Crafting
Hands-On
Solutions

Annual Report 2018
for the year ended December 31, 2018

PROFILE
Group Mission

Help resolve social issues with advanced imaging and IT solutions.
Group Vision

The Canon Marketing Japan Group understands and grows with its customers.
Code of Conduct

Establishment

Customer-centricity

1968

Canon
Asia
Marketing

Canon
EuropeCanon
U.S.A.

Canon
Inc.

Role within the Canon Group

Market and provide solutions,primarily in Japan.

Canon
Australia

Canon Marketing Japan

Identify customer needs
and issues

Analyze and provide feedback on
customer needs and issues

Canon Marketing Japan
Business Areas

MarketingServices

Canon Inc.
Research andDevelopment
Manufacturing

Alliance Partners in Japanand Overseas

SolutionsMarketBusiness Segments
Consumers

Enterprise

Area

Professional

Number of consolidated subsidiaries

Number of employees

20

17,647(As of January 1, 2019)(As of December 31, 2018)

Canon MJ’s original services and added value

Canon and other partners’ products
and services

Provide advanced imaging
and IT solutions

Domestic
Overseas

FINANCIAL HIGHLIGHTS OF FY2018
Net sales

Operating income

Profit attributable to owners of parent

Profit attributable to owners of parent per share

ROE

Cash dividends per share¥621.6 billion [1.7% ]¥20.8 billion [0.7% ]
6.9% [0.3pp ]CONTENTS¥28.9 billion [4.8% ]¥160.61 [0.7% ]¥60 [Same as FY2017]

1

FINANCIAL HIGHLIGHTS OF FY2018

25 SUSTAINABLE MANAGEMENT

2

AN INTERVIEW WITH THE PRESIDENT

29 CORPORATE GOVERNANCE

8	SPECIAL FEATURE: RESOLVING SOCIAL ISSUES THROUGH THE
CANON MJ GROUP’S IT SOLUTIONS

35 CANON MJ GROUP MEASURES TO PROMOTE THE USE OF IT
37 FINANCIAL SECTION

12 THREE-YEAR MANAGEMENT PLAN AND BUSINESS SEGMENTS

68 CANON MJ GROUP COMPANIES

14 REVIEW BY SEGMENT

69 CORPORATE DATA

16 SEGMENT STRATEGIES

Editorial Policy
Annual Report 2018 aims to provide information that investors need to understand how the Canon Marketing Japan Group generates corporate value. The interview
with the president presents policies and initiatives to drive growth and profitability under Three-Year Management Plan 2019–2021. The special feature showcases
the advanced information technology solutions that the Group is deploying. The segment business strategies section describes key strengths, business strategies,
and risk measures.
Disclaimer Regarding Forward-Looking Statements
This annual report contains forward-looking statements about the future performance and management plans of the Canon MJ Group. All forward-looking
statements are based on management’s assumptions in light of information available to the Company at the time of publication. The following factors
may therefore influence actual results. These factors include consumer trends in Japan as well as other major global markets, private capital
expenditures, currency fluctuations, notably against the U.S. dollar, materials prices, and political turmoil in certain countries and regions.

Canon Marketing Japan Inc. I Annual Report 20181

AN INTERVIEW WITH THE PRESIDENT

Masahiro Sakata
President

2

Canon Marketing Japan Inc. I Annual Report 2018

Q What was fiscal 2018 like for Canon MJ?
Markets for business-to-consumer (BtoC) products shrank more than envisaged.
Net sales decreased 1.7%, to ¥621,591 million. Operating income was(ROE) decreased 0.3 percentage point, to 6.9%. Markets in which thedown 4.8%, to ¥28,941 million. Profit attributable to owners of parent

Group maintains high shares, BtoC products in particular, shrank more

was up 0.7%, however, to a record ¥20,826 million. Return on equity

than we envisaged.

Q How did you perform in Canon’s core product areas of cameras, inkjet printers, officemultifunction printers (MFPs), and laser beam printers (LBPs)?
Approaches to date with regard to BtoC products no longer worked. The situation with businessto-business (BtoB) offerings was as expected.
Conditions in BtoC and BtoB areas differed.
In BtoC areas, our sales efforts have long conveyed the joys ofphotography and inkjet printing. However, with the pace of market

For BtoB products, markets are gradually shrinking in an
increasingly paperless atmosphere, but this is to be expected, and I
believe we can deal with this to a certain extent.

shrinkage becoming significant, the current situation will not change muchin our favor if we persist with current sales and marketing approaches.

Q

IT solutions sales grew 8.6% in fiscal 2018. This reflected greater demand for systems
integration (SI) services for the finance, manufacturing, and public sectors, IT solutions forsmall-to-medium-sized enterprises, and gains in security and data center services. Does thismean that markets expanded and that the Group’s strategies succeeded?
Our strategies factored into this, but the prime driver was market growth.
Since I became president in 2015, I have recognized that it would be

benefited less from our measures than from expansion of the IT

difficult to expand as before with Canon products. I therefore

market, which propelled the Group’s IT solutions growth. In IT

declared that IT solutions would be our growth driver, andsolutions for small-to-medium-sized enterprises, the appetite for

implemented measures accordingly. Our sector-specific SI initiatives

investment among customers has been solid, partly because of theand efforts to bolster data center services have delivered results.

end of support for Windows 7 and labor shortages, so our real

Nonetheless, a major factor in fiscal 2018 was that our performance

growth lies ahead of us.

Canon Marketing Japan Inc. I Annual Report 20183

Q

Tell us about your hopes for the second stage of the Nishi-Tokyo Data Center once it
is constructed.
We anticipate stable sales and earnings growth.
The data center business looks after customer data, so it naturally

and its second stage is expected to enhance sales stability for thehandles IT infrastructure for customers, including operations andGroup. As such, we have great hopes in these operations. They havemaintenance. Compared with SI, whose sales fluctuate according toalready delivered results, so we will keep investing in the data center

whether or not there are large deals, the data center business is

to further stabilize sales and profits.

extremely stable. Our Nishi-Tokyo Data Center has reached capacity,

Q By shifting from a product-based organizational framework to a customer-centric framework,
you accelerated efforts to mutually employ customer infrastructures and develop IT solutions
operations. You have also set up a business process outsourcing (BPO) center and otherwise
stepped up cross-functional capabilities. Have things progressed as you expected?
We now have a structure in place, including in terms of improving employee awarenesses. How
things function is further down the road.
Transforming our framework clarified how we need to act andconcentrate such functions in one place within the Group, as there is a

the issues we face. Still, it took us a year to change employee

tremendous need—particularly among large customers—to outsource

awarenesses and adapt to the new framework. I do not think

noncore operations. So, while we transformed employee consciousnesses

framework changes have generated results yet in terms of mutually

through framework changes and put in place a platform for using

using customer infrastructures and developing IT solutions operations

resources within the Group, I think it will be some time before the newfor small-to-medium-sized enterprises. It is in this context that I

framework fully functions.

believe it was a good idea to launch the BPO center so as to

Q How do you evaluate the Canon MJ strengths and core competencies of your customer base andsales capabilities, technological capabilities for IT solutions, and Canon brand strengths?
Recognition of our IT solutions will be key to improving our superior position.
Our solid customer base and sales capabilities over the years have given

In December 2017, we set about bridging that perception gap

us a competitive edge. We have amassed a strong record of technologicalby broadcasting television commercials to heighten our profile ascapabilities for IT solutions. I think that the Canon brand is wella provider of IT solutions. By enhancing awareness through such anrecognized and the customers have favorable feeling toward the brand.

approach, I think we will further extend our edge in terms of our

However, it is difficult to see how much positive effect we gain from

customer base and sales capabilities and our technological

the Canon brand in developing IT solutions business. Canon is strongly

capabilities for IT solutions.

associated with cameras, inkjet printers, copiers and MFPs, and LBPs.
Unfortunately, very few equate Canon MJ with customer IT solutions.

4

Canon Marketing Japan Inc. I Annual Report 2018

Q What was your stance on prevailing Japanese economic conditions when you formulated threeyear management plan for fiscal 2019–21?
It is important to lift productivity to alleviate labor shortages and to reform work practices.
I do not believe that Japanese economic conditions are poor. Regional

years. There have been calls for work practice reforms during that

economies are benefiting from inbound tourism, so they are a little

time, and improving productivity has become an urgent challenge forbrighter than before. Setting aside labor shortage problems, I do notcompanies, so demand for IT solutions should inevitably increase. We

think that the economy will deteriorate for at least the next two or

formulated our management plan for fiscal 2019–21 so we would

three years.

naturally reach our objectives.

Given that situation, labor shortages have worsened in recent

Q What will be the focus for growth under your medium-term management plan for the Consumers,
Enterprise, Area, and Professional segments?
We will strengthen IT solutions and be highly specialized.
The Consumers segment accounts for the bulk of Canon brandofferings. The presence of e-commerce is increasing in various fields,of Canon MJ’s direct sales unit for large enterprises, from which I hail.
MFPs and LBPs represent high proportions of sales in the Area

and will likely account for a rising proportion of sales in this segment.

segment. We consider it important to broaden our products andWe will focus on leveraging the e-commerce capabilities of ourservices, and put in place a structure for that purpose. We will drive

partners and the Group to build segment sales. Another priority will be

growth by increasing the proportion of sales from IT solutions toto broaden BtoC areas in IT products. This will eventually lift the ratio

small-to-medium-sized enterprises.

of non-Canon brands in overall sales of this segment.
In the Enterprise segment, we are doing very well with Canon IT

For the Professional segment, as I mentioned last year, ourchallenge is to enhance our expertise, which we currently lack in thissolutions. The key in this segment will be to work out ways toarea. We are hiring extensively, and the key to growth will be our ability

generate synergies between Canon IT solutions and the customer base

to attract and cultivate highly skilled and knowledgeable people.

Q In fiscal 2015–18, the Group’s IT solutions sales expanded an average 4.7% annually. This
exceeded average IT market growth during that period of around 3%. Will you concentrate
resources in high-growth fields to boost IT solutions sales to ¥300 billion?
We must concentrate resources on IT solutions.
Exactly. We need our people to begin thinking of ways to transform us

customers. Many Group employees have experienced selling superior

into an IT solutions company and concentrate resources accordingly.

hardware, but that alone does not provide solutions. As an added

The added value from hardware has declined comparatively, and wevalue, IT solutions are indispensable. I think we have to allocate

have to become an entity that can resolve the concerns and issues ofresources in that area.

Canon Marketing Japan Inc. I Annual Report 20185

Q I think you need to secure systems engineers to drive growth in IT solutions. Are you progressing
well in securing people?
Graduate hiring is proceeding as planned. However, attracting experienced people is proving agreat challenge.
We have been able to secure the targeted number of new graduates. At

firms need engineers in the artificial intelligence (AI) and digital

the same time, our efforts to acquire midcareer professionals havetransformation (DX) fields. On top of that, many customers are

been inadequate. To deal with orders we have received, we need moredeveloping overseas operations, and they need English language-

experienced people. Lots of companies have the technologies andbased support. It is in view of this situation that we are hiring people

engineers needed to build systems that customers want, and most ITof various nationalities.

Q You aim to augment MFP and LBP maintenance and cartridge revenue model with growth in cloudservices, IT maintenance and operations services, and data center services. To what extent doyou expect demand to increase?
We expect these areas to more than offset downturns in MFP and LBP maintenance andcartridge sales.
One factor of rising demand for IT maintenance and operations

As sales steadily decline from MFP and laser beam printerservices and data center services is the wide spread of e-commerce.

maintenance services and cartridges, we anticipate revenue growthPayments are becoming cashless with e-commerce penetration. This

from IT maintenance and operations services and data center services.

means that payments are becoming data, and cashless payments

In other words, as product-related services revenues decline we will

will cause data volumes to surge. Data center usage volumes andwork to generate growth through new IT solutions services. Services

frequencies are accordingly increasing.

revenues overall would therefore rise.

Q You have undertaken business process reforms and shared your call center systems
infrastructure as part of efforts to overhaul your cost structure. What benchmark are you using
to measure the resulting productivity improvements?
We are focusing on gross profit per employee.
The Group handles a range of products, for which it maintains multiple

marketing that ignores profitability, and that is why the focus is on

sales channels. We therefore emphasize gross profit per employee.

earnings. Another priority is selling, general and administrative

Sales of IT products are high, for example, but gross margins are low.

expenses as a percentage of revenues for each business segment.

If we were to make sales a benchmark, we would encourage

Q On the capital expenditure front, you are constructing the second stage of the Nishi-Tokyo Data
Center. What are your specific plans for acquisition investments?
We are pushing ahead with practical initiatives centered on the IT solutions area.

6

We are exploring acquisitions, centered on the IT solutions field, but

and that approach remains unchanged. At this stage, our more specificthe costs per transaction are a little on the high side. We previously

measures are to push ahead with investment projects and recruitrolled out a policy to invest ¥40 billion strategically over three years,

executives.

Canon Marketing Japan Inc. I Annual Report 2018

Q What is your stance on ESG?
We seek to meet customer expectations through business and contribute to social progress.
Japan’s society and market has changed throughout the 51 years

realizing societies that pursue progress in terms of the United Nations’since the Group’s establishment, and our products and services have

Sustainable Development Goals (SDGs) and the Paris Accord.

accordingly evolved in various ways. But the fundamentals of our

We will reinforce our commitment to good corporate citizenshipbusiness have remained constant; we are committed to meetingand faithfully cater to social requests and expectations by undertaking

customer expectations through business and contributing to social

environmental measures and initiatives to help resolve social issues.

progress. We currently aim to help resolve social issues through the IT

We will also create positive work environments and enhance corporate

solutions on which we are focusing. These endeavors relate deeply togovernance.

Q You established your Nomination and Remuneration Committee in fiscal 2018. With that inmind, how do you assess your efforts to ensure management transparency from governance
perspectives and oversight of the Board of Directors?
We have enhanced transparency.
We will endeavor to enhance transparency and disclose ourperspectives. Based on requests from shareholders and investors,

management decision-making approach from corporate governance

we are endeavoring to further strengthen corporate governance.

Q For fiscal 2018, you kept cash dividends at ¥60 per share based on a policy that comprehensively
factors in a medium-term earnings outlook based on a payout ratio of 30%, investment plans,and cash flows. Your payout ratio was therefore 37.4%, exceeding the 35% average for the past
few years. Do you consider this level appropriate?
We are maintaining an appropriate payout ratio.
I think that our current payout ratio is about right. We will keep

returns policy. We consider it important to produce returns forgenerating returns through dividends in keeping with our shareholder

shareholders by boosting earnings.

Q What is your outlook for fiscal 2019?
We will endeavor to further improve profitability.
The Group is focusing on global political and economic trends because

For the foreseeable future, we will concentrate on further increasing

it purchases from foreign companies in the software and industrial

profitability. Once we enter a period in which we bolster sales, we aim

equipment fields. As I mentioned earlier, I do not think that Japanese

to further improve earnings through high profitability. Management

economic conditions are poor. I expect this situation to continue.

will step up efforts to produce further shareholder returns throughWhile I explained that the Group’s efforts would center on IT

dividends. I look forward to the ongoing support and encouragement

solutions, Canon products will still account for a high proportion ofof shareholders regarding our efforts.

sales. I therefore do not expect a major increase in overall revenues.

Canon Marketing Japan Inc. I Annual Report 20187

SPECIAL FEATURE

Resolving Social Issues through the Canon MJ Group’s
IT Solutions
The Group is leveraging its comprehensive capabilities to grow the IT solutions business. This effort is one of the basic
policies of Long-Term Management Objectives Phase III, covering fiscal 2016 through 2020.
We use proprietary businesses that leverage mathematical, image analysis, and other technologies that we have acquired through mergers and acquisitions(M&As). We have steadily reinforced the IT infrastructure business of our world-class Nishi-Tokyo Data Center. At the same time, we have increased thesizes and the primes and quality of SI services projects in a drive to improve earnings.
For small-to-medium-sized enterprises, we have drawn on the customer base we have built through document solutions in offering cloud services,businesses that streamline operations, and numerous IT products, securing maintenance services for them. For our security businesses, we maintaintechnologies and products that cater to diverse customer needs, and are proud of our solid market presence.
The Group’s IT solutions business has thus steadily evolved. We will continue to take advantage of our advanced technological capabilities and strong
customer base to expand our unique services.
Group IT solutions revenues totaled ¥197.7 billion in fiscal 2018, accounting for 31% of net sales.
This special feature highlights three aspects of our IT solutions business.

Group IT solutions sales and plans
The compound average growth rate for Group IT solutions
sales from fiscal 2015 through 2018 was 4.7%, exceeding
the IT market average of around 3%. The Canon MJ Groupplans to expand IT solutions sales to ¥300 billion by

Percentages of Salesof the Group IT Solutions
in Net Sales

26.6%

28.1%

28.8%

31.8%

35.0%

300.0
Sales of the GroupIT Solutions

172.1

230.0
176.8

182.0

2016

2017

197.7

(Billions of yen)fiscal 2025.
2015

2018

2021

2025

(Plan)(Plan)

Began Construction of New Nishi-Tokyo Data Center Building in March 2019 and Will Launch New Services in Summer 2020
The cloud, IoT, AI, and other technological innovations have made cloud computing environments
increasingly important as part of social infrastructure. Cloud computing demand is surging. Data centersmust therefore meet even higher standards, including from the perspectives of buildings, facilities,
security, and operational quality.
Located on solid bedrock, a new building at our Nishi-Tokyo Data Center will cater to such needs. It will house 2,880 racks, with a power
capacity of 25 megavolt amperes (MVA), high-performance facilities, and robust security. The existing center building was set up in 2012. In 2017, it
received management and operations (M&O) certification from the Uptime Institute of the United States, which maintains the most trusted global
standard for data center operational quality. The new building will also secure third-party certification for world-class operational quality.
The Canon MJ Group will further reinforce its IT infrastructure business, centered on its data center operations. We will expand such stock IT
services businesses as data center, cloud, and systems operations services.

8

Canon Marketing Japan Inc. I Annual Report 2018

1

Educational Solutions

With the advent of an information-intensive society that is increasingly globalized and diverse, universities and othereducational institutions have to build more value. The Canon MJ Group supplies diverse solutions to many suchinstitutions and collaborates with customers to create more value.
Qualitative Improvements in Education and IT

Number of students per PC in advanced nations

In the years ahead, educational institutions will have to offer new

6.5

approaches to learning and improve educational environments. It willthus be vital for them to alleviate the workloads of teachers and create
environments that deliver quality outcomes.

2.1–
3.5

4.0

2.1–2.9

3.1

Denmark

United States

FinlandSingapore

4.7

4.9–5.0

Korea

The Netherlands

1.0–1.9
Australia

Japan

IT is an increasingly promising tool for making educational
institutions more attractive and reforming work practices. Good examples

Weekly working hours per teacher

are active learning, through which students pursue inquiries
independently, and e-learning based on interactive content. IT can also
make administrative work much easier for teaching staff, swiftly
distribute information to students and parents, and streamline device
management and other operations within campuses.

Japan 53.9

Total working hours

OECD average 38.3

17.7

Classes

19.3
8.7

Class planning and preparation

7.7

Extracurricular activities
Office work

5.5

Collaborative work and discussions
with colleagues

3.9

School management duties

3.0

The working hours of school teachers in Japanare longer than the average for counterparts in
Organization for Economic Co-operation andDevelopment (OECD) nations, although their classtimes are shorter. Japanese institutions need toreduce workloads, notably by streamlining classpreparations and administrative tasks.

Source: Ministry of Internal Affairs and Communications, “Study of Advanced Information andCommunication Technology Usage Measures in Education” (March 2015)

Canon MJ Group’s Initiatives
Canon MJ and Canon IT Solutions Inc. collaborated to offer the in Campus SERIES, a solution that draws on IT infrastructure systems development
technologies and expertise amassed over the years for the educational market. The great versatility of this series enables development in line withcustomer systems and budget. The series also makes it possible to manage attendance and disseminate and view class materials. It can also
employ deep learning based on AI technology to read handwritten scores and automatically tabulate results. The series thus helps improve thequality of education while lightening teaching loads.

Canon Marketing Japan Inc. I Annual Report 20189

SPECIAL FEATURE

2RESOLVING SOCIAL ISSUES THROUGH THE CANON MJ GROUP’S IT SOLUTIONSCybersecurity Solutions

The targets of cyberattacks expanded with the penetration of IoT. Progress with AI has made attack approaches moresophisticated. The Canon MJ Group provides one-stop security solutions for corporate customers of all scales andbusiness areas.
Cybersecurity Measures Increasingly Important

Percentages of cyberattacks targeting IoT devices

As IoT becomes ubiquitous, people will need to become more aware thateverything around them, from offices and factory machinery to
Others*: 36%

automobiles could become targets of cyberattacks. They will therefore

Attacks targeting IoT devices(including Web cameras androuters): 54%

Database attacks: 3%

have to overcome these challenges by centrally managing all Internetconnected devices and deploying the right measures to maintain business

Website attacks: 3%

continuity, even if subjected to cyberattacks. In the near future, we will

PC attacks: 5%

likely see attacks that are sophisticated and automated with AI abused* There have been not only attacks targeting ports specific to IoT devices but also more advanced attacks
targeting vulnerabilities in specific IoT devices, so Others includes attacks on IoT devices that are

and by remotely controlled robots, drones, and other devices. Such attacks

difficult to categorize based just on port numbers.

can also come from inside organizations, and it is accordingly important

Source: Ministry of Internal Affairs and Communications, “2018 Information Communications White Paper”

to deploy systems that minimize harm by swiftly detecting and tackling

Current and projected number of IoT devices worldwide

attacks. Cybersecurity measures must therefore be comprehensively
As of 2017, there were 27.49 billion IoTbalanced to enhance overall security levels.

devices worldwide, up around 60% from

2020

2017
27.49 billion

40.30 billion

17.07 billion in 2014. The number islikely to grow about 50% between 2017and 2020.

Source: Ministry of Internal Affairs and Communications, “2018 Information Communications White Paper”

Canon MJ Group’s Initiatives
Canon MJ, Canon IT Solutions, and Canon System &Education

Support Inc. joined hands to provide one-stop security

Printing

Finance

Manufacturing

Imaging

Offices

Logistics and services
Medical treatment

solutions. Services encompass everything fromidentifying risks to undertaking damage recovery, and a
Diverse IT security products and services

key feature is to undertake from solutions provision to
post-deployment support. In addition, in order toTotal security solutions

respond to ever-evolving cyberattacks, we are focusing
on training and self-improvement of engineers, andConsulting

Systems construction

actively working to improve the level of security

Operational services

Operational support

Security operations centers

technology.
Cybersecurity measures
knowledge

Solution sales and development
capabilities

Overseas product trading firms(Localization)

Canon Marketing Japan Group

10

Canon Marketing Japan Inc. I Annual Report 2018

3

Robotic Process Automation (RPA)

RPA software has attracted great attention for its potential to help enhance IT productivity and reform work practices.
The Canon MJ Group has embraced RPA, and is using it to help customers in a variety of ways.

Enhancing Productivity through RPA

The objective in deploying RPA throughout the Group was toJapanese companies have rapidly adopted RPA. The domestic market for

automate routine work and visualize work in the planning process of RPA

RPA is projected to expand 10-fold between 2017 and 2020.

development to simplify complex business processes.

Canon MJ began deploying RPA in 2016. The Company set up the

We are focusing on cultivating people to visualize business

RPA Department in 2018 to oversee and roll out full-fledged activities inprocesses and develop, run, and support the deployment of RPA.

that technology field.
RPA requests and assessments

Business process visualization

Identifying waste andinefficiency

Eliminating wastefulprocesses

Process simplification

RPA

Use of IT solutions
other than RPA

Identifying task overlap

Identifying tasks to
improve expertise

Consolidating and assigning
people full-timeBusiness processoptimization

Canon MJ Group’s Initiatives
Group companies Canon BizAttenda Inc. and Edifist Learning Inc.
jointly provide wide-ranging RPA support to customers, fromSuperStream-NX
Office Robot (accounting and payroll)educating about RPA tools to selling, deploying, and supporting
related products. In July 2018, we released the Office Robot which

Accounting skills

incorporates RPA functions to SuperStream-NX, an accounting and

Human
Microsoft Excel
resources skills file for settings

Customers’ own businessscenarios

payroll system that Group company SuperStream Inc. provides. We
RPA engines

have received numerous inquiries for this offering, as it provides

RPA engines

readily usable RPA templates that are easy for customers to use.
Shared menus

SuperStream-NX

Other systems

Source: Configuration of SuperStream-NX, Office Robot (accounting and payroll)

Canon Marketing Japan Inc. I Annual Report 201811

THREE-YEAR MANAGEMENT PLAN AND BUSINESS SEGMENTS

The basic strategies and numerical targets of our three-year management plan for fiscal 2019–2021
are as follows. We will shift operational resources to high-growth fields to achieve our goal of
becoming a vibrant and highly profitable Group.
Basic Strategies of Three-Year Management Plan 2019–2021• Maintain profitability in digital interchangeable lens cameras/
inkjet printers/MFPs/LBPs

Maintenance of income from major Canon products• Increase IT solutions (IT solutions for large and small-tomedium-sized enterprises)

Realization of increases in both sales and profits in themarket expansion areas, centering on IT solutions• Increase cross-business IT solutions (IT infrastructure, security,and BPO)

Establishment of revenue bases in Canon’s businesses
where growth is expected• Establish revenue bases of network cameras, production printing,and healthcare

Medium-Term Management Plan Targets(Billions of yen)

Results
FY2018FY2019FY2020

FY2021

621.6

622.0

635.0

655.0

—

0.1%

2.1%

3.1%

28.9

29.5

31.0

33.5

4.7%

4.7%

4.9%

5.1%

30.5

30.7

32.0

34.8

4.9%

4.9%

5.0%

5.3%

20.8

20.9

21.7

23.0

3.4%

3.4%

3.4%

3.5%

EPS(Yen)

161

161

167

178

ROE

6.9%

6.7%

6.8%

6.9%

Net sales
Growth rate
Operating income
Operating margin
Ordinary income
Ordinary income margin
Profit attributable to owners of parent
Return on sales

12

Medium-Term Management Plan Targets

Canon Marketing Japan Inc. I Annual Report 2018

* On January 1, 2018, Canon MJ transitioned from a product-based organizational framework to a customercentric framework. In line with this framework change, it switched from the Business Solutions, IT
Solutions, Imaging Systems, and Industrial / Medical reportable segments to the Consumers, Enterprise,
Area, and Professional segments from the first quarter of the year ended December 31, 2018.

Business Segment

CONSUMERS

Functional Unit

Supervisory
Division

Major Business Areas
Providing digital cameras and inkjet printers to consumers

Major Business Areas
Supplying Canon’s input / output equipment and solutions to help resolve the business-specificmanagement issues of large customers

BPO

ENTERPRISE

Major Group company
Canon IT Solutions Inc.

Service & Supervision

Supplying Canon’s input / output equipment and solutions to help resolve the management issues ofsmall-to-medium-sized enterprises around Japan

Marketing Supervision

Call Centers / Services

AREA

IT Platform

Major Business Areas

Major Group company
Canon System & Support Inc.

Major Business Areas
Providing solutions to customers in specialist areas
・Production Printing
Focusing on providing fast cut-sheet and continuous feed printers to printing companies

Major Group company
BPO

PROFESSIONAL

Canon Production Printing Systems Inc.
・Industrial Equipment
Supplying semiconductor fabrication and measuring equipment, mainly to semiconductor andother electronic device manufacturers
・Healthcare
Providing modalities, IT systems, and solutions combining modalities to medical institutions
and dispensing machines and IT systems to pharmacies

Major Group companies
Canon Lifecare Solutions Inc.
Canon ITS Medical Inc.

Canon Marketing Japan Inc. I Annual Report 201813

REVIEW BY SEGMENTCONSUMERS SEGMENT
Segment sales decreased 9.6%, to ¥150,245 million, with segment income plunging 42.1%, to ¥7,333 million.
Lower sales of digital interchangeable lens cameras

offsetting solid sales of business models[Upside factors]
Sales of mirrorless cameras increased• Secured top share of mirrorless cameras with the EOS Kiss M, our firstmirrorless offering under the Kiss brand• Released the EOS R, our first full-sized mirrorless model[Downside factor]• Shift from digital SLR to mirrorless cameras and shrinking market

Lower sales of ink cartridges

Lower sales of compact digital cameras[Factor]• Print volume reduction from decreases in the number of machines infield (MIF)

Higher sales of IT products[Factor]• Steady demand for gaming PCs and mobile batteries[Factor]• Contracting market

Lower inkjet printer sales[Factor]• Market sluggish owing to reduced production of New Year’s cards,

Consumers Segment

(Millions of yen)

FY2017FY2018

YoY growth rate

Segment sales

166,289

150,245(9.6)%

Segment income

12,671

7,333(42.1)%ENTERPRISE SEGMENT
Segment sales increased 5.7%, to ¥187,718 million. Segment income climbed 24.3%, to ¥9,610 million.
Higher sales to the financial services industry

Lower sales to the university education area

[Factors]• Major credit card and security brokerage SI projects• Form design-related solutions for life insurers and cloud systems tostreamline general insurer investigations• New orders for business process optimization orders in trust banking[Factor]• Several orders received for in Campus, an IT platform system fordisseminating information on campuses and providing learning
management; however, education sales were down slightly due toabsence of the previous year’s large orders

Higher sales for manufacturing customers

Higher sales by Canon IT Solutions Inc.

[Factors]• Production management systems for electrical manufacturers and large
office construction projects for chemicals manufacturers• Favorable systems migration project demand[Factors]• Business solutions to the above sectors performed well
• Data center services were popular• Demand steady for ESET security software and vehicular embedded
systems

Higher sales to logistics[Factors]• Document management system projects for airlines• Large orders for office MFPs

14

Canon Marketing Japan Inc. I Annual Report 2018

Sales of office MFPs in this segment increased to megabanks and large
logistics companies. Although shipments of LBPs to large life insurers andother customers were up, sales were down owing to lower unit prices.

Enterprise Segment

(Millions of yen)

FY2017FY2018

YoY growth rate

Segment sales

177,636

187,718

5.7%

Segment income

7,728

9,610

24.3%

AREA SEGMENT
Segment sales were down 0.8%, to ¥255,910 million, while segment income increased 14.0%, to ¥13,028 million.
[Upside factors]
Higher IT solutions business sales• Demand increased for IT products on business PC replacements• Favorable demand for IT deployment support and maintenance services• HOME IT support cloud service for small-to-medium-sized enterprises
and ESET antivirus software continued to perform well
[Downside factor]• Slow shipments for office MFPs, LBPs, and other key hardware

Area Segment

(Millions of yen)

FY2017FY2018

YoY growth rate

Segment sales

257,920

255,910(0.8)%

Segment income

11,43313,02814.0%

PROFESSIONAL SEGMENT
Segment sales decreased 3.1%, to ¥52,447 million. There was a segment loss of ¥938 million, compared with a loss of¥1,869 million posted in the previous year.
Lower production printing sales

Lower healthcare sales[Factor]• Lackluster demand for fast cut-sheet and continuous feed printers[Factor]• Lower demand for hospital modalities, which overshadowed growth inmedical IT systems and ophthalmic equipment

Higher industrial equipment sales[Factor]• Solid demand for semiconductor manufacturing and inspection/measuring equipment and industrial components

Sales of visual solutions basically unchanged[Factor]• While demand among broadcasters rose owing to the launch of 4K and
8K broadcast satellite services, network camera revenues declined

Professional Segment

(Millions of yen)

FY2017FY2018

YoY growth rate

Segment sales

54,14052,447(3.1)%

Segment loss

(1,869)(938)—

Canon Marketing Japan Inc. I Annual Report 201815

SEGMENT STRATEGIESCONSUMERS SEGMENT
Business Management Policies
While conditions are adverse in existing business markets, we will strive to expand in mirrorless camera, business inkjet printer, and other growthmarkets while adopting a more robust operating structure. We will roll out new products and services as a leader in the photo imaging field.

Strengths and Strategies• D ominant shares of the camera and printer markets: We will leverage ties with a wide range of customers and develop new products and services
to further increase customer satisfaction.
• D iverse channels: We will broaden our engagement with customers through various channels, including through mass retail, camera, and otherstores, as well as through e-commerce and our showrooms.
• Per capita productivity: This is very high in this segment. We will continue to enhance its efficiency while prioritizing growth and new
businesses.

Yoshiyuki Matsusaka
Director, Senior Managing Director
Director of Consumers Segment

Business Overview
The Consumers segment aims to broaden engagement with customers in
BtoC markets and maintain ongoing ties with them. The unit supplies
cameras, printers, and diverse other products and services that enable
customers to enjoy all things photo and video. The Canon MJ Groupbenefits from the support of numerous customers in Japan, and held theNo. 1 share of the domestic market in 2018 with regard to digital SLR,
mirrorless, and compact digital cameras and also inkjet and laser beam
printers. In mirrorless cameras, we announced and launched the EOS Kiss
M, our first offering from the Kiss brand in that category, and the new EOS
R SYSTEM. As a leading camera manufacturer, we will endeavor to satisfy
an array of customers, from entry to “full size” users, including throughmirrorless models.
That said, the markets for cameras and printers have matured. We will
work to increase customer satisfaction by focusing on high-value-added
products in existing and growth businesses while offering more products
and services that provide new value. A good example of the latter is theiNSPiC, a mini photo printer rolled out in 2018 for smartphone users.
We look to bolster sales of products carrying the Canon and other16

Canon Marketing Japan Inc. I Annual Report 2018brands and cultivate new services to increase everyday enjoyment for

the iNSPiC, we will continue to offer consumers new ways to enjoy prints.

our customers. With the tastes and purchasing patterns of consumers

We will pursue overall growth by compensating for lower consumer

diversifying, we aim to engage more with them through such existingmachines and lower consumables due to lower print volumes withchannels as mass retail and camera stores and wholesalers while

expansion in business models and such new offerings as the iNSPiC.

stepping up efforts in the e-commerce space.
This segment is one of the most productive in the Canon MJ GroupNew Businesses

despite having few personnel. The unit looks to streamline existing

Markets in core businesses are maturing, so we must urgently build new

businesses while investing to drive further growth.

businesses. Through our existing channels, e-commerce, showrooms, andother vehicles, we will invest extensively in externally sourced

Market Outlook and Strategies for Fiscal 2019

merchandise while bolstering service operations.

Digital interchangeable Lens Cameras
Demand for digital interchangeable lens cameras has trended downward

Risk Management Approachsince peaking in 2013, declining particularly for digital SLR cameras. In

Markets for our core businesses could shrink more than expected.

contrast, demand for mirrorless models has been favorable, outstripping

We will invest in mirrorless camera, business printer, and other growththat for SLRs for the first time in 2018. The gap is projected to grow inbusinesses, as well as new businesses and e-commerce channels that2019. We will endeavor to satisfy a wide range of consumers, not just in

can become new engines of expansion.

SLRs but also in entry-level and mid-range mirrorless offerings, primarily
for the EOS Kiss M, EOS R, and the EOS RP launched in March 2019.

Compact Digital Cameras
The compact digital camera market is trending down overall, withdemand expected to continue to decline in 2019. As such, Canon will
focus on high-value-added models that are market drivers, including highmagnification zoom lens cameras and high-resolution, high-definition
cameras.

Printers

EOS R SYSTEM

Aggregate printer market demand, including for inkjet and laser beammodels, was down around 5% in 2018. Demand for consumer inkjet
models is dropping, while that for business models is rising. For
consumer machines, we will focus on expanding sales of high-valueadded offerings and boosting unit prices. We will also expand ourpresence in business models by undertaking digital marketing. As with

Canon Marketing Japan Inc. I Annual Report 201817

SEGMENT STRATEGIESENTERPRISE SEGMENT
Business Management Policies
Human resources: Swiftly identify changes in the business environment and become individuals and teams that can conceive and execute ideas toresolve issues to drive customer growth.
Customer base: We will retain, deepen, broaden, and extend positive relationships with customers to grow and evolve with them.
Value provision: We will identify customers and market trends, understand ourselves, and provide and refine value that customers and markets
find attractive.

Strengths and Strategies• Strong marketing capabilities stemming from the MA Division’s customer base and industry-specific approach and business solutions.
• Canon Information Technology Services Inc.’s advanced systems development and technological capabilities, robust project track record, andindustry knowledge.
By combining these capabilities, we aim to create a business model that balances high added value and productivity and build a large IT solutions
business by accelerating our transformation to a business- and service-centric entity.

Masachika Adachi

Business Overview

Director, Senior Managing Director

The Enterprise segment offers industry-specific and management

Director of Enterprise Segment

solutions to large customers in the finance, manufacturing, retailing,
public, and education sectors. Our mission is to create value withcustomers and to become a true partner by delivering that value. We wantcustomers to rely on our organization and people and, where they require,
make us their first port of call. Our vision is to increase existing value
in markets and sectors and contribute to society. We seek to become
recognized in markets and sectors for our ability to resolve issues and forthe value of our solutions supply capabilities, which are highly trusted
among customers.
This segment focuses on synergizing the MA Division and the Canon
IT Solutions Group. The latter has lifted its development, technologies,
and quality over the past few years as a systems integrator, securing
customer trust. We will work to secure marketplace recognition bysafeguarding and expanding Canon IT Solutions’ businesses. As well, we
will create industry-specific solutions that reflect a familiarity withcustomer operations and fully leverage the MA Division’s customer base,completing a business model that reflects a service provision approach

18

Canon Marketing Japan Inc. I Annual Report 2018

that we can roll out to many industries and types of operation. We are

Retailing

confident that we can deliver better quality if we can harness lessons

We project SI demand in line with M&As in retailing, productivity

from Canon IT Solutions. We thereby seek to generate massive growthenhancements and task automation owing to labor shortages, andfrom a combination of the MA Division’s customer base and the prowess

enterprise system upgrade demand and cloud computing adoptionsof Canon IT Solutions.

among major trading firms. We will create solutions centered on point-ofsale and other sales promotion tasks and build enterprise systems based

Market Outlook and Strategies for Fiscal 2019

on demand forecasting and other capabilities.

All industries
They will harness the IoT, AI, and other digital technologies to expand

Educational markets

strategic IT investments in digital businesses to overhaul businessWith educational sites digitizing, the numerous business opportunities

processes and create new businesses. Industries will use RPA and otherthat we anticipate include operational support systems, educational

techniques to enhance work efficiency and shorten working hours, andcontent, and school facilities infrastructure. We will deploy a range of

expect to increase expenditure on teleworking and other diverse workhigh demand school operations and administration solutions, centered onpractice reforms.

the in Campus SERIES.

Financial services

Risk Management Approach

We expect new efforts to support growth, examples being in upgrade

There is a shortage of systems engineers in the IT solutions area, and thisdemand for enterprise systems in credit card, insurance, and securities

situation is expected to worsen. The Canon MJ Group will bolster hiringand investment services, investments in raising employee productivity,

quantitatively and quantitatively, boost human resources training, andstrengthening ties with customers, and the use of fintech. We will develop

pursue selection and concentration with vendors to enhance productivity.

business-specific solutions centered on fiduciary operations and damage
insurance assessment areas.
Manufacturing
Manufacturers will continue to surpass the average overall market growthby investing in IoT, AI, and other deployments. We also expect demand forenterprise system upgrades to continue. This will be not just in assembly
manufacturing, principally in the automotive sector, but also in
pharmaceuticals, chemicals, foods, consumer products, and other process
production, and in production and supply chain management. We will
cultivate enterprise systems that package such offerings as document
and production management, demand forecasts, and accounting andsalaries. At the same time, we will develop business-specific solutions
for manufacturing.

Canon Marketing Japan Inc. I Annual Report 201819

SEGMENT STRATEGIESAREA SEGMENT
Business Management Policies• Grow with partners by understanding our customers’ needs more deeply to help resolve their management and operational issues.
• Deliver outstanding customer satisfaction in service and support areas.
• Employ information and data to establish uniform management processes and management styles to enhance efficiency and productivity for ourpartners and our organization.
• Better incentivize and reward partners and employees and improve their satisfaction levels.

Strengths and Strategies• We can leverage partners’ nationwide customer bases and partner brands, through which we provide new value to cultivate growth for us and ourpartners alike.
• We maintain an IT support structure covering approximately 200 sites around Japan that positions us to expand businesses in growth areas andsynergize with partners.

Kunihiko Kubo
Senior Executive Officer
Director of Area Segment

Business Overview
We operate nationwide, focusing on offering management and businesssolutions for small-to-medium-sized customers with fewer than 1,000
employees. For example, we draw on expertise from proposals we havemade to date and our own to provide optimal solutions for information
security measures and productivity improvements, which are areas ofparticular customer interest.
Our customer channels are Canon System & Support Inc., asubsidiary of Canon MJ, business partners in Japan, and dealers andsystems partners, which are primarily systems integrators. We will
optimize the combined strengths of these channels and the Canon MJ
Group by undertaking area marketing and establishing an optimal
customer response structure that is both market- and customer-centric.
This segment is the Canon MJ Group’s largest in terms of revenues
and personnel, and offers significant growth potential in view of smallto-medium-sized enterprises investing solidly in IT. We aim to expand
further in markets for these enterprises by supplying Canon products andproviding the solutions mentioned earlier to deepen customer trust.

Market Outlook and Strategies for Fiscal 201920

Canon Marketing Japan Inc. I Annual Report 2018

In Japan, companies are reforming work practices to streamline

Risk Management Approach

operations, shorten working hours, and enhance productivity. They should

The counter-based maintenance business constitutes a high proportion ofaccordingly invest extensively in AI, cloud, RPA, and other IT fields. We

sales, and such sales could decrease. We will accordingly plan to increase

anticipate more opportunities in PCs in the runup to 2020, when Microsoft

print volumes by acquiring new MFP users.

Corporation ends support for Windows 7. Small-to-medium-sized

We also face business continuity risks, notably that our partners

customers lack specialist units and personnel in such IT areas, giving us

will age or leave no successors. We will thus construct a system in whichmore opportunities to offer one-stop products and services. We look to

we match partners with each other, provide personnel support to them,generate growth in IT solutions by accommodating customer demand. We

and can share and follow up with partner customers.

will materialize that expansion by setting up a specified division and fully
deploying small-to-medium-sized enterprise IT solutions offerings acrossall channels.
At the same time, we do not anticipate significant growth in themarkets for MFPs, LBPs, and other document output equipment becauseof the consolidation of such systems and the increasing digitization of
documents.
To expand product sales under such circumstances, we will have tosupply offerings that come with IT solutions and products that are
essentially capital goods for our customers. We will accordingly need to
deploy resources strategically in such fields, and will reinforce ourstructure and cultivate our human resources.
In view of robust corporate investments in IT solutions, the market
environment is positive for systems integrators that are a customer
channel for us. We expect to continue expanding by providing products
for the specific business and operational solutions of systems integrators.

Canon Marketing Japan Inc. I Annual Report 201821

SEGMENT STRATEGIESPROFESSIONAL SEGMENT: PRODUCTION PRINTING
Business Management Policies• We require all employees in this organization to explore ways to grow with our highly specialized customer base, swiftly delivering top-quality
products and services and attentive support.
• We are cultivating a cadre of professionals that can help customers tackle changes in the printing market.

Strengths and Strategies• We will leverage color inkjet printers to maintain and expand the customer base that we have amassed over the years, mainly among thoseengaged in data printing services*.
• We will take advantage of the technological and development capabilities that we have cultivated as partners of those customers to enter
new markets.
* Data printing services: The services that are contracted to print, edit, process, and enclose large quantities of bills and direct mails, using personal information.

Business Overview• Use new industrial printing offerings to enter markets for signs,

We offer business reform support for customers, primarily in the printing

displays, labels, and other media.

industry. We sell high-speed digital printers, wide-format printers, and• Secure new customers by replacing the offerings of other companies

point-of-purchase systems and consumables. We provide print prepresswith large-format printers and drawing management solutions.

and post-processing equipment and printing-related software and• Expand sales by differentiating printers with inspection devices andmaintenance services. We also develop and supply workflow systems andworkflow systems and by supplying total solutions.

print services.

・Endeavor to reinforce customer ties by helping resolve issues, notably
by cutting costs and focusing on core businesses by supplying andMarket Outlook and Strategies for Fiscal 2019

outsourcing business services at and from outside customer sites,

The printing market is gradually trending down, and this situation isnotably for document production and office equipment management.

expected to remain unchanged in 2019. The digital printing market isexpanding in Japan, however, albeit more slowly than in Europe or the

Risk Management Approach

United States. This is because of a shift away from offset printing toward

It is possible that digitization may not progress as expected because of

on-demand printing, which makes possible multi-type, small-quantity

lower-priced offset printing in the commercial printing sector. We willproduction in applications such as direct mails, insurance notices,

accordingly go beyond printing to offer an array of IT technology andteaching materials, and other mass documentation.

other Canon MJ Group solutions to address various customer issues in the

We will accordingly undertake the following business strategies:

printing market.

• Provide printing solutions for forms and variable data for data print
services printers, replacing them with color inkjet printers to maintainand expand the customer base.
• Secure new customers by offering color digital printers and solutions
lineups in keeping with deliverables, thereby expanding stock businesses.

22

Canon Marketing Japan Inc. I Annual Report 2018

High-speed continuous feed printerPROFESSIONAL SEGMENT: INDUSTRIAL EQUIPMENT
Business Management Policies
Our growth strategies underpin everything we do.
We accordingly pursue a mission of cultivating technological progress of industrial infrastructure and providing valuable solutions to realize asafe, secure, and affluent lifestyle, workplace, and society.
Our vision is to become a profitable business by fostering our businesses from customer-centric and global perspectives while cultivating ourservices businesses.

Strengths and Strategies• Identify world-class equipment and package it with technology.
• Provide field services that can install and support various equipment.
• Provide total solutions, including for process reforms, for customers in the industrial arena.

Business Overview

In IoT vision, we will broaden our product range by putting Canon-

This organization sells, installs, and supports semiconductor

made CMOS image sensors in camera units and AI cameras. We will also

manufacturing and inspection equipment, IoT-related vision products, andcultivate new markets by reinforcing our solutions offerings.

laser processing equipment, and currently handles the offerings of 18

In laser processing, we will step up sales of large metal 3D printerscompanies from 7 countries. We will accelerate product group expansion

for the aerospace and energy markets, in which 3D printer parts areand broaden our activities to continue meeting customer needs.

increasingly mass produced.

Market Outlook and Strategies for Fiscal 2019

Risk Management Approach

In the semiconductor market, in which demand was previously favorable,

Our risks in the year ahead are that markets will experience dramatic

memory device demand prospects are unclear. There are major delays inchanges and that ties with overseas business partners will dissipate.

capital investment owing to NAND flash memory production adjustments.

Accordingly, we will work to secure new product lines that enable us toThis situation will likely affect sales plans.

tackle and overcome such challenge. We will cultivate new businessAt the same time, markets for CMOS image sensors, power supply

partners and further strengthen customer and product diversity.

integrated circuits (ICs), and other sensors areas should remain brisk
because of advances in autonomous driving, AI, IoT, and othertechnologies.
We will further reinforce the customer and product diversity efforts
that we began undertaking last year in unstable markets. We will also
continue focusing on bolstering services sales.
In non-semiconductor markets, we anticipate steady demand in theIoT vision and laser processing areas.
Semiconductor manufacturing equipment

Canon Marketing Japan Inc. I Annual Report 201823

SEGMENT STRATEGIESPROFESSIONAL SEGMENT: HEALTHCARE
Business Management Policies
We will focus on bolstering and expanding sales of our cloud-based Medical Image Place service which can store and browse CT, MRI, and X-ray
image data, in providing solutions that leverage our strengths, thereby helping to enhance efficiency at medical sites and enhance patient care. We
will also accelerate reforms undertaken in the past few years while strengthening collaboration within the Group to broaden the business base andmaximize synergies.

Strengths and Strategies
・We expect demand for Medical Image Place to increase on the strength of medical fee reimbursement revisions implemented in 2018.
・T he market for optical coherence tomography angiography should benefit from eligibility for medical fee reimbursement. Our OCT-HS100 enjoys
a solid market reputation for its outstanding image quality, a Canon strength, and we seek to expand by incorporating AI in our offerings.
• We aim to expand our medical imaging solutions business by setting up a framework for collaborating with Canon Medical Systems Corporation,
Japan’s top manufacturer of medical equipment.

Business Overview

tomography angiography, and other offerings that are now eligible for

We sell various hardware in Japan and abroad centered on Canon’s digital

medical fee reimbursement. At the same time, we will focus on image

radiography systems, fundus cameras, ES Series hydrogen peroxide gas

diagnostics support and on reducing the diagnostics and treatment

sterilizers from Canon Lifecare Solutions Inc., and the fully automatic

workloads of medical professionals. We will bring together the Canon

AX930 and AX45f dispensing and packing machines of Canon Lifecare

Group’s wide-ranging resources to deploy medical IT services employing

Solutions. We are developing medical imaging solutions that draw on our

AI and other advanced IT.

imaging and IT strengths and our cloud-based remote interpretation
infrastructure services.

We are also devoting considerable effort to expanding our stockbusinesses, and aim to boost profitability.

We cater to diverse customer needs, providing an array of solutions
and services from constructing large medical information systems to

Risk Management Approach

receipt computers, electronic medical records, health testing systems,

Biennial medical fee reimbursement revisions and national governmentand dispensing systems.

policies may or may not benefit demand for our products.

Market Outlook and Strategies for Fiscal 2019
With the impact of medical fee reimbursement revisions in 2018, we
anticipate markets to expand and become brisker in areas of relaxed
regulations and conditions. We also expect progress with regional medical
collaboration through information and communications technology (ICT),the use of cloud-based medical information systems, and AI development
and commercialization in the medical arena.
We will focus on Medical Image Place, optical coherence

24

Canon Marketing Japan Inc. I Annual Report 2018

Ophthalmic equipment

SUSTAINABLE MANAGEMENTThe Canon MJ Group undertakes CSR activities
to help resolve social issues while harnessing

Philosophy
Mission /Visionthe power of marketing to create economic
value. In keeping with Canon’s corporate— CSR is Marketing —philosophy of Kyosei (which means living andworking together for the common good), we
will continue to pursue synergistic progress

CSR Awareness

Shared Philosophy: The “Three Selfs” Spirit

for the Group and for society and enhance thecorporate value and brand by benefiting
society through business. We will also
contribute to sustainable social developmentby making CSR central to corporate
management.

Canon Marketing Japan Inc. I Annual Report 2018

25

SUSTAINABLE MANAGEMENTCSR Awarenessreflecting high ratings for its business

Our participatory approach to CSR is based on the sharing of the Canon

philosophy and policies, organizational

MJ Group’s CSR philosophy and values by all employees, and on a

structure, systems and policy implementation,commitment to accurate knowledge. Our efforts to foster CSR

and evaluations and improvements. We willawareness in our employees are coordinated by the CSR Promotion

continue to undertake employee health

Division.

management efforts to remain attractive among investors focusing on
companies that enhance corporate value over the long term.

The “Three Selfs” Spirit
Our “Three Selfs” spirit is a central guiding principle that dates back to

Indicesthe founding of Canon and is part of our corporate DNA. The principle

Canon MJ has been included in the FTSE4Good Index Series for 15

states that employees should proactively take the initiative (self-

consecutive years. In 2018, we were part of FTSE Blossom Japan andmotivation), conduct oneself responsibly and with accountability (self-

the SNAM Sustainability Index for the second consecutive year, andmanagement), and know one’s position, roles, and circumstances (self-

were also included in the MSCI Japan ESG Select Leaders Index.

awareness). The Three Selfs spirit is the foundation of our CSR activities.

Sustainable Development Goals (SDGs) Initiatives
The Canon MJ Group endeavors to attain the internationally accepted
SDGs of the United Nations through its business activities, resolvingsocial issues and delivering new value to contribute to social
sustainability. For example, we are reusing and recycling products tocontribute to a circular economy, using carbon offsets to contribute to a
low-carbon society, and undertaking cybersecurity measures so that we

CSR Policies

can use ICT safely.

We produced the Canon MJ Group CSR Activity Policy to enable allGroup employees to practice CSR in their work. We will contribute tosustainable social development by sharing and applying the policy
throughout the entire Group.

CSR Activity Policy• We will contribute to the creation of an enriched social environment
in which people can live in safety and with peace of mind.

External Assessments• We will provide dependable quality through all of our business activities.

Selected as a Health and Productivity Stock in 2019

• We will contribute to the development of human resources capable ofJapan’s Ministry of Economy, Trade and Industry and the Tokyo Stockcontributing to the improvement of society.

Exchange select the stocks of outstanding companies listed on that• We will conduct our business activities fairly and in good faith, withexchange that engage in a program to strategically maintain andparticular emphasis on dialogues with stakeholders.

enhance the health and productivity management of employees and• We will strive to develop safe, healthy working environments.

thereby improve corporate earnings.

• We will contribute to the conservation of the environment and biodiversity.

Canon MJ was selected for the second consecutive year in 2019,26

Canon Marketing Japan Inc. I Annual Report 2018

• We will respect human rights.

Environmental Management

resources within the Group, thereby contributing to

The Canon MJ Group seeks to contribute to social progress by

the creation of a recycling-driven economy.

enhancing lifestyles and safeguarding the environment by deploying

Group member Canon Ecology Industry Inc. recycles usedin-house measures to prevent global warming and reduce waste while

cartridges, disassembling and cleaning reusable parts and crushing

pursuing distinctive initiatives as a marketing enterprise.

and pelletizing other parts for use in new cartridges.

Deploying Green Ratios (FY2016–2020)

Social Contributions

The Canon MJ Group formulated the following three Green Ratios as

As a good corporate citizen, the Canon MJ Group contributes to society

medium-term environmental benchmarks for monitoring annual progress.

through business and activities that help to create a society in which

Annual improvement in CO2 emissions intensity

all people can enjoy fulfilling lives.

Targets for 2016 through 2020

1.2% (year on year)2018 results

6.3%

Contributions to reductions in customer CO2 emissions
Targets for 2016 through 2020

More than 150,000 metric tons

2018 results

128,071 metric tons

Ratio of customer CO2 emissions reductions divided by the Canon MJ
Group’s own reductions

1. Furusato Project
The Canon Group embarked on the
Furusato (meaning “hometown”)
project to promote educational
efforts to help communities around
Japan to foster biodiversity inkeeping with its Biodiversity Policy, thereby bequeathing a better world

Targets for 2016 through 2020

More than triple

2018 results

2.2-fold

to future generations.
2. Smile for the Future Project

Participating in the Plastics Smart Campaign

In January 2012, we launched the Smile for the Future project to

The Canon MJ Group participates in this initiative of Japan’s Ministry

contribute to reconstruction in disaster-stricken areas following theof the Environment. Its campaign website showcases initiatives. Ours

Great East Japan Earthquake through the concept of enjoying

include recycling and plastics usage reduction efforts and initiatives

photography and nature. Our photography and nature programs help

to educate about the environmental impacts of plastics.

people to communicate with eachother and contribute to children’s

Registration examples

upbringings.

Recycling classes that highlight the environment’s importance
MFP remanufacturing

3. School Building Memorials ProjectCollecting and recycling ink cartridges

We joined hands with writing instrument maker Pentel to support thisClosed-loop recycling throughproject, which contributes to enduring memories of aging elementary

automated toner cartridge recycling

school buildings that are to be demolished and replaced. Through thesystemproject, children write down their memories and thanks on the walls
and windows of school buildings slated for demolition. The children

Product Collection and Recycling Activities

then document the drawings with a SLR camera for creating photo

We set up a program to efficiently collect used Canon MFPs, LBPs, andalbums or posters for decorating new school buildings.

those cartridges from customers and dealers and to recycle valuable

Pentel donates art materials and photo frames for the project

Canon Marketing Japan Inc. I Annual Report 201827

SUSTAINABLE MANAGEMENT

while we lend cameras and produce and donate large posters andharassment as an issue for discussion within work units.

photo albums. A total of 21 schools have taken advantage of thisproject since we launched it in June 2014.

We make it easier for employees to seek advice about harassment
by offering consultations and by enabling the sharing of concerns byemail or telephone.

• TOPICSOur School Building Memorials project received a special Ministry of

Initiatives to Employ People with Disabilities

Culture Agency Prize in Mecenat Awards 2018, sponsored by the

The Canon MJ Group is committed to employing people with disabilities,

Association for Corporate Support of the Arts, a non-profit organization.

and accordingly endeavors to create a barrier-free work environment.

The prize recognizes efforts to collaborate with external organizations
and create opportunities for social participation, including among

Employees with Disabilities (Non-Consolidated Basis)
Number of Employees with Disabilities

residents and children, while contributing to cultural and creative

2.20%
167

progress and helping to promote Japanese culture overseas.

Respecting Human Rights and Diversity

FY

’14

Percentage of Employees with Disabilities

2.18%

2.16%

161

157

’15

’16

2.10%

2.15%

150

150

’17

’18

The Canon MJ Group endeavors to prevent employee discrimination andharassment and fosters a corporate culture that values diversity.

As of June 2018, 2.15%* of Canon MJ’s employees were people withdisabilities, exceeding the Japanese government’s mandatory rate ofPreventing Discrimination and Promoting Diversity

2.0%. The Group will continue pushing ahead with new graduate and

The Canon Group aims to ensure that all executives and employees

midcareer hiring of individuals with disabilities.

alike understand and adhere to the Canon Group Code of Conduct, which*Calculated according to prescribed working hours, disability degrees, and other factors in keeping

encourages respect for individuals and individuality and prohibits
discrimination, including in terms of race, religion, nationality, gender,
and age.

with the Ministry of Health, Labour and Welfare standards.

Reforming Work Practices
The basic policy of the Canon MJ Group’s Long-Term Management

Within the Canon MJ Group, we utilize email magazines sent to all

Objectives Phase III is to become a corporate group in which its people

employees and compliance meetings for all work units to raise awarenesscan shine, and we are undertaking work practice reforms as part of thatamong executives and employees about discrimination issues.

approach. We are helping our people to work more efficiently so they
can complete their tasks during regular work hours, notably by

Combatting Harassment

instituting days without overtime, using satellite offices andCanon MJ engages in various awareness-building initiatives to prevent

teleworking, encouraging the use of IT tools, and leveraging AI and RPA.

sexual and power harassment.
Harassment issues are part of the agenda for training new
employees and managers. Compliance meetings also position

28

Canon Marketing Japan Inc. I Annual Report 2018

CORPORATE GOVERNANCE
Overview of Corporate Governance at the Canon MJ Group• Number of outside Audit & Supervisory Board members: 3• Number of outside Audit & Supervisory Board members designated as
independent: 2• Term of Audit & Supervisory Board members: 4 years• Independent auditor: Ernst & Young ShinNihon LLC• Use of executive officer system: Yes• Organizational format: Company with Audit & Supervisory
Board members• Number of directors: 6• Number of outside directors: 2• Number of outside directors designated as independent: 2• Term of directors: 1 year
• Number of Audit & Supervisory Board members: 5

Corporate Governance Organization(As of March 29, 2019)

General Meeting of Shareholders
Appointment / Dismissal

Appointment / Dismissal

Appointment / Dismissal

Monitoring

6 Directors
Board of Directors

Inquiry
ReportNomination and Remuneration Committee

5 Audit & Supervisory Board Members
Audit & Supervisory Board

Cooperation
Audit of financial
statements

Independent
AuditorCooperation

Management Committee

Internal Auditors Office

CSR Committee
Disclosure Committee

Cooperation

Internal audits

Internal Controls Evaluation Committee
AdviceBusiness Segments / Group Companies

Lawyers /Licensed Tax Accountants

Staff Managers

Basic Stance on Corporate GovernanceIndependence from the Parent Company

We recognize that sustainable growth in corporate value requires ongoing

The Company’s parent company is Canon Inc., which held 58.5% of the

improvement in such areas as management transparency and the monitoring

Company’s voting rights as of December 31, 2018. Within Canon Inc.’s corporateof progress toward management targets. This is reflected in our wide-ranging

group, the Company oversees sales, service, and marketing for Canon products

initiatives to strengthen corporate governance. We have implemented allin the Japanese market. The Company also supplies IT solutions and otherprinciples of Japan’s Corporate Governance Code.

services, clearly compartmentalizing its operations.

Protection of Minority Shareholders in Transactions with theControlling Shareholder and in General

the exclusive right to sell all Canon brand products in Japan, the exceptions

The Company’s controlling shareholder is Canon Inc. The Company concludes

determined by presenting the Company’s asking prices and engaging inimportant basic agreements with Canon Inc. based on resolutions of the Board

conventional negotiations. None of the Company’s directors concurrentlyof Directors. Such agreements are appropriately and fairly implemented

serves the parent company.

With regard to transactions with the parent company, the Company has

without compromising the Company’s interests. The Company acts

being semiconductor and LCD lithography systems. Transaction terms are

It is because of this situation that the Company faces no restrictions fromappropriately and fairly in all transactions, not just those with its controlling

the parent company in terms of operational activities and maintains a certain

shareholder, to avoid compromising its independence and interests and tolevel of independence from the parent company by making its own

safeguard the interests of all shareholders.

management decisions on business activities and operations.
The Company ensures the effectiveness of its corporate governanceas a listed enterprise by bolstering its internal auditing department while
independently building diverse internal controls systems through collaboration
with its Audit & Supervisory Board members and the independent auditor andsetting up committees.

Canon Marketing Japan Inc. I Annual Report 2018

29

CORPORATE GOVERNANCE

Policy on Constructive Dialogue with Shareholders

expertise. At least one outside Audit & Supervisory Board member is an outside

The Company helps to drive sustainable growth and improve corporate value

auditor who fulfills the independence criteria that the Board of Directors

over the medium and long terms by engaging in constructive dialogue withseparately determines.

shareholders, including through general meetings of shareholders, briefings on

The Audit & Supervisory Board cooperates with the independent auditor

management plans for the medium and long terms, results briefings, andand the Internal Auditors Office to assess performance and corporate assets

meetings with major institutional investors.

and ensure sound management.
There are five Audit & Supervisory Board members, of whom three are

Board of Directors, Directors, and Executive Officers

outside auditors. Their duties include attending Board of Directors’ meetings,

We maintain a structure in which the representative director oversees

speaking with directors and other parties, and perusing important accounts’Companywide business strategies and execution, while supervision of businessdocuments in line with the auditing policies and work allocations that the Audit

domains and headquarters functions is primarily through executive directors,& Supervisory Board stipulates, and conducting rigorous audits by examining

and add at least two independent external directors to ensure soundoperations and property.

management. In accordance with laws and ordinances, the Board of Directors
monitors important decisions and implementation.
Other decisions are handled by the representative director or under theInternal Auditors Office
The Internal Auditors Office produces internal audit policies for Canon MJ andrepresentative director’s direction and supervision through executive officers

its subsidiaries as an independent specialist that reports directly to thewhom the Board of Directors appoints through its resolutions to assume

president. It also conducts audits, assesses, and advises on all business

responsibility for making and implementing decisions for business domains

activities from the perspectives of credibility of financial reports, the validity

and headquarters functions.

and efficiency of operations, legal compliance, and the conservation of assets.

The Board of Directors comprises six members, including two outside

The auditors of Canon IT Solutions Inc. and Canon System & Support Inc.

directors. By limiting the term of office for directors to one year, we haveconduct assessments based on the same policies. The Canon MJ Group had 57

created a management structure capable of adapting quickly to changes in theaudit staff members (as of the end of January 2019).

business environment. Important decisions are made by the Board of Directors,
which normally meets once a month, and at Management Committee meetings

Audit of Financial Statements

attended by the directors of Canon MJ and the presidents of major subsidiaries.

The Canon MJ Group’s financial statements are audited by the Company’s

On March 29, 2011, we introduced an executive officer system. The

independent auditor, Ernst & Young ShinNihon LLC. The independent auditor

purpose of the system is to speed up management decision-making in therotates responsible partners who have been involved in audits of any company

Canon MJ Group by separating management decision-making from executive

for more than seven years. (They rotate a chief partner every five years.)functions and reducing the number of directors. It also clarifies responsibility
for the performance of business operations and strengthens executive
systems. There were 23 executive officers as of April 1, 2019.

Outside Directors and Outside Audit & Supervisory Board Members(as Defined under the Corporation Law)
Canon MJ has two outside directors and three outside Audit & Supervisory

Audit & Supervisory Board and Auditors

Board members. Pursuant to the consent of all Audit & Supervisory Board

The Audit & Supervisory Board functions independently of the Board ofmembers and the Board of Directors, we implemented our independence

Directors, and comprises individuals who are familiar with the Company’s

criteria for outside directors and outside Audit & Supervisory Board members

business or corporate management and who have accounting or otherto clarify the standards for ensuring outside directors and outside Audit &Reasons for Appointing Outside Directors
Independent director

Reason for appointment

Akio Dobashi*1*4

Mr. Dobashi has amassed ample expertise in corporate management as a senior executive of a general trading company, and also met
requirements for appointment as an independent director.

Yoshio Osawa*2*4

Mr. Osawa has amassed ample expertise in corporate management as a senior executive of a general trading company and an IT services firm,
and also met requirements for appointment as an independent director.

*1 Mr. Dobashi previously worked at Sojitz Corporation. Although the Company has a contract with Sojitz to maintain business and other equipment, transactions with that company account for less than 1% of theCompany’s consolidated net sales.
*2 Mr. Osawa previously worked at Sumitomo Corporation and SCSK Corporation, with which the Company does business. Transactions with Sumitomo are based on sales of business equipment, but such transactions
account for less than 1% of the Company’s consolidated net sales. Transactions with SCSK are based on sales of business equipment and on the supply of IT equipment, but such transactions account for less than 1% of
the Company’s consolidated net sales.

30

Canon Marketing Japan Inc. I Annual Report 2018

Reasons for Appointing Outside Audit & Supervisory Board Members
Independent Audit &Supervisory Board member

Reason for appointment
Mr. Tedo worked for many years in accounting in the Canon Group, and served as a Senior Vice President at Canon U.S.A., Inc., with his
expertise positioning him well to independently monitor the Company’s management.

Kunihiko Tedo
Nobuyasu Kusumi*3*4

Mr. Kusumi served as an insurance company executive for many years, and also met requirements for appointment as an independent
audit & supervisory board member.

Shigeo Hasegawa*4

Mr. Hasegawa has many years of accounting and auditing experience as a certified public accountant, and also met requirements forappointment as an independent audit & supervisory board member.

*3 Mr. Kusumi has served as a senior executive at Sompo Japan Nipponkoa Insurance Inc. and Sompo Japan Nipponkoa Himawari Life Insurance, Inc. The Company has an insurance policy with Sompo Japan Nipponkoa
Insurance and a contract with that company to sell business and other equipment. However, annual transaction volume is less than 1% of this company’s and the Company’s respective consolidated net sales. The
Company also has a contract with Sompo Japan Nipponkoa Himawari Life Insurance to sell business and other equipment. However, annual transaction volume is less than 1% of this company’s and the Company’s
respective consolidated net sales.
*4 Have notified the Tokyo Stock Exchange as an independent director or an independent audit & supervisory board member as prescribed by the Exchange.

Directors’ and Audit & Supervisory Board Members’ Attendance at Board Meetings
Outside directors

Outside Audit & Supervisory Board members

Name

Attendance at meetings of the Board of Directors and Audit & Supervisory Board during fiscal 2018

Akio Dobashi

15/15 times (100%) of Board of Directors’ meetings

Yoshio Osawa

10/10 times (100%) of Board of Directors’ meetings(attended all 10 Board of Directors’ meetings held subsequent to his appointment)

Kunihiko Tedo

15/15 times (100%) of Board of Directors’ meetings
18/18 times (100%) of Audit & Supervisory Board meetings

Nobuyasu Kusumi

15/15 times (100%) of Board of Directors’ meetings
18/18 times (100%) of Audit & Supervisory Board meetings

Shigeo Hasegawa

15/15 times (100%) of Board of Directors’ meetings
18/18 times (100%) of Audit & Supervisory Board meetingsand standards of independence. Our outside directors and Audit & Supervisory

Policies and Procedures for Determining Remuneration for Senior
Executives and Directors

Board members satisfy the independence criteria and help maintain andRemuneration for the representative director and directors consists of basic

improve the transparency and accountability of the Board of Directors.

remuneration, which is a fixed basic monthly fee for executing their roles andSupervisory Board members in keeping with the Corporate Governance Code

The Company does not maintain a specialist organization or provide

duties, a bonus linked to performance during the fiscal year, and stock

full-time staff to assist outside directors or outside Audit & Supervisory Board

incentives also linked to performance to promote improvements in medium- tomembers. Directors in charge of operations and other officials provide outside

long-term business performances and corporate value. The same applies todirectors with prior explanations of Board of Directors’ meeting agendas asremuneration for executive officers, who are senior executive officers or above.

needed. Internal auditors, directors in charge of operations, and other officials

Outside directors only receive basic remuneration.

provide outside Audit & Supervisory Board members with prior explanations of

The Company maintains a voluntary four-person Nomination and

Board of Directors’ meeting agendas as needed. Outside Audit & Supervisory

Remuneration Committee comprising the president, one director, and two

Board members attend Audit & Supervisory Board meetings, which are held at

independent outside directors. The committee verifies the appropriateness ofleast once monthly, as well as liaison meetings and other gatherings conducted

the remuneration system for directors and executive officers who are senior

as required to exchange information on important items and audit details.

executive officers or above, including ideas on calculating basic remunerations
and bonuses. Remunerations are all in line with the remuneration structure,

Analysis and Evaluation of Effectiveness of Board of Directors

whose basic calculation approaches were resolved at meetings of the Board of

The Company interviewed all directors and Audit & Supervisory Board members

Directors and are verified by the Nomination and Remuneration Committee.

about the effectiveness of the Board of Directors, and the Board of Directors

The total of basic remuneration and performance-linked stock incentives

analyzed and evaluated the findings. Although this process broadly confirmed

for directors must be less than the maximum total remuneration approved at

the effectiveness of the Board of Directors, some members suggested ways togeneral meetings of shareholders. Bonuses, however, are determined whenenhance decision-making effectiveness in meetings, including of the Board of

proposals for them are approved at ordinary general meetings of shareholders.

Directors. Of special note were agenda items at these meetings, criteria for
agendas, and the adequacy of reported matters. The Board of Directors willdraw on such feedback in its operations.
Canon Marketing Japan Inc. I Annual Report 201831

CORPORATE GOVERNANCE

Appointment and Nomination Procedures

Dismissal Procedures for Management Team Executives

The Company maintains a voluntary four-person Nomination and Remuneration

Directors and Audit & Supervisory Board members can ask the Nomination andCommittee comprising the president, one director, and two independent outside

Remuneration Committee for deliberations at any time to decide whether the

directors.

dismissal of a representative director, executive director, or executive officer

To nominate director or Audit & Supervisory Board member candidates

who is a senior executive officer or above (collectively, “management teamand appoint senior executive officers (including successors and president andexecutives”) is necessary in the event of illegal, unfair, or treasonous behavior

representative director candidates), the president and representative director

among such individuals, if they have failed to fulfill their roles, or for otherfirst nominates candidates from among those fulfilling requirements. The

reasons that make such people unsuited to retain their posts as management

nomination is submitted at a meeting of the Board of Directors after theteam executives.

Nomination and Remuneration Committee confirms that it is fair andAll results of Nomination and Remuneration Committee deliberations

appropriate.

shall be submitted to the Board of Directors, regardless of the outcome ofBoard of Directors’ deliberations on the necessity of dismissal. The
management team executives subject to deliberations cannot join in
discussions.

Resignations from Representative Director and Other Posts
Canon MJ maintains engagement with retired directors that have business association activities for the Company, but these retired directors are not in any way
involved in management decisions and functions.

Name

Former post

Post

Work arrangement and terms (full-time,
part-time, with or without compensation,and others)

Date of retirement fromformer posts

Engagement
term

Haruo Murase

Chairman

AdvisorWork arrangement:
Part-time Compensation: Yes

March 28, 2018

Renew after one year

Masami Kawasaki

President

Special advisor

Work arrangement:
Part-time Compensation: Yes

March 26, 2015

Renew after one year

IR Activities

IR outlines performances. The Company also embraces individual interview

We formulated the Canon MJ IR Policy in 2008 to clarify our stance, which isrequests, meeting requests from analysts and institutional investors, anddisclosed on the official investor relations (IR) website below. For retailteleconferences with foreign institutional investors. In 2018, it participated in a

investors, the president, the managing executive officer overseeing IR, or othersecurity firm-sponsored conference in New York and met with local

executives conduct Company briefings. In 2018, the Company exhibited at

institutional investors. The Company also participated in a domestic security

events and conducted Company briefings for many retail investors in February,firm-sponsored conference and held a meeting between the president andMay, August, and December. Also, the Company holds seminars on camera

overseas institutional investors.

usage for retail investors at branches of securities firms to help these people
familiarize themselves with the Company’s products. For analysts andinstitutional investors, the Company augments medium- to long-term
management plan briefings by the president at the beginning of year withquarterly results briefings at which the managing executive officer in charge of

32

Canon Marketing Japan Inc. I Annual Report 2018

Canon MJ IR website

canon.jp/8060e-ir

Messages from Outside Directors
It’s not a difficult thing to make someCanon MJ’s medium-term managementmoney with a little effort. But you needplan focuses particularly on the IT

more than a little effort to become

solutions market, which has considerable

extremely profitable. You have to keep up to

growth potential. The Company seeks todate on the latest trends, and in doing so

make IT solutions an engine of expansion.

you will soon discover that making money

As an outside director, I endeavor to ensure

Akio Dobashi

comes more naturally. It’s crucial to pay

Yoshio Osawa

transparent corporate governance. I also

Outside Director

attention to and to identify trends.

Outside Director

recognize that another important role is to

A key priority of Canon MJ’s mediumterm management plan is to draw on IT solutions to drive growth. I think
this is the right direction as it is in line with trends.

advise on efforts to drive growth.
I have amassed roughly 15 years of executive experience, including
my time at a trading firm and thereafter heading an IT solutions company.

A challenge with this is the Company’s ability to secure the rightPeople and organizations are adopting IT faster than ever and in more

people to help realize this objective. As such, the Company must urgently

complex ways. I believe that it’s essential for the Canon MJ Group to staydevelop a bold strategy to hire IT experts, such as through scouting.

one step ahead in this fast-moving environment to generate further growth.

Canon MJ set up its Nomination and Remuneration Committee thisThe Canon brand is a unique strength for the Company. It maintains afiscal year, marking a major step forward in corporate governance. As one

powerful nationwide sales network serving small-to-medium-sizedof its members, I will work diligently to ensure that the committee isenterprises. On top of that, the Company maintains a data center and as

effective.

part of its offering of services it centralizes the management of camera

The Board of Directors encourages free-spirited debate, and I feel

image, copier, and PC data over the cloud. In addition to selling copiers,

very at home with this organization because of how it values its people.

cameras, PCs, and other products, I believe that the Canon MJ Group has the

Employees are highly motivated, and if I were ever offered the opportunity

potential to generate tremendous growth by taking advantage of its unique

to become a regular worker in this organization I would gladly join.

strengths through a service model in which its IT solutions provide added
value. I will do my utmost to advise management regarding its strategies.

Management Systems
Raising the value of the Canon MJ Group’s corporate brand is an ongoing

consists of officials representing corporate departments and subsidiaries. Its

priority. We do this by maintaining high standards of corporate ethics

task is to develop internal controls systems for the entire Canon MJ Group.

Groupwide, and by developing structures capable of responding to a variety
of management risks.

Canon Inc., which is listed on the New York Stock Exchange, has adopted
systems that comply with the Sarbanes-Oxley Act, a U.S. law designed to
improve corporate governance. As a member of the global Canon Group, Canon

Risk Management

MJ has also applied global perspectives by establishing systems based on the

The Canon MJ Group has taken steps to ensure the continuity of its businesssame standards.

activities in the event of a major earthquake, an influenza outbreak, or othercontingencies that could impact its activities. These initiatives for the Group

Corporate Ethics and Complianceoverall are coordinated by the BCM* Committee, a subsidiary organization of

For the Canon MJ Group, compliance is not simply a matter of obeying laws andthe Management Committee.

regulations. We define compliance as obedience to regulatory requirements*BCM: Business continuity management

and social rules, a commitment to social justice, and continuing efforts to meetthe expectations of society. Our compliance activities are designed toInternal Controls

encourage high ethical values and respect for the law in individual employees

Based on the Companies Act, the Board of Directors resolved the basic policy

through awareness activities, employee education, and organizational activities.

for an internal controls system to ensure appropriate business practices, andis deploying that system in line with that policy.
Chaired by the president, the Internal Controls Evaluation Committee

In keeping with the rules that it sets, the Board of Directors carefully
deliberates and decides on important management matters and receives
reports from representative and executive directors and executive officers on

Canon Marketing Japan Inc. I Annual Report 201833

CORPORATE GOVERNANCE

business implementation progress.
We distribute the Canon Group Code of Conduct and other handbooks andWe have taken various steps to bolster information security governance,
moving forward with objective assessments and ongoing improvements. We

Compliance Cards to all Group employees and enhance awareness throughformulated the Basic Policy on Information Security for the Canon MJ Group andeducation and training. We convene the semiannual Compliance Meeting torolled out the Information Security Management System (ISMS) and Personal

confirm compliance risks and countermeasures at each work site. We also

Information Protection Management System (PMS) for the Group to standardize

maintain an ongoing internal reporting system.

and streamline management. We are optimizing our information security
countermeasures, training information security personnel, and have secured

Information Security

and maintained certification under the ISMS Conformity Assessment Scheme

The Canon MJ Group regards the reinforcement of information security as part ofand Privacy Mark. We deployed the Canon MJ Computer Security Incident

its responsibilities toward the creation of a more secure society, and as essential

Response Team to reinforce cybersecurity. We also issue the Information

to meeting customers’ expectations in line with its Customer Focus philosophy.

Security Report.

Business Risks
Impacts of Market Competition and Fluctuations

Credit Risks

In office MFPs and maintenance services, price competition continues.

The Canon MJ Group could experience unforeseen credit losses, as it engages

Although print volumes using MFPs are on a rising trend, the unit price forin many transactions in which it collects payments after providing goods andmaintenance services continues to fall, and profitability could deteriorate if

services. The Company therefore draws on credit information from external

price competition intensifies. A decline in print volumes driven by the trend

credit bureaus and other sources as part of thorough credit management

toward paperless offices could affect the Canon MJ Group’s results. An increase

efforts while hedging risks through factoring and other means. The Company

in unit sales of third-party laser printer toner cartridges could constrainprovides allowances for doubtful receivables to cover the risks of losses onrevenues from genuine Canon counterparts.

collection. Large unforeseen uncollectible amounts could detract from the

In IT Solutions, the Company carefully manages work hours in various SI

Group’s results and financial position.

projects to prevent losses. Nonetheless, such factors as additional customer
specifications, altered requirements, or mismatches in the Company’s andRelationship with Parent Company

customers’ interpretations of specifications or progress could hamper results.

Canon MJ is a subsidiary of Canon Inc., which owned 58.5% of its stock as of

The digital interchangeable lens camera market may shrink amid an

December 31, 2018. The Company has the exclusive right to sell all Canon

accelerating market shift from SLR to mirrorless models. Sales declines ofbrand products in Japan, the exceptions being semiconductor and LCD

inkjet printers and inkjet cartridges may accelerate amid the decrease in thelithography systems. In fiscal 2018, Canon MJ’s purchases from Canon Inc.

print volume associated with the declining demand for printing New Year’s

amounted to ¥198.4 billion, or 58.5% of its total purchases.

greeting cards.
In the industrial equipment business, capital spending among

Because of this relationship, a major shift in the management policies orbusiness activities of Canon Inc. could have a significant impact on the businesssemiconductor and device manufacturers greatly affects orders for

activities, performance, and financial position of the Canon MJ Group. If it

semiconductor fabrication and measuring equipment. Results could stagnate

becomes impossible to maintain the superiority of Canon products in relevant

if these manufacturers reduced such expenditure.

industries for whatever reason, the Group’s results could be adversely affected.

In the medical equipment business, the Pharmaceutical and Medical

34

Device Act (formerly, the Pharmaceutical Affairs Act) makes it mandatory to

Information Management

appoint sales administrators, set up post-marketing traceability information

The Canon MJ Group holds important information about various Groupsystems, and reinforce safety management structures. While the Group does

operations as well as a considerable amount of sensitive information about

its utmost to maintain systems to comply with such requirements,

companies and individuals. As such, we formulate information managementtransactions with medical institutions and medical equipment dealers could

policies and rules, educate and train employees to increase awareness of thedecline if its safety management structure or information systems do notimportance of information management, implement and check the status of

perform as envisaged.

system security measures, and create and deploy an ISMS. Notwithstanding

As we purchase products and services from many partners, includingthese measures, information that leaks externally as a result of cyberattacks

parent Canon Inc., we may face the risk of insufficient supplies of goods owing

could greatly inconvenience business partners and other stakeholders or lower

to certain partner circumstances, including natural disasters and major

the credit standing of the Canon MJ Group, thus possibly hampering its

accidents. Results could be affected if such situations hamper sales activities.

operations, results, and financial position.

Canon Marketing Japan Inc. I Annual Report 2018

CANON MJ GROUP MEASURES TO PROMOTE THE USE OF IT
The Canon MJ Group has formulated IT governance to further streamline IT investment management as well as maximize Group synergy. At the same time, the Group
continues to make efforts to reduce IT-related costs.

IT Governance
IT Investments to Boost Corporate Value

Reason for Adopting IT Governance

The Canon MJ Group has strategically shifted its IT investment approach away

The Canon MJ Group adopted IT governance in view of the importance of IT-from a focus on increasing productivity by better visualizing its operations andbased corporate management, complementing existing efforts to bolster

reinforcing management toward one of pursuing business growth by enhancing

corporate governance and sustainably increase corporate value.

customer experience and bolstering competitiveness. We also aim to leverage
the experience and performance amassed from IT investments to cultivate IT
solutions and improve corporate value.

Group IT GovernanceManagement Committee
Approve
Approve

Long-term management objectives

IT investment management
Plan

Three-year management plan

Approve

ReportAct

Do

ReportReviewCheck
IT strategy formulation

IT investment implementation

IT useGroup IT Governance• IT Investment Implementation

The Canon MJ Group set up a process to formulate IT strategies,

As well as conducting reviews at each stage, such as creating systems

implement IT investments, and use IT to enhance corporate value. The

concepts and planning and building systems, we have drawn on expertiseGroup created an IT investment management system to oversee IT

amassed through the business of Group firm Canon IT Solutions Inc. to set up

activities, results, and people concerned, and optimize the benefits of ITa system to comply with quality, cost, and delivery requirements.

investments while lowering their risks.

• IT Use
IT Governance Focuses

After deploying systems, IT investment assessment committees report theassessment of return on investment and collaborate with business divisions• IT Strategy Formulation

so that customers can benefit. The committee suggests improvements for

The Canon MJ Group’s business segments draw up three-year management

investments that have not delivered intended returns, and implements plan–

plans linked to the long-term management objectives, as part of which the IT

do–check–act (PDCA) cycles to generate reliable returns.

Department formulates Group IT strategies. The IT Department serves as a
hub for the Management Planning Department and business segments, putting• Future Initiatives

together and prioritizing the required IT measures and driving the formulation

We will enhance the functionality and links between the formulation of IT

of Group IT strategies.

strategies, IT investment management and implementation, and IT use andaccelerate proactive IT investing. We will draw on such efforts to deepen our• IT Investment Management

understanding of customers, enhance services that we can develop with them,

The Management Committee oversees two IT investment assessment

and help resolve social issues while increasing corporate value.

committees that approve and evaluate investments. These are the Business
Investment Assessment Committee, which focuses on operational growth, andthe Internal Operations IT Investment Assessment Committee, which seeks toincrease productivity. This setup enables us to start small with strategic
investments and then grow them.
Canon Marketing Japan Inc. I Annual Report 201835

BOARD OF DIRECTORS AND AUDIT & SUPERVISORY BOARD MEMBERS
AS OF MARCH 27, 201936

Shigeo Hasegawa

Kunihiko Tedo

Akio Dobashi

Yoshio Osawa

Nobuyasu Kusumi

Audit & Supervisory
Board Member(Outside)

Audit & Supervisory
Board Member(Standing, outside)

Director(Outside)

Director(Outside)

Audit & Supervisory
Board Member(Standing, outside)

Masahiro Shimizu

Shiro Hamada

Yoshiyuki Matsusaka

Masahiro Sakata

Masachika Adachi

Shinichi Inoue

Audit & Supervisory
Board Member(Standing)

Director, Senior
Executive Officer

Director, Senior Managing
Director

President &Representative Director

Director, Senior
Managing Director

Audit & Supervisory
Board Member(Standing)Canon Marketing Japan Inc. I Annual Report 2018

FINANCIAL SECTION
38

Ten-Year Consolidated Financial Summary

40

Financial Review

42

Consolidated Balance Sheets

44

Consolidated Statements of Income

45

Consolidated Statements of Comprehensive Income

46

Consolidated Statements of Changes in Net Assets

47

Consolidated Statements of Cash Flows48

Notes to Consolidated Financial Statements

66

Independent Auditor’s Report

Canon Marketing Japan Inc. I Annual Report 2018

37

TEN-YEAR CONSOLIDATED FINANCIAL SUMMARYCANON MARKETING JAPAN INC. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED DECEMBER 31

2018

2017

2016

2015

Net sales (Note 5)¥ 621,591¥ 632,190¥ 629,314¥ 646,003

Operating income

28,94130,407

27,676

26,647

Profit (loss) before income taxes

30,70830,91928,90327,498

Profit (loss) attributable to owners of parent

20,826

20,68018,162

15,670Total assets

498,791

510,833

497,728

486,502

Total stockholders’ equity (Note 4)

303,028

297,032

280,473

277,008

Cash flows from operating activities

16,99028,88533,30629,730Cash flows from investing activities(10,526)

7,964(19,461)(44,536)

Cash flows from financing activities(7,839)(7,145)(6,086)(6,225)

Cash and cash equivalents at end of year

135,572

136,980

107,286

99,574¥  160.61¥  159.48¥  140.06¥  120.84

60.00

60.00

50.00

45.00

2,336.97

2,290.70

2,162.96

2,136.22

For the year:

At year-end:

Cash flows:

Per share of common stock:
Profit (loss) attributable to owners of parent (Note 2)
Cash dividends (Note 3)
Stockholders’ equity (Note 4)

Notes 1. ‌The figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥111 to U.S.$1, the prevailing exchange rate as of December 31, 2018.
2. P‌ rofit (loss) attributable to owners of parent per share is based on the weighted average number of shares of common stock outstanding during the respective
fiscal years.
3. C‌ ash dividends per share are the amounts applicable to the respective fiscal years, including dividends to be paid after the end of the year.

Net Sales and Return on Sales (ROS)(Billions of yen / %)Net Sales

ROS

Operating Income and Operating Margin(Billions of yen / %)Operating
IncomeOperatingMarginWorking Capital
Total
Current
Liabilities

Total
Current
Assets(Billions of yen / Times)

4.8 4.7
3.3 3.4
687 674

4.1
3.8

2.9
632 622632 659 657 659 646
2.4 2.4 629

25.1

1.6 1.5

26.6

4.4

30.4

28.9

27.7

16.8 17.0

0.6
1.1

-0.6
FY ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18

38

Canon Marketing Japan Inc. I Annual Report 2018398
302 302 302

317 325

2.5 2.6

1.1

1.3

0.9
8.4
7.7
6.3

FY ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18

Current
Ratio

2.0

1.9

2.0

1.9

2.0

340 348 362

387
2.5
3.0

2.1

2.2

2.3

2.5

154 157 151 163 165 165 160 157 157 157
130

FY ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18

Millions of yen

Thousands of U.S. dollars(Note 1)

2014

2013

2012

2011

2010

2009

2018

¥ 659,432¥ 657,216¥ 659,218¥ 632,419¥ 674,159¥ 686,615$ 5,599,919

25,08817,013

16,802

8,442

7,736

6,297

260,730

25,85817,055

17,52910,972

8,584

(595)

276,649

16,03010,168

10,579

6,764

3,724

(4,343)

187,622479,747

467,076

462,574

447,765448,592

449,6074,493,613

270,061

256,795

253,862

250,671

246,680

246,8292,729,982

38,191

28,781

33,767

8,716

35,18618,144

153,063(15,221)(25,757)(16,067)(12,108)(13,012)(25,834)(94,829)(4,545)(9,105)(11,813)(3,811)(8,171)(4,324)(70,622)

120,607

102,183108,260

102,373

109,575

95,575

1,221,369

Yen

U.S. dollars(Note 1)¥  123.62¥   76.67¥   77.45¥   49.30¥   26.70¥   (31.62)$     1.45

40.00

24.00

24.00

20.00

20.00

20.00

0.54

2,082.60

1,980.22

1,907.50

1,827.25

1,798.16

1,797.31

21.05

4. ‌Total stockholders’ equity in the above table represents the total of stockholders’ equity and accumulated other comprehensive income (loss) in the consolidatedbalance sheets.
5. ‌Effective fiscal 2013, we have changed to an accounting method that deducts a portion of sales incentives (which had previously been accounted for under selling,
general and administrative expenses) from net sales; therefore, the amount of net sales for fiscal 2012 and relevant key management indicators have been adjusted
retroactively.

Total Stockholders’ Equity and ROE(Billions of yen / %)Total Stockholders’EquityROE

297 303
270 277 280257
254
247 247 251
6.1 5.7 6.5 7.2 6.9
4.2

Total Assets and Total Stockholders’ Equity Ratio

Profit (Loss) Attributable to Owners of Parent(Billions of yen / %)(Billions of yen)

Total Assets

Total Stockholders’Equity Ratio

20.7 20.8

498 511 499
480 487
463 46760.8
450 449 448
56.9 56.4 58.1
54.9 55.0 56.3
54.9 55.0
56.0

18.2
16.0 15.7
10.6 10.2

4.0
2.7

6.8

1.5

3.7

-1.7
FY ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18-4.3
FY ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18

FY ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18

Canon Marketing Japan Inc. I Annual Report 2018

39

FINANCIAL REVIEWBusiness Performance
Net Sales
Consolidated net sales for the year ended December 31, 2018, decreased

for airlines and large orders for office multifunction printers (MFPs).
In the key area of university education, we received several orders for in

1.7%, to ¥621,591 million, from the previous year. This was because

Campus, an IT platform system for disseminating information on campuses

markets for digital interchangeable lens cameras, inkjet printers, andand providing learning management. Nonetheless, education sales wereother offerings were more sluggish than expected, offsetting growth indown slightly due to absence of the previous year’s large orders.

revenues from the IT solutions and industrial equipment businesses.

Canon IT Solutions Inc. performed well in the year under review
with the above business-specific solutions, as well as with its data

Segment Information• Consumers Segment

center services, which have proven popular for their advanced facilities

During the term, we captured the top share of the mirrorless camera

embedded systems.

and high operational quality, ESET security software, and vehicularmarket with the EOS Kiss M, the first mirrorless model under the Kiss

Sales of office MFPs in this segment increased to megabanks andbrand. We also launched the EOS R, our first full-sized mirrorless camera.

large logistics companies. Although shipments of laser printers to large

Nonetheless, overall sales of digital interchangeable lens cameras

life insurers and other customers were up, sales were down owing to

declined as markets shrank amid a shift from single-lens reflex (SLR)

lower unit prices.

to mirrorless offerings. Compact digital camera sales decreased due
to shrinking of the compact digital camera market.

As a result of these factors, segment sales increased 5.7%, to¥187,718 million. Segment income climbed 24.3%, to ¥9,610 million.

Sales of inkjet printers were down because stagnant market
conditions as a result of fewer people creating their own New Year’s cards• Area Segment

overshadowed solid demand for business models. Ink cartridge sales

During the period under review, IT product sales rose on business PC

dropped as print volumes dwindled with fewer machines in field (MIF).

replacements. We also performed well in IT deployment support andSales of IT products were up on favorable gaming PC and mobile
battery revenues.

maintenance services. In addition, we continued to do well with the HOME
IT support cloud service for small-to-medium-sized enterprises and with

As a result of these factors, segment sales decreased 9.6%, to

ESET antivirus software, contributing to higher IT solutions business sales.

¥150,245 million, with segment income plunging 42.1%, to ¥7,333 million.

At the same time, shipments were slow for office MFPs, laser printers, andother key hardware, causing sales to dip. Segment income was up on• Enterprise Segment

growth in sales of laser printer cartridges and other high-margin items

In this segment, we performed well in large systems integration (SI)and a decline in selling, general and administrative expenses.

projects for credit cards and security brokerages, form design-related
solutions for life insurers, and cloud systems to streamline general

Segment sales accordingly were down 0.8%, to ¥255,910 million,
while segment income increased 14.0%, to ¥13,028 million.

insurer investigations. Sales rose for new business process optimization
orders in trust banking.
Sales for manufacturing customers were up on production
management systems for electrical manufacturers and large officeconstruction projects for chemicals manufacturers, as well as fromsystems migration projects.
Sales to retailers were up on document management system projects

40

Canon Marketing Japan Inc. I Annual Report 2018

• Professional Segment
Production printing sales were down owing to lackluster demand for fastcut-sheet and continuous feed printers.
Industrial equipment sales rose on solid demand for semiconductor
manufacturing and inspection/measuring equipment and industrial
components.

Healthcare sales were down because of low demand for hospitalmodalities, which overshadowed growth in medical IT systems andophthalmic equipment.
Visual solutions sales were basically unchanged while demand rose

camera revenues declined.
Segment sales thus decreased 3.1%, to ¥52,447 million. We posted
a segment loss of ¥938 million, compared with a loss of ¥1,869 million
posted in the previous year.

owing to the launch of 4K and 8K broadcast satellite services. Network

Income Analysis
Consolidated net sales were down 1.7%, to ¥621,591 million.
Cost of sales decreased 1.2%, to ¥403,418 million. Gross profit was
down 2.5%, to ¥218,173 million.
Selling, general and administrative expenses were down 2.1%, to¥189,232 million.

Operating income thus declined 4.8%, to ¥28,941 million. Total otherincome rocketed 245.0%, to ¥1,767 million.
As a result of these factors, profit attributable to owners of parent
increased 0.7%, to ¥20,826 million, and was up ¥1.13 on a per-sharebasis, to ¥160.61.

Financial Position
Total current assets decreased ¥10,262 million from the end of theprevious year, to ¥387,245 million. This stemmed from declines of ¥1,408
million in cash and cash equivalents, ¥8,585 million in notes andaccounts receivable, and ¥894 million in merchandise and finished goods.

¥523 million in consumption taxes payable.
Total long-term liabilities increased ¥9,405 million, to ¥65,317 million.
This reflected a ¥10,283 million increase in net defined benefit liabilities.
Total net assets rose ¥6,048 million, to ¥303,571 million. Key factors

Total non-current assets were down ¥1,780 million, to ¥111,546

in this change were ¥20,826 million in profit attributable to owners of

million. Prime factors were drops of ¥2,168 million in buildings andparent, ¥7,780 million in dividends paid, and a ¥6,380 million decrease

structures and ¥1,042 million in investments in securities.

in remeasurements of defined benefit plans.

Total current liabilities decreased ¥27,495 million, to ¥129,903

The total stockholders’ equity ratio was 60.8%, up 2.7 percentage

million. This was despite a ¥677 million rise in accrued income taxes, andpoints from a year earlier. Stockholders’ equity per share increased

reflected decreases of ¥25,109 million in notes and accounts payable and¥46.27, to ¥2,336.97.

Cash FlowsNet cash provided by operating activities amounted to ¥16,990 million, fromproperty, plant and equipment and ¥2,238 million in payments for¥28,885 million a year earlier. This change was due to ¥30,708 million inpurchases of intangible assets.

profit before income taxes, offset by decreases in depreciation andamortization to ¥13,282 million and in income taxes paid to ¥8,713 million.
Net cash used in investing activities totaled ¥10,526 million,
compared with ¥7,964 million provided by such activities in the previous
year. Key factors were ¥9,905 million in payments for purchases of

Net cash used in financing activities was ¥7,839 million, from
¥7,145 million a year earlier. This was largely due to ¥7,790 million in
dividends paid.
As a result of these factors, cash and cash equivalents at the end of theyear stood at ¥135,572 million, down ¥1,408 million from a year earlier.

Canon Marketing Japan Inc. I Annual Report 201841

CONSOLIDATED BALANCE SHEETSCANON MARKETING JAPAN INC. AND CONSOLIDATED SUBSIDIARIESDECEMBER 31, 2018 AND 2017
Millions of yen

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Notes 3, 11 and 12)
Notes and accounts receivable (Note 11)
Inventories (Note 5)
Deferred tax assets (Note 14)
Short-term loans receivable (Note 11)
Other current assets
Allowance for doubtful receivables
Total current assets

2018

2017

¥ 135,572
117,042
33,021
3,896
90,0147,792(92)
387,245¥ 136,980
125,627
33,871
4,063
90,0147,050(98)397,507

PROPERTY, PLANT AND EQUIPMENT:Land
Buildings and structures
Machinery and vehicles
Furniture and fixtures
Rental assets
Lease assets
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment

28,91851,755167
16,861
39,610388
334
138,033(66,046)
71,98729,01751,862308
17,72038,843562
90
138,402(63,311)75,091

4,941
6
316
3
5,266

5,153
13
316
3
5,485

7,986
36
304
4,424
19,144
2,831(432)
34,293
111,546¥ 498,791

9,028
30
404
4,880
16,2032,533(328)
32,750113,326¥ 510,833

INTANGIBLE ASSETS:
SoftwareLease assets
Utilization rights
Other intangible assets
Total intangible assets
INVESTMENTS AND OTHER ASSETS:
Investments in securities (Notes 11 and 12)Long-term loans receivable
Net defined benefit assets (Note 13)
Lease deposits (Notes 17 and 18)
Deferred tax assets (Note 14)
Other investments
Allowance for doubtful receivables
Total investments and other assets
Total non-current assets
Total assets

42

Canon Marketing Japan Inc. I Annual Report 2018

Millions of yen

LIABILITIES AND NET ASSETSCURRENT LIABILITIES:
Notes and accounts payable (Note 11)
Short-term loans payable (Note 18)
Lease obligations (Notes 11 and 18)
Accrued income taxes (Note 14)
Consumption taxes payable
Accrued expenses
Reserves
Other current liabilities
Total current liabilities

2018

2017

¥ 75,831
—
101
6,967
4,064
16,676
4,113
22,151
129,903¥ 100,940
147
125
6,290
4,586
18,1694,192
22,949157,398

LONG-TERM LIABILITIES:
Lease obligations (Notes 11 and 18)
Deferred tax liabilities (Note 14)
Allowance for long-term continuous service rewards (Note 2)
Net defined benefit liabilities (Notes 2 and 13)
Other long-term liabilities (Note 18)
Total long-term liabilities

117
30
1,019
59,887
4,264
65,317164439
961
49,604
4,744
55,91273,30382,820189,958(31,924)
314,157

73,30382,820176,912(31,921)301,1142,519
2
76(13,726)(11,129)543
303,571¥ 498,791

3,159
6
99
(7,346)(4,082)491
297,523¥ 510,833

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 4 and 10)
NET ASSETS (Note 2):
STOCKHOLDERS’ EQUITY (Notes 9 and 19):
Common stock
Authorized 299,500,000 shares; Issued 151,079,972 shares in 2018 and 2017
Capital surplus
Retained earnings
Treasury stock
Total stockholders’ equity
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)Net unrealized gains on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income (loss)
NON-CONTROLLING INTERESTS
Total net assets
Total liabilities and net assets• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc. I Annual Report 2018

43

CONSOLIDATED STATEMENTS OF INCOMECANON MARKETING JAPAN INC. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED DECEMBER 31, 2018 AND 2017
Millions of yen

2018¥ 621,591
403,418
218,173
189,232
28,9412017¥ 632,190
408,418
223,772
193,365
30,407

352
(13)
547
—
495
126
(16)
490
214
(311)
—
(65)
(52)
1,767
30,708

286
(12)
549
(12)
—
879
(1,033)
540
—
(898)
(100)
—
313
512
30,919INCOME TAXES (Note 14):
Current
Deferred
Total income taxes
Profit

9,893
(78)
9,815
¥  20,893

9,951
272
10,223¥  20,696

PROFIT ATTRIBUTABLE TO:
Non-controlling interests
Owners of parent
Profit¥      6720,826¥  20,893¥      1620,680¥  20,696

NET SALESCOST OF SALES (Note 5):
Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 6):
Operating income
OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Insurance income
Foreign exchange losses
Gain on investments in partnership
Gain on sales of fixed assets (Note 7)
Loss on impairment of fixed assets (Note 7)
Gain on sales of investments in securities
Gain on sales of shares of subsidiaries and associates
Loss on sales and disposal of fixed assets (Note 7)
Special extra retirement payments
Loss on disaster
Other, net
Total other income
Profit before income taxes

Yen

PER SHARE OF COMMON STOCK (Note 2):
Profit attributable to owners of parent
Cash dividends applicable to the year
• See accompanying notes to consolidated financial statements.

44

Canon Marketing Japan Inc. I Annual Report 2018¥   160.61¥    60.00¥   159.48¥    60.00

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECANON MARKETING JAPAN INC. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED DECEMBER 31, 2018 AND 2017
Millions of yen

PROFIT
OTHER COMPREHENSIVE INCOME (LOSS) (Note 8)
Net unrealized gains or losses on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income (loss)
Comprehensive income
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of parent
Non-controlling interests
Comprehensive income

2018¥ 20,893

2017¥ 20,696

(641)
(4)
(26)
(6,380)(7,051)¥ 13,842

831
21
(58)
2,214
3,008
¥ 23,704¥ 13,779
63¥ 13,842¥ 23,697
7¥ 23,704• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc. I Annual Report 201845

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSCANON MARKETING JAPAN INC. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED DECEMBER 31, 2018 AND 2017
Millions of yen

Number of sharesof common stock
151,079,972

BALANCE AT JANUARY 1, 2017
Profit attributable to owners of parent
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Profit attributable to non-controllinginterests
Cash dividends paid to non-controllinginterests
Other, net
BALANCE AT JANUARY 1, 2018
Profit attributable to owners of parent
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Profit attributable to non-controllinginterests
Cash dividends paid to non-controllinginterests
Other, net
BALANCE AT DECEMBER 31, 2018

Commonstock¥ 73,303

Stockholders’ equity
CapitalRetained
surplusearnings¥ 82,820¥ 163,364
20,680(7,132)

Treasurystock¥ (31,915)
(6)
0

0

151,079,972¥ 73,303¥ 82,820¥ 176,912
20,826(7,780)¥ (31,921)
(3)
0

0

151,079,972¥ 73,303¥ 82,820¥ 189,958¥ (31,924)

Millions of yen

BALANCE AT JANUARY 1, 2017
Profit attributable to owners of parent
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Profit attributable to non-controllinginterests
Cash dividends paid to non-controllinginterests
Other, net
BALANCE AT JANUARY 1, 2018
Profit attributable to owners of parent
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Profit attributable to non-controllinginterests
Cash dividends paid to non-controllinginterests
Other, net
BALANCE AT DECEMBER 31, 2018

Accumulated other comprehensive income (loss)
Net unrealized
Deferred gains Foreign currency Remeasurements Non-controlling
gains onor losses ontranslation of defined benefit interests
available-for-salehedgesadjustments
plans
securities¥ 2,329¥ (15)¥ 147¥ (9,560)¥ 446• See accompanying notes to consolidated financial statements.

46

Canon Marketing Japan Inc. I Annual Report 2018830
¥ 3,159(640)¥ 2,519

21
¥  6

(4)
¥  2

(48)
¥  99

(23)
¥  76

2,214
¥ (7,346)(6,380)¥ (13,726)

Total net
assets¥ 280,919
20,680(7,132)
(6)
0

16

16

(12)

(12)

41
¥ 491

3,058
¥ 297,523
20,826(7,780)
(3)
0

67

67

(11)

(11)

(4)
¥ 543

(7,051)¥ 303,571

CONSOLIDATED STATEMENTS OF CASH FLOWSCANON MARKETING JAPAN INC. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED DECEMBER 31, 2018 AND 2017
Millions of yen

CASH FLOWS FROM OPERATING ACTIVITIES:Profit before income taxes
Adjustments for:
Depreciation and amortization
Loss on impairment of fixed assets
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in net defined benefit liabilities
Decrease (increase) in net defined benefit assets
Increase (decrease) in allowance for bonuses
Interest and dividend income
Interest expense
Loss (gain) on sales and disposal of property, plant and equipment, net
Loss (gain) on sales of investments in securities
Loss (gain) on investments in partnership
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Other, net
Sub-totalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of intangible assets
Payments for purchases of investments in securities
Proceeds from sales of investments in securities
Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation
Decrease (increase) in short-term loans receivable, net
OtherNet cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term loans payable, net
Repayments of finance lease obligations
Proceeds from share issuance to non-controlling shareholders
Payments for purchases of treasury stock
Dividends paid
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

2018

2017

¥ 30,708¥ 30,919

13,282
16
100
1,228
(67)
3
(352)
13
183
(488)
(495)
8,355
859
(25,106)(2,874)25,365351(13)(8,713)
16,99014,269
1,033
(41)
(960)
(206)
(31)
(286)
12
7
(540)
32
(1,099)(3,917)(1,813)396
37,775285(12)(9,163)28,885(9,905)263(2,238)
(677)
1,535
527
(0)
(31)
(10,526)(12,071)
21,355(1,231)
(733)
881
—
10
(247)
7,964

91
(136)
—
(4)
(7,790)0(7,839)(33)(1,408)
136,980¥ 135,572

147
(192)
49
(7)
(7,140)(2)(7,145)(10)
29,694
107,286¥ 136,980• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc. I Annual Report 201847

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1

Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of Canon
Marketing Japan Inc. (the “Company”) and its consolidated
subsidiaries (the “Group”) are prepared on the basis of accounting
principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements ofInternational Financial Reporting Standards, and are compiled from2

Summary of Significant Accounting Policies(a) Principles of Consolidation
The accompanying consolidated financial statements for the year
ended December 31, 2018 include the accounts of the Company andall of its 20 (23 in 2017) subsidiaries.
All intercompany accounts and transactions are eliminated inconsolidation.
(b) Cash Equivalents
For purposes of the consolidated statements of cash flows, theCompany and its consolidated subsidiaries consider all highly liquid
investments, including securities, time deposits and certificates ofdeposit, all of which mature or become due within three months ofthe date of acquisition, to be cash equivalents.
(c) Securities
The held-to-maturity debt securities are stated at amortized cost.
Available-for-sale marketable securities are stated at fair market
value, with unrealized gain or loss, net of the applicable taxes,
reported as a separate component of net assets. Available-for-salesecurities whose fair value is not readily determinable are stated atcost determined by the moving-average method.
(d) Inventories
Merchandise and service parts are valued at cost determined by themonthly moving-average method. The carrying amount in the balance
sheet represents the amount after write-downs due to decreased
profitability.
Work in process is valued at cost determined by the specificidentification method.
Supplies are valued at cost determined by the last-purchaseprice method. The carrying amount in the balance sheet represents
the amount after write-downs due to decreased profitability.
(e) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation iscomputed by the declining-balance method for property andequipment, with the exception of items that are depreciated by thestraight-line method at rates based on the estimated useful lives of
the respective assets.

48

the consolidated financial statements prepared by the Company as
required by the Financial Instruments and Exchange Law of Japan.
Certain accounts and items presented in the original consolidated
financial statements in Japanese have been reclassified for theconvenience of readers outside Japan.

Canon Marketing Japan Inc. I Annual Report 2018

Such items are leased assets, certain assets of consolidated
subsidiaries, buildings purchased on or after April 1, 1998 (exclusiveof furniture and fixtures) and furniture and fixtures and structurespurchased on or after April 1, 2016.
The useful lives are as follows:
Buildings, from 5 to 75 years; furniture and fixtures, from 2 to 20
years; and rental assets, 3 years.
Normal repairs and maintenance, including minor renewals andimprovements, are charged to income as incurred.
(f) Intangible Assets
Software for sale is depreciated by a larger amount of the depreciation
based on the estimated sales quantity or the estimated sales revenueor the straight-line depreciation based on the estimated effective
duration of sales (up to three years). Internal-use software isdepreciated by the straight-line method based on the length of inhouse durability (five years).
(g) Leases
Leased assets under finance lease contracts are depreciated by thestraight-line method over their respective lease contract term withzero residual value.
(h) Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided in the amountrequired to cover possible losses on collection. It is determined byadding individually estimated uncollectible amounts for specific items
to an amount based on the actual rate of uncollected receivables of
the Group in prior years.
(i) Allowance for bonuses
Allowance for bonuses is provided at the estimated amount ofbonuses to be paid to employees subsequent to the balance sheet
date for services rendered in the current fiscal year.
(j) Bonuses to Directors
The estimated amount payable for the next round of directors’
bonuses, which are classed as expenses for the current year, has been
included in the accounts for the current fiscal year.

(k) Allowance for Long-Term Continuous Service Rewards
In order to set aside money for payment of rewards to employees who
have given long-term continuous service determined in accordancewith the Company’s internal regulations, an allowance for long-term
continuous service rewards is recorded based on the amount theCompany and certain consolidated subsidiaries expect to pay in the
future.
(I) Accounting Method for Retirement Benefits(1) ‌Method of attributing estimated amounts of retirement benefits toperiods
In calculating retirement benefit obligations, the estimated amount of
retirement benefits attributed to a period up to the current fiscal year
is primarily determined using the benefit formula basis.
(2) ‌Amortization of unrecognized actuarial gains and losses and priorservice cost
Unrecognized prior service cost is amortized by the straight-line
method over the average remaining service period of the eligible
employees at the time when it arose. Unrecognized actuarial gains
and losses are amortized from the fiscal year following the year inwhich they arose by the straight-line method over the averageremaining service period of the eligible employees.
(3) ‌Application of simplified method at smaller-sized companies, etc.
Certain consolidated subsidiaries apply the simplified method for
calculating net defined benefit liabilities and net periodic benefit
costs. Under this method, the payments for voluntary early retirementof all eligible employees at the end of the fiscal year are recognized
as retirement benefit obligations.
(m) Income Taxes
Deferred tax assets and liabilities are recorded to reflect the impact of
temporary differences between assets and liabilities recognized forfinancial reporting purposes and such amounts recognized for tax
purposes. These deferred taxes are measured by applying thestatutory income tax rate to the temporary differences.
(n) Translation of Foreign Currency Accounts
All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at
the current exchange rates in effect at the balance sheet date. The
foreign exchange gains and losses on translation are recognized in
the accompanying consolidated statements of income.
(o) Foreign Currency Financial Statements
The balance sheet accounts of the foreign subsidiaries are translated
into Japanese yen at the current exchange rates in effect at thebalance sheet date, except for the components of net assets excluding
non-controlling interests which are translated at their historicalexchange rates.
Revenue and expense accounts are translated at the averageexchange rates prevailing during the year.
(p) Per Share Amounts of Common Stock
Profit attributable to owners of parent per share is calculated using
profit available to holders of common stock, and the weighted average
number of shares of common stock outstanding for the period.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to therespective fiscal years, including dividends to be paid after the end of
the respective fiscal years.
(q) ‌Recognition of Revenues and Expenses and Recognition of
Revenue from Customized Software Development
For software development contracts in progress as of December 31,
the percentage-of-completion method is applied in cases where theoutcomes of such software development contracts can be estimatedreliably. When the percentage-of-completion method is applied, thepercentage of completion at the end of the fiscal year is determinedbased on actual costs incurred and estimated total contract costs. For
all other contracts, the completed-contract method is applied.
(r) Application of Consolidated Taxation System
The Company and certain consolidated subsidiaries have adopted theconsolidated taxation system.
(s) Accounting Standards Not Yet Applied
Implementation Guidance on Tax Effect Accounting (AccountingStandards Board of Japan (ASBJ) Guidance No. 28, February 16, 2018)
Implementation Guidance on Recoverability of Deferred Tax Assets(ASBJ Guidance No. 26, February 16, 2018)(1) Summary
The ASBJ revised the accounting for temporary differences related tothe shares of subsidiaries in separate financial statements andclarified the accounting for the recoverability of deferred tax assets
among companies in Classification 1.
(2) Scheduled application date
The Group plans to apply the guidance from the start of the fiscal year
ending December 31, 2019.
(3) Impact of applying relevant accounting standards
The Group is assessing the impact on the consolidated financial
statements of applying the Implementation Guidance on Tax EffectAccounting.
Accounting Standard for Revenue Recognition (ASBJ Statement No. 29,
March 30, 2018)
Implementation Guidance on Accounting Standard for Revenue
Recognition (ASBJ Guidance No. 30, March 30, 2018)

Canon Marketing Japan Inc. I Annual Report 201849

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(1) Summary
The International Accounting Standards Board (IASB) and the Financial
Accounting Standards Board (FASB) of the United States together
develop comprehensive revenue recognition standards. In May 2014,
they jointly issued a converged standard on the recognition of revenue
from contracts with customers, called Revenue from Contracts with
Customers (IFRS 15 for the IASB and Topic 606 for the FASB). IFRS 15
was applied from reporting periods starting on or after January 1,
2018, while Topic 606 was applied after December 15, 2017. In view of
those applications, the ASBJ developed a comprehensive accounting
standard for revenue recognition and issued an application guideline
for that standard.
From the perspective of financial statement comparability, which3

is one benefit from consistency with IFRS 15, a basic ASBJ policy indeveloping accounting standards relating to revenue recognition was
to start by incorporating the basic principles of IFRS 15 in formulating
an accounting standard. Where items needed to reflect practices todate in Japan, alternative approaches were added that would not
impair comparability.
(2) Scheduled application date
The Group plans to apply the relevant accounting standards from thestart of the fiscal year ending December 31, 2019.
(3) Impact of applying relevant accounting standards
The Group is assessing the impact on the consolidated financial
statements of applying the Accounting Standard for Revenue
Recognition.

Assets Pledged as Collateral
Assets pledged as collateral as of December 31, 2018 and 2017 were as follows:
Millions of yen

Time deposits
Total

4

2018
¥—
¥—

2017
¥ 59
¥ 59

Contingent Liabilities
Contingent liabilities as of December 31, 2018 and 2017 were as follows:
Millions of yen

Guarantees for employees’ housing loans
Total

5

2018
¥9
¥9

2017
¥ 15
¥ 15

Inventories
Inventories as of December 31, 2018 and 2017 were composed of the following:
Millions of yen

Merchandise
Service parts
Work in process
Supplies
Other
Total

2018
¥ 28,716
2,466
1,191
648
—
¥ 33,0212017¥ 29,795
2,281
958
782
55
¥ 33,871

Note: ‌For the software development contracts from which contract losses are expected, the inventory relating to such contracts and relevant reserves for contract losses do not offset each other and havebeen recorded in gross amounts in current assets and current liabilities, respectively.

50

Canon Marketing Japan Inc. I Annual Report 2018

Write-downs of inventories for the years ended December 31, 2018 and 2017, net of the amount of the reversal, were included in the following account:
Millions of yen

Cost of sales6

2018¥ 1,4492017¥ 2,004

Selling, General and Administrative Expenses
The primary components of “Selling, General and Administrative Expenses” for the years ended December 31, 2018 and 2017 were as follows:
Millions of yen

Salaries and allowances
Provision for bonuses
Provision for directors' bonuses
Provision of allowance for long-term continuous service rewards
Retirement benefit costs
Provision for product warranties
Provision of allowance for doubtful receivables

2018¥ 92,756
2,809
80
406
6,399
444
123

2017
¥ 95,053
2,918
128
394
4,395
465
19

Research and development costs included in “Selling, general and administrative expenses” and “Cost of sales” for the years ended December 31, 2018 and 2017 amounted to ¥522 million and ¥429
million, respectively.

7

Other Income (Expenses)
1. The components of “Gain on sales of fixed assets” for the years ended December 31, 2018 and 2017 were as follows:
Millions of yen

Buildings and structures
Furniture and fixtures
Rental assets
Land
Other
Total

2018
¥ 103
6
0
17
0
¥ 126

2017
¥ 741
13
0
124
1
¥ 879

2. The components of “Loss on sales and disposal of fixed assets” for the years ended December 31, 2018 and 2017 were as follows:
Millions of yen

Buildings and structures
Machinery and vehicles
Furniture and fixtures
Rental assets
Land
Software
Other
Total

2018
¥ 153
—
65
82
8
1
2
¥ 311

2017
¥ 603
0
44
88
140
14
9
¥ 898

Canon Marketing Japan Inc. I Annual Report 201851

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. There was no material loss on impairment of fixed assets required to be presented for the year ended December 31, 2018.
The Group recorded impairment losses for the following asset groups for the year ended December 31, 2017.
Location
Usage
Category
Itabashi-ku, Tokyo
Training center
Buildings, Land
Tomisato-shi, Chiba Prefecture
Business asset
Buildings, Land, OtherIn principle, business assets are grouped based on the entities in the Group.
In line with a decision to sell the above training center, the Group reduced book value to the recoverable amount and recorded impairment
loss of ¥793 million.
As a result of business restructuring, the Group reduced the book value of business assets to the recoverable value and recorded impairment
loss of ¥240 million.
Recoverable amount is based on the selling price less cost to disposal for business assets and is based on planned sale amounts for land.

8

Other Comprehensive Income (Loss)
The following table shows amount arising during the year, reclassification adjustments, pre-tax amount, tax effect and net-of-tax amount foreach component of other comprehensive income (loss) for the years ended December 31, 2018 and 2017.

Net unrealized gains or losses on available-for-sale securities
Amount arising during the year
Reclassification adjustments
Pre-tax amountTax effectNet-of-tax amountDeferred gains or losses on hedges
Amount arising during the year
Pre-tax amountTax effectNet-of-tax amountForeign currency translation adjustments
Amount arising during the year
Pre-tax amountTax effectNet-of-tax amountRemeasurements of defined benefit plans
Amount arising during the year
Reclassification adjustments
Pre-tax amountTax effectNet-of-tax amount
Total other comprehensive income (loss)

52

Canon Marketing Japan Inc. I Annual Report 2018

2018

2017

¥    (335)
(593)
(928)
287
(641)

¥ 1,749
(540)
1,209
(378)
831

(6)
(6)
2
(4)

30
30
(9)
21

(26)
(26)
—
(26)

(58)
(58)
—
(58)

(10,692)
1,471(9,221)
2,841(6,380)¥ (7,051)

3,431
(229)
3,202
(988)
2,214
¥ 3,008

9

Common Stock and Dividends
1. The following table shows the movement of number of common stock for the years ended December 31, 2018 and 2017.
As of January 1,
2017

Increase orpurchase(Thousands ofshares)151,080
21,409—3

Issued stock
Treasury stock

Decrease or sale
As of December 31,(Thousands of2017shares)—0

Increase orpurchase(Thousands ofshares)151,080
21,412

Decrease or sale
As of December 31,(Thousands of2018shares)—1—0

151,080
21,413

Notes: 1. The increase of treasury stock was due to the purchase of fractional stock.
2. The decrease of treasury stock was due to the sale of fractional stock.

2. Matters regarding dividends
The Company distributes a semiannual interim dividend by resolution of Board of Directors and annual dividend by resolution of Generalstockholders’ meeting.
Semiannual interim dividends is paid to the common stock holders of the Company as of semiannual period end and annual dividend is paid
to the common stock holders of the Company as of year end.
Resolution date, total dividends, dividend per share for the years ended December 31, 2018 and 2017 were as follows:
2018
Dividends

Resolution date

Annual dividendInterim dividend

March 28, 2018
July 25, 2018

Total dividends Dividend per share(Millions of yen)
(Yen)
¥ 4,538¥ 35¥ 3,242¥ 25

2017
Resolution date
March 29, 2017
July 26, 2017

Total dividends Dividend per share(Millions of yen)
(Yen)
¥ 3,890¥ 30¥ 3,242¥ 25

Annual dividend of ¥4,538 million (¥35 dividend per share) was resoluted by General stockholders’ meeting held on March 27, 2019.
Total dividend per share was ¥60 for fiscal 2018 and fiscal 2017, respectively.

10

Lease Transactions
1. Lessees’ accounting
The following table shows future minimum lease payments subsequent to December 31, 2018 and 2017 for noncancelable operating leases.
Millions of yen

Due within one year
Due after one year
Total

2018
¥  2,596
11,307¥ 13,903

2017¥  2,483
12,015¥ 14,498

2. Lessors’ accounting
Future minimum lease payments subsequent to December 31, 2018 for noncancelable operating leases consist of ¥1,890 million due within one
year and ¥2,543 million due after one year.

Canon Marketing Japan Inc. I Annual Report 201853

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11

Financial Instruments
1. Information on financial instruments(1) Policies for financial instruments
The Group limits its asset management to financial instrumentscharacterized as very safe and believes that financing should mainly
be conducted through the use of Group finances whenever necessary.
The Company enters into derivative transactions to hedge against
foreign exchange fluctuation risks and not for speculative purposes.
(2) Types and risks of financial instruments and systems to control
those risks
Operating receivables, consisting of notes and accounts receivable,
are exposed to credit risks of customers. The Group strives to mitigate
these risks by strict credit control utilizing credit information provided
by external credit agencies, as well as by credit insurance and otherrisk-hedging means.
Short-term loans receivable are mainly the loans to the parent
company by the Company, rendered in compliance with the internal
regulations for investment and management of funds.
Short-term investments in securities and investments insecurities consist primarily of held-to-maturity debt securities andequity securities issued by business counterparties of the Group, andare exposed to market price fluctuation risk. Regarding this risk, theGroup periodically monitors the fair values of the securities and thefinancial condition of their issuers i.e., business counterparties. In

addition, for securities other than held-to-maturity debt securities,
the Group continuously reviews the status of security holdings, taking
market conditions and relationships with business counterparties into
consideration.
Trade payables, consisting of notes and accounts payable, aremainly those due within six months.
Derivative transactions consist of forward exchange contracts tohedge against the risks of fluctuations in foreign currency denominatedtrade payables.
(3) Supplementary explanation on fair values of financial instruments
The fair values of financial instruments include not only values basedon market quotations, but also values calculated on a theoreticalbasis in cases where market quotations are not available. Such values
may vary depending on different assumptions, as variables arefactored into the calculation of such values.
2. Fair values of financial instruments
The book values of financial instruments in the consolidated balance
sheets as of December 31, 2018 and 2017, their fair values, and thedifferences between the two are as follows. The table below, however,excludes the financial instruments whose fair values are not readily
determinable (see Note 2).
Millions of yen

2018(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments in securities and investments in securities(4) Short-term loans receivable
Total assets(5) Notes and accounts payable
Total liabilities

Book value¥  65,072
117,042
76,89990,014¥ 349,027¥  75,831¥  75,831

Fair value¥  65,072
117,042
76,89990,014¥ 349,027¥  75,831¥  75,831

Difference
—
—
—
—
—
—
—
Millions of yen

2017(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments in securities and investments in securities(4) Short-term loans receivable
Total assets(5) Notes and accounts payable(6) Short-term loans payable
Total liabilities

54

Canon Marketing Japan Inc. I Annual Report 2018

Book value¥  66,480
125,627
77,99790,014¥ 360,118¥ 100,940
147¥ 101,087

Fair value¥  66,480
125,627
77,99790,014¥ 360,118¥ 100,940
147¥ 101,087

Difference
—
—
—
—
—
—
—
—

Notes: 1. Calculation methods of fair values of financial instruments and other matters relating to securities are as below:
Assets(1) Cash and deposits, (2) Notes and accounts receivable, and (4) Short- (3) Short-term investments in securities and investments in securities
term loans receivable
The fair values of equity securities are based on the prices at theThe book values of these assets are used as their fair values, sincesecurity exchanges, and those of debt securities are based on the prices
they are to be settled in the short term and accordingly their fair values at the security exchanges or quotations obtained from counterparty
approximate their book values.
financial institutions. Details of securities by holding objectives aredescribed in Note 12 Securities.
Liabilities(5) Notes and accounts payable, (6) Short-term loans payable
The book values of these liabilities are used as their fair values, since they are to be settled in the short term and accordingly their fair values
approximate their book values.
2. The book values of financial instruments whose fair values are not readily determinable as of December 31, 2018 and 2017 were as follows:
Millions of yen

2018
¥ 713
¥ 873

Equity securities
Investments in investment partnerships

2017
¥ 893
¥ 637

These financial instruments are not included in (3) Short-term investments in securities and investments in securities in the preceding table offair values, since they do not have market prices and therefore their fair values are not readily determinable.
3. The redemption schedule of monetary claims and securities with maturities as of December 31, 2018 and 2017 were summarized as follows:
Millions of yen

Cash and deposits
Notes and accounts receivable
Short-term investments in securities and investments in securities
Held-to-maturity debt securities(1) Corporate bonds(2) Other
Short-term loans receivable
Total

Due within
1 year¥  65,072
117,0422018
Due after
1 year——Due within
1 year¥  66,480
125,6272017
Due after
1 year
———70,50090,014¥ 342,628

—
—
—
—

—
70,50090,014¥ 352,621————

4. The repayment schedule of lease obligations as of December 31, 2018 and 2017 was as follows:
Millions of yen

2018
Due within
1 year¥ 101

1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
¥ 58

¥ 35

¥ 19

¥4

2017
Due within
1 year¥ 125

1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
¥ 92

¥ 44

¥ 21

¥6

Canon Marketing Japan Inc. I Annual Report 201855

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12

Securities
Securities as of December 31, 2018 and 2017 were classified and included in the following accounts:
Millions of yen

Securities classified as:
Available-for-sale:
Investments in securities
Held-to-maturity:
Cash and cash equivalents
Total

2018

2017

¥  7,986¥  9,028

70,500¥ 78,486

70,500¥ 79,528

The carrying amounts and aggregate fair values of investments in securities at December 31, 2018 and 2017 were as follows:
Millions of yen

2018
Cost
Securities classified as:
Available-for-sale:
Equity securities
Other
Total

Unrealized gains¥ 2,94711¥ 2,958

Unrealized losses¥ 3,4491¥ 3,450

¥ (8)
—
¥ (8)

Fair value¥ 6,38812¥ 6,400

Millions of yen

2017
Cost
Securities classified as:
Available-for-sale:
Equity securities
Other
Total

Unrealized gains¥ 3,00511¥ 3,016

Unrealized losses¥ 4,5122¥ 4,514¥ (32)—¥ (32)

Fair value¥ 7,48513¥ 7,498

Available-for-sale securities whose fair value is not readily determinable as of December 31, 2018 and 2017 were as follows:
Millions of yen

Available-for-sale:
Equity securities
Investments in investment partnerships
Total

2018

2017

¥   713873¥ 1,586¥   893637¥ 1,530

Impairment loss of ¥158 million was recorded on unlisted equity securities in the year ended December 31, 2018.

56

Canon Marketing Japan Inc. I Annual Report 2018

13

Employees’ Retirement and Severance Benefits
1. Overview
The Company has a defined contribution pension plan, a pension planwith a market-based variable accumulation rate (quasi-cash balanceplan), and a lump-sum severance payment plan, and its domestic
consolidated subsidiaries have defined benefit corporate pension

plans, and lump-sum severance payment plans. The Company
sometimes provides retiring employees with extra retirement
payments not included in the retirement benefit obligations actuariallycalculated in line with its retirement benefit accounting.

2. Defined benefit plans(1) Reconciliation of retirement benefit obligations at beginning and end of year
Millions of yen

Retirement benefit obligations at beginning of year
Service costs
Interest costs
Actuarial gains and losses
Benefit paid
Prior service costs
Transfer to a defined contribution plan
Other
Retirement benefit obligations at end of year2018
¥ 217,952
6,513
1,218
115
(7,161)——(0)¥ 218,637

2017¥ 216,803
6,615
1,325
(1,024)(6,481)
1,150
(412)
(24)
¥ 217,952(2) Reconciliation of plan assets at beginning and end of year
Millions of yen

Plan assets at beginning of year
Expected return on plan assets
Actuarial gains and losses
Contributions from the employer
Benefit paid
Other
Plan assets at end of year2018
¥ 169,452
4,221(10,577)
3,051(6,381)—¥ 159,766

2017¥ 163,874
4,686
3,601
3,182
(5,868)(23)¥ 169,452(3) Reconciliation of retirement benefit obligations at beginning and end of year for which the simplified method was applied
Millions of yen

Net defined benefit liabilities at beginning of year
Net periodic benefit costs
Benefit paid
Contributions to plans
Net defined benefit liabilities at end of year

2018
¥ 700
98
(52)
(34)
¥ 712

2017
¥ 640
112
(18)
(34)
¥ 700

Canon Marketing Japan Inc. I Annual Report 201857

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(4) Reconciliation of retirement benefit obligations and plan assets at year-end and net defined benefit liabilities and assets in consolidatedbalance sheets
Millions of yen

2018¥ 197,969
160,052
37,917
21,666¥  59,583¥  59,887(304)¥  59,583

Funded retirement benefit obligations
Plan assets
Unfunded retirement benefit obligations
Net liabilities and assets in consolidated balance sheets
Net defined benefit liabilities
Net defined benefit assets
Net liabilities and assets in consolidated balance sheets2017¥ 197,724
169,765
27,95921,241¥  49,200¥  49,604(404)¥  49,200

Note: Plan assets include plan assets for which the simplified method was applied.

(5) Retirement benefit costs
Millions of yen

2018¥ 6,513
1,218(4,221)
4,815(3,345)98¥ 5,078¥    —

Service costs
Interest costs
Expected return on plan assets
Amortization of actuarial gains and losses
Amortization of prior service costs
Net periodic benefit costs using the simplified method
Retirement benefit costs of defined benefit plans
The gain on transfer to a defined contribution plan recorded as “Other income”

2017¥ 6,615
1,325(4,686)
3,199(3,446)112¥ 3,119¥   (63)

Note: In addition to the above retirement benefit costs, the Group recorded ¥395 million and ¥282 million (including ¥100 million of special extra retirement payments) for extra retirement payments for theyears ended December 31, 2018 and 2017, respectively.

(6) Remeasurements of defined benefit plans before income tax effect adjustment
Changes in unrecognized prior service costs and unrecognized actuarial gains and losses for the years ended December 31, 2018 and 2017 wereas follows:
Millions of yen

2018
Unrecognized priorservice costs
At beginning of year
Net change
At end of year

¥ (4,751)
3,344¥ (1,407)

Unrecognizedactuarial gains
and losses¥ 15,431
5,877¥ 21,308

Total¥ 10,680
9,221¥ 19,901

2017
Unrecognized priorservice costs¥ (9,347)
4,596¥ (4,751)

Unrecognizedactuarial gains
and losses¥ 23,229(7,798)¥ 15,431

Total¥ 13,882(3,202)¥ 10,680

Note: Net change for the year ended December 31, 2017 includes the amount of ¥26 million in line with a transition from a lump sum severance payment plan to a defined contribution pension plan.

58

Canon Marketing Japan Inc. I Annual Report 2018

(7) Plan assets
1. Main components of plan assets
Ratios for main components of plan assets were as follows:

Bonds
StocksPooled funds
Life insurance company general accounts
Other
Total

2018
23%
2
49
20
6
100%

2017
22%
3
51
19
5
100%

Note: ‌The composition of pooled funds was 50% in bonds and 50% in stocks for the year ended December 31, 2018, and 46% in bonds and 54% in stocks for the year ended December 31, 2017.

2. Methodology for setting long-term expected rates of return
The long-term expected rate of return on plan assets are determined by considering current and projected plan asset allocations and current andanticipated long-term rates of return from diverse plan assets.
(8) Actuarial assumptions
The principal actuarial assumptions as of December 31, 2018 and 2017 were as follows:

Discount rates
Long-term expected rates of return on plan assets
Estimated rates of salary increases

2018
0.05 - 0.62%
2.0 - 2.5%
1.9 - 2.7%

2017
0.03 - 0.63%
2.0 - 3.0%
1.7 - 2.7%

3. Defined contribution plan
The required contributions of the Company and consolidated subsidiaries to defined contribution plans totaled ¥1,987 million and ¥1,990 million
for the years ended December 31, 2018 and 2017, respectively.

Canon Marketing Japan Inc. I Annual Report 201859

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14

Income Taxes
The effects of significant temporary differences, which resulted in deferred tax assets and liabilities as of December 31, 2018 and 2017, were as follows:
Millions of yen

DEFERRED TAX ASSETS:
Sales promotion expenses
Accrued bonuses to employees
Accrued business tax and business office tax
Loss on disposal and devaluation of inventories
Provision for loss on orders received
Net defined benefit liabilities
Loss on devaluation of investments in securities
Excess amortization of software
Excess depreciation of fixed assets
Loss carryforward
Asset retirement obligations
Allowance for long-term continuous service rewards
Loss on valuation of golf club membership
Lump-sum depreciable assets
Loss on impairment of fixed assets
Other
Gross deferred tax assets
Less: valuation allowance
Total deferred tax assets
DEFERRED TAX LIABILITIES:Net unrealized gains on available-for-sale securities
Deferred capital gain
Uncollected enterprise tax refunds
Deferred gains or losses on hedges
Other
Total deferred tax liabilities
Net deferred tax assets

2018

2017

¥    893
1,173
688
513
139
18,630
414
585
838
472
438
316
117
87
93
1,146
26,542(1,045)¥ 25,497¥    928
1,169
773
554
151
15,401
405
653
893
482
445
298
118
85
137
1,232
23,724(1,020)¥ 22,704¥ (1,113)(1,280)
(9)
(1)
(84)
¥ (2,487)¥ 23,010¥ (1,398)(1,404)
(6)
(3)
(66)
¥ (2,877)¥ 19,8272018¥  3,896
19,144(30)¥ 23,010

2017¥  4,063
16,203(439)¥ 19,827

Note: Net deferred tax assets as of March 31, 2018 and 2017 are reflected in the following accounts in the consolidated balance sheet:

Current assets—deferred tax assets
Investments and other assets—deferred tax assets
Long-term liabilities—deferred tax liabilities
Net deferred tax assets

A reconciliation between the statutory income tax rate and the effective income tax rate for the year ended December 31, 2018 was notpresented since the difference between the statutory income tax rate and effective income tax rate after applying tax effect accounting was lessthan 5% of the statutory rate.
A reconciliation between the statutory income tax rate and the effective income tax rate for the year ended December 31, 2017 was as follows:60

Canon Marketing Japan Inc. I Annual Report 2018

2017
31.0%
0.9
1.1
0.5
(0.0)
(0.4)
33.1%

Statutory income tax rate
Entertainment and other expenses permanently not deductible for tax purposes
Per-capita levy of inhabitants’ taxes
Valuation allowance
Dividend income not taxable
Other
Effective income tax rate

15

Segment Information
1. Segment Information(1) Description of Reportable Segments
Reportable segments are constituent units of the Group for which
separate financial information is available and they are subject toperiodic reviews by the Board of Directors to determine theallocation of management resources and assess their respective
operating results.
On January 1, 2018, the Group transitioned from a productbased organizational structure to one based on markets andcustomers to help materialize Long-Term Management Objectives

Phase III. It accordingly switched from the Business Solutions, IT
Solutions, Imaging Systems and Industrial/Medical reportablesegments to the Consumers, Enterprise, Area, and Professional
segments from the first quarter of the year ended December 31, 2018.
The Group established the BPO Management Center in July 2018
to reinforce its business process outsourcing business. The reportablesegment for Canon BizAttenda Inc., which focuses on businessprocess outsourcing, therefore changed from Enterprise to Other.

Major Business Areas and Group Companies
Reportable Segment
Major Business Areas and Group Companies
Consumers
Providing digital cameras and inkjet printers to consumers
Enterprise
Supplying Canon’s input/output equipment and solutions to help resolve the business-specific management issues oflarge customers[Major Group company]
Canon IT Solutions Inc.
Area
Supplying Canon’s input/output equipment and solutions to help resolve the management issues of small-tomedium-sized enterprises around Japan[Major Group company]
Canon System & Support Inc.
Professional
Providing solutions to customers in specialist areas•Production Printing
Focusing on providing fast continuous feed and cut-sheet printers to printing companies[Major Group company]
Canon Production Printing Systems Inc.
•Industrial Equipment
Supplying semiconductor fabrication and measuring equipment, mainly to semiconductor and other electronic device
manufacturers•Healthcare
Providing modalities, IT systems, and solutions combining modalities to medical institutions and dispensing
machines and IT systems to pharmacies[Major Group company]
Canon Lifecare Solutions Inc. and Canon ITS Medical Inc.
•Visual Solutions
Providing network camera solutions for surveillance and business applications and commercial imaging equipment
to broadcasters

Canon Marketing Japan Inc. I Annual Report 201861

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(2) Methods of measurement for sales, segment income (loss), assets, and other items for reportable segments
Accounting methods for reportable segments are the same as the accounting methods described in Note 2 Summary of significant accounting policies.
Segment income (loss) is measured based on the amount of operating income. Intersegment sales and transfers are based on market prices.
(3) Information by reportable segment for the years ended December 31, 2018 and 2017 were as follows:
Millions of yen

Year ended or as of December 31,

2018
Reportable Segment
Consumers Enterprise

Net sales:
External customers
Intersegment
Total
Segment income (loss)
Segment assets
Other items:
Depreciation and amortization
Changes in the amount of property,
plant and equipment and intangible
assetsArea

Professional¥ 150,158 ¥ 176,183 ¥ 242,867 ¥ 49,669
87
11,535
13,043
2,778
150,245 187,718 255,910
52,4477,333
9,610
13,028(938)
53,18680,31367,15924,090

Other

Total

Adjustments Consolidated¥ 2,714 ¥ 621,591— ¥ 621,591
4,264
31,707 ¥ (31,707)—
6,978 653,298 (31,707) 621,591
48
29,081(140)
28,941
2,144 226,892 271,899 498,791

779

7,861

3,226

590

56

12,512770

13,282

681

6,733

2,990

313

19

10,736

9

10,745

Notes: 1. “Other” includes call center business and BPO service business, which are not included in reportable segments.
2. Adjustments are as follows:	  (1) Adjustment of segment income (loss) eliminates intersegment transactions.
	  (2) Adjustment of segment assets is for corporate assets that do not belong to reportable segments. These assets mainly comprise surplus funds (cash and marketable securities) and assets relating
to head office land, buildings, and head office administrative units.
	  (3) Adjustment of depreciation and amortization is for head office building expenses that do not belong to reportable segments.
	  (4) Adjustment of increase of property, plant and equipment and intangible assets consists of capital investments in head office buildings that do not belong to reportable segments.
3. Total segment income (loss) after adjustments for reportable and other business segments equals operating income in the consolidated statements of income.

Millions of yen

Year ended or as of December 31,

2017
Reportable Segment
Consumers Enterprise

Net sales:
External customers
Intersegment
Total
Segment income (loss)
Segment assets
Other items:
Depreciation and amortization
Changes in the amount of property,
plant and equipment and intangible
assets62

Canon Marketing Japan Inc. I Annual Report 2018

Area

¥ 165,996 ¥ 167,654 ¥ 244,727
293
9,982
13,193
166,289 177,636 257,920
12,671
7,728
11,43358,366
83,09567,896

Professional¥ 51,347
2,793
54,140(1,869)32,741

Other

Total

Adjustments Consolidated¥ 2,466 ¥ 632,190— ¥ 632,190
4,685
30,946 ¥ (30,946)—
7,151 663,136(30,946) 632,190
397
30,3604730,407
1,495 243,593 267,240 510,833

852

7,936

3,553

1,097

36

13,474795

14,269

610

8,566

3,579

891

11

13,657

10

13,667

2. Related Information(1) Information by product and service
Disclosure of information by product and service is omitted since the segment information contains the same information.
(2) Information by geographical area
1. SalesDisclosure of information on sales by geographical area is omitted since sales to domestic external customers accounts for more than 90% ofconsolidated net sales.
2. Property, plant and equipment
Disclosure of information on property, plant and equipment by geographical area is omitted since the amount of domestic property, plant andequipment accounts for more than 90% of total property, plant and equipment recorded on the consolidated balance sheet.
(3) Information by major customers
Disclosure of information by major customers is omitted since no customer accounts for 10% or more of consolidated net sales.
3. Information on impairment loss on property, plant and equipment by reportable segment
Impairment losses on property, plant and equipment by reportable segment for the years ended 2018 and 2017 were as follows:
Millions of yen

Year ended or as of December 31,

2018
Reportable Segment
Consumers Enterprise

Impairment loss

¥ 15

Area

—

Professional
—

¥1

Other

Total

Adjustments

Recordedamount

—

¥ 16

—

¥ 16

Note: “Other” represents operating segments which are not included in the reportable segments and includes operations such as the shared-services business.

Millions of yen

Year ended or as of December 31,

2017
Reportable Segment
Consumers Enterprise

Impairment loss

—

—

Area

Professional

¥ 793

¥ 240

Other

Total

Adjustments

Recordedamount—¥ 1,033—¥ 1,033

4. Information on amortization and balance of goodwill by reportable segment
There were no applicable items for the years ended December 31, 2018 and 2017.
5. Information on gain on negative goodwill
There were no applicable items for the years ended December 31, 2018 and 2017.

Canon Marketing Japan Inc. I Annual Report 201863

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16

Related Party Transactions
Transaction conditions and policies for deciding transaction conditions, etc. with related party(1) ‌Purchases of products are decided based on price negotiations each fiscal year, after considering market prices and the affiliated company’s
proposals regarding desired prices.
(2) ‌Sales of office equipment and consumables, etc. are subject to similar conditions as general transactions.
(3) ‌With regard to loans of capital, interest rates on loans are decided rationally after considering market interest rates. Furthermore, collateral is
not accepted.
Transaction with parent company and major corporate stockholders, etc. for the year ended December 31, 2018 and related balance as ofDecember 31, 2018 were as follows:

Name ofCategory company,etc.

Percentage Related contents
Balance at
Capital orTransaction
possession Board
end of fiscal
investment Businessamountof voting members
year
Address
capital contents or
Business Contents of transactions (Millions of Accounts
rightsholding(Millions of(Millions of occupation
yen)(Ownership) concurrent relationships
yen)
yen)
(%)
positionsPurchasesof products

OhtaParent
Canon Inc.
ku,Tokyocompany

Development
Accounts¥ 42,070¥ 198,404
andpayableOperatingmanufacturing
Salesof
Manufacture transactionsin the office, (Ownership) 0 holdoffice equipof products¥174,762 imaging Direct 58.5 concurrent
ment andsold bysystem, and Indirect 0.0 positions
Accounts
consumables,
Canon MJ
industrial¥ 6,830 receivable ¥ 2,381
etc.
equipment
and others
areas
NonShort-term
Loans of¥ 90,000—
operatingloans
capitaltransactions

Note: Transaction amounts do not include consumption tax, etc., however, the account balances include consumption tax, etc.

Transaction with parent company and major corporate stockholders, etc. for the year ended December 31, 2017 and related balance as ofDecember 31, 2017 were as follows:

Name ofCategory company,etc.

Percentage Related contents
Balance at
Capital orTransaction
possession Board
end of fiscal
investment Businessamountof voting members
year
Address
capital contents or
Business Contents of transactions (Millions of Accounts
rightsholding(Millions of(Millions of occupation
relationships
yen)(Ownership) concurrent
yen)
yen)
(%)
positionsPurchasesof products

OhtaParent
Canon Inc.
ku,Tokyocompany

Development
Accounts¥ 67,880¥ 215,630
andpayableOperating Sales ofmanufacturing
Manufacture transactionsin the office, (Ownership) 0 holdoffice equipof products¥174,762 imaging Direct 58.5 concurrent
ment andsold bysystem, and Indirect 0.0 positions
Accounts
consumables,
Canon MJ
industrial¥ 7,276 receivable ¥ 2,250
etc.
equipment
and others
areas
NonShort-term
Loans of¥ 90,000—
operatingloans
capitaltransactions

Note: Transaction amounts do not include consumption tax, etc., however, the account balances include consumption tax, etc.

64

Canon Marketing Japan Inc. I Annual Report 201817

Asset Retirement Obligations
The Group recognizes restoration obligations under real estate rental
agreements of buildings and other real estates as asset retirement
obligations.
Instead of recognizing liabilities, the Group reasonably estimates
the uncollectible amount of lease deposits relating to the real estate

18

rental agreements, and accounts for the portion of such estimatedamount attributable to the current fiscal year as an expense.
The outstanding balances of lease deposits considered
uncollectible as of December 31, 2018 and 2017 were ¥2,795 millionand ¥2,920 million, respectively.

Lease Obligations, Loans Payable and Deposits
Lease obligations, loans payable and deposits as of December 31, 2018 and 2017 were as follows:
Millions of yen

Average interest rate (2018)
Short-term loans payable
Lease obligations
Current portion of lease obligations
Lease obligations (excluding current portion)
Long-term loans payable (excluding current portion)
Deposits
Total

19

—
0.01%

2018
¥    —

2017¥   147

101
117
218
—
4,034
¥ 4,252

125
164
289
—
4,123
¥ 4,559

Stockholders’ Equity
The Corporate Law of Japan went into effect on May 1, 2006, replacing
the Commercial Code. It is applicable to events or transactions ofcompanies in Japan occurring on or after May 1, 2006 and for fiscal
years ending on or after May 1, 2006.
The Corporate Law stipulates that the amounts actually paid in orprovided in consideration for newly issued stock shall be recorded ascommon stock. However, it also allows 50% or less of such amounts
to be recorded as additional paid-in capital.
Under the Corporate Law, a company that meets certain criteria
can establish its Articles of Incorporation so that dividends can be
paid to its existing stockholders by resolution of the Board of
Directors, without requiring the approval of a resolution at a generalstockholders’ meeting. The Company has met said criteria andamended its Articles of Incorporation at the annual generalstockholders’ meeting for fiscal 2006. The Corporate Law provides thatan amount equal to 10% of the amount to be disbursed as
distributions of capital surplus (other than the capital reserve) andretained earnings (other than the legal reserve) be transferred to thecapital reserve and the legal reserve, respectively, until the sum of thecapital reserve and the legal reserve equals 25% of the common
stock account. However, such appropriation cannot be made if theaggregate amount of the legal reserve exceeds 25% of common stock(i.e. the aggregate amount of the Company’s legal reserve has alreadyreached 25% of its common stock).

Canon Marketing Japan Inc. I Annual Report 2018

65

INDEPENDENT AUDITOR’S REPORT

66

Canon Marketing Japan Inc. I Annual Report 2018

(THIS PAGE INTENTIONALLY LEFT BLANK)

Canon Marketing Japan Inc. I Annual Report 201867

CANON MJ GROUP COMPANIESAS OF JANUARY 1, 2019

Segment

Company nameLines of business

Canon IT Solutions Inc.

Systems integration (SI) and consulting, IT services, and softwaredevelopment and sales

SuperStream Inc.

Planning, development, and sales of SuperStream NX management
infrastructure solution for accounting and salaries

Qualysite Technologies Inc.

Java systems development, and data center operations, maintenance,
and auxiliary services

Canon Software America, Inc.

Development of business applications software for Group companies

Canon Information Systems (Shanghai) Inc.

SI and consulting for Japanese and Group companies and development
and sales of software relating to Canon products

Canon IT Solutions (Thailand) Co., Ltd.

Supervision of businesses of Group companies in Thailand and Vietnam

Material Automation (Thailand) Co., Ltd.

Proposals, sales, and service related to IT hardware through software

ASAHI-M.A.T. Co., Ltd.

Sales and support for CAD, CAM, and CAE in Thailand

MAT Vietnam Company Limited

Proposals, sales, and service related to IT hardware through software in
Vietnam

Edifist Learning Inc.

Human resources development consulting, training, and auxiliary
services

Canon System & Support Inc.

IT solutions consulting, sales, support, and maintenance services for
Canon’s and third parties’ products

A&A Co., Ltd.

Exclusive domestic sales of 3D CAD software Vectorworks Japaneseversion and planning, development, and sales of related softwareEnterprise BU

Area BU

Production
Canon Production Printing Systems Inc.
Printing

Sales and maintenance services for production printers andconsumables, development and delivery of workflow systems, andprovision of printing services

Canon Lifecare Solutions Inc.

Sales of medical and healthcare devices equipment and related
consumables and medical imaging systems

Canon ITS Medical Inc.

Providing IT solutions for the medical and healthcare field, systems
development, network construction, and hardware sales

Canon BizAttenda Inc.

Consulting, business support BPO, back office BPO, office support
outsourcing, contact center outsourcing, temp staffing, and services

Canon Business Support Inc.

Office services for Group companies and BPO-related services

Canon Customer Support Inc.

Contact center operations focusing on Canon’s products, technicalsupport, reception counter for repair and maintenance of consumer
products, and photo business support

Professional BU
Healthcare

BPO Services

Service & Support

The Group comprises 20 consolidated subsidiaries (including domain name management companies).

68

Canon Marketing Japan Inc. I Annual Report 2018

CORPORATE DATAAS OF DECEMBER 31, 2018

Number of Shareholders
12,406

Headquarters
Canon S Tower, 16-6, Konan 2-chome, Minato-ku,
Tokyo 108-8011, Japan

Number of Employees
Consolidated: 17,647
Non-consolidated: 5,284(As of December 31, 2017)

Date of Establishment
February 1, 1968
Common Stock¥73,303,082,757

Main Locations of Operations
Headquarters, Makuhari office and branches(Sapporo, Sendai, Nagoya, Osaka, Hiroshima, and Fukuoka)(As of April 1, 2018)

Number of Shares Issued
151,079,972 shares
Stock Listing
Canon Marketing Japan Inc.’s common stock is traded on the First
Section of the Tokyo Stock Exchange. (Ticker Symbol: 8060)
Major Shareholders

Number of shares held(Thousands)
75,708
5,705
3,250
2,243
1,890
1,646
1,157
1,102
1,050
1,001

Name of shareholder
Canon Inc.
Canon Marketing Japan Group Employee Stock Ownership Association
The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
THE BANK OF NEW YORK, TREATY JASDEC ACCOUNTSTATE STREET BANK AND TRUST COMPANY 505001
Canon Marketing Japan Group Business Partner Stock Ownership Association
Japan Trustee Services Bank, Ltd. (Trust Account 5)
BNYMSANV RE BNYMIL RE LF MORANT WRIGHT NIPPON YIELD FUND
Mizuho Bank, Ltd.

Percentage of ownership
(%)
58.4%
4.4
2.5
1.7
1.5
1.3
0.9
0.9
0.8
0.8

Note: The percentage of ownership is calculated excluding the number of treasury stock (21,411,513 shares).

Shareholder Composition

Canon MJ Investor Relations Website

Financial Institutions
9.9%
Treasury Stock
14.2%

Canon MJ maintains a comprehensive investor relations (IR) website to further
facilitate communication with shareholders. The website contains:• News for investors • IR calendar• Financial results and other financial information• ‌Information on Long-Term Management Objectives Phase III (FY2016–2020) andThree-Year Management Plan
• Stock information • Annual reports

Securities Companies
1.1%

Other Domestic Companies
51.2%

Individuals and Others
11.7%
Foreign Companies, etc.
11.9%

canon.jp/8060e-ir
Stock Price Range and Trading Volume
Stock Price (Yen)
3,000

Trading Volume (Shares)
10,000,000

2,500

8,000,000

2,000

6,000,000

1,500
4,000,000

1,000

2,000,000

500
0

2016
1

3

5

7

9

11

2017
1

3

5

7

9

11

2018
1

3

5

7

9

11

2019
1

0
3

Canon Marketing Japan Inc. I Annual Report 201869

Headquarters
Canon S Tower, 16-6, Konan 2-chome,
Minato-ku, Tokyo 108-8011, Japan

Canon Marketing Japan Website(Investor Relations)canon.jp/8060e-ir