Annual Report
2006

Development Bank of Japan Annual Report 2006

Development Bank of Japan Annual Report 2006Contents■ Message from the Governor■ Profile■ Our Activities

23

9DBJ in Profile

3Financial Highlights

5

Privatization of DBJ

6■ Overview■ Project■ Activities■ Governance■ Financial Condition

2636

91423

Business Areas and Fiscal 2006 Investment and Loan Plan

10

Features of the Fiscal 2006 Investment and Loan Plan

11

■ Community Development

15■ Environmental Conservation and Sustainable Societies

17■ Creation of New Technologies and Industries

20

Promoting Foreign Direct Investment in Japanand Globalization of Japan's Regional Economies

23International Cooperation Activities

25Operations Management Cycle

27

Internal Management System

29

Disclosure

33

Corporate Social Responsibility（CSR）Activities

33■ Accounts Based on Corporate Accounting Standards

38■ Accounts Based on Accounting Standards for Special Agencies, etc.

78

■ Board of Directors

88■ Organization Chart89■ Location of Head and Branch Offices and Directory90＊Detailed list of contents within

Figures in this publication
Figures in this publication have been rounded down to the nearest whole unit, so the sum of individual
figures may not match the total shown. Any figures that fall short of a single unit are shown as zero（0）.
A dash（ー）indicates that there is no figure for the item concerned

1

DBJ Disclosure 2006

The Development Bank of Japan（DBJ）is a policybased

financialinstitution

whosemission

istocontribute to the development of Japan's society andeconomy.
The role of policy-based financial institutions has
been a key subject of debate for the Japanese
government in recent years. The Important Policy ofAdministrative Reform, endorsed by the Cabinet on
December 24, 2005, proposed that DBJ be completelyprivatized as a single entity, so that we could maintainour numerous functions and thus remain capable ofdeveloping new financial methods. We feel that theCabinet's decision indicated that our achievements inproviding

newfinancial

technologies

have

been

recognized among industrial and financial circles, aswell as community groups such as local public bodies.
DBJ has provided solutions while actively adopting

management

new methods of finance aligned with policy objectives inmeasures such as business continuity plans（BCP）tothe priority areas of community development, environment

prevent disasters. DBJ has already discussed thisconservation, and technology.

type of loan with many companies.

forcompanies

thattakepositive

DBJ is currently considering the appropriate business

DBJ is a firm supporter of technological development.

model as a private entity. Nevertheless, we will

DBJ helps entrepreneurs aiming to capitalize on theircontinue to demonstrate reliability, impartiality, longtechnologicalrange perspective, and public spirit. DBJ will also

management strategies and the technology's potential

continue to optimize its management resources, such asfor commercialization.

expertise with new financial technologies and project

The Important Policy of Administrative Reform, theevaluations, and our networks with the public andAdministrative Reform Promotion Law（"Law forprivate

theAdvancing Administrative Reform to Realize asustainable development of Japan's economy andStreamlined and Efficient Government"） and Policy-

society, by providing financial solutions based on

based Financing Reform Plan recommended that DBJ

medium- to long-term loan and equity financing.

transition in fiscal 2008 from our current status as a

DBJ supports community development by supporting

special public corporation, to a stock company,

business revitalization and business ventures. Further,with a view to complete privatization in the future.

DBJ provides solutions such as private finance initiatives

Throughout the privatization process, DBJ will（PFI）and public and private sector partnerships（PPP）tocontinue to build on the efforts that have beenenergize local economies and to maintain and improverecognized, and will strive to provide a wide range ofthe quality of community services limited by local

services and solutions.

government financial constraints.

On behalf of everyone at DBJ, I ask for your continued

With the world's first system of loans based on

support and goodwill as DBJ takes steps toward

environmental ratings, DBJ supports environment-privatization.

sector.

DBJaims

tocontributetoexpertisebyevaluating

Development Bank of Japan Annual Report 2006

Message from the Governor

technology

friendly investments and corporate activities thoroughfinancing and encouragement of corporate socialresponsibility（ CSR）. This has earned DBJ plaudits
from various interested parties. In addition, this spring

Takeshi Komura

DBJ began a loan program for promoting disaster

Governor

DBJ Disclosure 2006

2DBJ in Profile

The Development Bank of Japan was established in accordancewith the Development Bank of Japan Law on October 1, 1999, as thesuccessor to all rights and obligations of the Japan Development Bankand the Hokkaido-Tohoku Development Finance Public Corporation.
The finance functions of the Japan Regional Development Corporationand the Japan Environment Corporation were also transferred to DBJ.

Objectives
DBJ provides long-term financing and other policy-based schemes to qualified projects as a supplement andinducement to the lending and other services provided by ordinary financial institutions. By doing so, it promotes
the upgrading, vitalization and sustainable development of the economy and society; the realization of anenhanced quality of life; and the creation of self-reliant regions.

Capitalization（as of the end of March 2006）
DBJ is capitalized at ¥1,272.2 billion（wholly owned by the government）.

Number of Employees（as of the end of March 2006）
DBJ employs 1,352 workers.

Services
As an integrated policy-based financial institution, DBJ's implementation of the following functions supports desirable projects
in line with Japan's economic and social policy.
Supply of long-term funds（loans, debt guarantees, and other services）:
DBJ supplies long-term, fixed-interest, good-quality funds which, in collaboration with funding from private-sectorbanks, support projects that have high policy content.
Project support :DBJ's diverse skills and financing functions are put to practical use in promoting the smooth formulation of projects withhigh policy content. This support is provided comprehensively at every stage, from the project's initial concept to its planningand commercialization.
Information supply :Using its domestic and overseas networks, DBJ carries out study and research related to important economic, social,industrial, and local trends, and furnishes a wide range of information to interested parties.

3DBJ Disclosure 2006

Creating and publicly disclosing investment guidelines based on Medium-Term Policy Principles:
DBJ conducts its work according to the Medium-Term Policy Principles of the Development Bank of Japan,

DBJ in Profile

Characteristics of Business Management

which are prepared by the competent ministers.
Investment and Finance Guidelines are prepared and publicly disclosed for each fiscal year. In addition, theManagement Council, consisting of independent experts, deliberates on and announces the progress of work
related to matters set down in the Medium-Term Policy Principles.
Complementing and encouraging private financial institutions:
The Development Bank of Japan Law prohibits competition with private financial institutions. DBJ's role is tocomplement and encourage private financing.
Ensuring sound finance:
In managing its work as a policy-based financial institution, DBJ strives for sound and efficient operations
based on the principles of certainty of repayment and balanced revenues and expenditures, as well as forstrong risk management capacity and an upgraded system of asset/liability management.
Evaluating policy effectiveness:DBJ works to ensure its accountability as a governmental institution by evaluating objectively the contributionof its financing to policy effectiveness.

Business Scale
Lending scale and target fields correspond to each year's policy requirements, and, together with fiscal investment
plans, are determined by the Diet. Annual settlements are also submitted to the Diet. DBJ's business scale for fiscal
year 2006 is ¥1,110 billion.

Principles of Work Management
Competent ministers［Medium-Term Policy Principles］

Government（e.g., 3-year policy items）［Investment and Finance Guidelines］
Prepared each fiscal year in accordancewith Medium-Term Policy Principles･ Complementing and encouraging
private financial institutions･ Ensuring sound finance･ Evaluating policy effectiveness ofpolicy finance

DBJ（Disclosure）
外部評価

Management Council
Outside experts studies and reports
on implementation of theMedium-Term Policy Principles

Implementation ofthe budget
Operations evaluation

Creditmanagement
Asset assessment

Inspection byspecialist agency（e.g.,board of audit）

External audit

Accountability to the public

DBJ Disclosure 20064

Financial Highlights

Structure of Fund Procurement
FILP Agency BondsFiscal Investment andLoan Program
Government-Guaranteed Bonds

Financial
SpecialMarkets Account
Bonds

Loans, Private-Sector Services,
SocietyBusinesses,etc.
etc.
etc.

DBJ

Fiscal Loan Fund
Special AccountIndustrial Investment
Special AccountRatings for Development Bank of Japan (as of June 2006)
Ratings on Government-Guaranteed Bonds

Ratings on FILP Agency Bonds
Moody's

S&P

R&I

JCR

A2

AA−AAA

AAA

Notes: 1. FILP agency bonds are not government-guaranteed.
Notes: 2. Moody's: Moody's Investors Service, Inc.
S&P: Standard & Poor's
R&I: Rating and Investment Information, Inc.
JCR: Japan Credit Rating Agency, Ltd.

Moody'sS&P

Foreign currency-denominatedforeign bonds
Yen-denominated foreign bonds

Aaa

AA−

Domestic bonds

A2−

Financial Highlights（Non-consolidated）◆ Primary Management Indices
In fiscal 2006, which ended March 31, 2006, total revenue amounted to 385,836 million yen. Ordinary income totaled
67,261 million yen, and net earnings stood at 92,679 million yen.
The capital ratio（non-consolidated; BIS standards）was 16.07% at the end of fiscal 2006.
（Millions of yen）

Fiscal period
Total revenuesOrdinary income
Net earnings
EquityTotal equity
Total assets
Loans
Securities
Equity ratio
Return on equity（ROE）
Return on assets（ROA）
Overhead Ratio（ＯＨＲ）
Number of employees

Fifth period

Sixth period

2004

2005

2006

488,837
74,176113,986
1,194,286
1,753,646
15,326,174
14,785,724
426,98112.49 %
6.77 %
0.73 %
24.01 %
1,370

431,635
59,707
112,550
1,215,461
1,875,077
14,465,803
13,860,747
391,172
13.90 %
6.20 %
0.77 %
24.94 %
1,362

385,836
67,261
92,6791,272,286
2,010,684
13,682,11712,873,226
429,587
16.07 %
4.77 %
0.67 %
26.38 %
1,357

Note 1: ROE and ROA are based on net income
Note 2: OHR = General and administrative expenses / Gross operating income

5DBJ Disclosure 2006

Seventh period

DBJ provides long-term financing and other policy-

These discussions will inevitably lead to changes inbased schemes to qualified projects as a supplement or

DBJ's organizational structure. Nevertheless, we will

inducement to loans and other services provided bymaintain our financial expertise and network, which

ordinary financial institutions. By doing so, we promote

was built with your generous support following ourthe upgrading, vitalization and sustainable development ofprevious existences as the Japan Development Bank

the economy and society; the realization of an enhanced

andquality of life; and the creation of self-reliant regions.

Public Corporation. DBJ will strive to develop as atheprivate

Hokkaido-Tohoku

financialinstitution

Development
capableofPrivatization of DBJ

Privatization of DBJ

Financesatisfying

The role of policy-based financial institutions has been

sophisticated and diverse financial service needs withwidely debated in the Council on Economic and Fiscal

the reliability, impartiality, long range perspective, andPolicy in recent years. The Important Policy ofpublic spirit acquired in our role as a policy-based

Administrative Reform, endorsed by the Cabinet on

financial institution. DBJ will also work to enhance

December 24, 2005, proposed that DBJ be completelyconvenience while focusing on medium- to long-term

privatized as a single entity, so that we could continue toloan and equity financing, taking advantage of ourmaintain our numerous functions and thus remainresources such as project evaluation skills and risk-capable of developing new financial technologies.

taking capacity.

Accordingly, DBJ will become a stock company infiscal 2008, and be completely privatized within five toDBJ is determined to address society's needs and theseven years depending on market conditions.

challenges of the modern world with a pioneering
spirit and a long range perspective.

After the Administrative Reform Promotion Law（"Law for
Advancing Administrative Reform to Realize aStreamlined and Efficient Government"） was approvedon May 26, 2006, the Headquarters for theImplementation of Policy Finance Reform compiled
the Policy-based Financing Reform Plan on June 27.
This provides more detail on the DBJ's operations
after privatization, and will guide the legislative
process. The details will continue to be discussed.

DBJ Disclosure 2006

6DBJ's Vision

DBJ's Vision
DBJ Builds on Our Distinct Features
and Strengths to Become a Unique
Financial Institution
Vision
DBJ strives to be a financial institution that contributes to thesolution of social issues by:■ working to resolve social issues as an impartial and reliable organization■ prioritizing a long range perspective■ emphasizing public spirit

DBJ provides unique financial services through:■ a long range perspective in providing a total package of financial services such as financial advisory, loanand equity financing■ development of new financing methods for a wide range of risk-taking business financing■ functioning as a financial platform by actively providing:・industry surveys based on wide-ranging networks with industrial circles
・regional information based on networks in Japan and overseas
・policy information based on networks with government organizations■ respect for long standing relationships with customers■ open alliances capitalizing on DBJ's distinct features

DBJ will continue to build on our experiences in its customarybusiness areas through:■ cooperation with regional financial institutions to contribute to local economies■ promotion of environmental conservation and disaster prevention measures（CSR activities）■ strong performance in areas of industry and technology, infrastructure development, and support offinancial markets■ a role as a social safety net in the event of a natural disaster or other crisis

7

DBJ Disclosure 2006

DBJ's Vision

Solutions for Every Client
Clients
Private-sector Enterprises■ DBJ's advice and long-term equity and loan financing based on industrial research help create long-term
strategies for issues such as growth tactics, business revitalization, reorganization, capital policies, and thebolstering of international competitiveness.
■ DBJ supports clients' CSR activities with our expertise in environmental conservation, disaster prevention, and safety.
■ DBJ has developed a seamless process covering all stages of growth from equity to loan financing, tohelp new businesses expand.
■ DBJ contributes to the revitalization of communities as a partner of local companies.

National and Regional Governments and Other Public Sector Clients■ DBJ reinforces the consultative and long-term financing functions essential to financial reform andregional revitalization.
■ DBJ supports public-private collaborations from a public and impartial standpoint.

Services

A NewDevelopment
Bank of Japan

Medium- to Long-term Loans and Structured Finance■ DBJ will continue to provide medium- to long-term financing.
■ DBJ provides its own value-added financial services（loans based on the companies' fulfillment of environmental andsocial responsibilities, disaster prevention and safety measures, and potential for technological commercialization）.
■ DBJ will continue to develop and provide financing using non-recourse loans, unconventional secured loans
and structured loans, for example, debtor-in-possession（DIP）finance, and use of inventory andintellectual property rights as collateral.
■ DBJ helps to revitalize financial and capital markets by liquidating and securitizing assets.
■ DBJ serves as a pump primer with its impartiality in the credit market.

Equity Financing and Mezzanine Financing■ DBJ funds relatively high-risk projects such as mezzanine financing and equity financing for revitalization,reorganization and growth strategies, projects aimed at strengthening international competitiveness, andinfrastructure projects.
■ When providing funds for riskier projects, DBJ uses its ability to assess industries and businesses toevaluate a project's potential, and strives to enhance added value with a focus on long-term investment.

Consulting and Advisory■ DBJ provides advisory services based on our industry expertise and ability to develop new financing methods.
■ DBJ helps arrange financing such as structured finance.
■ The Advisory service is premised on DBJ's long-term partnership with our clients.
DBJ Disclosure 20068