Japan Securities Finance Co., Ltd.
Integrated Report2023

Corporate Message

Be unique. Be a pioneer.
Management Philosophy
As an institution specializing in securities finance, JSF has a mission to contribute to the developmentof the securities and financial markets by proactively meeting the diverse needs of the securities andfinancial sectors and to enhance the long-term interests of market participants and users, while always
maintaining a keen awareness of its public role.

Vision of the Future Targeted by JSF
As Japan’s only securities finance company supporting the infrastructure functions of securities andfinancial markets, JSF aims to be a distinct and unique company that operates with a high degree of
agility and flexibility. It will achieve sustainable growth and enhance its corporate value, while maintaining
strong financial soundness and contributing to the development of securities and financial markets.

Long-Term Direction
As Japan’s only securities finance company, JSF will continue to agilely and flexibly address the tradingneeds of securities and financial market participants. Through its contributions to market development,
JSF will seek to concentrate the collective efforts of its Group companies to sustain growth and enhance
its corporate value, while maintaining strong financial soundness.
Under this management direction, JSF will continue striving to steadily strengthen its earnings base andpursue stable and steady improvement of its capital efficiency, while remaining mindful of the cost ofequity, and will continue to work toward the steady improvement of ROE, keeping the 8% level in mind.
At the same time, with regard to shareholder returns, JSF will continue to maintain a total payout ratio of
100% during the period of its Seventh Medium-Term Management Plan (FY2023–FY2025), and strive toenhance shareholder returns thereafter as well.
Through these management efforts, JSF aims to establish a price to book ratio (PBR) exceeding 1.0 times.
In addition, under its organizational design as a Company with a Nominating Committee, etc., JSF will
strive to strengthen its corporate governance by tackling sustainability issues while focusing on further
improvement of the effectiveness of deliberations by its Board of Directors and respective committees,
the further enhancement of information disclosure, and the development of a robust human capital base.

Contents
About Us
Corporate Message/Management
Philosophy/Vision of the Future
Targeted by JSF/
Long-Term Direction ..................... Inside front cover
The JSF Group at a Glance ............................................. 2
JSF Group Highlights ........................................................ 4
Financial and Non-Financial Highlights ...................... 6
Value Creation Story
Message from the President ........................................ 8
History of the JSF Group .............................................. 12
Value Creation Process.................................................... 14
Message from the Chairperson of the Board........ 16
Dialogue with Newly Appointed Outside Directors..... 18Group Management Strategy
Seventh Medium-Term Management Plan ............ 20
Message from the Officer Responsible for
Corporate Strategy ................................................... 22
Corporate Strategy ....................................................... 26
Foundation Supporting Corporate Value
Corporate Governance................................................. 38
Compliance and Internal Audits ............................... 48
Officers .............................................................................. 50
Sustainability Initiatives................................................. 52
Addressing Climate Change and Environmental
	Protection (Initiatives Based on the TCFD
Recommendations) ................................................... 56
Risk Appetite Framework/Risk Management........ 59
Corporate Data
11-Year Highlights (Consolidated) ........................... 64
Financial Section ............................................................ 66
Shareholder and Investor Information ................. 128
Company Information ............................................... 129
Editorial Policy
Japan Securities Finance has issued this integrated report so that investors
and other stakeholders may gain an understanding of its efforts to create
sustainable value.
We hope that this report deepens understanding of the JSF Group,
whose mission is to contribute to the development of the securities market.
Report Coverage
Japan Securities Finance Co., Ltd. and its consolidated subsidiaries(“the JSF Group”)
Reporting Period
April 1, 2022 to March 31, 2023
(Some sections include information regarding matters occurring before
or after the reporting period.)
Reference Guidelines∙ IFRS Foundation, International Integrated Reporting Framework∙ Ministry of Economy, Trade and Industry, Guidance for Collaborative
Value Creation 2.0
Cautionary Note Regarding Forward-Looking Statements
Forward-looking statements such as performance forecasts in this report
are made by the Company based on information available at the timeof creation and include risks, uncertainties and other factors. Therefore,
actual results may differ significantly from forecasts due to changes invarious factors.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

1About Us

The JSF Group at a GlanceGroup Composition
The JSF Group is a corporate group that operates in sync with the securities and financial markets. The Group is composedof Japan Securities Finance Co., Ltd (JSF), which responds to the diverse needs of financial institutions and investors as aprovider of securities and financial market infrastructure, JSF Trust and Banking Co., Ltd., which provides highly distinctive
trust services, and Nihon Building Co., Ltd., which provides favorable office environments for Group companies andother companies.

JSF Group Operating Gross Profit* by Business (FY2022)

Securities finance business
Trust banking business
Real estate leasing business

Real estate leasing business

8.2%

Loans for margin transactions¥1.1 billion

21.8%¥3.0 billion

Trust banking business

18.5%¥2.6 billion

Consolidated operating
gross profit

Securities investment
and other¥13.7 billion

8.2%

Securities financing¥1.4 billion

41.4%¥5.8 billion*F igures for operating gross profit by business are on a
non-consolidated basis (before elimination of the effectsof consolidation), therefore the sum of these figures does
not correspond to consolidated operating gross profit.

Loans for negotiable margin transactions 2.2%
¥0.1 billion
Equity repo transactions
25.9%
Bond repo andgensaki transactions
57.0%¥3.3 billion

Securities financing
operating gross profit¥1.5 billion¥5.8 billion

Loans to retail 6.4%
¥0.4 billion
General stock lending 8.5%
¥0.5 billion

2

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Securities Finance Business: Japan Securities Finance Co., Ltd.

See page 26 for details.

Japan Securities Finance’s core business is securities financing (lending funds and securities to financial institutions, etc.), which iscentered on loans for margin transactions.
The loans for margin transactions business contributes to the smooth circulation of stocks and the proper price discovery
process in the market. We lend securities companies the funds and stocks necessary for standardized margin transaction.
An element of securities financing, bond repo and gensaki transactions is the business of intermediary lending needs andborrowing needs, mainly for government bond repo and gensaki transactions (transactions in which bonds are exchanged forcash). This business also covers equity repo transactions (in which cash is deposited in exchange for borrowing stock certificatesheld by financial institutions) and general stock lending (in which stock is procured from institutional investors and others, andlent to securities companies that mainly require it for trading).

JSF Business Overview
Funds

Securities

Borrowers

Loans for Margin Transactions(Margin Loans/Stock Loans)Standardized Margin
Transactions Business

Investors
Securities
companies

Securities Financing
SubsidiaryBusinesses

Equity repo transactions

Loans for negotiablemargin transactions

Bond repo andgensaki transactions

Loans to retail

Financial
institutions

General stock lending

Lenders

Money market, etc.

Institutional investors,
securities companies, etc.

Market Scale by Business
Loans for Margin Transactions Business (Margin Loans/Stock Loans)Standardized margin transaction buying balanceApprox. ¥Standardized margin selling balance

2,060 billion

Approx. ¥600 billion

Source: Publicly available data from domestic stock markets, including proprietary trading systems (as of March 31, 2023)

Bond Repo and Gensaki Transactions

Equity Repo Transactions; General Stock Lending and Other

Total bond repo and gensaki transactions market balance

Stock (collateral) lending transactions balanceApprox. ¥285 trillion

Approx. ¥17 trillion

Source: Publicly available data from the Japan Securities Dealers Association (as of March 31, 2023)

Trust Banking Business: JSF Trust and Banking Co., Ltd.

See page 32 for details.

Based on its management philosophy of contributing to the development of the securities and financial markets, JSF Trust andBanking Co., Ltd., focuses on providing custodial trust banking services, such as segregated management of customer assets
required by securities companies. With the increasing range of sectors in which customer asset preservation trusts are obligatory,
JSF Trust and Banking offers a wide range of trust products for customers in different industries.

Overview of Customer Asset Preservation Trusts
Calculation of funds required for segregated management

JSF Trust andBanking

Trust deposit additions
Trust deposit cancellations

Financial instrumentcompanies, etc.

Deposits of funds

Investors
Repayments of funds

Real Estate Leasing Business: Nihon Building Co., Ltd.
Japan Securities Finance Co., Ltd.

See page 33 for details.

Integrated Report 2023

3

About Us

JSF Group Highlights
We aim to achieve both stability and growth as we support
the infrastructure of the securities and financial markets.
Under the Medium-Term Management Policy announced in November 2021, we set ROE goals of 4% and 5%,
respectively, for the Sixth Medium-Term Management Plan (FY2020–FY2022) and Seventh Medium-Term Management
Plan (FY2023–FY2025). In FY2022, the final year of the Sixth Medium-Term Management Plan, we achieved ROE of
4.36%, thereby meeting our intermediate goal. Under the Seventh Medium-Term Management Plan, ourgoal for ROE is to maintain it at a stable level above 5% by FY2025 and aim further
improvements. Likewise, our goal for consolidated ordinary profit is to maintain it at a stablelevel over ¥10 billion and aim for further improvements as well. To achieve the new
management goals, we plan to accelerate and enhance management
reform initiatives that we have implemented, but we will also strive toimprove our corporate vitality and organizationaltransformation capabilities by training personnel
and securing diversity.
Sixth
Medium-Term
Management Plan
(through FY2022)

Medium-Term
Management
PolicyGoal

Results
ROE and Profit

FY2022 goal

ROE

4.0%

(%)

(Millions of yen)

5,966

5.0

6,000

5,174
4.0

3,971

3,556

4.36
3.79

3.0

4,000

2,000

3.03
2.66

2.0

0

2019

2020

2021

2022

(FY)

Sixth Medium-Term Management Plan
ROE (Left axis)  

FY2022 result

ROE

4.36%

Profit (Right axis)

Total Shareholder Return (Index*)
(%)
180

175.9
156.3

160
140

Capital Adequacy Ratio

120

As of March 31, 2023: 496.1%

100(Based on the Financial Instrument and Exchange
Act (FIEA), utilizing securities company calculation
methods)

We maintain equity capital at a levelthat exceeds the standard required forsettlement/payment systems.

4Japan Securities Finance Co., Ltd.

132.9
94.9
92.8

85.9

2019

2020

124.5

131.8

122.1

82.2

80

Total shareholder return (TSR)  

2021

2022

TOPIX returns (incl. dividends)* Capital gain + Dividends. Figure for March 31, 2018 = 100%.

Integrated Report 2023

2023
(As of March 31)

Vision of the Future Targeted by JSF
As Japan’s only securities finance company supporting
the infrastructure functions of securities and financial
markets, JSF aims to be a distinct and unique company
that operates with a high degree of agility and flexibility.

SeventhMedium-Term
Management Plan
(through FY2025)

Long-Term
Management
VisionIt will achieve sustainable growth and enhance its
corporate value, while maintaining strong financial
soundness and contributing to the development of
securities and financial markets.

See page 9 for details.

See page 20 for details.

Goals

Management Principles

By FY2025, maintain

1. Develop a strong governance system
2. M
 aintain solid equity capital and enhance
returns to shareholders
3. S trengthen and expand finance- andsecurities-related services
4. Strengthen the human resource base

ROE of5.0%

10 billion

Consolidated ordinary profit over ¥and aim for further improvements.

Main Initiatives•∙ Strengthen and Expand the Earnings Base Centered on Securities Financing

As a result of our policy of approaching issuing companies, the number of loanable stock issues has steadily increased from 2,522 at the endof FY2019 to 2,702 at the end of FY2022.
∙ As a result of diversifying revenue sources, basic profit* rose from ¥4,887 million in FY2019 to ¥8,610 million in FY2022.
*E stimated ordinary profit calculated as the sum of assumed average gross operating profit of the loans for margin transactions business (over the previous three years) and thegross operating profit of businesses other than the loans for margin transactions business (in FY2022).

∙ B y increasing the number of clients and flexibly responding to transaction needs, we have made securities financing a pillar of revenue growth.

In addition to cultivating new clients, such as foreign financial institutions or funds, we have expanded the range of securities we handle (including
foreign securities), and flexibly responded to client needs, such as by using tri-party services for repo transactions, and total return swaps (TRS).
∙ JSF Trust and Banking diversified its preservation trust product lineup in response to the obligation to preserve customer assets. Also, it
expanded its asset-backed loan (ABL) trusts to meet the funding needs of regional financial institutions.

•∙ Initiatives for New BusinessStarted fund administration services
J SF acquired regulatory approval to provide fund administration services for private equity concurrently to its current operations, and now offers
services ranging from fund set-up support for fund management companies, to operational support, such as post-investment accounting.
∙ We started empirical research with the University of Tokyo into securities financing transactions using blockchain technology.
In June 2021, JSF started joint empirical research with the School of Engineering of the University of Tokyo to verify the applicability ofblockchain technology to securities financing transactions.
In January 2022, lectures on the financial and securities markets and industrial-academic collaboration were held at the school.
In May 2023, a report was published summarizing the results of the empirical research.

•∙ Enhancement and Strengthening of Corporate GovernanceJ SF has established a governance system in consideration of Japan’s updated Corporate Governance Code and the transition to the Tokyo
Stock Exchange Prime market.
We have formulated and disclosed approaches to the composition and other aspects of the Board of Directors (such as increasing thenumber of outside directors), as well as a director skill matrix.
We have disclosed our cost of equity and formulated and disclosed approaches related to our business portfolio.
We have taken action to address sustainability issues (international cooperation with the Indonesian securities industry, TCFD disclosure, etc.).

 perational Efficiency Enhancements and Realization of Diverse Work Styles• OthroughProactive Use of Telework and Other Initiatives∙ In addition to the active promotion of the use of digital technologies such as robotic process automation (RPA), the establishment of teleworkhas helped us to achieve more efficient business operations and flexible work styles.

∙ T o respond to developments in our business that we intend to make more diverse going forward, we are promoting flexibility in employee
training, and hiring experienced personnel.

∙ We have enhanced our childcare and nursing care support system to promote work-life balance.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

5About Us

Financial and Non-Financial Highlights
Financial Highlights
Operating Revenue

Operating Profit

営業収益

営業利益

(Millions of yen)

(Millions of yen)

45,0007,000

42,518

6,000

6,235

6,354

2021

2022

36,00029,101

5,000

30,924 30,138

4,777
3,981

4,129

(FY)

2018

2019

 rofit Attributable to Owners of Parent
P
and ROE

Net Assets

27,0004,000

24,321

3,000
18,000
2,000
9,000

1,000

0

0
2018

2019

2020

2021

2022

(Millions of yen)

(%)

8,000

4.36

6,000

2.65

6

150,000

4.5

140,000

140,793
137,996

3

5,174
2,000

3,765

3,556

2018

2019

0

0

Profit attributable to owners of parent (Left axis)

6

126,687
1.5

2021Japan Securities Finance Co., Ltd.

130,000

5,966

3,971

2020

135,728

135,166

3.03
2.66

2022

(FY)

(Millions of yen)

3.79
4,000

2020

(FY)

ROE (Right axis)

Integrated Report 2023

120,000

0
2018

2019

2020

2021

2022

(FY)

Non-Financial Highlights
Bond Repo and Gensaki Transaction Value

 verage Outstanding Balance of LoansA
for Margin Transactions(Billions of yen)(Billions of yen)

597,178.8

600,000

400
366.1
350.1

500,000
454,242.8

300,000
200,000
100,000

300

291.3
265.3

402,588.9

400,000

300.6
283.1

284.2
261.6

254.7

219.9 224.6

200

267,406.0

175.5

173,299.1
155,993.8
128,058.1

188.9

100

0

0
2016 2017 2018 2019 2020 2021 2022

2017

2016

(FY)

Margin loans irectors and Ratio of Outside Directors
Dto Total Board of Directors(No. of directors)

8

60

60

6

4

333.9

71

71

7

7

2
5

5

2

2

2

3

3

2020

2021

2

(%)

70.0

2018

2019

2020

2021 2022 (FY)

Stock loans mployees (Non-consolidated, includingEseconded employees)(No. of employees)

300

252

251

247

241

247

78

79

77

78

82

174

172

170

163

165

2019

2020

2021

2022

2023

52.5
200
35.0

5

5

2022

2023

0

100
17.5

0

0

(FY)

(As of April 1)
No. of outside directors (Left axis)
No. of inside directors (Left axis)
Ratio of outside directors to total Board of Directors (Right axis)

Men

Women

Japan Securities Finance Co., Ltd.

Integrated Report 2023

7

Value Creation Story

Message from the President

As the only securities finance company
in Japan, we will contribute to thedevelopment of the country’s securities
and financial markets.
Shigeki Kushida
Representative Executive Officer & President
Japan Securities Finance Co., Ltd.
8

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Initiatives to Date Based on the Medium-Term Management Policy
FY2022 Results
In November 2021, the midpoint of the Sixth MediumTerm Management Plan (FY2020–FY2022), we formulated
and released a Medium-Term Management Policy thattook the Tokyo Stock Exchange market restructuring
and other changes as an opportunity to expedite
management transformation. In this policy, we set out
clear medium-term management goals for ROE (4% by
FY2022 and 5% by FY2025), and have since carriedout management transformation by mobilizing the fullresources of Group companies. As a result, ROE for
FY2022, the final year of the Sixth Medium-Term
Management Plan, was 4.36%, achieving the intermediate
ROE goal of 4% set in the Medium-Term Management

Policy, based on growth in the profit contribution of
securities financing, which we have steadily worked on(details on page 22: Message from the Officer
Responsible for Corporate Strategy).

FY2023 First-Half Results
For the Seventh Medium-Term Management Plan
(FY2023–FY2025), we set the management goals of 5%
ROE and consolidated ordinary profit of ¥10 billion by
FY2025. Results thus far show that we got off to a goodstart, led by securities financing. As of the midpoint of
FY2023, we are on track to achieve the 5% ROE goal
two years ahead of schedule.

Long-Term Management Vision
Given that our management efforts had achieved acertain level of success and we had reached a milestone,
we believed it was appropriate to further organize ourapproach to management going forward. As such, ourBoard of Directors engaged in thorough discussions onthat topic. As a result, we concluded that a two-tiered
approach to management would be appropriate, settingout a long-term management vision, and then using thatvision as a guide to formulate a medium-term
management plan and a shareholder return policy basedon specific business strategies. Accordingly, we recently
formulated the “Long-Term Management Vision,” andbased on that vision, upwardly revised the management
goals of the Seventh Medium-Term Management Plan.
We also formulated the new “Shareholder Return Policy
during the Period of the Seventh Medium-Term
Management Plan.” All of these were publicly announced
in November 2023.

mindful of the cost of equity, and will continue to work
toward the steady improvement of ROE, keeping the
8% level in mind. At the same time, with regard toshareholder returns, JSF will maintain a total payout
ratio of 100% during the period of its Seventh MediumTerm Management Plan, and strive to enhance shareholder
returns thereafter as well.
Through these management efforts, JSF aims toestablish a price to book ratio (PBR) exceeding 1.0 times.
In addition, under its organizational design as a Company
with a Nominating Committee, etc., JSF will strive tostrengthen its corporate governance by tackling sustainability
issues while focusing on further improvement of theeffectiveness of deliberations of its Board of Directors
and respective committees, the further enhancementof information disclosure, and the development of arobust human capital base.

Establishment of Corporate Message
Long-Term Direction
As its long-term management direction, JSF will continue
to agilely and flexibly address the trading needs of
securities and financial market participants as Japan’s
only securities finance company. Through its contributions
to market development, JSF will seek to concentrate
the collective efforts of its Group companies to sustain
growth and enhance its corporate value, while maintaining
strong financial soundness. Under this management
direction, JSF will continue striving to steadily strengthen
its earnings base and pursue the stable and steady
improvement of its capital efficiency, while remaining

In formulating the Long-Term Management Vision,
JSF reaffirmed its targeted vision of the future. To
communicate that vision to stakeholders inside andoutside the Company, we established a new corporate
message: “Be unique. Be a pioneer.” This expresses
what we want to be—a company that agilely and flexibly
addresses the trading needs of securities and financial
market participants, while incorporating advances infinancial technology in a constantly changing environment,
as Japan’s only securities finance company, thereby
pioneering the future of both the market and JSF.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

9

Value Creation Story

Message from the President

Seventh Medium-Term Management Plan
Set and Revised Management Goals
The Seventh Medium-Term Management Plan originally
had the goals of ROE of 5% and consolidated ordinary
profit of ¥10 billion by FY2025. However, in light of theLong-Term Management Vision and the JSF Group’s
performance so far in FY2023, we have revised thesegoals upward. Specifically, our new goals are to maintainROE at a stable level above 5% and aim for further
improvement, and to maintain consolidated ordinary
profit at a stable level of over ¥10 billion and aim forfurther improvement.

Further Strengthen the Loans for Margin
Transactions Business and Securities Financing
In the Seventh Medium-Term Management Plan, we
have outlined specific strategies and measures forachieving our management goals (details on page 20:
Seventh Medium-Term Management Plan). The main
pillar of the plan is to strengthen the loans for margintransactions business and securities financing.
The loans for margin transactions business is where
JSF has its origins as infrastructure for Japan’s securities
and financial markets. It is one of our core businesses,
accounting for a consistent portion of gross profit. We
have long worked to expand the number of loanable
stock issues and strengthen the procurement of stock
to be used for stock lending. We will continue working
to ensure stable operations and improve conveniencein the loans for margin transactions business in line withthe changing operating environments of stock markets.
In addition, with an accurate grasp of the trading needsof market participants, we will explore measures topromote the use of loans for margin transactions, andwork to bolster the foundation of the loans for margintransactions business by enhancing dissemination of
information related to standardized margin transactions
and loans for margin transactions.
In securities financing, needs for borrowing stockfor use as collateral in various financial transactions
and for lending stock to increase asset yields have fueled
strong demand in recent years for government bondand equity repurchase agreement (repo) transactions.
Demand for multi-currency cross-border transactions
has also been rising. In securities financing, we have
expanded transactions by agilely and flexibly addressingthese diverse domestic and international needs as theconnection point between markets in Japan and overseas.
In recent years, we have actively participated in overseas
conferences, which has helped to raise our international

10

Japan Securities Finance Co., Ltd.

Integrated Report 2023

profile, and have also been increasing our roster ofclients and the number of transactions. We will continue toeffectively utilize our expertise in financial and securities
transactions to proactively meet diverse needs for domestic
and international transactions and increase the numberof clients, as well as the currencies and securities we
handle in our transactions. In this way, we will enhanceand expand our securities financing business and expand
our earnings base (details on page 26: Securities Financing
Centered on Loans for Margin Transactions).

Strengthening Our Human Resource BaseIn the Seventh Medium-Term Management Plan, oneof the key strategies for achieving our management
goals is to strengthen human resource development
and improve engagement. We will continue to set highmanagement goals, and to make them achievable it isimportant to create a workplace environment in which
diverse employees can fully demonstrate their individuality
and strengths, enthusiastically and autonomously exploring
and transforming their work, and grow as they accumulate
experience and achievements. From this perspective,
we established a Human Capital Policy as the basic
policy for promoting human resource development
and other initiatives related to human capital formation.
The aim of this policy is to strengthen our human resource
base, which is the source of corporate value creation.
The Human Capital Policy sets forth the following
vision: (1) We respect the diverse values of our employees
and will strive to provide opportunities and supportive
environments so that diverse individuals can maximize
their individuality and strengths and grow on their own
through the performance of their work; (2) We will
promote the creation of a comfortable work environment
so that employees can engage in their work with peaceof mind; and (3) We will improve our corporate vitality
and organizational transformation capabilities andachieve more productive work styles by working to
improve employee engagement. The policy also setsout our expectations for human resources and clarifies
the details and direction of management’s efforts going
forward toward achieving this vision, in areas including
recruitment, and training and career advice (details on
page 34: Strengthening Human Resource Development
and Improving Engagement).

Capital Management Policy
Up to now, in the Medium-Term Management Policy
and the Seventh Medium-Term Management Plan, ourmanagement goal for ROE was 5%, based on ourestimate of the cost of equity (estimated to be around4.5%), and management has continued striving toachieve it. As I mentioned above, we are now working
toward the new, upwardly revised management goal:
maintain ROE at a stable level above 5% and aim forfurther improvement.
In terms of shareholder returns, during the periodof the Seventh Medium-Term Management Plan, we
will continue our policy of aiming to maintain a total
payout ratio of 100% through dividends and flexible

implementation of share buybacks. We will increase
dividends in FY2023, and for the period from FY2024
through FY2025 our policy is to pay dividends with atarget payout ratio of 70%.
Through these management efforts, we aim to firmly
establish a PBR exceeding 1.0 times.
From FY2026 as well, we will strive to steadilystrengthen our earnings base and pursue stable andsteady improvement of capital efficiency, while remaining
mindful of the cost of equity. In this way, we will strive
to continuously improve corporate value and enhanceshareholder returns.

Message to Investors and Other Stakeholders
FY2023 is the first year of the Seventh Medium-Term
Management Plan, and we have made an auspicious startin terms of performance. We still have many challenges
to address in order to sustain growth and enhance ourcorporate value while maintaining strong financial
soundness. However, as a distinct and unique financial

institution that operates with a high degree of agility andflexibility, we remain committed to contributing to thedevelopment of the securities and financial markets while
holding dear the sentiments in our corporate message inthe Long-Term Management Vision: Be unique. Be apioneer. We look forward to your ongoing support.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

11

Value Creation Story

History of the JSF Group
70 years of involvement in the development of Japan’s securities market
Established in 1950 as an institution specializing in securities finance, JSF has provided infrastructure functions for Japan’s securities
market for more than 70 years through its core loans for margin transactions business. In addition, we have developed various
services related to securities finance by keeping abreast of the evolution in client needs resulting from changing conditions in the
securities and financial markets.

Since 2013

Serving as Japan’s only
finance and taking on

1950−1979

In 2013, following the integration of the cash equity markets of the Tokyo Stock
Exchange and Osaka Securities Exchange, we merged with Osaka Securities
Finance Co., Ltd. In the loans for margin transactions business, we started handlingtransactions for Nagoya Stock Exchange in 2017 and for proprietary trading
systems (PTS) in 2019. Today, we are Japan’s only securities finance company.

Supporting Japan’s postwar
period of high economic growthwith institutional financing

Composition of Operating Revenue

We launched our loans for margin transactions
business in 1951 when the margin transaction
system was introduced. In 1968, when securities
companies became subject to licensing, weestablished a lending system to meet market
needs. As part of this system, we launched abond financing business to facilitate theunderwriting and circulation of public andcorporate bonds.

Securities finance business
Trust banking business
Real estate leasing business2013

1980−2012

Loans for margin transactions

Addressing rapid progress insecurities markets, as well as
global financial uncertainty andchanges amid globalization
In order to fulfill our role as securities market
infrastructure, in 1987 we built a network withsecurities companies and launched trading via
our JSF Online System. With the implementationof measures to promote the “Japanese Big
Bang” financial system reforms in 1998, weestablished JSF Trust and Banking Co., Ltd.,
whose business focuses on preservation trusts forcash segregated as deposits for customers forsecurities investments.

47.2%

Securities investment/other

15.1%

Japan Securities Finance Co., Ltd.

Integrated Report 2023

21.3%

Consolidated Ordinary Profit (Millions of yen)
4,230
3,349

3,119

2013

12

Securities financing

2014

2015

4,685
3,611

2016

2017

The Strengths
We Have Built
Loans for Margin
Transactions Business

Only one in Japan

institution specializing in securities
new challenges for growth
In 2019, JSF became a Company with a Nominating Committee, etc., thus separating
oversight and execution, with the Board of Directors responsible for making timely
management policy decisions and overseeing execution, and the executive side
responsible for executing management plans. In 2023, we launched the Seventh
Medium-Term Management Plan, covering the period from FY2023 through FY2025(from April 1, 2023 to March 31, 2026).

2022
2019

18.8%

JSF is the only securities finance company
in Japan that has been licensed to conduct
loans for margin transactions businessunder the Financial Instruments andExchange Act.

Business Partners

Network with domestic
and overseas financial
institutions
We are building business relationships withdomestic and overseas financial institutions
and institutional investors such as securities
companies, banks and insurance companies.
We also provide financial services forgeneral businesses and individual investors.

20.3%
13.8%

Value Creation

43.0%

51.6%

30.4%

7,164

5,046

Ability to build
services by leveraging
JSF strengths
Through many years of providing infrastructure
functions in the securities and financemarkets, we have cultivated both an accurate
understanding of the needs of thoseengaged in market transactions and stable
operational capabilities. In addition, owing
to our relatively small size, the transaction
services we have built are very agile
and flexible.

7,601

5,558
4,894

Stable Credit Ratings   

R&I, JCR   S&PAA− AOver the years, we have secured high credit
ratings, including an AA− rating from two
rating agencies based in Japan and an A
rating from a a rating agency based outside
Japan.
2018
Fifth Medium-Term
Management Plan

2019

2020

2021
Sixth Medium-Term
Management Plan

2022

(FY)

Japan Securities Finance Co., Ltd.

Integrated Report 2023

13

Value Creation Story

Value Creation Process

InputsBUSINESS  Financial Capital• High degree of financial soundness

External credit ratings: R&I: AA−
JCR: AA−
S&P: A
Capital adequacy ratio (based on FIEA)
	
496% (March 31, 2023)

Intellectual Capital• Ability to build securities finance services• Risk management expertise accumulated
over many years• Stable and highly productive operational
systemJSF’s Unique  J apan’s only company that handles loans
for margin transactionsN eutrality through not belonging to any
particular corporate group
Business Domains

Human Capital• Talent with knowledge and experience inSocial Issues• P opulation decline/aging• Globalization• P rogress of digitalization• Restructuring of market
segments and updates
to Japan’s Corporate
Governance Code andStewardship Code• Introduction of a new

NISA system by theJapanese government
to encourage stableasset formation

securities and finance, including operationof systems for loans for margin transactions,building of securities financing and trust
banking services, and risk management• S ecuring highly diverse human resources
through proactive and consistent hiringof experienced talent in addition to
new graduates• Using telework and other methods tocreate a comfortable work environment thatenables diverse work styles• Talent that can build risk management andsecurities finance services
Number of employees: 268 (consolidated)

In our loans for margin transactions business, we respond tochanges in the environment facing stock markets and totransaction needs. In securities financing, we meet the various
liquidity needs of our clients. In our securities investment
business, we aim to secure stable earnings through appropriate
risk control, and work to expand our fund procurement methods.
In the trust banking business, we are working to meet ourclients’ asset protection needs in new areas.

Social and Relationship Capital

Securities FinanceBusiness• L ong track record (73 years) and trust built
in operating a securities finance business etwork with domestic and overseas•Nfinancial institutions and institutional
investors such as securities companies,
banks and insurance companies• B usiness operations through participationin the settlement systems of central banks
and clearing houses

Material Issues

Securities FinanceBusiness

Loans for Margin
Transactions

Operation of Japan’s only
loans for margin transactions
business, an area where highstability is required

Loans for Margin
Transactions

Securities Investment

Securities Financing
Securities Investment

Environmental• Reduce environmental impact

Social• Promote academic research activities andfinancial and economic education activities• Promote diversity and develop humanresources• Respect human rights and prohibit
discrimination• Enhance functions as infrastructure forJapan’s securities and financial markets• Contribute to overseas securities andfinancial market infrastructure

BEFOREAFTER

Establishing a governance system to demonstrate

GovernanceCorporate   • S trive to enhance governance as a Company
with a Nominating Committee, etc.

• Implement the risk appetite framework (RAF)• Stably operate business that is not affectedby disasters, etc. (BCP)• Operate business based on a highawareness of compliance14

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Risk appetite
framework (RAF)

Cyber  

Outcomes

MODEL   Position

Vision of the Future Targeted by JSF

N etwork with domestic and overseas
financial institutions
M any years of high credit ratings
OutputsP rovision of liquidity through securities
finance functions

Trust Banking Business
Enhance our custodial
trust business,
including customer
asset preservation
trustsSecurities Financing
Aim for growth by rapidly
responding
to diversifying securities
and finance market
needsO perational stability and improved
convenience of the loans for margintransactions businessS trengthening and enhancement of
securities financing by expanding therange of clients, currencies andsecurities, etc.

As Japan’s only securities finance company
supporting the infrastructure functions of
securities and financial markets, JSF aims to
be a distinct and unique company that
operates with a high degree of agility andflexibility. It will achieve sustainable growthand enhance its corporate value, while
maintaining strong financial soundness andcontributing to the development of
securities and financial markets.

Social ValueContributing to market liquidityS ecuring of stable revenues fromsecurities investments by reviewing
the portfolio in an agile manner;expansion of stable funding methods,
including using foreign currencies

Highly resilient,stable business operations

S trengthening and enhancement of
the lineup of custodial trusts,
including customer asset preservation
trusts and ABL trusts, and the relatedtransaction network

Responding to client needs
according to changes in the
securities and financial markets

Economic Value
Real Estate Leasing Business

FY2025 Goals (Consolidated)

our public role and expertise as a financial institution  Governance
Security

ROE: Maintain at a stable level above 5% andaim for further improvement.
Consolidated ordinary profit: Maintain at astable level of over ¥10 billion and aim forfurther improvement.

FY2022 Results (Consolidated)

Business Continuity
Plan (BCP)· Operating revenue · Ordinary profit ·P rofit attributable toowners of parent · ROE Japan Securities Finance Co., Ltd.

¥42.5 billion¥7.6 billion¥5.9 billion
4.36%

Integrated Report 2023

15

Value Creation Story

Message from the Chairperson of the Board

I will work to improve the board’s effectiveness froma long-term perspective to increase corporate value.
Naotaka Obata
Outside Director, Chairperson of the Board, Nomination Committee Chairperson, Remuneration Committee Chairperson
In 2019, JSF transitioned to a “Company with a Nominating Committee, etc.” structure, which is designed to clearly separate
management supervision and execution. Under this structure, the two main missions of the Board of Directors are to formulate theCompany’s management policies and to supervise executive officers to ensure that they are executing business appropriately based on thosepolicies. To make sure that the board can effectively fulfill that role, five of the seven members of the board are outside directors who are
independent from the Company, and the chairperson of the Board of Directors and the chairpersons of the Nomination Committee,
Remuneration Committee and Audit Committee are all outside directors. I have served as the chairperson of the board and as chairpersonof the Nomination Committee and Remuneration Committee for the past four years. We outside directors have worked to fulfill our rolefrom an objective standpoint with an outsider’s point of view, bearing in mind JSF’s corporate philosophy of contributing to thedevelopment of the securities market while always maintaining a keen awareness of its public role.
I mentioned in last year’s integrated report that as chairperson of the Board of Directors, I have always had a mindset of maximizing its
effectiveness as a “monitoring board.” Fortunately, JSF’s Board of Directors is supported by the diverse knowledge of its directors,
and meaningful discussions take place in a free and open atmosphere. Executive management seriously considers the issues raised andopinions pointed out by the Board of Directors, and provides feedback to the board.
Going forward, I want to continue to lead in a way that vitalizes discussion at board meetings.

About the Long-Term Management Vision
JSF adopted its Medium-Term Management Policy at the Boardof Directors meeting in November 2021. In the Seventh MediumTerm Management Plan based on that policy, the Company set a
management goal of 5% ROE by 2025. Management’s efforts
since then have produced notable successes. Among these, theCompany expects to achieve 5% ROE two years ahead of schedulebased on estimates of performance for FY2023. This can be seen
as a significant milestone for management. Consequently, theCompany recognized the need to further consolidate its approachto management. Following extensive discussions by the Boardof Directors from a long-term perspective, in November 2023 theCompany formulated and released its Long-Term Management
Vision. In this vision, the Company has declared that it will strive
to steadily strengthen its earnings base and pursue stable andsteady improvement of capital efficiency, while remaining mindfulof the cost of equity, and will continue to work toward the steady
improvement of ROE, keeping the 8% level in mind. In addition,
more extensive discussions were conducted regarding a corporate
message that would clearly communicate the Vision of the16

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Future Targeted by JSF, which is to be a distinct and uniquecompany that operates with a high degree of agility and flexibility,
achieving sustainable growth and enhancing its corporate value,
while maintaining strong financial soundness. Guided by the LongTerm Management Vision, we then revised the Seventh MediumTerm Management Plan and formulated a shareholder return
policy for the period of the plan, and publicly announced both.

Enhancing and Strengthening Corporate
Governance to Improve Corporate Value
Following a review of the composition of the Board of Directors
from the viewpoint of creating a diverse board with multiple
layers of skills, the number of outside directors was increased bytwo (net increase) in 2022, and a second woman outside director
was appointed in 2023. Backed by their varied careers andknowledge, the newly added outside directors have actively
contributed opinions and suggestions, and we are now seeing
just how important diversity is.
In the area of sustainability, JSF is focusing on promoting
industry-academia collaboration and contributing to theinfrastructure of securities and financial markets, including
overseas. I intend to leverage my position as an outside director to
support these efforts, in addition to other initiatives such as theCompany’s initiatives to address climate change.

Improving the Effectiveness of
the Board of Directors
To further increase the effectiveness of the Board of Directors,
annual evaluations are conducted to identify issues related to theoperation of the board, and the board works in cooperation with
its secretariat to make improvements. Responses to the questionnairein the effectiveness evaluation indicated that the two new directors
appointed in FY2022 increased the diversity of opinions. Using
those opinions for reference, board members have beenworking with the secretariat of the Board of Directors tocreate a meeting environment that encourages lively
discussions. Initiatives include enhancing training to acquire
knowledge of the Company’s business, holding regular meetings
for outside directors to enable them to share information with one
another, and creating opportunities for outside directors anddepartment heads to exchange opinions. In Board of Directors andcommittee meetings, supervisory and executive sides ofmanagement deepen discussion on important matters while
mutually making proposals and raising points of contention in athree-step process: (1) issues are delineated and freely
discussed, (2) drafts are discussed, and (3) resolutions anddisclosure methods are deliberated, which leads to a final
conclusion. This approach is of great significance in the sensethat it ensures effectiveness in the oversight of business execution.

Initiatives in the Nomination Committee
In FY2022, the Nomination Committee discussed improving thetransparency of the nomination process for management
executives and in-house human resource development with aview to the selection of management executives.
Among these discussions, for the succession plan for thecurrent Representative Executive Officer & President, in January2023 the Board of Directors approved and announced a policythat the Company will consider candidates from a preliminary listof internal candidates, including experienced mid-career hires,but not public sector candidates, who possess the requisite
qualifications for the position. This policy stemmed from an informal
exchange of opinions between the Nomination Committee andexecutive management in the summer of 2022, in which theNomination Committee suggested that it would be appropriate
to have discussions from the viewpoint that the requisite qualities
and qualifications for the president may change depending on
the status of the Company’s business development. The executive
team had similarly become aware of this issue, and because there
was a consensus between the supervisory and executive sides
regarding a basic approach, subsequent discussions in the
Nomination Committee led to approval and announcement of
the policy. Since JSF’s business portfolio has centered on loans
for margin transactions, which are part of the infrastructure
supporting the securities market, the Company’s management
has been led by individuals with public-sector backgrounds.
However, given that the Company’s business strategy going
forward is to pursue business development with securities
financing and other businesses positioned as growth areas, it willplace greater emphasis on knowledge and experience related to thesecurities finance business, including technological innovation, andtherefore concluded that considering people from inside theCompany was appropriate. Based on this direction, the committee’s
policy is to move forward with discussions on a specific preliminary
list of succession candidates and the requisite qualifications, andto narrow the candidates down to a short list.
To ensure the effectiveness of management succession
planning, it is important to develop a pool of internal talent. To
that end, the Nomination Committee has discussed a specificapproach to cultivation of internal talent, and the results wereannounced on the Company website. Human resource strategy is
one of the pillars of the Seventh Medium-Term Management
Plan, and the Nomination Committee has raised issues with theexecutive side, such as the necessity of developing suitabletalent for the Company’s lines of business, and these issues havebeen reflected in the management plan.

Initiatives in the Remuneration Committee
The Remuneration Committee decides on the remuneration of
directors and executive officers, as well as officer remuneration
policies and other matters. In its officer remuneration system,
the Company has been working to enhance the linkage between
executive officer remuneration and performance, and has madechanges including properly reflecting the degree of progress
and achievement of the management goals in the medium-term
management plan in bonuses. In FY2023, the Company took
the start of the new medium-term management plan as anopportunity to revise the performance-linked remuneration of
executive officers to ensure that incentives are consistent with
our management policy. Bonuses are a short-term incentive,
with consolidated profit attributable to owners of parent usedas the reference indicator to clarify management responsibility
each fiscal year, while share-based remuneration is positioned
as a long-term incentive using ROE and consolidated ordinary
profit—the management goals of the Seventh Medium-Term
Management Plan—as the reference indicators. With the goalof reflecting both the performance of the Company as a wholeand each individual’s contribution to that performance, bonuses
are divided into a part linked to the Company’s performance anda part based on individual evaluations.
The Seventh Medium-Term Management Plan was revisedin November 2023, but only necessary changes were made to
the reference values for share-based remuneration based on
projected progress toward the management goals. Nochanges were made to the basic structure of the referenceindicators for bonuses and share-based remuneration.

Approach of the Board of Directors
Going Forward
The recently announced Long-Term Management Vision was theoutcome of extensive discussions by the Board of Directors
from a long-term perspective on matters such as the directionof our management policy regarding the realization of theCompany’s corporate philosophy and its targeted vision of the
future. The Company will continue to respond flexibly tochanges in the securities and financial markets. Through free andopen discussions, the Board of Directors will formulate
management policies, supervise business execution, and takeappropriate steps to strengthen corporate governance, firmly
determined to fulfill its role as a “monitoring board.”

Japan Securities Finance Co., Ltd.

Integrated Report 2023

17

Value Creation Story

Dialogue with Newly Appointed Outside Directors

Kensuke Futagoishi

Takayoshi Yamakawa

Outside Director

Outside Director

Q. First, please tell us a little about your backgrounds and experience.
Futagoishi: I have been in the banking industry for many years.

Yamakawa: After working at an IT device manufacturer, I madeAfter gaining experience in various departments, including

a career change, joining a consulting firm in 1995. In 2000,

corporate sales at a major bank, I moved to IY Bank Co, Ltd.

I co-founded Dream Incubator, where I served as president(currently Seven Bank, Ltd.) in 2003, where I served as president

from 2006 to 2020. Currently, I provide advice on corporate

from 2010 to 2018. During that time, I focused on expanding

management and other matters at Business Producer LLC.

the number of ATMs installed as social infrastructure andAs digitalization progresses in the financial market, I believe

providing digital services to address changing client needs.

my experience in corporate management and knowledge ofI aim to draw on my corporate management and otherdigital transformation will be useful in identifying newexperience to help supervise the implementation of JSF’s

business opportunities.

management policies and to support the creation of agovernance system capable of responding flexibly to changes
in the operating environment.

Q. How has your impression of JSF changed since your appointment to the board?
Yamakawa: What honestly surprised me was that securities

establish new businesses, but achieving success is extremely

financing, which began as a new business after the global

difficult. I am amazed that JSF’s securities financing business,financial crisis of 2008, has grown so large. Previously, I had

which has only been in operation for 10 years, now accounts

thought that loans for standardized margin transactions wasfor about 40% of the Company’s profit.

the Company’s core business. Many companies work to

18

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Futagoishi: My impression of JSF was that it is a solid company

of Directors meetings, over the past year, I feel that in addition

with a strong public role, as indicated by its corporate philosophy

to its solid governance and business execution, the Companyof contributing to the development of the securities and financial

takes advantage of its relatively small size to respond agilely

markets. Having attended various meetings, including Board

to changes in the environment.

Q. Please tell us about the activities and discussions of the Board of Directors
and the three statutory committees.
Futagoishi: The focus of activities at Board of Directors

Yamakawa: Because the Board of Directors is made up of

meetings in FY2022 was discussion of the Seventh Medium-

members with diverse backgrounds, discussion on any given

Term Management Plan. This plan covers one of the most criticalmatter involves a multi-faceted approach, enabling comprehensive

periods in JSF’s history. The Company needs to transform its

judgment and decision-making. Having people with a wide

corporate culture in order to provide new value as it shifts

range of knowledge giving candid recommendations makes

from its former focus on its public role. In meetings of thefor lively discussion. Also, because the secretariat has explained

Board of Directors and the statutory committees, there havethe points for discussion to members of the board and the

been lively discussions on topics such as how to develop

committees in advance of each meeting, discussions are wellhuman resources responsive to change, and how to encourage

defined and focused. Discussions also lead to quick action.

employees to internalize the president’s ideas in the management

For example, in response to a request from the Tokyo Stockplan. As a result, I feel that a well-thought-out plan has been

Exchange to listed companies at the end of March 2023, theformulated, especially for human resource strategy. I also

Board of Directors conducted a series of discussions, leading

think great care is being taken by the secretariat to facilitate

to the issuance of a news release on May 15 detailing thethese discussions.

Company’s initiatives.

Q. What points do you think are key for the JSF Group to achieve medium- tolong-term growth?
Yamakawa: Looking at the condition of the Company overFutagoishi: As I mentioned before, I think the key will be

the last few years, I feel that stronger governance andstrengthening human resource development and improving

earnings growth have generated synergy.

engagement, which is one of the strategies in the SeventhInternationalization and digitalization have also progressed in

Medium-Term Management Plan. To ensure the effectivenessJapan’s financial market, so it is important that the Companyof the management succession plan announced in April 2023,

respond agilely to these external changes in its pursuit of

it is necessary to strengthen the human resource base, centeredsustainable growth. I intend to apply my experience andon ensuring diversity and strengthening professionalism andknowledge for the Company’s growth, in ways such as offering

independence. As a member of the Board of Directors, I would

suggestions for using digital transformation to develop new

like to focus my efforts on building a system that supportsbusinesses and improve business efficiency.

the Company in helping employees grow by taking on challenges,
thereby enabling further growth.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

19

Group Management Strategy

Seventh Medium-Term Management Plan
Japan Securities Finance Co., Ltd. (“JSF,” or “the Company”) formulated its Seventh Medium-Term Management Plan,
which covers the three-year period from FY2023 through FY2025 (April 1, 2023 to March 31, 2026), and announced it
in February 2023. The Company later revised the 5% ROE management goal in its Medium-Term Management Policy
upward in light of the expected achievement of this goal in FY2023, two years ahead of schedule. (Note that thefollowing data is as of this revision.)
Based on our Management Philosophy, Long-Term Management Vision and Seventh Medium-Term Management
Plan, we will continue to focus the collective efforts of JSF and its Group companies on achieving sustainable growthand increasing corporate value over the medium to long term while maintaining strong financial soundness as asecurities finance company that performs infrastructure functions for the securities and financial markets.

Our Vision

Vision of the
Future Targetedby JSFManagement
Goals

As Japan’s only securities finance company supporting the infrastructure functions of securities
and financial markets, JSF aims to be a distinct and unique company that operates with a highdegree of agility and flexibility. It will achieve sustainable growth and enhance its corporate value,
while maintaining strong financial soundness and contributing to the development of securities
and financial markets.

· ROE: Maintain a stable level above 5% and aim for further improvement.
· C onsolidated ordinary profit: Maintain a stable level of over ¥10 billion and aim forfurther improvement.

Management Principles

20

1

To practice sound business management by thoroughly implementing compliance, corporate
governance, and risk management under a strong governance system, thereby establishing solid
credibility, while always maintaining a keen awareness of our social responsibilities as a securities
finance company.

2

To enhance corporate value while maintaining solid equity capital in order to ensure stability inmanagement and the financial soundness required of a securities finance company that supports
the infrastructure functions of the securities and financial markets, and to continue to enhance
returns to shareholders.

3

To further enhance JSF’s core loans for margin transactions business while also striving tostrengthen and expand the finance- and securities-related services provided by JSF and Group
companies and to further grow and solidify our business base.

4

To build a quick and efficient business management structure and strengthen our human resourcebase in order to address changes in the business environment in a timely and flexible manner, andto improve our corporate vitality and organizational transformation capabilities.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Strategies
Nine Strategies and Two Goals
Enhance the loans
for margintransactions
business as part of
securities market
Expand and enhance infrastructure
securities financing

1

2• Achieve sustainablegrowth and medium- tolong-term enhancementof corporate value
8

Strengthen humanresource development
and improveengagement

above 5% and aim for

9

Enhance the loans for margin transactions business as partof securities market infrastructure

Expand and enhance securities financing

Reinforce consolidated management of the Group

Secure stable revenues through securities investment andincrease fund-raising methods

Secure stable revenues from securities investments by reviewing the portfolio in anagile manner in response to changes in the external environment, underappropriate risk control. We will also work to expand stable funding methods,
including foreign currency, in order to meet the diverse requirements of our clients.

5

Maintain a stable level ofover ¥10 billion and aim forfurther improvement.

Promotesustainability

Pursue greater collaboration among Group companies in the areas of sales,risk management and operational management, and otherwise strengthen theGroup’s consolidated management.

4

Consolidated
ordinary profit

7 Strengthen ourcompetitive basethrough efficientbusiness
operations

JSF will effectively leverage its accumulated expertise in funds and securities
transactions to proactively handle diverse transactions with domestic andoverseas financial instruments business operators, etc., and expand and enhance
securities financing by widening the range of clients, target currencies andsecurities, etc., to increase revenue opportunities.

3

further improvement.

Pursue the
5 developmentof new business

JSF will appropriately respond to changes in the environment facing the stock
market and ensure the stable operation and improve the convenience of theloans for margin transactions business. Also, based on our ability to accurately
grasp the trading requirements of market participants, we will review measures
to promote the use of loans for margin transactions, strengthen the disseminationof information related to standardized margin transactions and loans for margintransactions, and strive to strengthen the foundation of the loans for margintransactions business.

2

Maintain a stable level

3

financial soundness

6

1

ROE

• Maintain strong

Secure stablerevenues throughsecurities investment
4and increase fundraising methods

Strengthen thebusinessmanagement
structure

Reinforce
consolidated
management of
the Group

6

Strengthen the business management structure

We will proactively meet our social obligations, and reaffirm compliance as amanagement prerequisite for achieving our corporate philosophy.
To establish unwavering public trust in JSF, we aim to ensure the effectivenessof our internal auditing and further enhance our risk management in responseto the increasingly diverse and complex risks associated with the finance business.

7

Strengthen our competitive base through efficientbusiness operations

As transaction volume increases and operations become more complex, theCompany will strive to build an efficient operational structure by reviewing
business processes and proactively utilizing digital technology to strengthen
its competitive base.

8

Strengthen human resource development and improveengagement

Through our efforts to strengthen human resource development and rebuild
our human resource portfolio, centered on ensuring diversity and on
strengthening professionalism and independence, as well as by improving
employee engagement, JSF will improve its corporate vitality andorganizational transformation capabilities.

9

Promote sustainability

In addition to striving to further strengthen our business continuity structureso that we can stably perform infrastructure functions for the securities andfinancial markets, JSF will also steadily address important issues related tosustainability, such as addressing climate change and environmental preservation.

Pursue the development of new business

Leveraging its characteristics as a securities finance company, JSF will workfrom a long-term perspective to develop and launch new business operations
in cooperation with related parties both inside and outside the Company, as
well as with Group companies.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

21

Group Management Strategy

Message from the Officer Responsible for
Corporate Strategy

Aiming to be a company that earns the trust of all stakeholders
Yutaka Okada
Senior Managing Executive Officer Responsible for Corporate Strategy

FY2022 Consolidated Financial Results

tighter supply and demand for government bonds amid expansion of
government bond purchases and expectations of policy changes by

In FY2022, the trend toward recovery from the economic

the Bank of Japan. In addition, our subsidiary JSF Trust and Banking

stagnation caused by the COVID-19 pandemic continued.

is focusing on custodial trust services including preservation trusts,

However, stock market movement remained stuck in a narrow

but asset-backed loan trusts were its main growth driver, and trust

range due to uncertainties about the future, including the conflictfees in FY2022 once again reached a record high. On the other hand,in Ukraine, inflation, and the risk of economic downturn due toin response to changes in the external environment, including risingtightening of fiscal policies in the United States and Europe.

interest rates overseas, we adjusted our portfolio of securities holdings

In these circumstances, consolidated results for FY2022
were operating profit of ¥6,354 million, a 1.9% increase year onin anticipation of operations going forward, and recorded a loss
on sales of foreign bonds.

year, ordinary profit of ¥7,601 million, a 6.1% increase, and

ROE in FY2022 was 4.36%, achieving the medium-term goal

profit attributable to owners of parent of ¥5,966 million, aof 4% ROE in the Medium-Term Management Policy announced in

15.3% increase.

November 2021.
Based on our estimates of results at the end of the interim

The driver of the profit increase in FY2022 was the strong
performance of securities financing, continuing on from FY2021.

period of FY2023, we are expecting ROE of 5.11% for theBond repo and gensaki transactions increased substantially, driven by

fiscal year.

rising transaction needs due to firm demand for collateral as well as

FY2022 Consolidated Results(Millions of yen)

FY202122

FY2022Year-on-year change

Operating revenue

30,13842,518+12,380

Operating expenses

16,53328,765+12,231

General and administrative expenses

7,368

7,398

+29

Operating profit

6,235

6,354

+119

Ordinary profit

7,164

7,601

+436

Profit attributable to owners of parent

5,174

5,966

+792

ROE

3.79%

4.36%

+0.57%

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Management Strategy
In the Seventh Medium-Term Management Plan, in addition toaccelerating and deepening our initiatives to date, we will

ROE and PBR(%)
5ROE (Left axis)

at a stable level above 5% and aim for further improvement(details on page 20: Seventh Medium-Term Management

3.79

4

Plan). Here I will explain our business portfolio, our efforts to

2.59

returns, and our initiatives for corporate governanceand sustainability.

Business Portfolio
The JSF Group is keenly aware of its public role as part of theinfrastructure of Japan’s securities and financial markets, and

1.90

1

2.65 2.66

0.54
0.42

0.91 0.8

3.03

2.19
0.40

0.59

0.6

0.64

0.4

0.38 0.35

0.30

implement management with an awareness of the cost of equity
and stock price, as well as our growth strategy, shareholder

2.98

0.55

3
2

1.0

4.36

strengthen the human resource base, and continue management
efforts toward the management goal we set for ROE: maintain

5.11 (Times)

PBR (Right axis)

0.2

0

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2023 (Sep.)(As of March 31, unless otherwise noted)
Notes: PBR is the value at the end of each fiscal year (March 31, except for 2023).
R OE for 2023 (Sep.) has been calculated using the estimated consolidated
results announced on November 6, 2023, and PBR for 2023 (Sep.) has
been calculated using the stock price on September 30, 2023.

Total Shareholder Return (Index*)
(%)
250

JSF

TOPIX (incl. dividends)

242.5

provides a variety of related services to meet the diverse needsof the securities and financial sectors. These services mainly
involve securities financing centered on loans for margintransactions, a licensed business. Since this core business isgreatly affected by market fluctuations and other factors, we

200
150
100

are continuing our efforts to diversify revenue sources, andwill work to achieve our management goals while staying
mindful of the importance of further improving capital efficiency
in each business. Based on this approach, the JSF Group willseek to achieve the Vision of the Future Targeted by JSF throughits business portfolio, which consists of securities financing

175.9
156.3

50

132.9
94.9
92.8

154.5
85.9

122.1

124.5

131.8

82.2

0
2019

2020

2021

2022
2023
2023 (Sep.)(As of March 31, unless otherwise noted)* Closing stock price on March 31, 2018 = 100%.

centered on loans for margin transactions, as well as securities
investment, trust banking and real estate leasing.

Efforts to Implement Managementwith an Awareness of the Cost of
Equity and the Stock Pricesoundness and business scope imposed by laws and regulations,and standards for participation in securities and fund settlement
systems, among others. As such, I believe that our cost of equity
is considerably lower than the general level because our businessis characterized by low strategic risk and high financial andearnings stability. We will continue our efforts to steadily

In our Medium-Term Management Policy and the Seventh

strengthen our earnings base and seek the stable and steady

Medium-Term Management Plan, we originally set the goal of

improvement of capital efficiency, while remaining mindful of

5% ROE, which exceeds the cost of equity (around 4.5%), andthe cost of equity, as we continue to work toward the steadyhave been continuing management efforts toward that goal.

improvement of ROE, with the 8% level in mind.

From the viewpoint of further enhancing shareholder returns,
we are aiming for a total payout ratio of 100% on a cumulative

Growth Strategy

basis from FY2021 through FY2025 by paying dividends andflexibly implementing share buybacks. In FY2022, the annual

The other management goal of the Seventh Medium-Termdividend was ¥32.0 per share, and we repurchased approximately

Management Plan is for consolidated ordinary profit: maintain¥3.0 billion in shares.

at a stable level of over ¥10 billion and aim for further improvement.

With these efforts, we project that we will achieve the goal

To achieve this goal, we must increase our earning power. Ourof 5% ROE two years ahead of schedule. In addition, the PBR

central strategy in sales in the Seventh Medium-Term Management

is now near 1.0 times, and total shareholder return (TSR) has

Plan is to further strengthen the loans for margin transactions

risen to a level that is well above the TOPIX average.

business and securities financing (details on page 26: Securities

Based on objective data and according to multiple

Financing Centered on Loans for Margin Transactions), but wecalculation methods, we have estimated our cost of equity towill also secure stable revenues in all of the businesses in ourbe around 4.5%. As a securities finance company that supports

portfolio. In the securities investment business, our basic

the infrastructure of Japan’s securities and financial markets,policy is to secure stable earnings by accumulating carry

we are subject to various restrictions in terms of financial

income based on low-interest funding backed by our highJapan Securities Finance Co., Ltd.

Integrated Report 2023

23

Group Management Strategy

Message from the Officer Responsible for Corporate Strategy
Corporate Governance Initiatives

creditworthiness. Thus, we appropriately control market risk
within our risk appetite framework (RAF), expanding stable

Composition of the Board of Directors

means of funding, including foreign currencies, as well as

JSF transitioned to a Company with a Nominating Committee,

focusing efforts on liquidity management. The trust banking

etc. in 2019, and the Board of Directors currently comprises

business flexibly meets transaction needs for various types offive outside and two inside directors. Accounting for about

preservation trusts, including trusts for cash segregated as
deposits, and custodial trusts such as asset-backed loan (ABL)
trusts. The real estate leasing business will continue to steadily
promote leasing of buildings owned by the JSF Group (for70% of board members, outside directors are central informulating management policies and in making personnel andremuneration decisions involving executive management. In

details of subsidiary businesses, see pages 32–33).

consideration of the balance between executive and non-Shareholder Returns

composition of the board was further reconsidered, and a

From the perspective of further enhancing shareholder returns,of Shareholders in June 2023.

we are aiming for a total payout ratio of 100% on a cumulative

Initiatives of the Board of Directors andthe Nomination Committee

executive directors, as well as diversity of age and gender, thesecond woman director was elected by the General Meetingbasis from FY2021 to FY2025 through dividends and flexible
implementation of share buybacks. Under this policy, dividends
for FY2022 were ¥32.0 per share, an increase of ¥2.0 from theIn FY2022, following a series of discussions by the Board of
Directors and the Nomination Committee, JSF’s approach toprevious fiscal year. In addition, we implemented ¥3.0 billion

the nomination process for management executives and efforts

in share buybacks from the market, for a total payout ratio

to improve the transparency of that process were disclosed onof 97.6%.

the Company website. Specifically, the appointment process

For FY2023, we continue to aim for a total payout ratio of

involves discussion by the Nomination Committee of a preliminary

100% through dividends and flexible implementation of sharelist of candidates, which is narrowed down to a short list frombuybacks based on our Shareholder Return Policy during thewhich the final decision is made following interviews with the

Period of the Seventh Medium-Term Management Plan

individual candidates. To improve the transparency of thisformulated in consideration of our Long-Term Management

process, the status of the nomination process, particularly

Vision. Accordingly, we plan to increase the dividend to ¥44.0

the active involvement of outside directors and the approach

per share for FY2023, and our policy for FY2024 through FY2025
is to actively pay dividends, aiming for a target payout ratio of
70%. We remain committed to enhancing shareholder returns.

to internal talent development with a view to the selection ofmanagement executives, have been disclosed (details on
page 43). In addition, regarding succession planning for the

Shareholder Returns
(Yen)
50

Dividends per share (Left axis)

Share buyback amount (Right axis)(Billions of yen)
3.5

3.3
3.0

3.0

45

2.3

40

JSF will actively pay+¥12

dividends during theperiod from FY2024

35

44
30
25

for a target payout ratio
of

0.5

30

26
20

through FY2025, aiming

70%

32

1.5
1.0

0

2019

2020

2021

2022

Dividends per share (Yen)

22

26

30

32

44

Share buyback amount(Billions of yen)

0.5

−

2.3

3.0

3.3

Total payout ratio (%)

71.0

60.1

97.6

97.6

101.0

2023 (forecast) (FY)
Note: F igure for dividends per share in
FY2023 is an estimate, and theshare buyback amount is the upper
limit of the buyback. The total
payout ratio is calculated using
the earnings estimates announced
on November 6, 2023.

Seventh Medium-Term Management Plan

Aiming for a total payout ratio of 100% on a cumulative basis through dividends andflexible implementation of share buybacks

Japan Securities Finance Co., Ltd.

2.0

0.5

22

Sixth Medium-Term Management Plan

24

2.5

Integrated Report 2023

Representative Executive Officer & President, the Nomination

Development Goals (SDGs) adopted by the United Nations,

Committee continues to discuss a preliminary list of candidates

and is an area in which JSF believes it is particularly welland requisite qualities.

positioned to contribute as a company that has long

Officer Remuneration
Along with the formulation of the Seventh Medium-Term
Management Plan, JSF revised officer remuneration in FY2023
to ensure that incentives are aligned with our management
policy. Performance-linked remuneration is divided into
short-term and long-term incentives, with bonuses positioned
as short-term incentives and share remuneration as long-term
incentives. Following the November 2023 revision of theSeventh Medium-Term Management Plan, necessary changes
were also made to remuneration through a resolution of theRemuneration Committee (details on page 45).

supported infrastructure functions of Japan’s securities andfinancial markets. Based on that belief, in addition to thegovernance initiatives described above, we are carrying out
environmental and social initiatives. Specifically, we provided
technical assistance to and invested in an Indonesian
securities finance company as a contribution to securities andfinancial market infrastructure overseas. In addition, as part ofour promotion of academic research activities, through an
industry-academia alliance we conducted demonstration tests
with the University of Tokyo to determine whether decentralized
ledger (blockchain) technology developed through joint
research could be applied to securities finance transactions,

Status of Dialogue with Shareholders

and presented a paper summarizing the research findings

As a Prime market listed company, JSF, in accordance with(details on pages 54–55). We also recognize that addressing

Japan’s Corporate Governance Code, engages in dialogue

climate change is a critical issue. Although our CO2 emissions

with its shareholders in a positive manner, within a reasonable

have never been large due to the nature of our businesses,

scope, in order to contribute to the sustainable growth andin line with the TCFD recommendations, we disclose information

the enhancement of corporate value over the medium to longon climate change on our corporate website and elsewhere

term. The three main themes and matters of interest that came(details on pages 56–58).

up in dialogue with shareholders in FY2022 were initiatives toenhance corporate value and capital efficiency, and their results;

To Our Stakeholders

the officer nomination process and initiatives in governance;
and information disclosure. The insights gained from

Going forward, we ask for your understanding and support forshareholders were discussed by the Board of Directors, after

our ongoing efforts to increase corporate value in the medium

which the board took action on insights that it determined theand long term with our public role in mind, as well as for our

Company should incorporate (details on pages 46–47).

measures to further strengthen corporate governance and our

The status of dialogue with shareholders is promptly

initiatives for sustainability.

reported to the Board of Directors after each such opportunity
so that the board and various committees can also take into
account the feedback of shareholders in their discussions.

Enhancement of Information Disclosure and Support for
Outside Directors
In FY2023, JSF continues to focus efforts on providing information
to shareholders and investors, clients, and other stakeholders.
Specifically, we are taking steps to enhance information tools,
such as making improvements to our corporate website. We
will maintain a corporate governance system suited to theenvironment we are in and our business portfolio, and work
toward sustainable corporate value improvement.
In FY2023, we continue to work on enhancing support foroutside directors, including two appointed in FY2022 and one
appointed in FY2023, with the assistance of the secretariat of
the Board of Directors, and strive to further improve theeffectiveness of the Board of Directors.

Initiatives for Sustainability
We also take a proactive approach to key issues related
to sustainability.
Developing and maintaining the infrastructure that forms
the foundation of socioeconomic activity is a key element inrealizing a sustainable society. It is also one of the Sustainable

Japan Securities Finance Co., Ltd.

Integrated Report 2023

25

Group Management Strategy

Corporate Strategy
Securities Financing Centered on
Loans for Margin Transactions
Message from the Responsible Executive Officer

We will achieve growth by meeting the diverse transaction needsof the securities and financial sectors in Japan and overseas
Our core loans for margin transactions business, licensed under the Financial
Instruments and Exchange Act, serves as infrastructure for the securities market as asource of funds and stock certificates for the smooth implementation of standardized
margin transactions. Securities financing, which has been the core driver of our earnings
in recent years, collectively refers to five business areas including the lending of funds
backed by securities and the lending of securities. We are promoting securities
financing as one of our growth engines, and are also working to expand our services
by increasing the number of business partners we work with, including foreign financial
institutions, and by diversifying securities handled to include foreign stocks and foreign
government bonds. Recently, assets in the Asian region, including Japanese equities,
have been accepted as collateral in transactions. In these transactions, high-quality
qualified liquid assets (HQLA) such as Japanese yen and Japanese government bonds
are taking the place of other assets. As an institution specializing in transactions
related to stocks and bonds, we will continue to provide agile and flexible proposals
to meet the diverse transaction needs of the securities and financial sectors in Japanand overseas.

Morikuni Shimoyamada
Senior Managing Executive Officer
Responsible for
Margin Loan Department,
Institutional Sales Department,
Retail Business Department

Business Environment and Strengths

Securities financing

Securities Financing

26

Operating Revenue(Loans for Margin Transactions and Securities Financing)Service

Details

Loans fornegotiablemargintransactions

While loans for margin transactions provide funds andstocks necessary for the settlement of standardized
margin transactions, the business of loans for negotiablemargin transactions involves lending funds to securities
companies to enable them to purchase stocks innegotiable margin transactions.

Equity repo
transactions

We are responding to the diversification of financing
methods of securities companies through transactions
such as those in which stocks are used as collateral whenlending funds to securities companies (general loans),
and those in which cash is deposited in exchange forborrowing stock held by a securities company (equity
repo transactions).

Loans to retail

These are transactions that involve lending funds toindividual investors and others, using stock as collateral.
The main service in this business is COM-STOCK loans(securities-backed loans that can be transacted online).

General stock
lending

General stock lending is the business of procuring stockfrom institutional investors and others, and lending it tosecurities companies that mainly require it for trading,thus contributing to the stability of the settlement system.

Bond repo
and gensaki
transactions

This is the business of matching (brokering) various
financial institutions’ lending and borrowing needs, mainly
for Japanese government bond repo and gensaki
transactions (transactions in which bonds are exchanged
for cash).

Japan Securities Finance Co., Ltd.

Integrated Report 2023

(Millions of yen)

25,00021,97620,00015,391

15,00012,517

10,000

9,661
7,724

12,36911,359

8,849

8,003
6,118

5,000

0
2018

2019

Loans for margin transactions

2020

2021

Securities financing

2022

(FY)

Strategies and Initiatives in the Medium-Term Management Plan

Key Points
Business Environment and Recognized Issues
Stock-related businesses, such as loans for margin transactions
and general stock lending, are prone to fluctuations in performancedue to stock market conditions. Still, demand for stock lendingtransactions has been increasing due to the brisk pace ofstock market trading since the second half of FY2022. In
terms of transaction needs, in addition to conventional
covering of short sales, there has been a trend towardborrowing Japanese equities for use as collateral. Furthermore,
the balance of equity repo transactions continues its uptrend inline with the growing purchases of Japanese stocks by foreign
financial institutions and others.
In the bond market, the balance of supply and demand
for Japanese government bonds is tightening amid the Bankof Japan’s increased purchases of government bonds andexpected policy changes as interest rates continue to rise due
to monetary tightening policies in Western nations. Attention
is also focusing further on the use of HQLA such as Japanese
government bonds as collateral for various financialtransactions. As a result of this growing demand for Japanese
government bonds and other securities among domestic andoverseas financial institutions, the market balance of bondrepo and gensaki transactions remains high.
We will continue to expand securities financing by making
the most of our high credit rating (creditworthiness) backed bysolid equity capital and the expertise we have cultivated infinancial and securities-related businesses.
Recent Initiatives and Strategies in
the Seventh Medium-Term Management Plan
Main Recent Initiatives· Began providing data on loans for margin transactions on
Nasdaq Data Link
Information on margin transactions and loans for margintransactions is key for understanding trends in the Japanesestock market, especially individual investor trading trends.
One of JSF’s businesses is the provision of data on loans for
margin transactions. As part of this business, we have begun
providing data on outstanding balances of loans for margintransactions and stock loans and the premium charge rate foreach stock issue through Nasdaq Data Link.
· Improved merchantability of loans to retail
Formerly, documents for new loan contracts had to be sent by
mail. Now, the application process can be completed on JSF’s
COM-STOCK LOANS website, improving the merchantabilityof our loans. In addition, efforts to acquire new clients andreview eligible collateral resulted in an increase in the loanbalance in FY2022.
Strategies in the Seventh Medium-Term Management Plan

· Enhance the loans for margin transactions businessIn addition to ensuring the stable operation of the loans for
margin transactions business by appropriately responding tochanges in the stock market environment in ways such as
expanding the number of loanable stock issues and steppingup the procurement of stock certificates, we will review measures
to promote the use of loans for margin transactions by accurately
grasping the trading requirements of market participants.
· Expand and enhance securities financing
We will continue working to expand our client base for securities
financing. To increase the number of securities borrowers, wewill actively attend international conferences and other events
to cultivate new business with foreign financial institutions
and others. To increase bond procurement sources, we will
work to strengthen relationships and expand transactions with
regional financial institutions and others. With respect to equity
repo transactions, we will continue to flexibly respond to clientneeds, enhancing our commercial appeal and improving
convenience in transactions in various ways, including diversifying
types of collateral accepted and currencies handled.

Highlights
Attending International Conferences(Securities Financing Group)
JSF actively helps domestic and overseas clients meet theirsecurities financing-related needs. As part of this support, we
actively participate in international securities financeconferences held in Europe, North America and Asia byorganizations such as the International Securities Lending
Association (ISLA) and Pan-Asia Securities Lending Association(PASLA). At these conferences, we work to strengthen
relationships with financial institutions based in these regions
and to develop new clients.
Conferences like these also serve as a valuable training
ground for our junior employees, allowing them to gather

knowledge on trends in overseas financial markets and thelatest technologies, which they can share with theircolleagues. In 2023, the PASLA conference was held in Tokyo,
with more than 20 JSF employees participating in meetings
with clients. We believe
this has contributed tostrengthening our
relationships with clientsand raising JSF’s namerecognition.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

27

Group Management Strategy

Securities Financing Centered on Loans for Margin Transactions

History of Securities Financing
The performance of our licensed loans for margin transactions
business is greatly affected by stock market conditions and thebalance of standardized margin transactions. As we must
maintain stable infrastructure functions for the securities andfinancial markets even during market downturns, we have beenworking to ensure our financial soundness by diversifying ourrevenue sources beyond loans for margin transactions.
Specifically, we leverage the expertise in handling securities
and funds that we have cultivated in our original business ofloans for margin transactions. Securities financing itself consistsof five businesses—bond repo and gensaki transactions, equity
repo transactions, general stock lending, loans for negotiable

Evolution of Securities Financing

margin transactions, and loans to retail—and has grown tobecome a mainstay of our earnings in recent years.
Particularly with regard to bond repo, gensaki and equity
repo transactions, JSF has grown its business with non-residents
of Japan since the 2010s through participation in overseas
conferences, and by diversifying its transaction schemes by
accepting foreign securities as collateral and utilizing derivatives
such as total return swaps (TRSs). These efforts have resulted
in a steady uptrend in transaction balances. In this section,
we present specific initiatives and risk management for bondrepo, gensaki and equity repo transactions.

See pages 12–13 for details on composition of operating revenue.

Early 2010s
Established to complement the loans
for margin transactions business

2020s
Grew into a mainstay revenue source for JSF· Promoted the use of derivatives through diversification oftransaction schemes, etc.

· A neutral position where JSF does not compete withclients (banks, securities companies, insurance companies)· Credit ratings based on the stability of the earnings baseand capital adequacy ratio

Late 2010s
Enhanced internal systems· Carried out overseas promotions (Participated in international

financial and securities conferences and utilized industry media
advertising, etc.)· Utilized tri-party repo transactions (Diversified securities handled
through more efficient collateral management, etc.)

28

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Bond Repo and Gensaki Transactions
Bond repo and gensaki transactions mainly involve theexchange of Japanese government bonds for cash. In recent
years, there has been an increase in transactions in which thesebonds are procured from institutional investors in Japan andlent to overseas financial institutions and hedge funds. Factors
driving this increase include the globalization of Japan’s bondmarket due to the increased entry of foreign-affiliated financial
institutions, and the significant increase in the ratio of overseas
financial institutions in the repo market due to increased demandfor collateral to reduce settlement risk and for HQLA to comply
with financial regulations. Amid these circumstances, transactions
now include the exchange of equities for government bonds,
not only securities for cash.
Domestic institutional investors, including regional financial
institutions, have investment needs with respect to the Japanese
government bonds they hold, but directly lending those bonds
to overseas entities such as financial institutions involves thesignificant burden of establishing business relationships, including
creating credit lines and handling international contracts. We
are in a unique position in that we can leverage our accumulated
expertise in international contracts and cross-border transactions
to serve as an intermediary between the investment needs ofdomestic institutional investors and the procurement needs ofoverseas financial institutions from a relatively neutral standpoint.
Going forward, we will continue to increase bond repo andgensaki transactions both domestically and internationally.

Outstanding Bond Repo Transaction Balance(Billions of yen)

12,00010,000
8,000
6,000
4,000
2,000
0
2015 2016 2017 2018 2019 2020 2021 2022 (FY)
Late 2010s

2020s· Bond repo needs increased with

· Increased transactions with overseas

the Bank of Japan’s adoption ofa negative interest rate policy
in January 2016
· Number of clients increased due tosuccessful cultivation of new clientsin Japan· Repo transactions (lending of Japanese
government bonds with equities
and other securities as collateral)
using tri-party services increased
amid growing demand for collateralclients (foreign banks and hedge
funds) and diversified transactions· Supply-demand balance forJapanese government bonds has
tightened amid the Bank of Japan’s
increased purchases of these bondsand expectations of policy changes

Equity Repo Transactions
In order to meet the diverse needs of our domestic andoverseas clients for purposes including fund procurement
and fund management mainly using domestic and overseas
equities, we are increasing the number of contract-basedtransactions (such as stock loan agreements, Global Master
Securities Lending Agreements (GMSLAs), TRSs, and loan
agreements). Amid the recent trend toward stronger corporate
governance, market expectations for awareness of the cost ofequity in management has led to widespread purchases ofJapanese stocks by overseas financial institutions and otherinvestors. Against this backdrop, equity repo transactions forfunding purposes have increased, and our transaction balancehas been trending upward.
In addition, we are actively meeting the needs of overseas
financial institutions for funding in Japanese yen collateralizedby Asian equities. Going forward, we will continue to leverage
our neutral position, high credit ratings and accumulatedtransaction expertise to flexibly meet the needs of our clientsin ways such as diversifying the types of collateral acceptedand currencies handled.

Outstanding Equity Repo Transaction Balance(Billions of yen)

1,200
1,000
800
600
400
200
0
2015 2016 2017 2018 2019 2020 2021 2022 (FY)
Late 2010s

2020s· Needs for funding in Japanese yen
temporarily decreased due to the
Bank of Japan’s adoption of anegative interest rate policy· Using tri-party services to enablefunding in Japanese yen collateralizedby Asian equities· Began equity repo transactions
collateralized by government bonds
or U.S. dollars· Launch of TRS trading withJapanese government bonds as
eligible securities· Increased equity repo transactions
in which foreign financial institutions
purchase Japanese equities forfunding purposes

Japan Securities Finance Co., Ltd.

Integrated Report 2023

29

Group Management Strategy

Securities Financing Centered on Loans for Margin Transactions

Expanding Overseas Transactions through Participation in International Conferences
and Other Events
For JSF, international conferences provide a valuable point ofcontact with potential new clients. We have been actively
participating in international conferences since the PASLA
conference in Taiwan in 2012, and have expanded our scopefrom Asia to include Europe and the United States, participating
for the first time in the ISLA conference in Europe in 2018 andthe RMA conference in North America in 2019.

RMA3
ISLA1/GFF4

PASLA2

1. International Securities Lending Association
Industry association representing the common interests of
securities lending and financing market participants acrossEurope, the Middle East and Africa (established in 1989)

3. Risk Management Association
Industry association dedicated to research and education
on various regulatory responses and topics in the financial
services industry (established in 1914)

2. Pan Asia Securities Lending Association
APAC market equivalent to ISLA (established in 1995)

4. Global Funding and Financing
International conference on securities finance, organizedby Clearstream

When attending conferences, we meet with a diverse groupof clients based outside Japan, including securities firms,
banks, tri-party agents and other financial institutions, aswell as stock exchanges, platform operators and magazinesand other media outlets based in various countries. Thesemeetings enable us to acquire information about the latest

30

Japan Securities Finance Co., Ltd.

Integrated Report 2023

technologies and overseas market trends and regulations in
the finance sector, which we then share within our organization.
In addition, the number of new transactions concluded has
increased as a result of our participation in overseas
conferences, which has contributed to the diversificationof our revenue.

Risk Management for Securities Financing
Within securities financing, bond repo and gensaki transactions
account for large transaction lots, and their balances haveincreased significantly in line with the growth of the business.
This tends to inflate the balance sheets. Following here
is an explanation of the structure and risk management inthis business.
Bond repo and gensaki transactions are brokeragetransactions that match the needs of lender and borrower.
As a result, on the balance sheets both assets (cash collateralfor securities borrowed and securities purchased under resaleagreements) and liabilities (cash collateral received for securities
lent and securities sold under repurchase agreements) expand,as shown in (1) below. As of March 31, 2023, the balance
sheets had expanded significantly as the balance of bondrepo and gensaki transactions reached a record high level.
However, we reduce net exposure through a series of measures,
including receiving and paying cash equivalent to the market
value of the bonds as collateral for the bonds involved inthese transactions, marking the bonds to market during thetransaction period, and executing margin calls (receiving/
paying the difference between the cash collateral and themarket value of the bonds) as appropriate (see (2) below). In
addition, most of our clients are eligible for debt assumption
by financial institutions with relatively high credit ratings orby the Japanese Securities Clearing Corporation (JSCC).
These risk controls have helped limit increases in net
exposure and credit risk even as the balance sheets andtransaction balances have grown.

(Billions of yen)March 31,2023
Total assets

14,056.2

Cash anddeposits

1,598.2

Operatingloans(Billions of yen)March 31,2023

Details
Total liabilities

13,920.4

Borrowings

325.7

Bank of Japan current
account

Outstanding balances ofmargin loans, negotiable
955.5 margin transactions, bondand general loans, and loans
to trust banks

Securities
purchased
under resaleagreements

3,561.4

Cashcollateralprovided for
securities
borrowed

Collateral deposited (for6,669.8 bond repo and equity repo
transactions, etc.)(1)
Entered inboth assets
andliabilities

Entered inboth assets
andliabilities

The balance of transactions in other securities financing,such as equity repo transactions, is also on an uptrend. In equityrelated transactions, JSF applies the same risk control measures
as for bond repo and gensaki transactions, and also sets
appropriate haircuts (value markdowns) based on the volatility
and market liquidity of the equity involved in the transactions
to limit the increase in exposure.

Call money

Details

Bank of Japan market
operation bank loans

2,190.4(2)
JSF conducts daily
mark-to-market value
adjustments (receipt andpayment of the difference
between the market
value and cash collateral),which limits exposure

Exposure

Securities
sold under
repurchaseagreements

4,781.8

Cashcollateral
received for
securities lent

Cash received as collateral
5,073.7 (for bond repo transactions,etc.)(Marketvalue ofbonds)(Cashcollateral)As with other securities finance businesses, such as loans
for margin transactions, securities financing is managed within
an integrated risk management framework by measuring theamount of credit risk on a daily basis and keeping it within thelimit for risk capital set based on JSF’s financial strength. In
addition, we monitor the counterparty exposure for each client
on a daily basis to ensure that exposure in times of stress iswithin a certain limit, thereby preventing excessive exposure
for specific clients.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

31

Group Management Strategy

Corporate Strategy

Net assets ¥27.9 billion

JSF Trust and Banking Co., Ltd.

Balance of trust assets ¥3,881.4 billion
Number of employees 42(As of March 31, 2023)

Business Description and Policy
JSF Trust and Banking Co., Ltd. was established in 1998 amid financial system
reforms known as the “Japanese Big Bang.” A wholly owned subsidiary of JSF, it
aims to contribute to the development of financial and capital markets as the JSF
Group’s trust business. Since its establishment, JSF Trust and Banking has beenenhancing and expanding its investment service systems and evolving its financial
technologies to meet needs that become more diverse year by year. Throughthese efforts, it has built, deepened and enhanced a proprietary business model
for its custodial trust banking business that includes preservation trusts forsecurities companies and other financial instruments companies.

Toshihiro Oritate
President
JSF Trust and Banking Co., Ltd.

Strategies and Initiatives in the Medium-Term Management Plan
One of the main management goals of the Sixth MediumTerm Management Plan (FY2020–FY2022) was further evolutionof custodial trust services in response to market developments
and technological innovations. Over the plan period, in thearea of preservation trusts, our core product, regulatory
authorities introduced a series of systemic enhancements
for crypto asset deposits and crowdfunding payments withinvestor protection. In response, we worked to build a new
business base by establishing a network of major dealers
and related organizations, which yielded reasonable results.
We also worked to address growing investment needs inour asset-backed loan (ABL) trust business, where we holdfunds managed by institutional investors. By enhancing ourtrusteeship system, we successfully increased the trust balance.
As a result, the number of JSF Trust and Banking trustees
has steadily increased. The balance of trust assets increased
from ¥2.2 trillion as of March 31, 2020 to ¥3.8 trillion as ofMarch 31, 2023, and JSF’s trust fees have increased for 11
consecutive years.
In the Seventh Medium-Term Management Plan (FY2023–
FY2025), which began on April 1, 2023, the custodial trust
business continues to serve as a core business. However,market trends indicate that new business needs are emerging
due to the combination of systemic enhancements in thefinancial and capital markets and the advancement of digitaltransformation. As a result of its activities to date, JSF Trustand Banking is gaining recognition in the marketplace, andaccurately addressing these new needs will be an importanttask going forward.
During the plan period, in the banking business we willcontinue to expand credit services in a manner consistent
with the Group’s philosophy and manage securities
appropriately based on market trends that are expected tochange, while conducting adequate risk management.

Basic Policy in the Seventh Medium-Term Management Plan (FY2023–FY2025)
1. In trust operations, we will further strengthen our transaction network for various types of preservation trusts and custodial trusts,
such as ABL trusts, to ensure a self-driven mechanism for expansion, and clearly establish the trust business as one of the JSF
Group’s core businesses.
2. In loan services, we will focus on providing fund management support to the JSF Group’s clients and meeting the funding needs ofblue-chip companies in capital markets, while also strengthening our transaction network from a credit operations standpoint.

32

Japan Securities Finance Co., Ltd.

Integrated Report 2023

3. We will position treasury services as an important part of efforts to enhance corporate value, and strive to generate stable earnings
under appropriate risk management.
4. We will create strong internal control and governance, achieve smooth development and operation of the core systems that
support it, and enhance human resources.

Strengths and Opportunities
Our strengths are our neutrality as an important member of the JSF
Group, our ability to make proposals and our agility based on our
expertise in the custodial trust business and our experience and trackrecord in this business since our founding, as well as our meticulous
administrative support capabilities. The system-side measures connectedto these strengths are also important points. In addition to the key
core system upgrades in the Sixth Medium-Term Management Plan(banking account system upgrade) and Seventh Medium-Term
Management Plan (trust account system upgrade), we will also build astable and efficient business management system and improve
productivity in terms of system support, including the use of RPA andother technologies in peripheral operations, with the aim of enhancing
services to trustees and improving our corporate value.
Another of our strengths is our collaboration with JSF, our parent
company. In the Sixth Medium-Term Management Plan, we promoted
collaboration in the areas of sales, risk management and operational
management, while striving to enhance not only our own but also theentire Group’s human resources through systematic personnel
exchanges. In the Seventh Medium-Term Management Plan, we will
strive to strengthen this kind of collaboration in a way that leads tothe mutual enhancement of the operational management capabilities
and human resources of both companies.

Balance of Trust Assets(Billions of yen)
4,000

3,881.4

3,000
2,000
1,000
0
2019

2020

2021

2022

2023
(As of March 31)

Ordinary Profit(Millions of yen)
1,600

1,415

1,200
800
400
0

Nihon Building Co., Ltd.

2018

2019

2020

2021

2022 (FY)Net assets ¥6.3 billion
Number of employees 15(As of March 31, 2023)

Business Description and Basic Policy
A wholly owned subsidiary of JSF, Nihon Building Co., Ltd. was established in 1958
as the JSF Group’s real estate leasing company. Nihon Building is tasked with
providing suitable, comfortable offices and various facilities to a range of clients,
including those in the securities and financial sectors.
In addition to working for the Group, such as managing the JSF head officebuilding, and steadily promoting the leasing business for buildings owned by theGroup mainly in the NihonbashiOrdinary Profit
Kayabacho district, Nihon(Millions of yen)
Building will continue to improve
800
651
its services in cooperation with600
parent company JSF, while
responding to changes in the400
business environment, including200
the redevelopment projects
under way in the Nihonbashi and
0
2018
2019
2020
2021
2022 (FY)
Kabutocho districts.

Kazuhiro Maeda
President
Nihon Building Co., Ltd.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

33

Group Management Strategy

Corporate Strategy

Strengthening Human Resource Development
and Improving Engagement
Message from the Responsible Executive Officer

By supporting the growth of each employee, we will improve ourcorporate vitality and organizational transformation capabilities.
Since our business structure has long been centered on our licensed business ofloans for margin transactions, teamwork is a strength we have relied on to maintainthe accurate and steady execution of ongoing operations. However, there havebeen dramatic changes in our environment in recent years. To respond to thesechanges, we believe an important management issue is to create a workplaceenvironment in which diverse employees can fully demonstrate their individuality
and strengths, enthusiastically and autonomously explore and transform their work,and grow as they accumulate experience and achievements. Based on this belief,
the new human resource strategy that we formulated as part of the Seventh
Medium-Term Management Plan is a compilation of a policy (our human capital
policy) and measures (a human resource development program) for strengthening
our base of human resources, which are the source of corporate value creation.
Through the implementation and effective operation of specific measuresthat we formalize going forward, we will encourage our valued employees—ourhuman capital—to exercise initiative. Furthermore, by continuously supporting the
growth of each and every employee, we will improve engagement, thereby
improving Company-wide vitality and organizational transformation capabilities.

Wataru SatoManaging Executive Officer
Interim General Manager of
Human Resources Department

Our Human Capital Policy
Our human capital policy serves as the basic policy for human resource development and other initiatives related to humancapital formation. The aim of this policy is to strengthen our human resource base, which is the source of corporate value
creation. It comprises our vision, criteria describing the ideal human resources that the Company wants to cultivate andstrengthen, and initiatives for achieving the vision. These initiatives will be formalized one by one in each area of recruitment,
training and career path, evaluation and remuneration, and environment.

Vision• We respect the diverse values of our employees and will strive to provide opportunities and supportive environments so that diverse
individuals can maximize their individuality and strengths and grow on their own through the performance of their work.
• We will promote the creation of a comfortable work environment so that employees can engage in their work with peace of mind.
• We will improve our corporate vitality and organizational transformation capabilities and achieve more productive work styles byworking to improve employee engagement.

Ideal

Career Stage

Talent who respect diverse values and work together with other employees to enhance
corporate value

Our
Expectationsfor Human
Resources

Talent who are able to accurately and steadily perform highly complex tasks, and contributeto maintaining the reliability of the Company’s infrastructure functions
Talent who are able to strive to gain a deeper and broader understanding of their assigned
work, and who are able to lead business transformation while enhancing their expertise in
their respective fields

Managers
Specialists

Talent who have expertise in a certain field and are able to lead and contribute within the
Company by making use of their expertise
Individuals who take the initiative, set high goals and work independently to achieve thosegoals with the involvement of the people around them
Talent who are able to take a leading role in management strategy from a broad perspective

34

Staff/Leaders

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Upper management
Experts

Efforts toward Our Vision
1. Recruitment• In addition to the hiring of new graduates, we actively and continuously hire people with prior experience in order to secure adiverse workforce.
• We have created environments for autonomous career development that allow employees to maximize their individuality andstrengths and grow on their own through the performance of their work.

2. Training andcareer path

• In order to support autonomous career development and taking on challenges, we have established new human resources
development programs, including revised and new training programs.
• We are building a stronger talent pool that can take a leading role in management strategy based on diversity, expertise,and independence.

3. Evaluation andremuneration

4. Environment• We will appropriately assess the contribution of employees’ performance of their work, including the degree to which they havedeveloped their abilities, demonstrated their performance, and fulfilled their expected roles.
• We will assess our employees’ independent approach and actions toward their work, such as work reform, work efficiency
improvement, and voluntary efforts to achieve ambitious goals.
• We will create a workplace environment that ensures work-life balance by promoting the use of various leave systems to help
employees balance childcare or nursing care with their work.
• We will promote the creation of a comfortable workplace environment that enables diverse work styles through the utilizationof telework.

Formulating Our Human Resource Development Program
In the initiatives for achieving the vision within our human capital policy, we state that we will develop a new human resource
development program to support each employee’s autonomous career development and taking on challenges toward personal
growth. Through the following initiatives and other efforts, we aim to diversify our human resource portfolio and strengthen thefoundation of our human resource capabilities.

• Visualization of human resource portfolio using IT• Support for medium- to long-term and autonomous career development based on career ownership• Wider range of self-development options through blended learning• Introduction of an in-house trainee system and mentor system• Enhanced experiences outside of the Company
Human Resource Development Program

Employees

JSF

Career Management (JSF/Employees)
Provide information
Clear indication ofnecessary humanresources
Career options

Provide learning
opportunities
Provide tools

Set careergoals

Acquirespecialized
knowledge
and skills

Career design
Life design

Proactive
learning

Provideopportunities tosucceed
Selection,
placement andutilization

Accumulate
experience

Evaluate
performance

Generate
results

On-the-job
training

Synergy

Synergy

Off-the-jobtraining
Rank-based training
Theme-specific training
Lectures and externalseminars

Practice in theworkplace

SynergySelf-development
Take onchallenges

Evaluation
Value
improvement

e-Learning
Distance learning courses
Qualification acquisition support system
Self-development support system

Japan Securities Finance Co., Ltd.

Integrated Report 2023

35

Group Management Strategy

Corporate Strategy
Diversity and Inclusion
Promoting Active Participation of Experienced Hires
In aiming for sustainable growth and improved corporate
value, we will flexibly recruit talent from a wide range ofindustries in accordance with the evolution of our business.
This will include people who can supply diversified financial
services, people who can help us enter new fields and people

with specialized expertise, all regardless of nationality. We
also provide support for experienced personnel we hire sothat they can maximize their abilities in the workplace. We
provide them with opportunities to acquire knowledge bothin their specialized fields and in our main business areas.

Leveraging Previous Career Experienceand Finding Fulfillment at JSF
I started my career in the systems department of a megabank, followed by a position in a
consulting firm with strengths in IT, after which I joined JSF in August 2022.
My current responsibilities range from system implementation to information security
management and arranging LAN installation. Before joining JSF, I was on my guard for the
possibility that it was an exclusionary company not used to hiring experienced personnel.
Contrary to my fears, I received a warm, unreserved welcome. Even in my early days at JSF,
I received positive encouragement for my improvement proposals, as well as significant
discretionary authority, which helped me loosen up and settle into my work. I feel there is
still quite a lot I can do to help JSF, and I intend to continue making the best of myexperience and skills and engaging in my work free of cares.

Uran Okutomi
Systems Planning Department

Promoting Active Participation of Women
In order to step up the active participation of women, we continue
to target a ratio of 40% or higher for women graduate
hires to total new graduate hires. In recent years, we havemaintained this ratio at 50% or higher. In addition, we
provide career development support such as various
training opportunities so that women can take on leadership

Employees(Number)

300
250
200
150
100

Managerial Positions
Men
Women
Ratio of women

33.2
31.5 31.2 32.4
30.1 31.0
82
78
79
77
78
77

179

174

172

170

163

165

(%)

(Number)

40

120

2
30

80

40
20

0

10
2018 2019 2020 2021 2022 2023

Japan Securities Finance Co., Ltd.

2

2

2

3

(%)

6
4

5

3.7

4

2.9

60
20

New Graduate Hires

Men
Women
Ratio of women

100

50

36

roles at an early stage of their careers. We also fully
leverage the abilities and individuality of all of ouremployees by maintaining an environment in which they canbalance active participation in work while providing childcare
or nursing care. Through such measures, we plan to increase
the ratio of women in managerial positions.

2.1
94

2.2
90

2.2
90

2
100

104

0
2018 2019 2020 2021 2022 2023

Integrated Report 2023

10
8

Men
Women
Ratio of women

60.0

0

0

60
3

4
2

80
70

60.0

50.0

1

(%)

66.7

6

3

2.1
93

(Number)

3

2

2

3

50

50.0

40

2

40.0
3

3

30

2018 2019 2020 2021 2022 2023

(FY)

2

1

2

2

Supporting Work-Life Balance
As stated earlier, one of our initiatives for achieving the vision
is to help employees balance work with childcare or nursing
care. We do this by establishing various support systems, aswell as by informing employees of system changes in linewith legal or regulatory revisions and by establishing andoperating a system for providing individual consultation andsupport. For employees who apply for childcare or nursing
care leave, we conduct individual interviews to understandtheir various concerns, worries and needs, and then create aplan to facilitate their smooth return to the workplace after
taking leave.

Childcare and Nursing Care Support System• Childcare and nursing care leave of absence • Child and adult nursing care leave • Option of reduced working hours• Exemption from overtime work • Childbirth support leave • Subsidies for babysitting expenses• Creation of support plan and implementation of measures for returning to work after taking childcare leave• Support for returning to work and for continuing work
• Distributing pamphlets and raising awareness within the Company regarding in-house systems related to childcare and nursing care
• Distributing pamphlets about childbirth to expecting employees
2018

2019

2020

2021

2022

Women
Number taking childcare leave (half-day, hourly)

10

10

8

13

25

Number taking a childcare leave of absence

3

6

8

6

5

100%

100%

100%

100%

100%

10

9

10

13

13

Number taking childcare leave (half-day, hourly)

14

15

11

12

13

Number taking special leave (childbirth support leave)

7

10

6

7

3

100%

100%

100%

77%

100%

Rate of women returning to work after taking a childcare
leave of absence
Number on reduced working hours system (childcare)
MenRate of men taking special leave (childbirth support leave)

Promoting Work-Life Balance
Through the use of telework and other means, we willachieve efficient and diverse work styles unrestricted bytime and place and promote the creation of a comfortable
work environment. Telework is available to all employees,
and accounts for about 40% of days worked per week on
average, post-pandemic.
In addition, JSF has set the rate of paid leave taken
and overtime hours worked as important indicators, andencourages employees to reduce overtime work and takeleave at an appropriate frequency and duration. We also
pay attention to changes in employees’ work conditions,such as the psychological burden of work and stresscaused by the work environment. Employees who are
dealing with issues are identified and followed up withquickly to help improve conditions.

Rate of Paid Leave Taken

Overtime Hours Worked (Monthly Average per Employee)(%)
80(Hours)
20

74.4

76.6
72.6

70

66.4

68.9

15

60

10

50

5

14.7
11.1

9.7

15.4

11.2

0

40
2018

2019

2020

2021

2022

2018

2019

2020

Japan Securities Finance Co., Ltd.

2021

2022 (FY)

Integrated Report 2023

37

Foundation Supporting Corporate Value

Corporate Governance
Basic Concept
Under this corporate philosophy, the Company has
adopted the Company with a Nominating Committee, etc.
structure under the Companies Act, based on which it strives
to clarify the separation of supervision and execution ofbusiness operations, further strengthen supervision by having
mainly outside directors to ensure sound management, andachieve prompt business execution that responds quickly
to changes in the business environment.

As an institution specializing in securities finance, JSF has a
mission to contribute to the development of the securities
and financial markets by proactively meeting the diverse
needs of the securities and financial sectors and to enhance
the long-term interests of market participants and users,
while always maintaining a keen awareness of its public role.
Based on this thinking, the Company aims to gain the solid
trust of society through sound business operations.

Corporate Governance System

General Meeting of Shareholders

Accounting Auditor

Board of Directors (7 members)
Nomination Committee (5 members)
Remuneration Committee (5 members)
Cooperation

Survey and report, etc.

Audit Committee (3 members)
Entrustment andsupervision ofbusiness execution

Internal Audit
Department

Risk Management Committee

Internal
audit

Secretariat

Corporate Governance Office

Management Committee

Audit

Report to Audit
Committee

Business Execution

Representative Executive Officer & President

Cooperation

Outside Director

Compliance Committee

Executive Officers

Compliance Department

ReportManagement administration and report, etc.

Risk Management Department

ChecksBusiness Departments

External Reporting Contact Desk

Audit

Cooperation

Inside Director

Consult andreportJSF Group Companies
Note: Entities in area enclosed by dashed outlines are subject to internal audit.

Corporate Governance History
The Company has a history of taking a strong interest in andbeing proactive about corporate governance since the time
it was a Company with a Board of Auditors. For example, in
FY2015, the Company appointed a woman outside director,
and in FY2016, it established a Nomination Committee
and Remuneration Committee, with the majority of thecommittee members being outside directors and outside
Audit & Supervisory Board members. In FY2018, theCompany formulated a succession plan for candidates for
executive director at the time.
Based on this foundation, JSF transitioned to a Company
with a Nominating Committee, etc. in FY2019. The aim of
this was to separate supervision from execution to create asystem that would enable the Company to push forwardwith its management policies. The organization would be

38

Japan Securities Finance Co., Ltd.

Integrated Report 2023

comprised of the Board of Directors, responsible fordetermining and supervising management policies suchas medium-term management plans, and an execution
side composed of the Executive Committee under thesupervision of the Representative Executive Officer &President. This would allow for prompt and effective decisionmaking. Therefore, from the outset, the chairpersons of
the Board of Directors and the three statutory committees
were all outside directors, and the majority of the directors
were independent outside directors.
Under the basic framework as a Company with aNominating Committee, etc., JSF has made various efforts
to improve its effectiveness accordingly. A summary of key
initiatives is presented here.

Company with a Board
of Auditors

JSF’s Corporate Governance Enhancements in Retrospect
FY2015• Appointed a woman outside director

FY2016• Established a Nomination Committee and Remuneration Committee∙ Made the majority of the committee members outside directors and outside Audit & Supervisory Board members• Introduced a share-based remuneration plan

FY2017• Began holding an outside officers-only meeting

FY2018• Formulated succession plans for candidates for executive director (management executives)

FY2019• Transitioned to a Company with a Nominating Committee, etc.
∙ S eparated supervision and execution, with the Board of Directors determining and supervising management policies suchas medium-term management plans, and the Executive Committee under the supervision of the Representative Executive
Officer & President, for a system to make prompt decisions to realize the management policies∙ Made the chairpersons of the Board of Directors and the three statutory committees all outside directors∙ Independent outside directors come to account for the majority of directors• Formulated and announced the Sixth Medium-Term Management Plan
∙ Pushed to expand and strengthen the securities financing business and trust banking business, promoted thediversification of revenue sources, and enhanced profitability∙ Set and announced management goals (number of loanable stock issues and basic profit)

Company with a Nominating Committee, etc.

FY2020• Introduced performance-linked remuneration for officers∙ Introduced performance-linked remuneration for officers in line with the management goals of the Sixth MediumTerm Management Plan
• Formulated and announced the Medium-Term Management Policy∙ Ensured a higher level of transparency and commitment to sustainable growth and medium- to long-term enhancementof corporate value∙ S et a management goal of achieving ROE of 5% by FY2025, above the cost of equity (estimated to be around 4.5%)∙ Aiming to achieve a total payout ratio of 100% on a cumulative basis by FY2025• Formulated and announced our approach to the composition and other aspects of the Board of Directors∙ Amid the changing environment of globalization and digital transformation, decided on a policy of structuring theBoard of Directors that is attentive to the diversification of skills, balancing the numbers on the supervision andexecution sides and diversifying board members in terms of age and gender, in order to formulate medium-term
management plans in accordance with the Medium-Term Management Policy and further exercise supervisory
functions

FY2021• Formulated and announced our approach to the appointment of executive officers• Formulated and publicly announced our basic approach concerning our business portfolio∙ Decided on a business portfolio consisting of securities financing centered on loans for margin transactions, as well as
securities investment, trust banking and real estate leasing• Formulated and announced our basic approach to sustainability∙ By providing loans for margin transactions and various other services as infrastructure for securities and financial
markets, the JSF Group aims to contribute to the realization of a sustainable society, including by providing support tomarket participants who are engaged in similar initiatives.
• Strengthened the functions of the secretariat of the Board of Directors∙ A Corporate Governance Office was established from the perspective of promptly addressing corporate governanceissues and further strengthening the secretariat functions of the Board of Directors. The office fulfills a secretariat
function for deliberations of the Nomination Committee, the Remuneration Committee and the Board of Directors on
the various measures mentioned above.

FY2022• Improved the transparency of the nomination process for management executives∙ Pursuant to decisions by the Nomination Committee and the Board of Directors, in March 2023, publicly announced
the operational specifics of the nomination process for management executives, particularly the independent and active
involvement of outside directors in the Nomination Committee and other committees, and the approach to in-househuman resource development with a view to the selection of management executives (details on pages 43–44)• Formulated and publicly announced the Seventh Medium-Term Management Plan (details on page 20)•D etermined the officer remuneration system in line with the Seventh Medium-Term Management Plan (details on page 45)

FY2023• Announced efforts to respond to the Tokyo Stock Exchange’s request to listed companies, as well as the status of
dialogue with shareholders• Implemented a Company stock incentive program for employees• Formulated and announced the Long-Term Management Vision (details on page 9)Japan Securities Finance Co., Ltd.

Integrated Report 2023

39

Foundation Supporting Corporate Value

Corporate Governance
Composition of the Board of Directors
The Board of Directors comprises a variety of directors withdiverse expertise, experience and other characteristics, basedon a skill matrix formulated by the Company. To the extent
stipulated in the Articles of Incorporation, JSF secures theappropriate number of members to maximize the effectivenessand efficiency of the board’s functions. In addition, multiple
outside directors independent from the Company and possessing

Overview of the Board of Directors (As of June 22, 2023)
Organization form

Company with a Nominating
Committee, etc.

Chairperson of the board

Outside director

Maximum number of directors
as stipulated in the Articles
of Incorporation

8

Number of directors

7

Number of outside directors[Independent directors]

5 [5]abundant experience and expert knowledge of business
management and other matters have been appointed to theboard to ensure appropriate business operations while enabling
objective and neutral management supervision from external
viewpoints. The Board of Directors currently comprises sevenmembers (including five outside directors), with an outside
director serving as chairperson.

Non-Executive
Directors

Independent
Outside Directors

6 7 6 75 5 5 585.785.7%%

100100%%

Director Expertise (Skill Matrix), Attendance at Board of Directors and Other Meetings
Area of Expertise
Name

Finance,Financial
Internal
Outside/ Corporate
International Legal affairs,
securities,
affairs,
control, risk
Inside management
affairs
complianceeconomics
accounting management

NaotakaObata

Outside

100%
13/13

100%
8/8

100%
7/7

—

Shoko
SuginoOutside

100%
13/13

100%
8/8

100%
7/7

100%
13/13

Kensuke
Futagoishi1

Outside

100%
10/10

100%
8/8

100%
6/6

—

Takayoshi
Yamakawa1

Outside

100%
10/10

100%
6/6

100%
11/11

SetsukoEgami2

Outside——Inside

100%
13/13

100%
8/8

100%
7/7

—

Inside

100%
13/13

—

—

100%
13/13

Shigeki Kushida
Representative Executive
Officer & President

Hiroshi
AsakuraChairperson

40

FY2022 Meeting AttendanceJapan Securities Finance Co., Ltd.

Integrated Report 2023

ESG

Member (As of June 22, 2023)

Audit
Board of Nomination Remuneration
Directors Committee Committee Committee

1. Appointed in June 2022—

2. Appointed in June 2023

Status of Board of Director Initiatives
Committed to achieving the Medium-Term Management
Policy’s medium-term management goal of 5% ROE by FY2025,
in FY2022 we compiled the Seventh Medium-Term Management
Plan based on discussions of JSF’s management policy forthe coming three years and the strategies and measures it
encompasses. In particular, in order to respond agilely andflexibly to changes in the business environment we need to
improve corporate vitality and organizational transformation
capabilities by developing human resources and ensuring
diversity. We therefore discussed human resource strategies
for the Seventh Medium-Term Management Plan, and formulated
and publicly announced our Human Capital Policy, which is
our basic policy for promoting initiatives related to humancapital formation. In addition, in order to increase employee
job satisfaction, motivation and interest in improving corporate
value, we also discussed and publicly announced our Company
stock incentive program for employees under which we will
grant JSF stock to employees based on the Company’s
performance in FY2022, the final year of the Sixth MediumTerm Management Plan.
Among initiatives related to promoting sustainability and
ESG, we have clarified and publicly announced our policy
with regard to addressing climate change and environmental
protection (initiatives to meet the TCFD recommendations).

Namely, JSF will work to realize a sustainable global
environment through its business activities and to enhance
disclosure of climate-related information in accordance with
the TCFD recommendations. The board also received
reports from executive officers and discussed various
initiatives related to the Company’s material issues, such asefforts for carbon neutrality and programs to promoteacademic research.
Main Agenda Items for FY2022
Corporate Governance• Formulation of the Seventh Medium-Term Management Plan
• Partial revision of Basic Policy on Corporate Governance• Examination of sustainability issues (e.g., addressing carbon neutrality)• Disclosure of climate-related financial information in accordance with
the TCFD recommendations• Examination of implementation of Company stock incentive programfor employees• Evaluation of the effectiveness of the Board of Directors
Risk Management• Summary report on the risk appetite framework (RAF)• Examination of risk appetite indicators• Implementation status of internal audits
Capital and Financial Policy• Examination of future shareholder returns• Evaluation of strategic equity holdings• Status of dialogue with investors

Overview of Each Statutory Committee and Status of Initiatives
Nomination Committee
To ensure that the Board of Directors can adequately determine
management policies and supervise execution, the Nomination
Committee deliberates and decides on general matters related
to the appointment and dismissal of the Company’s management
executive team (directors, executive officers and corporate
officers) such as the composition of the Board of Directors,
including the skill matrix; determination of director candidates;consideration of succession plans; qualifications required of
executive officers and corporate officers; the policy for their
appointment and dismissal; and determination of specificcandidates. The committee currently comprises five directors(including four outside directors), and is chaired by anoutside director.
Main Agenda Items for FY2022
Consideration of management executive team succession plans
Consideration of the transparency of the selection process and thein-house human resource development policy for management
executive team members• Consideration of the approach to the appointment of executive
officers and corporate officers• Nomination of director, executive officer and corporate officer
candidates for FY2023••

Remuneration Committee
The Remuneration Committee deliberates and decides on
general matters related to amounts of remuneration for senior
management (directors, executive officers and corporate officers)
for the steady implementation of the Medium-Term Management
Policy and management plans based on this policy. These
matters include making sure the remuneration system is consistent
with the implementation of the management policy and relatedplans, deciding on remuneration for individual members ofsenior management, and the policy for determination thereof.
The committee currently comprises five directors (including
four outside directors), and is chaired by an outside director.
Main Agenda Items for FY2022
 etermination of FY2022 remuneration amounts for individualD
directors and executive officers• Consideration of the officer remuneration system in conjunction withthe formulation of the Seventh Medium-Term Management Plan•

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41

Foundation Supporting Corporate Value

Corporate Governance

Audit Committee
In addition to carrying out tasks such as auditing the executionof duties of directors and executive officers and preparing
audit reports, the Audit Committee deliberates on anddetermines the content of proposals (including those on
appointment and dismissal of the accounting auditor) to besubmitted to the General Meeting of Shareholders.

The committee currently comprises three directors (including
two outside directors), and is chaired by an outside director.
Main Agenda Items for FY2022
 usiness operation status, risk management, compliance,Binternal auditing• Reports from the accounting auditor (audit plans, major audit
matters, etc.)•

Evaluation of the Effectiveness of the Board of Directors
In FY2022, based on an evaluation by each of the directors,
the Board of Directors analyzed and evaluated matters related
to its effectiveness including the composition and operationof the Board of Directors, the support system for directors andthe directors’ individual initiatives, as well as an evaluation of
the three statutory committees, namely, the Nomination Committee,
the Remuneration Committee and the Audit Committee.
For the analysis and evaluation, a questionnaire surveyof all directors was conducted. The Company has chosen to

receive recommendations from an external organization
regarding the content of the questionnaire and, in principle,
to send responses directly to that organization. The board’s
analysis and evaluation are based on the external organization’sreport of the aggregated results and an opinion exchange
meeting, including with the outside directors, held prior to
conducting the questionnaire survey.

Overall Evaluation
The questionnaire responses and other findings confirmedthat the composition, operation, support system and otheraspects of the Board of Directors and the committees are allappropriate. Board and committee meetings were also highly

evaluated for their free, lively and constructive discussions
and exchanges of opinions.
Based on these findings, the Company judged that theeffectiveness of its Board of Directors has been ensured.

Initiatives to Address Issues in FY2022
FY2022 was the final year of the Sixth Medium-Term Management
Plan, and the main item for discussion was the formulationof the Seventh Medium-Term Management Plan, aimed atachieving the medium-term management goal of 5% ROE
by FY2025. We evaluated the process for formulating mediumterm management plans, and concluded that follow-up on the
progress of the Sixth Medium-Term Management Plan, which
is a prerequisite for plan formulation, is being carried out
appropriately; and that executive officers explain management
issues to the Board of Directors in a timely manner and provide
sufficient information related to discussions.
With regard to the constructive dialogue that JSF maintains
with shareholders and investors to improve corporate value
over the medium to long term, we concluded that feedback to
the Board of Directors regarding the status of dialogue withshareholders and investors is being provided appropriately. In
addition, in conjunction with the formulation of the Seventh
Medium-Term Management Plan, the committees discussed

topics such as the revision of officer remuneration and theapproach to in-house human resource development with aview to selecting management executives. We concluded
that the committees’ discussions regarding nomination andremuneration were carried out in accordance with the
management policy. With the addition of two new directors
in FY2022, we worked to enhance the provision of informationand training, and to improve secretariat functions. Specifically,in addition to continuing to provide advance explanations onimportant agenda items for Board of Directors meetings, we
also worked to enhance the provision of information in ways
such as conducting tours of JSF business locations. Based onthese initiatives, we concluded that the provision of informationand the improvement of the functions of the secretariat werecarried out appropriately. However, because we believe thatproviding various types of information to directors constitutes
the basis of discussions at Board of Directors meetings, wewill remain cognizant of this issue and work to improve it.

Issues to Address in FY2023
With regard to the way JSF disseminates information, some
respondents felt that we should focus more on providing
information to shareholders and investors in general, including
individual shareholders. Consequently, we recognize this as an
issue and are addressing it in FY2023 by enhancing various
tools for providing information, such as our website andintegrated report.

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Furthermore, we will continue working to provide information
to directors and enhance opportunities for outside directors to
exchange opinions, based on our ongoing awareness thatthese are issues we need to address.
The Company will work to address all of the aforementioned
issues to further improve the effectiveness of the Boardof Directors.

Approach to Selecting the Management Executive TeamJSF believes that the roles expected of its management team,
centered on the Representative Executive Officer & President,change over time depending on the environment in which
the Company operates and its business portfolio. With thisin mind, the appointment of our management team andsuccession planning are structured based on our approachconcerning the Company’s business portfolio, as follows:• Operation of a loans for margin transactions system

The loans for margin transactions business is the foundation and raison d’etre of the Company as a licensed
business under the Financial Instrument and Exchange Act. JSF will continue to maintain and strengthen thisbusiness by appropriately responding to the changing business environment surrounding the stock market andproperly understanding the trading requirements of market participants.

JSF’s aims forbusiness expansion• Securities financing and trust banking businessIn the securities financing business, JSF is actively responding to the expansion of transactions with domestic
and overseas market participants by leveraging its background in loans for margin transactions and other services.
Specifically, we are expanding the number of clients, and the currencies and securities covered. To achieve this,
we are actively engaged in cross-border securities loans through international forums such as PASLA and ISLA.
In the trust banking business, we are also expanding by focusing on so-called custodial trusts, such as preservation
trusts, and by taking advantage of our agility and flexibility to gain a high market share in niche areas. These
operations are expected to make a significant contribution to the Company’s future profitability.

• Loans for margin transactions system
Qualities considered
important for eachbusiness in JSF’s
portfolio

Because loans for margin transactions systems are widely used by securities companies, the qualifications required
for their administration emphasize their public role, impartiality, and neutrality. In addition, going forward, JSF
must be flexible in responding to the changing business environment and participants’ needs, and in uncovering
participants’ new requirements in this field. For this reason, a project team was established in FY2023 to consider
the ideal mechanisms for margin loan transactions from a medium- to long-term perspective.

• Securities financing and other businesses

Since the securities financing business and trust banking business also involve an extensive range of market
participants, we believe even more strongly that the above-mentioned qualities are appropriate for JSF, which
supports the securities and financial market infrastructure. However, for these businesses, knowledge andexperience related to securities and financial business, markets, and technological innovation, as well asinternational expertise, are even more important qualities.

Approach to the Structure of the Management Team
Based on such future business developments and the required
qualifications, the management team is currently being structured
as follows:

expertise; advanced knowledge of business management,risk management, and financial accounting; and flexibility inresponding to the changing business environment.

• Execution• Supervision

JSF will build an overall executive system with the qualities
sought by combining the strengths and talents of each individual
executive officer so that the above business development
can proceed effectively. The required qualities of the entire
executive team are having a thorough recognition of their
public role; extensive knowledge of the market in general;familiarity with various laws and regulations; knowledge of
the Company’s highly specialized operations; international

After establishing a skill matrix to enable effective supervisionof the above execution, we will structure a team of directors
taking into consideration the multi-layering of skills anddiversification in age and gender. In recent years, experiencein corporate management in the financial and industrial sectors,
specialized knowledge such as that relating to law, andexpertise in digital transformation and innovative businesshave been emphasized.

Approach to Succession Planning for the Representative Executive Officer & President
Among the succession plans for the management executive
team mentioned above, the Nomination Committee engages
on an ongoing basis in discussions of a preliminary list of specificcandidates and requisite qualities for the Representative Executive
Officer & President, for whom the succession plan is particularly
important.
Regarding the preliminary list of candidates, we are taking
into consideration the above-mentioned direction for developing
JSF’s business by positioning securities financing and otherareas as growth fields, as well as the composition of theexecutive officer team as a whole. At the same time, we aremainly considering candidates from within the Company,
including experienced mid-career hires, but not candidates

from public sector backgrounds, with more emphasis on
knowledge and experience in securities and financial businesses,
including technological innovation.
The qualities required of the Representative Executive
Officer & President currently under discussion include highethical standards and a sense of responsibility as a representativeof a company with a public role; the ability to accurately
understand changes in the operating environment and develop
strategies for shaping a vision for JSF’s future; both a long-term
and a big-picture perspective; decision-making and execution
abilities; leadership; and communication skills that contributeto organizational vitality.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

43

Foundation Supporting Corporate Value

Corporate GovernanceManagement Team Appointment Process and the Roles Played by the Nomination
Committee and the Board of Directors
The appointment of the management team is one of the most important missions of the Nomination Committee and Board of
Directors, and this committee and the Board of Directors are independently and actively engaged in the following management
nomination process:Appointment Process1)	Deliberation and determination of the basic qualitativerequirements
	The Nomination Committee and Board of Directors deliberates
and determines the “Approach to the structure of the Boardof Directors,” the skill matrix for directors, and the “Approachto the appointment of Executive Officers,” and establishes
the required qualities as described on the previous page.
2)	Preliminary list discussions
	Discussions are held on the preliminary list of candidates.
In the case of directors, individuals with corporate management

executive experience, legal and other experts, and thosewith expertise in digital transformation and innovative business.
In the case of executive officers, those from within the Company
and outside persons (e.g., those from public sector backgrounds
and those from the securities and financial sectors).
3) Narrowing down and finalizing the list to a short list
	Following 2), above, the Nomination Committee narrows
down the candidates to a short list based on their backgrounds,
expertise, and evaluation results. The final decision is thenmade based on this short list.

Independent and Active Involvement of the Nomination Committee in the Above Process
The Nominating Committee gathers information during various
opportunities such as regular briefings and discussions at theBoard of Directors, on-site tours, and briefings prior to theBoard of Directors meeting from the executive side. The
committee also exchanges opinions with outside directors(excluding the director who also serves as the Representative
Executive Officer & President) through activities such as outside
director liaison committee meetings. Based on this understandingof the Company’s operations and candidates, as well as proactive
questions from the supervisory side and a review and proposals
by the executive side in response to such questions, deliberations
and decisions are effectively carried out.
As an example, JSF disclosed its current view regarding
succession planning for the current president, which is toconsider internal personnel, including employees hired
mid-career, but not including those from public sector
backgrounds, as was the policy as of January 2023. This point
was already raised by the Nomination Committee in the

Basic approach

Skill matrix

Directors

Individuals withcorporate management
experience, legal andother experts, andthose with expertise indigital transformationand innovative business

Qualities sought

Individuals fromwithin the Company
and individuals fromthe public sector or
the securities andfinancial sector

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Integrated Report 2023

Executive
officers

44

Approach to board
structure

Preliminary list

summer of 2022 during an informal exchange of views
between the Nomination Committee and the executive team.
Likewise, on the executive side as well, a similar awareness of
the issue had emerged during the process of establishing ourapproach to the business portfolio and our thoughts on
appointing executive officers based on this approach since2021, and a basic understanding was reached between the
supervisory and executive sides. Based on these
considerations, the succession plan for the Representative
Executive Officer & President was discussed and disclosed in
January 2023 after being approved by the Nomination
Committee and the Board of Directors.
For important matters, including the aforementioned cases,
decisions are made after several rounds of discussions, withthe supervisory side proposing and raising issues to the executive
side, in the form of deliberations on 1) organization of theissues and free discussion, 2) discussions on the draft proposals,and 3) deliberation on the resolutions and disclosure.

Short list

Interviews, etc.

Nomination Committee narrows the list to ashort list.

∙ Interviews are held for new director
candidates.

∙ Executive officer candidates are judged on

their character and qualifications over thecourse of regular briefings and discussions at
Board of Directors meetings, as well as
through interviews, as necessary.

Decision

Candidates for
director are
determined by the
Nomination Committee(Appointed by theGeneral Meeting of
Shareholders)
The Board of
Directors makes
decisions on
candidates based on
the candidates
selected by the
Nomination
Committee.

Officer Remuneration System
Revision of the Officer Remuneration System in Line with the Seventh Medium-Term Management Plan
The Remuneration Committee revised the design of remuneration for officers to create incentives consistent with the management
policy under the Seventh Medium-Term Management Plan, which started in FY2023.
Overview of the New Remuneration System for Officers
Regarding performance-linked remuneration, it is divided into short-term and long-term incentives, with bonuses positioned as
short-term incentives and share-based remuneration as long-term incentives.
Regarding bonuses, consolidated current fiscal year profit shall be used as a reference index from the perspective of defining
management responsibility for each fiscal year as a short-term incentive. In addition, remuneration is divided into a
performance-based component and an individual evaluation component. It may increase or decrease depending on theindividual evaluation.
Regarding share-based remuneration, ROE and consolidated ordinary profit, for which management goals have been set in theSeventh Medium-Term Management Plan, will be used as reference indicators for the long-term incentive.

∙∙∙

Policy for Determining the Amount of Remuneration for Officers and the Calculation Method Thereof
Details of Policy and Determination Method
Remuneration for officers shall be based on systems and standards in accordance with the respective roles and expected functionsof directors and executive officers, in order to achieve sustained growth and enhancement of corporate value over the medium tolong term based on the corporate philosophy and management principles. Specifically, individual amounts of remuneration shallbe determined by the Remuneration Committee based on the following policy decided on by the committee.

• Directors∙ With a view to having supervisory functions carried out appropriately, directors shall receive only fixed monthly remuneration (baseremuneration). Performance-linked remuneration shall not be provided to directors.

∙ R emuneration for individual directors shall be determined in accordance with the responsibilities of each director, such as whether
that person is serving in a full-time or part-time capacity or as a chairperson.

∙ Directors concurrently serving as executive officers shall not receive remuneration as directors.
• Executive Officers∙ With a view to enhancing correlation with the Company’s business performance and share value, remuneration for executive officers
shall comprise fixed monthly remuneration (base remuneration), performance-linked officer bonuses and share-based remuneration.

∙ Fixed monthly remuneration (base remuneration) shall be determined in accordance with each executive officer’s position.
∙ R egarding performance-linked remuneration, it is divided into short-term and long-term officer incentives, with bonuses positioned
as short-term incentives and share-based remuneration as long-term incentives.

∙ To clarify the responsibilities of management each fiscal year for short-term incentives, officer bonuses shall be determined after

the end of each fiscal year, in accordance with business performance and individual evaluation for the fiscal year, and are paid
within three months after being decided.
∙ As for share-based remuneration, a Board Benefit Trust (BBT) scheme shall be used to award each executive officer points as along-term incentive. Points shall be determined based on correlation with the achievement of management goals in the mediumterm management plan, from the perspective of strengthening the link between medium- to long-term increases in corporate
value and shareholder returns. Upon retirement from office, executive officers are issued Company shares corresponding to thenumber of points they have accumulated.

Overview of the Officer Remuneration System (FY2023)

Basic

Proportion of total
remuneration paid

Fixed or variable
remuneration

65%

Fixed

Payment standards
Position

Chairperson

President

Senior managing
executive officer

Managing
executive officer

20%

Bonus
Performancelinked
Sharebased(performancelinked
component:
15%; individual
evaluation
component: 5%)

15%

Linked to short-term
performance(short-term incentive)

Linked to medium- tolong-term performance(long-term incentive)

Base calculation
amount according
to position

Performancelinked coefficient

Consolidated profit<YoY change>• Number of standard points according to position × Performance-linked coefficient• Consolidated ROE and consolidated ordinary profit (Degree of achievement: Actual

values in relation to standard values for each fiscal year)

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45

Foundation Supporting Corporate Value

Corporate GovernanceTotal Amount of Remuneration by Officer Classification (FY2022)

Officer classification

Total amount of
remuneration paid
(Thousands of yen)

Total amount of remuneration paid by type of remuneration(Thousands of yen)

Basic

Non-monetary

Bonus

Number of
eligible officers(Share-based)

Director(Excluding outside directors)

8,400

8,400

—

—

2

Outside director

61,56061,560——5

Executive officer

329,977

219,480

72,23038,267

7

1. Directors concurrently serving as executive officers shall not receive remuneration as directors.
2. The indicators for calculating performance-linked bonuses are the number of loanable stock issues, basic profit and consolidated profit, which in FY2022 were 2,702
stock issues, ¥8,610 million and ¥5,966 million, respectively.
3. The indicator for calculating performance-linked share-based remuneration is consolidated ordinary profit (3-year average), which in FY2022 was ¥6,774 million.

Status of Dialogue with Shareholders (FY2022)
As a Prime market listed company, JSF, based on Japan’s
Corporate Governance Code, engages in dialogue with its
shareholders in a positive manner, within reasonable limits,in order to contribute to the sustainable growth and theenhancement of corporate value over the medium to long term.
Main persons
engaging in
dialogue

The status of dialogue with shareholders conducted by
JSF’s management and others during FY2022 is as follows.

∙ The Representative Executive Officer & President and the Senior Managing Executive Officer Responsible for Corporate
Strategy engage in dialogue.

∙ Depending on the substance of an opportunity for dialogue, outside directors may also participate.

Overview ofshareholders withwhom dialogue
was conducted

Total: 41 times∙ Individual interviews: 39 times (Domestic investors: 9; Overseas investors: 4; Total: 13 companies)∙ Information sessions: 2 times (total of 23 companies participated)

Main themes,
matters of interestto shareholders,etc.

(1) Initiatives and achievements to enhance corporate value and capital efficiency(2) Officer nomination process and initiatives in governance(3) Information disclosure

Feedback fromshareholders to
the Board of
Directors∙ JSF reports the status of dialogue with shareholders to the Board of Directors promptly after each opportunity for
dialogue.

∙ Through these initiatives, we strive to ensure that the Board of Directors and the various committees hold discussions
that also take into account the feedback of shareholders.

Below, we introduce specific examples of dialogue, including shareholder opinions, matters that were brought to our attention byshareholders and our response to them, and matters that were explained to and understood by shareholders.

Initiatives and achievements to enhance corporate value and capital efficiency The Company explained that it has been striving to improve profitability and capital efficiency by setting a management goal of achieving
ROE of 5%, exceeding the cost of equity (estimated to be around 4.5%), during the period of the Seventh Medium-Term Management Planin its Medium-Term Management Policy, that JSF’s ROE has been steadily increasing in recent years as a result of the initiatives under the
Sixth Medium-Term Management Plan, and that JSF is making steady progress toward achieving its ROE target of 4% for FY2022. Many
shareholders understand our cost of equity and management goal, given our nature as a securities finance company, and have positively
assessed our efforts and accomplishments over the past several years. However, there were differences in perception among a portion of
the shareholders regarding the level of the ROE target and the time frame for achieving it.
 		 In addition, we received feedback from shareholders that they would like to see continued efforts to enhance corporate value after theSeventh Medium-Term Management Plan period is over. In light of this, we have indicated that we will further promote our efforts to enhance
corporate value, and will continue our management efforts to achieve a higher ROE level in FY2026 and beyond.

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Officer nomination process and governance initiatives The Company transitioned to a Company with a Nominating Committee, etc. in 2019 and is working to further enhance and strengthen its
corporate governance. The Company published its policy regarding the composition of the Board of Directors and the appointment of executive
officers in FY2021. In our dialogue with shareholders, we provided explanations regarding governance at JSF, focusing on the details of thenomination process for these officers. Many of our shareholders have given JSF favorable evaluations for its governance initiatives.
 		 We also received feedback that, from now on, shareholders expect the disclosure of information to focus on the evolution of governanceefforts to date, specifics about the status of the nomination process, the roles played by outside directors, and human capital initiatives. In
light of these comments, in March 2023 we disclosed our approach to the appointment of management executives and our internal humanresources development policy in anticipation of these appointments (details on page 43).
 		 Specifically, we disclosed the following cases that were proposed as issues raised by outside directors regarding the actual operational
aspects of the Nomination Committee, Remuneration Committee and Board of Directors, each of which is led by an outside director.
 		∙ Succession planning for the current Representative Executive Officer & President 		∙ Internal human resource development initiatives in response to the business portfolio 		∙ More proactive disclosure of our approach to human capital

Information disclosure Although many shareholders have stated that dialogue has enabled them to better understand JSF’s management policies and the special
characteristics of JSF on which they are based, and the Company’s various governance initiatives, they also commented that suchinformation should be widely disseminated to the general public. In response to this, in FY2022 JSF formulated and published its first Integrated
Report incorporating such information. Also, as mentioned above, we disclosed our approach to the appointment of management and ourinternal human resource development in anticipation of these appointments. Specifically, our report sets out our approach to the appointmentof management executives based on the business development we aim to achieve and the qualities considered important for each businessin our business portfolio, and explains our approach to the composition of the management executive team and succession planning for the
Representative Executive Officer & President. Also, from the perspective that the development of internal human resources is important for
ensuring the effectiveness of management succession planning, the report explains the direction of human resource development andspecific initiatives. It also describes the specific commitments of the Nomination Committee and the Board of Directors in the abovementioned initiatives.
 		 We recognize through discussions at Board of Directors meetings that we need to develop tools and systems to enhance information
disclosure, and we will continue to proactively disseminate information with regard to this as well.

Policy on Strategic Equity Holdings
The Company has been reducing strategic equity holdings.
Between March 2018 and March 2022, it reduced shares oflisted issues held by 91% on a market value basis, andshares of total issues held including listed and unlisted
issues by 78%. In FY2022 as well, the Board of Directors

received a report on the status of strategic equity holdings.
Upon verifying the propriety of all strategic equity holdings,
the board determined that they all remained justifiable (thenumber of stock issues did not change from the previous
fiscal year-end).

Policy on Strategic Equity Holdings
Basic Policy(1) In order to contribute to sustainable growth and an increasein corporate value over the medium to long term, JSF strategicallyholds other companies’ shares it deems necessary for purposessuch as strengthening business relationships.

(2) With respect to strategic equity holdings, the Company
examines the status of dividends and valuation gains andlosses, the status of transactions with investee companies,
and the history and the effects of the shareholdings, andbased on this examination, reduces the number of strategic
equity holdings in shareholdings deemed to be no longer
necessary.

March 31, 2023
Number of issues

Carrying amount

Percentage of
total assets

Percentage ofnet assets

Listed shares2¥1,254 million

0.009%

0.924%

Unlisted shares

7¥1,780 million

0.013%

1.311%

Japan Securities Finance Co., Ltd.

Integrated Report 2023

47

Foundation Supporting Corporate Value

Compliance and Internal Audits
Message from the Responsible Executive Officer

We will promote the establishment of a systemthat reflects our awareness of our public role.
We are always aware of our public role in supporting the infrastructure functionsof securities and financial markets. We believe that conducting business in compliancewith laws, regulations and rules is crucial, as are honest and fair corporate activities.
In order to realize our corporate philosophy, we position compliance as a precondition
for management. We have therefore established a system to ensure thoroughcompliance, and will proactively respond to the social demands placed on the
Company. In addition, one of the strategies in the Seventh Medium-Term Management
Plan is to strengthen the business management structure, and we are building arobust system to ensure the effectiveness of internal audits and contribute toincreased corporate value over the medium to long term.

Shinichi Sugiyama
Managing Executive Officer
Responsible for Compliance Department,Internal Audit Department

Compliance System
We have established a Compliance Committee, chaired by
the executive officer responsible for the Compliance Department,
to deliberate on important matters related to compliance,such as formulating a compliance program and considering
measures to be taken when compliance-related issues arise.
In addition to educating officers and employees regarding
honest and fair conduct based on high ethical standards, theCompliance Department works to thoroughly implement andpromote Company-wide compliance activities. Activities include
holding meetings for compliance officers to communicate

and share information with those in charge in each department,
and compliance management meetings to share awarenesswith senior management.
In addition, the Company plays a central role in promoting
the establishment and strengthening of the overall compliancesystem for the JSF Group, in ways such as holding Group
compliance liaison meetings and Group compliance officer
liaison meetings to promote mutual understanding andinformation sharing among Group companies.

Compliance System

Board of Directors
Management Committee
ReportCompliance Committee(Chairperson: Executive Officer Responsible
for Compliance Department)

ReportCompliance Department
Compliance personnel

ReportExternal Reporting Desk
Consult/Report

Consult/Report

Consulting and reporting personnel (Managers and employees)

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Consult/ReportFormulating Conduct Guidelines and Compliance Program
In addition to formulating and disseminating the JSF BusinessConduct Guidelines and the accompanying Compliance Manual,
the Company is working to instill compliance awareness byhaving all officers and employees carry a “compliance selfcheck card” at all times. In addition, the Company has formulated
a Compliance Program as a practical plan for promoting
compliance, and the Board of Directors receives regular reportson the program’s implementation status.
The Compliance Program incorporates specific measuresrelated to compliance promotion from the perspectives ofunderstanding compliance risks and the status of legal
compliance (such as the establishment of systems related tolaws and regulations and self-inspections using checklists),
compliance awareness-raising activities (including training
and tests), and cooperation in and promotion of complianceactivities (activities aimed at sharing recognition and awarenessamong Group companies and among officers and employees).

Response to Money Laundering and Other Issues
As Japan’s financial institutions are required to strengthen
their response to money laundering within an internationalframework, we are conducting risk assessments and evaluationsof money laundering and other issues with regard to our clients incompliance with the guidelines issued by Japan’s Financial
Services Agency. At the same time, we have strengthened

our system for implementing mitigation measures. We willcontinue to collect information on the changing external
environment and trends at other financial institutions, and willcontinuously review our business practices under the leadershipof our management executive team.

Initiatives to Block Relationships with Antisocial Forces
The organization as a whole takes a resolute stance against
demands made by antisocial forces that threaten the orderand safety of civil society. Our aim is to eliminate any
relationships with antisocial forces by working closely withexternal specialized agencies such as the police, anti-organizedcrime campaign centers, and attorneys. We are also working
to block such relationships through appropriate pre-screening

and organized crime exclusion clauses in contracts andother documents.
The Compliance Department ensures the effectivenessof efforts to block relationships with antisocial forces in various
ways, including centrally managing and accumulating information
on such groups, building a database, conducting training
activities and preparing response manuals.

Initiatives to Protect Clients and Personal Information
Regarding opinions and complaints received from clients, weclarify the relevant facts and responsibilities and work to
resolve the situation quickly, honestly, fairly and appropriately,with respect for the client’s position. In the event of a disputeor similar issue, we respond appropriately in accordance withthe aims of the financial alternative dispute resolution (ADR)
system.
In addition, regarding transactions between Company orGroup company businesses and their clients, or between
Company or Group company clients, we carry out our duties
appropriately, taking necessary measures in accordance withlaws and regulations and our conflict of interest management
policy to ensure that the interests of our clients are notwrongfully harmed.
We take appropriate measures to safely and properly
manage the personal information of our clients to prevent
leakage, loss, damage or other issues, and educate and properly
supervise our employees to that same end. In addition, whenentrusting the handling of personal information and similar
data that we have received, we appropriately supervise theentrusted party.

Internal Audit System
The Company has established an Internal Audit Department
as an independent department to conduct audits of all Company
businesses and departments. Additionally, the Internal Audit
Department conducts Group-wide audits, targeting the operationsof consolidated subsidiaries, as necessary.
Specifically, the Internal Audit Department verifies the
propriety and effectiveness of the internal control system of
each business and department, reports the audit results to
the Representative Executive Officer & President and to theManagement Committee, and then makes recommendations
for improvements and enhanced conformance to the audited
department based on its evaluation. Moreover, importantmatters such as internal audit plans and audit results arereported to the Audit Committee and the Board of Directors.
By establishing this internal audit system, we have strengthened
our operational management system and ensure effective,
sound corporate activities.

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Integrated Report 2023

49

Foundation Supporting Corporate Value

Officers
Directors

Takayoshi Yamakawa
Director

Shoko Sugino
Director

50

Kensuke Futagoishi
Director

Naotaka Obata

Director, Chairperson of the Board

Hiroshi Asakura

Shigeki Kushida
Director

Director

Setsuko Egami
Director

Naotaka Obata

Shoko Sugino

Kensuke Futagoishi

Takayoshi Yamakawa

Director, Chairperson of the Board

Director

Director

Director

Apr. 1968 Joined The Mitsubishi Bank, Ltd.
May 1999 Managing Executive Officer of The
Bank of Tokyo-Mitsubishi, Ltd.
Jan. 2004 Senior Managing Executive Officerof The Bank of Tokyo-Mitsubishi, Ltd.
Jun. 2004 Deputy President of The Bank ofTokyo-Mitsubishi, Ltd.
Jun. 2005 President and CEO of Diamond
Lease Company Limited
Apr. 2007 President and CEO of Mitsubishi
UFJ Lease & Finance Company
Limited (currently Mitsubishi HC
Capital Inc.)
Jun. 2010 Chairman of Mitsubishi UFJ Lease &Finance Company Limited
Jun. 2012 Executive Advisor to the Board,
Mitsubishi UFJ Lease & Finance
Company Limited
Apr. 2013 Board member of Japan Pension
ServiceJun. 2018 Special Advisor, Mitsubishi UFJ
Lease & Finance Company Limited(currently Mitsubishi HC Capital Inc.)
Jun. 2019 Director, Chairperson of the Boardof Japan Securities Finance Co., Ltd.
(current position)
Jun. 2023 Honorary Advisor, Mitsubishi HC
Capital Inc. (current position)

Apr. 1973 Registered as an attorney
Joined Fujibayashi Law Office
Apr. 1994 Partner Attorney at Fujibayashi Law
Office (current position)
Apr. 1997 Professor for The Legal Training andResearch Institute of Japan
Apr. 2000 Tokyo Family Court Conciliation
Committee Member
Jul. 2005 Environment Dispute Coordination
Commission Member
Mar. 2007 Outside Audit & Supervisory Board
Member of Kitoku Shinryo Co., Ltd.
Jun. 2018 Outside Audit & Supervisory Board
Member of Takeei Corporation(current position)
Jun. 2019 Director of Japan Securities FinanceCo., Ltd. (current position)
Jun. 2022 Outside Director of Janome
Corporation (current position)

Apr. 1977 Joined The Sanwa Bank, Limited
Apr. 2001 General Manager, Retail Banking
Planning Division, UFJ Holdings, Inc.
Jan. 2002 General Manager, Gotanda
Corporate Sales Department andBranch Manager, Gotanda Branch,
UFJ Bank Limited
Oct. 2003 Joined IY Bank Co., Ltd.
(currently Seven Bank, Ltd.)
Jun. 2004 Director of IY Bank Co., Ltd.
(currently Seven Bank, Ltd.)
Jun. 2006 Director, Executive Officer of Seven
Bank, Ltd.
Nov. 2007 Director, Managing Executive Officer
of Seven Bank, Ltd.
Jun. 2009 Director, Senior Managing Executive
Officer of Seven Bank, Ltd.
Jun. 2010 President and Representative
Director of Seven Bank, Ltd.
Jun. 2018 Chairman and Representative
Director of Seven Bank, Ltd.
Jun. 2022 Executive Advisor of Seven Bank,
Ltd. (current position)
Director of Japan Securities FinanceCo., Ltd. (current position)

Apr. 1991 Joined Yokogawa Hewlett Packard Co.
Oct. 1995 Joined The Boston Consulting Group
Jun. 2000 Founder (co-established), Director
and CTO of Dream Incubator Inc.
Jun. 2005 Vice Representative Director ofDream Incubator Inc.
Jun. 2006 Representative Director & CEO of
Dream Incubator Inc.
(retired June 2020)
Jul. 2020 Representative Partner of Business
Producer LLC (current position)
Jan. 2021 Outside Director of BitStar, Inc.
(current position)
Apr. 2021 Outside Director of Baseconnect Inc.
(current position)
Jun. 2021 Outside Director of Akatsuki
Securities, Inc. (current position)
Jun. 2022 Outside Director of FP Corp.
(current position)
Director of Japan Securities FinanceCo., Ltd. (current position)

Japan Securities Finance Co., Ltd.

Significant concurrent positions

Partner Attorney at Fujibayashi Law OfficeOutside Audit & Supervisory Board Member ofTakeei Corporation
Outside Director of Janome Corporation

Integrated Report 2023

Significant concurrent positions

Representative Partner of Business Producer LLC
Outside Director of Akatsuki Securities, Inc.
Outside Director of FP Corporation

Setsuko Egami

Shigeki Kushida

Hiroshi Asakura

Director

Director

Director

May 2008 Deputy Director-General of
Personnel and Corporate Affairs
Department (Personnel
Management), Bank of Japan (BOJ)

Apr. 1978 Joined Japan Securities Finance Co., Ltd.
Jun. 2002 General Manager of Planning
Department

Apr. 1983 Chief Editor of Travail of Japan
Recruit Center

Jun. 2015 Outside Director of Mitsubishi
Estate Co., Ltd.

Dec. 2001 Head of Frontier Service
Development Laboratory of East
Japan Railway Company
Apr. 2006 Visiting Professor of Graduate
School of Public Management,
Waseda University

Jun. 2018 Outside Director of Mitsubishi
Motors Corporation

Nov. 2006 Member of Government Tax
Commission

Jun. 2023 Director of Japan Securities
Finance Co., Ltd.
(current position)

Jun. 2007 Outside Auditor of Taisho
Pharmaceutical Co., Ltd.
Apr. 2009 Professor of Graduate School of
Humanities, Musashi University
Professor of Faculty of Sociology,
Musashi University

Jun. 2020 Outside Director of Resona
Holdings, Inc. (current position)
Apr. 2021 Professor Emeritus, Musashi
University (current position)

Significant concurrent positions

Professor Emeritus, Musashi University
Outside Director of Resona Holdings, Inc.

Mar. 2009 Director-General of Personnel andCorporate Affairs Department, BOJ
Jun. 2010 Director-General of Monetary Affairs
Department, BOJ
May 2011 General Manager of Nagoya Branch, BOJ
Mar. 2013 Executive Director of BOJ
Apr. 2017 Senior Advisor of American FamilyLife Assurance Company (currently
Aflac Japan Ltd.)May 2019 Advisor of Japan Securities FinanceCo., Ltd.
Jun. 2019 Director, Representative Executive
Officer & President of Japan
Securities Finance Co., Ltd.
(current position)

Jun. 2011 Outside Auditor of Yusen Logistics
Co., Ltd.
Apr. 2012 Dean of Faculty of Sociology,
Musashi University

Jun. 2005 General Manager of Margin Loan
Department
Jun. 2006 Corporate Officer & General Manager
of Margin Loan Department
Feb. 2008 Corporate Officer & General Manager
of Loan Department
Jun. 2009 Managing Director
Jun. 2013 Senior Managing Director(retired in June 2016)
Jun. 2016 President of Nihon Building Co., Ltd.
(retired in June 2021)
Jun. 2021 Director of Japan Securities FinanceCo., Ltd. (current position)

Jun. 2022 Director of JSF Trust & Banking Co.,
Ltd. (current position)
Significant concurrent positions

Outside Director of Denso Corporation

Executive Officers

Eizo Kobayashi

Shigeki Kushida

Yutaka Okada

Morikuni Shimoyamada

Chairperson

Representative Executive Officer &President

Senior Managing Executive Officer
Responsible for Corporate
Governance Office, Business
Development Department, Treasury
Department, International Relations

Senior Managing Executive Officer
Responsible for Margin Loan
Department, Institutional Sales
Department, Retail Business
Department

Masaru Sekiguchi

Shinichi Sugiyama

Wataru SatoManaging Executive Officer
Responsible for Risk Management
Department, Corporate Planning
Department, Settlement & Custody
Department, Information Systems
Planning Department, Osaka Branch,Group Companies Relations

Managing Executive Officer
Responsible for Internal Audit
Department, ComplianceDepartment

Managing Executive Officer
Interim General Manager of Human
Resources Department

Yuji Yoshimoto

Ken Toda

Hiroyuki Matsui

General Manager of ComplianceDepartment

General Manager of Risk
Management Department

Corporate Officers
Jun Akabane
General Manager of Osaka BranchJapan Securities Finance Co., Ltd.

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51

Foundation Supporting Corporate Value

Sustainability Initiatives
Basic Approach to Sustainability
The development of infrastructure that serves as the foundationof socio-economic activities is a key element in realizing asustainable society, and it is also one of the Sustainable
Development Goals (SDGs: Goal 9). The JSF Group provides
a variety of services, including the loans for margin transactions
business, as a company that supports the infrastructure ofJapan’s securities and financial markets, and works to improve
the liquidity of the domestic securities and financial markets,
as well as convenience for market participants. Through these
activities, we aim to contribute to initiatives to realize asustainable society, including supporting market participants
who are engaged in similar initiatives.
Because it is responsible for the infrastructure of the
securities and financial markets, the Group believes it isimportant to build a system that provides stable operations
regardless of circumstances. To this end, we must not only
respond to disasters in a narrow sense, but also ensure thestability and high reliability of our business base.
In addition, we believe that there are issues toward
which the Group can also contribute by utilizing the knowhow and other resources that it has cultivated over theyears. Based on this perspective, we are currently aware of
the following material issues. Our Group recognizes theroles expected of it in addressing these material issues andwill advance various initiatives while flexibly responding tochanges in the social environment.

Material Issues That We Recognize
Classification

Item

E

Climate change

EducationS

Human resources• Promote financial and economics-themed education activities• Promote academic research activities• Promote diversity• Develop and secure human resources and create a pleasant workplace• Respect human rights, prohibit discrimination and respect diversity• Prohibit all types of harassment

Capital market•E nhance functions as infrastructure for Japan’s securities and financial markets• Contribute to overseas securities and financial market infrastructure• Continuously improve corporate governanceBusiness continuity planning(BCP)• Stably operate business that is not affected by disasters, etc.

Compliance• Operate business based on a high awareness of compliance

Risk management

52• Promote reduction in environmental impact

Human rights

Corporate governanceG

IssuesJapan Securities Finance Co., Ltd.

• Implement the risk appetite framework (RAF)

Integrated Report 2023

Dialogue with Stakeholders
We are promoting the following initiatives in order to gain and maintain the support and trust of our stakeholders.

• Hold financial results briefings for analysts and institutional investors (May and November 2022) and
Shareholders andinvestors

individual interviews• Conduct shareholder surveys and share survey responses with the Board of Directors• Introduce hybrid shareholder meetings that enable both online and in-person participation (Live streamingof general meetings for shareholders unable to attend due to remote location or other reasons)

Employees
Business partners
and others
Society• Hold dialogue sessions between top management and employees to share value (Online meetings
for all employees, and regular small group dialogue sessions with voluntary participation)• Conduct employee surveys and DI* surveys to understand employee attitudes and opinions• Interviews and participation in international conferences• Hold various seminars on margin transactions for securities company employees• Support international cooperation and securities market development, and engage in academic researchon securities and financial markets• Make donations for disaster relief* Diffusion Index: An index based on employee surveys that measures employee job satisfaction, changes in workplace conditions and other conditions

Initiatives• Improve Company facilities to conserve electricity, and be conscious of environmental impact• Promote paperless operations in all areas of the Company• Carry out initiatives to address the TCFD recommendations• Hold a lecture on “Financial and Securities Markets and Industry-Academia Alliance—Blockchain Case Studies” at the Graduate School ofEngineering at the University of Tokyo• Hold various seminars on margin transactions• Conduct joint empirical research with the University of Tokyo (Securities Finance Transactions Using Distributed Ledger Technology)• Provide support for childbirth, childcare and nursing care
- Introduce telework Company-wide- Monitor employee engagement• Conduct harassment prevention training for new managers• Establish an Internal Reporting Desk and an External Reporting Desk

• Provide technical assistance and investment in securities finance in Indonesia• Strive to enhance governance as a Company with a Nominating Committee, etc.
- Ensure that the majority of directors are independent outside directors- Ensure that the chairpersons of the Board of Directors and the three statutory committees are independent outside directors- Establish a dedicated department to address various corporate governance issues with a sense of urgency• Continue to strengthen the BCP system and cyber security system to ensure stable business operations as a part of the infrastructure of securities
and financial markets• Prepare manuals and establish Compliance Enhancement Month• Implement RAF and establish a system to integrate business management and risk management

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53

Foundation Supporting Corporate Value

Sustainability Initiatives

Empirical Research on Securities Finance Transactions Using Distributed Ledger Technology
JSF and the Graduate School of Engineering of the Universityof Tokyo (University of Tokyo) have been conducting empiricalresearch since April 2021 to explore the feasibility of using
distributed ledger technology to facilitate transactions involving
tokenized securities or collateral in repo transactions andsecurities lending and borrowing transactions. The two parties
released a report on the results on May 30, 2023.*

JSF was responsible for conceptualization and scheme
planning, research of related market practices, and compilationof the final report, while the University of Tokyo was in chargeof data analysis and review of basic technologies and systems
concerning distributed ledger technology.
In this research, we evaluated the following three points
and identified five implications.

* https://www.jsf.co.jp/english/media/report_dlt_en.pdf

Points Evaluated• Feasibility of securities finance transactions execution (individual bilateral transactions)• System performance when processing transactions in market-wide scale• Impacts of collateralized securities diversification and threshold setting for margin call on net credit amount and necessary
liquidity, including the evaluation in the event of market turmoil

Conceptual Diagram of Individual Bilateral Transaction
Tokenized collateral pledge
Tokenized securities loan

CompanyA

Simultaneous fulfillment

Company
B

Daily mark-to-market andcollateral transfers

Implications(1) Transaction feasibility
Various types of securities finance transactions, including
those involving the exchange of assets denominated in different
currencies and securities tokens to securities tokens, can besmoothly implemented to the end of the transaction period,
from the start of transactions through margin calls.
(2) Reduction of settlement risks, especially in the case ofsimultaneous execution of transactions denominated indifferent currencies
Token-to-token exchanges can be automatically conductedsimultaneously without any time difference, even if theunderlying assets are denominated in different currencies.
In addition, margin calls can be automatically implemented
without the need for operations by transaction parties.
(3) Flexibility in reducing credit risk and enhancing the
economization of liquidity
Automation of margin calls reduces operational burden, making
it easier to make margin calls, and credit risk may be reduced.

In addition, the appropriate combination of collateralized securities
diversification effect and margin call threshold setting can reduce
credit risk and economize liquidity, especially during market turmoil.
(4) Streamlining of operation
Automation of settlement and margin call administration makes
it possible for straight through processing (STP) and to improvethe efficiency of securities finance transactions administrationand the management of operational risk. In particular, this has
the potential to significantly reduce operations and time requirements
for exchanging transaction information and checking status
with counterparties located in other countries, thereby improving
the efficiency of transactions.
(5) Utilization of assets with low liquidity
It will become easier to transfer rights of low-liquidity assets bytokenization, providing the potential to not only hold these assets,
but also to utilize them as collateral for securities finance transactions(the valuation of the underlying asset itself may improve as theutilization value increases).

We expect the findings of this research to be utilized for social implementation in a number of fields in the future, including the securities
industry. In addition, we believe that this research, through industry-academia collaboration, provided positive outcomes that address
important sustainability issues recognized by JSF, especially contributions to the promotion of academic research activities and theinfrastructure of securities and financial markets.

54

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Cooperative Relationships with Indonesia’s Securities Market Infrastructure
Technical Cooperation and Investment in an Indonesian Securities Finance Company
In Indonesia, the government’s policy objectives are to strengthen
the financial services sector to contribute to medium- to longterm growth and to stabilize the financial system as a basis forsustainable economic development. A project to establish
and operate a securities finance company in Indonesia waslaunched in 2014, and in December 2016, PT Pendanaan
Efek Indonesia (PEI) was established with investments by
three companies, including the Indonesia Stock Exchange.
As part of the infrastructure of the Japanese securities
market, JSF has been actively supporting this project since

its beginning in ways such as providing knowledge of securities
financing, and acquired a 10% stake in PEI in August 2020
through an investment of ¥400 million. Going forward, we
will further utilize the knowledge we have accumulated in
the securities finance business to support PEI and Indonesia
Stock Exchange Group in their business development andmarket infrastructure improvements, and continue to strengthen
cooperative relationships with all parties involved as we
contribute to the sustainable development of Indonesia’s
economy as well as its financial and securities markets.

The Sixth Workshop for Participants in Indonesia’s Securities Sector
JSF regularly conducts workshops to deepen interaction withpeople involved in Indonesia’s securities sector. We held oursixth workshop at our Company headquarters from September
4-6, 2023. A total of 20 people came to Japan from organizations
including the Indonesia Stock Exchange (IDX), PEI, the Indonesia
Clearing and Guarantee Corporation (KPEI), the Indonesia
Central Securities Depository (KSEI), and the Indonesia Financial
Services Authority (OJK) for an exchange of opinions on a wide
range of topics including JSF’s loans for margin transactions

business, securities financing and trust business, Indonesia’s
economic and financial situation, capital markets, and an
overview of PEI’s business. At the workshop, young and midcareer employees played a central role in giving presentations.
Expanding networks and facilitating interaction with people
from different cultures and business environments is also usefulfor human resource development, as it helps our peopleacquire an international perspective.

Collaboration with Indonesia Securities Finance (PEI)
I have been involved in projects in Indonesia since summer 2019. Following the signing of amemorandum of understanding in 2014 to introduce a securities finance system to stimulate
Indonesia’s securities market, we have met with our Indonesian counterparts many times, sharedknowledge face-to-face, and had multiple discussions about investing in Indonesian securities
finance. Under these circumstances, the investment project gained momentum at the time of the
COVID-19 pandemic in 2020, and JSF made its investment in August 2020. During the pandemic,
negotiations were mainly conducted online, and the investment signing ceremony was also held
online, and I recall the challenges both parties dealt with. Currently, we continue to collaborateclosely by attending general meetings of shareholders and various other meetings, and holding
workshops for people from both countries involved in the securities sector.

Yusuke Tamai
Business Development
Department

Winner at the International Finance Awards and the Annual Global Economics Awards
JSF received the following awards sponsored by British financial media outlets International Finance Publications Limited and The
Global Economics Limited. These awards recognize outstanding companies in the field of international finance.
International Finance Awards 2022, Most Innovative Securities Finance Company (second consecutive year)T he Annual Global Economics Awards 2022 (AGEA), Best Client Services
Team in Securities Lending
The Annual Global Economics Awards 2023 (AGEA), Best Corporate
Governance Practices (Finance). This was JSF’s first award in a corporate
governance-related category.

Japan Securities Finance Co., Ltd.

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55

Foundation Supporting Corporate Value

Addressing Climate Change and Environmental
Protection (Initiatives Based on the TCFD Recommendations)
In addition to engaging in initiatives aimed at bringing about a sustainable global environment through its business activities,
JSF is working to improve disclosure of climate change information in accordance with the TCFD* recommendations.
* Task Force on Climate-related Financial Disclosures: Established by the Financial Stability Board (FSB) in 2015 at the request of the G20 for the purpose of financial
stability. The final report on frameworks for disclosure of climate-related risks and opportunities (TCFD recommendations) published in 2017 calls on companies toassess the risks and opportunities of climate change, reflect them in their business strategy and risk management, understand their financial impact, and disclose
this information.

Governance• To drive Group-wide climate-related efforts, the Board of Directors approved the “Basic Stance on Sustainability,” in which it
recognizes climate change as a material issue for its business.

• T he Management Committee (chaired by the Representative Executive Officer & President) deliberates and decides on sustainability
initiatives, including those concerning climate-related issues, and the Board of Directors oversees the progress on these initiatives.

• S pecific sustainability initiatives, including those concerning climate-related issues, are detailed in the action plan for the mediumterm management plan, and they are carried out across the organization under the oversight of the Corporate Governance Office.

Strategy• As a company responsible for Japan’s securities and financial market infrastructure, JSF recognizes the importance of building
systems that operate reliably regardless of conditions. Therefore, we believe that realizing a sustainable global environment is
crucial for the continuation of our business activities, and that climate change is a material issue for our business.

• After identifying the risks and opportunities of climate change that could impact our business activities, we qualitatively analyze
those impacts and verify the resilience of our management strategy.

• In responding to the transformation into a carbon-free society, we support the efforts of the securities and financial markets
participants that are grappling with climate-related issues by improving our financial services and the commercial appeal of our
products. At the same time, we are aiming to enhance our own corporate value.
Recognized Risks• Climate change risks are divided into two categories for identification and recognition purposes. These are “transition risks,”
which are risks arising from the process of transitioning to a lower-carbon economy to address climate change, and “physicalrisks,” which are risks of losses arising directly from climate change.

• For recognized risks, assumptions have been made about the type of damage (direct or indirect), the scale of the risk (large,
medium or small), and the time frame (short- to medium- to long-term).

• JSF believes that the increase in its credit costs will be limited because most of its lending comprises securities-backed loans tosecurities firms and banks.
Type of risk

Transition
risks

56

Description

DamageScale

Time frame

Higher operating costs due to taxation changes related to climate change, such as stricter
regulation and carbon taxes

DirectSmall

Medium- tolong-term

Decline in securities financing balance due to factors such as worsening economic conditions,weak financial and securities markets and declining demand for funding due to the effects ofglobal warming

IndirectMediumMedium- tolong-term

Decline in share prices due to stakeholder criticism of JSF’s response to global warming andinadequate disclosure

DirectSmall

Medium- tolong-term

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Type of risk

Description

DamageScale

Time frame

DirectMediumShort- tolong-term

Higher credit costs as a result of damage to counterparty business locations due
to major storm and flood damage

Indirect

Small

Short- tolong-term

Business relocation costs incurred due to rising sea levels

DirectMediumLong-term

Higher credit costs as a result of damage to counterparty business locations due
to rising sea levels

Indirect

Small

Long-term

Damage to owned real estate and facilities due to major storm and flood damage,with damage to facilities affecting business continuity
Acute
risks
Physical risks

Chronic
risks

Drop in prices of securities held as a result of worsening financial and securities
markets due to the effects of extreme weather events

Note: Short-term, medium-term and long-term time frames are assumed to be 3 years or less, 3–10 years and 10 years or longer, respectively.

Recognized Opportunities• JSF anticipates and recognizes the following opportunities associated with tackling climate-related issues.
 ur initiatives with respect to these climate-related issues are incorporated into the action plan for the medium-term management•O
plan, and we are monitoring the progress of their implementation.
Opportunity
Resource-efficientenergy sources
Markets for
products andservices

Description

Time frame• Promoting resource and energy savings• Utilizing renewable energy

Short- tolong-term• Offering financial services that support the transition to a carbon-free society• Contributing to an environmentally sustainable society through investments in green bonds and other instruments• Increased demand for funding due to the expanding market for ESG investment• Gaining the trust of counterparties and capital markets as a result of appropriate initiatives and disclosure in

Short- tolong-term

response to climate-related issues

Resilience• Ensuring business continuity in securities market infrastructure such as loans for margin transactions bybuilding a resilient BCP system

Short- tolong-term

Scenario Analysis• A qualitative analysis of the impact of climate on the JSF Group, based on two scenarios, is presented below. Under the 2°C
scenario, global warming is curbed due to strict countermeasures, while under the 4°C scenario, global warming continues toprogress in the absence of drastic measures.
2°C scenario1

4°C scenario2• Greenhouse gas emissions are curtailed through policy
Assumptions

measures• There are advances in low-carbon technologies andthey are widely adopted• Sudden storm and flood damage occurs at a similar
scale and frequency as at present• Demand increases for funding in the financial andOpportunities• Without drastic policy measures, greenhouse gas

emissions continue to increase at the current rate

• Sudden storm and flood damage occurs more frequently
and is larger in scale• Chronic changes, such as rising sea levels, have asignificant impact on economic activity• Demand increases for funding in connection withsecurities markets due to growing ESG investment• Need increases for financial products and services

investment in infrastructure for disaster preparedness

related to environmental protection• Stakeholders criticize JSF’s response to global
Transition risks

Risks• Securities financing balances decline as the economy

warming, causing its share price to decline• Equipment costs rise as a result of measures to cut
greenhouse gas emissions and enhance BCP

and financial markets deteriorate due to the effects ofglobal warming• Sudden extreme weather events are similar to those at
Physical riskspresent, and no major financial impact is expected• There is no irreversible climate change, such as rising
sea levels, and no major financial impact is expected• There is damage to owned real estate and facilities due

to major storms and flooding, affecting business continuity(assumes limited increase in credit costs in conjunction
with damage to counterparty financial institutions)• Relocation expenses arise from damage to owned realestate due to rising sea levels

1. 2°C Scenario: International Energy Agency (IEA) 2°C Scenario (2DS)
2. 4°C Scenario: Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathway (RCP) 8.5

Japan Securities Finance Co., Ltd.

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57

Foundation Supporting Corporate Value

Addressing Climate Change and Environmental Protection(Initiatives Based on the TCFD Recommendations)

Risk Management• JSF recognizes that climate change not only poses the risk of a significant impact on the global environment, but it could also
affect its financial position in the future.

• Because these climate change risks could cause or amplify financial risks (credit risk and market risk, for example), we manage
the risks associated with climate change within an integrated risk management framework.

Metrics and Targets• We are working to save resources and energy by promoting telework, using web conferencing both inside and outside theCompany, introducing an electronic decision-making system and a paperless meeting system, and digitalizing document storage.

• In FY2022, we converted all lighting in our head office building to LED as an energy-saving measure. We also considered
initiatives for achieving carbon neutrality and reported the direction of such initiatives to the Board of Directors.

• The JSF Group’s CO2 emissions (combined Scope 1 and Scope 2 emissions*) are shown below. We have steadily reduced CO2
emissions and are implementing initiatives to reduce them still further.
* Scope 1: Direct emissions (use of gas, gasoline, etc.); Scope 2: Indirect emissions (use of electric power)(t-CO2)CO2 emissions

58

Japan Securities Finance Co., Ltd.

FY2019FY2020

FY2021

FY2022

923

874

856

810

Integrated Report 2023

Risk Appetite Framework/Risk Management
Message from the Responsible Executive Officer
Risk appetite is the type and total amount of risk that a company takes on in orderto achieve its medium-term management plans. JSF’s management goals are capitalefficiency, profitability and shareholder returns, and we clearly identify risks that
we should be willing to take1 and risks that we should avoid2 in order to achieve
those goals within the scope of our management capabilities. Our risk appetite
framework (RAF) integrates business management and risk management. Determining
the management targets for the Seventh Medium-Term Management Plan involved
reviewing our risk appetite and relevant indicators, which we are now regularly monitoring.
In addition, the Company plays a public role as a provider of securities market
infrastructure, so we are strongly aware that the risks we take on should in no way
impact our ability to maintain financial soundness or stably operate our loans for
margin transactions business.
We will continue strengthening our monitoring system, promoting a Groupwide RAF management system and taking other steps to improve the sophistication

Masaru Sekiguchi

of our RAF in order to increase corporate value over the medium to long term.

Managing Executive Officer
Responsible for Risk Management
Department

1. Risks to be taken: Risks associated with revenue-generating activities
2. Risks to be avoided: Unacceptable risks such as conduct risk

Risk Appetite Framework

RAF overview

Social andpublic role

Business characteristics (licensed business,
concurrent businesses), risk characteristics
Risk culture

RAF operation structure
Corporate philosophy and management strategy

Supervision

Board ofDirectors

Business management
Medium-term
management plan

Risk management
Integrated
management

Risk management policy
Type and amount of risk to
be taken (Risk appetite)

Execution

Management
Committee

Risk Management
Committee
Corporate Planning
Department
Risk Management
Department

Risk appetite indicators

Improvement

Monitoring

Analysis andreportingManagement of capital adequacy
ratio (based on FIEA)

Integrated risk management

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59

Foundation Supporting Corporate Value

Risk Appetite Framework/Risk Management
Basic Policy for Risk Appetite Framework
The Group considers the RAF to be part of its corporate
governance framework. Our objective is to maintain the highdegree of financial soundness required of a securities financecompany responsible for the infrastructure functions of Japan’s
securities market, while improving medium- to long-term
corporate value as expected of a listed company. To thisend, the RAF improves the transparency of the review anddecision-making process for establishing the Company’s
overall risk-taking policy, including capital allocation andstrengthening of profitability. Furthermore, the RAF optimizes
allocation of management resources and strengthens themonitoring system.

Risk Appetite Framework GovernanceIn the execution of business management, we set moredetailed targets and decide plans for each business as we
promote the medium-term management plan, keeping in
mind our risk management policy, risk appetite and risk
appetite indicators decided by the Board of Directors.
The Board of Directors works to improve and strengthen
the effectiveness of the RAF on an ongoing basis by monitoringrisk appetite and risk appetite indicators as it supervises
the status of business execution. If risk appetite indicators
deviate from set levels, the board analyzes the causes
and formulates countermeasures.

Operation
In the operation of the RAF, the Board of Directors establishes
a risk management policy for overall management based on
the social role that JSF should play as a company responsiblefor infrastructure functions of Japan’s securities market andits medium- to long-term vision for the future. At the sametime, the board determines the basic items of the RAF, suchas risk appetite and the risk appetite indicators that specificallyreflect its components, in conformance with the mediumterm management plan. Risk appetite is set from a wide
range of perspectives, including management stability andfinancial soundness, as well as the social responsibility forthe infrastructure functions of and contributing to Japan’s
securities market.

Process for Setting and Managing Risk Appetite(1) Confirm premises for management plan formulation
Formulate multiple scenarios that take into account changes in the domestic and overseas environment, and verify premises
for formulating medium-term management strategies, including capital and liquidity constraints.

(2) Consider medium-term management plan proposals
Consider business plans that encompass business goals, risk appetite, and business strategies in order to realize the Vision of
the Future Targeted by JSF.
Review as appropriate
based on verification results(3) Verify risk appetite

Evaluate the propriety of financial plans and risk appetite through stress tests, and revise business plan proposals, as necessary.

(4) Determine medium-term management plan
The Board of Directors discusses and decides management goals, risk appetite and management strategies.

(5) Monitor risk appetite compliance
Regularly monitor indicators for each aspect of risk appetite and check compliance status.
Upper limit exceeded or other reason(6) Reset risk appetite

Reset risk appetite in the case of discrepancies between risk appetite indicators and actual operations, or if significant changes
occur in the operating environment.

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Fostering and Instilling a Risk Culture
We must provide risk management education and training
and share risk information to foster and inculcate a risk culture
throughout the Group. Therefore, we conduct regular in-housetraining to help employees deepen their understanding of
the RAF and employ it in our business operations. Regarding
risk information, we conduct surveys of market trends andmonitor business partners as needed, and collaborate withbusiness operations departments to share necessary information.

In addition, risk governance is further strengthened
through an ongoing cycle of reminders of risk culture throughthe operation of the RAF, which further fosters and instills
this culture.
We will continue to promote greater sophistication in
our risk governance, which constitutes part of our corporate
governance, with the aim of achieving sustainable growth andincreasing corporate value over the medium to long term.

Risk Management
Basic Policies
JSF plays a public role as a provider of infrastructure forsecurities and financial markets, so we are strongly awarethat the risks we take on should help maintain financial
soundness and increase corporate value. Furthermore, we
position risk management as one of our most importantmanagement issues, and through the JSF Business Conduct
Guidelines and our risk management policy, we instill amindset and risk culture that emphasizes risk management
throughout JSF.

Risk Management System
We broadly classify assumed risks for management as credit
risk, market risk, liquidity risk, operational risk and systemrisk. For credit risk and market risk, we strive to secure profits
while quantitatively identifying risks and keeping them within
levels that match our financial strength. For liquidity risk,
operational risk and system risk, we strive to prevent their
manifestation by implementing appropriate management
according to risk characteristics.

Regarding reporting, credit risk and market risk are reported
to the Management Committee following discussion at the
Risk Management Committee, and liquidity risk is reported
to the Management Committee following deliberations at theAsset Liability Management (ALM) Committee. The officers
responsible for each committee regularly report to the Boardof Directors on the status of risks and measures to improverisk management.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

61

Foundation Supporting Corporate Value

Risk Appetite Framework/Risk Management

Risk Management System
Board of Directors
President
Management

Executive Officer
Responsible for Risk
Management Department

ALM Committee

Risk Management
Committee

Executive Officer
Responsible
for Information Systems
Planning Department

ChecksManaging
departments

Risk Management Department(Supervising department for risk management)

Information Systems
Planning Department

ChecksInstitutional Sales
Department

Operation
departments

Executive Officer
Responsible for Internal
Audit Department

Treasury
Department

Treasury
Department

Retail Business
Department

Margin Loan
Department

Margin Loan
Department

Each department

Each department

Operational risk

System risk

Treasury Department

Supervising department for internal audits

department

Executive Officer
Responsible forTreasury Department

Internal Audit Department

Committee orManagement Committee

Osaka Branch

Liquidity risk

Market risk

Credit risk

Based on this approach to risk management, we have developed a system that supports the expansion of our balance sheet byusing the risk appetite framework as described below.

Capital Adequacy Ratio (Adequacy of Equity Capital)
In participating in the Japanese Securities Clearing Corporation

We also verify our capital adequacy by using stress tests(JSCC) clearing and settlement system, we are required to

to calculate impacts on our equity capital, and formulate action

calculate, manage and maintain our capital adequacy ratio

plans, as necessary. We conduct two types of stress tests:

above a certain level in accordance with the Financial Instruments

monthly tests based on individual credit and market stressand Exchange Act. Specifically, we precisely calculate andscenarios, and semi-annual comprehensive stress tests based

manage this ratio on a monthly basis, monitor the impact ofon scenarios that reflect the current financial environment.

daily market fluctuations on equity capital, and quickly
report this information to management.

Integrated Risk Management
Credit Risk Management

62

JSF quantifies and manages credit risk using default rates

relevant collateral on a daily basis. In the event of borrower

for in-house ratings that it has calculated for each of its businessbankruptcy, we take steps including selling securities held as

partners. For credit management, we screen business partners,

collateral to promptly collect receivables. Additionally, we

securities accepted as collateral, and loans, and set and manage

manage large credit positions by calculating the stress exposuretransaction limits for each business partner. For each loan

for each business partner across our businesses on a dailytransaction, we reduce exposure by marking to market thebasis and sharing this information with business departments.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

Market Risk Management
JSF quantifies and manages market risks. Furthermore, toa given portfolio. At the same time, we appropriately control

validate the reliability of the market risk quantification model

investment losses by setting loss limits based on overall

we have adopted, we also implement back testing to compare

profit and loss.

calculated value at risk (VaR) with virtual profit and loss from

Liquidity Risk Management
JSF recognizes liquidity risk as a significant risk, and strives

management. Furthermore, we avoid fund shortages by

to ensure the funding liquidity necessary for stable businessconducting liquidity stress tests to address risks such as cash

operations by diversifying funding methods and maturities.

outflows when stress occurs in the funding environment.

For cash flow management, we set a minimum amountIn addition, we manage liquidity risk on a consolidatedof liquidity reserves based on the assumption that certain

basis by receiving daily reports from JSF Trust and Banking

stress events will occur in financial markets. We monitor thethat include cash flow forecasts and the status of its liquidity

state of liquidity reserves by formulating cash flow forecasts

reserves. Furthermore, we prepare for unforeseen circumstancesand confirming the amount of funding available, as well aswith measures to supplement liquidity, such as holding a certain

the status of highly liquid asset holdings, while confirming

amount of government bonds that we can immediately convert

concentrated maturities for large amounts of funds. We also

into cash.

have a system for reporting the status of daily cash flow to

Initiatives for BCP
Basic Concept for BCP
As a securities finance company with a social mission tocontinue operations that serve as infrastructure for the
securities market, such as loans for margin transactions, forthe handling of a possible disaster event such as a largescale earthquake, JSF has established a business continuity
plan (BCP) system so that operations can be continued orresumed as soon as possible, and so the impact of thedisaster on our business partners and related externalorganizations is minimized.

The Company has positioned the loans for margintransactions, loans for negotiable margin transactions andfund/securities settlement businesses as operations to becontinued on a priority basis. We have established a policy
assuming the respective cases of 1) injury (or threat of injury)
to officers and employees, and damage to buildings, etc.,2) damage to the Company’s main centers, and 3)
insufficient personnel.

Comments from the Osaka Branch about the Operational Status of BCP
The Osaka Branch was established as a BCP base in September
2018 with the aim of strengthening business continuity inthe event of a large-scale disaster such as an earthquake
directly beneath the Tokyo metropolitan area or a wide-areadisaster there. In normal times, the two locations conduct
operations in parallel with each other, so that in the eventof a disaster in the Tokyo metropolitan area, the Osaka Branch
can function as a remote backup office for the Tokyo head
office, handling important operations centered on loans for
margin transactions and their settlement, which are securities
market infrastructure.
In addition, in response to the widespread adoption of
remote work during the COVID-19 pandemic, we havepositioned remote work as a third BCP base, enabling
business continuity in collaboration with the Osaka Branchin the event of a disaster.

Japan Securities Finance Co., Ltd.

Integrated Report 2023

63

Corporate Data

11-Year Highlights (Consolidated)

FY2012FY2013

FY2014FY2015

Operating revenue

17,675

19,566

20,30022,035

Operating profit

1,787

2,568

3,025

2,558

Ordinary profit

2,557

3,119

4,230

3,349

Profit attributable to owners of parent

1,777

6,211

3,520

2,645

Comprehensive income

4,257

6,978

8,079

8,410

Net assets

118,590

135,227

137,145

142,030

Total assets

3,433,456

3,914,388

3,482,601

3,249,170

Net assets per share (Yen)1

1,274.67

1,260.43

1,373.93

1,467.01

Profit per share (Yen)1

19.10

60.35

33.94

26.90

Capital adequacy ratio (%)2

641.9

459.1

405.5

344.6

Return on equity (%)

1.52

4.89

2.59

1.90

Price-earnings ratio (Times)

37.89

9.91

22.36

16.80

Cash flows from operating activities

106,689(27,055)(58,989)

247,148

Cash flows from investing activities(1,230)(1,078)(1,085)(9,959)Cash flows from financing activities(1,310)(1,610)(6,207)(3,604)

114,258

93,06926,787260,371

73.3

23.2

44.2

59.5

258 [2]295 [3]289 [3]282 [5]

Cash and cash equivalents at end of year
Dividend payout ratio (%)
Number of employees [Average number of
temporary workers] (Number)

1. In calculating net assets per share, Company shares held by the Board Benefit Trust (BBT) are included in the treasury stock deducted from the total number ofshares issued and outstanding at the end of the fiscal year. These shares are also included in treasury shares deducted when calculating the average number ofshares during the term when calculating profit per share.
2. The capital adequacy ratio (based on FIEA) is calculated for Japan Securities Finance Co., Ltd. only.

64

Japan Securities Finance Co., Ltd.

Integrated Report 2023

(Millions of yen)
FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

23,06626,33324,321

29,10130,92430,13842,518

2,802

3,881

3,981

4,129

4,777

6,235

6,354

3,611

4,685

5,046

4,894

5,558

7,164

7,601

3,078

4,225

3,765

3,556

3,971

5,174

5,966

(469)

6,819

935

(11,571)

10,499

7,889

3,491

139,712

143,811140,793

126,687

135,166

137,996

135,728

4,645,051

4,960,161

5,291,372

9,814,494

12,136,229

14,168,656

14,056,217

1,452.63

1,518.77

1,519.30

1,381.22

1,473.24

1,545.03

1,574.64

31.90

44.24

40.02

38.47

43.28

56.61

67.76

444.4

471.0

408.5

332.2

507.5

348.1

496.1

2.19

2.98

2.65

2.66

3.03

3.79

4.36

18.55

14.75

14.58

12.81

18.43

16.27

15.01

818,189(290,514)

226,351

275,039

164,459(122,304)

303,546(7,507)(4,440)(8,652)(4,794)

2,230

4,907

3,447

(1,902)(2,725)(3,970)(2,557)(2,031)(5,088)(5,786)

1,069,150

771,469

985,197

1,252,884

1,417,543

1,295,058

1,596,264

56.4

58.8

55.0

57.2

60.1

53.0

47.2

281 [5]281 [6]281 [3]272 [3]272 [4]264 [5]268 [5]

Japan Securities Finance Co., Ltd.

Integrated Report 2023

65

Corporate Data

Financial Section

Consolidated Financial Statements ���������������������������������������������������������������������������������������������������������������� 68
Consolidated Balance Sheets ������������������������������������������������������������������������������������������������������������������� 68
Consolidated Statement of Income ��������������������������������������������������������������������������������������������������������� 70
Consolidated Statement of Comprehensive Income �������������������������������������������������������������������������������� 72
Consolidated Statement of Changes in Equity ���������������������������������������������������������������������������������������� 73
Consolidated Statement of Cash Flows ��������������������������������������������������������������������������������������������������� 76
Notes to Consolidated Financial Statements ������������������������������������������������������������������������������������������� 78
Independent Auditor’s Report ��������������������������������������������������������������������������������������������������������������������� 122

66

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Integrated Report 2023

Disclaimer: This document is a translation of the Japanese original and is an excerpt of the section on
consolidated financial statements. The Japanese original has been disclosed in Japan in accordance with
the Japanese accounting standards and the Financial Instruments and Exchange Act. This document does
not contain or constitute any guarantee and the Company will not compensate any losses and/or damage
stemming from actions taken based on this document. In the event of any discrepancy between theJapanese original and this document, the Japanese original shall prevail.

JAPAN SECURITIES FINANCE CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Consolidated Financial Statements
March 31, 2023

1. Preparation Policy of the Consolidated and Non-consolidated Financial Statements(1) The consolidated financial statements of the Company are prepared in accordance with the “Ordinanceon Terminology, Forms, and Preparation Methods of Consolidated Financial Statements” (Ordinance ofthe Ministry of Finance No. 28 of 1976).
(2) The non-consolidated financial statements of the Company are prepared in accordance with the“Ordinance on Terminology, Forms, and Preparation Methods of Financial Statements (Ordinance ofthe Ministry of Finance No. 59, of 1963).

2. Audit Certification

In accordance with the provisions of Article 193-2 (1) of the Financial Instruments and Exchange Act,the consolidated financial statements and the non-consolidated financial statements for the fiscal andbusiness year (from April 1, 2022 to March 31, 2023) were audited by Crowe Toyo & Co.

3. Special Effort to Ensure the Appropriateness of Consolidated Financial Statements, etc.

The Company is making special effort to ensure the appropriateness of the consolidated financial
statements. Specifically, the Company has been a member of the Financial Accounting Standards
Foundation and participated in training programs conducted by the organizations which determine
accounting standards in order to ensure that the content of accounting standards is properly understood andthat changes in accounting standards can be properly addressed.

Japan Securities Finance Co., Ltd.
-1-Integrated Report 2023

67

Corporate Data

1. Consolidated Financial Statements(1) Consolidated Financial Statements(i) Consolidated Balance Sheets
Millions of yen
2023
2022
ASSETS
Current assets
Cash and deposits *1
Securities *1,*5
Operating loans *1,*3
Securities purchased under resaleagreements¥

Cash collateral provided for securities
borrowed
Other *1
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land *7
Construction in progress
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities *1,*4,*5
Bad debts
Retirement benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

1,598,274
71,013
955,550¥

Thousands of
U.S. dollars(Note)
2023

1,299,070
109,724
891,485$ 12,018,912
534,019
7,185,670

3,561,406

3,928,146

26,781,518

6,669,821

6,499,422

50,156,574

405,951(165)
13,261,853

355,293(133)
13,083,009

3,052,727(1,244)
99,728,179

9,044(6,893)
2,150
1,280
(699)
580
3,264
1
5,997
916

9,039
(6,762)
2,276
1,478(1,268)
210
3,264
304
6,056
960

68,010(51,835)
16,174
9,625(5,260)4,365
24,551
7
45,0996,893

745,621
1,042,496
81
95
1,180
437
40,64835,696(81)(95)
787,450
1,078,629
794,364
1,085,646¥ 14,056,217 ¥ 14,168,656

5,607,018
610
8,873
305,676(610)
5,921,568
5,973,561$ 105,701,740

Note Method of translation of the financial statements is described in “(7) Financial Statement Translation” in “4. Significant
accounting principles”.

68Japan Securities Finance Co., Ltd.

Integrated Report 2023
-2-

Millions of yen
2023
2022
LIABILITIESCurrent liabilities
Call money *1¥ 2,190,400 ¥ 1,858,400
Short-term borrowings *1
92,010239,210
Current portion of long-term borrowings
1,000―
Commercial papers
451,000
496,000
Securities sold under repurchase
4,781,801
5,544,898
agreements
Cash collateral received for securities lent
5,073,776
4,706,496
Income taxes payable
750
879
Provision for bonuses
495
466
Provision for bonuses for directors and107106
other officers
Borrowed money from trust account871,335
1,031,412
Other219,774
137,585
Total current liabilities
13,682,448
14,015,456
Non-current liabilities
Long-term borrowings *1
232,700
4,000
Deferred tax liabilities
2,196
3,011
Deferred tax liabilities for land revaluation *7
74
74
Provision for share awards for directors and240
228
other officers
Retirement benefit liability
217
213
Asset retirement obligations
56
55
Derivatives liabilities
2,013
7,054
Other
542
563
Total non-current liabilities
238,040
15,202
Total liabilities
13,920,489
14,030,659
NET ASSETS
Shareholders’ equity
Share capital
10,00010,000Capital surplus
8,878
8,878
Retained earnings
118,702115,521
Treasury shares(7,655)(4,680)Total shareholders' equity
129,925
129,719
Accumulated other comprehensive income
Valuation difference on available-for(4,300)
9,920
sale securities
Deferred gains or losses on hedges
9,782(1,967)
Revaluation reserve for land *7
168
168
Remeasurements of defined benefit plans
152
156
Total accumulated other comprehensive
5,802
8,277
incomeTotal net assets
135,728
137,996
Total liabilities and net assets
14,056,217
14,168,656

Thousands of
U.S. dollars(Note)
2023$ 16,471,649
691,908
7,519
3,391,487
35,958,799
38,154,429
5,640
3,723
806
6,552,376
1,652,685
102,891,027
1,749,887
16,519
557
1,805
1,633
425
15,142
4,076
1,790,047
104,681,074

75,19966,769892,631(57,566)
977,033(32,338)
73,561
1,263
1,145
43,632
1,020,665
105,701,740

Note Method of translation of the financial statements is described in “(7) Financial Statement Translation” in “4. Significant
accounting principles”.
Japan Securities Finance Co., Ltd.
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Integrated Report 2023

69

Corporate Data(ii) Consolidated Statement of Income and Consolidated Statement of Comprehensive
IncomeConsolidated Statement of Income
Thousands of
U.S. dollars(Note)
2023

Millions of yen
2023
2022
Operating revenue
Interest on loans receivable¥
Interest income on securities purchased under resaleagreements
Interest income on cash collateral provided for
securities borrowed
Securities lending fees
Other operating revenue
Total operating revenue
Operating expenses
Interest expenses
Interest expenses on securities sold under
repurchase agreements
Securities borrowing fees
Other operating expenses
Total operating expenses
Operating gross profit
General and administrative expenses
Remuneration, salaries and allowances
Retirement benefit expenses
Provision for bonuses
Provision for bonuses for directors and otherofficers
Provision for share awards for directors and otherofficers
Depreciation
Provision of allowance for doubtful accounts
Reversal of allowance for doubtful accounts
Other
Total general and administrative expenses *1
Operating profit

70

Japan Securities Finance Co., Ltd.

Integrated Report 2023
-4-

¥

2,486

¥

2,708

$

18,70010,683

5,714

80,339

2,553

2,250

19,204

12,844
13,94942,5189,457
10,00630,13896,592
104,899
319,737

1,033

747

7,774

6,015

3,614

45,236

13,456
8,258
28,765
13,7539,357
2,814
16,533
13,604

101,195
62,106
216,312
103,425

2,897
169
495

3,008
248
466

21,787
1,270
3,723

107

106

806

49

36

368

682
17
―
2,981
7,398
6,354

1,195
―
(571)
2,876
7,368
6,235

5,128
133
―
22,41955,63747,787¥$

Thousands of
U.S. dollars(Note)
2023

Millions of yen
2023
2022
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using
equity method
Gain on investments in investment partnerships
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Commission for purchase of treasury shares
Loss on investments in money held in trust
Loss on investments in investment partnerships
Miscellaneous expenses
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sale of non-current assets *2
Gain on revision of retirement benefit plan
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets *3
Branch office relocation expenses
Total Extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

¥

¥
¥

247
207

¥

294
186

$

1,859
1,561

523

446

3,938

156
122
1,257

―
31
959

1,173
924
9,457

0
8
―
2
0
10
7,601

0
6
14
4
4
29
7,164

0
63
―
15
2
81
57,162

―
671
671

40
―
40

―
5,050
5,050

―
―
―
8,273
1,965
340
2,306
5,966
―
5,966

41
16
58
7,147
2,071
(98)
1,972
5,174
―
5,174

―
―
―
62,212
14,784
2,559
17,34344,869―44,869¥¥$$Note Method of translation of the financial statements is described in “(7) Financial Statement Translation” in “4. Significant
accounting principles”.

Japan Securities Finance Co., Ltd.
-5-Integrated Report 2023

71

Corporate Data

Consolidated Statement of Comprehensive Income

Profit¥Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income *Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable to noncontrolling interests

Millions of yen
2023
2022
5,966 ¥
5,174

Thousands of
U.S. dollars(Note)
2023$
44,869(14,213)
11,749(56)(12,534)
15,010206(106,888)
88,357
(424)

45

32

342

¥

(2,474)
3,491 ¥

2,714
7,889

$

(18,611)26,257

¥

3,491

¥

7,889

$

26,257

¥

―

¥

―

$

―

Note Method of translation of the financial statements is described in “(7) Financial Statement Translation” in “4. Significant
accounting principles”.

72

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Integrated Report 2023
-6-

(iii) Consolidated Statement of Changes in Equity
Previous Fiscal Year (From April 1, 2021 to March 31, 2022)(Millions of yen)
Shareholders’ equity
Share capital
Balance at April 1,
2021
Cumulative effects ofaccounting changes
Restated balance atApril 1, 2021
Changes arising during
year¥

Capital surplus

10,000 ¥Retained earnings

8,878 ¥

Total shareholders’equityTreasury shares

113,133 ¥(2,407) ¥129,6040
10,0008,878

113,133

Cash dividends
Net income
attributable to ownersof parent
Purchase of treasury
share
Disposal of treasury
share
Net changes otherthan stockholders’equityTotal changes during
the year
Balance at March 31,
¥
2022

0
(2,407)

129,605(2,786)(2,786)

5,174

5,174

0

(2,301)(2,301)

28

28

114

―

0

2,387

(2,272)

10,000 ¥8,878 ¥

115,521 ¥(4,680) ¥129,719

Accumulated other comprehensive income

Balance at April 1,
2021
Cumulative effects ofaccounting changes
Restated balance atApril 1, 2021
Changes arising during
year

Valuationdifference on
Deferred gains oravailable-for-sale losses on hedges
securities¥

22,432 ¥Revaluation
reserve for land

(16,978) ¥Remeasurements Total accumulated
Total net assetsofotherdefined benefit
comprehensive
plansincome168 ¥(59) ¥

5,562 ¥

022,432(16,978)

168

(59)

5,562

135,167

Cash dividends
Net income
attributable to ownersof parent
Purchase of treasury
share
Disposal of treasury
share
Net changes otherthan stockholders’equityTotal changes during
the year
Balance at March 31,¥
2022

135,166(2,786)
5,174(2,301)
28(12,512)

15,010

―

216

2,714

2,714

(12,512)

15,010

―

216

2,714

2,829

(1,967) ¥

168 ¥

156 ¥

8,277 ¥

137,996

9,920 ¥

Japan Securities Finance Co., Ltd.
-7-

Integrated Report 2023

73

Corporate Data

Current Fiscal Year (From April 1, 2022 to March 31, 2023)(Millions of yen)
Shareholders’ equity
Share capital
Balance at April 1,
2022
Changes arising during
year¥

Capital surplus

10,000 ¥Retained earnings

8,878 ¥

115,521 ¥Cash dividends
Net income
attributable to ownersof parent
Purchase of treasury
share
Disposal of treasury
share
Net changes otherthan stockholders’equityTotal changes during
the year
Balance at March 31,¥
2023

Total shareholders’equityTreasury shares(4,680) ¥129,719(2,786)(2,786)

5,966

5,966
(3,000)(3,000)

26

26

206

―

―

3,180

(2,974)10,000 ¥8,878 ¥

118,702 ¥(7,655) ¥129,925

Accumulated other comprehensive income

Balance at April 1,
2022
Changes arising during
year

Valuationdifference on
Deferred gains oravailable-for-sale losses on hedges
securities¥

9,920 ¥

Revaluation
reserve for land

(1,967) ¥Remeasurements Total accumulated
Total net assetsofotherdefined benefit
comprehensive
plansincome

168 ¥

156 ¥

8,277 ¥Cash dividends
Net income
attributable to ownersof parent
Purchase of treasury
share
Disposal of treasury
share
Net changes otherthan stockholders’equityTotal changes during
the year
Balance at March 31,
¥
2023

74

Japan Securities Finance Co., Ltd.

137,996(2,786)
5,966(3,000)26(14,220)

11,749―(4)(2,474)(2,474)(14,220)

11,749―(4)(2,474)(2,268)(4,300) ¥9,782 ¥

168 ¥

152 ¥

5,802 ¥

135,728

Integrated Report 2023
-8-

Current Fiscal Year (From April 1, 2022 to March 31, 2023)(Thousands of U.S. dollars)
Shareholders’ equity
Share capital
Balance at April 1,
2022
Changes arising during
year$

Capital surplus

75,199 $Retained earnings

66,769 $868,712 $Cash dividends
Net income
attributable to ownersof parent
Purchase of treasury
share
Disposal of treasury
share
Cancellation oftreasury share
Net changes otherthan stockholders’equityTotal changes during
the year
Balance at March 31,$
2023

Treasury shares

Total shareholders’equity(35,198) $975,482(20,950)(20,950)

44,86944,869(22,566)(22,566)

198

198

―

―

23,919(22,368)

1,551

75,199 $66,769 $892,631 $(57,566) $977,033

Accumulated other comprehensive income

Balance at April 1,
2022
Changes arising during
year

Valuationdifference on
Deferred gains oravailable-for-sale losses on hedges
securities$

74,598 $Revaluation
reserve for land

(14,795) $Remeasurements Total accumulated
Total net assetsofotherdefined benefit
comprehensive
plansincome1,263 $

1,177 $

62,243 $Cash dividends
Net income
attributable to ownersof parent
Purchase of treasury
share
Disposal of treasury
share
Cancellation oftreasury share
Net changes otherthan stockholders’equityTotal changes during
the year
Balance at March 31,$
2023

1,037,726(20,950)
44,869(22,566)
198(106,937)

88,357―(32)(18,611)(18,611)(106,937)

88,357―(32)(18,611)(17,060)(32,338) $73,561 $1,263 $

1,145 $

43,632 $1,020,665

Note Method of translation of the financial statements is described in “(7) Financial Statement Translation” in “4. Significant
accounting principles”.

Japan Securities Finance Co., Ltd.
-9-

Integrated Report 2023

75

Corporate Data(iv) Consolidated Statement of Cash Flows
Thousands of
U.S. dollars(Note)
2023

Millions of yen
2023
2022
Cash flows from operating activities
Profit before income taxes¥
Depreciation
Loss (gain) on sale and retirement of non-current
assetsLoss (gain) related to securities
Increase (decrease) in allowance for doubtful
accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for bonuses for
directors and other officers
Increase (decrease) in provision for share awards
for directors and other officers
Increase (decrease) in retirement benefit liability
Interest and dividend income
Interest expenses
Share of loss (profit) of entities accounted for using
equity method
Decrease (increase) in operating loans receivable
Net decrease (increase) in call loans
Net decrease (increase) in securities purchased
under resale agreements
Net decrease (increase) in cash collateral provided
for securities borrowed
Net increase (decrease) in call money
Net increase (decrease) in short-term borrowings
Net increase (decrease) in commercial papers
Net increase (decrease) in securities sold under
repurchase agreements
Net increase (decrease) in cash collateral received
for securities lent
Net increase (decrease) in cash collateral received
for margin transactions
Net increase (decrease) in borrowed money fromtrust accountNet increase (decrease) in long-term borrowings
Purchase of short-term and long-term investment
securities
Proceeds from sale and redemption of short-termand long-term investment securities
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Income taxes refund
Net cash provided by (used in) operating activities ¥76

Japan Securities Finance Co., Ltd.

Integrated Report 2023
- 10 -

8,273
682

¥

7,147
1,195

$

62,212
5,128

5

(17)

45

1,530

251

11,512

17

(571)

130

28

7

212

0

(11)

2

11

(3)

85

(739)
(20,347)
7,049

(346)
(15,866)
4,361(5,560)(153,009)
53,011

(523)

(446)

(3,938)(64,064)―

224,8672,500(481,761)―

366,739(926,289)

2,757,857(170,398)(1,173,851)(1,281,387)

332,000(147,200)(45,000)

151,800
101,616(117,000)

2,496,616(1,106,933)(338,396)(763,097)

1,353,090(5,738,439)

367,279

677,793

2,761,912(19,829)(15,407)(149,116)(160,077)(112,050)(1,203,768)

229,700

1,000

1,727,327(228,058)(466,887)(1,714,980)

539,458

267,505

4,056,688

62,003
295,443
21,016(6,999)(11,911)
5,995
303,546 ¥(93,766)(129,379)
15,362(4,171)(8,191)
4,074(122,304)

466,2632,221,716
158,043(52,631)(89,570)
45,0862,282,644$

Thousands of
U.S. dollars(Note)
2023

Millions of yen
2023
2022
Cash flows from investing activities
Purchase of investment securities
Proceeds from sale and redemption of investment
securities
Purchase of property, plant and equipment
Proceeds from sale of property, plant andequipment
Purchase of intangible assets
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Dividends paid
Purchase of treasury shares
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period *¥(317) ¥

(645)$

(2,385)

4,402

6,296

33,103

(353)

(641)

(2,656)

―

48

―

(285)
1
3,447

(153)
2
4,907

(2,144)925,926(2,786)(3,000)―(5,786)(2,786)(2,301)0(5,088)(20,950)(22,566)―(43,516)―――

301,206
1,295,058
1,596,264(122,485)
1,417,543
1,295,058

2,265,053
9,738,743
12,003,797

Note Method of translation of the financial statements is described in “(7) Financial Statement Translation” in “4. Significant
accounting principles”.

Japan Securities Finance Co., Ltd.
- 11 -

Integrated Report 2023

77

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023

(Basis of Presentation of the Consolidated Financial Statements)
1. Scope of consolidation
Number of consolidated subsidiaries: 2 companies
All two subsidiaries are consolidated.
Names of consolidated subsidiaries
JSF Trust and Banking Co., Ltd.
Nihon Building Co., Ltd.

2. Application of the equity method
Number of affiliates accounted for by the equity method: 2 companies
Name of the companies
Japan Information Processing Service Co., Ltd.
JSF Information Technology Co., Ltd.
3. Accounting periods of consolidated subsidiaries
The fiscal year end of consolidated subsidiaries is the same as the consolidated fiscal year end.
4. Significant accounting principles(1) Valuation standards and methodology for material assets(i) Securities
Available-for-sale-securities:
Securities other than for which there are no fair value:
Stated at fair value based on the quoted market price at the fiscal year end (with any unrealized
gains or losses being reported directly as a component of shareholders’ equity and the cost of any
securities sold being computed by the moving average method)
Securities for which there are no fair value:
Stated at cost determined by the moving average method(ii) Derivatives
Stated at fair value(2) Depreciation and amortization methods for material depreciable assets(i) Property, plant and equipment
The Company and its subsidiaries provided depreciation principally by the declining-balancemethod based on the estimated useful lives, except for the buildings acquired on or after April 1,
1998 and the equipment attached to buildings and structures acquired on or after April 1, 2016, which
are depreciated based on the straight-line method.
The estimated useful lives are as follows:
Buildings and structures 3-50 years(ii) Intangible assets
Straight-line method is applied.
Software for internal use is amortized by the straight-line method over the estimated useful life (5to 7 years).
(3) Basis of material allowances(i) Allowance for doubtful accounts
Allowance for doubtful accounts is measured at estimated recoverable amounts. For general
receivables, the recoverable amounts are estimated by historical write-off ratio and for individual
receivables such as receivables with default risk, the recoverable amounts are estimated individual
basis.
(ii) Provision for bonuses
Provision for bonuses is measured based on estimated amount of payment for employee bonuses.

78

Japan Securities Finance Co., Ltd.

Integrated Report 2023
- 12 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023(iii) Provision for bonuses for directors and other officers
Provision for bonuses for directors and other officers is measured based on estimated amount of
payment for directors (including executive officers) bonuses.
(iv) Provision for share awards for directors and other officers
Provision for share awards for directors and other officers is measured based on estimated amountof stock benefit obligation as of the end of the current fiscal year based on internal regulations forthe payment of the Company’s stock.
(4) Accounting treatment for retirement benefits(i) The method of attributing expected retirement benefit
For calculating benefit obligation, the method of attributing expected retirement benefit to periods
up to the end of current fiscal year is the benefit formula basis.
(ii) The method of amortizing actuarial gains and losses, and past service costs
Actuarial gains and losses are amortized using the declining balance method within over averageremaining years of service of the employees (15 years) from the following year in which the gains
or losses are recognized.
Past service costs are recorded as expenses at the year in which the costs are recognized.
Consolidated subsidiaries apply a simplified method to calculate liabilities for retirement benefits
and retirement benefit expenses, using required payment assuming retirement for personal reason at
the end of the fiscal year as retirement benefit obligation.
(5) Significant method of hedge accounting(i) Hedge accounting
In principle, deferral hedge accounting is applied. For Interest rate swaps, if they satisfy therequirements for treatment that incorporates swaps into underlying accounting items, they areaccounted for by incorporating swaps into underlying accounting items.
(ii) Hedge methods and hedged items
Hedge methods Interest rate swaps, foreign exchange contracts, etc.
Hedged items
Securities, investment securities, borrowings, etc.
(iii) Hedge policy
In accordance with the Group's internal rules for risk management, Hedging is used to hedge
against the risk of future fluctuations in interest rates and foreign currency exchange rates, etc.
(iv) Evaluation of hedge effectiveness
The Group compares market fluctuations of hedged items with those of hedge methos andevaluates the effectiveness of hedge based on the amount of fluctuation of both. However, for interest
rate swaps which incorporating swaps into underlying accounting items, the evaluation of theeffectiveness of hedge is omitted.
(Hedge relationships to which "Practical Solution on the Treatment of Hedge Accounting for
Financial Instruments that Reference LIBOR" is applied)
Among the above hedge relationships, the exceptional treatment prescribed in the PITF is applied
to all hedge relationships included in the scope of application of "Practical Solution on the Treatment
of Hedge Accounting for Financial Instruments that Reference LIBOR" (PITF No. 40, March 17,2023). The details of hedging relationships to which the PITF is applied are as follows.
Hedge accounting

Deferral hedge accounting and for interest rate swaps, accounting for byincorporating swaps into underlying accounting items
Hedge methods
Interest rate swaps
Hedged items
Securities, investment securities, borrowings, etc.
Hedging transactions Offsetting market fluctuations or fixing cash flows(6) Cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents as stated in the consolidated statements of cash flows consist of cash in
hand, readily available deposits, and any short-term liquid investments with a maturity not exceeding
three months at the time of purchase whose value is not subject to significant fluctuation risk.

Japan Securities Finance Co., Ltd.
- 13 -

Integrated Report 2023

79

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(7) Financial Statement Translation
The translations of the yen amounts into U.S. dollars are included solely for the convenience of thereader, using the prevailing exchange rate as of March 31, 2023, which was ¥132.98 to U.S. $1. Thistranslation should not be construed as a representation that the amounts shown could be converted into
U.S. dollars at such rate.
(Significant Accounting Estimates)
Recoverability of deferred tax assets(1) Deferred tax assets and liabilities in the accompanying consolidated balance sheet as of March 31,
2023 are as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Deferred tax assets
Deferred tax liabilities
Deferred tax liabilities (Net)¥¥13,80916,006
2,196¥¥

16,595
19,607
3,011$$

103,846
120,366
16,519(2) Information on the nature of significant accounting estimates for identified items
Deferred tax assets before offsetting with deferred tax liabilities are estimated based on the timing
and amount of reversal of future deductible temporary difference in future consolidated financial year.
These estimates may be affected by changes in uncertain economic conditions in the future, and if theactual timing and amount of the reversal of temporary differences differ from the estimates, it may havea significant impact on the amount of deferred tax assets in the consolidated financial statements for thefollowing fiscal year.
(Changes in Accounting Policies)(Application of “Implementation Guidance on Accounting Standards for Fair Value Measurement”)“Implementation Guidance on Accounting Standard for Fair Value Measurement”（ASBJ Guidance
No. 31, June 17, 2021. Hereinafter referred to as the “Implementation Guidance”) have been applied fromthe beginning of the year ended March 31, 2023, and in accordance with the transitional treatment stipulated
in paragraph 27-2 of the Implementation Guidance, the new accounting policy stipulated by the
Implementation Guidance will be prospectively applied.
As a result, investment securities, deferred tax liabilities, and valuation difference on available-for-salesecurities increased by ¥2,623 million ($19,729 thousand), ¥809 million ($6,087 thousand), and ¥1,814
million ($13,641 thousand), respectively, in the consolidated balance sheets for the current fiscal year.
In accordance with Paragraph 27-3 of the Implementation Guidance, in the note "Financial Instruments"
the items regarding investment trusts with regard to the breakdown of the fair value of financial instruments
by level, etc., are not presented those for the previous fiscal year.
(Accounting Standards Not Yet Adopted)“Accounting Standard for Current Income Taxes" (ASBJ Statement No. 27, October 28, 2022)“Accounting Standard for Presentation of Comprehensive Income" (ASBJ Statement No. 25, October 28,
2022)"Guidance on Accounting Standard for Tax Effect Accounting" (ASBJ Guidance No. 28, October 28, 2022,
ASBJ)

80

Japan Securities Finance Co., Ltd.

Integrated Report 2023
- 14 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(1) Overview
In February 2018, ASBJ issued ASBJ Statement No. 28, "Partial Amendments to Accounting Standard
for Tax Effect Accounting", etc. (Hereinafter referred to as the "ASBJ Statement No. 28, etc."), which
completed the transfer of practical guidelines on tax effect accounting at the JICPA to the ASBJ
Accounting Standards Board. In the course of deliberation, the following two issues, which were to bereviewed again after the release of ASBJ Statement No. 28, etc., were discussed and published.
(i) Accounting section of tax expenses (taxation on other comprehensive income)(ii) Tax effect on the sale of shares of subsidiaries, etc., (shares of subsidiaries or affiliates) when thegroup corporate taxation system is applied(2) Scheduled date of adoption
This accounting standard will be applied from the beginning of the fiscal year ending March 31, 2025.
(3) Effect of adoption
The amounts of the impact of applying “Accounting Standard for Current Income Taxes”, etc., areunder evaluation at this time.
(Reclassification)(Consolidated Balance Sheets)“Accounts payable-other" under "Current liabilities," which was independently presented in the previous
fiscal year, is included in "Other" in the current consolidated fiscal year because it has become insignificant
in terms of amount. To reflect this change in presentation, the consolidated financial statements for theprevious fiscal year have been reclassified.
As a result, ¥128 million ($963 thousand) presented as “Accounts payable-other” under “Current
liabilities” in the consolidated balance sheet for the previous fiscal year has been reclassified as “Other.”(Additional Information)(Transactions of Delivering the Company’s Own Stock to Directors through Trust)
The Company has introduced a performance-based share remuneration plan called “Board Benefit Trust(BBT)” in order to further clarify the linkage between remuneration for directors (other than outside directors)
and executive officers (collectively “directors”) and the performance and share value of the Company,
thereby enhancing their awareness of the need to contribute to the efforts to archive improved businessperformance and greater enterprise value in the medium to long term.
1. Outline of the plan
The Plan is a performance-based share remuneration plan under which the Company’s shares will beacquired through a trust using money contributed by the Company and the Company’s shares and themoney equivalent to the market value of the shares will be delivered by the Trust to directors pursuant to
the “Rules for Delivery of Shares to Directors” to be established by the board of directors.
In principle, the Shares, etc. will be delivered when he/she resigns as director.
2. Stock remaining in the trust
In accordance with the “Practical Solution on Transactions of delivering the Company’s Own Stockto Employees etc. through Trust (ASBJ Practical Issue Task Force (PITF) No. 30, March 26, 2015)”, theCompany recorded assets and liabilities of the trust on the Company’s balance sheet as assets andliabilities of the Company. The Company recorded own stocks in the trust as treasury stocks under net
assets at book value in the trust excluding associated costs. The book value of the own stocks was ¥484
million ($3,646 thousand) and the number of the stocks was 1,022 thousand shares as of March 31, 2023,
and ¥511 million and the number of the stocks was 1,077 thousand shares as of March 31, 2022.

Japan Securities Finance Co., Ltd.
- 15 -

Integrated Report 2023

81

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Notes to the Consolidated Balance Sheets)*1 Assets pledges as collateral and secured debt
Assets pledged as collateral are as follows:

Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Securities
Operating loans
Investment securities¥

65,607502,453
293,024¥

86,459526,090
370,156$

The above assets are pledged as collateral for the following obligations:Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Call money
Short-term borrowings
Long-term borrowings¥

280,000¥

250,000
137,200―

229,700

493,362
3,778,410
2,203,521$

2,105,579―

1,727,327―

For call money, short-term borrowings and long-term borrowings, in addition to the assets pledged ascollateral above, a portion of the collateral according to 2 and 6 below is also pledged.
In addition, the following items are pledged as collateral for the clearing funds of Japan Securities
Clearing Corporation and JASDEC DVP Clearing Corporation.
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Cash and deposits
Current assets (other)
Investment securities¥

25
378,375
5,875

¥

25
230,004
1,222$

2 Collateralized financial assets with rights of free disposal are as follows:

Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Fair value of the securities receivable as
collateral
Securities lentCollateral provided
On hand¥2,904,598
147,985
682,5092,074,103¥

2,519,083
182,137
358,707
1,978,237

187
2,845,359
44,183$

21,842,371
1,112,838
5,132,424
15,597,108*3 Credit line for financial instruments dealers and customers, and undrawn amount related to overdraft
agreements, of the Company and JSF Trust and Banking Co., Ltd. are as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Total credit line¥
956,058¥
957,858$
7,189,487
Drawn amount
97,30063,680731,688
Undrawn amount¥
858,758¥
894,178$
6,457,798
Since some of these contracts expire without the rights exercised, the undrawn amount itself does notnecessarily affect future cash flows.

82

Japan Securities Finance Co., Ltd.

Integrated Report 2023
- 16 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
*4 Items related to affiliated companies are as follows:

Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Investment securities (stocks)

¥

5,060

¥

4,595

$

38,056*5 Balance sheet amount of securities lent under loan for consumption agreement, etc. are as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Securities
Investment securities

¥

2,007
180,608¥

8,764
424,126$

15,094
1,358,160

6 The fair value of the securities borrowed under loan for consumption agreement, etc. are as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
The fair value of the securities borrowed
Securities loaned
Securities pledged as collateral
On hand¥ 10,287,704
9,613,304
641,815
32,584¥

10,092,917
9,565,616
478,582
48,717$77,362,795
72,291,352
4,826,408
245,034*7 The Company revaluated its land at fair value, pursuant to the Law Concerning Land Revaluation (Law
No.34 March 31, 1998) and its amendments (Law No.19 March 31, 2001) (the “Law”), and for net
unrealized gain, tax equivalent is presented as “Deferred tax liabilities for land revaluation” under
LIABILITIES and the amounts net of the tax equivalent is presented as “Revaluation reserve for land”
under NET ASSETS.
Date of revaluation: March 31, 2002
Revaluation method to be prescribed on Article3, paragraph3 of the Law Concerning Land Revaluation:
The revaluation is calculated by making reasonable adjustments to the value calculated by the method
specified and announced by the Commissioner of the National Tax Agency for calculating the value ofland as the basis for calculating the taxable value of land as stipulated in Article 16 of the Land Value
Tax Law based on Article 2, clause 4 of the Enforcement Order for the Law Concerning Revaluation ofLand (Ordinance No. 119 March 31, 1998).

Japan Securities Finance Co., Ltd.
- 17 -

Integrated Report 2023

83

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Notes to the Consolidated Statements of Income)*1 Research and development expenses included in general and administrative expenses and manufacturingcosts for the year are as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
¥

0

¥

40

$

*2 Breakdown of gain on sale of non-current assets are as follows:

Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Tools, furniture and fixtures

¥

―

¥

40

$

*3 Breakdown of loss on retirement of non-current assets are as follows:

84

Japan Securities Finance Co., Ltd.

¥

Integrated Report 2023
- 18 -

―
―

¥

2
39

―

Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Buildings and structures
Demolition and removal expenses

0

$

―
―

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Notes to the Consolidated Statements of Comprehensive Income)*1 Reclassification adjustments and tax effects related to other comprehensive income

Valuation difference on available-for-salesecurities:
Arising during the year
Reclassification adjustment
Before tax effect adjustment
Tax effect
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges:
Arising during the year
Reclassification adjustment
Before tax effect adjustment
Tax effect
Deferred gains or losses on hedges
Remeasurements of defined benefit plans:Arising during the year
Reclassification adjustment
Before tax effect adjustment
Tax effectRemeasurements of defined benefit plans
Share of other comprehensive income ofentities accounted for using equity method:
Arising during the year
Reclassification adjustment
Share of other comprehensive income ofentities accounted for using equity method
Total other comprehensive income

Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
¥

¥

(22,004)
1,530(20,473)
6,260¥(18,641)251(18,390)
5,855(165,475)
11,512(153,962)
47,074(14,213)(12,534)(106,888)

16,935―
16,935(5,185)
11,74915,362―
15,362(352)
15,010127,353―
127,353(38,995)
88,357

(93)
(43)
(137)
81
(56)

319
1
321
(115)
206

(703)
(330)
(1,034)
610
(424)

38
6

25
6

290
51

45
(2,474)

32
2,714

342
(18,611)¥

Japan Securities Finance Co., Ltd.
- 19 -$$

Integrated Report 2023

85

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Notes to the Consolidated Statements of Changes in Net Assets)
Previous fiscal year (From April 1, 2021 to March 31, 2022)
1 Type and number of issued shares and treasury shares
Type of share

Number of shares at the
beginning of the year

Increase(Thousands of shares)

Decrease

Number of shares at theend of the year

Shares outstanding
96,000――96,000Common stock
Treasury shares
4,252
2,490
59
6,683
Common stock (Note)
Notes:
1 Number of shares include shares which are held by the “Board Benefit Trust (BBT)” (1,137 thousands of shares at the
beginning of the fiscal year and 1,077 thousands of shares at the end of the fiscal year)
2 Increase of 2,489 thousands of shares is due to purchase of treasury shares and 1 thousands of shares is due to purchase ofshares less than one unit.
3 Decrease of 59 thousands of shares is due to delivery of treasury shares from the “Board Benefit Trust (BBT)” to respective
person and 0 thousands of shares is due to sale of treasury shares less than one unit.

2 Stock acquisition rights, etc.
No items to report.
3 Dividends(1) Dividends paid(a) Dividends paid during the year ended March 31, 2022
The following was approved by the Board of Directors held on May 17, 2021.
(a)
Total dividends¥1,393 million(b)Cash dividends per common share¥15(c)Record date
March 31, 2021(d)
Effective dateJune 3, 2021
Note

Total dividends include dividends of ¥17 million to shares which are owned by “Board Benefit Trust (BBT)”The following was approved by the Board of Directors held on November 2, 2021.
(a)
Total dividends¥1,393 million(b)Cash dividends per common share¥15(c)Record date
September 30, 2021(d)
Effective date
December 3, 2021

Note

Total dividends include dividends of ¥16 million to shares which are owned by “Board Benefit Trust (BBT)”(2) Dividends to be paid after the balance sheet date but the record date for the payment belongs to the year
ended March 31, 2022
The following was approved by the Board of Directors held on May 16, 2022.
(a)
Total dividends¥1,356 million(b)Cash dividends per common share¥15(c)Record date
March 31, 2022(d)
Effective dateJune 2, 2022
Note

86

Total dividends include dividends of ¥16 million to shares which are owned by “Board Benefit Trust (BBT)”

Japan Securities Finance Co., Ltd.

Integrated Report 2023
- 20 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Current fiscal year (From April 1, 2022 to March 31, 2023)
1 Type and number of issued shares and treasury shares
Type of share

Number of shares at the
beginning of the year

(Thousands of shares)

Increase

Decrease

Number of shares at theend of the year

Shares outstanding
96,000――96,000Common stock
Treasury shares
6,683
3,175
55
9,803
Common stock (Note)
Notes:
1 Number of shares include shares which are held by the “Board Benefit Trust (BBT)” (1,077 thousands of shares at the
beginning of the fiscal year and 1,022 thousands of shares at the end of the fiscal year)
2 Increase of 3,174 thousands of shares is due to purchase of treasury shares and 0 thousands of shares is due to purchase ofshares less than one unit.
3 Decrease of 55 thousands of shares is due to delivery of treasury shares from the “Board Benefit Trust (BBT)” to respective
person.
4 The Company resolved at the Board of Directors meeting held on March 20, 2023 to cancel treasury stock in accordancewith Article 178 of the Companies Act, but has not completed the cancellation procedures for the following treasury stock
as of the end of the current fiscal year.
Book value¥6,532 million ($49,126 thousand)Type of share
Common stock
Number of share 8,000 thousands of shares
The cancellation procedures for the above treasury stock was completed on April 20, 2023.

2 Stock acquisition rights, etc.
No items to report.
3 Dividends(1) Dividends paid(a) Dividends paid during the year ended March 31, 2023
The following was approved by the Board of Directors held on May 16, 2022.
(a)
Total dividends¥1,356 million ($10,197 thousand)(b)
Cash dividends per common share¥15 ($ 0.11)(c)
Record date
March 31, 2022(d)
Effective dateJune 2, 2022
Note

Total dividends include dividends of ¥16 million ($123 thousand) to shares which are owned by “Board Benefit Trust(BBT)”

The following was approved by the Board of Directors held on November 7, 2022.
(a)
Total dividends¥1,429 million ($10,752 thousand)(b)
Cash dividends per common share¥16 ($0.12)(c)
Record date
September 30, 2022(d)
Effective date
December 7, 2022

Note

Total dividends include dividends of ¥16 million ($123 thousand) to shares which are owned by “Board Benefit Trust(BBT)”(2) Dividends to be paid after the balance sheet date but the record date for the payment belongs to the year
ended March 31, 2023
The following was approved by the Board of Directors held on May 15, 2023.
(a)
Total dividends¥1,395 million ($10,495 thousand)(b)
Cash dividends per common share¥16 ($0.12)(c)
Record date
March 31, 2023(d)
Effective dateJune 1, 2023
Note

Total dividends include dividends of ¥16 million ($123 thousand) to shares which are owned by “Board Benefit Trust(BBT)”

Japan Securities Finance Co., Ltd.
- 21 -

Integrated Report 2023

87

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Note to the Consolidated Statements of Cash Flows)
The reconciliation between year-end balance of cash and cash equivalents and amounts stated in the
consolidated balance sheets
Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Cash and deposits¥
Time deposits with maturities of over threemonthsCertificate of deposits with maturities of overthree months¥
Cash and cash equivalents

88Japan Securities Finance Co., Ltd.

Integrated Report 2023
- 22 -

1,598,274¥(10)(2,000)1,596,264

1,299,070

$

(10)
¥

(4,002)
1,295,058

12,018,912(75)$(15,039)
12,003,797

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Financial Instruments)
1. Conditions of Financial instruments(1) Management policy
The Company and a consolidated subsidiary, JSF Trust and Banking Co., Ltd. (“JSFTB”) mainly deal infinancial instruments. The Company is engaged in providing loan services, mainly loans for margintransactions. The loans for margin transaction are loan services which are money lending or stock loan forsettlement of standardized margin transactions. The transaction is strongly effected by security market
condition, therefore, the Company raises money flexibly from short-term finance market, primarily from callmarket. The Company manages securities such as Japanese Government Bonds to manage the funds
efficiently.
A consolidated subsidiary, JSFTB is engaged in providing credit services such as loans as banking
business and finance and securities activities. JSFTB invests in highly liquid and safe-and-secure securities
such as government bonds, local government bonds, public corporation bonds and government-backed bonds
as securities investment activities and usually raises money through a trust account.
(2) Financial instruments and risks
Main financial instrument that the Company holds are trade loans receivable, collateral money forsecurities borrowed, short-term investments and investments in securities such as government bonds andequity securities. Collateral money for securities borrowed is the collateral for cash-secured bond lendingtransaction, cash-secured stock lending transaction and securities borrowed of loan on margin transactions.
Main financial instrument that JSFTB holds are loans to government, other credit granting and securities
such as government bonds, local government bonds, public corporation bonds and government-backed
bonds. Trade loans receivable held by the Company and JSFTB are exposed to credit risks that caused fromcounterparties’ default of contract. Securities are exposed to market risks. Regarding raising money such as
call money and short-term borrowings of the Company and JSFTB, the liabilities are exposed to liquidity
risks that caused from turmoil in the financial markets or a credit rating down.
The Company has entered into forward exchange contract for hedging currency exchange risk of bonds
denominated in foreign currency and interest rate swaps for hedging interest rate risk of fixed-rate bonds.
Hedge accounting is applied to the derivatives and the Company regularly monitors the hedge effectiveness
whether the relationship between hedging derivatives and hedged assets are appropriate and the currency
exchange risk and the interest rate risk of hedged items are offset by hedging derivatives.
JSFTB has entered into interest rate swaps for hedging fixed-rate loans, bonds and borrowings as a partof interest risk control (ALM). Hedge accounting is applied to the derivatives held for ALM purpose, andthe Company regularly monitors the hedge effectiveness whether the relationship between hedging
derivatives and hedged assets or liabilities are appropriate.
(3) Financial instruments risk management
The Company places risk management as top priority of management. Basic policy of risk management
is approved at the Board of Directors, and various rules for risk management according to the basic policy
are established for concrete risk management method or system. The Company regularly receives a reportfrom JSFTB concerning its risk management.
(i) Integrated risk management
The Company quantizes the risk by Value at Risk (VaR) approach after allocating risk capital withinequity capital, and controls the quantized risk amount within the allocated risk capital. Each business
operation department controls a risk within the allocated risk capital, risk management department that is
independent from each operational section quantizes the risk, monitors the risk management and reports
to the management.
(ii) Credit risk
The Company manages all of the credit risk strictly to maintain and improve assets quality. The Risk
Management Department evaluates credit risks according to the in-house rating and quantizes andcontrols the credit risk using the default rate by each in-house rating category. Stress tests are also
performed for compensating the quantization control. The Risk Management Department evaluates
customers or loans, and sets up the credit limits, while business operation department monitors the credit
limit. Assets owned by business operation departments are assessed by themselves strictly. The Company
receives collateral securities for each loan and revaluates the securities daily to mitigate the collectability
Japan Securities Finance Co., Ltd.
- 23 -

Integrated Report 2023

89

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
issues, and the Company collects the claims quickly through sale of the collaterals when the customer
bankrupts.
(iii) Market risk
The Risk Management Department quantizes and controls market risks, and performs stress tests tocompensate the quantization control. Back-testing which is the test compared calculated VaR andestimated profit or loss by using the fixed portfolio is performed to test the reliability of the Company’smarket risk quantization model.
(iv) Quantitative information of market risk
The Company calculates VaR of short-term investments and investments in securities by using Deltamethod (confidence interval: 99%, holding period: 10-240 days, observation period: 20 days-1 year
(holding period and observation period are depending on purposes in holding)). Market risk amount(possible losses) of the Company is ¥6,220 million ($46,774 thousand) as of March 31, 2023.
Because VaR is a statistical estimate of market risk amount at a particular probability using past market
movement data, VaR may not capture the risk during radical market movements that are extreme in nature.
(v) Liquidity risk
The Treasury Department of the Company seeks to diversify financing channels and to secure stablefinancing sources. For sound cash flow management, the Company develops cash flow forecast,understands the amount can be raised or future liquidity and also understands dates of a large payment
concentration, the Company has a system to report to the management with daily cash flow status. The
Company tries to hold enough liquidity, for example, to possess a certain amount of government bonds,
makes a contingency plan and builds a company-wide emergency response system against contingencies.
Liquidity stress tests are performed monthly for ascertaining whether consolidated liquidity held by theCompany and JSFTB is adequate. At the “ALM Committee” held in every quarter, the Company develops
cash flow forecast based on estimates of loans outstanding, studies policies for ALM (Asset Liability
Management) such as revenue management for assets and liabilities of the Company and the Company
has a system to report to the management.
(vi) Subsidiary’s risk control system
JSFTB basic policy of risk management is approved at the Board of Directors, and various rules forrisk management according to the basic policy are established for concrete risk management method orsystem, and the Risk Management Department controls the risks totally. The Risk Management
Department measures and monitors the risk quantity, collects and analyzes information and reports therisk condition to the management for maintaining the proper risk management.
JSFTB calculates market risk amount for all market transactions. Interest rate risk amount which is amajor risk variable is calculated by VaR (Delta method; holding period: 1 year, confidence interval: 99%,
observation period: 5 years). JSFTB market risk amount is ¥5,228 million ($39,311 thousand) as ofMarch 31, 2023.
(4) Supplemental explanation regarding fair value of financial instruments
The fair value might differ if different assumptions are used because to measure fair value of financial
instruments, variable factors are considered. In addition, the contract amounts of derivative transactions in
the Notes to “Derivative” are not in themselves indicative of the market risk associated with derivativetransactions.

90

Japan Securities Finance Co., Ltd.

Integrated Report 2023
- 24 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
2. Fair value of financial instruments, etc.
Carrying amount in the consolidated balance sheets, fair values and differences are as follows:
Previous fiscal year (As of March 31, 2022)
Millions of yen
Carrying
Fair value
Differences
amount(1) Operating loans¥

891,485

Allowance for doubtful accounts *2(90)(2) Securities and investment securities *3
Held-to-maturity securities
Available-for-sale securities
Assets total¥

891,395¥

891,396

¥

1

¥

1,511
1,142,362
2,035,268¥

1,673
1,142,362
2,035,432

¥

162
―
164

Long-term borrowings
Liabilities total

¥
¥

4,000
4,000

¥
¥

3,998
3,998

¥
¥

(1)
(1)

Derivative transactions *4

¥

5,686

¥

5,686

¥

―

Notes:*1 Cash is omitted and deposits, call loans, securities purchased under resale agreements, cash collateral provided for securities
borrowed, call money, short-term borrowings, commercial papers, securities sold under repurchase agreements and cash
collateral received for securities lent are also omitted as most of these are settled in the short term and their fair value
approximates their carrying amount.
*2 General and specific allowance for operating loans is deducted.
*3 The following financial instruments with no market prices are not included in “(2) Securities and investment securities”.
Carrying amount of those financial instruments are as follows:
Millions of yen

Unlisted equity securities
Other securities
Investments in affiliates
Investments in investment limited partnership

¥

1,765
4,595
1,986

*4 Net receivables and payables, which were derived from derivative transactions, are presented in net amounts, and any item
for which the total becomes a net liability is indicated in parentheses.

Japan Securities Finance Co., Ltd.
- 25 -

Integrated Report 2023

91

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Current fiscal year (As of March 31, 2023)

Millions of yen
Carrying
amount(1) Operating loans¥

Allowance for doubtful accounts *2

Fair value

Differences

955,550(121)(2) Securities and investment securities *3
Available-for-sale securities
Assets total¥

955,429¥

955,426¥(2)¥

808,123
1,763,553¥

808,123
1,763,550

¥

―
(2)

Long-term borrowings *4
Liabilities total¥¥

233,700
233,700¥¥

232,763
232,763

¥
¥

(936)
(936)

Derivative transactions *5¥

15,839¥15,839¥―Thousands of U.S. dollars
Carrying
amount(1) Operating loans$

Allowance for doubtful accounts *2

Fair value

Differences

7,185,670(910)$(2) Securities and investment securities *3
Available-for-sale securities
Assets total

7,184,760$

7,184,738$(22)

6,077,030$ 13,261,791

6,077,030$ 13,261,769

$

―
(22)

Long-term borrowings *4
Liabilities Total$$

1,757,407
1,757,407$$

1,750,363
1,750,363$$(7,043)(7,043)

Derivative transactions *5$

119,109$

119,109$―

Notes:*1 Cash is omitted and deposits, call loans, securities purchased under resale agreements, cash collateral provided for securities
borrowed, call money, short-term borrowings, commercial papers, securities sold under repurchase agreements and cash
collateral received for securities lent are also omitted as most of these are settled in the short term and their fair value
approximates their carrying amount.
*2 General and specific allowance for operating loans is deducted.
*3 The following financial instruments with no market prices are not included in “(2) Securities and investment securities”.
Carrying amount of those financial instruments are as follows:
Thousands ofMillions of yen
U.S. dollars
Unlisted equity securities
Other securities¥
1,786 $
13,436
Investments in affiliates
5,060
38,056
Investments in investment limited partnership
1,664
12,513*4 Current portion of long-term borrowings are included in long-term borrowings.
*5 Net receivables and payables, which were derived from derivative transactions, are presented in net amounts, and any item
for which the total becomes a net liability is indicated in parentheses.

92

Japan Securities Finance Co., Ltd.

Integrated Report 2023
- 26 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Note 1. Projected future redemption of monetary claim and securities with maturities after the end of the
fiscal year
Previous fiscal year (As of March 31, 2022)
Millions of yen
Due after
Due after
one yearfive years
Due within
through fivethrough ten
Due after
one year
years
years
ten years
Cash and deposits
Operating loans
Securities purchased under resaleagreements
Cash collateral provided for
securities borrowed
Securities and investments securities
Held-to-maturity securities(Government bonds)
Available-for-sale securities withmaturities
Bond securities
1) Government bonds2) Corporate bonds3) Other
Total¥

1,299,070
870,912

¥

¥

―
656

¥

―
―

3,928,146―――

6,349,422

150,000

―

―

―

―

―

1,500

6,000
100,319
3,326¥ 12,557,196

65,767
311,619
57,175604,477

51,40034,27539,709126,040

395,000―
29,511
426,011¥¥

Current fiscal year (As of March 31, 2023)¥

1,598,274
930,245¥¥¥¥

Millions of yen
Due after
Due after
one yearfive years
through fivethrough ten
years
years

Due within
one year
Cash and deposits
Operating loans
Securities purchased under resaleagreements
Cash collateral provided for
securities borrowed
Securities and investments securities
Available-for-sale securities withmaturities
Bond securities
1) Government bonds2) Corporate bonds3) Other
Total―
19,916¥―25,127¥―177

Due after
ten years¥――

3,561,406―――

6,469,821

200,000

―

―

7,400
58,4293,094¥ 12,628,671

54,767
277,965
40,964
598,824

37,0003,000
20,52960,707

266,500―
14,369280,869¥¥

Japan Securities Finance Co., Ltd.
- 27 -¥

Integrated Report 2023

93

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Thousands of U.S. dollars
Due after
Due after
one yearfive years
through fivethrough ten
years
years

Due within
one year
Cash and deposits
Operating loans
Securities purchased under resaleagreements
Cash collateral provided for
securities borrowed
Securities and investments securities
Available-for-sale securities withmaturities
Bond securities
1) Government bonds2) Corporate bonds3) Other
Total

$

$

12,018,912 $
6,995,379―
188,957

$

―
1,333

Due after
ten years$――

26,781,518

―

―

―

48,652,589

1,503,985――

55,647439,381
23,271
94,966,700 $

411,843
2,090,276
308,053
4,503,117

278,237
22,559154,382456,5132,004,060―
108,053$ 2,112,114$

Note 2. Repayments schedule of long-term borrowings and other interest-bearing liabilities after the end of
the fiscal year
Previous fiscal year (As of March 31, 2022)
Millions of yen
Due after
Due after
Due after
Due after
one year
two years
three years
four years
Due within
throughthroughthroughthroughDue after
one year
two years
three years
four years
five years
five years
Call money
Short-term borrowings
Commercial paper
Securities sold under
repurchaseagreements
Cash collateral
received for
securities lentLong-term borrowings
Total

94

Japan Securities Finance Co., Ltd.

¥1,858,400 ¥
239,210496,000―――

5,544,898

―

―

―

―

―

4,706,496―¥ 12,845,005 ¥

―
1,000
1,000

―
―
―

―
―
―

―
―
―

―
3,000
3,000

Integrated Report 2023
- 28 -

¥

¥

―
―
―

¥

¥

―
―
―

¥

¥

―
―
―

¥

¥

―
―
―

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Current fiscal year (As of March 31, 2023)

Due within
one yearCall money
Short-term borrowings
Commercial paper
Securities sold under
repurchaseagreements
Cash collateral
received for
securities lentLong-term borrowings
Total

¥

¥

¥

4,781,801

―

―

―

―

―

5,073,776―
1,000
149,800¥ 12,589,987 ¥ 149,800

―
―
―

―
―
―

―
79,90079,900

―
3,000
3,000

¥

―
―
―

¥

¥

Thousands of U.S. dollars
Due after
Due after
two years
three years
throughthroughthree years
four years

Due after
one yearthrough
two years$$¥

Due after
four years
throughfive years$

Due after
five years

35,958,799

―

―

―

―

―

38,154,429―
7,519
1,126,485$ 94,675,791 $ 1,126,485

―
―
―

―
―
―

―
600,842$ 600,842―
22,55922,559Japan Securities Finance Co., Ltd.
- 29 -

―
―
―

―
―
―

―
―
―

$

―
―
―

¥

$ 16,471,649 $
691,908
3,391,487

$

―
―
―

―
―
―

Due after
five years

―
―
―

¥

―
―
―

Due after
four years
throughfive years

2,190,400 ¥
92,010451,000

Due within
one yearCall money
Short-term borrowings
Commercial paper
Securities sold under
repurchaseagreements
Cash collateral
received for
securities lentLong-term borrowings
Total

Millions of yen
Due after
Due after
two years
three years
throughthroughthree years
four years

Due after
one yearthrough
two years

$

$

―
―
―

Integrated Report 2023

95

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
3. Breakdown of financial instruments by each fair value level
The fair value of financial instruments is classified into the following three levels, depending on theobservability and materiality of the inputs used to measure fair value.
Level 1: Fair value based on quoted market prices for assets or liabilities that are the subject of thecalculation of such fair value in an active market amongst the inputs to the measurement ofobservable fair value
Level 2: Fair value measured using inputs for the calculation of fair value other than Level 1 inputs
amongst the inputs to the measurement of observable fair value
Level 3: Fair value measured using unobservable inputs for fair value calculations
Fair value is classified at the lowest priority level in the measurement of fair value among the levels towhich each of those inputs belong where multiple inputs are used that have a significant impact on themeasurement of fair value.
(1) Financial instruments that are stated at fair value in the accompanying consolidated balance sheets
Previous fiscal year (As of March 31, 2022)
Millions of yen
Fair value
Classification
Level 1
Level 2
Level 3
Total
Securities and investment securities
Available-for-sale securities
Equity securities
Bonds
Government and local bonds, etc.
Corporate bonds
Other
Derivative transactions
Currency-relatedInterest-related
Debt-related
Assets total
Derivative transactions
Currency-relatedInterest-related
Equity securities-related
Liabilities total¥¥

12,022 ¥― ¥― ¥12,022

467,407―
80,76460,418447,40944,836―――

527,826
447,409125,600――
114
560,308 ¥11
12,736―565,412 ¥

―
―
―
― ¥

11
12,736114
1,125,720

― ¥
―
943
943 ¥

122 ¥
6,111
―
6,233 ¥

― ¥
―
―
― ¥

122
6,111
943
7,176

¥

¥

Note Investment trusts of ¥29,504 million recorded on the consolidated balance sheets at fair value are not included in thetable above in accordance with Paragraph 26 of the “Guidance on Accounting Standard for Fair Value Measurement”(ASBJ Guidance No. 31, July 4, 2019).

96

Japan Securities Finance Co., Ltd.

Integrated Report 2023
- 30 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Current fiscal year (As of March 31, 2023)
Classification

Millions of yen
Fair value
Level 2
Level 3

Level 1

Total

Securities and investment securities
Available-for-sale securities
Equity securities
Bonds
Government and local bonds, etc.
Corporate bonds
Other
Other
Derivative transactions
Currency-relatedInterest-related
Assets total
Derivative transactions
Currency-relatedInterest-related
Equity securities-related
Liabilities total¥¥

11,493 ¥― ¥11,493295,746―
13,317
11,74060,335340,053
59,27016,167――――356,081
340,053
72,587
27,907――332,297 ¥1
17,866493,693 ¥

―
―
― ¥

1
17,866825,991

― ¥
―
53
53 ¥

28 ¥
1,946
―
1,974 ¥

― ¥
―
―
― ¥

28
1,946
53
2,028

¥

¥

Classification― ¥Thousands of U.S. dollars
Fair value
Level 2
Level 3

Level 1

Total

Securities and investment securities
Available-for-sale securities
Equity securities
Bonds
Government and local bonds, etc.
Corporate bonds
Other
Other
Derivative transactions
Currency-relatedInterest-related
Assets total
Derivative transactions
Currency-relatedInterest-related
Equity securities-related
Liabilities total

$

$
$

$

86,428 $― $― $86,4282,223,995―
100,144
88,287453,715
2,557,174
445,709
121,575――――

2,677,710
2,557,174
545,853
209,863――2,498,855 $

8134,358
3,712,542 $

―
―
― $

8
134,358
6,211,397

― $
―
405
405 $

211 $
14,639―14,851 $

― $
―
―
― $

211
14,639405
15,257

Japan Securities Finance Co., Ltd.
- 31 -

Integrated Report 2023

97

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(2) Financial instruments other than that are stated at fair value in the accompanying consolidated balance
sheetsPrevious fiscal year (As of March 31, 2022)
Millions of yen
Fair value
Classification
Level 1
Level 2
Level 3
Total¥―¥
526,090¥
365,306¥
891,396
Operating loans
Securities and investment securities
Held-to-maturity securities
1,673
―
―
1,673
Government and local bonds, etc.
Assets total¥
1,673 ¥
526,090 ¥
365,306 ¥893,070¥― ¥3,998 ¥
― ¥3,998Long-term borrowings
Liabilities total¥― ¥3,998 ¥
― ¥3,998
Current fiscal year (As of March 31, 2023)
Classification
Operating loans
Assets total
Long-term borrowings (Note)
Liabilities total

¥
¥
¥
¥

Level 1

―
―
―
―

¥
¥
¥
¥

Millions of yen
Fair value
Level 2
Level 3
502,453 ¥452,973502,453 ¥452,973
232,763 ¥―
232,763 ¥
―

¥
¥
¥
¥

Total
955,426
955,426
232,763
232,763

$
$
$
$

Total
7,184,738
7,184,738
1,750,363
1,750,363

Note Current portion of long-term borrowings are included in long-term borrowings.

Classification
Operating loans
Assets total
Long-term borrowings (Note)
Liabilities total

$
$
$
$

Level 1

―
―
―
―

$
$
$
$

Thousands of U.S. dollars
Fair value
Level 2
Level 3
3,778,410 $
3,406,328
3,778,410 $
3,406,328
1,750,363 $―
1,750,363 $―Note Current portion of long-term borrowings are included in long-term borrowings.

Note Explanation of valuation methods and inputs used to calculate fair value
Securities and investment securities
Securities and investment securities for which unadjusted quoted market prices in active markets areavailable are classified as Level 1 fair value. This mainly includes listed equities, listed mutual funds, andgovernment bonds. If the market is not active, even if published quoted market prices are used, the market
value is classified as Level 2 fair value. This mainly includes municipal bonds and corporate bonds. For
mutual funds for which no market trading prices exist, reference prices are used as fair value and classified
as Level 2 fair value if there are no material restrictions that would require compensation for the risk frommarket participants with respect to cancellation or repurchase requests.

98

Japan Securities Finance Co., Ltd.

Integrated Report 2023
- 32 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Operating loans
For operating loans with variable interest rates, the carrying amounts are used as the fair value because
the fair value approximates the carrying amounts if the credit conditions of the borrowers have notchanged significantly since the loans were made, as the variable interest rate reflects the market interest
rates in a short period of time. For long-term loans with fixed interest rates, the fair value is calculated
for each category based on the term by discounting the total amount of principal by the market interest
rate. For short-term loans with fixed interest rates, the carrying amounts are used as the fair value because
the fair value approximates the carrying amounts. The fair value of doubtful receivables is calculated
based on the estimated amount of collection from collateral and guarantees, etc. and the fair value
approximates the balance sheet amount on the end of consolidated fiscal year less the current estimateduncollectable amount, and such amounts are used as the fair value. Credit risk is considered in calculatingthese fair values, and if the impact of unobservable inputs is significant, the fair value is classified as Level
3; otherwise, the fair value is classified as Level 2.
Long-term borrowings
For long-term loans with variable interest rates, the carrying amount are used as fair value because thefair value approximates the carrying amount since the variable interest rate reflects the market interest
rate in a short period of time and the Company's credit status has not changed significantly since theexecution of the loans. For those with fixed interest rates are calculated using the discounted present value
method based on the total amount of principal and interest rate that takes into account the remaining termof the debt and credit risk. When unobservable inputs are not used in the calculation of these fair values,
or when the effect of such inputs is not significant, the fair value is classified as Level 2.
Derivative transactions
Stock index futures transactions are valued using quoted market prices and are classified as Level 1
because they are traded in active markets. The fair values of interest rate swaps and foreign exchange
contracts are determined using the discounted present value method with observable inputs such as interest
rates and foreign exchange rates, and are classified as Level 2.

Japan Securities Finance Co., Ltd.
- 33 -

Integrated Report 2023

99

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Securities)
1. Held-to-maturity debt securities with market value
Previous fiscal year (As of March 31, 2022)
Type(1) Government
bonds, local bonds,
etc.
Fair value exceeds the(2) Corporate bonds
carrying amount(3) Other
Subtotal(1) Government
bonds, local bonds,
etc.
Fair value not exceed(2) Corporate bonds
the carrying amount(3) Other
Subtotal
Total

Carrying amountMillions of yen
Fair value

Differences¥

1,511 ¥

1,673 ¥

162

¥

―
―
1,511 ¥――
1,673 ¥

―
―
162

¥

― ¥

― ¥

―

¥
¥

―
―
― ¥
1,511 ¥――
― ¥1,673 ¥―――
162

Millions of yen
Carrying amount
Acquisition cost¥
11,708 ¥3,890 ¥

Differences
7,818

Current fiscal year (As of March 31, 2023)
No items to report.
2. Available-for-sale securities with market value
Previous fiscal year (As of March 31, 2022)

Carrying amountexceeding acquisition
cost

Carrying amount notexceeding acquisition
cost

Type
(1) Equity securities(2) Bonds
Government
bonds, municipal
bonds, etc.
Corporate bonds
Other(3) Others
Subtotal(1) Equity securities(2) Bonds
Government
bonds, local
bonds, etc.
Corporate bonds
Other(3) Others
Subtotal
Total

¥
¥

¥
¥

266,390

250,879

15,511

11,73342,943
14,829347,606 ¥313 ¥11,70040,264
10,407317,142 ¥
345 ¥

32
2,679
4,421
30,463(32)

261,435

272,679(11,243)435,675

436,495(819)

82,656
14,674
794,756 ¥
1,142,362 ¥

85,22914,674809,424 ¥
1,126,567 ¥(2,573)(0)(14,668)
15,794Note Consolidated balance sheet carrying amounts of ¥1,765 million for unlisted equity securities, and ¥1,986 million forinvestments in investment limited partnership are not included above because they do not have market prices and theirfair value is extremely difficult to measure.

100 Japan Securities Finance Co., Ltd. Integrated Report 2023
- 34 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Current fiscal year (As of March 31, 2023)

Carrying amountexceeding acquisition
cost

Carrying amount notexceeding acquisition
cost

Type
(1) Equity securities(2) Bonds
Government
bonds, municipal
bonds, etc.
Corporate bonds
Other(3) Others
Subtotal(1) Equity securities(2) Bonds
Government
bonds, local
bonds, etc.
Corporate bonds
Other(3) Others
Subtotal
Total

Millions of yen
Carrying amount
Acquisition cost¥
11,493 ¥4,235 ¥¥¥¥¥

Differences
7,257

83,37077,456

5,913

82,512
3,811
27,380208,567 ¥― ¥82,4903,276
21,648189,107 ¥
― ¥

21
534
5,732
19,460―272,711290,256(17,544)257,540

258,099(558)

68,776526
599,555 ¥
808,123 ¥73,192542
622,091 ¥
811,199 ¥(4,416)(16)(22,535)(3,075)Note Consolidated balance sheet carrying amounts of ¥1,786 million ($13,436 thousand) for unlisted equity securities, and¥1,664 million ($12,513 thousand) for investments in investment limited partnership are not included above because
they do not have market prices and their fair value is extremely difficult to measure.

Thousands of U.S. dollars
Carrying amount
Acquisition cost$
86,428 $
31,854 $Carrying amountexceeding acquisition
cost

Carrying amount notexceeding acquisition
cost

Type
(1) Equity securities(2) Bonds
Government
bonds, local
bonds, etc.
Corporate bonds
Other(3) Others
Subtotal$(1) Equity securities $(2) Bonds
Government
bonds, local
bonds, etc.
Corporate bonds

Other(3) Others
Subtotal
Total

$
$

626,936

582,463

44,472620,486
28,662205,9021,568,416 $― $620,323
24,639
162,796
1,422,077 $
― $

163
4,022
43,105
146,338―

2,050,774

2,182,710(131,935)

1,936,687

1,940,886(4,198)517,191
3,961
4,508,614 $
6,077,030 $

550,402
4,082
4,678,081 $
6,100,158 $(33,210)(121)(169,466)(23,127)

Japan Securities Finance Co., Ltd.
- 35 -

Differences
54,574Integrated Report 2023 101

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
3. Available-for-sale securities sold during the fiscal year
Previous fiscal year (From April 1, 2021 to March 31, 2022)
Proceeds fromsale(1) Equity securities(2) Bonds
Government bonds, local bonds, etc.
Corporate bonds
Other(3) Others

¥

2,778

¥

7,412
―
7,869
3,832
21,892Millions of yen
Gross realized
gains
¥

1,344

¥

7
―
57
46
1,456

Gross realized
losses
¥

300

¥

2
―
277
1,127
1,707

Current fiscal year (From April 1, 2022 to March 31, 2023)
Proceeds fromsale(1) Equity securities(2) Bonds
Government bonds, local bonds, etc.
Corporate bonds
Other(3) Others

¥

―

¥

155,348
47,90459,991
4,402
267,646

Millions of yen
Gross realized
gains
¥

―

¥

4,854
52
116
605
5,629

Gross realized
losses
¥

―

¥

101
212
6,846
―
7,160

Thousands of U.S. dollars
Proceeds from
Gross realized
sale
gains
(1) Equity securities(2) Bonds
Government bonds, local bonds, etc.
Corporate bonds
Other(3) Others

$

―

$

1,168,205
360,236
451,134
33,1032,012,680$―$

36,506
394
878
4,552
42,331Gross realized
losses
$

―

$

762
1,597
51,484―53,844

4. Reclassified securities for which the purpose of holding has changed
In the current fiscal year, the entire amount of government bonds (consolidated balance sheet amount:¥1,510 million ($11,362 thousand)), which were previously held to maturity, were changed to availablefor-sale securities. This was due to a change in fund management policy. The impact of this change on the
consolidated financial statements is immaterial.

102 Japan Securities Finance Co., Ltd. Integrated Report 2023
- 36 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Derivative Transactions)
1. Derivative transactions for which hedge accounting is not applied
Currency-related
Previous fiscal year (As of March 31, 2022)

Category

Non-market
transactions

Contract
amounts

Nature oftransaction
Forward exchange
contract:
Sell:
U.S. dollars
Euro
Australian dollars
Buy:
U.S. dollars

Millions of yen
Of whichwithinFair value
one year

¥

1,024
1,375
640

¥

―
―
―

182

¥

―

(34)
(61)
(24)

Gains orlosses on
valuation

¥

(34)
(61)
(24)

9

9

Millions of yen
Of whichwithinFair value
one year

Gains orlosses on
valuation

Current fiscal year (As of March 31, 2023)

Category

Non-market
transactions

Category

Non-market
transactions

Contract
amounts

Nature oftransaction
Forward exchange
contract:
Sell:
U.S. dollars
Euro
Buy:
U.S. dollars

¥

¥

686

$

109
2,204
5,165

―
―

¥

―

Contract
amounts

Nature oftransaction
Forward exchange
contract:
Sell:
U.S. dollars
Euro
Buy:
U.S. dollars

14
293

$

(0)
(8)

(0)
(8)

(4)

(4)

Thousands of U.S. dollars
Of whichwithinFair value
one year

Gains orlosses on
valuation

―
―
―

$

(1)
(67)
(37)

Japan Securities Finance Co., Ltd.
- 37 -

¥

$

(1)
(67)
(37)

Integrated Report 2023 103

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
2. Derivative transactions for which hedge accounting is applied(1) Currency derivatives
Previous fiscal year (As of March 31, 2022)
No items to report.
Current fiscal year (As of March 31, 2023)
Hedge
accounting
method*1

Nature of transaction

Hedged items

Forward exchange contract:
Sell
Euro

Investments securities

Note:*1 Deferred hedge accounting is applied.

Hedge
accounting
method*1

Nature of transaction

Hedged items

Forward exchange contract:
Sell
Euro

Investments securities

Note:*1 Deferred hedge accounting is applied.

Millions of yen
Contract or
Of whichnotional
Fair value
over one year
amounts
¥

501 ¥

― ¥

(12)

Thousands of U.S. dollars
Contract or
Of whichnotional
Fair value
over one year
amounts$

3,768 $

― $(96)(2) Interest rate derivatives
Previous fiscal year (As of March 31, 2022)
Hedge
accounting
method*1*2Nature of transaction
Interest rate swaps:
Variable rate received for
fixed rate
Interest rate swaps:
Variable rate received
for fixed rate
Variable rate paid
for fixed rate

Hedged items

Millions of yen
Contract or
Of whichnotional
Fair value
over one year
amounts

Securities andInvestments securities ¥825,668 ¥

808,349 ¥¥

98,427 ¥19,180 ¥*3Long-term borrowings ¥3,000 ¥

3,000 ¥

*3

Operating loans

6,625

Notes:*1 Deferred hedge accounting is applied.
*2 The difference in amounts to be paid or received on interest rate swaps is recognized over the life of the agreements as an
adjustment to interest expense.
*3 For the assets and liabilities for which interest rate swap contracts are used to hedge the interest rate fluctuations, fair valueof derivative financial instrument is included in fair value of the respective assets and liabilities as hedged items.

104 Japan Securities Finance Co., Ltd. Integrated Report 2023
- 38 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Current fiscal year (As of March 31, 2023)
Hedge
accounting
method*1*2Nature of transaction
Interest rate swaps:
Variable rate received for
fixed rate
Variable rate paid
for fixed rate
Interest rate swaps:
Variable rate received
for fixed rate
Variable rate paid
for fixed rate

Hedged items

Millions of yen
Contract or
Of whichnotional
Fair value
over one year
amounts

Securities andInvestments securities ¥682,371 ¥

655,543 ¥

15,523Long-term borrowings ¥126,000 ¥126,000 ¥396

Operating loans¥

14,385 ¥14,385 ¥*3Long-term borrowings ¥29,100 ¥29,100 ¥*3

Notes:*1 Deferred hedge accounting is applied.
*2 The difference in amounts to be paid or received on interest rate swaps is recognized over the life of the agreements as an
adjustment to interest expense.
*3 For the assets and liabilities for which interest rate swap contracts are used to hedge the interest rate fluctuations, fair valueof derivative financial instrument is included in fair value of the respective assets and liabilities as hedged items.

Hedge
accounting
method*1*2Nature of transaction
Interest rate swaps:
Variable rate received for
fixed rate
Variable rate paid
for fixed rate
Interest rate swaps:
Variable rate received
for fixed rate
Variable rate paid
for fixed rate

Hedged items

Thousands of U.S. dollars
Contract or
Of whichnotional
Fair value
over one year
amounts

Securities andInvestments securities $ 5,131,382 $ 4,929,638 $ 116,734
Long-term borrowings $947,510 $947,510 $2,984

Operating loans$

108,174 $108,174 $*3Long-term borrowings $218,829 $

218,829 $*3

Notes:*1 Deferred hedge accounting is applied.
*2 The difference in amounts to be paid or received on interest rate swaps is recognized over the life of the agreements as an
adjustment to interest expense.
*3 For the assets and liabilities for which interest rate swap contracts are used to hedge the interest rate fluctuations, fair valueof derivative financial instrument is included in fair value of the respective assets and liabilities as hedged items.

(3) Bond derivatives
Previous fiscal year (As of March 31, 2022)
Hedge
accounting
method*1

Nature of transaction
Bond futures:
Sell

Note *1 Deferred hedge accounting is applied.

Hedged items

Millions of yen
Contract or
Of whichnotional
Fair value
over one year
amounts

Investments securities ¥3,053 ¥―¥

114

Current fiscal year (As of March 31, 2023)
No items to report.

Japan Securities Finance Co., Ltd.
- 39 -

Integrated Report 2023 105

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(4) Stock derivatives
Previous fiscal year (As of March 31, 2022)
Hedge
accounting
method*1

Nature of transaction
Stock index futures:
Sell

Note *1 Deferred hedge accounting is applied.

Hedged items

Investments securities ¥Current fiscal year (As of March 31, 2023)
Hedge
accounting
method*1

Nature of transaction
Stock index futures:
Sell

Note *1 Deferred hedge accounting is applied.

Hedge
accounting
method*1

Nature of transaction
Stock index futures:
Sell

Note *1 Deferred hedge accounting is applied.

Millions of yen
Contract or
Of whichnotional
Fair value
over one year
amounts

Hedged items- 40 -(943)

9,602 ¥―¥

(53)

Thousands of U.S. dollars
Contract or
Of whichnotional
Fair value
over one year
amounts

Investments securities $106 Japan Securities Finance Co., Ltd. Integrated Report 2023―¥

Millions of yen
Contract or
Of whichnotional
Fair value
over one year
amounts

Investments securities ¥Hedged items

8,984 ¥

72,213 $

―$

(405)

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Retirement Benefits)
1. Outline of retirement benefit plans
The Company has defined benefit plans which consist of a defined benefit corporate pension plan anda lump-sum retirement benefit plan, and a defined contribution pension plan. The Company has
established retirement benefit trust for the defined benefit corporate pension plan and the lump-sum
retirement benefit plan.
Consolidated subsidiaries’ main retirement plan is a defined benefit lump-sum retirement plan and thesimplified method has been adopted for the calculation of retirement benefit liability and retirement
benefit expenses for the plans.
2. Defined benefit plan
(1) Reconciliation of changes in retirement benefit obligation (the following table excludes certain plans
mentioned in (3))
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Retirement benefit obligation at beginning of year
Service cost
Interest cost
Actuarial gains and losses
Benefits paid
Past service costs incurred
Retirement benefit obligation at end of year

¥

¥

9,187
282
51
(211)
(308)
(671)
8,329

¥

¥

9,421
320
28
(213)
(369)
―
9,187

$

$

69,0892,122384(1,587)(2,321)(5,050)62,636(2) Reconciliation of changes in plan assets (the following table excludes certain plans mentioned in (3))
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Plan assets at beginning of year
Expected return on plan assets
Actuarial gains and losses
Employer contributions
Benefits paid
Plan assets at end of year

¥

¥

9,624
192
(304)
278
(281)
9,509

¥

¥

9,482
189
106
119
(273)
9,624

$

$

72,376
1,447(2,290)2,091(2,114)71,510(3) Reconciliation of changes in retirement benefit liability whose plans adopted the simplified method
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Retirement benefit liability at beginning of year
Retirement benefit expenses
Benefits paid
Contributions
Retirement benefit liability at end of year

¥

¥

213
36
(32)
(0)
217

¥

¥

184
51
(22)
(0)
213

$

$

Japan Securities Finance Co., Ltd.
- 41 -

1,608
275
(247)
(2)
1,633

Integrated Report 2023 107

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(4) Reconciliation between retirement benefit obligation and plan assets and liability for retirement benefit
and asset for retirement benefit recognized in consolidated balance sheets
Thousands ofMillions of yen
U.S. dollars
2023
2022
2023
Funded retirement benefit obligation
Plan assets
Unfunded retirement benefit obligation
Net liability and asset recognized in consolidatedbalance sheets
Liability for retirement benefit
Net liability and asset recognized in consolidatedbalance sheets

¥

8,329
(9,509)(1,180)
217

¥

9,187
(9,624)
(437)
213

$

62,636(71,510)(8,873)
1,633

¥

¥
¥

(223)
213
(437)

$

¥

(962)
217
(1,180)$(7,239)1,633(8,873)

¥

(962)

¥

(223)

$

(7,239)(5) The components of retirement benefit expenses

Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains or losses
Past service costs recorded as expenses*1
Retirement benefit expenses calculated by thesimplified method
Retirement benefit expenses

¥

¥

282
51
(192)
(43)
(671)
36
(538)

¥

¥

320
28
(189)
1
―
51
212

$

$

2,122
384
(1,447)(330)(5,050)275(4,046)Note *1 Past service costs recorded as expenses was recognized as a result of revision of the Company’s retirement benefit
plan, and is recorded as “Gain on revision of retirement benefit plan” in extraordinary income.

(6) Remeasurements of retirement benefit plans before related tax effects

Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Actuarial gains or losses
Total

¥
¥

(137)
(137)

¥
¥

321
321

$
$

(7) Accumulated remeasurements of retirement benefit plans before related tax effects

Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
Unamortized actuarial gains or losses
Total

¥
¥

108 Japan Securities Finance Co., Ltd. Integrated Report 2023
- 42 -

(172)
(172)

¥
¥

(309)
(309)

(1,034)(1,034)$$(1,294)(1,294)

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(8) Plan assets(a) Percentage by major category of plan assets
Debt securities
Equity securities
General account
Other
Total

2023

2022

26.9%
33.7
9.5
29.9
100.0%

39.1%
34.3
9.4
17.2
100.0%

Note Plan assets as of March 31, 2023 and 2022 include the retirement benefit trust contributed for the years ended
March 31, 2023 and 2022 which are 9.0% and 9.4% of total plan assets, respectively.

(b) Determination procedure of long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Company considers the current
and projected asset allocation, as well as current and future long-term rate of returns for various
categories of the plan assets.
(9) Basis for calculation of actuarial assumptions
The assumptions used in accounting for the above plans as of March 31, 2023 and 2022 are as
follows:
2023
2022(a) Discount rate(b) Long-term expected rate of return on plan assets(c) Expected salary increase rate

0.9%
2.0%
5.2%

0.5%
2.0%
5.2%

3. Defined contribution plans
For the years ended March 31, 2023 and 2022, the amount to be paid by the Company and its
consolidated subsidiaries to the defined contribution plans was ¥35 million ($267 thousand) and ¥36
million, respectively.

Japan Securities Finance Co., Ltd.
- 43 -

Integrated Report 2023 109

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Tax Effect Accounting)
1. The principal components of deferred tax assets and deferred tax liabilities are as follows:

Deferred tax assets:
Accrued business tax
Accrued bonuses
Retirement benefit liability
Allowance for doubtful accounts
Deferred losses on hedges
Net unrealized loss on available-for-sale securities
Other
Subtotal
Valuation allowance
Deferred tax assets total
Deferred tax liabilities:
Gain on evaluation of subsidiaries’ assets
Net unrealized gain on other securities
Gain on evaluation of acquired assets by merger
Deferred loss on hedges
Other
Deferred tax liabilities total
Net deferred tax liabilities

Millions of yen
2023
2022
¥

¥

84
152
575
35
4,876
7,907
276
13,907(98)
13,809(154)(6,024)(452)(9,193)(180)(16,006)(2,196)

¥

¥

103
143
843
24
10,2595,003
305
16,682(87)
16,595(154)(9,379)(452)(9,390)(229)(19,607)(3,011)Thousands of
U.S. dollars
2023
$

$

633
1,145
4,325
267
36,672
59,464
2,077
104,585(738)
103,846(1,165)(45,301)(3,404)(69,137)(1,357)(120,366)(16,519)

2. The reconciliation of the statutory tax rate and the effective tax rate when there is a significant difference

Statutory tax rate
Equity in gains of affiliates
Expenses not deductible for tax purposes
Valuation allowance
Income not credited for tax purposes
Elimination of dividend income
Other
Effective tax rate

2023

2022

30.6%
(1.9)
0.5
0.1
(21.5)
19.5
0.6
27.9%

30.6%
(1.9)
0.5
(1.0)
(6.9)
5.6
0.7
27.6%

(Revenue Recognition)
Information on the revenue recognition is omitted as revenue subject to the “Account Standards for
Revenue Recognition” is immaterial for “Securities finance business”,” Trust banking business” and”
Real estate leasing business” which are conducted by the Group.

110 Japan Securities Finance Co., Ltd. Integrated Report 2023
- 44 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Segment Information)
1. Outline of the reportable segments
The reportable segments of the Group are the business units for which the Group is able to obtainrespective financial information separately in order for the Board of Directors to conduct periodic
investigation to determine distribution of management resources and evaluate their business results.
“Securities finance business” conducted by the Company, “Trust banking business” conducted by JSF
Trust and Banking Co., Ltd., a consolidated subsidiary and “Real estate leasing business” conducted by
Nihon Building Co., Ltd., a consolidated subsidiary, are the Group’s reportable segments.
“Securities finance business” is engaged in providing loan services, government and corporate bondfinancing and general loans, bond lending and stock lending. “Trust banking business” is engaged inproviding trust services such as securities trust and banking services such as deposit or loan. “Real estateleasing business” is mainly engaged in providing services for leasing and managing real estate owned by
the Group.
2. Calculation methods of operating revenue, profit or loss, assets, liabilities and other items for eachreportable segment.
As the methods of accounting treatment for the reported business segments are the same as description
in the “Basis of Presentation of the Consolidated Financial Statements”.
Profits by reportable segments are based on ordinary profit base. Intersegment revenue and transfer
are based on arms-length transactions.
3. Information on operating revenue, profit or loss, assets, liabilities and other items for each reportablesegment
Previous fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Securities
Real estate
finance
Trust banking
leasing
Total
Revenues:
Revenues to third parties ¥26,558 ¥
2,737
¥
841 ¥
30,138Intersegment revenues and
28
222
445
696
transfers
Total¥
26,586 ¥2,960¥
1,286 ¥
30,834
Segment profit¥
5,928 ¥
1,385
¥
707 ¥
8,021
Segment assets¥
12,714,123 ¥1,557,744¥
9,614 ¥
14,281,482
Others:Depreciation andamortization
¥
993 ¥
104
¥
96 ¥
1,194
Interest income
294
―
16
311
Extraordinary income
40
―
―
40
(Gain on sale of noncurrent assets)
(40)
(―)
(―)
(40)
Income taxes
1,371
361
241
1,974

Japan Securities Finance Co., Ltd.
- 45 -

Integrated Report 2023 111

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Current fiscal year (From April 1, 2022 to March 31, 2023)

Revenues:
Revenues to third parties
Intersegment revenues andtransfers
Total
Segment profit
Segment assets
Others:Depreciation andamortization
Interest income
Extraordinary income(Gain on revision ofretirement benefit plan)
Income taxes

Revenues:
Revenues to third parties
Intersegment revenues andtransfers
Total
Segment profit
Segment assets
Others:Depreciation andamortization
Interest income
Extraordinary income(Gain on revision ofretirement benefit plan)
Income taxes

Millions of yen
Real estate
Trust banking
leasing

Securities
finance¥

38,594

¥

36

3,115

¥

249

808

Total
¥

389

42,518675¥¥¥

38,631
10,274
12,482,291

¥
¥
¥

3,364
1,415
1,758,123

¥
¥
¥

1,197
651
7,788

¥
¥
¥

43,194
12,342
14,248,203

¥

482
247
671

¥

105
―
―

¥

94
13
―

¥

681
260
671

(671)
1,644

(―)
439

290,231

(671)
2,306

Thousands of U.S. dollars
Real estate
Trust banking
leasing

Securities
finance
$

(―)
221

$

274

23,428

$

1,873

6,078

Total
$

2,930

319,737
5,078

$
$
$

290,505
77,267
93,865,932$$$

25,301
10,642
13,220,959

$
$
$

9,008
4,902
58,568$$$324,815
92,812
107,145,460

$

3,625
1,859
5,050

$

793
―
―

$

707
99
―

$

5,126
1,958
5,050

(5,050)12,364(―)
3,307

112 Japan Securities Finance Co., Ltd. Integrated Report 2023
- 46 -(―)
1,669(5,050)17,341

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
4. Reconciliation between total amounts of reportable segments and consolidated financial statements

Operating profit
Total segment profit

Thousands of
U.S. dollars
2023

Millions of yen
2023
2022
¥

43,194¥30,834$

324,815

Elimination of intersegment transactions

(675)

(696)

(5,078)

Other
Operating profit in consolidated financial
statements

―

―

―

¥

¥

12,342Elimination of intersegment transactions
Share of profit of entities accounted for using
equity method
Other
Ordinary profit in consolidated financial
statements¥

30,138$¥¥319,737
Thousands of
U.S. dollars
2023

8,021

$

92,812(5,264)(1,303)(39,587)

523

446

3,938

―

―

―

7,601

¥

7,164

$

14,248,203¥

14,281,482

57,162Thousands of
U.S. dollars
2023

Millions of yen
2023
2022

AssetsTotal segment assets¥

Millions of yen
2023
2022

Ordinary profit
Total segment profit

42,518$107,145,460

Elimination of intersegment credits(172,025)(91,221)(1,293,621)

Elimination of investments and capital(24,913)(26,268)(187,349)

Other
Total assets in consolidated financial
statements

4,953

4,664

37,250¥14,056,217¥

14,168,656$

105,701,740

Japan Securities Finance Co., Ltd.
- 47 -

Integrated Report 2023 113

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Millions of yen

Segment total

Other items

March 31, 2022
Depreciation and amortization
Interest income
Extraordinary income(Gain on sale of non-current assets)
Income taxes¥

March 31, 2023
Depreciation and amortization¥
Interest income
Extraordinary income(Gain on revision of retirement benefit plan)
Income taxes

Amounts in the
consolidated
financialstatements

Adjustments

1,194
311
40
(40)
1,974

¥

0
(16)
―
(―)
(2)

¥

1,195
294
40
(40)
1,972

681
260
671
(671)
2,306

¥

0
(13)
―
(―)
0

¥

682
247
671
(671)
2,306

Thousands of U.S. dollars

Segment total

Other items

March 31, 2023
Depreciation and amortization
Interest income
Extraordinary income
Gain on revision of retirement benefit plan
Income taxes

$

5,126
1,958
5,050
(5,050)17,341

Adjustments
$

2
(99)
―
(―)
1

Amounts in the
consolidated
financialstatements

$

5,128
1,859
5,050
(5,050)17,343[Related information]
Previous fiscal year (From April 1, 2021 to March 31, 2022)
1. Information by products and services
Millions of yen
2022

Operating revenue toexternal customers

Loans formargintransaction
¥

6,118

Bond lending¥

11,985

Other¥

12,033

Total¥

30,138

2. Geographic information(1) Operating revenue
Because revenues from external customers inside Japan are over 90% of operating revenue in the
consolidated statement of income, the geographic information is not disclosed.
(2) Property, plant and equipment
Because there are no property, plant and equipment outside Japan, the geographic information is notdisclosed.
3. Information by major customers
Because no particular customer whose operating revenue is over 10% of operating revenue in the
consolidated statement of income exists, the information by major customers is not disclosed.

114 Japan Securities Finance Co., Ltd. Integrated Report 2023

- 48 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Current fiscal year (From April 1, 2022 to March 31, 2023)
1. Information by products and services
Millions of yen
2023

Operating revenue toexternal customers

Loans formargintransaction
¥

8,003

Bond lending¥

18,037

Other¥

16,477

Total¥

42,518

Thousands of U.S. dollars
2023

Operating revenue toexternal customers

Loans formargintransaction$

60,187

Bond lending$

135,638

Other$

123,911

Total$

319,737

2. Geographic information(1) Operating revenue
Because revenues from external customers inside Japan are over 90% of operating revenue in the
consolidated statement of income, the geographic information is not disclosed.
(2) Property, plant and equipment
Because there are no property, plant and equipment outside Japan, the geographic information is notdisclosed.
3. Information by major customers
Because no particular customer whose operating revenue is over 10% of operating revenue in the
consolidated statement of income exists, the information by major customers is not disclosed.
[Information of impairment losses on fixed assets by reportable segments]
No items to report.
[Amortization and unamortized balance of goodwill by reportable segments]
No items to report.
[Negative goodwill incurred by reported segments]
No items to report.
[Information of related parties]
1. Business transactions with related parties
No items to report.
2. Note to significant affiliate companies
No items to report.

Japan Securities Finance Co., Ltd.
- 49 -

Integrated Report 2023 115

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Per Share Information)
2023¥

Net assets per share
Profit per share

Yen

1,574.64 ¥67.76

U.S. dollars
2023

2022
1,545.03
56.61

$

11.84
0.5

Notes:
1. Diluted profit per share for the previous and current fiscal year are not stated as there are no potential shares that have dilutive
effect.
2. The basis for calculating net assets per share is as follows:

Millions of yen
2023
2022
¥

Total net assets
Amount deducted from total net assets
Net assets applicable to common shareholders¥

135,728 ¥―
135,728 ¥

137,996―
137,996

Thousands of
U.S. dollars
2023
$
$

1,020,665―
1,020,665

Number of shares (Thousands)
2023
2022
Number of common shares outstanding

96,00096,000

Number of common treasury shares

9,803

6,683

Number of common shares outstandingon which net assets per share is calculated

86,19689,316

3. The basis for calculating profit per share is as follows:

Millions of yen
2023
2022
Profit attributable to owners of parent
Profit not attributable to common shareholders
Profit applicable to common shareholders of theparent company

Thousands of
U.S. dollars
2023¥

5,966 ¥
―

5,174
―

$

44,869―¥5,966 ¥

5,174$

44,869Number of shares (Thousands)
2023
2022
Weighted average number of common shares

88,051

91,401

4. For calculating “Net assets per share”, the Company’s own stocks which are held by the trust (BBT) (1,077 and 1,022
thousands shares for previous and current fiscal year, respectively) are included in the treasury stocks which are excluded
from the calculation of number of shares outstanding at end of year.
For calculating “Profit per share”, the Company’s own stocks which are held by the trust (BBT) (1,086 and 1,035
thousands shares for previous and current fiscal year, respectively) are included in the treasury stocks which are excluded
from the calculation of weighted average number of shares.

116 Japan Securities Finance Co., Ltd. Integrated Report 2023
- 50 -

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
(Subsequent Event)(Acquisition of treasury shares)
The Company’s Board of Directors held on May 9, 2023 has resolved to acquire treasury sharespursuant to the provisions of Article 156 of the Companies Act, as applied by replacing the relevant terms
pursuant to the provisions of Article 165, paragraph (3) of the same Act.
1. Reasons for the acquisition of treasury shares
The Company acquires treasury shares in accordance with Shareholder Return Policy, aim for a total
return ratio of 100% on a cumulative basis from FY2021 through FY2025 by the flexible payment ofdividends and acquisition of treasury shares.
2. Details of matters related to acquisition(1) Class of shares to be acquired
Common shares of the Company(2) Total number of shares that can be acquired
Up to 3,300,000 shares (3.8% of the total number of issued shares excluding treasury shares)(3) Total amount of share acquisition costs
UP to ¥3,300 million ($24,815 thousand)(4) Acquisition period
From May 10, 2023 to March 31, 2024
(Disposal of treasury shares)
The Company’s Board of Directors held on May 9, 2023 has resolved to dispose of treasury sharesthrough a third-party allotment.
1. Purpose and reasons for the disposal of treasury shares
The Company will grant the Company’s common shares to its employees in accordance with theCompany's performance in fiscal 2022, in an attempt to increase the job satisfaction and motivation of its
employees and to provide incentives to increase the Company's corporate value over the medium to longterm.
2. Details of matters related to disposal(1) Date of disposal
June 30, 2023
(2) Class and number of shares to be disposed
Common shares of the Company 49,000 shares *1(3) Disposal price¥1,018 ($7.65) per share(4) Total amount of shares to be disposed¥49,882,000 ($375 thousand) *1(5) Method of disposal of treasury shares
Third-party allotment(6) Recipient of treasury shares to be disposed of
Employee stock ownership plan of the Company(7) Other
With respect to this disposal of treasury shares, the Company has filed a securities registration
statement in accordance with the Financial Instruments and Exchange Act.
Japan Securities Finance Co., Ltd.
- 51 -

Integrated Report 2023 117

Corporate Data

Notes to Consolidated Financial Statements

Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023
Note *1 The number and the total amount of shares to be disposed of are maximum values, and the actual number and thetotal amount of shares to be disposed of are expected to be fixed according to the number of members of the employee stock
ownership plan of the Company after the completion of the promotion for admission to the employee stock ownership plan.

118 Japan Securities Finance Co., Ltd. Integrated Report 2023
- 52 -

Supplementary Information to Consolidated Financial Statements
Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023(v) Supplementary Statements[Detailed Schedule of Bonds]
No items to report.

[Detailed Schedule of Borrowings]

Classification
Short-term borrowings
Long-term borrowings due within one
year
Lease obligation due within one year

At the beginningof the fiscal year¥
239,210―¥

Repayment
due
―
―

―

―

―

4,000

232,700

0.049 %

―

―

―

―
From
January2025
To April
2031―

1,858,400
496,000

2,190,400
451,000(0.013)%0.004 %――

2,967,110――

Long-term borrowings(except for due within one year)
Lease obligation(except for due within one year)
Other interest-bearing liabilities:
Call money (due within one year)
Commercial papers (due within one
year)
Total

Millions of yen
2023
At the end of the
Averagefiscal year
interest rates¥
92,0100.020 %
1,000
0.120 %

2,597,610¥

Notes:
1 Average interest rates are calculated based on the interest rates at the end of the fiscal year.
2 Cash collateral received for securities lent is excluded from other interest-bearing liabilities.
3 The amounts of long-term borrowings (except for due within one year) due within five years of the end of the fiscal year are
as follows:

Due after one
year throughtwo years
Long-term borrowings¥

149,800

Millions of yen
2023
Due after two
Due after three
years throughyears throughthreefour years
years
¥
― ¥
―

Japan Securities Finance Co., Ltd.
- 53 -

Due after four
years throughfive years¥

79,900Integrated Report 2023 119

Corporate Data

Supplementary Information to Consolidated Financial Statements
Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023

Classification
Short-term borrowings
Long-term borrowings due within one
year
Lease obligation due within one year

At the beginningof the fiscal year$
1,798,841―$

Repayment
due
―
―

―

―

―

30,0791,749,887

0.049 %

―

―

―

―
From
January2025
To April
2031―

13,975,033
3,729,884

16,471,649
3,391,487(0.013)%0.004 %――

22,312,453――

Long-term borrowings(except for due within one year)
Lease obligation(except for due within one year)
Other interest-bearing liabilities:
Call money (due within one year)
Commercial papers (due within one
year)
Total

Thousands of U.S. dollars
2023
At the end of the
Averagefiscal year
interest rates$
691,9080.020 %
7,519
0.120 %

19,533,839$

Notes:
1 Average interest rates are calculated based on the interest rates at the end of the fiscal year.
2 Cash collateral received for securities lent is excluded from other interest-bearing liabilities.
3 The amounts of long-term borrowings (except for due within one year) due within five years of the end of the fiscal year are
as follows:

Due after one
year throughtwo years
Long-term borrowings$

1,126,485

Thousands of U.S. dollars
2023
Due after two
Due after three
years throughyears throughthreefour years
years
$
― $
―

Due after four
years throughfive years$

600,842[Detailed Schedule of Asset Retirement Obligations]Pursuant to Article 92-2 of the Regulations for Consolidated Financial Statements, this information
has been omitted because the balance of asset retirement obligations at the beginning and at the end of the
fiscal year ended March 31, 2023 was less than 1/100th of the balance of liabilities and net assets at the
beginning and at the end of the fiscal year ended March 31, 2023.

120 Japan Securities Finance Co., Ltd. Integrated Report 2023
- 54 -

Supplementary Information to Consolidated Financial Statements
Japan Securities Financial Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2023

(2) Other

Quarterly information for the current fiscal year

Cumulative period
Operating revenue
Profit before income taxes
Profit attributable to owners of parentFirst
quarter¥
11,0922,870
2,063

Millions of yen
2023
SecondThird
quarterquarter¥
21,081 ¥
31,638
5,806
8,256
4,110
5,911

Fourthquarter¥
42,518
8,273
5,966

Yen
2023
Profit per share (Cumulative period)
Profit per share (Quarterly period)

Cumulative period
Operating revenue
Profit before income taxes
Profit attributable to owners of parent

Profit per share (Cumulative period)
Profit per share (Quarterly period)

First
quarter
¥
23.10
23.10

Secondquarter
¥
46.09
22.98

Third
quarter
¥
66.71
20.59

Fourthquarter
¥
67.76
0.64

First
quarter$
83,41821,58815,518

Thousands of U.S. dollars
2023
SecondThird
quarterquarter$
158,531 $237,919
43,66562,08730,91144,457

Fourthquarter$
319,737
62,212
44,869First
quarter
$
0.17
0.17

U.S. dollars
2023
SecondThird
quarterquarter$
0.34 $
0.50
0.17
0.15

Fourthquarter
$
0.50
0.00

Japan Securities Finance Co., Ltd.

Integrated Report 2023 121- 55 -

Corporate Data

122 Japan Securities Finance Co., Ltd. Integrated Report 2023

Japan Securities Finance Co., Ltd.

Integrated Report 2023 123

Corporate Data

124 Japan Securities Finance Co., Ltd. Integrated Report 2023

Japan Securities Finance Co., Ltd.

Integrated Report 2023 125

Corporate Data

126 Japan Securities Finance Co., Ltd. Integrated Report 2023

Japan Securities Finance Co., Ltd.

Integrated Report 2023 127

Corporate Data

Shareholder and Investor Information
Share Information(As of March 31, 2023)

Shares Held by Shareholder Type(Thousands)

Total number of authorized shares

200,000,000

Total number of issued and outstanding shares

96,000,0001

Number of shareholders

Financial institutions
21,000 (21.9%)

Treasury stock
8,7701 (9.1%)

Securities
companies
5,657 (5.9%)

Foreign investors
37,645 (39.2%)

10,561

1. T otal before the retirement of 8,000,000 shares of treasury stock on April 20, 2023,
upon which the total became 88,000,000 shares issued and outstanding.

Individuals
and others
15,161 (15.8%)

Other Japanesecompanies
7,764 (8.1%)

Major Shareholders (Top 10)
Number of shares held(Thousands)

Shareholding ratio2(%)

THE SFP VALUE REALIZATION MASTER FUND LTD.

12,624

14.47

The Master Trust Bank of Japan, Ltd. (Trust account)

10,214

11.70

Capital Market Promotion Foundation

4,654

5.33

THE CHASE MANHATTAN BANK, N.A. LONDON SPECIAL OMNIBUS SECS
LENDING ACCOUNT

4,307

4.93

Mizuho Bank, Ltd.

3,536

4.05

Custody Bank of Japan, Ltd. (Trust account)

3,480

3.99

INTERTRUST TRUSTEES (CAYMAN) LIMITED SOLELY IN ITS CAPACITY AS
TRUSTEE OF JAPAN-UP

3,109

3.56

INTERTRUST TRUSTEES CAYMAN LIMITED AS TRUSTEEOF JAPAN-UP UNIT TRUST

1,725

1.97

STATE STREET BANK WEST CLIENT - TREATY 505234

1,670

1.91

BNYM AS AGT/CLTS 10 PERCENT

1,479

1.69

2. T he shareholding ratio has been calculated based on the total number of shares issued and outstanding less the total number of shares of treasury stock held by the Company asof March 31, 2023 (8,770,527).

Share Price(Yen)

JSF (Left axis)

TOPIX (Right axis)

1,500

3,000

1,200

2,500

900

2,000

600

1,500

300

1,000
2013

2014

2015

2016

2017

128 Japan Securities Finance Co., Ltd. Integrated Report 2023

2018

2019

2020

2021

2022

2023

Company Information(As of March 31, 2023)

Company Profile
Name

Japan Securities Finance Co, Ltd.

Representative

Shigeki Kushida, Representative Executive Officer & President

Head office

1-2-10 Nihonbashi-Kayabacho, Chuo-ku, Tokyo 103-0025, Japan

Established

July 1927

Incorporated

February 1950 (Newly launched as a securities finance company)

Capital¥10 billion

Stock listing

Tokyo Stock Exchange Prime Market

Main business

Securities finance business based on the Financial Instruments and Exchange Act(Loans for margin transactions, securities financing, and securities investment)

WebsiteA variety of information about the JSF Group, including Company profile, news releases, financial details and IR information,
is available on our website, which is optimized for smartphone viewing.
We also offer an e-mail notification service for registered users, providing timely updates on news releases and IR
announcements.

https://www.jsf.co.jp/english/about/
Corporate Website

Investor Relations

https://www.jsf.co.jp/english/

https://www.jsf.co.jp/english/ir/

E-mail Notification Service

Loans for Margin Transactions

https://www.jsf.co.jp/english/ir/mail/https://www.taisyaku.jp/english/

Japan Securities Finance Co., Ltd.

Integrated Report 2023 129

Japan Securities Finance Co., Ltd.
1-2-10 Nihonbashi-Kayabacho, Chuo-ku, Tokyo 103-0025, Japan