Risk Factors

The following section describes risks associated with the businesses of the Group, which could have a material impact on investor judgment. The Group (the Company and its consolidated subsidiaries) is aware of the risks and will strive to avoid them, or to deal with them if they emerge.
This section includes forward-looking statements, which are based on our judgments at the date of submission of the securities report. The following is not intended to include all the business risks of the Group.


(1) Natural disasters

The Group has prepared measures against possible natural disasters, including major earthquakes and typhoons. However, if large-scale natural disasters occur, and if physical injury and business interruption are caused, the Group's performance and financial position could be adversely affected.


(2) Accidents

The Group has prepared measures against possible interruptions, including accidents, disasters caused by illegal activities such as terrorist attacks, failures of equipment and information systems, and problems caused by the inadequate quality of food and construction work. However, if serious accidents result in physical injury and business interruption, the Group's performance and financial position could be adversely affected.


(3) Compliance

The Group complies with applicable laws and regulations and follows its business ethics in its businesses, including railway operations and the real estate business. However, if the Group's reputation is harmed as a result of violations of laws and regulations, or business ethics, the Group's performance and financial position could be adversely affected, with a loss of customers and business partners.


(4) Changes in the business environment

(ⅰ) Legal requirements

The Group's businesses, including railway operations and real estate business, are governed by laws and regulations, including the Railway Business Act and Building Standards Act. If the applicable laws and regulations change, the Group's performance and financial position could be adversely affected due to increases in expenses and restrictions on activities in association with compliance with revised laws and regulations.


(ⅱ) Economic situation

The Group's management resources are concentrated in the areas served by the Company's railway lines. Declines in consumer spending, falls in the population, and demographic changes (declining birth rates and an aging population) in these areas could reduce the Group's revenue, which would adversely affect the Group's performance and financial position.
The Group has developed the three-year medium-term management plan and is implementing initiatives under the plan. However, the plan may not be implemented as expected or may not produce the expected earnings and effects due to changes in the economic situation. In this case, the Group's performance and financial position could be adversely affected.


(ⅲ) Decline in land prices

The Group owns extensive real estate (for sale and for operations) necessary for business. If real estate prices fall due to a sluggish real estate market or other factors, the Group's performance and financial position could be adversely affected through declines in revenues and the posting of a valuation loss and a loss on sales.


(ⅳ) Decline in stock prices

The Group has investment securities, including stocks, and its corporate pension assets and retirement benefit trusts include numerous stocks and bonds. A sluggish stock and bond market and inadequate equity capital at investment destinations could adversely affect the Group's performance and financial position through the posting of a valuation loss and a loss on sales.


(ⅴ) Rising interest rates

The Group has raised the funds necessary for its railway operations and other businesses through bonds and borrowings from financial institutions, and the ratio of its interest-bearing debt* to its total assets is high. The Group raises funds at fixed interest rates and curbs interest-bearing debt. However, if interest rates rise, or if the Company is downgraded by rating agencies, the burden of interest could increase, and financing conditions could worsen, which would adversely affect the Group's performance and financial position.


(ⅵ) International situation

The Group operates not only in Japan but also overseas, especially in Vietnam. Conflicts, wars, acts of terrorism, epidemics, and other international events could adversely affect the Group's performance and financial position.
Changes in exchange rates could adversely affect the Group's performance and financial position in yen.


*Interest-bearing debt: the sum of borrowings, bonds, and commercial paper