President’s Message

In March 2024, the Bank of Japan ended its negative interest rate policy, marking the return of a world with interest rates. While we had long anticipated a future rise in interest rates, the recent pace of increases has significantly outstripped the forecasts of multiple domestic think tanks.
Looking back, Japan’s zero interest rate policy, which began in February 1999 in response to the financial crisis epitomized by the collapse of major securities companies and the subsequent credit crunch, persisted until this March. This policy was briefly interrupted only during a period of slight economic recovery between July 2006 and December 2008. In essence, we’ve experienced virtually zero interest rates since the dawn of the 21st century. As a non-bank financial institution where interest rates constitute our funding costs, this era of zero interest rates has been extraordinarily favorable and fortuitous for us.
Naturally, our Company achieved steady growth even before the introduction of the zero interest rate policy in 1999, and some might argue that we’ve merely returned to that era. However, there’s a crucial difference between then and now: the growth rate of the Japanese economy. In 1989, when we changed our name from Orient Finance to Orient Corporation, Japan’s nominal GDP growth rate stood at about 7%, with real GDP growth at approximately 5%. During these phases of economic expansion, we could generate profits by investing the funds we raised in high-growth sectors.
By contrast, today’s economic growth rate hovers at around 1% in terms of real GDP. We now face an unprecedented scenario: a world that has interest rates, but no substantial growth. Of course, saying that there’s no growth might be somewhat hyperbolic in light of future prospects. Nevertheless, I believe we can no longer expect the robust growth witnessed during the high-growth era of the 1955 to early 1970s, or even the stable growth period of the 1980s.
Our Company will be celebrating its 70th anniversary this December. For the next 30 years leading up to our centennial, we must navigate new challenges in this uncharted world featuring interest rates. At this pivotal juncture in history, I am keenly aware of the weight of the responsibility of steering our management.

I believe that a corporate philosophy is a guiding light that all excellent companies have regardless of their size.
The motivation for reviewing our Corporate Philosophy, which was established in 1995, was the significant changes of the times. 1995, when we formulated our previous philosophy, was the peak year for Japan’s working-age population, and the Japanese government was promoting deregulation and structural reforms following the collapse of the real estate bubble. Windows 95 was released, marking the beginning of an era where every household had a computer, and the penetration rate of mobile phones rapidly increased from about 5% in the previous year to 10% in just a single year. I think this was an era when society believed that continued economic growth would persist. Times have changed considerably between when we formulated the previous philosophy and now, and about three years ago, when we were formulating the current medium-term management plan, I realized that the previous philosophy had become somewhat outdated. I felt that under the previous philosophy, we would follow the same path as before and wouldn’t be able to adapt to the new era, so it was necessary to formulate a new corporate philosophy and clearly express the thoughts and ideas embedded in that philosophy both internally and externally.
That being said, in formulating the new philosophy, it was quite difficult to accurately predict the future 30 years from now, as our intuition failed to grasp the non-linear changes that the future has in store for the 21st century.
However, what we can almost certainly anticipate for the next 30 years is that Japan’s population will decrease to around 100 million, and consequently, the age range considered to be working age will likely be redefined. Additionally, global warming will continue to advance, and the trend towards decarbonization will intensify in an effort to curb it, leading to the creation of various new technologies to address the issue, such as nuclear fusion.
To directly address these changes and fluctuations over the next 30 years, and to continue to balance solving social issues with growth as a company, we have set our purpose as “Open the Future with You”, infusing our determination to proactively approach society’s potential needs rather than taking a passive approach. Furthermore, based on the integrity and trust we have long cherished, we have established four values that express our desire to imagine the future and take on the challenge of creating new value. We established and announced this new philosophy, combining our Purpose and four values, in April 2024.

Looking ahead to the next decade, the most pressing social issue we must address is undoubtedly the global environmental crisis. The push to prevent environmental degradation and achieve net-zero greenhouse gas emissions to mitigate climate change will further intensify, and financial institutions’ investments will increasingly shift in this direction. Consequently, corporate management must naturally shift in the same direction. For the coming decade, sustainability will unquestionably remain a central theme. We must consider how to balance the sustainability of our planet and society with the sustainability of our Company. I believe this involves identifying high-growth markets and determining how we, as a company, can contribute to solving social issues.
Before formulating our current medium-term management plan, we articulated the vision for our society as “a sustainable society in which everyone can realize a fulfilling life”. To make this vision a reality, we defined the vision of the Company as: “an innovative and leading company that provides financial services by always being attentive and responsive to our customers, while contributing to solving various social issues” and “a company that is more than ever recognized by its stakeholders for its significance in society”. This focus on sustainability, aimed at enhancing both social and corporate value from a long-term perspective, forms the core of our management approach. Our medium-term management plan outlines the specific strategies and measures to achieve this goal. In our current plan, which runs through fiscal year 2024, we are concentrating on developing a framework for sustainability management and optimizing our business portfolio to boost sustainable and stable profitability. Reflecting on our progress through fiscal year 2023, the second year of the plan, I believe we have made substantial strides in developing and reinforcing three key foundations: governance, human resources strategy, and financial discipline.

We are making steady efforts to strengthen our governance, which serves as the foundation of our management. In addition to establishing the new Corporate Philosophy I explained earlier, we have also transitioned from a company with a Board of Corporate Auditors to a company with an Audit and Supervisory Committee in June 2022, while increasing the ratio of Independent External Directors on the Board of Directors to one-third or more.
Furthermore, since 2022, we have formulated new basic management policies such as the Information Disclosure Basic Policy, Human Rights Basic Policy, and Environmental Basic Policy. From the perspective of sustainability management, in fiscal year 2023, we responded for the first time to the Climate Change Questionnaire survey by CDP, an international NGO that evaluates the environmental activities of major global companies. As a result of our response, we received a B rating, the third-highest rating, as well as remarkably high praise and encouragement as a first-time respondent. Moreover, we were selected as a constituent of the MSCI Nihonkabu ESG Select Leaders Index in March 2024, and in May of the same year, we acquired an A rating in MSCI’s ESG ratings. While there is still room for improvement, I believe we have been able to build a track record that aligns well with international standards.
On the financial front as well, we are strengthening our foundation through the establishment of new capital policies and financial discipline. When I became President in 2020, we were in the midst of the COVID-19 pandemic, but looking at the Japanese economy, Abenomics had made progress in overcoming the deflationary mindset, and the market environment was characterized by negative interest rates and lower default rates. Given that future interest rates can only move upward, we have been working to strengthen our financial base with the belief that JCR and R&I ratings are crucial for non-bank financial institutions to continue smooth and important fundraising in the future. Our rating, which was BBB+ at the time, has now been upgraded by three notches to A+, the highest level in the industry, and I believe our financial issues have been resolved.
In our human resources strategy, to develop talent that can successfully adapt to the new era, we have implemented various reforms to our personnel system, including the abolition of transfers involving undesired relocations and the decision to introduce job postings. We started a mission- and performance-based evaluation system for managerial positions in April 2023, and expanded it to union members starting April 2024. The aim of these system reforms is to support autonomous career development. In an era of rapid change, we as a company are committed to firmly supporting employees who seek to carve out new paths for themselves. By developing and operating systems based on this concept, we aim to build a win-win relationship between the Company and its employees.

Building on this management foundation, we are also restructuring our business portfolio to advance initiatives that contribute to solving social issues and enhancing social value. With the aim of transforming our business portfolio into one with high risk-return and cost-return, we have established four key strategies: cultivating priority markets and exploring new business fields, establishing market-in type of sales, creation of new services through collaboration with other industries and leading-edge companies, and delving into process innovation. Additionally, we have positioned the acceleration of structural reform of the installment credit business as a company-wide initiative.
I believe these various business strategy initiatives are making steady progress. For example, in 2023, we invested in Honest, a Fintech in Indonesia, establishing a strategic partnership with the only company other than local banks to hold a credit card business license in the country. I have personally engaged in dialogue with the founder and CEO of this company, who started the business based on financial and technological knowledge gained from studying at a U.S. university. Having witnessed the leapfrogging phenomenon unfold in that country, I can’t help but feel a sense of crisis, wondering if Japan has been quietly overtaken. It’s truly eye-opening. Indonesia, with Southeast Asia’s largest population at 280 million, is experiencing an expansion in its middle-income class along with rapid economic development and widespread digital infrastructure. However, only about half of the total population has a bank account, and the credit card penetration rate is only around 5%, indicating that access to financial services is not necessarily sufficient. We aim to capture the inevitably expanding market needs and are also considering integration with our auto loan business that we have been operating in the country.
Moreover, we are seeing examples of initiatives that embody our new Corporate Philosophy by creating new value. One such example is the Akikatsu Loan, which promotes the circulation of vacant houses, a social issue affecting all of Japan. This solution focuses on the fact that housing loans and similar financial products are difficult to apply to vacant houses whose collateral value has decreased over time. As a result, even those who want to purchase such properties are forced to give up due to financial constraints, perpetuating the vacant house problem in local communities. We made this product a reality through repeated development efforts in collaboration with AKIYA KATSUYO Co., Ltd., which operates Akikatsu Navi, an online platform that matches vacant house owners with potential buyers nationwide utilizing our long-established network with regional financial institutions and digital technology. The Akikatsu Loan product received the 2023 Nikkei Superior Products and Services Awards: Nikkei Veritas Award.

While each initiative is steadily moving forward, due to the impact of interest rate increases progressing more rapidly than initially anticipated, we cannot expect to achieve our original target of 40 billion yen in ordinary profit in fiscal year 2024, the final year of the current medium-term management plan. In May, we revised the ordinary profit target downward to 20 billion yen. Our original interest rate outlook was based on what we believed to be objectively reasonable forecasts made by multiple domestic think tanks. However, in the first year of the medium-term management plan, we suddenly exceeded the interest rate increase anticipated for the three-year period, making me keenly aware that we are indeed in an era where unexpected events can occur.
We consider the final year of the current medium-term management plan to be an important turning point for future growth. While achieving the promised management goals is of course important, it is also crucial to lay the foundation for the next leap forward and phase of growth. To improve our PBR, we must continue to transform into a high-growth company by working on two aspects: improving ROE and ROA, and enhancing non-financial value. As we steadily continue to put the current medium-term management plan into action, we will deepen discussions on formulating the next medium-term management plan for the next decade.

The society we aim for is a sustainable society in which everyone can realize a fulfilling life. To achieve this, we have been steadily producing results while maximizing our abundant human capital, based on the idea of balancing social value and the enhancement of corporate value.
I believe our Company has the potential to generate even greater added value going forward. Building on the collaborations we have established with our customers and business partners, we will create a new growth strategy for this new era with interest rates. I believe this to be my mission.
I ask for the continued support of all our stakeholders, including our customers, business partners, shareholders, employees, students interested in our Company, and local communities, as we look to meet your expectations.