Kazuki Yamamoto: Thank you very much for asking the question. So please refer to page 38, as I’ve been said, so there has been no update, as you have mentioned, but currently we are considering in the second half for us, in the first half of next year. There has been no major changes. For this year, the capital recycling that would allow us to exit some of the projects, the deals, so we are going to proceed with the deal by taking much of the time so that it will be a tail heavy this fiscal year. So therefore, with the deals that we are proceeding with, it is progressing just as scheduled. However, by end of March, at the closing of fiscal period, in order to achieve that target, it doesn’t mean to say that we’ll be relaxing some of the terms and conditions in order to achieve the target.
So we are proceeding with a negotiation in a very cautious manner with a buyer so that we’ll be able to continue to build the profits in a steady manner. As for the third quarter, so be, a sort of real estate, we did manage to exit some of the deals, but in the fourth quarter as well we hope to proceed with the same. As for the next fiscal period, you have asked the question about the next fiscal period, which is within the scope of the next — the plan, but that there will be some changes in the macroeconomic conditions such as ForEx, so as far as some of the deals that we have listed, so we would like to of course refer to the changes in the climate and continue to build up the profit. I’m sorry that I won’t be able to share with you any specific numbers, but I hope this would answer to your question.
Naruhiko Sakamaki: Yes. Thank you so much.
Operator: Thank you. SMBC Nikko Securities’ Muraki san, please ask your question.
Masao Muraki: This is Muraki. I have a question. 400 billion for next year, I understand this is still being discussed. And for this fiscal year, high interest rate is continuing and you’re trying to offset the negative overseas with the domestic performance and the next year is that direction. Maybe your assumption is that the direction will not change, but 400 billion yen, this was already very high to begin with. And as you are discussing what is the level of the base plan or the range or direction? Can you please maybe share more information about these things because I don’t want to see a big surprise three months down the line? At this point in time, can you please suggest the direction that the company is going to?
Kazuki Yamamoto: Thank you. As you have mentioned, for this fiscal year high interest rate means that we’re struggling with overseas business and we tried to offset that negative with strong performance in Japan; that is true. And for next year, we do not believe that the interest rate would come down that easily outside of Japan, we cannot really be that optimistic. But if you think about US credit, for example, as we gain more visibility into how the risk is changing, we will try to assess the situation carefully and try to be active where we can. So, we actually are talking about specific strategies, as we plan for next year right now. On page 10, of the handout, and this is something that was already disclosed last time, and this is basically the launchpad for next fiscal year.
And 400 billion yen is the target what we are trying to aim for and this is the assumption of the plan. And then we will try to assess where we can see more room for growth or where we should not try too hard. And for each of the segment, we are discussing between the management and segment head and negotiate these details. Now, Mr. Inoue has already spoken about the mid-term’s direction and 300 billion yen should be like a stable level ORIX and that we should be able to aim for 400 billion as well, but we want to do that without expanding the balance sheet too much. And this is why we want to do a combination of capital recycling approaches. So, this basic direction remains unchanged. And hopefully the spring we will not share any negative surprises with you.
Masao Muraki: Thank you. As you have said, bottoming out or maybe the change in the interest rate direction, in the United States, you are trying to shrink your credit portfolio and they are talking about that as well as investment in real estate, is that correct?
Kazuki Yamamoto: Yes, especially credit and the current interest environment, real estate and mortgage business cannot be done very actively, but potentially, there is strength in these markets in the United States. So, once the interest rate hike eases and once it starts to come down, then for example, housing development or bond issuance, maybe we can see some positive signs there. And in terms of private equity or equity investment, mid-cap corporate will continue to struggle in terms of performance. So, for debt and equity when believe that the flow is kind of frozen, we did not expect a sudden improvement there, but we will continue to work strongly what we have within a business portfolio right now.
Masao Muraki: That’s very clear. Thank you very much.
Operator: Thank you for the question. Next we have Daiwa Securities, Mr. Watanabe. Over to you.
Kazuki Watanabe: Thank you. I am Watanabe from Daiwa Securities. I would like to ask one question, and I can refer to page 44 and that is with regard to the capital policy. So the expression in fact that change, so sustainable growth, but also at the same time growing ROE by efficient usage of their capital. Was there anything at the backdrop at the time of calculation, the buy back and also the DPS, any kind of idea to this based on this page?
Kazuki Yamamoto: Thank you. Well, just as you had mentioned, yes, we made a slight change in the expression. As I had mentioned at the very beginning, that inbound traveling in fact has been driving our growth, so therefore the base profit has been growing and the segment profit. We are beginning to feel the positivity from those growth implications. So therefore, it is not that we will be dependent on the capital gain, but we would like to continue to invest in the base profit generation businesses that should be improving our ROE. And also with regard to the capital policy that you have asked, so at the time of the benefit of being kind of eliminated or dropped, we thought that there is some positivity in expanding the DPS going forward.
So, just as being asked by Muraki san earlier, the business plan and the discussion of business plan, inclusive of the BOD discussion, we would like to, of course, continue to discuss over this topic, however, PD of one times and going beyond one times, in fact, is something that has to be endorsed by a solid equity story, but if you could give us a little more time for us to arrive at a final idea. About the shareholders return is going to be expanded or is this the direction for this fiscal period, well, recently, so, in the capital market, the new [Indiscernible], for example, there has been a lot of discussion about the possible investment by the retail investors. So, we would like to appeal to as broad shareholder base as much as possible.
So, on the basis of a shareholder return, so what will be the ideal capital policy based on this reaction that we may get from the shareholders, so this is how we want to arrive at the shareholders return policy for this year. Thank you.
Operator: Thank you very much. JPMorgan Securities, Sato san, please ask your question.
Koki Sato: Yes, I have a question. With regard to Asian business, are there any specific risks that you are aware of or focused on? Maybe it is not very serious, but from the first quarter, I think there has been some impact; I want to know which line and which region this is happening. And on page 31 is showing a more detailed breakdown of each country, especially in China and also greater China for equity investment, are you seeing some risks there? In order to welcome the new fiscal year in a clean way, earlier you were talking about possible impairment in Q4, but should we account for that or not? Thank you.
Kazuki Yamamoto: As you have mentioned, Asia and Australia area has ex China, Asia and also greater China, and there are discrepancies external Asia, Australia, South Korea and India. This is where we have our strengths like lease and also finance related to real estate, this is where we see business opportunities. So, we will continue to maintain businesses there. And possible challenges would include, as you can see on page 31, and the message that you want to deliver on this page was, for example, number for Hong Kong finance and also banking business. And in terms of credit, the market is not really improving, it is actually worsening. So, we are evaluating our assets and this is resulting in the correct credit allowance.
So, we trying to be strict with risk definition, we are being extremely cautious. And as you can see in section two, at least for general business, especially for China domestic market, at least customers credit status has to be of course assessed very carefully, but we do have assets, so we believe that we can continue this business. And the third point is, as you have mentioned, as far as equity investments are concerned, we need to be very risk sensitive and we are. China related investment and its demand is actually decreasing overseas. And also Chinese domestic investors are becoming more selective about what investments are attractive to them. We have no belief that the situation will improve quickly just this year and next year, so equity investments will not be added newly in defense.
