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President's Message 2007

Management group message

January 8, 2007

Last year was the second of our three-year medium-term management plan, NEXT50-Phase II. It was a significant transitional period, in which we carried the momentum gained in the first year of the plan into its final year. As we moved to the next stage of our business growth, we started operations at several key facilities, launching our headquarters' research and test laboratory, opening a Global Parts Center and an astaxanthin raw material plant in Japan, and beginning production at new motorcycle plants in Indonesia and Vietnam. In addition, we increased the output capacity in our intelligent machinery business. Thus, we invested aggressively to boost production in Japan and overseas.

We were also active in philanthropy, establishing the Yamaha Motor Foundation for Sports in December.

We are still in the process of evaluating our consolidated business results for the fiscal year ended December 31, 2006. However, we expect to achieve 1,520 billion yen in net sales and 125 billion yen in recurring profit. These results for fiscal 2006 are expected to meet the final targets specified in Next50-Phase II, a year ahead of schedule. However, in fiscal 2007, we must leverage the investment we made last year, in order to make a still greater leap.

In addition to attaining outstanding results, we also need to earn the continued trust of the communities we serve by raising employee awareness of issues such as compliance, and increasing the credibility of our corporate system.

With this in mind, we intend to address the following key priorities in 2007.

1. Realizing the Goals in the NEXT50-Phase II Plan

In implementing the NEXT50-phase II medium-term management plan, we are working hard to create value that differentiates Yamaha; to continue the profit-oriented approach; and to maximise opportunities for business growth. Let us review the progress of each of these management issues in more detail.

To create distinctive value that sets Yamaha apart from the competition, we are stressing the unparalleled technology, products, and marketing that define the Yamaha identity. We intend to deliver added value that our customers cannot get anywhere else. In the ASEAN market, for example, we have introduced a new concept -- automatic motorcycles -- and vitalised the market. However, I do not believe we have achieved comparable results in Europe and the United States. Because the environment in these mature markets makes it more difficult to differentiate Yamaha, we need to redouble our efforts to enhance the brand image through the kind of high-value-added marketing that only Yamaha can offer. With this approach, we will surely win greater brand recognition and advance towards the goal of differentiating Yamaha from the competition.

By continuing the profit-oriented approach, we intend to build on the profitable structure that we created during our previous medium-term management plan, and extend it group-wide. However, there is room for improvement in this regard. Last year, our profitability actually declined, due to rising raw material prices and other negative factors.

To reverse this decline, we need to improve profitability at every step in the operation -- product planning, development, purchasing, production and sales -- by deploying our system-supplier system group-wide. We are resolved to become more cost conscious, reviewing once again all product processes from a comprehensive, upstream perspective.

In order to maximise growth opportunities, we aim to enhance our business foundation in markets with potential for further growth, thereby creating new businesses and demand. In India, we are still facing some difficulties in expanding our business. However, we have been able to achieve growth in Brazil and successfully exploit demand in Russia. In addition, our new life science business has begun full-scale operation. Overall, I believe that these efforts have paved the way for further success in the next medium-term management plan. In 2007, we intend to accelerate our action on all these fronts.

2. Taking a Consistent Customer-first Approach

In the second half of 2006, we issued a series of recalls in Japan, calling our commitment to quality into question.

Quality problems are among the most serious management issues we face. In addition to the actual cost of recalling defective products, we suffer the opportunity cost of diverting time and labour to recalls that should have been invested in our future. As important as that may be, however, it is even more crucial to recognise that shortcomings in quality also risk betraying our customers' trust and expectations. These issues can destroy the brand image that our predecessors have created. Therefore, everyone on our team must once again consider whether we are doing our best to serve our customers. This means looking for solutions beyond our conventional approaches. We are committed to continuously improve our ability to detect quality problems before they arise, and to take action based on better decisions. With this in mind, we are determined to meet the challenges we face in this area.

3. Establishing a Model Corporate Culture

Last January 23, Yamaha Motor Company in Japan was investigated for allegedly breaching export regulations concerning unmanned helicopters. We must frankly recognise that our actions raised serious concerns in society, but by learning from the incident, we can build a model corporate culture that inspires confidence from the society around us. Compliance is a crucial component. We must not only abide by the law but also ensure that our own self-directed corporate ethics reinforce compliance.

We plan to initiate a variety of programmes designed to fulfill our corporate social responsibilities, including initiatives proposed by the Compliance Special Committee. Once these projects are in motion, management will have a yardstick to determine whether the company is living up to the expectations of society, and is capable of sustainable growth. Based on their findings, Yamaha Motor will make whatever improvements are necessary to become a model corporate citizen with a culture that inspires trust.

Making a Leap into the Future

This year will be pivotal in determining whether we can leverage the profitable structure built during the previous medium-term management plan to achieve the growth targets specified in NEXT50-Phase II. Although we face challenges such as a harsh business environment and rising costs, we must go all out for success.

Having survived and prospered over the competition throughout the past 50 years, I believe that Yamaha Motor is capable of accomplishing any goal. I will do my best to meet the expectations of our valued customers and business associates, and to support the efforts of all employees who work under the Yamaha banner.

If we liken our three-year plan to the track and field triple jump, we have finished the first-year "hop" and the second-year "step." As in the athletic activity, winning or losing depends on how strong we are in the final "jump" -- which we are now approaching. I hope and believe that all of us in the Yamaha Motor Group will combine our individual efforts to make a dramatic leap into the future.

Yamaha Motor Co., Ltd.
President and Representative Director
Takashi Kajikawa
(January 8, 2007)

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