For the past three years I have been heading a drive to reform the financial structure of the Daiwa House group, principally through a focus on improving cash flows, with the ultimate goal of maximizing shareholder value.

The Japanese economy has stagnated to the point where many companies exhibit chronic indebtedness, and the total interest-bearing debt burden of the private sector has been reduced by a mere 13% over the last six years. In this situation, it is all the more vital for us to strengthen our operating cash flow to build the sort of firm financial base that allows for further development of our group. Only by so doing can we achieve our top-priority goal of raising our earning power.

Over the last few years, we have pushed through a wide range of measures to realize improved financial health, including the recognition of more than ¥80 billion in extraordinary losses, mainly from the write-down of inventories and securities holdings, the revaluation of landholdings at fair market prices, the repayment of short- and long-term bank borrowings, and drastic cost-cutting. In the reporting period, we set further milestones on the road to financial health with two bold management decisions.

Firstly, in the face of the present severe business conditions against the backdrop of a decline in profitability on landholdings, we took vigorous steps to dispose of land and buildings held for sale, thanks to which we succeeded in achieving our target of debt-free management at the non-consolidated accounts level.

Secondly, we applied stricter standards to the valuation of real estate, equities, and accounts receivable. In doing this, we have completely eliminated a major negative factor that would have affected our business performance in the future. As a result, we posted ¥210 billion under extraordinary loss account including loss on retirement benefits. We carried out lump-sum amortization of unrecognized actuarial shortfall and changed other accounting policies on discount rates of plan assets.

The Japanese economy is likely to remain sluggish for the foreseeable future. However, we intend to put this difficult period to good use by harnessing the excellent management and staff morale that result from target achievement, and by leveraging our sound balance sheet — with its low risk of price fluctuation on assets — to expand our sphere of corporate activity with more sincerity and further enhance our business performance.