Japan's nominal GDP fell by 0.7% in fiscal 2002 for the second year-on-year decline in a row. The deflationary process continued to take its toll, with stock prices dropping to 20% of their peak level at the end of the 1980s bubble, and land prices slipping to 57% of their all-time high. Corporate bankruptcies during the term were the fourth-highest since World War II, while unemployment reached 5.4% in calendar 2002, the highest level since 1948, when compilation of statistics began.

Performances differed from one industry to another. Export-oriented sectors such as manufacturing, particularly the automotive industry, were supported by strong overseas demand. In contrast, industries with little or no export presence were severely affected by the economy's sluggishness. Among these was the construction industry, including housing, in which the Daiwa House group operates, where the market shrank yet again during the reporting period.

Overall construction investment was down 7.1% from the previous term, while new housing construction starts stood at 1,145,553 units, the lowest level since fiscal 1983. Construction of owner-occupied housing posted a third consecutive year of decline (down 3.1% at 365,507 houses), and construction of condominiums — was previously held up the housing market as a whole — slumped 11.0% to 198,432. In contrast to this evident further decline in housing acquisition by individual consumers, construction of housing units for rent continues to grow — by 2.8% year-on-year to 454,505 in the term under review — against the backdrop of low interest rates, declining land prices, and a weak stock market.

The near-future outlook for our group's business environment is generally gloomy, but thanks to the improvements we have achieved over the past two years, we have good hopes of pursuing rewarding business operations even amid a stagnant economic situation. We now have the sort of efficient corporate structure in place that will allow us to make major strides in business performance once Japan's economy gets properly back on the road to recovery. Please see our annual report for further details of performance in this and other operational segments.