May 30, 2014
Revised on August 1, 2017

Adoption of Japan’s Stewardship CodeGovernment Pension Investment Fund

1. Basic Concepts on the Adoption of the Code

Government Pension Investment Fund (GPIF) is an independent administrative agency
whose primary objective1 is to contribute to the stability of the schemes of Employees’
Pension Insurance and National Pension by managing and investing the reserve funds
entrusted by the Minister of Health, Labour, and Welfare (the Reserve Funds) and by
distributing the investment return to the Pension Special Account.

GPIF formulates Medium-term Plans including the policy asset mix from a long-term
perspective, matters to be observed for management and investment, etc., in accordancewith applicable laws and regulations and the Medium-term Objectives indicated by the
Minister of Health, Labour and Welfare (Laws and Regulations). According to the said
Medium-term Plans, GPIF invests in domestic and foreign bonds and equities. Actual
investments are entrusted to trust banks and investment management companies (assetmanagers), except for certain investments in bonds.

The “Council of Experts on the Stewardship Code” (convened by the Financial ServicesAgency) recently released the “Principles for Responsible Institutional Investors [Japan’sStewardship Code]” (the Code), as a set of principles that are considered to be useful for
responsible institutional investors in fulfilling “Stewardship Responsibilities.”__________________
1

Article 3 of the Act on the Government Pension Investment Fund (the GPIF Act) (Act No. 105 of2004)1

“Stewardship Responsibilities” as prescribed in the Code refer to the responsibilities of
institutional investors to enhance medium- to long-term investment return for their clientsand beneficiaries by improving and fostering corporate value and sustainable growth ofJapanese investee companies, through constructive or purposeful dialogue (engagement)with the companies, based on in-depth knowledge of the companies and their businessenvironment.

Article 20, Paragraph 2 of the GPIF Act stipulates that the management and investment of
the Reserve Funds should be conducted “in consideration of influences on the financial
market and other private sector activities.” However, the Expert Panel on Economic
Assumptions for Pension Financing and Investment Objectives of the Reserve Funds under
the Pension Sub-Committee of the Advisory Council Social Security for the Ministry ofHealth, Labour and Welfare suggested that formulation and disclosure, etc. of the policy inexercising voting rights should be considered in light of the Code, based on theabove-mentioned Article. It suggested such activities should also be based on opinionsfrom the Investment Advisory Committee of GPIF, that includes members recommended
by both labor and business. Since then GPIF has been discussing possible adoption, etc. ofthe Code.

To maximize medium- to long-term investment return for the beneficiary by improving andfostering investee companies’ corporate value and sustainable growth is appropriate for thenature of the Reserve Funds, and critical for GPIF that holds domestic equities over thelong term. From such perspective, GPIF has adopted the Code, and will fulfill thestewardship responsibilities. It will do so by complying with the Code to the extent
possible on its own, or understanding the implementation of the Code by asset managers,and also by disclosing summary of implementation every fiscal year.

In fulfilling stewardship responsibilities, GPIF will pay due consideration, with regard toinvestment of the Reserve Funds, to the following points as prescribed by applicable lawsand regulations:(1) GPIF should manage and invest the Reserve Funds exclusively for the benefit of thebeneficiary;(2) GPIF should manage and invest the Reserve Funds in a safe and efficient manner from a2

long-term perspective2; and(3) GPIF should consider influences on the financial markets and other private sector
activities3 and also pay due consideration for the following points as indicated by theMedium-term Objectives:(4) GPIF should take appropriate measures such as exercising voting rights from theviewpoint of maximizing the long-term shareholders’ value, etc., while paying due
consideration not to exert influence on corporate management in the private sector4; and(5) GPIF should not select individual shares by its own in equity investments, taking into
consideration the impact on corporate management5.

2. Measures for Each Principle of the Code
Please see “the Policy to Fulfill Stewardship Responsibilities” as per the separate sheet.

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2Article 79-2 of the Employees’ Pension Insurance Act (Act No. 115 of 1954) and Article 75 of theNational Pension Act (Act No. 141 of 1959)

3 Article 20, Paragraph 2 of the GPIF Act
4 GPIF Medium-term Objectives No. 2-5(1)5 GPIF Medium-term Objectives No. 2-5(1)3