ITOCHU Corporation 2009 BIAC Business Roundtable Global economic growth: How deep will it fall and when will it bounce back? Sumitaka FUJITA ITOCHU Corporation May 21, 2009

ITOCHU Corporation 1 Figure 1 Japan’s industrial production has fallen sharply

ITOCHU Corporation 2 Figure 2 Negative economic growth continues

ITOCHU Corporation 3 Our main scenario for economy of Japan and Asia  How deep will it fall? □ Industrial production has fallen two-thirds from its peak a year ago. □ Negative economic growth for three quarters since the 2Q of 2008  When will it bounce back? □ Likely to hit the bottom during the 1Q and 2Q of 2009 □ Start to recover from the 3Q of 2009 ⇒ but moderate recovery

ITOCHU Corporation 4 Background 1) End of the sharp falls in exports of Asian countries ◇ The sharp falls in global demand for automotives and housing investments have come to an end. ◇ The steady progress of inventory adjustment in Western economies 2)Positive effects of economic stimulus packages 3)Losses from bad loans in Asia are smaller than those in West ◇ The negative impact on demand in Asian countries from reluctance by banks to extend new loans is not as severe as it is in Western countries.

ITOCHU Corporation 5 Background 1) End of the sharp falls in exports of Asian countries ◇ The sharp falls in global demand for automotives and housing investments have come to an end. ◇ The steady progress of inventory adjustment in Western economies 2)Positive effects of economic stimulus packages 3)Losses from bad loans in Asia are smaller than those in West ◇ The negative impact on demand in Asian countries from reluctance by banks to extend new loans is not as severe as it is in Western countries.

ITOCHU Corporation 6 Figure 3 End of the sharp falls in exports JapanChina

ITOCHU Corporation 7 Background 1) End of the sharp falls in exports of Asian countries ◇ The sharp falls in global demand for automotives and housing investments have come to an end. ◇ The steady progress of inventory adjustment in Western economies 2)Positive effects of economic stimulus packages 3)Losses from bad loans in Asia are smaller than those in West ◇ The negative impact on demand in Asian countries from reluctance by banks to extend new loans is not as severe as it is in Western countries.

ITOCHU Corporation 8 Figure 4 Economic stimulus packages

ITOCHU Corporation 9 Figure 5 Car sales is bottoming out World total

ITOCHU Corporation 10 Background 1) End of the sharp falls in exports of Asian countries ◇ The sharp falls in global demand for automotives and housing investments have come to an end. ◇ The steady progress of inventory adjustment in Western economies 2)Positive effects of economic stimulus packages 3)Losses from bad loans in Asia are smaller than those in West ◇ The negative impact on demand in Asian countries from reluctance by banks to extend new loans is not as severe as it is in Western countries.

ITOCHU Corporation 11 Figure 6 Amount of reported write-downs of Financial Institutions

ITOCHU Corporation 12 Other points 1) Asian economy to be decoupled from West ◇ The housing bubble in Asia is much smaller than that in West ◇ The enormous potential demand in China and India 2) Economy of Japan (Concerns) ◇ Sluggish consumer spending due to excessive wage restraint and decreasing population (Positive elements) ◇ Unexpectedly early economic recovery ? due to early capital spending adjustment