West Japan Railway Company

If a railway accident occurs, it could cause severe harm to passengers' lives and property, and could have a serious impact on management through compensation costs and business interruption. Based on lessons learned from the Fukuchiyama Line train accident, the Company has formulated the "Safety Kodo Plan 2027" and is promoting platform gate installation (approximately ¥40.0 billion by FY2027 (ending March 2027)) and level crossing safety measures, but continuous investment in both hardware and software aspects will be required.

Railway infrastructure could suffer large-scale damage from natural disasters such as earthquakes, typhoons, and heavy rain, and the recent trend of increasing severity is raising this risk. The Company plans to complete seismic reinforcement of the entire Sanyo Shinkansen line by the end of FY2053 (ending March 2053), with an estimated maintenance cost of approximately ¥300.0 billion over 30 years, and this long-term, substantial capital investment burden will affect its finances. The Company has established a commitment line with financial institutions in preparation for emergency fundraising.

The Company regards the progression of population decline and the aging society/low birthrate as its greatest management risk, as the medium- to long-term decline in railway users will squeeze revenue. The impact is significant on a business model centered on the railway business, which is characterized by mass transportation, and if depopulation, changes in urban structure, and polarization of consumer behavior become apparent, they could have a major impact on the Group's overall earnings. The Company is promoting mobility transformation and business portfolio transformation under the "Medium-Term Management Plan 2030".

Prolonged yen depreciation, price increases, and rising interest rates could increase business costs, while price pass-through may be constrained by fare regulations under the Railway Business Act. If fluctuations in energy and raw material prices coincide with supply chain dysfunction, there is a risk that the Group's overall earnings will deteriorate. The Company has indicated a policy of pursuing revenue generation and cost reduction while implementing fare revisions at an appropriate time as necessary.

The decline in the working-age population in the western Japan region could make it difficult to secure the technical and skilled personnel necessary for railway operations as well as personnel responsible for creating new value. If human resource recruitment stagnates, there is a risk of impeding business continuity and the execution of the strategy under the "Medium-Term Management Plan 2030". The Company is addressing this through expanding diverse recruitment channels, including mid-career hiring, comeback hiring, referral hiring, and re-employment of those aged 65 and over, as well as promoting its human resource strategy.

If cyberattacks or system failures occur affecting railway operations, ticket sales, or systems in various business areas, this could impede business execution. If personal information or trade secrets are leaked, this could affect earnings through loss of competitive advantage and decline in social credibility. The Company is implementing regular inspections, improving officers' and employees' IT literacy, and strengthening cooperation with external organizations under the Information Security Committee chaired by the CISO.

Operational suspensions or labor shortages at partner companies contracted for construction and maintenance, or disruptions to procurement routes for parts and materials, could make it difficult to smoothly procure the technical capabilities and parts necessary for railway operations. The Company is addressing this through leveling construction workloads, improving the working environment to enable stable outsourcing to partner companies, and placing advance orders for spare parts and substituting alternative parts based on medium- to long-term aging replacement plans. The Company has also established the "JR West Group Supply Chain Policy" and is promoting risk management in the areas of human rights and the environment.

There are regulations such as the fare and charge upper-limit authorization system and the obligation to give advance notice of line abolition under the Railway Business Act, and changes to licensing standards could affect earnings. Although the "Revenue and Cost Calculation Guidelines" were revised in April 2024, if revenue declines due to population decline and costs continue to rise due to inflation, fare revisions may become necessary to secure appropriate resources. Even after exemption from application of the JR Companies Act, obligations to cooperate between companies, maintain lines, and give consideration to small and medium-sized enterprises based on the guidelines of the Minister of Land, Infrastructure, Transport and Tourism continue.

Violations of a wide range of laws and regulations, including the Companies Act, the Antimonopoly Act, the Personal Information Protection Act, and the Railway Business Act, could result in administrative penalties and a decline in social credibility, affecting business operations. Not only legal violations but also events contrary to social norms, corporate ethics, and human rights could adversely affect customer usage and human resource recruitment. The Company is addressing this through the establishment of the "Corporate Ethics and Human Rights Committee" chaired by the President and Representative Director, dissemination of the "JR West Group Code of Conduct", and the internal whistleblowing and human rights remedy policy formulated in April 2026.

The extension of the Hokuriku Shinkansen west of Tsuruga (Obama-Kyoto route) is still at the stage of environmental impact assessment, and since the timing of construction commencement and opening is uncertain, the impact on revenue plans is difficult to foresee. Although the leasing fee for newly built Shinkansen lines is calculated within the scope of benefits received (¥9.3 billion per year for the Kanazawa-Tsuruga section), the Company recognizes that the basic principles of bearing costs within the scope of benefits received and separating parallel conventional line operations must be maintained even when construction is extended toward full-line opening. Changes to the extension plan or revisions to cost-sharing rules could affect the Company's finances.