Message from the President Feb.2008

a monthly magazine for our employee Feb.2008

Trends in the Business Climate and Corporate Activities

Accordingly, many different viewpoints exist on this issue. Some would argue that even if the U.S. economy began to slow down, there’d be no large effect on the global economy, because the real economies of the so-called BRICs (Brazil, Russia, India and China) and other newly emerging countries such as Vietnam, Thailand and South Africa are expanding. (In other words, according to decoupling theory, linkage between the U.S. economy and the global economy is decreasing.) Conversely, others would argue that in fact the reason why the emerging countries’ economies are performing well is because they depend to a large extent on exports to the United States, and if the U.S. economy slows, so in turn will the global economy. We’ll have to wait and see which theory is ultimately proved correct.

If the global economy does slow down, it’s reasonable to predict this would affect profits and investment trends among Meitec’s main clients: major Japanese manufacturers. If this happened, not only would cost cuts occur, but reductions in technological development investments would also be a possibility. As a result, Meitec could feel effects in terms of order trends, as well as the risk of a decreased working ratio among our engineers. On the other hand, the recruiting environment might improve as a result of reduced investment in technological development among major manufacturing industry companies. Looking back over more than 30 years of Meitec’s history, we’ve managed to grow continually through a cycle of economic upturns and downturns excluding only the bursting of the bubble economy, so that now we have a team of engineers numbering approximately 6,000. Therefore, we believe that even if an economic slowdown occurs, while we’d naturally have to assume that times would become more difficult from a business perspective, it’s important for us to make management-based judgments for the Company concerning how much risk we should take on, and whether to continue career support incorporating corporate growth drivers such as recruitment and training. Even if influence on the global economy were minimal, and no large effects were experienced in the business climate, we’d make careful judgments concerning the continued building of the Group’s growth model (a model incorporating linked growth among each of the Meitec Group companies) currently undertaken by all companies across the entire Group.

In addition to the subprime mortgage financial crisis, material and energy costs continue to soar, and actual demand from emerging countries continues to increase, while speculative capital also has an effect on the economy. In any case, as the economies of each country continue to grow more closely linked, economies will become more complex, and problems won’t remain localized in one country. Thus, predictions about the markets and environment in which companies are situated will become increasingly difficult. As the future becomes less and less clear, however, it becomes increasingly important to continue to push forward to implement what needs to be done as a company, without leaving ourselves at the mercy of changes in the market or environment. Keeping this in mind, we believe that the major Japanese manufacturing industry companies that make up Meitec’s main clients have become aware that continuing investment in technological development will be vital to sustain growth in their own companies, and over the last 10 to 15 years, many of these companies have undertaken structural reform to execute this on a continuing basis. Accordingly, unless economic conditions worsen significantly, our current prediction is that probably more companies will continue to invest in technological development than not. At the same time, we believe we shouldn’t be overly influenced by this optimistic perspective.

Markets and environments change; that’s an undeniable truth. It’s the reason why the sustained creation of strong and flexible structures and frameworks is the most crucial theme for corporations and individuals.

February, 2008

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