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Questions and Answers at the Conference on Results for Nine Months ended December 31, 2007.
(Click the questions for the corresponding answers.)

Q1: Are there any changes in the demand outlook for construction and mining equipment, by region, which you showed us when you announced the interim results?

Q2: Can you tell us about the inventory level of new equipment at your distributors in North America? Can you also tell us whether or not the drop in North American demand has affected Latin American markets?

Q3: Please share with us your views on the European markets in the fourth quarter of the current fiscal year, i.e., January through March, 2008 and fiscal 2008.

Q4:Can you tell us about the market condition of construction and mining equipment in the five major countries in Europe, such as Germany, the UK, France, Italy and Spain, with special attention on Spain?

Q5:Please describe the growth rates of third quarter sales of construction and mining equipment by region in more detail.

Q6:Demand for construction and mining equipment in Japan in the third quarter of the current fiscal year declined from the previous third quarter. However, your domestic sales for the third quarter increased by 6.7% from the third quarter a year ago. Can you explain the reason?

Q7: When I convert your sales of construction and mining equipment in Europe into Euro and compare them at second and third quarters, I find they are about equal. In view of the fact that your third quarter sales were larger than the second quarter both one and two years ago, I cannot help but feel that European demand might peak out. Can you tell us anything special about this?

Q8: Can you discuss your projection on sales of mining equipment for the current fiscal year?

Q9: When we compare the segment profit ratio of the construction and mining equipment business for the second and third quarters of the current fiscal year, we find a decline of 0.5 percentage points from 15.8% to 15.3%. Can you tell us about the effects of foreign exchange on this decline of segment profit ratio?

Q10:With respect to the factors affecting the profits of your construction and mining equipment business, your price hikes have covered the increased purchase costs into the third quarter. Can you tell us what we should expect in the fourth quarter and next fiscal year?

Q11:Concerning the fourth quarter, you have changed your assumption of foreign exchange rates to ¥106 per US$1. By taking the foreign exchange sensitivity into account, I think this exchange rate should result in minus ¥6 to 7 billion from the original plan on an operating profit basis. To offset this minus, I believe you need to increase sales by some ¥30 billion. Do you think you can do it when you have some problems like production capacity?

Q12:Are you presently experiencing some problems in relation to shipping? How about next fiscal year? If you have quantitative data about shipping risks, can you tell us what kind of risks you are considering?

Q13:Please tell us your projection for fiscal 2008.

back to top Q1
Are there any changes in the demand outlook for construction and mining equipment, by region, which you showed us when you announced the interim results?

A1
Concerning global demand for construction and mining equipment for the current fiscal year, when we announced our interim business results, we revised the rate of growth from 7%, which we had anticipated at the start of the fiscal year, to 12%. Today we see a possibility of further increasing to about 15%. We believe China will generate the largest momentum for this possible increase, followed by Asia and Africa. With respect to North American demand, it has dropped 18 to 20%, which is within the range which we explained when we announced the interim results. Up to now, there is no region where demand has worsened from our projections.

back to top Q2
Can you tell us about the inventory level of new equipment at your distributors in North America? Can you also tell us whether or not the drop in North American demand has affected Latin American markets?

A2
Our distributors have kept their inventories of new equipment at an appropriate level. At the end of December last year, their inventory level was 2.0 months, a further improvement from March 31, 2007.

Demand for equipment centering on mining equipment in Latin America has continued to thrive as before, and thus I don't think there is any adverse effect from the slowdown of the North American market.

back to top Q3
Please share with us your views on the European markets in the fourth quarter of the current fiscal year, i.e., January through March, 2008 and fiscal 2008.

A3
European demand for the third quarter of the current fiscal year was up about 10% from the third quarter a year earlier. We are also anticipating that a similar situation will remain in the fourth quarter, driven by an increase in demand in eastern Europe. With respect to fiscal 2008, we are analyzing the market conditions now.

back to top Q4
Can you tell us about the market condition of construction and mining equipment in the five major countries in Europe, such as Germany, the UK, France, Italy and Spain, with special attention on Spain?

A4
Looking at December 2007 alone, we find the UK was rather slowing, while Germany, which is the largest in Europe, was good. As a result, demand in the five major countries as a whole increased from December 2006. In Spain, demand increased by 5% in December 2007 from December 2006. As Spain accounts for 7 to 8% of European market, we don't think that the slowing housing market of Spain will have a big impact on our business results.

back to top Q5
Please describe the growth rates of third quarter sales of construction and mining equipment by region in more detail.

A5
Growth rates of our sales by region are shown in this table below.

Note: Starting in the current fiscal year, we have changed the breakdown table of this region to "Europe & CIS" from "Western Europe and Eastern Europe & Russia" which was used before.

back to top Q6
Demand for construction and mining equipment in Japan in the third quarter of the current fiscal year declined from the previous third quarter. However, your domestic sales for the third quarter increased by 6.7% from the third quarter a year ago. Can you explain the reason?

A6
Japanese demand for construction equipment in the third quarter declined, centering on compact models and in the rental market, as affected especially by the revision of Japan's Building Codes, but this decline in demand has affected our sales very little. We improved third quarter sales from the previous third quarter largely because we expanded external sales of engines and casts over the previous third quarter.

back to top Q7
When I convert your sales of construction and mining equipment in Europe into Euro and compare them at second and third quarters, I find they are about equal. In view of the fact that your third quarter sales were larger than the second quarter both one and two years ago, I cannot help but feel that European demand might peak out. Can you tell us anything special about this?

A7
I am sorry that I don't have Euro-converted figures with me now. On the Japanese yen basis, however, our second quarter sales in Europe were about ¥82.0 billion and third quarter sales, about ¥78 billion, showing a slight decline. As these two sales figures are on the same level, we don't think anything very significant happened between the second and third quarters.

back to top Q8
Can you discuss your projection on sales of mining equipment for the current fiscal year?

A8
With respect to mining equipment, we still have some limitations to produce, such as production capacity and procurement of super-large tires. Accordingly, it is difficult to substantially expand our projection of US$2.8 billion sales for the current fiscal year, and we expect that final sales will be about the same as our projection.

back to top Q9
When we compare the segment profit ratio of the construction and mining equipment business for the second and third quarters of the current fiscal year, we find a decline of 0.5 percentage points from 15.8% to 15.3%. Can you tell us about the effects of foreign exchange on this decline of segment profit ratio?

A9
The effect of foreign exchange is about minus 0.4 percentage points. Coupled with this, our fixed costs are inclined to increase somewhat in the second half period, and that will be minus 0.6 percentage points. These two factors together are bringing the segment profit ratio down by 1.0 percentage point. Therefore, if we didn't have these two factors, the segment profit ratio for the third quarter would have improved somewhat from the second quarter.

back to top Q10
With respect to the factors affecting the profits of your construction and mining equipment business, your price hikes have covered the increased purchase costs into the third quarter. Can you tell us what we should expect in the fourth quarter and next fiscal year?

A10
We expect that the current situation will continue in the fourth quarter, that is, our price hikes covering the increase in procurement costs. While we believe that prices of materials and other items which we purchase will increase slowly but steadily, we also believe that we should be able to cover the increase in purchasing costs with our firm price realization.

back to top Q11
Concerning the fourth quarter, you have changed your assumption of foreign exchange rates to ¥106 per US$1. By taking the foreign exchange sensitivity into account, I think this exchange rate should result in minus ¥6 to 7 billion from the original plan on an operating profit basis. To offset this minus, I believe you need to increase sales by some ¥30 billion. Do you think you can do it when you have some problems like production capacity?

A11
You are absolutely right about the foreign exchange rates. Compared to our assumption of ¥115 per US$1 for the last half period, which was made when we announced the interim results, ¥106 would translate into a decline of ¥6 to 7 billion in operating profit. To offset these declines, we need to expand sales by ¥20 to 30 billion. Since we have been making good sales in emerging economies, I believe we should be able to achieve our projected figure. We have been increasing our production capacity steadily. So we have no problem at all with respect to production. Our only concern is shipping for exports.

back to top Q12
Are you presently experiencing some problems in relation to shipping? How about next fiscal year? If you have quantitative data about shipping risks, can you tell us what kind of risks you are considering?

A12
Since we cannot control shipping by ourselves, we will continue our efforts, like submitting our shipping plans to shipping companies as early as possible. We are estimating about ¥20 billion for our logistic risks including shipping. Since the shortage of cargo vessels is directly related to ship building, we believe it will remain with us throughout next fiscal year. Such logistical problems are not limited to Japan. We are also having trouble shipping our products from Brazil to Europe. Also on land, it's difficult to secure our transportation on the Siberian railway. We believe it will take a considerable amount of time for us to see some improvements in the situation.

back to top Q13
Please tell us your projection for fiscal 2008.

A13
With respect to fiscal 2008, we are currently developing our business plans. All in all, we are expecting that the current good conditions will continue. We are anticipating that global demand for construction and mining equipment will increase about 10% from the current fiscal year. While global demand increased 12 to 13% in 2005 and 2006, we achieved higher rates of growth in sales by increasing our selling prices and market shares. For fiscal 2008, we should be able to achieve sales at a higher rate of growth than that of global demand, depending on our efforts, of course.

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