In this issue Feature Story. No. 299 January 2003

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1 No. 299 January 2003 Published monthly by Public Relations Center Corporate Secretariat Div. Nippon Steel Corporation In this issue Steel-Canvas Series by Hiroji Noda Spring Wind (Born in 1952, his art combines abstract painting with other materials. He was awarded the 2001 Newcomer Prize by the Minister of Education, Culture, Sports, Science and Technology.) More about Nippon Steel WWW Notice If you have received the web-version of Nippon Steel News via , you are already a registered subscriber, thus no new registration is required. Associates who wish to become subscribers are requested to click on the icon to complete and submit the registration form. Upon registration the monthly web-version newsletter will be sent directly to the submitted address. The Year 2003: Crucial for Japan's Revitalization What Major Challenges Face Corporate Enterprises? Top company leaders Mikio Sasaki (center), President & CEO of Mitsubishi Corporation, Shoei Utsuda (left), President of Mitsui & Co., Ltd. and Akira Chihaya (right), President of Nippon Steel Corporation, discussed the major themes that Japanese companies must grapple with in order to revitalize the Japanese economy.

2 to Top The Year 2003 Crucial for Japan's Revitalization What Major Challenges Face Corporate Enterprises? "Now that Japan has no choice but to compete on the strength of human wisdom that creates technology, all sectors of society need to re-evaluate the true value of manufacturing." "As a trading company, we have a truly earnest desire to foster venture businesses and also to function as an interested party in the creation and fostering of technologies that will eventually unfold as successful businesses." "Our company has long put prime emphasis on the development of environmental technologies. We will continue our utmost efforts to create new value and to contribute to the society by fully utilizing the potentials of our technologies." Mikio Sasaki President & CEO of Mitsubishi Corporation Shoei Utsuda President of Mitsui & Co., Ltd. Akira Chihaya President of Nippon Steel Corporation Top company leaders Mikio Sasaki, President & CEO of Mitsubishi Corporation, Shoei Utsuda, President of Mitsui & Co., Ltd. and Akira Chihaya, President of Nippon Steel Corporation, discussed the major themes that Japanese companies must grapple with in order to revitalize the Japanese economy along with other topics at a meeting with Nippon Steel Monthly (January/February 2003), a house magazine of Nippon Steel. Highlights from their discussion follow.

3 to Top A New Business Model Capitalizing on Superb Technology Chihaya: Japan has a major accumulation of excellent core technologies. It is now imperative that national policies be implemented that fully utilize these technological capabilities as the trump card we need. To this end, Japan as a whole must aggressively create new technological systems that integrate not only the various existing technologies but novel advances in such fields as nanotechnology, genetic engineering and robotics as well. It is time for both the people and the government to share a common perspective that emphasizes the pursuit of regionally unique development throughout the country. Sasaki: There is heightened expectation among many countries regarding Japan's broadly ranging technological capabilities from basic research to commercialization. Notably, in the ASEAN countries who are now in fierce cost competition with China, demand is intensifying for a package shift in Japanese industrial technology. This would include ancillary services yielding higher added value, in addition to the kinds of technologies and manufacturing know-how that lead to higher productivity. Japan should henceforth orient itself towards an Advanced Science and Technology Oriented Nation. From that perspective, the Japanese government will allocate several hundred billion yen of its budget to R&D activities in four priority areas life science, IT, the environment, and nanotechnology materials. My ardent wish is that the R&D and commercialization of newer technologies will be further augmented through closer collaboration among the industrial, governmental and academic sectors. Chihaya: One absorbing topic in Japan last year was the presentation of the Nobel Prize to two Japanese scientists Dr. Masatoshi Koshiba and Mr. Koichi Tanaka. Interestingly, at a press conference held at the airport immediately before his departure for the awards ceremony in Sweden, Mr. Tanaka said, "A scientist laboriously fosters a technology even though it is unknown when or if it will be useful. I'd like to stress that such effort is a Nobel Prize technology in the bud." I think that Japan should put more emphasis on the national importance of technological development so that it could produce Nobel Prize winners virtually every year. Imaging Satellite IKONOS Mitsubishi Corporation, via its subsidiary Japan Space Imaging Corporation, provides ground image data taken by the high-resolution satellite IKONOS with a resolution capacity of down to one square meter. These imaging data are used in diverse fields such as forest/river control, urban development, environmental protection and map production. Photos show IKONOS and two satellite images: International Stadium Yokohama (venue for the final match of 2002 World Cup Korea/Japan) and Odaiba, a coastal urban development area in Tokyo.

4 to Top Utsuda: A recent notable trend is that the momentum in basic research is shifting to China, as often indicated by U.S. researchers. In addition, a large number of students from China and India pursue postgraduate courses at American universities. Many Chinese enterprises lure those researchers home by offering exceptionally good treatment, thereby creating an ever-growing array of desirable research environments in China. In fact, some Americans are already warning against this development. It worries me that, if this trend continues to intensify, it will sooner or later diminish even Japan's dominant position in the area of fundamental research. Henceforth, it is important to further develop Japan's excellent applied technologies namely, her strength in product development and systems creation while also strengthening the infrastructure that supports basic research. Sasaki: Creating Value through Commercializing New Technology and Intellectual Property this is the slogan of our company's team for new technologies and new materials. Today, no matter how excellent a technology may be and no matter how remarkable an expert's skill may be, these do not ensure the successful creation of a new business. Budding technology unfolds as a business only through a combination of various factors. Our company positions commercializing new technologies and materials and intellectual property rights as one of our core strategies. We base this on our comprehensive capabilities specifically, our amassed business know-how that enables us to offer and create a variety of processes for business. I expect that several new businesses will come into existence within the coming few years. Henceforth, our company intends to reinforce this commitment and will play a role in the creation of new industries. Utsuda: Our company is pursuing the development of biotechnology and nanotechnology, both of which are said to be the mega-technologies of tomorrow. For instance, as part of our biotechnology program we are actively studying the genes associated with breast cancer using a protein molecule analyzer invented by Mr. Koichi Tanaka, the aforementioned Nobel Prize winner. The aim of this study is to collect the DNA data of breast cancer victims in order to scientifically identify Biotechnology Business Mitsui & Co., Ltd., jointly with the National Cancer Centre of Singapore, established in March 2001 Agenica Research in Singapore, to which Shimadzu Corporation acquired equity participation in June Agenica Research is engaged in the analysis of cancer-related genes and in the study of hormones, which pertain mainly to Asian people.

5 to Top people constitutionally predisposed to this disease and to provide future genetic treatment. Conventionally, Japanese trading companies have served in the transfer of technologies developed overseas to Japan or, conversely, in the introduction of Japanese technologies abroad, thus tending to do business by capitalizing on Solidifying Japan's Presence in Asia Sasaki: The rapid emergence of China as a major economic power has had a large impact upon ASEAN countries. When I made a business trip to these countries in September of last year, I talked with government- and private-sector leaders and a central topic of conversation was how to cope with the recent remarkable growth of China. Although they compared China to a giant dragon, they regarded its growth not so much as a threat but as an expanding business opportunity. Accordingly, with high hopes of flourishing side by side with China, they now wish to collaborate with Japan to formulate a suitable approach to the current market situation. Japanese industry exhibits two prominent tactics in its current shift of production bases in Asia: "technological gaps." But our company, like Mitsubishi Corporation, has recently become an interested party in technological development and is committed to the creation and fostering of venture businesses and technologies with the aim of eventually turning them into viable business undertakings. one is the transfer of domestic production bases to China and the other is the transfer of production bases in ASEAN countries to China. The ASEAN countries, of course, are especially wary of the latter tactic. The growth of ASEAN countries as a whole, with a total population of about 500 million, is important not only to Japan, but also to China and the United States. Japan, as an Asian nation whose economic development is a step ahead of the others, must assume a leading role that takes into consideration the overall situation of Asia. Utsuda: Our company views China as a "greater China" and considers the region of China and the ASEAN countries together as the company's most strategically important area. With their headquarters in Tokyo, the Japanese trading companies in Nantong Baogang-Nippon Steel Co., Ltd. in China This company is a joint venture of Nippon Steel, Mitsui & Co., Ltd., Shanghai Baosteel Group Corporation and Nantong City Investment Administration Center. It was established in 1994 to manufacture steel bars using an integrated electric furnace steelmaking-bar rolling process.

6 to Top general have hitherto functioned with Tokyo as their operational center. As a result, most business transactions have flowed between the ASEAN countries and Japan and between China and Japan. But today we have a growing volume of offshore transactions that take various forms totally outside Japan, including transactions between China and ASEAN. Our company's new arrangements are designed to respond promptly to such changes. Another noteworthy factor is that China has completely transformed itself from the conventional "factory China" to "market China." In light of the enormous vigor of China, a huge country with a purchasing potential of about 300 million people, our company intends to take a more aggressive approach to the Chinese market. Our company is now undertaking jointly with Nippon Steel Corporation an electric furnace steelmaking-bar rolling project, Nantong Baogang-Nippon Steel Co., Ltd. What is essential for this project is that management be well aware of China as a huge market. Chihaya: From an international viewpoint, I think the two different waves of globalization and bloc economies are proceeding parallel to each other. The EU is now considering the creation of a huge economic bloc that would involve Eastern Europe. Already in existence are NAFTA (North American Free Trade Agreement) in North America and MERCOSUR (Southern Common Market in South America). In view of these developments, I think Japan ought to establish a new cooperative relationship with other East Asian countries, including Korea, China and Taiwan. In the future, Japan should expand this relationship to include not only the ASEAN countries but Australia and New Zealand as well. Eventually this would lead to the formation of economic areas such as a Pan Pacific (East Asia + Oceania) Common Area. Utsuda: I think Japan should essentially take the initiative in that respect. Global and Social Contributions Built on the Strength of Excellent Environmental Technologies Sasaki: Our company established the Philanthropy Department in 1973 and the Environmental Affairs Department in In addition, at the United Nations Conference on Environment and Development (UNCED), the so-called Earth Summit, held in Brazil in 1992, our company president at that time participated in the joint declaration made by fifty of the world's most prominent economists. Thus, our company has a long history of pursuing symbiosis with the earth and its environment. The Environmental Charter of Mitsubishi Corporation expressly states as its basic concept that an enterprise can not exist without consideration for the environment. How seriously an enterprise considers the way it deals with the global environment will become an increasingly important factor in increasing its corporate value. In this sense, I hope that Nippon Steel's rich endowment of technological capabilities for reducing environmental burdens will demonstrate maximum performance in diverse fields when it is wedded to new business operations.

7 to Top Chihaya: Nippon Steel has been enthusiastically developing technologies to contribute to the creation of a recycling-oriented society. Notably, our efforts have concentrated on the recycling of not only iron- and steelmaking by-products but also plastic wastes, used tires and other by-products generated by society and by other industries. Thus, we have accumulated a variety of technologies and know-how useful to the recycling industry. I believe that these technologies and knowhow have reached the stage where they can hold some values as a new independent business. In China, through the transfer of technologies aimed at conserving energy and preserving the environment, technologies that were developed for iron- and steelmaking processes, our company is providing aid and support that will benefit efforts not only to curb global warming but also to improve the quality of the environment in China. Quite recently, Nippon Steel and Beijing New Building Materials Co., Ltd. launched a new joint venture to market in China a steel-framed housing system developed by Nippon Steel. In fact, one of the factors expediting this project was an environmental issue peculiar to China. I understand that reckless lumbering conducted over many years to provide wood for baking bricks hampers the smooth water flow of the Yellow River (Hwang Ho). Given this limited availability of lumber to bake bricks, steel is the only alternative material that dispenses entirely with bricks for low-rise housing. Now our company wishes to respond to the high expectations of the Chinese people for steel-framed houses. Utsuda: It seems to me that the environmental technologies now dominating the market emphasize methods to reduce carbon dioxide emissions. In this sense, they can be said to be rather passive. I think that a more active approach to technological development is also important. For example, a technology for collecting carbon dioxide and solidifying it in deep water has been presented. Insofar as Japan is surround by sea, I hope that much more money will be invested in the development and commercialization of similar technologies in our country. Our company is now undertaking a unique longterm project in Australia: the planting of eucalyptus trees. This has the dual purpose of securing papermaking materials for the future and of contributing Steel-framed Houses for China A joint-venture company to supply steel-framed houses in China has been inaugurated by three Japanese companies Nippon Steel, Toyota Motor Corporation and Mitsubishi Corporation and the Chinese building materials maker, Beijing New Building Materials Co., Ltd. Photos show the joint venture signing ceremony in September 2002 and a steel-framed house built in Beijing.

8 to Top to the conservation of a natural forest and the mitigation of global warming. The area to be planted annually is about 4,500 hectares. Amid the increasing depletion of natural forests, including tropical rain forests, in many quarters of the world, this tree planting project is expected to go a long way toward global environmental conservation. Greenhouse Gas Emissions Trading Mitsubishi Corporation, jointly with Natsource LLC of the U.S. and 12 other companies, established Natsource Japan Co., Ltd. as an initial step in the formation of a market for trading of greenhouse gas emissions credit (photo: transactions at Natsource LLC of U.S.). Eucalyptus Tree-planting Project in Australia Mitsui & Co., Ltd., jointly with Nippon Paper Industries Co., Ltd., is promoting eight tree-planting projects in Australia. Eucalyptus trees are being planted for use as paper-making materials. The total area planted thus far exceeds 21,000 hectares and will contribute to the protection of forest resources while at the same time mitigating global warming. All copyrights reserved by Nippon Steel Corporation HEAD OFFICE Public Relations Center 6-3, Otemachi 2-chome, Chiyoda-ku, Tokyo , Japan Phone: Fax: to 5609 OVERSEAS OFFICES New York Phone: Fax: Chicago Phone: Fax: Houston Phone: Fax: Düsseldorf Phone: Fax: London Phone: Fax: Sydney Phone: Fax: More about Nippon Steel on the website: Singapore Phone: Fax: Bangkok Phone: Fax: São Paulo Phone: Fax: Beijing Phone: Fax: Shanghai Phone: Fax: Guangzhou Phone: Fax: Thank you. issue coming soon.