By size : Large enterprises and SMEs took a downturn for two months in a row

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1 TDB Trends Research (Research & Summary for May 2018) Domestic economy worsened for two months in a row due to rising crude oil prices ~ Retail industry significantly worsened because of weak consumer confidence ~ keiki@mail.tdb.co.jp (Companies researched: 23,157 ; Valid responses: 10,001 ; Response rate: 43.2 %; Survey start date: May 2002) < Overview of May 2018: Economy continues at a standstill > The economic diffusion index (DI) in May 2018 was 49.4, down 0.4 points from the previous month, and worsened for two months in a row. The domestic economy remained at a standstill, due to an increased burden of costs for companies and individuals caused by rising crude oil prices, amid growing uncertainty over the environment surrounding the Japanese economy. By industry : The retail industry significantly worsened due to an increased cost burden and weak consumption caused by rising crude oil prices. By size : Large enterprises and SMEs took a downturn for two months in a row. <Future outlook: Possibility of change in expansion trend > While the domestic economy is expected to be led by exports and capital investment, it is necessary to observe carefully the possibility of the emerging overseas risks putting downward pressure on business activity By region : While eight of the ten regions worsened, improvement was not seen in any region After 3 months After 1 month (Prediction ) After 6 months After 1 year May Jun July Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Jan Feb Mar Apr May Projected future DI Change from May *: Economic DIs are calculated based on the structural ARIMA model, in which economic statistics are incorporated to the ARIMA model. 1

2 Economic Diffusion Index (Economic DI)1/2 Total Large Firms Small to Medium-sized Firms Micro Firms Agriculture,Forestry,Fisheries Finance Construction Real Estate Food,BEWerages,Livestock Feed Construction Materials,Furniture, Ceramics,Stone and Clay Products Pulp, Paper and Paper Products Publishing,Printing Manufacturing Chemical Steel,Nonferrous Metals,Mining General Machinery Electrical Machinery Transportation Machinery,Equipment Precision Machinery, Medical Instruments and Equipment Other Total Food,BEWerages Construction Materials, Furniture,Ceramics, Stone and Clay Products Wholesale Paper Products,Stationery,Books Chemical Recycled Resources Steel,Nonferrous Metals, Mining Products Machinery,Equipment Other Total

3 Economic Diffusion Index (Economic DI)2/2 Food,BEWerages Drugs,Sundries Furniture Retail Electrical Household Appliances, Information Machinery and Equipment Motor Vehicles,Motor Vehicle Parts Special Merchandise Various Merchandise Other Total Transportation,Warehousing Restaurants Postal,Telecommunications Electricity,Gas,Water,Heat Leasing,Rentals Lodging, Hotels Recreation Broadcasting Service Maintenance,Guarding,Testing Advertising Information Labor Dispatching Special Services Medical,Welfare,Public Health Education Other Total Other Hokkaido Tohoku kitakanto minamikanto Hokuriku Tokai Kinki Chugoku Shikoku Kyushu

4 Appendix 1.Research Subjects(Companies Researched 23,157 ; Valid responses: 10,001 ; Response rate: 43.2%) Appendix 1.Region Hokkaido Tohoku kitakanto Tokai Kinki Chugoku 1,108 1, minamikanto 3,243 Shikoku 287 Hokuriku 565 Kyushu 724 Total 10,001 2.Industry (10 Industries 51 Lines of business) Agriculture,Forestry,Fisheries Finance Construction Real Estate , Retail Food,Beverages Drugs,Sundries Furniture Food,Beverages,Livestock Feed Electrical Household Appliances,Information Machinery and Equipment Motor Vehicles,Motor Vehicle Parts 67 Construction Materials,Furniture,Ceramics,Stone and Clay Products 217 Special Merchandise 130 Pulp, Paper and Paper Products 97 Various Merchandise 45 Publishing,Printing 186 Others 6 Manufacturing Chemical 407 Transportation,Warehousing 413 3,223 Steel,Nonferrous Metals,Mining 504 Restaurants 40 General Machinery 442 Telecommunications 12 Electrical Machinery 330 Electricity,Gas,Water,Heat 8 Transportation Machinery,Equipment 97 Leasing,Rentals 102 Precision Machinery,Medical Instruments and Equipment 76 Lodging, Hotels 27 Others 87 Recreation 57 Food,Beverages 348 Service Broadcasting ,384 Maintenance,Guarding,Testing 151 Construction Materials,Furniture,Ceramics,Stone and Clay Products 318 Advertising 107 Wholesale Paper Products,Stationery,Books 103 Information 428 3,959 Chemical 271 Labor Dispatching 54 Recycled Resources 29 Special Services Size Steel,Nonferrous Metals,Mining Products 310 Medical,Welfare,Public Health 109 Machinery,Equipment 908 Education 23 Others 333 Others 150 Others 45 Total 10,001 Large Firms 2, % Small to Medium-sized Firms 8, % micro Firms 2, % Total 10, % 4

5 2.Research Items *Business Confidence (current, in 3 months, in 6 months, in 1 year) *Business Conditions (sales, purchasing and selling unit price, inventory, capacity utilization ratio, number of employees, overtime work hours) 3.Research Period and Methodology Internet-based survey conducted May The explanation of the Economic Diffusion Index Research Purpose/Researched Terms TDB Economic Trend Research (started from May 2002) is a monthly statistical survey conducted for over 20,000 nationwide corporations on their general business activities including the current condition and future outlook of the industry business performance and operating climate. The primary purpose of such a survey is to assess the current state of Japan s economy. Selection of the Subject Corporations Companies of all sizes in all domestic industries are eligible to participate in the survey. DI Formula The DI (Diffusion Index) is calculated by attaching a number (in parenthesis in the diagram below) to each of seven possible responses. Then multiplying the percentage of each response by the appropriate number, and adding the results. Very Moderately Neither or Moderately Very ( 0 ) ( 1/6 ) ( 2/6 ) ( 3/6 ) ( 4/6 ) ( 5/6 ) ( 6/6 ) DI=50 Dividing point A DI over 50 is in the range of. A score under 50 is. The number 50 is the dividing point ( Neither or ). All numbers are rounded off to the hundredth. It should be noted that no weight is given to a company s responses based on its size. Calculations are made according to a one company, one vote rule.. For example, all corporations rated Very. DI=6/6x100(%)=100 All corporations rated Neither nor. DI=3/6x100(%)=50. Size Classification Industry Large Firms Small to Medium-Sized Firms (Micro Firms included) Micro Firms Manufacturing and Capital: More than 300 million yen Capital: Below 300 million yen Other Industries* and or No. of Employee: Below 20 No. of Employee: Over 300 No. of Employee: Below 300 Wholesale Trade Capital: More than 100 million yen Capital: Below 100 million yen No. of Employee: Over 100 No. of Employee: Below 100 Retail Trade Capital: More than 50 million yen Capital: Below 50 million yen No. of Employee: Over 50 No. of Employee: Below 50 Service** Capital: More than 50 million yen Capital: Below 50 million yen No. of Employee: Over 100 No. of Employee: Below 100 Note1: Large Firms refer to companies that rank in the top 3% in terms of sales volume according to the type of business, among small to midium-sized corporations excluding micro firms, which are defined in Small and Medium Enterprises Basic Act. Note2: Small to Medium-Sized Firms refer to companies that rank in the bottom 50% in terms of sales volume according to the type of business, among those not categorized as small to midium-sized corporations in Small to Medium-Sized Enterprises Basic Act. 5