulations. I would like to take this occasion to ask all member firms in the NYK Group around the world to again renew their awareness of the importance of compliance.

The term CSR tends to be taken as a high-sounding slogan. But it simply means the awareness that corporations are also citizens in our society. We should always consider together what the NYK Group should do to be a good citizen and continue earning society's trust and respect.

Moreover, the internal control and monitoring system, the so-called J-SOX for corporations that is based on Japan's Financial Instruments and Exchange Law, will be enforced from April this year. Although I think NYK Group members concerned with the new system are now doing their utmost for final preparations, I would like to take this occasion to ask all of you for cooperation so that our group will be able to get off to a smooth start in the implementation of the new system.

7. Problem 4: Group Values

Fourth, let NYK Group Values further permeate the group this year. Exactly a year ago, I took this occasion to announce the NYK Group Values - integrity, innovation, and intensity. As I said then, what is important above all is for all of you to dedicate your daily activities to making these abstract concepts concrete.

During the past year, we have pushed ahead with various movements, such as Value Jam, both in Japan and abroad to facilitate the spread of the Group Values. I am hopeful that in the process of actually applying the Group Values - integrity, innovation, and intensity, or "the 3Is" - the NYK Group will achieve greater progress and the lives of everyone working for the NYK Group will become even more enriched and enjoyable.

From this year, I would like to hold a World 3Is Meeting as a place to propose specific moves for spreading the Group Values, to announce the results of such moves, and to promote exchanges regarding the 3Is campaign. I am looking forward to even greater participation from all of you in this campaign.

8. Conclusion

On the occasion of this New Year's greeting, I have set forth some of my thoughts.

In concluding my greetings, let me pray in all sincerity for the health and happiness of all of you working for the NYK Group and your families during the new year.