Happy New Year! I extend New Year's greetings from headquarters here in Tokyo to all the members of the Sumitomo Corporation Group around the world.

 

The macro environment

 

Last year was another year of tumultuous developments. The global financial crisis spread to affect the real economy at an unforeseen pace and scale, leading to simultaneous downturns in countries around the world. But thanks to coordinated efforts by governments led by the Group of 20, with the authorities implementing all the policy measures available, the world economy has passed the worst phase, and is now in a period of recovery led primarily by China and other Asian economies. But there are still some negative factors at work: Growth in demand remains heavily dependent on government policy measures. Also, the jobs picture in the developed countries has deteriorated. And concerns remain over the aftereffects of the financial crisis in terms of fiscal deficits and the solvency of some emerging countries. We therefore judge that the pace of growth will be modest in the period ahead.

 

The year 2009 also brought major changes on the political front, with the inauguration of President Barack Obama in the United States and the launch of the new administration of Prime Minister Yukio Hatoyama here in Japan, with the Democratic Party of Japan taking over from the long-ruling Liberal Democratic Party. Both of these new administrations were put in place by electorates looking for change and reform, and I am hoping that both leaders will steadily deal with the many issues that the world faces today.

 

Sumitomo Shoji Research Institute has identified 2010 as "a year that will test our path toward self-sustaining growth." At present, the world economy is being supported by growth in emerging countries, China in particular, and by demand created by government stimulus packages like new car buyer incentives. The question in the year ahead will be whether this pattern can be replaced by one in which the recovery becomes self-propelled, led by demand from the private sector. The "passing of the baton" to a self-propelled recovery may lead to a temporary slowdown in the pace of growth, but given the firmness of the emerging economies, I believe that the risk of a double dip in the world economy as a whole is limited.

 

Our medium-term management plan, FOCUS'10, and a view to the next 100 years

 

Our medium-term management plan, FOCUS'10

 

The above sums up my view of the macro environment; next I would like to confirm where our company now stands.

 

First of all, in the current fiscal year, which is the initial year of FOCUS'10, our medium-term management plan, our consolidated net income for the first half came to ¥62.1 billion. As I noted earlier, the prospects for the period ahead are still clouded, and so we cannot be complacent, but this result, which is equivalent to 54% of our target for the year, encourages me to believe we will be able to reach the annual target. In the remaining three months of the fiscal year, let us all brace ourselves and keep up our efforts, making sure not to miss any opportunities.

 

The theme of FOCUS'10 is "a growth scenario on a new stage," and on this basis we are aiming to become a value-creating company that leverages change into growth. The current crisis will eventually reach an end, and we will see the exit ahead of us. But meanwhile, the crisis has given rise to major structural changes in various fields. So when we emerge from the tunnel, I think we will probably see a scene that is very different from before. People have called this crisis a "once in a century" event, and we must prepare ourselves for what lies beyond it to be a world that none of us has ever experienced. I imagine that you, at the front lines of business, must sense this very acutely in your everyday work.

 

We are now approaching a critical stage amid this paradigm shift. The changes are tumultuous, but we must not let them toss us about. It is essential that we constantly step ahead and carry out reforms by ourselves, a process that leads to create new value, and that we look at our businesses in the context of how they relate to society so as to realize even greater value creation. In addition, the purpose of strengthening our soundness and efficiency is to achieve sustained growth through a comprehensive overhaul of the contents of our operations, allowing us to deploy our corporate resources proactively in tapping opportunities for growth. Under FOCUS'10, we are aiming for "the creation of new value;" I would like you all to reconfirm this, along with the understanding that the implementation of this value-creation cycle is the way for us to put our Corporate Mission Statement into practice.

 

Now I would like to look at the contents of the paradigm shift in slightly more specific terms. As I see it, the paradigm shift occurring in today's world includes two noteworthy aspects, namely, the shift in the global power structure and the shift in industrial structures.

 

By the shift in the global power structure I mean the rising presence of the emerging countries. In both economic and political terms, we are seeing a shift in the global order from the Group of 8 to the Group of 20. The emerging countries, amply endowed with resources, population, and territory, have been rising rapidly, and their presence has grown tremendously. Up to now we have allocated a relatively large share of our corporate resources to the developed countries, but I believe that a major management issue for us now is how to tap into the growth of these emerging countries. I want each of our business units to look at these countries in more concrete terms to see if there are opportunities for us to take advantage of this growth. I am also hoping that each of our regional organizations will come up with ambitious and specific proposals for strategy and tactics to match the trends in their respective markets. In other words, it is essential for us to further strengthen our globally consolidated management in keeping with the shift in the global power structure. In order to accomplish this, I want to see even greater efforts at active communication between our business units and regional organizations, and also between the regional organizations.

 

The other paradigm shift is seen in the shift in industrial structures. For example, in the automobile industry, moves to counter global warming are leading to heightened expectations for electric vehicles, and this is being accompanied by the emergence of large numbers of small manufacturers in this field--a shift from the Big Three to the "small hundred." This sort of structural change is now happening in various fields, and it has been called the twenty-first-century Industrial Revolution. The heightening of concern for the environment has been giving rise to new business models in areas like the reduction of greenhouse gas emissions and the tapping of new energy sources, such as wind power and solar energy. In addition, the tightening of the markets for food products accompanying the economic advance of the emerging countries is expected to develop into a major issue of global scale in the field of food and agriculture over the medium to long term. This sort of structural change will present major new problems for society to tackle, and if we can offer solutions to such problems, we will be able to create large amounts of added value and to establish new businesses of greater scale than ever before.

 

This year we will implement some necessary measures for this purpose on a full-scale basis. The environment is now a theme running through all industries, and it cannot be handled just with our current organizations, which are divided vertically along the lines of industries and products. For this reason, we will launch the New Industry Development & Cross-function Business Unit this April, aiming to construct a new earnings pillar for the future. Through this business unit we will accelerate the process of developing commercial businesses and will expand business fields in the areas of the environment and new energy sources, which are viewed as having good future growth prospects. In addition, we will place the Financial Service Division and the Logistics & Insurance Business Division in this new business unit so as to tap their capabilities in financial technology and logistics technology for the development of new businesses, as well as to offer their functions to other organizational units in such a way as to promote and support the value-creation activities of the company as a whole. By bringing businesses that previously belonged to different organizations together within a single organizational unit and pooling the experiences, expertise, and relationships with customers that we have built up in each of these areas, I am hoping we will be able to get them to function in a synergic manner and thereby leverage our integrated corporate strength to the maximum degree.

 

The phenomena of the shift in the global power structure and the shift in industrial structures are not limited to new fields; they are occurring in the fields of business handled by all of our business units and regional organizations. Taking the structural changes as the source of business opportunities, we intend to actively allocate corporate resources to fields and regions of high potential.

 

A view to the next 100 years

 

Next I would like to consider our current situation in terms of the temporal axis of history. Our company was founded in 1919, just after World War I, as Osaka Hokko Kaisha, Ltd., so last year was our ninetieth anniversary. Under FOCUS'10 we are taking a view to the coming 10 years, through 2019, at which point we will reach our centennial. It is no small accomplishment for a company to last 100 years. Our survival is thanks to the weight of the trust that our predecessors have built up, along with their unstinting efforts at innovation, and I feel deep gratitude and respect for their accomplishments. A business can build up its history only with the backing of trust; at the same time, we must remember that conditions change as history progresses, and those companies that neglect their own innovation are eventually driven from the historical field.

 

It is our responsibility to take the trust and the spirit of innovation that the Sumitomo Group as a whole has built up over its 400-year history and pass it on to the next generation. I have renewed my own personal determination to create new value by continuing to reform myself, preserving our foundation of trust and maintaining a spirit of sincerity and dedication, as those who went before us did. It is my dream that Sumitomo Corporation will continue from its first 100 years through another 100 years as a company whose reason for being is recognized by society.

 

I see the 10 years from our ninetieth anniversary to our hundredth as being the period for laying the foundation in preparation for the new stage of the next 100 years. And I take 2010 as being the turning point for us in responding to the paradigm shift and laying this foundation. Some of our earlier models of success may no longer be applicable, and we will find ourselves tackling challenges in new and unknown fields; also, there may be times when we need to bid farewell to the past. It will certainly not be easy, but we must avoid complacency and be ready to endure present hardships and do what needs to be done now for the sake of future happiness. This is the spirit that I hope every one of us, including me, will maintain. Let us make 2010 into a year that we can all look back on with a sense of accomplishment as having been a major milestone.

 

Message to officers and employees

 

As we start the year 2010, let me convey three points-which are basic, but which I want all officers and employees to bear in mind.

 

Don't be afraid of risks

 

The first point is not to be afraid of risks.

In any sort of activity, it is necessary to have courage and not fear risks when undertaking something new. Of course it is essential to analyze the risks carefully, but we need to have a mind-set that views them not as threats but as opportunities. In a time of turbulent change like the present, one could even say that there are risks involved in not taking risks. When considering potential activities, let us not just point out the problems and list reasons why something cannot be done; instead, let us have a strong "can do" spirit, think of how we can succeed, and act accordingly.

 

Remember to learn with humility

 

My second point is the need for a posture of learning with humility.

The great inventor Thomas Edison is quoted as having said, "We don't know a millionth of one percent about anything." Even in fields where we excel, there are bound to be things that we do not know. So let us take care to maintain a humble posture, reminding ourselves, "I may just think I know this," and "I still have a lot to learn." Self-confidence is completely different from overconfidence and arrogance. Take an objective view of yourself, and never forget the spirit of humility that allows you to learn from anybody, anywhere.
 I myself will continue to place importance on this posture of learning with humility-always maintaining a respectful attitude toward others and listening attentively to what they say. I hope all of you will make similar efforts.

 

Be enthusiastic!

 

The last point is to be enthusiastic.

I enjoy reading historical novels, and find that at turning points in history there are always figures who have hearts burning with enthusiasm and who play a major role. This applies within our own company as well. The valiant efforts and struggles of our predecessors were involved in the birth and fostering of the businesses that have continued to this day. In order to accomplish something big, of course it is important to come up with a corporate policy and to make appropriate organizational arrangements. But there is no mistaking the fact that what actually makes things move is the enthusiasm of individual employees working on the front lines. The lead actors are each of you working as individuals in your respective positions. I hope that all of you will share the enthusiasm and lofty spirit of laying the foundation for the next 100 years at this historic juncture, and that you will boldly tackle the challenges of building up new businesses.

 

Looking ahead to a new year

 

To sum up the above three points, they all involve the enhancement of the power of the individual-in other words, "human power." Last year a TV program in Japan reported on our company's San Cristobal mine in Bolivia, and I was very moved by the words at the end of the program: "This is the fruit of a trading company's human power." Creating value by leveraging our integrated corporate strength is also something that can be accomplished only through the efforts made by each of you as individuals. I want you to actively tackle the various challenges you face, apply your full self to your work, and find joy in growth through your work. And I want those of you who manage others to give them motivation for their jobs. Ongoing efforts of this sort are the way to achieve mutual growth, I believe.
 I have a vision of workplaces full of individuals each capable of "lighting up his or her corner" -a Japanese precept, meaning "do your best in your respective positions." I hope from my heart that Sumitomo Corporation Group will be carried on the shoulders of people rich in human power, individuals who have experienced the joy of creating value, share this joy with others, and always give encouragement to their colleagues. Let us all pool our power to make the year 2010 the turning point for the next 100 years.

 

In concluding my New Year's greeting for 2010, I pray that this will be a year of good health and successful activities for each and every one of you, officers and employees of the Sumitomo Corporation Group, and your families.