OUTLINE OF THE JFE GROUP

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 THE FIRST MEDIUM-TERM BUSINESS PLAN

MAIN MEASURES 1. Enhance our marketing capabilities 2. Implement global strategy 3. Establish an optimal production system and streamline facilities 4. Reorganize and consolidate group companies CONSOLIDATED FINANCIAL TARGETS   Billions of yen   Actual (approximate) Actual Target* Plan's final target (Years ended/ending March 31) 2003 2004 2005 2006 Ordinary income 91    208.5  385  230  Return on sales (ROS) 4.6%    9.9%  16.6%  11.0%  * Estimated figures for the year ending March 2005 are those declared as of August 30, 2004.

 REVIEW OF EARNINGS FOR THE YEAR ENDED MARCH 2004
In the year ended March 2004, demand for steel was robust, both in Japan and abroad, primarily for use in the automotive and shipbuilding industries. Our Group output of crude steel reached 30.55 million tons. The JFE Steel Group's consolidated net sales increased 6.4% from the year before to ¥2,103.9 billion, in part because of our efforts to boost sales of Only One and Number One products. On the profit side, several factors, including improvements in selling prices, the streamlining of facilities following the consolidation, the integration of production technologies, reorganization of group companies and other cost reductions and productivity enhancements, helped us to absorb rising raw material costs and offset a temporary increase in depreciation costs stemming from a change in the depreciation method. As a result, consolidated operating income was up 80% to ¥242.7 billion, and consolidated ordinary income surged 130% to ¥208.5 billion.

 FUNDAMENTAL STRATEGY
PRODUCT-BASED MANAGEMENT SYSTEM AND ONLY ONE, NUMBER ONE STRATEGIES
JFE Steel employs a product-based management system under which we manage our profitability across divisions — including sales, production, logistics and research — and thereby optimize our strategic policies, focusing on eight basic types of products. This system makes it possible for us to know the profitability of any given order, helping to clarify how we can best improve our profitability. This in turn makes our management process more transparent, easier to understand, and more efficient. At the same time, this system helps us to get a good idea of our customers' increasingly sophisticated needs, so that we can enhance our marketing capabilities.
  JFE Steel is also pursuing a strategy of improving our product mix with Only One, Number One products based on technology that is unique (Only One) or simply the best (Number One) in the industry. These are highly profitable because they are relatively immune from price competition. We have various Only One and Number One products and technologies. Our Only One products include processing technology-based products such as NANO HITEN, hot-rolled TMCP high-formability steel sheets, and HISTORY (high-speed tube welding and optimum reducing technology) steel tubes. Our Number One products include high-quality corrosion-resistant chromate-free steel sheets, high-quality plates made by Super-OLAC (on-line accelerated cooling), and high-alloyed OCTG. In the year ended March 2004, Only One and Number One products made up about 13% of JFE Steel's overall net sales, and by the year ending March 2006, we aim to increase this figure to 15-20% as outlined in our Medium-Term Business Plan.

EXAMPLES OF ONLY ONE, NUMBER ONE PRODUCTS AND TECHNOLOGIES   • Only One • Number One Sheets   NANO HITEN   Chromate-free steel sheets Plates   TMCP plates for construction and structural use (HBL 385)   Plates for high-heat input welding, for use in shipbuilding Shapes and spiral tubes   Super-KING method   H-section steel with uniform external demension Tubular products   HISTORY steel tube   13 Cr seamless OCTG Electrical steel   Super Core   High magnetic flux density, low-iron-loss electrical steel Other   Marine block   Alloyed steel powder for sinter hardening

 BUILDING THE OPTIMAL PRODUCTION SYSTEM
At JFE Steel, we have calculated that in order to maximize profitability we should have an annual output of crude steel of 27 million tons on a non-consolidated basis. We are therefore taking steps to streamline our facilities toward that goal. In our upstream processes we have already closed two blast furnaces (with a total annual capacity of 3.90 million tons), establishing a production system based on nine operating blast furnaces. In fact, our non-consolidated crude steel output in the year ended March 2004 was 27.01 million tons, exactly in line with our plan. In downstream processes, we have made progress toward closing 15 production lines (with a combined annual capacity of 3.5 million tons) and as of the end of June 2004 had completed closure of 12 of these lines. We calculate the profitability improvements from this integration of facilities at ¥10.0 billion annually. We have succeeded in increasing the efficiency of our downstream processes by more than 10 percentage points.

FACILITIES SHUTDOWNS
			Planned closings		Completed closings		Notes
Upstream processes: Blast furnaces			2		2		Completed (9 blast furnace system)
Downstream processes: Rolling		Cold-rolling (including annealing)	2		2		Completed
		Coating	6		3		Closure of another 3 lines planned: Chiba EGL, Chiba CGL, Fukuyama TFL
		Shapes and bars	2		2		Completed
		Welded steel pipe	5		5		Completed

 GLOBAL STRATEGY
JFE Steel aims to (1) export primarily its highly-profitable Only One and Number One products, such as environmentally friendly steel, and high-quality steel for use in automobiles, shipbuilding and home appliances, and (2) form win-win alliances with overseas partners with which we can share management ideas over the medium to long term that will help us expand our exports and secure stable profits based on strategic alliances and mutual trust. Our steel exports in the year ended March 2004 totaled about 10 million tons (JFE Steel's export ratio is 40.6% on a non-consolidated basis); about 42% of our total exports was shipped to our alliance partners.
  Based on this strategy, we took a significant step in October 2003 by forming a joint venture with Guangzhou Iron & Steel Enterprises Holdings Ltd., strengthening our position to respond to the rapidly expanding demand for steel in China. Guangzhou JFE Steel Sheet Company Ltd. will be involved primarily in producing hot-dip galvanized steel sheets mainly for use in automobile manufacturing. JFE Steel holds a 51% interest in the new venture and will be the primary provider of the high-quality cold-rolled steel sheets used as materials.

 OUTLOOK FOR THE YEAR ENDING MARCH 2005
FORECAST FOR THE SALES ENVIRONMENT
The sales environment surrounding the steel business remains strong both in Japan and abroad. In Japan projects in the civil engineering field continue to decrease as a result of the decline in investments available for public works, but we expect to see a sustained recovery in demand from the manufacturing sector, particularly in the areas of automobiles, shipbuilding, construction machinery, and electronics. We think this will help sustain the domestic demand for steel.
  Furthermore, looking at the steel export market, rapid economic growth in China, an economic recovery in the U.S., and strong growth in other countries in Asia should combine to fuel further growth in global steel demand.
  Given this domestic and international demand environment, for the past several years the rising output of crude steel in China has led to worldwide shortages of the raw materials used in steel production, and the balance of supply and demand has been quite tight on a global scale.
  In this situation, we plan to continue manufacturing crude steel at full capacity in the year ending March 2005. Production is, however, likely to rise slightly above the previous year's level (30.55 million tons on a consolidated basis), in part because of blast furnace revamp in the second half of the fiscal year. We project that JFE Steel's consolidated net sales will grow 10.3% to ¥2,340.0 billion.

PROFIT LIKELY TO REMAIN STRONG IN THE YEAR ENDING MARCH 2005
We expect JFE Steel's consolidated ordinary income to grow 84.6% from the previous year to ¥385.0 billion. The main reason is that we project a ¥239.0 billion profit boost, as our Only One and Number One strategies should lead to improvements in our product mix and substantial increases in our selling prices, while growing demand will help augment our sales volume. This will go far in absorbing the rise in raw materials costs (estimated at ¥135 billion). Furthermore, the ¥47.0 billion reduction in production costs plus profit gains at affiliated companies will help earnings to expand, and we are aiming for a consolidated return on sales of 16.6%.
  The impact of the tight money policy in China is unlikely to be a big threat. The risk of lower selling prices is expected to be more than offset by the positive effects that come from restrained investment, which will brake the rapid rise in production capacity and dampen the increase in raw material costs. As a result, we see the curbs on investment in China as related to the continued tight state of the supply-demand environment in the steel market over the medium to long term, and not necessarily a negative factor.

 OUR RESPONSE TO RAW MATERIAL ISSUES
Regarding the raw materials used in steelmaking, we expect that the tight balance of supply and demand and the harsh conditions on the price front are likely to continue for several more years. In this environment, JFE Steel aims to implement the following policies: We plan to further expand our raw material-related investment, if the conditions are met, without being bound by the initial ¥5.0 billion (3 years) target set in the Medium-Term Business Plan. Furthermore, we will strive to achieve secure long-term supplies of raw materials at lower costs.

1) INVESTMENT IN NEW MINING DEVELOPMENT • Project name CVRD-owned Fabrica Nova mine (Minas Gerais, Brazil) • Project description Total volume: about 450 million tons Production: 10-15 million tons per year, with production to start in 2005 • Partners and shares JFE 50%, CVRD* (Brazil) 50% • Details of purchasing contract 12-year contract for 2 million tons per year of ore to be supplied to PSC (wholly-owned JFE subsidiary specializing in sintered ore) • Project name BHPB Yandi mine W-4 mining area (Western Australia, Australia) • Project description Total volume: about 110 million tons Production: max. 15 million tons per year, with production to start in 2005 • Partners and shares JFE 20%, BHP Billiton* (Australia) 68%, ITOCHU Corporation 6.4%, Mitsui & Co., Ltd. 5.6% • Details of purchasing contract JFE Steel is a participant in a joint venture for mining development. 11-year contract for 16 million tons per year of ore to be supplied to JFE Steel • Technical cooperation Joint technical development of Lower Channel Iron Deposit (LCID) iron ore for commercialization   *One of the world's top three iron-ore suppliers.   2) CREATE ALLOY JOINT VENTURE Company name Erdos Manganese Alloys Co., Ltd. (Neimenggu and QiPanjing, China) Project description Product: silico-manganese Total volume: 150 thousand tons per year, with production to start in the summer of 2005 Partners and shares JFE 24.5%, Erdos Electric Power Metallurgy Co. 51%, Mitsui & Co., Ltd. 24.5%   3) INTRODUCTION OF OPTIMAL ORE CARRIERS FOR HARBOR CONDITIONS IN LOADING AREAS 230,000-ton-class large ore carriers Two carriers to be launched in 2004-2006 300,000 ton-class large ore carriers Two carriers to be launched in the second half of 2008 Setouchi MAX (designed for use in the shallow waters of western Japan) 17 current ships to be replaced by new models in 2003-2006

 CAPITAL INVESTMENT PLAN

CAPITAL INVESTMENT PLANS
		Billions of yen
		Actual		Target
	(Years ended/ending March 31)	2004		2005
	Construction basis	101.0		95.0
	Payments basis	81.7		121.6
	Depreciation	138.6		132.5

 REORGANIZING AND CONSOLIDATING GROUP COMPANIES
In order to maximize the beneficial effects of the consolidation at an early date, in April 2003, JFE Steel reorganizing and consolidated group companies in the fields of containers, construction materials and chemicals. In April 2004, we completed reorganizing in the areas of surface treatments, logistics, facilities maintenance and services, and in July, mining and slag. In October 2004 we plan reorganizing in the areas of trading, plate distribution and processing, intellectual property and technology information, research support and testing and analysis. This will complete the reorganization and consolidation of JFE Steel's group companies as envisioned in the Medium-Term Business Plan, in a span of just one and a half years, and contribute to establishing the foundations for higher profitability earlier than we expected.

Field	Subject group companies for consolidation		New company	Consoli- dation time
Container	Kawasaki Steel Container Co., Ltd	KOKAN DRUM COMPANY, LTD	JFEContainer Co., Ltd	April 2003
Construction material	Kawasaki Steel Metal Products & Engineering Inc.	Nippon Kokan Light Steel Kabushiki Kaisha	JFE Metal Products & Engineering Inc.	April 2003
Chemical	Chemical Division, Kawasaki Steel Corporation	ADCHEMCO Corporation	JFE Chemical Corp.	April 2003
Surface treatment	Kawatetsu Galvanizing Co., Ltd.	NKK Steel Sheet & Strip Corp	JFE Galvanizing and Coating Co., Ltd.	April 2004
Logistics	Kawatetsu Transportation and Technology Co., Ltd.	NKK Marine & Logistics Corp.	JFE LOGISTICS CORPORATION	April 2004
Plant maintenance (Control)	Kawatetsu Electoricengineering Co., Ltd.	KDK Elesys Co., Ltd.	JFE Electrical & Control Systems, Inc.	April 2004
Plant maintenance (Machinery)	Kawatetsu Machinery Co., Ltd.	MENTEC KIKO CORP.	JFE Mechanical Co., Ltd.	April 2004
Service	Kawatetsu Life Corp.	NKK Facilities & Favor Co., Ltd.	JFE LIFE CORPORATION	April 2004
Mining and slag	Kawatetsu Mining Co., Ltd.	Kokan Mining Co., Ltd.	JFE Mineral CO., Ltd.	July 2004
Trading	Kawasho Corporation	NKK Trading Inc.	JFE SHOJI HOLDINGS INC.	October 2004
Steel plate distribution and processing	Kawatetsu Kozai Kogyo Kaisha, Ltd.	Tokyo Shearing Co., Ltd.	JFE KOZAI CORPORATION	October 2004
Intellectual property and technology information Supporting R&D and inspection & analysis	KAWASAKI STEEL Techno- research Corporation	NK Techno Service Co., Ltd. Kokan Keisoku K.K.	JFE Techno-Research Corporation	October 2004

 RESEARCH AND DEVELOPMENT SYSTEMS
CREATING THE WORLD'S BEST NEXT-GENERATION PRODUCTS AND TECHNOLOGIES THROUGH THE JFE STEEL RESEARCH LABORATORY
For JFE Steel to fulfill its obligation to contribute to society, it must carry out strategic and effective technological development, with an eye towards future technology trends. The JFE Steel Research Laboratory is a world-class specialty institution which supports this effort. The Laboratory aims to create the world's best next-generation products and technologies and is actively involved in developing and putting to practical use Only One and Number One products and technologies, which reflect our pursuit of the finest in terms of strength and processing functionality.
  In its R&D activities, our research laboratory works closely with the production and marketing divisions and all subsidiaries and affiliates, to find the best solutions in terms of our customers' needs as well as our own productivity and profitability. It also contributes to our marketing efforts by helping to improve productivity and lower production costs.