A New Year Message from the President

NKK President Yoichi Shimogaichi

May I express my congratulations as we begin the New Year and extend my sincerest wishes for your health, happiness and prosperity in 1998.

Since I took office as president of NKK in June 1997, many things have happened. These events include the currency crises in Southeast Asia that originated in Thailand, lingering recession in the Japanese economy, fall of stock prices, and failures of banks and securities houses. The recent global warming conference (the Third Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change, or COP3) in Kyoto established a difficult environmental target, especially hard to attain for Japan. The environment surrounding us has been undergoing greater change than we have anticipated, and at an accelerated pace.

On the topic of companies, they are literally entering an era of the survival of the fittest. Only strong companies can survive while companies that have been left behind by the marketplace have no recourse but to withdraw. In my presidential inaugural address, I declared that my goal was to "make NKK a strong company" with the conviction that a strong company can always overcome any difficulty. To meet this objective, our company must continue to take every possible measure toward rationalization and reduction of costs. This is a never-ending task in surviving our competition. We at NKK intend to implement and foster all policies that improve our company's competitive strength.

As to the domestic economy, it has declined further. The government has announced a special economic package that includes an income tax cut of \2 trillion, yet its impact on the economic recovery is expected to be minimal. As far as overseas activities are concerned, Southeast Asia, which had previously been sustaining vigorous economic growth, has stagnated due to the latest currency crises. Under these circumstances, we can no longer expect a quantitative increase in demand from both inside and outside the country. It is essential that we build a company structure capable of earning the necessary profits in this increasingly competitive world.

NKK has been promoting overseas businesses with the emphasis on Southeast Asia. There may be a short-term change in our course depending upon the fluctuation in economic conditions, yet we intend to conduct our business with our long-range policy in Southeast Asia unchanged.

At the international conference to halt global warming held in Kyoto in December, it was agreed that developed countries should reduce greenhouse gas emissions during the period from 2008 through 2012. Japan is required to meet difficult targets in reducing emission levels. Thus, it is important that we implement global warming prevention measures worldwide, and, as a steelmaker, NKK will actively engage in the reduction of greenhouse gas emissions.

In our environment-related business activities, we anticipate numerous opportunities to arise which address various environmental issues. In addition to our ongoing activities in waste incineration and water treatment plants, we intend to aggressively develop new areas of business such as the collection, treatment and recycling of waste.

I believe that 1998 will be a year of challenge for NKK. We must be able to actively respond to the challenges that result from change in domestic and international economies and use them as opportunities for further growth. I look forward to earning your continued encouragement and support.