1. 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

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

3. ITOCHU Corporation 2 Figure 2 Negative economic growth continues

4. 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

5. 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.

6. 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.

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

8. 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.

9. ITOCHU Corporation 8 Figure 4 Economic stimulus packages

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

11. 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.

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

13. 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