Japanese SESC's Recommendation for a Payment Order of Administrative Surcharge

As already announced in a release of February 23, 2007 entitled "Re: Komatsu's Redemption of Its Own Shares in 2005," Komatsu Ltd. (President & CEO: Masahiro Sakane) was under investigation by the Japanese Securities and Exchange Surveillance Commission ("SESC") in relation to Komatsu's redemption in July, 2005 of some of its own shares from the market (see below for details). The SESC announced today that, pursuant to Paragraph 1, Article 20 of the Financial Services Agency Establishment Act, it recommended to the Prime Minister and to the Commissioner of the Financial Services Agency to issue a payment order of administrative surcharge based on the fact that Komatsu's conduct constituted a violation of Japan's Securities and Exchange Law.

Komatsu hereby sincerely apologizes to the shareholders, investors and all other stakeholders concerned for any anxiety or inconvenience caused by this misconduct. Komatsu takes this event very seriously and will vigorously pursue preventive measures against recurrence, including enhancement of its relevant procedures and personnel training.

Komatsu redeemed 1,700,000 shares of its own common stock from the market during the period from July 4 through July 19, 2005, by depositing the funds required for the redemptions in advance with a trust bank that would redeem the shares under certain prescribed conditions. On July 13, 2005, in the midst of the redemption period, Komatsu publicly announced the dissolution of one of its subsidiaries whose main features are described in the below. The dissolution of a subsidiary is considered a "material fact" under the relevant law and there is no de minimis exemption. Therefore, Komatsu's redemption of its own shares before the disclosure of its subsidiary's dissolution constitutes a violation of Paragraph 1, Article 166 of Japan's Securities and Exchange Law which prohibits insider trading.

The amount of administrative surcharge which the SESC recommends to be paid, in accordance with Japan's Securities and Exchange Law: JPY43.78 million (Approx. $370,000)

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