General Condition of the Market
From 2002 onward, there was unprecedented and continuous growth in the world economy and the Japanese economy. The machine tool industry also saw dramatic growth, and in 2007 the total value of orders of the Japan Machine Tool Builders' Association (JMTBA) reached approximately 1.6 trillion yen, the highest figure on record.
In Japan and in European countries there were strong demands relating to complex, high-accuracy machining, so there was a high level of demand for the latest, highperformance machine tools, and we also made good progress with replacing aging equipment. Meanwhile, in countries such as the BRICs (Brazil, Russia, India and China) and elsewhere, which were undergoing rapid economic growth and industrialization, together with an improvement in people's standard of living, there was an increase in demand for high-performance Japanese machine tools, and the machine tool market was rapidly expanding.
In the first half of FY 2008, despite concern over the effect of soaring crude oil and raw material prices on corporate profits, we maintained a good level of orders due to favorable business results of companies in each country leading to very strong investment in plant and equipment. However, in the second half, the financial crisis that originated in the United States had grave and serious effects on the real economy, including a contraction of credit in all countries, and effects on consumption, investment, employment and trade.
In Japan, too, there were major effects: the deterioration in companies' financing due to the contraction of credit, the clampdown on the profits of exporting companies caused by the abrupt rise in the value of the yen, and the sudden collapse in car sales. Particularly since October last year, there has been a rapid decline in investment in plant and equipment both in Japan and overseas and we have come up against a sudden fall in orders. As a result of this, the value of machine tool orders in 2008 ended up with 970 billion yen, an 39.4% decrease from the previous year.
