Japan Finance Corporation
FINANCIAL ACCOUNT RELATED TO THE FINANCIAL OPERATIONS FOR FACILITATING REALIGNMENT OF
UNITED STATES FORCES IN JAPANBalance Sheet （as of March 31, 2011）(Millions of yen)

AssetsLiabilities

Cash and due from banks

359

Other liabilities

1

Due from banks359

Accrued expenses

1

Other assets

0Provision for bonuses

4

Other0

Provision for directors’ bonuses0

Property, plant and equipment

0

Provision for retirement benefits

113

Other0

Provision for directors’ retirement

0benefits
Total liabilities

119

Net assets

Total assets

360

Retained earnings

241

Other retained earnings

241

Retained earnings brought forward

241

Total shareholders’ equity

241

Total net assets

241

Total liabilities and net assets

360

Japan Finance Corporation
FINANCIAL ACCOUNT RELATED TO THE FINANCIAL OPERATIONS FOR FACILITATING REALIGNMENT OF
UNITED STATES FORCES IN JAPANStatement of Operations （Year ended March 31, 2011）(Millions of yen)

Ordinary income

411

Receipts from the national budget

411

Receipts from the general account of the national budget

411

Other income0

Other0Ordinary expenses

170

Fees and commissions payments

22

Other fees and commissions

22

General and administrative expenses

147

Ordinary profit

241

Net income241

Japan Finance Corporation
FINANCIAL ACCOUNT RELATED TO THE FINANCIAL OPERATIONS FOR FACILITATING REALIGNMENT OF
UNITED STATES FORCES IN JAPANStatement of Changes in Net Assets （Year ended March 31, 2011）(Millions of yen)

Shareholders’ equity
Retained earnings
Other retained earnings
Retained earnings brought forward
Balance at the end of previous period―

Changes of items during the period
Net income (loss)

241

Total changes of items during the period

241

Balance at the end of current period

241

Total retained earnings
Balance at the end of previous period―

Changes of items during the period
Net income (loss)

241

Total changes of items during the period

241

Balance at the end of current period

241

Total shareholders’ equity
Balance at the end of previous period―

Changes of items during the period
Net income (loss)

241

Total changes of items during the period

241

Balance at the end of current period

241

Total net assets
Balance at the end of previous period―

Changes of items during the period
Net income (loss)

241

Total changes of items during the period

241

Balance at the end of current period241

Japan Finance Corporation
FINANCIAL ACCOUNT RELATED TO THE FINANCIAL OPERATIONS FOR FACILITATINGREALIGNMENT OF UNITED STATES FORCES IN JAPANNotes to Financial Statements
FINANCIALACCOUNTRELATED TO THE FINANCIAL OPERATIONS FORFACILITATING REALIGNMENT OF UNITED STATES FORCES IN JAPANAmounts presented are rounded down to the nearest million yen.

1. Significant accounting policies(a) Depreciation basis for fixed assets
Property, plant and equipment
Tangible fixed assets are depreciated under the declining-balance method over their usefuleconomic lives.
Amortization is based on the following range of estimated useful lives:
Other: 2 years to 20 years(b) Accounting policy for reserves(i) Provision for bonuses
The “provision for bonuses” is calculated and provided for based on the estimated amountsof future payments attributable to the services that have been rendered by employees to thedate of the balance sheet.
(ii) Provision for directors’ bonuses
The “provision for directors’ bonuses” is calculated and provided for based on the estimatedamounts of future payments attributable to the services that have been rendered by directors
to the date of the balance sheet.
(iii) Provision for retirement benefits
The “provision for retirement benefits” represents the future payment for pension andretirement benefits to employees, and is accrued based on the projected benefit obligations
and the estimated pension plan assets at the fiscal period end.
Unrecognized prior service costs are recognized as income or expense by the straight-line
method over a certain number of years; 10 years within the average remaining work period ofemployees at the year of occurrence.
Unrecognized actuarial differences are recognized as income or expense from thefollowing fiscal year by the straight-line method over a period up to a maximum of 10 years
within the average remaining service period of employees of the respective fiscal year.
(iv) Provision for directors’ retirement benefits
The “provision for directors’ retirement benefits,” which provides for future retirement
pension payments to directors, corporate auditors and executive officers, is recognized at theamount accrued at the end of the fiscal year.

Japan Finance CorporationFINANCIAL ACCOUNT RELATED TO THE FINANCIAL OPERATIONS FOR FACILITATINGREALIGNMENT OF UNITED STATES FORCES IN JAPAN(c) Consumption and other taxes
Consumption taxes and local consumption taxes (“consumption taxes”) are excluded fromtransaction amounts. Amounts of nondeductible consumption taxes related to property, plantand equipment are expensed as incurred.

2. Assets pledged as collateral
Pursuant to Article 52 of the JFC Act, assets of JFC are pledged as general collateral for all bonds
issued by JFC. There is no issued bond in Financial Account Related to the Financial Operations
for Facilitating Realignment of United States Forces in Japan.

3. Accumulated depreciation of fixed assets
Accumulated depreciation of fixed assets amounted to ¥0 million.

4. Restriction in dividend distribution
JFC is restricted in its dividend distribution pursuant to Article 47 of the JFC Act*1. In the eventthat the amount of the retained earnings brought forward in the balance sheet exceeds zero in eachaccount related to the operations*2 listed in each Item of Article 41 hereof, JFC shall accumulate,as a reserve, the amount calculated in accordance with the standards prescribed by a Cabinet
Order to the extent that it reaches the certain amount, and if there is still a surplus, JFC shall pay
such surplus into the national treasury within 3 months after closing date.
In the event that the amount of the retained earnings brought forward falls below zero in eachaccount set forth in the preceding paragraph, legal capital surplus and legal retained earnings shallbe transferred to retained earnings brought forward to the extent that the amount of retainedearnings brought forward becomes zero.

*1 Including instances deemed applicable by the replacement of terms pursuant to the provisions of Article 22 (1) ofthe Act on Special Measures Concerning Smooth Implementation of Realignment of United States Forces in Japan(Act No. 67; 2007) and instances deemed applicable by the replacement of terms pursuant to the provisions ofArticle 17 of the Act on the Promotion of Businesses to Develop and Manufacture Energy and EnvironmentallyFriendly Products (Act No. 38; 2010).

*2 Including instances deemed applicable by the replacement of terms pursuant to the provisions of Article 17 of theAct on the Promotion of Businesses to Develop and Manufacture Energy and Environmentally Friendly Products(Act No. 38; 2010) and operations listed in Article 16 of the Act on Special Measures Concerning Smooth
Implementation of Realignment of United States Forces in Japan [hereafter referred to as “operations listed undereach section of Article 41 of the same law.”Japan Finance Corporation
FINANCIAL ACCOUNT RELATED TO THE FINANCIAL OPERATIONS FOR FACILITATINGREALIGNMENT OF UNITED STATES FORCES IN JAPAN5. Financial instruments and related disclosure
1. Status of financial instruments(1) Initiatives for financial instrumentsBased on the JFC Act, we are a governmental financial institution founded for the purpose of
supplementing the financing conducted by general financial institutions and contributing to
the development of the Japanese and global economic society and the improvement of thelifestyle of citizens.
The budget required for governmental financial operations is decided on by the Diet ofJapan, and business plans and financial plans (funds through borrowing from the fiscal
investment funds and loans, bonds and investments from the general account, equity
participation, etc.) are appended to the budget and submitted to the Diet of Japan.
These operations are classified into Micro Business and Individual Operations, Agriculture,Forestry, Fisheries and Food Business Operations, SME Loan Programs and Securitization
SupportPrograms(Guarantee-typeOperation),Securitization

SupportPrograms(Purchase-type Operation), Credit Insurance Programs, JBIC Operations, FinancialOperations for Facilitating Realignment of United States Forces in Japan, Operations toFacilitate Crisis Responses, and Operations to Facilitate Specific Business Promotion.
Accounts are made for each classification (“operation account”) for accounting treatment.
The funds procured by JFC through borrowing from the fiscal investment funds and loans,bonds and investments from the general account are managed separately by each operational
account. In principle, it is assumed that funds intended for one operation account will not be
used for another operation account. Accordingly, ALM (asset and liability management) is
conducted for the risks associated with financial assets and liabilities for each operationaccount. Note that financial instruments that can be used for the management of surplus
funds are limited to extremely safe instruments such as Japanese government bonds, etc., as
stipulated by The JFC Act.
In the Financial Account related to the Financial Operations for Facilitating Realignmentof United States Forces in Japan, this account conducts in this fiscal year necessary
operations related to making equity investments, loans and other operations necessary for theprojects to facilitate realignment of United States Forces in Japan. However, in this accountthere is no loan or funds for loan raised in this fiscal year.

(2) Types of financial instruments and risks
The financial assets and liabilities owned by JFC are managed in separate operation accounts.
The only financial assets held in this account are cash deposits and since there are no
financial liabilities present, accordingly the following risks are considered to be limited.

Japan Finance Corporation
FINANCIAL ACCOUNT RELATED TO THE FINANCIAL OPERATIONS FOR FACILITATINGREALIGNMENT OF UNITED STATES FORCES IN JAPAN(a) Market risk
Market risk is the risk that the value of assets and liabilities (including off-balance sheetassets) will fluctuate and losses will be suffered, or profits derived from assets andliabilities (including off-balance sheet assets) will fluctuate and losses will be suffered dueto the fluctuation of various market risk factors such as interest rates, exchange rates, etc.
In the fiscal year the only financial assets or liabilities held in this account are cash
deposits, and therefore market risk is considered to be limited.

(b) Liquidity risk
The liquidity risk of this account is considered to be limited because it does not accept
deposits, it secures stable funds from government grants only, and it has yet to provide aloan as of the end of the current fiscal year.

(3) Risk management structure for financial instruments
JFC has a Corporate Governance Committee established to properly conduct management inorder to comprehensively handle risks faced, including risks associated with financial
instruments, to ensure the sustained and stable realization of the financing policies of thefunction.
For each type of risk, management policies and procedures have been created to handle
the specific types of credit risks, market risks, and liquidity risks for financing associatedwith each operation, and a structure has been established to smoothly handle these tasks ineach operation.
The risk management structure for these operations is described below.

(a) Market risk management
The main type of market risk associated with these operations is interest-rate risk.
These operations strive to undertake appropriate risk management practices bymanaging funds procured from government grants through current deposits.
In addition, this financial instrument doesn’t have material sensitivity to interest rate
fluctuations since funds are managed using current deposits.

(b) Liquidity risk management related to fund procurement
Funding for these operations is procured by government grants only. Efforts are made forproper risk management through the assessment of the cash flows.

Japan Finance Corporation
FINANCIAL ACCOUNT RELATED TO THE FINANCIAL OPERATIONS FOR FACILITATINGREALIGNMENT OF UNITED STATES FORCES IN JAPAN(4) Supplementary explanation concerning fair value of financial instruments
The fair value of financial instruments includes amounts based on market value andamounts that have been reasonably estimated when no market value is available. Set
valuation inputs are used for the calculation of this amount, and if different valuation inputsare used the resulting amount could vary.

2. Fair value of financial instruments
The amount in the balance sheet at March 31, 2011, and the related fair value, and difference isas follows.

(Millions of yen)Amount on
Fair value

Difference

Balance Sheet
Cash and due from banks

359

359

―

Total assets

359

359

―

(Note 1) Valuation methodologies used for estimating fair values for financial instruments

AssetsCash and due from banks
For due from banks that do not mature or have a maturity under 3 months, the carrying amountis used as fair value because fair value resembles the carrying amount.

(Note 2) Redemption schedule for receivables and redeemable securities with future redemption
dates(Millions of yen)

Maturities
Maturities
within one
year

after oneyear butwithinthree359

after three
years butwithinfive years

years

Due from banks

Maturities——

Maturities

Maturities

after fiveafteryears but

sevenwithinyears butseven

within ten

years

years

—

—

Maturities
after tenyears—

6. Deferred tax accounting
JFC does not apply deferred tax accounting since JFC is a nontaxable entity classified in theJapan Finance Corporation
FINANCIAL ACCOUNT RELATED TO THE FINANCIAL OPERATIONS FOR FACILITATINGREALIGNMENT OF UNITED STATES FORCES IN JAPANArticle 2 (5) of the Corporation Tax Act (Act No. 34; 1965).

7. Retirement benefits
JFC has a defined benefit pension plan comprising of a welfare pension fund plan and a lump-sum
severance indemnity plan.

(a) The funded status of the pension plans
March 31, 2011 (Millions of yen)
Projected benefit obligations (A)(159)

Fair value of plan assets (B)38

Unfunded pension obligations (C)=(A)+(B)(120)

Unrecognized prior service costs (E)0Actuarial unrecognized difference (D)5

Net amount recognized on the balance sheet(113)(F)=(C)+(D)+(E)Prepaid pension cost (G)—Provision for retirement benefits (H)=(F)–(G)(113)(b) Component of pension cost
March 31, 2011 (Millions of yen)
Service cost

5Interest cost

3

Expected return on plan assets(0)

Amortization of prior service cost accounted for0

as expense
Actuarial differences accounted for as expense

0

Other costs—

Net pensions cost

8(Note) Employee contributions to pension funds have been deducted from the service cost.

Japan Finance Corporation
FINANCIAL ACCOUNT RELATED TO THE FINANCIAL OPERATIONS FOR FACILITATINGREALIGNMENT OF UNITED STATES FORCES IN JAPAN(c) Principal assumptions
March 31, 2011
Discount rate

2.0%

Expected rate of return on plan assets

2.0%

Method of attributing the projected benefits toStraight-line basis

periods of services
Terms to amortize unrecognized prior service costs

10 years

Terms

10 years

toamortize

actuarial

unrecognizeddifferences

8. Related party transaction
No Capital stock, but Receipts from the national budget ¥411 million

9. Subsequent events
The Japan Bank for International Cooperation Act (hereafter, the “New JBIC Act”) was passed onApril 28, 2011 at the 177th ordinary session of the Diet. Based on this Act, on April 1, 2012, JBIC
will be separated from JFC to form Japan Bank for International Cooperation Co., Ltd. (hereafter“New JBIC”), and effective on the same date, JFC’s JBIC Operations and Finance Operations for
Facilitating Realignment of United States Forces in Japan will be transferred to the New JBIC.

JFC will underwrite the stock of the New JBIC, and will transfer this stock without compensationto the government of Japanese at the time the New JBIC is established on April 1, 2012. Effective
the same day, assets and liabilities relating to JFC’s JBIC operations and Financial Operations for
Facilitating Realignment of United States Forces in Japan will be succeeded by the New JBIC.
The amount of assets and liabilities to be succeeded will be the assessed amount as determined byan evaluation committee based on the New JBIC Act. After the establishment of the New JBIC,
profit and loss relating to JFC’s JBIC Operations and Financial Operations for Facilitating
Realignment of United States Forces in Japan will no longer be recognized as profit and loss ofJFC. Note that there is no impact on cash flows of Account for JBIC operations, Financial
Account Related to the Financial Operations for Facilitating Realignment of United States Forcesin Japan, or the New JBIC.