JAPAN POST HOLDINGS Co.,Ltd.

The Postal & Logistics Business has recorded operating losses for three consecutive fiscal years, as a decline in mail volume due to digitalization, increased personnel costs from minimum wage hikes, and rising procurement costs from inflation have compounded. Despite measures such as the October 2024 postal rate revision, these have not been sufficient to offset the impact, and if an operating loss is again expected in the following fiscal year, there is a risk of impairment losses being recorded on fixed assets. The Group is promoting consolidation of collection and delivery hubs and transformation into a comprehensive logistics company, but if these measures do not proceed as planned, it could have a material impact on the Group's business performance and financial position.

In June 2025, the Ministry of Land, Infrastructure, Transport and Tourism revoked the Company's general motor truck transportation business license, rendering approximately 2,500 trucks unusable and prohibiting re-acquisition of the license for five years. In addition, as a result of a nationwide investigation into failure to conduct mandatory roll call procedures, vehicle suspensions were enforced at 1,862 post offices (ending June 1, 2026). Should similar legal violations occur in the future, there is a risk of even stricter sanctions and material adverse effects on the reliability and reputation of the postal network.

The majority of the Group's earnings arise from the two financial companies, the Banking Business and the Life Insurance Business (97.4% of total segment profit), meaning that sharp fluctuations in market prices such as interest rates, stock prices, and exchange rates directly impact business performance. Financial markets remain unstable due to domestic and international military conflicts, trade policy disputes, fiscal concerns, and inflationary pressures, and if market risk, credit risk, or liquidity risk materializes, it could affect the entire Group through the business performance and financial position of the two financial companies. Although the two financial companies conduct stress tests and agile portfolio management under an ALM framework, they may not be able to fully respond to sudden fluctuations or market turmoil.

Under the Postal Service Privatization Act, the Company is obligated to dispose of its shares in the two financial companies as early as practicable, and as of the end of March 2026, held voting rights of 49.8% in Japan Post Bank and 49.7% in Japan Post Insurance. As the sale progresses, the decline in the Company's equity stake could reduce profit attributable to owners of the parent and the source of dividend funds, making it difficult to maintain financial soundness. There is also a risk that decision-making by the two financial companies may diverge from the Group's intentions, making integrated group management difficult, as well as the possibility that additional regulations under the Postal Service Privatization Act may not be lifted, preventing an expansion of the two financial companies' management discretion.

In fiscal 2024, cases were identified in which non-public financial information was used for insurance solicitation without customer consent, and cases of soliciting single-premium whole life insurance before regulatory approval was obtained, leading to receipt of an order for report submission from the regulatory authority in March 2025. Following the earlier issue of solicitation quality problems with Japan Post Insurance products, multiple legal violation cases have materialized as conduct risk contrary to customer-oriented business operations, and preventive measures have been formulated, announced, and are being implemented. If similar incidents occur in the future, they could lead to administrative sanctions, loss of social credibility, and deterioration in business performance.

The Group's cyber risk is increasing due to heightened geopolitical tensions, an increase in sophisticated cyberattacks by nation-states and organizations, and increased internet connectivity and supply chain diversification accompanying DX promotion. The Group has established a Group Cybersecurity Committee and conducts entry/exit countermeasures and incident response drills, but if a large-scale, prolonged business suspension or leakage of personal information occurs, it could affect business performance and financial position through damage compensation, administrative sanctions, and loss of social credibility.

In addition to the decline in the working population due to the declining birthrate and aging population and a tightening labor market, there is a risk that securing personnel will become difficult due to salary levels lagging behind other companies. In the Postal & Logistics Business, a worsening shortage of truck drivers and other workers, along with intensifying competition to secure IT specialists needed for DX promotion, are challenges. Given rising domestic wage levels, even a small per-employee salary increase could have a significant impact on the Group's business performance and financial position due to the workforce of over 200,000 employees.

The Company has been actively pursuing M&A, including acquiring a 19.9% stake in Logisteed Holdings from KKR and entering into a capital and business alliance in December 2025, and making Tonami Holdings a consolidated subsidiary in April 2025. If integration with acquired companies results in failure to maintain relationships with key customers, impairment of the value of acquired assets, or loss of personnel, or if relationships with alliance partners deteriorate, as in the case of the suspension of collaboration with Yamato Transport, this could result in significant costs and impairment losses, affecting the Group's business performance and financial position.

The legal obligation to ensure universal service under the Postal Service Privatization Act and related laws restricts the scaling back of less profitable businesses and locations, while maintenance costs continue to rise due to minimum wage increases and inflation. Even as usage of postal, savings, and insurance services continues to decline, the obligation to maintain the nationwide post office network may make it difficult to reconcile public service obligations with profitability. If costs increase and profit and loss deteriorates significantly, there is also a risk that excessive pursuit of profitability in sales or fund management involving excessive risk could give rise to conduct risk or investment risk.

The Postal & Logistics Business has recorded operating losses for three consecutive fiscal years, and if a loss is again expected in the following fiscal year, there is a possibility of impairment losses being recorded on fixed assets used in that business. In addition, if the substantial value of the Company's shares in Japan Post and the two financial companies falls significantly below book value with no prospect of recovery, impairment losses would need to be recorded, potentially reducing distributable amounts and making it difficult to pay shareholder dividends. Impairment risk is also inherent in the International Logistics Business (Toll Group) and the Real Estate Business due to changes in the business environment and rising construction costs, among other factors.