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November 3, 2016

Fumiyo Harada

DBJ’s Path for Privatization- Adopting to Changes in Organizational and Institutional Frameworks-

Corporate Profile of DBJ (as of March 31, 2016)

Establishment:

October 1, 2008 under the Development Bank of Japan Inc. Act (the “DBJ Act”)

Shareholders: 100% owned by the government of Japan

Total assets: JPY 15,907 billion (consolidated) (USD 141.1 billion)*

Total Outstanding Loan: JPY 13,724 billion (Non-consolidated) (USD 121.7 billion)*

Total Outstanding Investments: JPY 809 billion (Non-consolidated) (USD 7.1 billion)*

Total Equity: JPY 2,884 billion (Consolidated) (USD 25.5 billion)*

Basel III Common Equity Tier 1

Ratio16.85%

Number of staff: 1,187

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* JPY/USD=112.68 as of March 31, 2016.

Japan Development Bank (Est.1951)

Hokkaido-Tohoku Development Finance Public Corporation (Est.1956)

Development Bank of

JapanMerged in

1999

2008

DBJ (JDB) – Past & Present

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1. 1951-1955: Reconstruction and independence of the economyEconomic recovery

Rapid growth

Stable growth

Economic bubble

Post-bubble

Structural reform

The Lehman Shock &

The Great East Japan Earthquake

2. 1956-1965: High-growth infrastructure development

3. 1966-1971: Development of international competitiveness and social

development loans

4. 1972-1984: Improvements to quality of life and stable supply of energy

5. 1985-1995: Development of lifestyle and social infrastructure and a

smooth industrial transformation

6. 1996-2000: Creation of a vibrant and affluent society and stable

economy

7. 2001-2007: Financial solutions that support communities, the

environment and technology

8. 2008 onward: Development Bank of Japan Inc. established

• Global financial crisis • The Great East Japan Earthquake

• Reinforcing the function of supplying growth capital

Loans Outstanding by Industry (March 31, 2016, consolidated)

25％

Real estate and leasing

Others

Manufacturing

Transportation and

communication

20％19％

18％

18％

3

Electrical, gas, heat supply

and water

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How was the DBJ Act before?

• Full privatization of DBJ had been postponed twice and the government was to review

the organization of DBJ by the end of March 2015.

Conversion to a joint-stock company Response to the Financial Crisis Response to the Earthquake

“The Government should dispose

its holding of DBJ’s share capital

within approximately 5-7 years

from Oct. 2010.”

Partial Amendment of the DBJ Act (Jun. 2009)

2011The Great East Japan

Earthquake

DBJ Act (Jun. 2007) Revision of the DBJ Act (May 2011)

“The Government shall review its

involvement in DBJ by the end of

Mar. 2012.”

“According to the progress of the

Crisis Response Operations, the

government shall inject capital in

DBJ until Mar. 2012.”

“The Government should dispose

its holding of DBJ’s share capital

within approximately 5-7 years

from Apr. 2012.”

“The Government should dispose

its holding of DBJ’s share capital

within approximately 5-7 years

from Apr. 2015.”

“The Government shall review its

involvement in DBJ by the end of

Mar. 2015.”

“According to the progress of the

Crisis Response Operations, the

government shall inject capital in

DBJ until Mar. 2015.”

2008

Financial Crisis

The Amendment of the DBJ Act

The minimum

proportion of holding

of share capital by

the government

While DBJ engages in the Crisis Response Operations

While DBJ engages in

the Special Investment Operations

Mar. 2026 FOR AN INDEFINITE

PERIOD

More than 1/3

1/2 or more

The act for Partial Amendment of the DBJ Act was passed into law in

2015 by the National Diet. The new Act states;

May 2015 Mar. 2021

1. The full privatization of DBJ still remains as a target but the implementation schedule is not

yet decided.

2. The government shall hold 1/2 or more of the issued share capital of DBJ until the completion

of the Special Investment Operations(expected to be completed by March 2026).

3. After March 2026, FOR AN INDEFINITE PERIOD (until otherwise provided for by law), the

government shall hold more than 1/3 of the issued share capital of DBJ with a view to

ensuring a proper conduct by DBJ of the Crisis Response Operations.

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(Expected to be decided)

Finance under Crisis Response Program

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6.2 Trillion

(Cumulative)

101 billion

(Flow)（JPY 100 million)

GFC

Great East

Japan

Earthquake

Case Study- Crisis Response Program

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6.2 Trillion

(Cumulative)

GFC

Great East

Japan

Earthquake

DBJ’s response to the Great East Japan Earthquake and Tsunami

Electric Power Supply Problems – New Safety Measures

TEPCO Needs – Stable supply and Compensation

Tohoku Revival Reinforcement Office

Restoration and Reconstruction Loans – 2.2 trillion Yen

Reconstruction Funds – 89 Projects

Japanese

Government

¥50 billion(FY2016)

Special Investment Operations

* USD/JPY=112.68 as of March 31, 2016.

Complement and Encourage

private-sector companies

(pump-priming effects, etc.)

Capital funds

(preferred shares and

subordinated loans)

Special Investment

Operations

¥100 billion (FY2016)

(USD 887 million)*

Total amount will be up to

¥500 billion by

FY2020

¥50 billion (FY2016)

Core capital

Special Investment

Operations

Monitoring Board

Evaluation,

Verification

Other financial

institutions

(megabanks, regional banks,

private funds, etc.) En

han

ce ris

k c

ap

ital s

up

po

rting

gro

wth

Loans, etc.

Initiatives for Target

Companies

• Utilize management

resources effectively

• Make management

innovations

cultivate new business

new collaboration with

other sectors

• Regional invigoration

• Promoting corporate

competitiveness

• Development of markets

for growth capital

Political Targets

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Case Study - Special Investment Operations

DBJ & The Shizuoka Bank – Co-financing Offshore

DBJ and The Shizuoka Bank, Ltd., a Japanese local bank, cooperated in the finance of the

share acquisition of an existing Thai power producer by a Japanese local gas utility

company, Shizuoka Gas Co., Ltd.

This first overseas investment project for the company was intended to acquire

management knowledge and business promotion skills overseas as well as to build offshore

networks.

Promoting Japan’s local economic vitalization by supporting local companies together with

Japanese local banks is one of our top-priority missions as a DFI.

[EPEC’s gas-fired thermal power generation facility]

[Operational Company]

Eastern Power & Electric Company, Ltd. (EPEC)

SGBBGMS

Power

China Development

Industrial Bank

Total Gas & Power

Thailand

DBJShizuoka Gas Shizuoka Bank

Common

stock

Preferred stock

32% 28% 28% 12%

Senior Loan

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DBJ used to fully rely on the Japanese government for its fund raising through direct

borrowing from the government and foreign bonds guaranteed by the government.

Today, DBJ issues domestic and international bonds, with or without Japanese

government guarantee, and borrows money directly from lenders such as regional

banks in addition to the government.

As for bond issuance, approximately 70% is in the domestic capital market and

approximately 30% is in the international market.

Most of the bonds are denominated in JPY but DBJ aims to increase its USD issuance

along with an expected increase in USD assets.

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Change in Funding Activities

* USD/JPY=112.68, EUR/JPY=127.70, GBP/JPY=161.92 as of March 31, 2016.

74.5%

8.5%

17.0%Foreign Bonds

Guaranteed by the Govt

Repayment and others

Today1998

Government Borrowing

Copyright © Development Bank of Japan Inc. 2016

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