This is Akitoshi Ichii speaking, President and CEO of NSK. Thank you for joining our online financial conference. Today, I would like to outline NSK's business results for the first half of fiscal 2021. Without further ado, let's get into the first half results on page three. In the first half, the automotive industry saw production cutbacks due to a greater than expected impact from semiconductor shortages and components supply problems. Demand for industrial machinery remained strong due to the recovery of the machine tool sector and robust demand for the semiconductor manufacturing equipment. We also saw a rise in costs due to higher prices for steel and ocean freight, while the yen weakened against other currencies. As a result, in the first half, we achieved sales of JPY 417.8 billion with an operating income of 3.8% or JPY 16 billion.
Net income was JPY 8 billion. Sales increased by JPY 101.9 billion and operating income by JPY 26.6 billion compared to the same period last year. Next, let's move on to page four. Sales in the first half were affected by the overall decline in automotive production volume, but recovered compared to the previous year's contraction in industrial activity and automaker plant shutdowns due to COVID-19. As a result, we achieved a 32% increase in sales over the same period last year, or a 27% increase excluding the effect of currency exchange rates. Operating income rebounded from a loss of JPY 10.6 billion in the first half of the previous year to a profit of JPY 16 billion, a year-on-year increase of JPY 26.6 billion.
However, in the second quarter, automotive production cutbacks significantly increased due to supply chain issues such as semiconductor and component shortages, resulting in a decrease in both sales and profits compared to the first quarter. Next, we will move on to page five with a V chart laying out the factors affecting operating income. As you can see, the increase in profit is largely due to the increase in volume. This was accompanied by a corresponding increase in costs detailed in the middle of the page. In the second bar from the left, volume and mix had a positive effect, increasing net sales by JPY 86 billion, which in turn yielded a JPY 36.4 billion increase in operating income, excluding the effect of currency exchange rates.
Sales price increases contributed JPY 0.8 billion, while an increase in external procurement costs resulted in net negative JPY 2.7 billion. We originally estimated that steel price increases would lead to a JPY 6 billion cost increase for the full year, but we have already reached JPY 5.2 billion in the first half alone. In addition to efforts to reduce procurement costs, we have gone beyond the scope of our initial plan and stepped up efforts to pass on cost increases to the market and curb the decline in sales prices. However, we have been unable to offset the entirety of the cost increases. Looking at the general cost column, costs increased by JPY 10.4 billion, largely due to the increase in labor costs and expenses.
The JPY 8 billion in labor costs includes JPY 5 billion in employment adjustment subsidies related to COVID. A weaker yen had a positive effect of JPY 4.1 billion, while operating expenses had a negative effect of JPY 1.6 billion. As a result, operating income was JPY 16.0 billion, a JPY 26.6 billion increase from the previous year. Moving on to page six, let's look at the results by business segment. Industrial Machinery business results in the first half are in the table on the left, and the graph on the right shows the quarterly trends of sales and profits. In the first half, sales in the Industrial Machinery business were JPY 165.3 billion, an increase of JPY 41.4 billion or 33% over the same period last year.
Operating income was JPY 14.2 billion, an increase of JPY 13.9 billion over the same period last year, mainly due to an increase in volume, and we were able to restore the operating income margin to 8.6%. Orders for machine tool products remained at a high level although there was a lull in the Chinese market. The semiconductor manufacturing equipment sector also continued to be strong. Although demand in the wind turbine and railway sectors has remained flat, the industrial machinery business has continued to recover through five consecutive quarters since bottoming out in the first quarter of the previous year, and profits have been improving along with sales. Next, we will look at the automotive business on page seven.
In the first half, the automotive business posted sales of JPY 233.9 billion, an operating income of JPY 0.3 billion, an increase of JPY 51.1 billion and JPY 13.4 billion, respectively, over the same period last year. In the first half, global automotive production volume totaled approximately 35 million units, according to IHS, a 6% recovery compared to the same period last year. Our sales increased by 28% compared to the same period last year, or by 23% excluding the effect of exchange rates. As you can see, our sales outperformed the growth in global automotive production. This was driven by regional customer mix and demand from customers implementing supply chain and inventory measures.
However, looking at our sales by quarter, sales peaked in the third quarter of last year and have been declining since the fourth quarter onwards. Due to the semiconductor shortage and COVID-19, the component supply problem has been growing and automotive production dropped to the 16 million unit level in this latest period, the second quarter. Second quarter sales of JPY 112.2 billion were lower than the previous year's results, and regrettably, we were in the red. Next, I'd like to outline our full year forecast on page nine. These are our forecasted results for fiscal 2021. Our full year sales forecast remains unchanged from the forecast we released publicly in May at JPY 860 billion. We expect the recovery in the industrial machinery business and positive currency translation to make up for the decline in the automotive business.
As for profit, we have revised both operating income and net income down by JPY 8 billion to JPY 44.5 billion and JPY 30 billion, respectively, reflecting the decline in sales volume, excluding the effect of currency exchange rates and the increase in procurement costs. Regarding dividends, our interim dividend will be JPY 10 per share, combined with the planned year-end dividend of JPY 15 per share, we will maintain our plan for an annual dividend of JPY 25 per share. To give some additional information on our assumptions for the business environment in the second half of fiscal 2021, as in the first half, we expect the Industrial Machinery business to be solid, primarily in the machine tool and semiconductor manufacturing equipment sectors.
However, in the automotive business, although problems with the supply of semiconductors and components are beginning to improve, we are assuming that automotive production will decline from the initial forecast of 86 million vehicles to approximately 76 million vehicles. We also reviewed our cost assumptions for steel materials and ocean freight rates due to the current market conditions, and applied the same currency rate we experienced in the first half to our second half forecast. Next, page 10 shows our forecasts for fiscal 2021 versus our results in fiscal 2020. Despite the impact of higher steel prices, transportation costs, and other costs compared to the previous year, we expect net sales to increase by JPY 112.4 billion and operating income to increase by JPY 38.1 billion. Moving on to page 11, I'd like to outline our result forecasts by business segment. The top section shows the Industrial Machinery business.
As previously stated, robust demand continued in machine tools and semiconductor manufacturing equipment. For the full year, we forecast sales of JPY 340 billion and segment income of JPY 32 billion or 9.4% of sales. Year-on-year, we expect sales to increase by JPY 64.8 billion and segment income by JPY 24.3 billion. Our sales forecast for the second half is JPY 174.7 billion, and we will aim to restore segment income to the 10% level. Next, I'll outline the automotive business. When we released our original results forecast in May, global automotive production volume was forecast at 86.5 million vehicles based on the assumption that the semiconductor shortage would ease over the course of the year.
In our revised forecast, in addition to the 35 million vehicles produced in the first half of the year, production is expected to be 41 million vehicles in the second half, giving a total of 76 million vehicles for the full year. This represents a decrease from the previous year and a 12% reduction from our original plan. This figure is even slightly lower than the 77 million vehicles produced last year when production was impacted by plant shutdowns due to COVID-19. In these circumstances, we are forecasting sales in the automotive business to be JPY 480 billion for the full year, which is an increase of JPY 30.3 billion over the previous year. We expect segment income to improve by JPY 4 billion from the previous year and break even. Next, looking at page 12.
This V chart shows the change from last year's operating income result of JPY 6.3 billion to this year's initial forecast of JPY 53 billion, and finally, the revised forecast of JPY 44.5 billion. On the left, you can see that in the initial forecast, we expected a JPY 6 billion increase in the cost of raw materials, the impact of which we aimed to minimize by passing on to the market by increasing sales prices and making cost reductions. Based on that, we estimated that we would see a JPY 50 billion increase in income from the recovery of volume and an accompanying JPY 10 billion cost increase. In contrast to that, on the right, you can see that in the revised forecast, there is a JPY 7 billion decrease in income due to a JPY 25 billion reduction of sales, excluding currency exchange impact.
There is also an additional JPY 6 billion increase in steel costs compared to the initial forecast. In addition to this, we expect to see a JPY 4.5 billion increase in costs due to factors that included inflated costs for ocean freight and other forms of transportation, production fluctuations, and increased labor costs to ensure supply to our customers. We have also incorporated an additional sales price increase strategy in the second half of the year to recover JPY 3 billion of the total cost increase of JPY 10.5 billion. Factoring that strategy in, we expect a net decrease in operating income of JPY 7.5 billion due to the increase of costs. The depreciation of the yen will boost income by JPY 6 billion. Factoring all of this in, we reduced the initial operating income forecast of JPY 53 billion announced in May by JPY 8.5 billion, resulting in a revised forecast of JPY 44.5 billion.
Moving on, I would like to touch on some points from our management policy for the second half of this fiscal year. Please look at page 13. Operations in the second half will also face inherent supply chain risks that are difficult to predict, including considerable automaker production cuts caused by the semiconductor shortages, a sixth wave of COVID in Japan, and power supply restrictions in China. Amidst these difficulties, we will work to maximize output in the industrial machinery business by fully leveraging our production sites around the world to meet customer deadlines. The automotive business has seen fluctuations in demand, with decreases being followed by rapid recovery. Under these circumstances, NSK will aim to maintain productivity by increasing the accuracy of production and inventory control.
In this business environment, we will inevitably pass on the increased price of steel and other raw materials to the market by increasing sales prices. With inflation exceeding our initial forecast, we need to ensure that our customers understand the need for the additional price increase and prepare for the risk of further increases. Last year, we put the brakes on capital expenditure due to COVID-19. Despite making a downward adjustment of our profit forecast, we would like to carry out capital expenditure according to our initial plan this year. Lastly, let's move on to page 15. This section will be brief, but with regard to NSK's response to vehicle electrification, orders for E-Axle products have increased globally due to NSK's efforts to leverage its core technologies and ability to improve fuel efficiency.
We will work to ensure that NSK moves forward with initiatives to secure a high market share for these products. We will also strengthen new product development initiatives, especially in China and Japan. Additionally, we will make preparations to grow our industrial machinery business by reorganizing Fujisawa Plant, launching an integrated large size bearing production line at NSK Toyama, increasing production capacity at Shenyang Plant in China, and proceeding with the feasibility study for a new plant to increase small size bearing production capacity. We also want to make steady progress in developing environmentally friendly products. That concludes my explanation of the fiscal 2021 second quarter financial results. Thank you.