Q&As on the Presentation of Financial Statements for the First Quarter of FY2009.3, Ended June 30, 2008

A1 : The impact of these losses in the first quarter was about ¥500 million higher than for the same period of the previous fiscal year. For the full fiscal year, the impact will be about ¥2 billion higher.

A2 : There have not been any major changes in trends in the guitar market, and our understanding is that Yamaha’s acoustic guitar, especially electric acoustic guitars have been well received in the market. In addition, the operating environment for sales in the acoustic drum business is tough, but in the electronic drum field, the market is growing, and we are anticipating future growth.

A3 : In the wind instruments business, along with expansion in orders, there were quality problems in the case of some products, and production delays occurred in the medium- to high-quality categories. However, production delays were actually more of a problem in the digital musical instruments area, but, during June, we made up for the production delays that occurred in some areas in May. This catch-up production in June was one factor resulting in higher inventories at the end of the quarter.

A4 : We have heard that restraining capital investment is an issue in some areas, but this is not such a major problem at the present time.

A5 : Operating income in the AV/IT business was above the previous forecast for the first quarter, but we believe this was due partially to delays in recognition of expenses. For the full fiscal year, if we exclude foreign currency factors, we believe real sales will be down ¥800 million compared to the previously announced forecast. Also, we are strengthening our marketing slightly for lower-margin, mass-market products. As a result of these factors, we have, therefore, revised the outlook for operating income downward at this time.

A6 : The decline in sales of LSI ring tone sound chips was in line with our expectations, and the principal cause of the decline was the delay in introducing semiconductors for areas where growth is anticipated, which we had expected would make up for the decline in LSI sound chips.

In the first quarter, the replacement of pachinko machines did not proceed as anticipated, and in particular shipments of graphics LSIs for amusement equipment were delayed. In addition, in the digital amplifier LSIs, we have experienced delays in development, and we now believe that, as a whole, some of the shipments we had counted on in the second half of the fiscal year may slip into next fiscal year. We have, therefore, lowered our outlook for sales for the full fiscal year.

A7 : We are expecting sales to remain at the level of the previous fiscal year excluding the factors of revisions in foreign currency exchange rates. We have lowered our full year forecast for operating income compared with the previous outlook because raw material prices have risen more than we anticipated.

In the first quarter, as a result of the deduction of unrealized gains on inventories, operating income was lower than forecast previously. For example, under the rules we have set for transactions between Head Office business departments and subsidiaries, when foreign currency fluctuations exceed preset limits, we make adjustments in the transfer prices. We believe another reason for the decline in operating income was that these adjustments were not reflected in the ratio for the deduction of unrealized gains on inventories.

A8 : A strike occurred at our portable keyboard plant in China in May, but things returned to normal in June.

A9 : We were originally assuming sales of silicon microphones amounting to only several hundred million yen during the current fiscal year; so, we were not expecting large sales amounts. As a result of delays in development, we now anticipate that full-scale sales of silicon microphones will slip into the next fiscal year.

A10 : SG&A expenses during the first quarter in the musical instruments business on a real basis, excluding the effects of the consolidation of additional subsidiaries and foreign currency movements, increased ¥900 million compared with the same period of the previous fiscal year, but this represented a decline of ¥500 million compared with the previous forecast. For the full fiscal year, on the same real basis, we are expecting an increase of ¥1.5 billion year on year, which will be ¥1.1 billion lower than in the previous forecast.

A11 : Our components business got its start as a result of our application of technology for metallic molds in the production of musical instruments, and, although it has grown as a business in its own right, we are more interested in making use of the new manufacturing methods and other skills we have acquired for producing magnesium parts and automobile interior wood components in our musical instruments manufacturing business and in reducing costs. In the magnesium parts business, during the first quarter, as a result of a decline in sales of products for use in mobile phones, overall sales in this business declined, and improvements in process yields were delayed. Looking ahead, we will focus on increasing yields and thereby improving profitability.

In addition, in our automobile interior wood components business, the outlook for sales trends of the luxury automobiles of our customers is uncertain, but we will work for a smooth start of production in time for the fall when our major automobile company customer will introduce new models. Looking ahead, we would like to expand the range of our customers for these components among European automobile companies.

In the lifestyle-related products segment, we are working to strengthen our position in the home remodeling business and improve profitability by emphasizing further development and expansion in units mainly for the medium- to high-quality product segments.

At the same time, to reduce manufacturing costs, we are moving ahead with review and reforms in factory workforce systems and in the lineup of suppliers of basic materials.

A12 : Yamaha’s semiconductor business has technological synergies with its core musical instruments and AV equipment businesses. Accordingly, there will be no change in our policy of strengthening this business going forward.

To strengthen our product development systems, we are moving forward actively to increase personnel in this area and to promote interchange among personnel in the semiconductor business on the one hand and the musical instruments and AV equipment businesses on the other. As a result of these measures, we want to strengthen this business to the point where it can generate a stable ¥5 billion and ¥10 billion in operating income annually in the medium term.