New Year's Speech by President Miyahara

I wish you all a very Happy New Year! Hoping that all of you enjoyed very pleasant New Year holidays, I would like to take this occasion to say a few words at the outset of this year's business.

As you are already well aware, the world economy has been gripped by drastic upheaval since September last year. The financial crisis that began in United States has been expanding into a world economic crisis, and the dominant view now is that the economies of advanced countries like the United States, European Union (EU) members, and Japan will mostly experience negative growth in real terms during 2009. Moreover, economic growth will likely slow down in emerging economies such as China and India as well.

The rapid squeezing of the world economy has shaken the very foundation of the real economy around the globe, seriously impacting production, consumption, and transport, which is our own sphere of business.
In a concerted effort to cope with this extraordinary situation, which has been described as one not experienced since the Great Depression some 80 years ago, the world's major powers have successively come up with injections of public funds into financial institutions and emergency business stimulus measures to expand domestic demand.
In the United States, President-elect Barack Obama has already announced a set of economic measures reportedly amounting to $700 billion or even as much as $1 trillion. Some contend, however, that this will be far from sufficient, making it necessary to adopt an even more far-reaching business stimulus policy or a "second New Deal" policy involving more than twice as much spending as reportedly considered by Mr. Obama. Great expectations are being placed on his strong and speedy leadership.
Meanwhile, among the so-called BRICs (Brazil, Russia, India, and China), China has quickly hammered out a set of business stimulus measures for spending a total of 4 trillion yuan (?57 trillion) over the next two years with a view to expanding domestic demand. It is said that this country with its huge population of 1.3 billion needs to maintain annual economic growth of at least eight percent.
Spearheaded by President Hu Jintao, the Chinese government is expected to implement these measures with indomitable resolve. We are hopeful that this will also contribute to restoring demand for the marine transport of iron ore and other resources, which is currently at a standstill.
In Japan as well, we see an evident contraction of economic activity in various spheres. In particular, export-related industries find themselves in a very tough situation. The government is called upon to carry out appropriate economic measures earnestly at the earliest possible date, including the supply of funds necessary for corporate activities.
And so, this year is likely to become an extremely rigorous year. I must also point out that we are now experiencing just the beginning of a great many future difficulties because the shrinking world economy will affect the shipping business half a year or a year after it affects other industries. It is said that the faltering world economy will not hit bottom until the second half of next year 2010 at the earliest. In the meantime, demand will continue to shrink, and it will take a year or two more before the world economy recovers cruising speed. So that means we must be prepared for hard times over the upcoming three or four full years, which will be completely different from the last few favorable years.

To overcome this impending crisis, on January first 2009, I set up an Emergency Structural Reform Project that covers the entire NYK Group. Instead of merely confronting the coming difficulties with patched-up, this project aims to reorganize our business model under new circumstances of our own choosing and prepare for a leap forward to future stages.
As I said internally, this project consists of four reform committees, three for business units and one for an administration unit, and will continue for two years.

And please note that the subtitle for this new project is, "To overcome the harsh winter and successfully reach the Sea of Yosoro (Sea of Steady-Going)." The term "Yosoro" (Steady ahead!) is the command given by the captain when a vessel, after bypassing a dangerous spot by turning to the right or to the left, returns the wheel to its upright position and sails safely straight ahead. Similarly, we intend to overcome impending difficulties through the energy of the whole NYK Group and go forward under the command "Yosoro."
I will resign the president on April 1st this year and Mr.Kudo will succeed the president of NYK. After coming April, I hope all the Group members will enthusiastically continue this new project under new president Mr.Kudo.

When I announced the new medium-term management plan New Horizon 2010 in March last year, I emphasized its three basic pillars: Growth, Stability, and Environment. Although circumstances surrounding our management have undergone a drastic change, there is no change whatsoever in our management policy based on these three pillars. I believe that now is the very time to demonstrate the true worth of the stability that underlies New Horizon 2010. In the context of this stability, we have hoisted a strategy of "stabilizing our earnings through the acquisition of long-term contracts."
Our NYK Group has all along pursued a policy of attaching prime importance to medium- and long-term profits grounded in mutual trust with important customers, accruing those profits primarily from long-term contracts rather than from short-term profits from fleet operation in the spot market. Henceforth, we intend to hold fast to this policy, one that gives priority to long-term relationships with customers and applies not only to the bulk-energy transportation division but also to the liner, logistics, and other business divisions. This policy, with its "customer-oriented" attitude, forms the base of the NYK Group, so I would ask all NYK Group personnel to remind themselves of this policy, especially as we enter hard times.

Further, for more than 20 years the NYK Group has been devoting its energies to the development of non-shipping divisions. In fact, we included the "strengthening of comprehensive logistic strategy" in the growth targets of New Horizon 2010.
We intend to maintain our stable management by ensuring and fostering diverse operations such as overland transport, air transport, and logistics, which promise to become major spheres of business, rather than relying solely on marine transport, which is liable to be affected by market fluctuation.
I believe that this concept of a comprehensive logistic strategy will be appreciated afresh in the unfolding new age of business. I would like to point out to all NYK Group personnel engaged in those various operations that the time has arrived to give full play to your strengths. Let us do our best together!

As for the numerical targets of New Horizon 2010, I would like to revise them around March this year after carefully re-examining the world economy, exchange rates, and fuel prices.

Regarding "Environment," another of the basic pillars of New Horizon 2010, this year promises to be crucial, for the post-Kyoto Protocol framework will be determined by the International Maritime Organization (IMO)'s general meeting in November, and COP15 of the United Nations Framework Convention on Climate Change (UNFCCC) will be held in December.
At present, shipping is free of any restrictions on greenhouse gas (GHG) emissions. But the post-Kyoto Protocol framework is expected to impose certain restrictions on GHG emissions from ships, raising the possibility that the NYK Group management will also be impacted to no small extent, depending on the new framework. Accordingly, we regard Environment as one of the most challenging areas for our management.
Last year, I set in motion the NYK Cool Earth Project and strengthened our efforts to cope with environmental problems by inaugurating, among other projects, the Environmental Advisory Council and by making car carriers in sence that incorporate the use of solar power.
Although the NYK Group management is surrounded by severe circumstances, environmental problems remain as important as ever. Let us continue to strengthen the efforts of the NYK Group as a whole to properly deal with environmental problems.

All the topics I have mentioned so far may sound too serious for discussion in a joyful New Year's mood. Yet I have dared do so to impress upon each and every one of you the very rigorous prospects for this year.
Under these circumstances, the NYK Group Values - Integrity, Innovation, and Intensity - that I announced two years ago are becoming more and more important. At the first 3 I's World Meeting, held in November last year, we could reconfirm how far these values had permeated the activities of the NYK Group in various parts of the world. In this sense, the meeting was truly rewarding.
As I just said, it is in times of difficulty that the Group Values can demonstrate their true worth. Thus, we are planning to hold a similar 3 I's World Meeting on November 18 this year, and are already looking forward to active participation from various parts of the world.

Finally, as we have done at the start of every year, let us together pledge afresh to thoroughly ensure safety in all our operations by preventing major accidents throughout the year. The frequent pirate attacks in the Gulf of Aden last year must have caused difficulty for all the crewmen of our fleet and all the onshore personnel in charge of safety and taking adequate countermeasures. I would like to take this occasion to urge all of you to join together in ensuring safety throughout 2009.
In conclusion, let me pray in all sincerity for the health and happiness of all of you working for the NYK Group and your families during this new year.