NEWS RELEASE
24-D-0240

May 31, 2024
Japan Credit Rating Agency, Ltd. (JCR) announces the following preliminary Climate Transition Bond Evaluation Results.

The Government of Japan
Japan Climate Transition Bond (FY2024)
Overall
Preliminary
Evaluation

Greenness/
Transition
Preliminary Evaluation(Use of Proceeds)

Management,
Operation andTransparency
Preliminary Evaluation

Green 1(T)

gt1

m1

IssuerRedemption Date

The Government of Japan
10-year Japan Climate Transition Bonds (2nd)※
5-year Japan Climate Transition Bonds (2nd)interest-bearing government bonds
10-year bonds: face value of approximately JPY 350
billion for two times※
5-year bonds: face value of approximately JPY 350
billion for two times
Total: approximately JPY 1.4 trillion
to be decided
10-year bond: May 28, 2024, October 20245-year bond: July 18, 2024, January 202510-year bond: May 20, 2034 (TBD)
5-year bond: July 20, 2029 (TBD)

Method ofRedemption

Lump-sum redemption at maturity

Use of Proceeds

Projects that meet the eligibility criteria identified in the
Climate Transition Bond Framework based on the GX
Promotion Strategy

Subject
Type
Issue AmountInterest Rate
Auction Date※

Assignment

10-year Japan Climate Transition Bonds (2nd) which was auctioned on May 28, 2024. JCR has already published Climate
Transition Evaluation Results on the same day (24-D-0291).

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Evaluation Overview▶▶▶ 1. Overview of Japan

Japan is located off the coast of the Far East and East Asia at the eastern tip of the Eurasiancontinent, and along the northwest coast of the Pacific Ocean, forming an arcuate archipelago asa whole. Approximately 70 per cent of Japan's land is mountainous, and approximately 67 percent of that is forest. Japan is a country that experiences more natural disasters such as
earthquakes and typhoons than any other country in the world. 18.5 per cent of earthquakes ofmagnitude 6 or higher that occur around the world occur in Japan. In addition, Japan accounts
for 17.5 per cent of the damage caused by natural disasters including typhoons and earthquakes
worldwide. In Japan, natural disasters, which have become increasingly severe in recent years,
have caused much damage, including blackouts that lasted for several weeks, and further
measures to both mitigate and adapt to climate change have become an urgent and top priority
issue.
Japan has many manufacturing industries that are internationally competitive. According to the2023 White Paper on Manufacturing Industries1, there were 825 major manufacturing items in
2020, of which 220 items had a global share of 60 per cent or more, making it an overwhelming
leader in the world. Approximately 70 per cent of this is used as parts and materials for electronics
and automobiles, making this a strength of Japan's manufacturing industry.
The total amount of greenhouse gas ﴾hereinafter referred to as "GHG"﴿2 emissions in Japan withthe thriving manufacturing industry, was 1.135 billion tons-CO2e as of FY2022 that ranked theseventh largest in the world 3 ; however, the actual amount in FY2022 was reduced byapproximately 19.3 per cent from FY2013. Of which, the total carbon dioxide ﴾hereinafter referred
to as "CO2"﴿ emissions amounted to 1.037 billion tons-CO2 and 92.9 per cent of the emissions are
resulting from energy use. The breakdown by sector is as follows: the energy transformation
sector, 40.5 per cent; the industrial sector, 24.4 per cent; the transportation sector, 17.8 per cent;
the commercial industry, etc. sectors, 5.5 per cent and the residential sector, 4.8 per cent.

▶▶▶ 2. Overview of Japan's transition strategy

The Government of Japan declared "net-zero by 2050 " in October 2020, based on the goals set
out in the Paris Agreement ﴾substantially reduce global greenhouse gas emissions to hold global
temperature increase to well below 2°C above pre-industrial levels and pursue efforts to limit it
to 1.5°C above pre-industrial levels,﴿ and legalized it by amending the Act on Promotion of Global——————————————
Ministry of Economy, Trade and Industry, Ministry of Health, Labor and Welfare, Ministry of Education, Culture, Sports, Scienceand Technology “2023 White Paper on Manufacturing Industries ﴾Annual report based on Article 8 of Basic Act on the
Promotion of Core Manufacturing Technology﴿” https://www.meti.go.jp/report/whitepaper/mono/2023 /index.html
2CO2, methane, dinitrogen monoxide ﴾nitrous oxide,﴿ hydrofluorocarbons ﴾HFC,﴿ perfluorocarbons ﴾PFC﴿ and sulfur hexafluoride
﴾SF6﴿
3
Emissions Database for Global Atmospheric Research﴾EDGAR﴿ "Emissions Database for Global Atmospheric Research" in 2022
https://edgar.jrc.ec.europa.eu/report_2023
1

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Warming Countermeasures in 2021. In April 2021, the government expressed that it aimed toreduce GHG by 46 per cent ﴾from FY2013﴿ in FY2030 and continuingly challenge to realize 50 per
cent reduction as an interim goal for net-zero by 2050.
As mentioned above, energy-derived CO2 accounts for a little under 90 per cent of total GHG
emissions of Japan. It is therefore significant to steadily take concrete measures for
decarbonization in the industry, business, transportation and residential sectors, based on thenational energy basic plan and the national energy mix to achieve the 2030 target. The
Government of Japan launched GX that is to transform the industrial and social structures fromfossil energy-centered since the Industrial Revolution into clean energy-centered in the 6thStrategic Energy Plan decided in the cabinet in October 2021. The government has held the GX
Implementation Council, chaired by the Prime Minister and composed of experts from thegovernment, private sector experts and academia since 2023 and compiled Basic Policy for the
Realization of GX. The GX Promotion Act and the GX Decarbonization Electricity Act were enacted
in 2023, and a system to promote the initiatives toward "Pro-Growth Carbon Pricing ﴾CP﴿
Concepts" was established. "GX Promotion Strategy" was decided in the cabinet in July 2023,
based on the GX Promotion Act as a concrete strategy for implementing a series of policies.
The government centered to seek for further energy consumption reduction and for making
renewable energy the main power sources as its first prioritized strategy. It then supports to realize
the development of next-generation technologies in 22 sectors, including, but not limited to, themaximum utilization of nuclear power or hydrogen/ammonia/carbon recycling.

▶▶▶ 3. Validity on Transition Strategy ﴾Outline of Alignment Evaluation with CTFH﴿

The Government of Japan's transition strategy and specific policies satisfy the four elements of
the Climate Transition Finance Handbook 4 and the Basic Guidelines on Climate Transition
Finance5 ﴾collectively referred to as the CTFH, etc.﴿. The goal set by the Government of Japan toreduce GHG emissions by 46 per cent compared to FY2013 levels in FY2030 meets the goal of
limiting global temperature rise to below 2°C as set by the Paris Agreement, but does not meetthe goal limiting global temperature rise to 1.5°C or lower. JCR expects the government's further
considerations to accelerate its efforts to reach even higher targets which will be enable 1.5°Clevel rise. JCR evaluates the level of ambition as being relatively ambitious when comparing thetarget values of other countries with the same base year.
The Government of Japan's transition strategy calls for public and private sectors to invest 150
trillion yen over the next 10 years in order to achieve net-zero by 2050 and the interim milestone
goal of FY2030 ﴾46 per cent reduction compared to FY2013﴿. The plan is to go beyond the SDS——————————————
International Capital Market Association ﴾ICMA﴿ “Climate Transition Finance Handbook 2023”
https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/climate-transition-financehandbook/5
Financial Services Agency, Ministry of Economy, Trade and Industry, Ministry of the Environment “Basic Guidelines on Climate
Transition Finance 2021 Edition” https://www.meti.go.jp/press/2021/05/20210507001/20210507001-1.pdf
4

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scenario ﴾Business As Usual﴿, as the government is planning to attract GX investment byimplementing investments stipulated in the Japan Climate Transition Bond Framework in advance.
JCR evaluates that this is a highly ambitious strategy, requiring efforts in addition to the BAU.

▶▶▶ 4. Overview of climate transition bond evaluation

The subjects of this evaluation are the 10-year Japan Climate Transition Bonds ﴾2nd﴿ and 5-year
Japan Climate Transition Bonds ﴾2nd﴿ to be issued by Japan in FY2024 starting from April 2024 toMarch 2025 ﴾collectively referred to as the “Japan Climate Transition Bonds ﴾FY2024﴿" or the"Bonds"﴿. JCR will evaluate whether this Bonds complies with the Green Bond Principles ﴾GBP﴿6,
Green Bond Guidelines ﴾GB Guidelines﴿7, CTFH, etc. Although these are principles or guidelines
and are not legally supported regulations, JCR conducts evaluations by referring to the principles
and guidelines as currently unified domestic and international standards.
The Government of Japan has established eligibility criteria for the Japan Climate Transition Bond
Framework in line with the goals and policies established in the GX Promotion Strategy based on
the Plan for Global Warming Countermeasures, the Basic Energy Plan, etc. The projects for which
the proceeds of this Bonds will be used are R&D funds and/or subsidy programs selected by theGovernment of Japan which meets the eligibility criteria set forth in its framework. In addition,although many of the eligible projects are research and development funding and subsidy
programs and are unlikely to directly cause serious negative environmental or social impacts,
environmental and social considerations should be taken into account when evaluating andselecting individual eligible projects. Based on the above, it is expected that the use of proceedsfrom this Bonds will promote GX initiatives across Japan and contribute to achieving net-zero by2050 and its milestone goal in FY2030. Looking at the specific allocation of funds by CO2 emitting
sector, JCR sees that measures are being taken in a well-balanced manner, as shown in the figure
below.

——————————————
International Capital Market Association ﴾ICMA﴿ "Green Bond Principles 2021" https://www.icmagroup.org/green-social-andsustainability-bonds/green-bond-principles-gbp/
7
Ministry of the Environment “Green Bond Guidelines 2022 Edition” https://wwitnv.go.jp/content/000062495.pdf
6

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Figure 1: Relationship between use of proceeds from this Bonds and CO2 emitting industries8

In the process of selecting projects set out in this Bonds by the government include ﴾1﴿ a liaison
system between relevant ministries and agencies has been established; ﴾2﴿ the selection is to be
finally approved in the GX Implementation Council chaired by the Prime Minister; ﴾3﴿ bonds to beissued, based on this framework are managed separately from other accounts in the energy
supply and demand account of the special account for energy measures and ﴾4﴿ allocated projects
are separately categorized as GX-related budgets in the same account. JCR therefore has
evaluated that a system has been established to properly classify and manage proceeds financed,
based on this framework. JCR has also confirmed that reporting contents/periods on the
allocation of proceeds and impacts are adequately established. Accordingly, JCR has evaluatedthat the management and operation system in the national government has been established andhas transparency.
Accordingly, JCR has assigned "gt1" to the preliminary evaluation of the "Greenness/Transition
Evaluation (Use of Proceeds),"m1" to the preliminary evaluation of the "Management, Operation
and Transparency Evaluation" and "Green 1﴾T﴿" to the "JCR Climate Transition Bond Preliminary
Evaluation" for this Bonds. JCR has evaluated that this Bonds satisfies the criteria for items requiredin the "Green Bond Principles," "Green Bond Guidelines," and CTFH, etc.

——————————————
8

Created by JCR based on the Ministry of the Environment's "Japan’s National Greenhouse Gas Emissions and Removals in
Fiscal Year 2022"
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Table of contents
Chapter 1: Overview of Evaluation Targets
Chapter 2: Alignment with Climate Transition Finance Handbook
2-1. Japan's Economic Policy and Transition Strategy
2-2. Alignment with Items Required in the Climate Transition Finance Handbook
Chapter 3: Consistency with Green Bond Principles, etc.
■ Evaluation Phase 1: Green/Transition evaluation
I. Use of Proceeds
JCR's Key Consideration in This Factor
Current status of evaluation target and evaluation of JCR
1. Overview of use of proceeds
2. Project overview and impact (environmental improvement effect)
3. Negative impact on the environment and society
4. Consistency with SDGs

■ Evaluation phase 2: Management, Operation and Transparency Evaluation
I. Selecting Criteria and Processes of the Use of Proceeds
JCR's Key Consideration in This Factor
Current status of evaluation target and evaluation of JCR
1. Goal
2. Selection criteria
3. Process
II. Management of Proceeds
JCR's Key Consideration in This Factor
Current status of evaluation target and evaluation of JCR

III. Reporting
JCR's Key Consideration in This Factor
Current status of evaluation target and evaluation of JCR

IV. Efforts to Address Organizational Environmental Issues
JCR's Key Consideration in This Factor
Current status of evaluation target and evaluation of JCR■ Evaluation phase 3: Evaluation Result (Conclusion)

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Chapter 1: Overview of Evaluation Targets
The subjects of this evaluation are the 10-year Japan Climate Transition Bonds ﴾2nd﴿ and 5-year
Japan Climate Transition Bonds ﴾2nd﴿ to be issued by Japan in FY2024 ﴾collectively referred to as
the "Japan Climate Transition Bonds ﴾FY2024﴿" or the "Bonds"﴿.
The proceeds will be allocated to the projects, aiming to realize net-zero by 2050 that is aninternational commitment aligned with the Paris Agreement and a 46 per cent reduction by
FY2030 ﴾from base year FY2013﴿ based on the "Strategy for Promoting Transition to a
Decarbonized, Growth-Oriented Economic Structure ﴾known as GX Promotion Strategy﴿."The proceeds shall be selected from the measures/projects stipulated “GX Promotion Strategy”
as well as the Climate transition finance framework established by the government. It will be
repaid by several measures, since future carbon pricing ﴾"CP" refers to charge for fossil fuels andexpenses borne by specified business in the electricity sector﴿ as financial resources: 1﴿ it shallbe taken into account the balance between benefits and burdens of citizens, 2﴿ the investment
decision is difficult for the private sector while considering the benefits and burdens perspectives
and 3﴿ it shall be prioritized to the investment area which will contribute to realize both emission
reduction and industrial competitiveness strengthening and economic development of Japan.
The government considers to support high emission companies which participate in emission
trading system called “GX League9”. So the implementing bodies of the use of proceeds shall beselected from those companies.
The "GX Promotion Strategy" listed 14 future action for efforts as exemplified in the"Decarbonization initiatives for GX on the premise of ensuring a stable energy supply" that
promote toward decarbonization by the public and private sectors. The Government of Japan
has organized these efforts into the Climate Transition Bond Framework as eligibility criteria for"Japan Climate Transition Bonds," which are individual issues of GX Economy Transition Bonds
﴾See Japan Climate Transition Bond Framework10 and JCR Evaluation Report11 published on
November 7, 2023﴿.
In the Japan Climate Transition Bond Framework, the Government of Japan states that the
selection of the use of proceeds will be based on the "basic conditions" of investment promotion
measures based on the basic concept of upfront investment support for GX Economy Transition
Bonds shown in Table 1﴾eligible business﴿.

——————————————
GX is an abbreviation for Green Transformation, which refers to the transformation and activities aimed at achieving this goalby utilizing clean energy while avoiding the use of fossil fuels as much as possible. The GX League is a group of companies
that are actively working on GX, together with players from the government, academia, and finance who are taking on thechallenge of GX, to discuss reforming the entire economic and social system and creating new markets. It was established by
the Ministry of Economy, Trade and Industry as a place to practice creativity.
10
Cabinet Secretariat / Financial Services Agency / Ministry of Finance /Ministry of Economy, Trade and Industry / Ministry of theEnvironment, "Japan Climate Transition Bond Framework", November 2023
https://www.meti.go.jp/policy/energy_environment/global_warming/transition/climate_transition_bond_framework_eng.pdf
11
JCR "Japan Climate Transition Bond Framework Evaluation Report", November 2023
https://www.jcr.co.jp/download/b5abf0635c83b738b5c0dbc0628553c0b1bc9d13dcb3365a5c/23d1036en_2.pdf
9

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Table 1: GX Economy Transition Bond “basic conditions” in the selection of the use of proceeds (overview) 12
I.
II.
III.
IV.

Basic Conditions
Efforts that are truly difficult to make investment decisions solely by the private sector
Efforts that contribute to strengthening industrial competitiveness, economic growth and emission
reduction, which are essential for achieving GX
Integration with regulations and institutional measures that change corporate investment anddemand-side behaviour
Efforts that contribute to the expansion of domestic investment including for human capital

The government prioritizes projects that align with the types which meet each of therequirements from A to C for increasing industrial competitiveness/economic growth and therequirements from 1 to 3 for emission reduction as candidates subject to support in addition to
the aforementioned principles.

Figure 2: Requirements for selecting the use of proceeds for GX economy transition bonds13——————————————
Source: Cabinet Secretariat / Financial Services Agency / Ministry of Finance /Ministry of Economy, Trade and Industry /Ministry of the Environment, "Japan Climate Transition Bonds Framework", November 2023
13
Source: Cabinet Secretariat / Financial Services Agency / Ministry of Finance /Ministry of Economy, Trade and Industry /Ministry of the Environment, "Japan Climate Transition Bonds Framework", November 2023
12

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Based on the above, JCR evaluates the alignment of this Bonds with the Green Bond Principles,
the Green Bond Guidelines of the Ministry of the Environment, and CTFH, etc., based on JCR
Green Finance Evaluation Methodology in the next chapter in detail.

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Chapter 2: Alignment with Climate Transition Finance Handbook
2-1. Japan's Economic Policy and Transition Strategy<Outline/Political/Social Situations>Japan is located off the coast of the Far East and East Asia at the eastern end of the EurasianContinent and the coastal areas in northwestern part of the Pacific Ocean, and it is island arcs asa whole. The land area is roughly 378,000 km2, approximately 70 per cent of which ismountainous terrain that include roughly 67 per cent of forests and it ranks 62nd in the world.
Natural disasters, such as earthquakes or typhoons has hit Japan more often than the rest of theworld. While Japan's land area accounts for only about 0.29 per cent in the world, 18.5 per centof earthquakes with a magnitude of 6 or higher have occurred in Japan since 7.1 per cent of theworld's active volcanoes are located in Japan where there are many active faults. The amount ofdamage that Japan has suffered by natural disasters, including typhoons or earthquakes
accounts for 17.5 per cent of the world; therefore, Japan is called as a disaster-prone country.
Further measures from both mitigation/adaptation to climate change are urgent and the mostimportant issues since many damage has recently occurred due to earthquakes and intensifying
storms and floods disasters although the national government strives to make the country more
resilient to climate change and earthquakes.

Number of houses power outages(10 thousands)

2018
Hokkaido
Eastern
Iburi
Earthquake:Max
2.95
millionhousing, 99per cent resolved after 50hours

Typhoon Jebi: Max 2.40 million
housing, 99per cent resolved after

Number of houses
power outages(10 thousands)

Heavy rain in Western Japan
Max 80,000
housing, 99percent resolved
after 120 hours

Hours after the max power outages (hrs)

120 hours

Typhoon Trami: Max 1.80 million
housing, 99per cent resolved
after 70 hours

Request for power saving（Hokkaido Earthquake）

Hours after the max power outages

Figure 3: The number of power outages and time taken to resolve in each disaster14

The Japanese GDP in 2023 ranked forth after the United States, China and Germany thanks to alarge number of internationally competitive manufacturing companies. According to the 2023
White Paper on Manufacturing Industries, Japan has 825 major manufacturing items in 2020 ofwhich 220 items hold 60 per cent or more global market shares, a predominantly high number,——————————————
14

Agency for Natural Resources and Energy at https://www.enecho.meti.go.jp/about/special/johoteikyo/blackout.html
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compared to the United States ﴾99 items,﴿ Europe ﴾50 items﴿ and China ﴾45 items.﴿ Roughly 70
per cent of the items are parts/materials, including electronics or automobiles, which is thestrength of the Japanese manufacturing industry.
The total amount of GHG emissions in Japan with the thriving manufacturing industry, was 1.135
billion tons-CO2e as of FY2022, ranked the seventh largest in the world; however, the actual
amount in FY2022 was reduced by approximately 19.3 per cent from FY2013. Of which, the total
CO2 emissions amounted to 1.037 billion tons-CO2, and 92.9 per cent of the emissions are
resulting from energy use. The breakdown by sector is as follows: the energy transformation
sector, 40.5 per cent; the industrial sector ﴾the iron and steel, chemical and allied products andother industry﴿, 24.4 per cent; the transportation sector, 17.8 per cent; the commercial industry,
etc. sectors, 5.5 per cent and the residential sector, 4.8 per cent ﴾Figure 3, before electricity andheat distribution.﴿

Figure 4: Breakdown of CO2 emissions by sector (FY2022)15

The Government of Japan has aggressively led the decarbonization initiatives in the international
community with ambitious developmental promotion of solid/new technologies by discussing
over global promotion of GX that is a transformation of the entire economic and social system
so as to shift to the clean energy-centered economy, society and industrial structure from thefossil fuel-centered since the Industrial Revolution, based on the spirit of the Paris Agreement
and furthermore to integrate carbon neutral, a circular economy and nature revival byaccelerating the measures against climate change in the whole world and by compiling anagreement, stating to aim to keep the global temperature rise below 1.5 °C by 2030 in the "G7
Sapporo Climate, Energy and Environment Ministers' Meeting" as its host country in the G7
Hiroshima Summit in May 2023.
——————————————
15

Created by JCR based on the Ministry of the Environment's "Japan’s National Greenhouse Gas Emissions and Removals in
Fiscal Year 2022"
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<Plan for Global Warming Countermeasures>
The Government of Japan established goals set forth in the Paris Agreement ﴾keep the global
temperature rise well below 2 °C and to pursue efforts to limit the temperature increase evenfurther to 1.5 °C﴿ and set out the basic principles for promoting global warming countermeasures,such as realizing decarbonized society for net-zero by 2050, the integrated improvement of theenvironment, economy and society and the close cooperation with citizens and other parties
concerned in the Act on Promotion of Global Warming Countermeasures revised in March 2021.
The goal of reducing GHG by 46 per cent in FY2030 from FY2013 as an interim target wasannounced, adding its challenge continues to further reduce by 50 per cent in the Plan for Global
Warming Countermeasures revised in October 2022, based on the revised Act on Promotion of
Global Warming Countermeasures.
The transition of GHG emissions in Japan, which is the premise of the plan, is shown in Figures
5 and 6, respectively. The total GHG emissions amounted to 1.135 billion t-CO2e in FY2022,
decreased by roughly 19.3 per cent ﴾271.9 million t-CO2e﴿ from FY2013 ﴾1.407 billion t-CO2e.﴿

Figure 5: Changes in Japan's total GHG emissions16——————————————
16

Source: the Ministry of the Environment's "Japan’s National Greenhouse Gas Emissions and Removals in Fiscal Year 2022"
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Figure 6: Trends in Japan's CO2 Emissions by Sector17

The reduction targets were established for FY2030 by GHG and by division for energy-derived
CO2 in the Plan for Global Warming Countermeasures ﴾see Figure 7, next page.﴿ Some examples
of measures that are expected to be taken by the national and local governments for respective
emission sources or targets by division were also set forth with the specific reduction figures inthis plan.

——————————————
17

Translated by JCR based on the Ministry of the Environment's "Japan’s National Greenhouse Gas Emissions and Removals in
Fiscal Year 2022"
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(Unit: Million t-CO 2, (Base year 2013 comparison))
FY2013
Greenhouse gas emissions and removals

FY2019

1,408
1,235

Energy-related CO 2
Industry

463

Commercial and others

238

Residential

208

Transport

224

Energy Conversion

106

Non-energy-related CO 2

82.3

Methane (CH4)30.0

Nitrous oxide (N2O)

21.4

Four gases incl. alternative CFC

39.1

Hydrofluorocarbons (HFCs)

32.1

Perfluorocarbons (PFCs)

3.3

Sulfur hexafluoride (SF6)

2.1

Nitrogen trifluoride (NF3)

1.6

Greenhouse gas removals-

FY20301,166(▲17%)
1,029(▲17%)
384(▲17%)
193(▲19%)
159(▲23%)
206
(▲8%)
89.3
(▲16%)
79.2
(▲4%)
28.4
(▲5%)
19.8
(▲8%)
55.4
(+42%)
49.7(+55%)
3.4
(+4%)
2.0
(▲4%)
0.26
(▲84%)▲45.9

760(▲46%)
677(▲45%)
289(▲38%)
116(▲51%)
70(▲66%)
146(▲35%)
56(▲47%)
70.0(▲15%)
26.7(▲11%)
17.8(▲17%)
21.8(▲44%)
14.5(▲55%)
4.2(+26%)
2.7(+27%)
0.5(▲70%)▲47.7

Japan aims to contribute to international emission
reductions and removals at the level of a cumulative

Joint Crediting Mechanism (JCM)

total of approximately 100 million tCO2 by fiscal
year 2030 through public-private collaborations.
Japan will appropriately count the acquired credits
to achieve its NDC.

Figure 7: Japan’s GHG Emission Reduction Targets and guidelines by GHG and other categories18<Strategy for Promoting Transition to Decarbonized Growth-Oriented Economic
Structure (GX Promotion Strategy)>
As shown in Figure 7 above, energy-derived CO2 accounts for a little under 90 per cent of GHG
emissions in Japan. It is therefore important to steadily take concrete measures for
decarbonization in the industry, business, transportation and residential sectors, based on thenational energy basic plan and national energy mix in order to achieve the FY2030 target. The
Government of Japan launched "GX" that is to transform the industrial and social structures——————————————
18

Source: "Plan for Global Warming Countermeasures" decided in the cabinet in October 22, 2021 athttps://www.env.go.jp/content/900440195.pdf
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mainly from fossil energy-centered since the Industrial Revolution into clean energy-centered in
the 6th Strategic Energy Plan, decided in the cabinet in October 2021. The government has held
the GX Implementation Council, chaired by the Prime Minister and composed of experts fromthe government, private sectors and academia since 2023 and compiled "the Basic Policy for the
Realization of GX." The GX Promotion Act and the GX Decarbonized Power Supply Act wereenacted in 2023, and a system to promote initiatives toward “Pro-Growth Carbon Pricing
Concept” was established. "GX Promotion Strategy" was decided in the cabinet in July 2023,
based on the GX Promotion Act as a concrete strategy for implementing a series of policies.
Table 2: Overview of GX Promotion Strategy19(1) GX initiatives based on the premise of ensuring a(2) Realization and implementation of the “Pro-Growthstable energy supply
Carbon Pricing Concept” and other initiatives
1. Promotion of thorough energy efficiency improvement
To realize GX investments with over 150 trillion yen by public
・ Energy saving support for small- and medium-sized
and private sectors for the next 10 years.
enterprises
1. Upfront Investment support utilizing GX Economy
・ Housing energy saving support
Transition Bonds
・ Conversion to non-fossil energy and further energy・ Support up-front investment of 20 trillion yen for thesaving support in five major industries ﴾steel, chemical,
next 10 years
cement, paper and automobile﴿2. GX investment incentives through “Pro-Growth Carbon
2. Making renewable energy a mainstay power source
Pricing Concept”
・ Accelerating maintaining grids and realizing submarine<Specific example>
direct current ﴾DC﴿ transmission from Hokkaidoi﴿ Full-scale operations of the emissions trading scheme ﴾in・ Introducing renewable energy in harmony with theand after FY2026﴿
community, social implementation of next generationii﴿ Introducing a carbon tax system for fossil fuels importers
solar power ﴾Perovskite﴿ and floating offshore wind﴾in and after FY2028﴿
power* GX Acceleration Agency was established as the
3. Utilization of nuclear power
aforementioned implementing body・ Materializing next-generation innovation reactors
3. Utilization of new financial instruments
・ Securing an operation period of 40 years + 20 years
・ GX Acceleration Agency considers/implements risk
and additional extension on the premise of strict safety
supplement measures, such as debt guarantee
inspection
・ Environment development to promote sustainable
・ Increasing efforts for nuclear fuel cycles/
financedecommissioning and final disposal
4. International strategy, Just Transitions, and GX of small and4. Other important matters
medium enterprises ﴾SMEs﴿ and other businesses
・ Constructing hydrogen/ammonia supply chains・ Asia Zero Emission Community Initiatives
・ Introducing decarbonization power supply auction
・ Promoting smooth labor mobility
・ Strategically securing surplus LNG
・ Stimulating demand for decarbonized products
・ R & D, capital expenditures and demand creation for
・ Promoting efforts throughout the supply chains,
GX, such as carbon recycling, batteries, resource
including SMEs, such as human resources development
recycling, next-generation automobiles/ aircraft or
during the SME support period for push-type support
zero-emission ships(3) Progress Evaluation and Necessary Reviews: Progress evaluation will be regularly conducted, based on the impacts
on the progress of GX investments, global trends and economy.

The GX Promotion Strategy highly prioritize energy conservation and introducing as much
renewable energy as possible as a main power source, After doing the prioritized policy above,
the government supplements the rest of the electricity demands which cannot be covered byrenewable energy by next-generation clean energy such as hydrogen, ammonia and synthetic
fuels as well as nuclear power to realize zero carbon emission society. It also includes resources
recycling and other important measures. All of these measures are based on technical grounds,
and the combinations of technologies assumed in each cross section by FY2023, FY2030, FY2040——————————————
19

Summarized/prepares by JCR based on disclosure materials provided by METI.
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and FY2050 are compiled as "Future milestones" for all 22 categories. CO2 reduction effects,
economic rationality and probability of social implementation in the Sector-specific Investment
Strategies for the next 10 years and the action plan with a five-year lead will be discussed per
sector by experts with academics invited and will be eventually decided in the GX
Implementation Council, chaired by the Prime Minister as for concrete projects for the measures
set forth in these Pathway.
The "Future milestones" is aligned with the sectoral technology roadmaps ﴾hereinafter referred
to as "sectoral roadmap"﴿ formulated by the METI. The sectoral roadmaps have been preparedsequentially since FY2021 for industries with relatively large emissions, such as steel, chemicals,
electric power, gas, oil, paper and pulp, cement or automobiles. Low-carbon/decarbonizedtechnologies for achieving net-zero by 2050 to be sectorally used are comprehensively covered,including the existing/future technologies that will be developed, aiming at social
implementation and the routes are shown so as to align with the 2030 goals to limit to keep the
global temperature rise well below 2 °C and to pursue efforts to limit the temperature increase
even further to 1.5 °C and to achieve net-zero by2050 with the combination of thesetechnologies.

<Materiality of Decarbonization Transition Strategies in Japan>
The Government of Japan has positioned the GX initiatives as important measures that willcontribute to the re-increasing Japanese industrial competitiveness by ensuring a stable supply
of clean energy and creating new demand and markets in the decarbonization sector throughshifting from the industrial and social structures on fossil energy-centered since the Industrial
Revolution to clean energy-centered. Acceleration of GX, DX etc. is positioned as one of the fivepillars for increasing investments and implementing economic and social reforms to accelerate
new capitalism in the "Basic Policy on Economic and Fiscal Management and Reform 2023" and"Grand Design and Action Plan for a New Form of Capitalism."
Table 3: Framework of Basic Policies for Economic and Fiscal Management and Reform for 202320
I. Basic Views on Macroeconomic Management
Proceed with bold reforms to overcome the historical and structural changes and challenges facing Japan, both internaland external, which may be referred to as “turning points in the times.”
II. An Accelerating New Form of Capitalism
III. Responding to the Environment Changes
Realization of structural wage increases through the trinity labor Surrounding Japan
market reforms, and strengthening investment in people, and Responding to changes in the international
creating a substantial middle classenvironment
Drastic strengthening of measures to cope with the declining Disaster prevention and mitigation, national resilience,birth rate and child policy
reconstruction from the Great East Japan Earthquake,
Expanding investment and implementing economic and social etc.
reforms
Safety and security of people's lives
1. Increasing domestic investment and strengthening supply
chains through public-private partnerships
2. Acceleration of GX, DX etc.

——————————————
20

Prepared by JCR, based on the website of Cabinet Office, Basic Policy on Economic and Fiscal Management and Reform 2023
https://www5.cao.go.jp/keizai-shimon/kaigi/cabinet/honebuto/2023/summary_en.pdf
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3. Driving Start-ups and Converting to New Industrial
Structure Promoting Impact Investment
4. Promoting Science, Technology and Innovation throughPublic-Private Partnerships
5. Deploying Inbound Strategies
Creation of an inclusive society
Revitalization of local communities and small businesses
IV. Medium- and Long-Term Economic and Fiscal Management

V. Policy for Near-term Economic and Fiscal
Management and FY2024 Budget Formulation<Governance>
The directions of policies for GX implementation will be decided in the GX Implementation
Council, chaired by the Prime Minister, with relevant ministers and experts participated. The
Council includes experts in the industrial and financial sectors. The Cabinet Secretariat GX Officeinclude officials sent from the Financial Services Agency, the Ministry of Foreign Affairs, theMinistry of Finance, the Ministry of Health, Labor and Welfare, the Ministry of Agriculture,
Forestry and Fisheries, the METI, the Ministry of Land, Infrastructure, Transport and Tourism andthe Ministry of the Environment, and they will compile proposals, including investment
promotion measures of relevant ministries and agencies and will submit the sectoral investment
strategical proposals, based on considerations in the working group with external experts to the
GX Implementation Council.

Figure 8: Governance Structure21——————————————
21

Source: Cabinet Secretariat / Financial Services Agency / Ministry of Finance /Ministry of Economy, Trade and Industry /Ministry of the Environment, "Japan Climate Transition Bonds Framework", November 2023
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The current status/measures of GHG emissions and removals will be approved in the Global
Warming Prevention Headquarters, in which all ministers annually participate, and then the plan
will be updated/promoted as necessary from the viewpoint of measuring the effects of theaforementioned investment strategies.

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2-2. Alignment with Items Required in the Climate Transition FinanceHandbook
Element 1: Issuer's climate transition strategy and governance﴾1﴿ Does the issuer have a transition strategy for climate change mitigation?
The Government of Japan has clarified that it aims to achieve net-zero by 2050 for which it willtake necessary measures in the Act on Promotion of Global Warming Countermeasures. The
government set the FY2030 target ﴾a 46 per cent reduction from FY2013﴿ to align with the target
agreed in the Paris Agreement and established the reduction target per emission source for
FY2030 from FY2013 in the Plan for Global Warming Countermeasures revised in 2021.
Specific measures toward the aforementioned goals are compiled in the GX Promotion Strategy
﴾see Table 2 above.﴿ The top priority is to thoroughly promote energy conservation and to makerenewable energy main power source as specific initiatives to be undertaken by the Governmentof Japan, and then it aims to achieve its goals by supporting in respective sectors so as toimplement/achieve next-generation technologies/developments, such as the utilization of
nuclear power or hydrogen/ammonia/carbon recycling in the 22 sectors.
Accordingly, the Government of Japan has strategies for transitioning to mitigate climate change.

﴾2﴿ Is the use of the "transition" label in financing intended to contribute to realizing astrategy for transitioning to a business model in which issuers can effectively address
climate-related risks and contribute to achieving the goals of the Paris Agreement?
The Government of Japan published the Basic Guidelines on Climate Transition Finance in May
2021, shortly after the first edition of CTFH was published by ICMA in December 2020. This basic
guideline aims to encourage efforts to steadily reduce carbon emissions, such as energy saving
in sectors where is difficult to reduce emissions or to accelerate the innovation that contributes
to transitions, including long-term R & D for decarbonization. The Guideline was formulated toachieve net-zero by 2050 in Japan and to contribute to realizing the goals of the Paris Agreement
in order to establish the position as a financing tool for transition, in particular, in the sector
where is difficult to reduce emissions and to use more proceeds by early disseminating climatetransition finance and by ensuring the credibility when financing proceeds under the name oftransition finance.
This Bonds was formulated in accordance with the CTFH and its Basic Guidelines, and is intended
to contribute to realizing the strategies to shift to a business model by which Japan as a wholeis contributable to achieving the goals of the Paris Agreement.

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﴾3﴿ Has a governance system been established to ensure the effectiveness of the transition
strategy?
The Government of Japan, as mentioned above, will invite relevant ministries, external academics
and experts in respective sectors required for GX, will eventually formulate the transition strategy
in the GX Implementation Council, chaired by the Prime Minister based on necessary discussions,will report the subsequent progress to the Council and will review them as needed.
Accordingly JCR has evaluated that the Government of Japan has established a system to steadily
implement the transition strategy.

Element 2: Business model environmental materiality
Japan's GHG emissions are the seventh largest in the world in 2022, and it is expected for Japanto lead the international community to initiatively limit the global temperature rise to the levelset by the Paris Agreement. Taking into account that carbon prices will be introduced
domestically and internationally hereafter, it is urgent to realize a carbon-neutral society, todecarbonize various types of products stipulated by the GX Promotion Act and to change thestructure of each business type while many manufacturing industries that is internationallycompetitive continuously maintain good performance. Under these circumstances, theGovernment of Japan presented a "Grand Design and Action Plan for a New Form of Capitalism"
in June 2023 in which GX in Japan is expected to contribute to re-increasing the industrial
competitiveness by making the best use of its knowledge in these sectors and to accelerating
the transition to the decarbonization in the country as a whole since there are many researchdecarbonization technologies in which Japanese companies have technological strength.
Accordingly, JCR has evaluated that the Government of Japan's efforts to achieve net-zero in GX
are one of the most important issues for Japan.

Element 3: Climate transition strategy and targets to be science-based
Does the transition roadmap meet the followings?
﴾1﴿ The roadmap is quantitatively measurable and the target covers Scope 1 and Scope 2,
respectively ﴾it is desirable that the Scope 3 target be set to the extent feasible.﴿

As shown in the Plan for Global Warming Countermeasures, Japan's GHG emission reduction
target is aligned with the goals of the Paris Agreement, which are science based targets agreed
upon by the international community; specifically, to limit the global temperature increase towell below 2 °C. JCR has examined this factor according to the definition established by PCAF22
since the Government of Japan does not use the concept of Scope 1, Scope 2 and Scope 3 forthe total amount of emissions. Assuming that the direct business activities of Government ofJapan are Scope 1 and Scope 2, the target setting and specific measures are planned for reducing——————————————
22"Decarbonization practice guidance starting from portfolio carbon analysis for financial institutions" by Ministry ofEnvironment, at https://www.env.go.jp/content/000125696.pdf
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the emission from the central government’s administration activities. The total emissions ofJapan as a whole, which is equivalent to those of Scope 3 are disclosed in the Plan for Global
Warming Countermeasures, by emission sources and by sectors as described in Figure 6 of thisreport.
Accordingly, the Government of Japan's plan appropriately covers the target scopes. And boththe emission reduction results and mid target are disclosed, which shows Japan’s transition
plan’s high transparency.

﴾2﴿ Whether the GHG emission reduction target aligns with globally recognized science basedtarget or not

The target set by the Government of Japan was established in 2021 on the premise of achieving
the global temperature rise well below 2 °C declared in the Paris Agreement. The sectorial
roadmaps which were formulated especially for high GHG emitted industries to achieve net zero
emission by 2050, align with the IEA23's NZE scenario24 and SDS scenario25. The sectoral pathway
were also taken into consideration of the possible menu of the current and future carbon
reduction technologies.
The target formulated by the Government of Japan ﴾a reduction rate, 2.7 per cent per year﴿ is set
to align with the 1.5 °C level shown in the IPCC 26 's 1.5 °C Special Report 27 ﴾a 45 per centreduction by 2030 from the 2010 level; a reduction rate of 2.25 per cent per year.﴿ Consequently,
JCR has evaluated that the government targets is aligned with the target established, based on
scientific grounds.28
For reference, the figure below ﴾next page﴿ shows the relative ambition level of goal setting
compared to that of other countries.

——————————————
IEA: International Energy Agency
Net Zero Emissions by 2050 Scenario by IEA
25
Sustainable Development Scenario ﴾Sustainable Development Scenario﴿, which is the path to fully achieve the sustainable
development goals by the IEA
26
IPCC: Intergovernmental Panel on Climate Change
27
IPCC "Global Warming of 1.5°C An IPCC Special Report on the impacts of global warming of 1.5 °C above pre-industrial levels
and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat ofclimate change, sustainable development, and efforts to eradicate poverty at
https://www.ipcc.ch/site/assets/uploads/sites/2/2022/06/SR15_Full_Report_HR.pdf
28
The IPCC's 1.5 °C Special Report was updated in the IPCC's the 6th Assessment Report ﴾AR6﴿ Integration Report in which the
1.5 °C is targeted to be reduced by roughly 36 – 69 per cent of CO2 from FY2016 by FY2030: Reduction Rate: 3.3 – 3.6 percent
per year.
23
24

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Country

Emission Reduction Target by 2030
(Base Year 2013)

The U.K.
Switzerland
BrazilJapan
The U.S.A.
Saudi Arabia
EU27
CanadaSouth Africa
South Koriea
UkraineAustralia
MexicoThailandKazakhstan
China
Malaysia
RussiaIndia
Indonesia
Pakistan

Figure 9: GHG emission reduction rate target for FY2030 (comparison when each country's target is replacedwith figures based on the 2013 standard)29

﴾3﴿ Details must be publicly disclosed ﴾including intermediate milestones﴿

The goal of the Government of Japan to achieve net-zero by 2050 is clearly stated in the Act on
Promotion of Global Warming Countermeasures. The goal of reducing the total GHG emissions
by 46 per cent from FY2013 in FY2030 was announced in the Plan for Global WarmingCountermeasures as an interim target, and it is also added that the challenge will continue,
aiming for a higher goal, a 50 per cent reduction. Furthermore, the FY2030 targets per emission
source are disclosed in the plan, which is highly transparent.

﴾4﴿ Certified/verified by an independent third party

Japan's GHG emissions and removals ﴾inventory﴿ are reported to the United Nations Secretariat.
In addition, Japan is required to submit a Biennial Transparency Report ﴾BTR﴿ every two years,
which reports on the status of GHG emissions and removals, as well as progress towards
achieving the NDC, to have a review conducted by the Secretariat. In addition, the current NDC
and the Plan for Global Warming Countermeasures were discussed in a council that included
experts with scientific knowledge, and were under the public consultation before being
approved by the Global Warming Prevention Headquarters, which consists of all cabinet
ministers. JCR believes that these are sufficiently controlled by domestic and international——————————————
29

Materials of a joint meeting for a clean energy strategy "Materialize political initiatives for realizing GX"
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experts other than those in the department responsible for calculating GHG emissions, and thatthey can be deemed to have been verified by a third party.

Consequently, JCR has evaluated that the Government of Japan's efforts to achieve net-zero by2050 are based on scientific evidences and meet the requirements in Element 3.

Element 4: Implementation transparency
The Government of Japan has recognized the need for invest a total amount of 150 trillion yenof public and private investment in the GX Promotion Strategy for the next 10 years. The specificbreakdown is also published by energy supply division and demand division, respectively as
follows:

Figure 10: Breakdown of public/private investments for the next 10 years30

Of the total investment of 150 trillion yen, 20 trillion yen is expected to be implemented as aninvestment promotion measure through GX Economy Transition Bonds. In order to increase thepredictability of companies and strongly draw out GX investment, the Japan government hascompiled a "Sector-specific Investment Strategies" in FY2023 as a concrete investment
promotion measure for the next 10 years and a "Five-Year Action Plan." In addition, at the GX
Executive Committee held in May 2024, the main implementation status of GX investment
support measures and a breakdown of the government's investment plans for the next 3-10
years were presented as follows31:——————————————
30
31

Sources: Materials for the GX Implementation Conference: Toward the achievement of GX in Japan
December 22, 2023 "Sector-specific Investment Strategies"
https://www.cas.go.jp/jp/seisaku/gx_jikkou_kaigi/pdf/kihon1222.pdf
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Figure 11: Implementation status of GX investment support measures32

The specific investment details of each year are to be announced after the approval of the annual
budget, since the government's budget is to be implemented in a single year.
Accordingly, JCR has evaluated that the government's investment plan to be highly transparent,
as it discloses information such as the government's planned expenditures, the scale of public
and private investment that is expected to be promoted by such expenditures, and a 10-yearroadmap.

——————————————
32

Translated by JCR based on “Toward accelerating Japan’s green transformation” ﴾May 13, 2024﴿ submitted to GX promotion
council.
https://www.cas.go.jp/jp/seisaku/gx_jikkou_kaigi/dai11/siryou1.pdf
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The sectoral roadmaps formulated by the METI indicated that there are more than one sectorsthat require business transformation or employment transfer along with the implementation of
the transition strategy in Japan. No consideration is needed for direct and just transition likecompanies' transition strategies since much expenditures through GX economy transition bonds
are used for R & D or subsidy programs for companies. On the other hand, the Government ofJapan recognizes that the realization of just transition is an important issue when considering
Japanese characteristics, which has a high ratio of manufacturing and low mobility of humanresources. For this reason, the government will promote just transition as a whole policy package,
such as the design of CP that ensures predictability and the consideration in the GX
Implementation Council in which academics from the world of labor and the business circle
participated.
The possibility of a lock-in to fossil fuels is lower since both of the sectoral roadmap formulatedby the Government of Japan and the path in the GX Promotion Strategy are designed to achieve
net-zero by 2050, and the roadmap is established not to rely on carbon credit as much as
possible and to realize carbon neutral through the next-generation technological innovation.
From the perspective of DNSH ﴾Do No Significant Harm﴿, environmental impact and resilience
are taken into account in the evaluation when selecting research and development targets, andclear criteria are established in the criteria for granting subsidies in the subsidy program, so that
serious negative impacts on the environment can be avoided. Accordingly, JCR has evaluatedthat this Bonds satisfy the four elements required in the Climate Transition FinanceHandbook.

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Chapter 3: Consistency with Green Bond Principles, etc.

Evaluation Phase 1: Greenness/Transition
Evaluation

gt1

I. Use of Proceeds
JCR's Key Consideration on This Factor
In this section, JCR will firstly confirm whether the proceeds financed are allocated togreen/transition projects that bring about clear environmental benefits. Then, in case where
negative impacts on the environment and society is expected with the use of proceeds, theimpacts will be fully examined by an in-house specialized division or external third parties and will
confirm that necessary workarounds and mitigation measures are taken. Lastly, JCR will confirmalignment with the Sustainable Development Goals ﴾hereinafter referred to as "SDGs".﴿

▶▶▶ Current Status of Evaluation Targets and JCR's Evaluation

JCR conducted an evaluation of the Japan Climate Transition Bond Framework developed by theGovernment of Japan and published the evaluation report on November 7, 2023. In this evaluation
report, JCR confirmed how each criterion of the Japan Climate Transition Bond Framework contributes
to the realization of a decarbonized society in Japan. All of the uses of proceeds determined by theGovernment of Japan for this Bonds fall under the categories whose eligibility and environmental
improvement effects were confirmed in the framework evaluation. Therefore, JCR evaluates that all of
the planned uses of the proceeds from this Bonds are important projects for Japan's 2030 GHG
reduction goals and Japan's transition to a decarbonized society.

1. Overview of use of proceeds
In the Japan Climate Transition Bond Framework, the Government of Japan determines the use ofproceeds from the areas specified in the GX Promotion Strategy as measures that contribute toJapan's GX, and the basic conditions specified in the strategy ﴾see Chapter 1﴿. Established as
research and development funds and/or subsidy programs for projects that meet therequirements. Table 4 shows the use of proceeds for this Bonds, which is organized according to
the use of proceeds classification in the Japan Climate Transition Bond Framework. In addition,"Deep Tech Startup Support Program in the Green Transformation field," which provides necessary
support for social implementation for startup companies in the GX sector, and "Capital for GX
Acceleration Agency," in which the GX Acceleration Agency provides financial support services
such as debt guarantees to supplement risks that private financial institutions cannot fully address
mainly in the GX sector, are businesses that target all categories, so they are described as crosssectoral in Table4. Please see below for details of the businesses.

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Table 4: Use of proceeds for this Bonds in the classification of the Japan Climate Transition Bond Framework33
Main Category(Green category)Sub-category
Eligibility criteria
Promotion of thorough energy
efficiency improvement

Houses and buildings

1

Energy efficiency

Digital investment aimed at
decarbonization

Battery industry

Making renewable energy amajor power source
2

Renewable energy
Infrastructure
Utilization of nuclear power3

4

Low-carbon anddecarbonized energy

Establishing electricity and gas
markets to achieve carbon
neutrality
GX in transport sector

Clean transportation

Infrastructure (repeat)

5

6

Restructuring the manufacturingindustry (fuel and feedstocks
transition)
Facilitating introduction ofhydrogen and ammonia

Circular economy
adapted products,
production
technologies andprocesses

Carbon Recycling and CCS

Environmentally
sustainable

Food, agriculture, forestry, andfisheries industry

Use of proceeds for this Bonds
Subsidy for energy saving
investments/demand structure conversion
Subsidy for promoting energy savings inhouseholds through installing high-efficiency
water heaters
Accelerating energy/emissions savings ofhousing through promoting renovations forinsulated windows
Accelerating decarbonizing renovations forcommercial buildings
Support for strengthening domestic
production capacity of power semiconductors
contributing to energy savings
R&D for post-5G information communications
system infrastructure enhancement
Support for strengthening manufacturing
supply chains of batteries
Installation support for electricity storage
systems such as grid-scale batteries to expand
renewable energy usage
Support for building GX supply chains("Installation support for electricity storage systems
such as grid-scale batteries to expand renewableenergy usage" also meet this criterion.)
Regional decarbonization promotion grant
Development of test furnace of fast reactor
Development of test furnace of hightemperature gas-cooled reactor(No applicable projects in this Bonds.)-

Subsidy for introducing clean energy vehicles
Promotion of electrifying commercial vehicles
Support for establishing production andsupply system of sustainable aviation fuel
(SAF)
Promotion of the construction of zeroemission ships etc.
(No applicable projects in this Bonds)--

Support for energy/manufacturing process
conversion for hard-to-abate industries

Support focused on the price gap to build
supply chains for hydrogen and its derivatives("Support for building GX supply chains" also meets
this criterion)(No applicable project in this Bonds)-(No applicable projects in this Bonds)——————————————
33

Created by JCR from materials provided by the Ministry of Economy, Trade and Industry.
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management of living
natural resources andland use,
Circular economy

Resource circulation-

Cross-sectoral (applies to all green categories)-

Support for enhancing the resilience andautonomy of circular economy systems
through industry-government-academia
collaboration
Investment promotion for advanced resource
circulation
Deep Tech Startup Support Program in theGreen Transformation field
Capital for GX Acceleration Agency

The planned use of proceeds from this Bonds and classification by target area are as shown in the
figure and the table below. While roughly half of the issue amount for the first series of Japanese
Climate Transition Bonds ﴾issued in FY2023﴿ was earmarked for research and development funds
34, a notable feature of the second series of this Bonds ﴾issued in FY2024﴿ is that two-thirds of thetotal issue amount will be used to subsidize capital investments and other projects that contributeto reducing GHG emissions. In particular, the costs of subsidies are large for power
semiconductors, which have become difficult to procure due to excessive demand in recent years,
and for batteries, for which demand is expected to increase in the future. In addition, the amounts
shown in the chart below are the budget amounts for each project, and funds will be allocated
1.4 trillion yen for projects whose initiatives and scale have been decided.

Figure 12: The amount-based breakdown of the use of proceeds for this Bonds (2nd issue) (by funded projecttype)35——————————————The total budget project funds to be used for the first bond will be 1.6089 trillion yen, of which 893.4 billion yen ﴾55%﴿ will beallocated to research and development funds. The total issue amount of the first series of bonds is 1,599.3 billion yen, and theamount allocated to each purpose will be reported in the funds allocation report.
35
Created by JCR from materials provided by the Ministry of Economy, Trade and Industry.
34

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Figure 13: The budget amount for projects to for this Bonds (2nd issues) by sector36*Figures 12 and 13 show the total budget amount for the projects covered by this Bonds, and the total amountof this Bonds issuance is planned to be 1.4 trillion yen. The actual amount allocated will be reported in the funds
allocation report.

Table 5: Projects allocated to this Bonds37
BudgetYear(1) ResearchandDevelopment

New/
continuationNew

Appropriated projects(including some potential projects)

Target Area

1.

Startup Support

Continuation
Continuation
Continuation

2.

Deep Tech Startup Support Program in
the Green Transformation field
Development of test furnace of hightemperature gas-cooled reactor
Development of test furnace of fast
reactor
R&D
forpost-5G
information
communications system infrastructureenhancement

2023/
2024
2024

Continuat
ion
New

5.

Battery Industry

495.8

Decarbonization of
manufacturing

32.7

2024

New

7.

Clean
Transportation

27.6

2024

New

8.

Supportforstrengthening
manufacturing supply chains of batteries
Supportforenergy/manufacturing
process conversion for hard-to-abate
industries
Support for establishing production andsupply system of sustainable aviation fuel
(SAF)
Support for enhancing the resilience andResource Recycling

3.5

2024
2024
2024
2023

3.
4.

Project
budget(JPY billion)
41.0

Clean Energy

27.4

Clean Energy

28.9

Semiconductors for
AI

28,1

125.4
(2) Support
forcapitalinvestment

6.

——————————————
36
37

Created by JCR from materials provided by the Ministry of Economy, Trade and Industry.
Created by JCR from materials provided by the Ministry of Economy, Trade and Industry.
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(3)Introduction
Support

2024
2024

New
New

9.
10.

2024

New

11.

2023

Continuat
ion

12.

2023

Continuat
ion

13.

2024

New

14.

2024

Continuat
ion

15.

2023

New

16.

2023

Continuation
Continuat
ion

17.

2023

New

19.

2023

Continuat
ion
New

20.

2023

2024

(4)
Capitalcontributions
to the Agency

2024

New

18.

21.

22.

autonomy of circular economy systems
through industry-government-academia
collaboration
Support for building GX supply chains
Investment promotion for advanced
resource circulation
Promotion of the construction of zeroemission ships etc.
Support for strengthening domestic
production
capacityofpower
semiconductors contributing to energy
savings
Subsidyforenergysavinginvestments/demand
structure
conversion

Clean Energy
Resource Recycling

54.8
5.0

Clean
Transportation
Power
Semiconductors

9.4
280.6

Decarbonization of
manufacturing

91.0

1,000.4
8.5

Installation support for electricity
storage systems such as grid-scalebatteries to expand renewable energy
usage
Regional decarbonization promotion
grantBattery Industry

Clean Energy

6.0

Subsidy for promoting energy savings inhouseholds through installing highefficiency water heaters
Subsidy for introducing clean energy
vehiclesAccelerating energy/emissions savingsof housing through promoting
renovations for insulated windows
Accelerating decarbonizing renovations
for commercial buildings

Energyconservation in theresidential sector
CleanTransportation
Energyconservation in theresidential sector
Energyconservationfor
data
centers/existingcommercial
buildings
Clean
Transportation
Price gap subsidies(hydrogen, etc.)

58.0

Promotion of electrifying commercial
vehiclesSupport focused on the price gap tobuild supply chains for hydrogen and its
derivatives
Capital for GX Acceleration Agency

GX
Acceleration
Agency

129.1
135.0

11.1

40.9
8.9

397.5
120.0
120.0
1,643.3

Total*Table 5 shows the breakdown of the budget amounts for the projects covered by this Bonds, andthe total amount of this Bonds is expected to be 1.4 trillion yen. The actual amount allocated will
be reported in the funds allocation report.
In Table 5, projects that were newly added as a use of proceeds from this Bonds ﴾issued in FY2024﴿
are indicated as "New," while projects that were included in the use of proceeds from the firstseries of Japanese Climate Transition Bonds ﴾issued in FY2023﴿ and will continue in this Bonds

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﴾issued in FY2024﴿ are indicated as “Continuation.” Continuing operations include businesses thathave different names but are identical in content. The ratio of new projects to continuing projects
is as follows. In terms of the total budget amount, new projects: 381 billion yen, continuing
projects: 1,263 billion yen, with continuing projects accounting for nearly 80per cent.

New
381
23%

Continuation
1,263
77%
(unit: JPY billion)

Figure 14: Proportion of new and continuing projects in this Bonds (based on budget amount)38——————————————
38

Prepared by JCR from documents submitted by the Ministry of Economy, Trade and Industry
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2. Project overview and impact (environmental improvement effect)
The proceeds from this Bonds will be used for ﴾1﴿ research and development support, ﴾2﴿ subsidy
programs to support capital investment, ﴾3﴿ subsidy programs for introduction support, and ﴾4﴿
capital contributions to the GX Acceleration Agency. In the light of the policy intent, the projects
are classified into the following four themes: ﴾A﴿ Innovative R&D to gain new markets, ﴾B﴿ Capital
investment that contributes to both emissions reduction and economic growth, ﴾C﴿ Creating
demand at a national level for economic growth, and ﴾D﴿ Cross-cutting efforts to realize GX. The
outline of each project and its environmental benefits are detailed below. JCR has confirmed thatthe use of proceeds from this Bonds meet the eligibility criteria, which have been confirmed in
the framework evaluation for both eligibility and environmental benefits. JCR also confirmed thatall grant program recipients are required to submit their direct and indirect GHG emissions, aswell as GHG emission reduction targets for 2030 and other GHG emission reduction initiatives, ina pre-defined format, as part of the GX League membership requirements. Therefore, JCR assesses
that all of the uses of proceeds planned for this Bonds are important projects for achieving net
zero by 2050 and the intermediate target of 2030, which has been set as a milestone.
﴾1﴿ Research and development support projects
Use of proceeds 1: Deep Tech Startup Support Program in the Green Transformation field
ICMA GBP
Classification

GB Guidelines
Policy Intention

Background/
Objective“Renewable energy”, “Energy efficiency”, “Clean transportation”, “ Circular economy adapted
products, production technologies and processes and/or certified eco-efficient products”,“Environmentally sustainable management of living natural resources and land use”.
“Projects for renewable energy,” “Projects for energy efficiency,” “Projects for cleantransportation,” “Projects concerning production technologies and processes andenvironmentally friendly products for the circular economy,” and “ Projects for the sustainable
management of living natural resources and land use.”(A) Innovative R&D to gain new markets
In order to promote the technological innovation necessary to achieve net-zero and to promotemarket growth in the GX industry and corporate GX, it is necessary to accelerate the growth ofstartups in the GX field. In Japan, the Five-Year Startup Development Plan39 outlines a policy tocreate an ecosystem in Japan that produces and nurtures startups and realize a second startup
boom, with the aim of transforming social issues into engines of growth and realizing asustainable economic society. To achieve this, goals have been set such as increasing investment
in startups by more than 10 times the current level in five years and creating 100 unicorns in the
future.
Among startups, so-called “deep tech startups” require long-term research and development andlarge amounts of capital before the technology can be established, and the risk ofcommercializing the business is high. However, as the international community faces diverse anddifficult social challenges, the innovative technologies possessed by deep tech startups could
help resolve these issues, and they also have the potential to realize growth for Japan’s economy
by creating new companies and industries backed by innovative technology.
In particular, as shown in the figure below (next page), Japan has many internationallycompetitive technologies in the GX sector, but is lagging behind in international competition at
the social implementation stage in the GX sector. Therefore, in order to quickly implement a wide
range of technological seeds, we recognize the importance of utilizing startups in terms of——————————————
39

New Capitalism Realization Council "Startup Development Five-Year Plan" ﴾November 28, 2022﴿
https://www.cas.go.jp/jp/seisaku/atarashii_sihonsyugi/kaigi/dai13/shiryou1.pdf
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flexible research and development systems that take market trends into account, access to risk
capital, etc.
Total patent asset 2010-201940

In the GX sector, there are many businesses that utilize the aforementioned deep tech, but there
are significant barriers in terms of demand and fundraising between the time when startups are
created based on technological seeds, the time when these startups conduct research anddevelopment, and the time when they can realize social implementation.
The purpose of this project is to support the efforts of each company in order to resolve theseissues and strongly encourage startups to implement GX-related technologies as soon as
possible, so as to avoid “winning in technology but losing in business.”
This program will target projects that meet the following three criteria: (i) there is a specifictechnology seed and it is expected that there will be an R&D element; (ii) it will be possible tocreate innovations that will strengthen competitiveness; and (iii) it will be possible to create
innovations that will achieve carbon neutrality on a global scale and strengthen Japan’s industrial
competitiveness, for example by setting ambitious targets for reducing CO2 emissions based on
the GX Promotion Strategy.

Business summary

This program has three options::[1] STS Phase (Seed-stage Technology-based Startups, practical research and development (firsthalf))In addition to research and development of core technologies and development of prototypes,
government will support the implementation of feasibility studies to determine the direction oftechnological development toward commercialization.
・Subsidy amount: up to 300 million yen or up to 500 million yen (※) / Project period:
Approximately 1.5 to 2 years (however, up to 4 years within the same phase) ※Whencollaborating with operating companies or conducting overseas technology demonstrations[2] PCA Phase (Product Commercialization Alliance, practical application research anddevelopment (later stage))
In addition to developing prototypes and initial production technology, the company will also
support the implementation of feasibility studies aimed at capturing major markets.
・Subsidy amount: up to 500 million yen or up to 1 billion yen (※) / Project period:
Approximately 1.5 to 2 years (however, up to 4 years within the same phase) ※Whencollaborating with operating companies or conducting overseas technology demonstrations[3] DMP Phase (Demonstration development for Mass Production)
It will support the implementation of demonstrations necessary for commercialization throughresearch and development on mass production technology, as well as the design, manufacture,purchase, introduction, and operation of production and inspection equipment for mass
production.

——————————————
40

Created by JCR based on the Ministry of Economy, Trade and Industry's "Guidance for creating and growing GX startups~Securing initial demand and diversifying financing~"
https://www.meti.go.jp/policy/energy_environment/global_warming/gx_startup/gx_guidance.pdf
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・Subsidy amount: Up to 2.5 billion yen / Project period ・Project period: Approximately 1.5 to 2
years (however, up to 4 years within the same phase)

Development
Goals

Technology
Maturity Targets

ImpactSubsidy rate

Related Links[1] STS phase: The product or service solves a problem for intended customers in the initial
market.
[2] PCA phase: The product or service solves problems for target audiences in the initial market
and beyond in the mainstream market, and meets the requirements to generate ongoingrevenue.
[3] DMP Phase: The products and services are targeted to the main market (mainstream)
Necessary to solve the problems and build a business model that can start commercial
production and secure continuous income
Once the requirements are met, the next round of funding will see the company move into actual
mass production.
TRL5 (STS phase), TRL6 (PCA phase), TRL7 (DMP phase)* Please note that the TRL assumed for each phase varies depending on the characteristics of thetechnical field and business domain, so it is a guideline.
The goal is to accelerate the business growth of startups in the GX field.
In the short term, the program is aimed to have 50% of those who have raised funds for the next
round of funding within one year of the end of support.
In the medium term, it is aimed to start large-scale commercial production, etc., and in the longterm, it is aimed to promote GX and create and develop a GX startup ecosystem[1] STS Phase: Grant rate: 2/3 or less
[2] PCA Phase: Grant rate: 2/3 or less[3] DMP Phase: Grant rate: 2/3 or less or 1/2 or lesshttps://www.nedo.go.jp/activities/ZZJP_100250.html
https://www.nedo.go.jp/koubo/CA2_100460.html(Reference) Ministry of Economy, Trade and Industry “Guidance for the creation and growth of
GX startups: Securing initial demand and diversifying financing”
https://www.meti.go.jp/policy/energy_environment/global_warming/gx_startup/gx_guidance.pdf

Use of proceeds 2: Development of test furnace of high temperature gas-cooled reactor(Continued projects from the first series of Japanese Climate Transition Bonds (issued in FY2023))
ICMA GBP
classification41
GB guidelines“Low carbon/decarbonized energy”

Policy Intention(A) Innovative R&D to gain new markets

Background/
Objective

A high-temperature gas reactor is a nuclear reactor that uses ceramic materials, mainly graphite,as the main constituent material of the reactor core, and uses helium gas as a coolant to extract
the heat generated by nuclear fission. A high-temperature gas furnace with an outlet coolant
temperature of 700°C to 950°C is called a high-temperature gas furnace. By using a ceramicmaterial with excellent heat resistance, it is possible to extract energy from high-temperature
heat of over 700°C, which has the potential to be used for energy generation or to producehydrogen using a high-temperature gas furnace. Regarding hydrogen production, which is
attracting attention for decarbonization in industrial fields including steelmaking and chemicals, it
has the potential to decarbonize a shaft furnace that can perform complete hydrogen reduction
steelmaking with a single high-temperature gas furnace. There is. Comparing hydrogenproduction using a high-temperature gas furnace and solar energy generation, the required sitearea is approximately 1/1,600th.
In Japan, JAEA owns the High Temperature Engineering Test and Research Reactor (HTTR). The
test research reactor HTTR achieved 50 days of continuous high-temperature operation at theworld’s highest temperature of 950°C, and conducted tests simulating an accident in which“Projects concerning eco-efficient products, production technologies, and processes”——————————————
41

Since there is no example of the green project classification for the use of this fund in ICMA's GBP, it was established at thetime of formulating Japan Climate Transition Framework.
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Business summary

Development
Goals

Technology
maturity goals
impactRelated URLs

coolant was lost, similar to the TEPCO Fukushima Daiichi Nuclear Energy Plant accident. It has theworld’s leading technology, including ensuring that water cools naturally. Utilizing the test andresearch reactor HTTR, in addition to international demonstrations of safety, it plan to develop
the technology necessary to produce large quantities of carbon-free hydrogen at low cost by2030. It also plan to conduct research and development on carbon-free hydrogen production
methods that utilize ultra-high temperature heat, including the IS method and methane thermal
decomposition method.
In order to achieve the government’s goal of net-zero by 2050, it is essential to reduce emissions
from the industrial sector, including steel and chemicals, which account for approximately 25% of
total domestic emissions. As mentioned above, high-temperature gas reactors are expected to be
used for high-temperature heat utilization of 800°C or higher, which is higher than conventional
light water reactors, and for industrial applications such as hydrogen production. In Japan, theaforementioned test and research reactor HTTR has been restarted, and it are now at the stage
where it can develop a demonstration reactor with the aim of commercialization as a means ofdecarbonizing heat demand and hydrogen production. Through this project, it aim to provide astable supply of large amounts of hydrogen at approximately 12 yen/Nm3 by 2050 using
decarbonized high-temperature heat over 800°C and carbon-free hydrogen production methods.
The ultimate goal is to connect it to industrial use.
In order to develop hydrogen production evaluation technology, hydrogen production tests will
be conducted using the High Temperature Gas Reactor Test and Research Reactor HTTR, which
has achieved the world’s highest temperature of 950°C as a high-temperature heat source. In
addition, it will design and construct a high-temperature gas reactor demonstration reactor,
develop elemental technologies, and consider supply chains such as fuel production.
In FY2024, manufacturer system preparation, basic design of hydrogen plant connected to HTTR,
and equipment development and elemental technology development for carbon-free hydrogen
will be carried out in preparation for the conceptual design of a demonstration reactor.
Furthermore, a procurement feasibility study for ultra-high temperature materials will be
conducted.
This project will conduct a feasibility study of carbon-free hydrogen production methods thatutilize high temperatures of 800°C or higher (IS method, methane pyrolysis method, hightemperature steam electrolysis, etc.) by 2030. The goal is to establish connection technology andevaluation methods that achieve high safety using a decarbonized high-temperature heat sourceand hydrogen production technology using the commercially available methane steam reforming
method.
TRL6 or higher (2030)
By 2030, it will establish connection technology between high-temperature heat sources andhydrogen production plants and demonstrate that hydrogen production is possible. It will also
gain an outlook on the technological feasibility of carbon-free hydrogen production methods (ISmethod, methane pyrolysis method, high-temperature steam electrolysis, etc.).
・Achieve the tasks set for each FY year to confirm the connection technology between ultrahigh temperature heat sources and hydrogen production facilities.
・By the end of the project in FY2022, technology for evaluating hydrogen production should beestablished, and the design tolerance should be within ±10% of the error between predicted andmeasured values.
https://www.meti.go.jp/main/yosan/yosan_fy2023/pr/gx/gx_denga_02.pdf

Use of proceeds 3: Development of test furnace of fast reactor(Continued projects from the first series of Japanese Climate Transition Bonds (issued in FY2023))
ICMA GBP
classification
GB guidelines"Low carbon/decarbonized energy"

Policy Intention(A) Innovative R&D to gain new markets

Background/
Objective

A fast reactor is a nuclear reactor in which the fission chain reaction is sustained by high-energy
neutrons (fast neutrons). Since fast neutrons cause nuclear fission of the fuel, in order to avoid

N.A.

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deceleration of fast neutrons as much as possible, moderators like those in light water reactors
are not required, and fuel with increased fuel density in the fuel assembly is used. Fast reactors
utilize fast neutrons to further enhance the effectiveness of the nuclear fuel cycle by reducing thevolume and toxicity of such high-level radioactive waste and making effective use of resources.
Fast reactors do not require moderators, but use liquid metals, mainly sodium, as coolants forfuel assemblies. Furthermore, after a light water reactor finishes generating electricity, the spent
fuel contains resources that can be recycled, such as uranium and plutonium. By collecting andreprocessing these and reusing them as fuel for fast reactors, a long-term stable supply of energy
becomes possible.
When reprocessed fuel is used in light water reactors (light water reactors pullthermal), the lessflammable plutonium (high-grade plutonium) gradually increases, so it can be reused as fuel only
a few times, whereas fast reactors also burn the less flammable plutonium. It plays an extremely
important role in the effective use of resources.
In addition, fast reactors are expected to further enhance the effectiveness of the nuclear fuelcycle in reducing the volume and potential toxicity of radioactive waste and in effectively utilizing
resources.
Based on the above, the purpose of this project is to support research and development such as
the conceptual design of fast reactors and the development of technological infrastructure thatcan be applied to demonstration reactors.
A sodium-cooled fast reactor (SFR) is a moderator-less fast reactor that uses liquid metal sodium
as a coolant.
In the fast reactor strategic roadmap revised in December 2022, a fast reactor technology
evaluation committee was established under the strategic working group established by thegovernment, manufacturers, electric energy companies, and research institutions. As a result of
the committee's consideration of sodium-cooled reactors, light water-cooled fast reactors, andmolten salt fast reactors as candidates, sodium was selected as the coolant that should beprioritized for development. The liquid metal sodium used as a coolant reacts violently with waterand burns, so it must be handled with great care.

Business summary

The milestones for this project are as follows.
1) Summer 2023: Select specifications for the reactor concept and core companies forconceptual design from 2024 onwards
Based on the coolants that should be prioritized for development in FY2022, and based on the
results of subsequent technical studies, the international situation, and domestic market needs,
from among the sodium-cooled reactors, conceptual design will begin in FY2024. In addition to
selecting the specifications for the new reactor concept, it will also reselect a core company thatwill be responsible for the design of the concept, associated technological development, andfuture manufacturing and construction, and clarify the development system. In addition,measures to maintain human resources, technology, and supply chains will be implemented.
2) FY2024 to FY2028: Conceptual design of demonstration reactor and necessary research anddevelopment
The core companies will conduct the conceptual design of the demonstration reactor. First, it will
carry out the conceptual design of the plant, while conducting necessary research anddevelopment (evaluation of a decay heat removal system that can respond to various situations,evaluation of the conclusion of a core meltdown accident inside the reactor vessel, irradiation
tests for advanced fuel, data maintenance to set standards for new materials etc.) and gain
knowledge through research and development results and international cooperation around2026. Based on this, it will conduct specific studies on fuel technology and develop the system as
a whole, including plants and fuel. The conceptual design will be carried out by around 2028.
3) Around FY2028: Decision to move to Step 3 based on the results of the reactor conceptual
design and the status of system development, etc.
In moving to Step 3, in addition to creating a common understanding among related parties tobuild a system, it will fulfill its accountability to ensure that the technology is accepted by society,and it will also take specific measures regarding location measures and regulatory responses. It isnecessary to consider how to respond. It is also essential that an appropriate business
management system be established.
If the market mechanism does not work properly, it is necessary to verify that the long-term
interests of the people can be secured, and then, as with other energy sources, appropriate
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development
goalsTechnology
maturity goals
ImpactRelated URLs

institutional measures to supplement the market are needed. It is appropriate that various
adjustments with the location area should be carried out by the established business
management system, in collaboration with the government and electric utilities with experiencein locating light water reactors.
The government will provide institutional support in cooperation with electric utilities and thelocation regions.
In addition, it is important to build a mechanism that can raise development funds in an
appropriate business management system in collaboration with electric utilities, who are the final
users of nuclear energy generation technology, and the government is creating an environment
in which such a mechanism can function.
Based on the status of these considerations, it will make a decision to move to Step 3 around
FY2028, and proceed with the outlook and consideration of activities from around FY2030
onwards.
Goals by 2028
a. Technology maturity level (TRL)・Present an evaluation plan that will contribute to licensing regarding the safe design of fast
reactors. In addition, the technological maturity of the elemental technologies for fast reactors
and fast reactor cycles shall be at the technology demonstration stage (TRL6) or higher.
b. Economical aspects
・In a cost evaluation assuming a plant that is a large reactor and takes into account learning
effects, etc., it is considered to be equivalent to a light water reactor. - Continuous operation
period of 13 months or more, availability rate of 80% or more, net energy efficiency of 35% or
more, and plant life of 60 years.
・At a breeding ratio of 1.03, the average extraction burnup of the entire core will be 80 GWd/t.
c. Reducing the volume of radioactive waste and reducing its potential toxicity
・The average MA content in the core is approximately 3wt% (the maximum MA content in thefuel assembly is 5% or less).
d. sustainability
・While ensuring a breeding ratio of 1.03, taking into account the uncertainty of Pu supply anddemand, secure the potential to operate a core configuration with a breeding ratio of 1.1 to 1.2.
e. flexibility - Flexibly respond to output scale and location conditions.
・Consider specific operational methods (heat storage, etc.) that can coexist with variable
renewable energy such as solar and wind energy.
f. In preparation for regulatory compliance and consultation with regulations, clarify important
issues, begin exchanging opinions, and present research and development plans for Step 3 andbeyond.
TRL6 or higher (2028)
・Technology maturity level at which transition to Step 3 can be determined.
・It expect to rebuild the supply chain through the development of fast reactors and fast reactor
cycles in the conceptual design, and to cultivate skills and promote employment in the industrial
world after Step 3.
・Obtain permit data and present an acquisition plan so that the business management systemfrom Step 3 onward can make construction decisions.
https://www.meti.go.jp/shingikai/enecho/denryoku_gas/genshiryoku/kakushinro_wg/pdf/007_01_
00.pdf

Use of proceeds 4: R&D for post-5G information communications system infrastructureenhancement(Continued projects from the first series of Japanese Climate Transition Bonds (issued in FY2023))
ICMA GBP
classification
GB guidelines"Energy efficiency"

Policy Intention(A) Innovative R&D to gain new markets“Projects for energy efficiency”

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Background/
Objective

Business summary

Fifth-generation mobile communication systems (5G) are more advanced than fourth-generation
mobile communication systems (4G), and feature enhanced functions such as ultra-low latency
and multiple simultaneous connections. By developing core technologies for new informationand communications systems that are compatible with 5G (post-5G), we aim to strengthen
Japan's development and manufacturing base for 5G information and communications systems
and to achieve both a digital society and decarbonization.
This project is broadly divided into two parts:(1) Development of post-5G information and communications systems
The project will support technological development for the entire information andcommunications network and each of its constituent elements (core network, transmission paths,
base stations), as well as basic models for generative AI, which is considered to be the killer
application of post-5G information and communications systems.
(2) Development of cutting-edge semiconductor design and manufacturing technologies
We will support the development through international collaboration of fundamental
technologies in which Japan has an advantage, such as cutting-edge semiconductor systemdesign technology, the mounting technology required for manufacturing, and miniaturizationrelated technologies, as well as next-generation semiconductor manufacturing technologies.
Of these, the following two projects can be used for this Bonds proceeds:
Development of packaging technology related to photonics-electronics convergence anddeterministic latency computing platform technology...Optical chiplet implementation technology, which implements multiple circuit chips such as
CPU/GPU/memory connected by photoelectric conversion devices using photonics-electronics
convergence technology that combines circuits that handle electrical signals with circuits that
handle optical signals, within a semiconductor package, makes it possible to connect computing
resources such as CPUs, memories, and xPUs directly over long distances with high speed andlow loss without using electrical wiring. In this project, it will develop optical chiplet mounting
technology and the peripheral technologies required for its implementation.

Development
Goals

Technology
Maturity Targets
ImpactRelated URLs

Development of manufacturing technology for next-generation wideband, low-power HBM...In post-5G information and communications systems, in order to cope with the increase in dataprocessing volume in data centers and the increase in calculation processing in AI processing, theperformance of processors is improving and the importance of wideband memory (HBM), whichtransfers data between processors at high speeds, is increasing. Demand for AI is expected tocontinue to increase in the future, which will require even higher bandwidth for memory. At thesame time, it is expected that the power consumption associated with memory transfers will
become enormous, so technology that can achieve this with low power consumption will be
required. Therefore, it is developing wideband, low-power HBM manufacturing technology.
The following quantitative targets have been set for individual development projects in eachbusiness category.
Development of packaging technology related to photonics-electronics convergence anddeterministic latency computing platform technology...Power consumption is reduced by 30-40% or more (compared to equivalent technologies or
products that were in widespread use at the time research and development began).
Development of manufacturing technology for next-generation wideband, low-power HBM…Power consumption is reduced by 30% or more (compared to equivalent technologies or
products that were in use at the time research and development began)
TRL6-9More than 50% of technologies developed in the project will be put to practical use
https://www.meti.go.jp/policy/mono_info_service/joho/post5g/pdf/20230925001.pdf
https://www.meti.go.jp/policy/mono_info_service/joho/post5g/pdf/20240329_keikaku.pdf

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﴾2﴿ Subsidy programs to support capital investment
Use of proceeds 5: Support for strengthening manufacturing supply chains of batteries (Continued
projects from the first series of Japanese Climate Transition Bonds (issued in FY2023))
ICMA GBP
Classification
GB Guidelines
Policy Intention
Background/
Objective

Business summary

Subsidy rate

Related URLs

"Energy efficiency," "Renewable energy," and "Clean transportation.""Projects for energy efficiency," "Projects for renewable energy," and "Projects for cleantransportation"(A) Innovative R&D to gain new markets, (B) Capital investment that contributes to bothemissions reduction and economic growthBatteries are essential for maintaining the foundation of the electrified and digitalized society of
the future, for example, for the electrification of automobiles and other forms of mobility, foradjusting supply and demand to make renewable energy the primary power source, and as
backup power sources for 5G communication base stations and other facilities.
While demand is expected to continue to expand in the future, Japan's share is declining.
Given this background, this project aims to strengthen the domestic battery manufacturing
supply chain, including small and medium-sized enterprises, by supporting capital investment
and technological development in batteries, and materials, and manufacturing equipment.
In order to strengthen the manufacturing supply chain of batteries and ensure a stable supply,
the following measures will be taken.
(1) Support for capital investment in batteries, materials, and manufacturing equipment.
In order to strengthen the domestic manufacturing base for batteries, materials andmanufacturing equipment subsidies will be provided to businesses that develop large-scale
manufacturing bases, manufacturing bases for parts and materials whose production in Japan iscurrently limited, and manufacturing bases that use unique technologies.
(2) Support for technological development of batteries, materials and manufacturing equipment.
Subsidies will be provided to businesses that develop technologies to establish the superiority
and indispensability of batteries, materials, and manufacturing equipment technologies todecarbonize the manufacturing process, and digital technologies to manage data in the
manufacturing process and improve productivity.
Investment in manufacturing facilities for in-vehicle and stationary batteries, and support fortechnical development = 1/3, technology = 1/2
However, the upper limit for capital investment by small and medium-sized enterprises related tothe development of manufacturing infrastructure for battery manufacturing equipment is 1/2.
https://www.meti.go.jp/policy/economy/economic_security/battery/Use of proceeds 6: Support for energy/manufacturing process conversion for hard-to-abate
industries
ICMA GBP
Classification
GB Guidelines
Policy Intention
Background/
Objective"Energy efficiency", "Circular economy adapted products, production technologies andprocesses""Projects for energy efficiency," "Projects concerning production technologies and processes andenvironmentally friendly products"(B) Capital investment that contributes to both emissions reduction and economic growth
Aiming for carbon neutrality by 2050, to reduce emissions from energy and manufacturing
processes of hard-to abate sectors, such as steel, chemicals, and pulp and paper, and tostrengthen industrial competitiveness are inevitable.
For the characteristics of each industry and their efforts toward decarbonization, please refer topages 42-46 of the JCR Evaluation Report on the Japan Climate Transition Bond Framework
published on November 7, 2023.42——————————————
42

November 7, 2023 JCR "Japan Climate Transition Bond Framework" Evaluation Reporthttps://www.jcr.co.jp/download/d7ecdb849999ae618186f0c18658fc88688ff72d8700580e8c/23d1036_2.pdf
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Business summary(1) Manufacturing process conversion project
It will support capital investment to transition from conventional manufacturing processes thatinvolve large amounts of CO2 emissions to new low-emission manufacturing processes.
a.
SteelConversion from blast furnaces and converters to innovative electric furnaces, and introduction ofa steelmaking process that utilizes hydrogen. For example,(i). Hydrogen reduction by blast furnace method;
Reduce iron ore using hydrogen instead of carbon. CO2 is used for CCUS or methanation.
(ii). Direct hydrogen reduction;
Reducing low-grade iron ore using only hydrogen without using coal. Steel is produced bymelting the manufactured pellets in an electric furnace.
(iii). Switching from blast furnace to electric furnace;
Reduced iron and iron scrap are melted in an electric furnace to manufacture steel products.
It is developing technology to remove impurities (phosphorus, copper, etc.) at that time.
b.
Chemical
Switching to chemical recycling processes that utilize waste plastics and reduce the amount of
naphtha used, and switching to bio-based raw materials produced from plants and other sourcesthat have low emissions throughout their life cycle.
In order for realizing carbon neutrality in chemical sector,(i). Fuel conversion: replace the coal to ammonia, etc., in the naphtha cracking process(ii). Process conversion: replace naphtha oriented raw materials to bio-ethanol, waste plastic, etc.
to make chemical products.
Overseas company, like BASF, started to calculate CFP of chemical products to seek for lower CF
products. Considering the introduction of CBAM, it is necessary to enlarge the supply of lower
carbon chemical products, in addition to high quality, which is the base of Japan’s highcompetitiveness.
c.
Paper and pulp
Shift to a bio-refinery business that utilizes wood pulp, which has the potential to be analternative material to fossil fuel-derived products
In order for realizing carbon neutrality in paper and pulp sector,(i). Fuel conversion: replace coal to black liquor, which is generated during the chemical
breakdown and separation of wood pulp production.
(ii). Process conversion: to develop new business such as bio-refinery (cellulose, CNF, bioethanol, etc.)
It is necessary to transform from paper and pulp industry to become bio-refinery industry, whichlead this industry survive. In order to do so, collaboration with different industries to enjoy thescale merits.
d.
CementExpanding the production of carbon recycled cement through fuel conversion in the firing
process and coal-fired boilers, and implementing technology to capture CO2 generated during
cement manufacturing (conversion of raw materials).
In order for realizing carbon neutrality in cement industry,(i).
Fuel conversion: replace calcination process and coal fired power plants to waste andbiomass fuel.
(ii).
Raw material conversion: Recycling waste concrete, which enables CO2 collection arecycling in the process of producing cements with net zero emission(2) Fuel conversion for in-house power generation facilities, etc.
Converting to fossil fuels to low carbon fuel that contribute to significant emission reductions incoal-fired in-house power generation facilities, boilers, etc. in the hard to abate sectors.
Regarding the fuel conversion measures from coal set out in the Sector-specific Investment
Strategies, the main ones cited are ammonia for chemicals, black liquor and biomass for paper
and pulp, and waste-to-energy and biomass for cement. In the cement sector, according to thecarbon neutral strategies published by major Japanese cement companies, waste, hydrogen,ammonia combustion, synthetic methane, etc. are envisaged as fuels for conversion.

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Subsidy rate

Subsidize one-third of capital investment plans.

Related URLs

Steel
https://www.meti.go.jp/press/2023/12/20231222005/20231222005-01.pdf
Chemicalhttps://www.meti.go.jp/press/2023/12/20231222005/20231222005-02.pdf
Paper and pulp
https://www.meti.go.jp/press/2023/12/20231222005/20231222005-03.pdf
Cementhttps://www.meti.go.jp/press/2023/12/20231222005/20231222005-04.pdf

Use of proceeds 7: Support for establishing production and supply system of sustainable aviationfuel (SAF)
ICMA GBP
Classification
GB Guidelines"Clean Transportation"

Policy Intention(B) Capital investment that contributes to both emissions reduction and economic growth

Background/
Objective

Sustainable Aviation Fuel (SAF) is attracting attention as a decarbonized fuel that will play animportant role in enabling decarbonization in large aircraft, where electrification andhydrogenation are difficult. SAF is aviation fuel produced from sustainable sources other thanfossil fuels, such as used cooking oil and animal and vegetable oils, and is said to be able toreduce CO2 emissions by about 60% to 80% compared to conventional fossil fuels.43
According to the Sector-specific Investment Strategies compiled by the Japanese government,
the global supply of SAF in 2022 is estimated to be approximately 300,000 kl (approximately 0.1%of the global jet fuel supply).
Meanwhile, IATA, an industry association made up of airlines around the world, has announced agoal of achieving net-zero total CO2 emissions from the air transport sector by 2050.The amountof SAF needed to achieve net-zero emissions in 2050 is estimated to be 449 billion liters (= 450
million kl), which is 1.5 times the world's jet fuel supply as of 2022.
The Clean Skies for Tomorrow Coalition, a World Economic Forum group that aims to promote
the introduction of SAF, has declared that it will increase the proportion of SAF in the fuel used in
the global aviation industry to 10% by 2030. In addition, Oneworld has declared that all of its
member companies, and each airline, will replace 10% of the fuel they use with SAF.

Business summary"Projects for Clean Transportation "As demand for SAF increases internationally, the aim of this initiative is to build domestic supply
capacity for SAF, thereby aiming to supply domestically and to Asian countries where aviation
demand is expanding, as well as to ensure security by producing aviation fuel in-house.
In particular, with an eye towards a decarbonized society, oil refiners are moving away fromtraditional oil refining and sales and toward the green chemical industry by applying fuelproduction technologies such as SAF, which is expected to help support the oil industry's
transition to a decarbonized business.
Support for capital investment etc. in large-scale domestic SAF manufacturing.
Among the types of raw materials and technologies for domestic SAF production that are eligible
for the subsidy, there is no restriction on specific technologies, but the first step in creating a GX
market in the Sector-specific Investment Strategies is to simultaneously build a support systemfor obtaining international certification through an evaluation of environmental sustainability and
GHG emissions.

——————————————
43

Based on CO2 emissions throughout the life cycle ﴾including emissions during processes such as cultivation, harvesting,manufacturing, and transportation of raw materials﴿. In addition, since the ASTM standard currently stipulates an upper limiton the amount of diesel that can be mixed with conventional fuels, the actual CO2 reduction effect will be lower than theabove value.
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Types of SAF by raw materials and technologies
Manufacturing technology

Major raw materials

HEFA ﴾Hydroprocessed Esters andUsed cooking oil, Ghee, Pongamia, Microalgae, etc.

Fatty Acids﴿
ATJ ﴾Alcohol to Jet﴿

1st generation bioethanol ﴾Sugar cane, Corns, etc.﴿
2nd generation bioethanol ﴾non-edible plants 、
waste paper、other wastes﴿

gasification、FT synthesis

Garbage ﴾waste plastics, etc.﴿

Synthesis fuel

CO2、Hydrogen

Subsidy rate

1/3 or 1/2

Related URLs

4th Public-Private Council for Promoting the Introduction of Sustainable Aviation Fuel (SAF)
Secretariat Document
https://www.meti.go.jp/shingikai/energy_environment/saf/pdf/004_05_00.pdf
Reference to the Sector-specific Investment Strategies (SAF)
https://www.meti.go.jp/press/2023/12/20231222005/20231222005-08.pdf

Use of proceeds 8: Support for enhancing the resilience and autonomy of circular economy
systems through industry-government-academia collaboration
ICMA GBP
Classification
GB Guidelines
Policy Intention
Background/
Objective"Pollution prevention and control", "Circular economy adapted products, production
technologies and processes""Projects for pollution prevention and control," "Projects concerning production technologies
and processes and environmentally friendly products for the circular economy"(B) Capital investment that contributes to both emissions reduction and economic growth
Of the GHG emissions in Japan, emissions from sectors where there is room for contributing to
reduction through resource circulation amounted to 413 million t-CO2e (approximately 36% of
total emissions) in FY2020.
Approximately 80% of GHG emissions from Japan's waste sector come from waste incineration(simple incineration, heat recovery, and use of raw materials and fuels) and other processes. In
order to reduce GHG emissions associated with incineration, etc., it is important to increase theuse of recycled resources (recycled materials, renewable resources, etc.). The effect of reducing
CO2 emissions by using recycled materials from each materials is quite significant; e.g. recycled
aluminum cans reduce 66%, recycled steel reduce 79% of emission, compared to virgin material.
(Please refer page 12 in "Reference to the Sector-specific Investment Strategies (Resource
Circulation)" (Japanese, the related URL below).
In order to promote more resource recycling, METI formulated the "Growth-oriented Resource
Autonomous Economy Strategy" in March 2023.44
This strategy aims to control the risk of international supply disruptions, including for generalpurpose industrial and consumer goods, as much as possible by restructuring resource
circulation economy policies, and to make the domestic resource circulation system moreautonomous and resilient, while achieving sustainable and steady growth through the acquisitionof international competitiveness.

——————————————
44

Ministry of Economy, Trade and Industry, "Growth-oriented Resource Independent Economic Strategy" ﴾March 2023﴿
https://www.meti.go.jp/press/2022/03/20230331010/20230331010.html
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Business summary

In addition, based on this strategy, in order to strengthen industry-government-academia
collaboration toward the realization of a circular economy, the industry-government-academia
partnership "Circular Partners: CPs" on the circular economy was launched in September 2023.
Through organic collaboration among related entities such as related organizations andorganizations, the transition to a circular economy will be accelerated.
Utilizing the framework of the " Circular Partners: CPs," it will support the following capital
investments, etc., in order to realize initiatives that achieve both decarbonization and economic
growth at an early stage toward the creation of a new resource recycling market..
(1) Development and demonstration of technologies related to resource circulation througharterial and venous linkages for automobiles and batteries, electrical and electronic products,
packaging, plastics, textiles, etc.
Conceptual image of a "resource circulation market through collaboration between arteriovenous
and venous industries"(2) Development, demonstration, and commercialization of technologies for "recycling-conscious
manufacturing" that contributes to ensuring longer life and easier recycling for automobiles andbatteries, electrical and electronic products, packaging, plastics, textiles, etc.

Subsidy rate

1/3 or 1/2

Related URLs

Reference to the Sector-specific Investment Strategies (Resource Circulation)
https://www.meti.go.jp/press/2023/12/20231222005/20231222005-11.pdf

Use of proceeds 9: Support for building GX supply chains
ICMA GBP
Classification
GB Guidelines"Renewable energy"

Policy Intention(B) Capital investment that contributes to both emissions reduction and economic growth

Background/
Objective

As an increasing number of countries and regions declare carbon neutrality, long-term and largescale investment competition is intensifying toward GX, which will achieve both emission
reductions and enhanced industrial competitiveness and economic growth. Against thisbackground, the aim is to make maximum use of the strengths of Japan's manufacturing supply
chains, including those of small and medium-sized enterprises, and technological infrastructure,and to build a domestic manufacturing supply chain for the renewable energy business, which isessential for realizing GX.
Support will be provided for capital investment by manufacturers planning large-scale
investments in electrolyzer, floating offshore wind power generation equipment, perovskite solar
cells, fuel cells, etc., as well as related components, materials, and manufacturing equipment, formanufacturers that currently have components, materials, or unique technologies with limited
domestic production.

Business summary"Projects for renewable energy "Perovskite solar cells
This is a new type of solar cell that uses a crystalline material called perovskite, and is a nextgeneration solar cell that can be installed on the walls of buildings, etc.

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Main components and materials for offshore wind power generation equipment

Subsidy rate

1/3 or 1/2

Related URLs

Reference to the Sector-specific Investment Strategies (Next-Generation Renewable Energy)
https://www.meti.go.jp/press/2023/12/20231222005/20231222005-14.pdf

Use of proceeds 10: Investment promotion for advanced resource circulation
ICMA GBP
Classification
GB Guidelines
Policy Intention
Background/
Objective

Business summary"Pollution prevention and control", "Circular economy adapted products, production
technologies and processes""Projects for pollution prevention and control," " Projects concerning production technologies
and processes and environmentally friendly products for the circular economy"(B) Capital investment that contributes to both emissions reduction and economic growth
Resource recycling is an important element in making effective use of limited resources andresolving waste problems both domestically and internationally. The purpose of this project is topromote both the transition to a circular economy and the decarbonization of the resource
circulation sector by investing in (1) resource circulation facilities that will make a significant
contribution to reducing emissions in industries where it is difficult to reduce CO2 emissions, and(2) recycling facilities that will supply high-quality regenerated products that are essential for therefinery of innovative GX products.
1) Emission reduction contribution projects for industries where it is difficult to reduce CO2
emissionsSupport for the demonstration and implementation of large-scale, advanced separation andrecovery equipment for waste plastics, metals, etc., and recycling equipment.
2) High-quality refurbished products supply business for innovative GX products
Support resource circulation initiatives that supply the raw materials for innovative products (e.g.,batteries) needed for the GX transition.
Specifically, this refers to demonstration and capital investment that contributes to theestablishment of resource circulation through collaboration between the manufacturing industry
and the resource circulation industry, such as lithium battery recovery equipment and recycledmaterial production equipment.

Subsidy rate

1/3 or 1/2

Related URLs

Ministry of the Environment Budget Project
https://www.env.go.jp/content/000181430.pdf

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Use of proceeds 11: Promotion of the construction of zero-emission ships etc.
ICMA GBP
Classification
GB Guidelines
Policy Intention
Background/
Objective

Business summary"Clean Transportation""Clean Transportation Projects"(B) Capital investment that contributes to both emissions reduction and economic growth
Of the CO2 emissions from Japan's transportation sector, ships account for the second largest
proportion after automobiles, and in order to achieve net-zero by 2050, the widespread use ofzero-emission ships that use hydrogen and ammonia fuels (see below) is essential.
In Japan, there are a variety of companies in the supply chain for marine business operators,
including manufacturers of producing important marine equipment such as zero-emission ships
etc., and the shipbuilders that construct them. By providing this support, the aim is to strengthen
the international competitiveness of the shipping industry.
1) Ammonia fuelAmmonia fuel, as the name suggests, uses ammonia as a marine fuel. Ammonia fuel is expected
to have a cruising range that makes it usable not only for domestic shipping but also for
oceangoing shipping. Although ammonia has a relatively low risk of being flammable or
explosive, it is toxic and corrosive, and care must be taken when handling it. In addition, sinceammonia (NH3) itself does not contain carbon atoms, it does not produce CO2 when burned.
Instead, it produces nitrous oxide (N2O), which has a greenhouse effect about 300 times that of
CO2. Therefore, research and development is underway on countermeasures by combustion
control and treatment equipment etc.
Currently, several domestic companies have obtained Approval in Principle (AiP) for ammoniafueled ships from Class NK, an organization that sets standards for ship hulls, outfitting, andengines, as well as rules for class registration and conducts inspections of such standards.
Additionally, research and development is underway on ammonia-fueled tugboats and ammoniafueled ammonia gas carriers. After demonstration experiments, it is expected that the tugboats
will be in commercial operation as soon as possible, by 2024, and the ammonia gas carriers by
2028.
2) Hydrogen fuelHydrogen fuel is fuel that obtains its energy by directly burning hydrogen. As for hydrogen fuel,liquefied hydrogen is stored in a tank and vaporized before being burned. The challenge is todevelop the technology to properly store and burn hydrogen, an extremely light element, andresearch and development is currently underway toward a demonstration experiment. A domestic
company is currently conducting research into engine technology that runs on a mixture ofhydrogen and low-sulfur fuel oil, and has obtained AiP from Class NK for hydrogen-fueled ships.
The engine is scheduled to be installed on a hydrogen carrier scheduled to enter service in thelate 2020s.
The government will support capital investment required for the development and expansion of
production facilities for engines, fuel tanks, fuel supply systems, etc., which are necessary for theconstruction of zero-emission ships, etc., as well as the development and expansion of facilities
for installing the above-mentioned marine equipment on ships.

Subsidy rate

1/3 or 1/2

Related URLs

Reference to the Sector-specific Investment Strategies (Ships)
https://www.meti.go.jp/press/2023/12/20231222005/20231222005-09.pdf

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Use of proceeds 12: Support for strengthening domestic production capacity of power
semiconductors contributing to energy savings(Continued projects from the first series of Japanese Climate Transition Bonds (issued in FY2023))
ICMA GBP
Classification
GB Guidelines"Clean transportation" and "Renewable energy"

Policy Intention(B) Capital investment that contributes to both emissions reduction and economic growth

Background/
Objective

As semiconductors play an increasingly large role in people's lives in response to digitalizationand green innovation, power semiconductors (such as SiC power semiconductors; see below)that control voltage are essential as power control devices for all types of equipment, including
EVs and wind power generators, in order to achieve carbon neutrality in the future, and are also
extremely important in terms of economic security.
It will support companies in strengthening domestic production capacity for power
semiconductors and other products while leveraging the technological advantages of eachcompany and ensuring steady investment toward the realization of GX, while strengthening the
supply chain.
●About power semiconductors
Power semiconductors are semiconductors used to control and supply electrical energy, forexample by converting alternating current to direct current or lowering voltage. It has a wide
range of applications, including in-vehicle batteries, power transmission and distribution, railway
vehicles, and home appliances (air conditioner inverters), and is effective in reducing electricalloss in products and improving energy efficiency.
The switching function of power semiconductors is primarily used for power conversion.
The market size of power semiconductors is expected to continue to expand steadily in the
future. One of the factors driving market expansion is the shift to electric vehicles. Power
semiconductors are widely used for input and output of electricity for batteries, motor drives, etc.
In addition, large amounts of power semiconductors are required for data centers, solar power
generation, wind power generation, stationary batteries, and other areas where investment isincreasing. Anticipating this demand, power semiconductor manufacturers are increasing theircapital investments and accelerating their development.

Business summary"Projects for clean transportation" and "Projects for renewable energy "●About SiC semiconductors
Because power semiconductors handle large voltages and currents, "loss" caused by electricity
being converted into heat inside them can be a problem. SiC semiconductors are expected to bea technology that can eliminate this loss. SiC semiconductors are a 1:1 compound of silicon (Si)and carbon, and are produced by solidifying silicon and black smoke in an electric furnace andcarbonizing it. SiC, a next-generation power semiconductor material, has lower power loss thanconventional silicon (Si) materials. For example, research has shown that power semiconductors
using SiC materials have succeeded in reducing power loss (on-resistance) by approximately 70%
in the prototype stage compared to types using conventional silicon materials.
Pursuant to the Economic Security Promotion Act, any party seeking to ensure a stable supply ofsemiconductors is eligible to receive support if it prepares a plan for the measures it intends toimplement to ensure a stable supply of semiconductors and other products (supply assuranceplan) and submits it to the Minister of Economy, Trade and Industry and receives approval.

Subsidy rate

The investment must be of a significant scale (in principle, a business scale of 200 billion yen ormore) that is deemed necessary to maintain international competitiveness in the future, primarilyin SiC power semiconductors. In addition, when granting certification, the efforts made toward
the procurement of important parts and materials will also be taken into consideration.
The performance of the facilities and equipment to be introduced is cutting-edge.
1/3

Related URLs

https://www.meti.go.jp/policy/economy/economic_security/semicon/index.html

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Use of proceeds 13: Subsidy for energy saving investments/demand structure conversion(Continued projects from the first series of Japanese Climate Transition Bonds (issued in FY2023))
ICMA GBP
Classification
GB Guidelines"Energy efficiency"

Policy Intention(B) Capital investment that contributes to both emissions reduction and economic growth

Background/
Objective

The 6th Strategic Energy Plan set a goal of reducing energy consumption by approximately 62
million kl by 2030 through energy conservation. Recognizing that it is necessary to further dig
deeper into energy conservation in these two sectors, the "Technology Evaluation Committee forAdvanced Energy Conservation Technologies, etc." established by the Agency for Natural
Resources and Energy in FY2020 concluded that high energy conservation potential is expected.
The government announced a policy to discover advanced technologies in the market andprovide intensive support through subsidies and other means. The purpose of this project is tocontribute to the achievement of the "Energy Supply and Demand Outlook for FY2030" by
supporting efforts to achieve significant energy conservation throughout factories andworkplaces through the introduction of equipment that involves mechanical design, equipment
designed and manufactured according to the purpose and application of the business operator,
and advanced equipment, etc., as well as equipment renewal that involves electrification and fuelconversion that will lead to decarbonization. Provide support in response to companies' multiyear investment plans and cultivate demand for energy-saving investments, especially amongsmall and medium-sized enterprises. Furthermore, by promoting the upgrading of facilities andequipment with high energy-saving performance in factories, etc., it will both reduce greenhousegas emissions and strengthen Japan's industrial competitiveness. As a goal, it plans to promote
the implementation of measures centered on energy-saving equipment investment among theenergy-saving measures (approximately 27 million kl) in the industrial and business sectors basedon the energy supply and demand outlook for FY2030, and will include the effects of this budget
project, aiming to achieve energy savings of 21.55 million kl.
I. Factory/ Workplace type(A) Advanced Projects
Support to the introduction of advanced equipment that can achieve significant energy savingsin factories and workplaces.
The target equipment, design, and construction costs for projects that meet any of the following
requirements on a crude oil equivalent basis at the application unit are covered.
(1) Energy conservation rate + non-fossil fuel ratio increase rate: 30% or more
(2) Energy saving amount + non-fossil fuel consumption: 1,000 kl or more
(3) Improvement rate of energy consumption per unit of production: 15% or more

Business summary"Projects for energy efficiency"(B) Custom-made businessSupport to the upgrade to energy-efficient equipment and process modifications, including the
introduction of custom-made equipment that requires individual design.
The target equipment, design, and construction costs for projects that meet any of the following
requirements on a crude oil equivalent basis at the application unit are covered.
(1) Energy conservation rate + non-fossil fuel ratio increase rate: 10% or more
(2) Energy saving amount + non-fossil fuel consumption: 700kl or more
(3) Improvement rate of energy consumption per unit: 7% or more
II. Electrification/decarbonization type
Fuel conversion for the purpose of electrification and decarbonization, such as conversion fromfossil fuels to electricity and conversion to lower carbon fuels.
It will support the introduction of accompanying equipment, etc.
[Target business]
Businesses that fall under electrification and fuel conversion for the purpose of decarbonization[Supported equipment]
The following equipment* which meet energy standards set by the Sustainable open Innovation

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Subsidy rate

Initiative (SII);・Industrial heat pump・Of commercial water heaters, commercial heat pump water heaters
・Low carbon industrial furnace
・High efficiency cogeneration
・High performance boiler*However, equipment that uses coal and oil is not included.
I. Factory/ Workplace type(A) Advanced Projects
Small and medium-sized enterprises: up to 2/3, large enterprises and others: up to 1/2[Subsidy limit]
Upper limit (energy saving) 1.5 billion yen (non-fossil conversion) 2 billion yen*3 billion yen in the case of multi-year project (4 billion yen in the case of non-fossil conversion)
Lower limit: 1 million yen(B) Custom-made business
Small and medium-sized enterprises: up to 1/2, large enterprises and others: up to 1/3[Subsidy limit]
Upper limit (energy saving) 1.5 billion yen (non-fossil conversion) 2 billion yen*3 billion yen in the case of multi-year project (4 billion yen in the case of non-fossil conversion)
Lower limit: 1 million yen

Related URLs

II. Electrification/decarbonization type up to 1/2[Subsidy limit]
Upper limit 300 million yen (electrification) 500 million yen
Lower limit: 300,000 yen
https://sii.or.jp/koujou05r/overview2.html

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﴾3﴿ Subsidy Program for introducing support
Use of proceeds 14: Installation support for electricity storage systems such as grid-scale batteries
to expand renewable energy usage
ICMA GBP
Classification
GB Guidelines
Policy Intention
Background/
Objective"Energy efficiency," "Renewable energy," and "Clean transportation.""Projects for energy efficiency," "Projects for renewable energy," and "Projects for cleantransportation "(C) Creating demand at a national level for economic growth (Subsidies)
In order to achieve net-zero by 2050, it is necessary to accelerate the introduction of renewableenergy. On the other hand, the amount of electricity generated by renewable energy sources
such as solar and wind power fluctuates greatly depending on the weather, time of day, etc.,
which can result in power surpluses at certain times of the day and lead to output controls. In
addition, if their introduction becomes widespread, it could have an impact on the stability of thepower grid.
For this reason, it is necessary to secure decarbonized adjustment capacity that can respond tothese fluctuations, and further introduction and utilization of large-scale power storage systems
such as grid batteries is expected.
The status of introduction of grid batteries is as follows: their introduction has expanded rapidly
over the past one or two years, with contract applications for connection totaling approximately
3.30 million kW nationwide. In order to make renewable energy the main power source, it will
become necessary to introduce technology that allows for even longer charging and discharging
times. As a result, the market for long-term energy storage technology is expected to expand inJapan as well.

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Business summary

Subsidy rate
Related URLs

The government will subsidize the introduction costs of power storage systems, such as gridbatteries and electrolyzer, which will contribute to the expansion of renewable energy adoption.
The purpose of this project is to secure the necessary adjustment capacity for the large-scale
introduction of renewable energy by subsidizing part of the installation costs to introduce largescale power storage systems, such as grid-connected batteries that are directly connected to thepower grid.
2/3, 1/2, 1/3
Reference to the Sector-specific Investment Strategies (Batteries)
https://www.meti.go.jp/press/2023/12/20231222005/20231222005-06.pdf

Use of proceeds 15: Regional decarbonization promotion grant(Continued projects from the first series of Japanese Climate Transition Bonds (issued in FY2023))
ICMA GBP
Classification
GB Guidelines"Renewable energy"

Policy Intention(C) Creating demand at a national level for economic growth (Subsidies)

Background/
Objective

This project aims to support the introduction of key decarbonization products and technologies
with a high emission reduction effect in areas (specific areas) designated by the Ministry of theEnvironment as Decarbonization leading areas based on the Regional Decarbonization
Roadmap45, the Plan for Global Warming Countermeasures, and the Basic Policy for Realization of
GX, where private businesses will build self-operated microgrids through public-private
partnerships.

"Projects for renewable energy "A microgrid is a small-scale energy network that aims to achieve local production andconsumption by having energy supply sources and consumption facilities within a community,
rather than relying on electricity supply from large-scale power plants. Renewable energy sources
such as solar power, wind power, and biomass power will be used as energy sources, but since
the supply of renewable energy is intermittent, it is said to be difficult to match it to energy
demand. To stabilize this energy, the microgrid will be managed and operated using informationand communications technology. Normally, electricity is transmitted to the end consumer via asubstation, and the longer the distance, the more power loss and energy usage occurs fortransmission. However, by installing small-scale power generation facilities near the end
consumer and supplying electricity from there, power loss can be reduced. Furthermore, evenwhen a natural disaster occurs, if the power generation facilities in the area are not damaged, thetime from disaster to recovery can be shortened by switching only to local production andconsumption.

Subsidy rate

In light of the above, the Regional Decarbonization Roadmap gives examples of decarbonization
efforts that utilize digital technologies tailored to regional characteristics, such as the use of
microgrids.
Subsidies are available to local governments in areas (specific regions) that are Decarbonization
leading areas and have built self-operated microgrids that benefit private businesses.
In principle, 2/3

Related URLs

https://policies.env.go.jp/policy/roadmap/assets/grants/chiiki-datsutanso-kofukin-R6.pdf

Business summary——————————————
45

National and Local Council for the Achievement of Decarbonization, "Regional Decarbonization Roadmap: A Transition Strategy
for the Next Era Starting from Local Communities" ﴾June 9, 2021﴿
https://www.cas.go.jp/jp/seisaku/datsutanso/pdf/20210609_chiiki_roadmap.pdf
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Use of proceeds 16: Subsidy for promoting energy savings in households through installing highefficiency water heaters
ICMA GBP
Classification
GB Guidelines"Energy efficiency"

Policy Intention(C) Creating demand at a national level for economic growth (Subsidies)

Background/
Objective

Approximately 14.7% of Japan's GHG emissions come from the residential sector, with emissions
from hot water supply accounting for approximately 25% of these emissions. This project aims tocontribute to achieving the "Energy Supply and Demand Outlook for FY2030" by supporting the
introduction of highly efficient water heaters such as heat pump water heaters and household
fuel cells and expanding their use.

"Energy conservation projects"

The following high-efficiency water heaters are eligible:
Heat pump water heater: This system uses the principle of a heat pump, which transfers
heat by utilizing the properties of gas - the temperature rises when it is compressed andfalls when it expands - to boil water and store it in a tank.
Domestic fuel cells: Generate electricity through a chemical reaction between hydrogenmade from city gas, LP gas, etc. and oxygen in the air, and also use the waste heat from thepower generation process to boil water and store it in a tank.
Hybrid water heater: A system that combines a heat pump water heater and a gas water
heater to produce hot water and store it in a tank. By using two heat sources, hot water canbe supplied more efficiently.

Business summary

Subsidy rate
Related URLs

●Energy consumption efficiency of high-efficiency water heaters
This subsidy project sets the following performance requirements for the highly efficient water
heaters that are eligible.
Heat pump water heater
The EcoCute is a Top Runner System-eligible device that meets the 2025 target standard
value (standard energy consumption efficiency) under the Energy Conservation Act.
Hybrid water heater
The system uses both an electric heat pump and a gas auxiliary heat source as heat source
equipment, and is equipped with a hot water storage tank.
The annual hot water efficiency must be 108% or higher according to the standard (JGKAS
A705) set by the Japan Gas and Kerosene Appliances Industry Association.
Domestic fuel cells
The product must be registered on the list of registered devices published by the Fuel Cell
Promotion Association (FCA).
Please refer to the following URL (Japanese) for product requirements.
FCA: http://fca-enefarm.org/registration_apply.html
The program provides subsidies for the costs of installing high-efficiency water heaters, which arenecessary for consumers to reduce energy consumption at home. It is expected that the company
will support the introduction of over 400,000 units next fiscal year.
<Installation of high-efficiency water heaters>(a) Heat pump water heater: 80,000 to 130,000 yen/unit(b) Hybrid water heater: 100,000 to 150,000 yen/unit(c) Home fuel cell: 180,000 to 200,000 yen/unit
As shown above, fixed price for each device/performance.
Reference to the Sector-specific Investment Strategies (Life-related Industry)
https://www.meti.go.jp/press/2023/12/20231222005/20231222005-10.pdf

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Use of proceeds 17: Subsidy for introducing clean energy vehicles(Continued projects from the first series of Japanese Climate Transition Bonds (issued in FY2023))
ICMA GBP
Classification
GB Guidelines
Policy Intention
Background/
Objective

Business summary

Subsidy rate

Related URLs

"Clean transportation""Projects for clean transportation "(C) Creating demand at a national level for economic growth (Subsidies)
The transportation sector accounts for about 20% of Japan's carbon dioxide emissions. The
automotive sector accounts for approximately 90% of the transportation sector, and in order toachieve net-zero by 2050, the spread of clean energy vehicles with excellent environmental
performance is important. It is also important to leverage the spread of electric vehicles in thedomestic market while strengthening the competitiveness of the automobile industry to capture
overseas markets. The purpose is to strengthen industrial competitiveness and reduce carbon
dioxide emissions by supporting the costs of introducing electric vehicles and other vehicles.
Based on the purpose of GX support, from the perspective of promoting the creation of anenvironment in which electrified vehicles can be used sustainably, the amount of subsidies foreach company's vehicles is determined by comprehensively evaluating not only the performanceof the vehicle, but also the efforts of the automakers, such as the development of charging
infrastructure, the securing of an after-sales service system, and the sustainability of the entire life
cycle. – In order to encourage price reductions, for high-priced vehicles (over 8.4 million yen
excluding tax), the calculated subsidy amount is multiplied by a price coefficient of 0.8.
For PHEVs, which directly emit CO2, the CBI sets a threshold of 50g-CO2/km/vehicle/person fortank-to-wheel (drive from the fuel tank to the tires). JCR has confirmed that there are no vehicles
that exceed the threshold among the eligible vehicles for which the proceeds of this Bonds will
be used.
Subsidies are provided to individuals, corporations, local governments, etc. who purchase eligible
vehicles, according to the following criteria.
EV upper limit: 850,000 yen
Light EV upper limit: 550,000 yen
PHEV upper limit: 550,000 yen
FCV upper limit:: 2.55 million yen
https://www.meti.go.jp/policy/mono_info_service/mono/automobile/cev/r5hosei_cev.html

Use of proceeds 18: Accelerating energy/emissions savings of housing through promoting
renovations for insulated windows(Continued projects from the first series of Japanese Climate Transition Bonds (issued in FY2023))
ICMA GBP
Classification
GB Guidelines
Policy Intention
Background/
Objective"Energy efficiency""Projects for energy efficiency"(C) Creating demand at a national level for economic growth (Subsidies)
The Plan for Global Warming Countermeasures sets a goal of reducing GHG emissions from theresidential sector by 66% by FY2030 compared to FY2013, but approximately 80% of existinghouses do not meet current energy conservation standards, making energy conservation
measures for houses an urgent priority. In particular, energy efficiency retrofit that reduce thetransfer of heat between inside and outside the house directly lead to improved operating
efficiency of heating and cooling systems, which account for a large source of CO2 emissions in
the residential sector, and greatly contribute to reducing energy consumption.
By improving the insulation performance of windows of existing houses, which are a major
source of heat loss (about 70% of the total heat loss of houses comes through windows), theburden of heating and cooling costs can be reduced, and lead to CO2 emissions reductions. The
goal is to reduce total CO2 emissions from residential sector by approximately 70% (compared to
FY2013) and lead to ensure energy-saving performance at the level of the ZEH standard*1 as theaverage for all of the existing houses in 2050.
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*1 Definition of ZEH
ZEH is a system that "significantly improves the insulation performance of the exterior envelope,
maintains the quality of the indoor environment through the introduction of highly efficientequipment systems, achieves significant energy savings, and then introduces renewable energy,etc." This refers to housing that aims for zero annual primary energy consumption and meets thefollowing four conditions.
(i) ZEH reinforced exterior standard (*2016 Energy Conservation Standards 1-8 Regions (attention
must be paid to ensuring ηAC value, airtightness, and moisture-proofing performance, etc.)) andUA value [W/m2K] 1.2 Region: 0.40, 3 Region: 0.50 or less, 4-7 Region: 0.60 or less)(ii) Reduce primary energy consumption, excluding renewable energy, by more than 20% fromthe standard primary energy consumption.
(iii) Introduction of renewable energy (regardless of capacity)(iv) Reduce primary energy consumption by 100% or more from standard primary energy
consumption through the addition of renewable energy sources, etc.
* ZEH reinforced exterior standard

Business summary

Area 1(Asahikaw
a City)Area 2(Sapporo
City)

Area 3(MoriokaCity)

Area 4(SendaiCity)

Area 5(Niigata
City)

Area 6(Tokyo)Area 7(Miyazaki
City)

Averageheat transfer
coefficient of
the outer
skin

0.4

0,4

0.5

0.6

0.6

0.6

0.6

Heat transfer
limits ofwindows

1.9

1.9

1.9

2.33

2.33

2.33

2.33

Renovation of insulated windows in existing houses
・Subsidy amount: Fixed amount according to the performance of the windows, etc.
・Target: Window (glass/sash) retrofit(Windows should meet certain standards, such as having a thermal transmission coefficient (Uwvalue) of 1.9 or less, which exceeding satisfies the target standard value of the Top Runner
System for Building Materials 2030.*2*2 Insulation repair standards
Glass

Detached houses
and low-riseapartment
buildings
Mid-to-high riseapartments
Subsidy rate
Related URLs

Inner window

Outsidewindow (Cover
type)

Outsidewindow (Chiselmethod)Uw1.9 or lessUw1.9 or lessUw1.9 or lessUw1.9 or lessUw1.9 or lessUw1.9 or lessUw2.3 or lessUw1.9 or less

Individuals will receive approximately half the amount (up to 2 million yen)https://www.env.go.jp/earth/earth/ondanka/building_insulation/window_00002.html

Use of proceeds 19: Accelerating decarbonizing renovations for commercial buildings
ICMA GBP
Classification
GB Guidelines
Policy Intention"Energy efficiency""Projects for energy efficiency"(C) Creating demand at a national level for economic growth (Subsidies)

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Background/
Objective

Business summary

Subsidy rate
Related URLs

In the buildings sector, it is essential to take measures for existing buildings that have a large
potential for CO2 reduction to achieve 2050 goal, which is to ensure the energy efficientperformance at the level of ZEB standard as the average for all of the existing buildings in 2050.
By supporting the acceleration of the introduction of high-insulation exterior and high-efficiency
air conditioning equipment, the goal is to achieve both strengthening industrial competitivenessand economic growth by reducing prices of the products, and reducing greenhouse gas
emissions from buildings, such as commercial and educational facilities, as well as improving thequality of life, including health and comfort.
(1) Support for accelerating decarbonization renovation of commercial buildings Subsidies forequipment to promote high insulation of the exterior envelope of existing buildings and theintroduction of high-efficiency air conditioning equipment, etc.
Main requirement: Envelope performance after renovation is BPI 1.0 or less. And primary energy
consumption is reduced by 30% or 40% or more depending on the use from the energy
conservation standard (hotels, hospitals, department stores, restaurants, etc.: 30%, offices,
schools, etc.: 40%)
Main target equipment: insulated windows, insulation materials, high-efficiency air conditioning
equipment, high-efficiency lighting (equipment that meets certain standards, such as exceeding
the Top Runner System target value).
(2) Cost of outsourcing support services such as data management and analysis related tosupport for accelerating decarbonization renovation of commercial buildings.
Depending on the renovation content, a fixed amount or a subsidy rate of 1/2 to 1/3
https://bl-renos.jp

Use of proceeds 20: Promotion of electrifying commercial vehicles(Continued projects from the first series of Japanese Climate Transition Bonds (issued in FY2023))
ICMA GBP
Classification
GB Guidelines
Policy Intention
Background/
Objective"Clean Transportation"

Business summary

Subsidies will be provided to the following businesses that have plans to introduce non-fossil energy
vehicles for the introduction of vehicles (BEVs, PHEVs, FCVs, etc.) and charging equipment forelectrifying commercial vehicles (trucks, taxis, buses).

"Projects for clean transportation"(C) Creating demand at a national level for economic growth (Subsidies)
The transportation sector accounts for approximately 20% of Japan's total CO2 emissions, ofwhich approximately 40% comes from commercial vehicles such as trucks. In order to achieve
net-zero by 2050 and the GHG reduction target for FY2030 (a 46% reduction compared to
FY2013), the electrification of commercial vehicles (BEVs, PHEVs, FCVs, etc.) is essential. To thisend, this project will provide subsidies for the electrification of commercial vehicles (trucks, taxis,
and buses) and support the acceleration of their adoption in the early stages of widespread use,
thereby achieving both enhanced industrial competitiveness and economic growth through lower
prices, as well as reduced GHG emissions.
This project will provide subsidies for the introduction of vehicles and charging equipment for theelectrification of commercial vehicles (trucks, taxis, buses) (BEVs, PHEVs, FCVs, etc.), thereby
attracting domestic investment over the next 10 years and achieving the 2030 targets forcommercial vehicles of 8 tons or less: a 20-30% ratio of electric vehicles in new car sales, and forvehicles over 8 tons: an advance introduction of a cumulative 5,000 electric vehicles. Combinedwith separate support for the introduction of passenger cars, this will promote decarbonization of
the entire transportation sector.
Additionally, price competitiveness will be improved by reducing vehicle prices and accelerating
innovation.

*Businesses eligible for subsidies[Trucks](i) Freight truck transportation business operators
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(ii) Persons who use private commercial vehicles (trucks, etc.) for business purposes (limited tovehicles with a gross vehicle weight of over 2.5 tons)(iii) Persons whose business is to rent commercial vehicles (trucks, etc.) (limited to those who rent
commercial vehicles to (i), (ii), and (iv).)(iv) Local government(v) Any other person deemed appropriate by the executive body with the approval of the Ministerof the Environment.
[Taxis and Buses](i) Persons who uses vehicles such as taxis for business purposes(ii) Persons whose business is leasing vehicles such as taxis.
(Limited to those who lend to (i), (iii), and (vii).)(iii) Educational corporations or companies that lend taxis, etc., or bus vehicles that they own or
use to specified passenger motor vehicle transportation business operators, and entrust themwith passenger transportation.
(iv) Persons who lend his or her own taxi, etc. or bus vehicle to a passenger vehicle transportation
business that is a subsidiary company established by the company with an investment ratio of
more than 50%, such as by spinning off a passenger vehicle transportation business.
(v) Persons who use bus vehicles for business purposes(vi) Persons whose business is leasing bus vehicles (limited to those leasing to (v) and (vii))(vii) Local government(viii) Any other person deemed appropriate by the subsidy body with the approval of the Ministerof the Environment.
For PHEVs, which directly emit CO2, the CBI sets a threshold of 50g-CO2/km/vehicle/person fortank-to-wheel (drive from the fuel tank to the tires). JCR has confirmed that there are no vehicles thatexceed the threshold among the eligible vehicles for which the proceeds of this Bonds will be used.

Subsidy rate

Related URLs

[Trucks] EV trucks/van, FCV trucks Subsidy rate: 2/3 of the difference with standard fuel efficiency
vehicles, etc.
[Taxis] EV taxi/FCV taxi/PHEV taxi Subsidy rate: 1/4 of the vehicle price, etc.
[Buses] EV bus/FCV bus subsidy rate: 2/3 of the difference with standard fuel efficiency vehicles,
etc.
[Charging equipment] Subsidy rate: 1/2 etc.
*In principle, this is limited to those introduced together with the above vehicles.
(Trucks) https://www.levo.or.jp/subsidy/hoseiyosan/(Taxis and buses) https://www.ataj.or.jp/index_taxibus.html

Use of proceeds 21: Support focused on the price gap to build supply chains for hydrogen and its
derivatives
ICMA GBP
Classification
GB Guidelines
Policy Intention
Background/
Objective"Circular economy adapted products, production technologies and processes""Projects concerning production technologies and processes and environmentally friendly
products for the circular economy"(D) Cross-cutting efforts to realize GX
Hydrogen is expected to be utilized in hard-to-abate sectors such as steel and chemicals, where
there are few alternative technologies and transition is difficult, as well as in the mobility field andpower generation. Japan's Basic Hydrogen Strategy, revised in June 2023, outlines the following
four points:(i)In addition to the 2030 target of 3 million tons of hydrogen, etc., the target is set at 12
million tons for 2040 and around 20 million tons for 2050 (cost targets will be reduced fromthe current 100 yen/Nm3 to 30 yen/Nm3 in 2030 and 20 yen/Nm3 in 2050).
(ii) A target for the introduction of electroryzer by Japanese-related companies both
domestically and overseas is set at around 15 GW by 2030.
(iii) A support system will be established for building supply chains and developing supply
infrastructure.
(iv) The G7 has agreed on carbon intensity, aiming to transition to low-carbon hydrogen, etc.

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The target costs for 2030 and 2050 under (i) are set at levels that are fully competitive withfossil fuels. The purpose of this project is to promote the social implementation of hydrogenby providing price differential support to reduce the cost of hydrogen supply to the same levelas existing raw fuels.

Business summary

In addition, in May 2024, in order to promote the supply and use of low-carbon hydrogen at an
early stage, and for the government to will take the lead in formulating a basic policy, by
establishing a plan certification system, and taking special measures to support businesses thathave received plan approval (such as "support focusing on price gaps" and "support for basedevelopment") and regulations, the Diet passed the . The Act on Promotion of the Supply andUtilization of Low-Carbon Hydrogen and its Derivatives for Smooth Transition to a Decarbonized,
Growth-Oriented Economic Structure (Hydrogen Society Promotion Act) was enacted, stipulating
The Act also stipulates that businesses supplying hydrogen and other products should takemeasures such as formulating judgment criteria to be addressed.
This project will support all or part of the difference between the "reference price calculated fromthe cost required for the production and supply of low-carbon hydrogen" and the "reference
price that takes into account environmental value and other factors in addition to the existing
raw material and fuel price to be substituted."
The Sector-specific Investment Strategies have been proposed with the following three points as
its core requirements, but the details are yet to be considered.
1) Energy policy (S+3E) perspective
The business must satisfy all of the S+3E criteria, namely, it must be a business that contributes tostable supply (use), is low-cost, contributes to decarbonization, and utilizes decarbonizedresources in an economically rational and efficient manner, with safety as the fundamental
premise.
2) Perspective on realizing GX•The GX policy is based on the "Basic Principles of Investment Promotion Measures Using Japan
Climate Transition Bonds," and prioritizes projects that "contribute to the realization ofstrengthening industrial competitiveness, economic growth, and emission reductions" while"taking into consideration factors such as the need for domestic supply, which is essential toachieving GX, and will support projects with the highest priority."•Taking this into consideration, the government requires the following three items to be included
in business plans seeking support that focuses on price gaps.
(1) In areas and applications where there are few alternative technologies, such as steel
and chemicals, and where transition is difficult, it will also lead the way in raw material
and fuel conversion, involving new capital investment and business innovation.
(2) As a result of (1), it is deemed that the project will contribute significantly tostrengthening the international competitiveness of industries related to the supply andutilization of low-carbon hydrogen, etc.
(3) Based on a concept consistent with international accounting rules, it is expected tocontribute to reducing domestic emissions and keep carbon intensity below a certain
level.
* In order to confirm (1), a unified business plan must be prepared jointly by both the supplierand the user seeking support.
3) Building a self-reliant pilot supply chain•For support focusing on price differentials, projects that are expected to start supply by fiscal
year 2030 should be selected, provided that they are pioneering and expected to be self-reliant,leading to the establishment of subsequent supply chains thereafter.
•Therefore, in order to ensure economic independence, it is requested that supply be continued
for a certain period (10 years) after the 15-year support period ends.
•In addition, in order to appropriately return the knowledge gained from support focusing on
price gaps, the applicant shall also confirm whether there are plans to utilize the know-how of the
supported businesses to implement new related businesses both domestically and overseas inorder to develop new industries and new markets.

Related URLs

https://www.meti.go.jp/press/2023/12/20231222005/20231222005-13.pdf

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﴾4﴿ Capital investment in the GX Acceleration Agency
Use of proceeds 22: Capital investment in the Agency for Promoting the Transition to a CarbonFree Economy (GX Acceleration Agency)
ICMA GBP
Classification

GB Guidelines

Policy Intention
Background/
Objective

Business summary"Renewable energy", "Energy efficiency", "Clean transportation", "Low carbon/decarbonizedenergy," "Circular economy adapted products, production technologies and processes and/or
certified eco-efficient products", "Environmentally sustainable management of living natural
resources and land use".
"Projects for renewable energy," "Projects for energy efficiency," "Projects for cleantransportation," "Projects concerning production technologies and processes andenvironmentally friendly products for the circular economy," and " Projects for the sustainable
management of living natural resources and land use."(D) Cross-cutting efforts to realize GX
As mentioned above, as the investment race to realize GX accelerates on a global scale, Japan willneed to invest more than 150 trillion yen in GX from both the public and private sectors over the
next 10 years in order to simultaneously achieve international commitments such as net-zero by2050 while strengthening industrial competitiveness and achieving economic growth. The GX
Promotion Act was enacted based on the "Basic Policies for Realizing GX" compiled by the GX
Implementation Council in December 2023. The law codifies (1) the formulation andimplementation of a GX promotion strategy, (2) the issuance of GX economy transition bonds,(3)the introduction of growth-oriented carbon pricing, (4) the establishment of a GX Acceleration
Agency, and (5) progress evaluation and necessary review. In line with this, the purpose of thisinitiative is to raise capital to establish the GX Acceleration Agency.
The GX Acceleration Agency is defined in the Strategy for Promoting the Transition to a CarbonDecarbonized Growth-Oriented Economic Structure (GX Promotion Strategy) as an agency thatcarries out operations related to the operation of the emissions trading system and the collectionof charges and levies (including part of the support for upfront investment).
The agency is scheduled to begin operations on July 1, 2024. The details of the work disclosed at
the time of evaluation are as follows:
Initially established: Financial support business (debt guarantees, etc.)
2026~ Add CP related business
2028~ Collecting the GX-surcharge on fossil fuel supply
2033~ Allowance auctioning will be held, and specific business contributions will be collected.
*To promote GX, corporate collaboration efforts and research and development will also be
implemented.
This Bonds will be primarily used for financial support operations (debt guarantees, etc.) that arescheduled to begin immediately after the company's establishment.
The basis of this financial support business is to identify risks that private financial institutions
cannot truly address when implementing new GX technologies in society, when there aretechnical, completion, and demand risks and a high level of uncertainty, and to compensate forthose risks. In addition, risk compensation will be provided, taking into account that the funding
source will be GX Economy Transition Bonds, which can be used in the same way as budgetarymeasures.
The following five points have been proposed as standards that the Agency should follow whenproviding financial support.
(1) Activities that are aligned with government policies such as the GX Promotion Strategy and
the Japan Climate Transition Bond Framework(2) Social implementation of new technologies or businesses utilizing them(3) There are risks that cannot be fully addressed by private financial institutions, etc., and theserisks need to be supplemented.
(4) Sustainability of the recipients of support, contribution to GX policy, stimulating private
financing, contributing to the development of new financing methods, and creating quality jobs
(5) Build and commit to a system to efficiently, effectively and reliably implement support
projects
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Related URLs

(Source: The 11th GX Implementation Council materials)
https://www.meti.go.jp/press/2023/12/20231222005/20231222005-13.pdf
https://www.cas.go.jp/jp/seisaku/gx_jikkou_kaigi/dai11/siryou1.pdf

2. Negative Impacts on the Environment
Among the uses of funds covered by this Bonds, for research and development funds, it will checkfor potential negative impacts on the environment and society during the project selection andevaluation process at the time of review when contributing to each R&D expense. It will also
confirm mitigation measures as necessary. In addition, when implementing subsidy programs,
individual business operators identify negative impacts on the environment and society based onlaws and regulations such as environmental impact assessment, and ensure that necessary
mitigation measures are taken.
As stated in Chapter 2 of this report, avoidance of lock-in to fossil fuels, consideration for a fairtransition, and consideration of DNSH will be appropriately considered, and additional measuresand mitigation measures will be considered as necessary.
In consideration of the impact on the environment and society, the Japan Climate Transition Bond
Framework has established the following exclusion criteria. JCR has confirmed that the use ofproceeds from this Bonds does not fall under these exclusion criteria.
Businesses aimed at manufacturing, selling, or distributing weapons of mass destruction suchas nuclear weapons, chemical weapons, or biological weapons, or inhumane weapons suchas anti-personnel landmines; Businesses that manufacture products and provide services that
support the manufacture or sale of non-human weapons
Businesses related to coal mining, refining, and transportation
Business related to owning or operating gambling facilities/businesses
Businesses related to forced labor that do not comply with the laws and regulations of thecountry where the business is located and involve inappropriate relationships such as bribery,corruption, extortion, embezzlement, etc.
Businesses related to transactions that may cause social issues such as human rights and theenvironment
Based on the above, JCR evaluates that the negative impact on the environment and society has
been taken into account and appropriate measures have been taken regarding the use of theproceeds of this Bonds.

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3. Consistency with SDGs
JCR evaluated the use of proceeds contributes to the following SDGs’ goals and targets inreference to ICMA's SDGs mapping.
Goal 7: Affordable and clean energy
Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix
Target 7.3: By 2030, double the global rate of improvement in energy efficiency
Goal 8: Decent work and economic growthTarget 8.2: Achieve higher levels of economic productivity through diversification, technologicalupgrading and innovation, including through a focus on high-value added and labour-intensive
sectors
Target 8.4: Improve progressively, through 2030, global resource efficiency in consumption andproduction and endeavour to decouple economic growth from environmental degradation, in
accordance with the 10-Year Framework of Programmes on Sustainable Consumption and
Production, with developed countries taking the lead
Goal 9: Industry, innovation and infrastructure
Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure, including regional andtransborder infrastructure, to support economic development and human well-being, with a focus
on affordable and equitable access for all
Target 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raiseindustry’s share of employment and gross domestic product, in line with national circumstances, anddouble its share in least developed countries
Target 9.4: By 2030, upgrade infrastructure and retrofit industries to make them sustainable, withincreased resource-use efficiency and greater adoption of clean and environmentally soundtechnologies and industrial processes, with all countries taking action in accordance with theirrespective capabilities
Target 9.5: Enhance scientific research, upgrade the technological capabilities of industrial sectors inall countries, in particular developing countries, including, by 2030, encouraging innovation andsubstantially increasing the number of research and development workers per 1 million people andpublic and private research and development spending
Goal 11: Sustainable cities and communities
Target 11.6: By 2030, reduce the adverse per capita environmental impact of cities, including by
paying special attention to air quality and municipal and other waste management
Goal 12: Responsible consumption and production
Target 12.5: By 2030, substantially reduce waste generation through prevention, reduction, recycling
and reuse
Goal 13: Climate action
Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural
disasters in all countries
Goal 15: Life on land
Target 15.2: By 2020, promote the implementation of sustainable management of all types of forests,
halt deforestation, restore degraded forests and substantially increase afforestation andreforestation globally

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Goal 17: Partnerships for the goals
Target 17.17: Encourage and promote effective public, public-private and civil society partnerships,building on the experience and resourcing strategies of partnerships

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Evaluation Phase 2: Management, Operation andTransparency Evaluation

m1

I. Selection Criteria and Processes of the Use of Proceeds
JCR's Key Consideration in This Factor
In this section, JCR will confirm the objectives to be achieved through this evaluation target, theadequacy of the green project selection criteria and processes, and whether a series ofprocesses will be appropriately disclosed to investors.
▶▶▶ Current Status of Evaluation Targets and JCR Evaluation

An organization was established with cross-ministerial expertise for the goals, green project selection
criteria and processes in this Bonds and the GX Implementation Council, chaired by the Prime Minister
under the leadership of the Cabinet Office is appropriately involved, and all disclosures were made about
these conference bodies and their operations; therefore, JCR has evaluated that the transparency is also
ensured.

1. Goal
Basic Policy for the Realization of GX 46

The main plans and laws and regulations to achieve net-zero by 2050 and a 46 per centreduction in GHG emissions in FY2030 ﴾from FY2013﴿ are as follows:-

Plan for Global Warming Countermeasures-

The 6th Strategic Energy Plan-

Basic Policy for the Realization of GX ﴾GX Implementation Council﴿

-Act for Promoting a Smooth Transition to a Decarbonized Growth-Oriented Industrial
Structure ﴾GX Promotion Act﴿-Act for Partial Revision of the Electricity Business Act and Other Acts for Establishing
Electricity Supply Systems for Realizing a Decarbonized Society ﴾GX Decarbonization
Electricity Act﴿-Strategy for Promoting Transition to a Decarbonized, Growth-Oriented Economic Structure﴾GX Promotion Strategy, included Sector-specific Investment Strategies ﴾roadmaps﴿﴿

It is important for the Government of Japan to reduce CO2 emissions from energy sources, which
account for roughly 90 per cent of GHG reductions. The Government of Japan discussed its
specific reduction efforts in the GX Implementation Council, and the GX Promotion Act wasenacted. The issuance of Japan Climate Transition Bonds, including this Bonds, is a measure
stipulated in Article 7 of the GX Promotion Act, and is clearly positioned as part of the Governmentof Japan's policy toward the realization of decarbonized society.
——————————————
46

Created by JCR from the basic policy for the realization of GX
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2. Selection Criteria
In the framework evaluation published in the evaluation report on November 7, 2023, JCR
confirmed that the selection criteria set by the Government of Japan in the Japan Climate
Transition Bond Framework are consistent with the content stipulated in the GX Promotion
Strategy. The project is evaluated as being appropriate and has an environmental improvement
effect.
The use of proceeds set out in this Bonds was included in the Sector-specific Investment Strategies
﴾roadmaps﴿ however, the individual eligibility criteria ﴾environmental benefits﴿ will be examined in
the working group with experts invited hereafter. JCR has evaluated that the project selection
criteria are appropriate.

3. Process
In selecting projects for which the proceeds of this Bonds, the alignment is to be confirmed in
the liaison meeting with relevant ministries and agencies; therefore, JCR has evaluated that theprocess is appropriate.
The Government of Japan's goals, selection criteria and processes for this Bonds are disclosed in
the Japan Climate Transition Framework and this evaluation report. The Government of Japanplans to disclose the target projects on its website when issuing this Bonds based on the Japan
Climate Transition Framework. Therefore, JCR has evaluated that transparency to investors is
ensured.

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II. Management of proceeds
JCR's Key Consideration in This Factor
It is usually assumed that the method of managing the proceeds financed widely varies
depending upon the finance raisers. JCR will confirm that the proceeds financed based on thisevaluation target are surely allocated to green projects, and that mechanisms and internal
systems are in place so that the allocation can be easily tracked and managed.
JCR will emphasize whether the proceeds financed by this evaluation target are scheduled to beearly used for green projects and it will also give importance to the evaluation of the
management/operation methods of unallocated proceeds.
▶▶▶ Current Status of Evaluation Targets and JCR's Evaluation

JCR has evaluated that the Government of Japan's proceeds management system has been properly
established and is highly transparent since the method of managing the proceeds financed will be
disclosed in this evaluation report and the framework has been already disclosed on its website.
The proceeds financed by this Bonds will be entered into the energy supply and demand accountof the special account for energy measures immediately after the issuance of the bonds, and will
be executed from the Special Account for Energy Measures in accordance with the adoption of
the R&D project and the finalization of the subsidy project. All management of the fund allocation
status is carried out in the accounting system dedicated to GX Economy Transition bonds, and theexecution status is carried out in the Cabinet GX Office established in the Cabinet Office.
The plan for proceeds allocation is, in principle, subject to projects whose operations will begin
in and after the fiscal period concerned or proceeds was already allocated and all proceeds willbe allocated in the fiscal period in question and in cases where unallocated proceeds are
generated, they shall be managed in cash. Accordingly, JCR has evaluated the plan as adequate.
The management of proceeds will be inspected by the Audit Office, an independent body, in thesame way as the normal budget process. The decision on the use of proceeds and the allocation
will be confirmed in the liaison meeting with relevant ministries and agencies. The ledger on the
management of proceeds financed will be retained until the repayment of the target Bonds andthe retention period based on laws and regulations.
Consequently, JCR has evaluated that the Government of Japan's proceeds management system
has been properly established, and that the management method of the proceeds financed will
be disclosed in this evaluation report; therefore, it is highly transparent.

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III. Reporting
JCR's Key Consideration in This Factor
JCR will evaluate whether the disclosure system to investors before and after financing based on
this evaluation target is planned in a detailed and effective manner in this section.

▶▶▶ Current Status of Evaluation Targets and JCR Evaluation

JCR has evaluated that the Government of Japan's reporting will be appropriately disclosed for both theallocation of proceeds and the environmental benefits to investors.
Reporting on the allocation of proceeds
The Government of Japan will annually disclose the contents set out in Japan Climate Transition
Framework regarding the allocation of proceeds financed by Japan Climate Transition Bonds on
its website. In cases where any significant change is made in the financial situation after the fullamount of the proceeds financed were allocated, the disclosure shall be made in a timely manner.
Reporting on environmental benefits
The Government of Japan plans to annually disclose the contents set forth in Japan Climate
Transition Framework on its website as reporting on the environmental benefits of eligible projects.
These disclosure items will quantity the progress and the expected CO2 reduction effects for R &D and the environmental benefits, such as the expected CO2 reduction effects by implementing
the subsidy program for the program in refining the Sector-specific Investment Strategies and thedisclosure will be made within the realm of possibility. The progress and environmental benefits
for impact reporting will be updated at least until the end of the individual projects, and theinformation will be disclosed on the website for the repayment period.
Accordingly, JCR has evaluated that the reporting system by the Government of Japan isadequate.

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IV. Efforts to Address Organizational Environmental Issues
JCR's Key Consideration in This Factor
JCR will evaluate whether the top finance raiser positions environmental issues as important
issues with high management priority, or whether policies/processes/criteria for selecting
eligible projects are clearly positioned by establishing divisions that specialize in environmental
sectors or collaborating with external organizations in this section.

▶▶▶ Current Status of Evaluation Targets and JCR Evaluation

JCR has confirmed that the Government of Japan has positioned the realization of decarbonized society
as one of Japan's important issues and has stipulated laws and regulations for the decarbonization of GX
and energy sources, and is working on it as an important priority issue for the government. JCR has
evaluated in practical that a liaison meeting with relevant ministries and agencies has been establishedunder the initiative of the GX Implementation Council, headed by the Prime Minister, and thegovernment as a whole is working on it, and the GX Implementation Council and the working groupresponsible for the concrete examination of Sector-specific Investment Strategies has invited experts
from academic, financial and industrial sectors to build a system for repeated multifaceted examinations.

Please refer to Chapter 2 2.1 and 2.2 in this evaluation report for details on the current status of
this evaluation target.

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Evaluation Phase 3: Evaluation Result(Conclusion)

Green 1(T)JCR assigned "gt1" to the preliminary appraisal of "Greenness/Transition Evaluation ﴾Use ofProceeds,﴿" "m1" to the preliminary appraisal of "Management, Operation and Transparency
Evaluation" based on JCR Green Finance Evaluation Methodology. As a result, JCR assigned"Green 1﴾T﴿" to the "JCR Preliminary Climate Transition Bond Evaluation" for this Bonds. This
Bonds meet the criteria for the items required in the Green Bond Principles, the Green Bond
Guidelines, the Climate Transition Finance Handbook, and the Basic Guidelines on Climate
Transition Finance.

Management/operation/transparency evaluation

Greenness/ Transition

Evaluation

m1

m2

m3

m4

m5

gt1

Green 1(T)Green 2(T)Green 3(T)Green 4(T)Green 5(T)gt2

Green 2(T)Green 2(T)Green 3(T)Green 4(T)Green 5(T)gt3

Green 3(T)Green 3(T)Green 4(T)Green 5(T)

N/A

gt4

Green 4(T)Green 4(T)Green 5(T)

N/A

N/A

gt5

Green 5(T)Green 5(T)

N/A

N/A

N/A

Responsible Analyst: Atsuko Kajiwara, Kosuke Kajiwara, Tomohiko Inamura, Takuto Toda, Haruna Goto

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Important Explanation on this Evaluation
1. Assumptions, Significance, and Limitations of JCR Climate Transition Finance Evaluation
JCR Climate Transition Finance Evaluation provided by Japan Credit Rating Agency (hereinafter referred to as "JCR")
covers the policies set out in the JCR Climate Transition Finance Evaluation as an evaluation target and states JCR's
comprehensive opinion on the extent to which allocation is made to the Green/Transition Project defined by JCR andon the degree to which the efforts to ensure the management, operation and transparency on the use of proceeds atpresent. It is therefore not intended to evaluate the specific environmental benefits and the management/operation
system/transparency on the use of proceeds, such as individual bonds or borrowings implemented based on the policies.

JCR, in principle, does not directly measure the environmental benefits of proceeds financed through the green/transition
finance although JCR confirms that the environmental benefits are quantitatively and qualitatively measured by an issuer orborrower (hereinafter the issuer and borrower are collectively referred to as a "finance raiser") or the third parties requestedby the finance raiser.

2. Methodology Used in this Evaluation
The methodology used to make this evaluation is posted as JCR Green Finance Evaluation Methodology in the Sustainable
Finance/ESG section on the JCR's website at https://www.jcr.co.jp/
3. Relation with Conduct for Credit Rating Business
The conduct of assigning and providing JCR Green Finance evaluation is performed by JCR as its related business and isdifferent from the conduct for the credit rating business.
4. Relation with Credit RatingThis evaluation is different from a credit rating and does not commit to providing a predetermined credit rating or makeavailable for inspection.
5. Impartiality when Evaluating JCR Green Finance
There are no capital or personnel relationships that could create a conflict of interest between this evaluation target and JCR.
Points to Consider

The information contained in this document was obtained by JCR from finance raisers and accurate and reliable sources. Such information however may be mistaken
for artificial, mechanical or other reasons. Therefore, JCR makes neither representation nor warranty, express or implied, as to the accuracy, result, eligibility, timeliness,completeness, merchantability, or fitness for any particular purpose of such information, and JCR assumes no responsibility for any errors, omissions or consequencesof using such information. JCR shall not be liable for any loss of opportunity and extraordinary, indirect, incidental or consequential damage of any kind, including any
loss of money, which result from any use of such information under any circumstances, whether contractual liability, tort liability, negligence or other causes of liability,
and whether such damage is foreseeable or unforeseeable. JCR Green Finance Evaluation does not express any opinion on various risks (credit risk, price fluctuation
risk or market liquidity risk) on the green finance that is the subject of evaluation. JCR Green Finance Evaluation is a comprehensive opinion of JCR at present and does
neither represent facts nor make any recommendation regarding risk assessments or decisions on the purchase, sale or holding of individual bonds or commercial paper.
JCR Green Finance Evaluation may be modified, suspended or withdrawn due to changes in information or lack of information. All rights pertaining to this document,
including data from the JCR Green Finance Evaluation is prohibited from being reproduced, modified or otherwise altered without the permission of JCR.

Terminology

JCR Climate Transition Finance Evaluation: The assessment of the extent to which proceeds financed by the Climate Transition Finance are allocated to green/transition
finance defined by JCR and the degree of management, operation and transparency related to the use of proceeds for the green/transition finance. The evaluation is madeon a scale of five in the order from top to bottom with evaluation symbols, Green 1 (T), Green 2 (T), Green 3 (T), Green 4 (T), Green 5 (T)Status of Registration as External Evaluator of Sustainability Finance・Ministry of the Environment: Registered as External Reviewer of Green Finance・ICMA (observer registration as an external evaluator with the International Capital Market Association)
・UNEP FI Positive Impact Financial Principles Working Group Member
・Climate Bonds Initiative Approved Verifier

Other Registration Status as Credit Rating Agency
・Credit Rating Agency: the Commissioner of the Financial Services Agency (Credit Rating) No. 1
・EU Certified Credit Rating Agency
・NRSRO: JCR registered with the following four of the five credit rating classes of the Nationally Recognized Statistical Rating Organization ("NRSRO") as defined by
the U.S. Securities and Exchange Commission: (1) financial institutions, broker/dealers, (2) insurance companies, (3) general business corporations and (4) national/
local governments. In cases where disclosure is required based on Rule 17g-7(a) of the Securities Exchange Act, such disclosure is attached to News Release on the
JCR webpage at https://www.jcr.co.jp/en/.

For inquiries, please contact us below
TEL: 03-3544-7013 FAX: 03-3544-7026
Information Service Department

Japan Credit Rating Agency, Ltd.
Jiji Press Building, 5-15-8 Ginza, Chuo-ku, Tokyo 104-0061, Japan
Tel. +81 3 3544 7013, Fax. +81 3 3544 7026

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