continuously changing socio-economic needs. The emerging egg shape illustrates our efforts to shape a continuously unfolding future.

DBJ chose environmentally friendly paper and printing methods for the production of this report. Pages 1–68 and 143–146 are madeof paper certified by the Forest Stewardship Council (FSC) as being made from sustainably managed forests. Cover pages, page
1–2 and 71–170 are made of recycled paper. All pages are printed with soy ink certified by the American Soybean Association.

Printed in Japan

Development Bank of Japan

http://www.dbj.go.jp/english/

Annual Report & CSR Report 2007

The shape and coloring of DBJ’s logo seeks to convey the sense of creativity, energy and youthful vigor with which the Bank strives to meet

Annual Report & CSR Report 2007

Contents
01■ Profile02■ Financial Highlights

03■ Message from the Governor

04■ Privatizing DBJ

08■ The DBJ Difference

10■ DBJ’s Role

12

■ CSR at DBJ

14■ DBJ’s Management Functions

15

Management System

15

Corporate Governance

17Internal Audits

18

Compliance

19

Risk Management

23

Disclosure

24■ Overview of Investment and Loan Activities

25

DBJ’s Investments and Loans

28

Fiscal 2008 Investment and Loan Plans

29■ Providing Financial Services to Resolve the Issues Society Faces

30

Revitalization Assistance for Regional Economies

36

Environment Conservation and Building Social Infrastructure

42

Technology: A Creative Force that Drives Economic Growth46

Promoting Foreign Direct Investment in Japan and Supporting the Internationalization of Local Communities

47

Providing a Safety Net

48

Case Studies of Other Initiatives

50

Making Use of Information Functions

53■ Responsibilities as a Member of Society

54

Communicating with the Public

56

Fostering Human Resources and Creating a Comfortable Work Environment

58

DBJ’s Environmental Management

61■ Intellectual Asset Report

62Intellectual Assets Management

65

Financial Platform that Enables DBJ to Meet the Needs of the Times

69■ Financial Condition

71

Accounts Based on Corporate Accounting Standards

123

Accounts Based on Accounting Standards for Special Agencies, etc.

133

■ Appendices

134

Outline of Fiscal 2007 Operations Evaluation Report

138

Excerpt from the Development Bank of Japan Law (Law No. 73 of 1999)

140

Excerpt from the New DBJ Law (Law No. 35 of 2007)143■ Corporate Data

143

Board of Directors and Auditors

144

Organization Chart

145

Timeline146■ Locations and Directory

Profile (As of March 31, 2007)
Established:

October 1, 1999 (Former Japan Development Bank: 1951,

Governor:Takeshi Komura

Number of employees:

1,347 (Fiscal 2008)

Capital:¥1,272.2 billion (All capital is funded by the government of Japan)

Address:

9-1, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-0004, Japan

URL:

http://www.dbj.go.jp/

Number of offices:

Branch offices 10, representative offices 8 and overseas representative offices 6

Total assets:¥13,073.9 billion

Loans:¥12,146.4 billion

Net earnings:¥75.1 billion

Capital adequacy ratio:

19.19%

Ratings on FILP agency bond:Aaa (Moody’s Investors Service, Inc), AA- (Standard & Poor’s Corp.),

Former Hokkaido-Tohoku Development Finance Public Corporation: 1956)

AA (Rating and Investment Information, Inc.), AAA (Japan Credit Rating Agency, Ltd.)
Note: Total assets, loans, net earnings and the capital adequacy ratio are calculated on a non-consolidated basis.

1

Financial Highlights (Non-consolidated)

For the years ended March 31 or as of March 31(Billions of yen)

(Millions of U.S.dollars)

FY 2007

FY 2006

FY 2005

FY 2007

Total revenue

398.9

411.6

484.5

3,379.7

Net earnings

75.1

92.6

112.5

636.7

Capital1,272.2

1,272.2

1,215.4

10,777.5

Total net assets

1,981.5

2,010.6

1,875.0

16,785.9

Total assets

13,073.9

13,682.1

14,465.8

110,749.5

Loans

12,146.4

12,873.2

13,860.7

102,892.5

Securities

366.4

429.5

391.1

3,104.3

Capital adequacy ratio (BIS standard) (%)

19.19

16.07

13.90

Ratio of risk monitored loan (Banking Law base) (%)

1.2

1.6

2.9

Return on equity (%)

3.91

4.77

6.20

Return on assets (%)

0.57

0.67

0.77

Overhead ratio (%)

26.51

26.38

24.94

Number of employees

1,352

1,357

1,362

Notes: 1. “Total equity” figures are used for “total net assets” through March 31, 2006.
2. The capital adequacy ratios given for March 31, 2005 and 2006 are calculated according to former BIS standards; the March 31, 2007, figure is calculated according to
the new BIS standards.
3. Return on equity and return on assets are based on net earnings.
4. Overhead ratio = General and administrative expenses/Gross operating profit
5. Amounts in U.S. dollars are presented solely for the convenience of readers outside Japan. The rate of ¥118.05=$1.00, the effective exchange rate prevailing as ofMarch 31, 2007, has been used in the conversion.

Total Net Assets

Overhead Ratio（Billions of yen）
2,500

（％）
50.00

1,875.0

2,000

2,010.6

1,981.5

40.00

1,500

30.00

1,000

20.00

500

10.00

24.94

26.38

26.51

Fiscal 2005

Fiscal 2006

Fiscal 2007

0.00

0

Fiscal 2005

Fiscal 2006

Fiscal 2007

Capital Adequacy Ratio(BIS standard)

Ratio of Risk Monitored Loan
(Banking Law base)

（％）
25.00

（％）
5.0

19.19

20.00

4.0

16.07
15.00

13.90

3.0

10.00

2.0

5.00

1.0

2.9

1.6

1.2

0.00

0.0

Fiscal 2005

2

Financial Highlights

Fiscal 2006

Fiscal 2007

Fiscal 2005

Fiscal 2006

Fiscal 2007

Message from the Governor

The Development Bank of Japan (DBJ) is a policy-based
financial institution whose mission is to contribute to thedevelopment of Japan’s society and economy.
Against the backdrop of deliberations on policy
finance reform, in May 2006 the Administrative Reform
Promotion Law determined the direction for our privatization. On June 2007, the Diet passed the New DBJ Law.
As a result of these proceedings, DBJ will become anincorporated “special” company in October 2008 and thenprogress to full privatization. We have just begun making
preparations for our shift toward independent management.
The new DBJ has established its goal as being “yourinnovative financial partner.” The background of this goal
is 50 years of experience in contributing to the growthof the Japanese economy and four corporate values—
a long-term perspective, neutrality, public-mindedness

environmental and economic elements into each of its

and reliability—as well as financial services that employ

activities. We believe that this approach is the best way tocorporate analysis and industrial research. As a result,fulfill our social responsibilities, so we have adopted

rather than focus on short-term profit we take a neutral“disclosure from a CSR perspective” as a core concept,

and long-term perspective. We work with customers,

a springboard from which to introduce our activities.

helping them to assess their situation and turn the future

Looking to the future, as we endeavor to meet thethey envision into reality. Employing creative financing,expectations of our stakeholders we will fulfill the mission

DBJ looks beyond the economic value of its investments

embedded in our four corporate values—a long-termto the social value they create as the Bank strives to con-perspective, neutrality, public-mindedness and reliability.

tribute to the future prosperity of local communities as well

Aiming to imbue all our executives and employees withas that of the nation.

an ongoing sense of evolution and challenge, we willIn the future, DBJ will remain unfettered by traditional

approach full privatization as a “small financial institution

financing methods, providing a complete range of invest-that punches above its weight class.” We will put forth ourment and financing options that include a mixture of senior

best efforts to build a muscular corporate structure thatloans, mezzanine financing and equity investment. We will

will support us on the path toward privatization.

remain committed to finding appropriate solutions to ourcustomers’ issues.

In line with our privatization, the efforts we make toaddress thoroughly the various issues our clients face will

As a member of society, DBJ recognizes that it has

grow more flexible and sophisticated as we add to oursocial responsibilities and that each and every action it

problem-solving skills. I ask for the continued support oftakes must be appropriate. This recognition forms theour stakeholders as we take bold new steps forward.

basis of our corporate social responsibility (CSR) outlook.
Stemming from this understanding, DBJ works to integrate

July 2007

CSR activities into its core business, strives to build corpo-

Development Bank of Japanrate value and does its utmost to realize a sustainable

Governorsociety.

Takeshi Komura

This report represents the amalgamation of our annual
report and our CSR report. This approach is particularly
appropriate as it reflects DBJ’s efforts to combine social,

Message from the Governor

3

Privatizing DBJ

Your Innovative
FinancialPartnerBusiness Model of the New DBJ
The new DBJ will help clients address the issues they face through three corebusinesses: loans, investment and consulting/advisory services.

Long-Term Financing/Structured Finance

Investing/Mezzanine Finance● Continue to offer medium- to long-term financing● Provide mezzanine, equity and other financing that

● Provide unique high-value-added financial services(ex., environmentally and socially responsible
investing in financing projects to commercialize
technologies or promote measures deemed toprotect against disasters or enhance safety)● Respond to diverse needs by offering non-recourse
loans; develop and provide financing offeringcollateral and structural flexibility (debtor-inpossession financing, inventory collateral, andintellectual property rights as collateral, etc.)

targets business revitalization and restructuring,
implementation of growth strategies, enhanced
international competitiveness and the developmentof infrastructure businesses

Resolving
Clients’ Issues

Consulting/Advisory Services● Propose the use of DBJ’s industry researchcapabilities and expertise in developing new
financial technologies● Deliver structured financing and other financial
arrangement services

4Formulation of the Development Bank of Japan Inc. Law and the Privatization Process
On June 6, 2007, the Development Bank of Japan Inc.
Law (New DBJ Law) was passed by the 166th regular Diet
Upper House plenary session and enacted. This law
provides for the Development Bank of Japan’s

privatization (conversion to a joint-stock company) in
October 2008, leading to full privatization five to sevenyears thereafter, the exact timing to be determined by taking market trends into account.

Overview of the Development Bank of Japan Inc. Law
Provisions

Financial Services Offered by
the New DBJ■ Scheduled conversion to joint-stock company: October 2008
■ Target for disposing of government-owned shares: Five to seven years after October 2008

(Immediately after disposing of the stock, measures are to be implemented that repeal special
legislation passed during the transition period.)(Stock disposition methods that will enable DBJ to continue its core investment and loanfunctions, which involve long-term business funding, are under consideration, and necessary
measures are to be implemented.)Integrated Investment and Loan Methods
Sophisticated Financial Methods■ Scope of Operations• Centering on current businesses (including loans, debt guarantees, Fiscal Investment and Loan
Program (FILP) agency bonds and government-guaranteed bonds), DBJ will employ methods that arecomplementary from a fund-raising perspective (such as accepting negotiable deposits and issuingfinancial debentures), and develop new financial technologies as business needs dictate.

Delivery of solutions
Client-specific issues

Minimization of Government Involvement• Eliminate budgetary controls, remove umbrella authorization of corporate bonds and loans anddiscontinue regulation of subsidiaries owned for investment purposes.

Financing• Measures are designed for a smooth shift to independent funding through though the issuance of FILP
agency bonds and government-guaranteed bonds during the transition.
• DBJ may also take out long-term loans from private-sector financial institutions.

Other Topics• Legislation will be considered for the transition period that will put DBJ on the same footing as thecurrent systems provide.
• Formulate progressive measures.
• Create measures stipulating responses by designated financial institutions at crisis-response times.

Note: Please refer to page 139 for details of the New DBJ Law.

The Privatization Process
FY2006

FY2007

FY2008Preparation Period(government-affiliatedfinancial institution)

June 2007
New DBJ Law
goes into effect

Shareholders
Company
form
Business
Financing

FY2009FY2010FY2011FY2012 FY2013–FY2015

Transition Period(Five to seven years, with the exact timing determined by taking
market trends into account)(Special stock corporation with shares held by the government)

October 2008
Privatization(conversion toa joint-stock company)

100% government
Government-affiliated financial
institution (special public corporation)
Based on current DBJ Law
Government-guaranteed bonds, FILP
agency bonds, independent financing

FY2016After full privatization

Full privatization

Private sector

Government

100% private

Joint-stock company (special stock corporation)

Joint-stock corporation

Based on new DBJ Law

Based on general
financial legislation

Independent funding, government-guaranteed bonds
and FILP agency bonds

Independent financing

Note: Business categories following full privatization will be selected by taking into consideration operations during the transition period.

Privatizing DBJ

5

New DBJ Aiming to Be a “Your Innovative Financial Partner”
As it moves toward privatization in October 2008, the new
DBJ aspires to be a “your innovative financial partner.”
While applying its financial strength stemming from theexpertise and capabilities it has accumulated over theyears, DBJ will maintain an unwavering “client-first”
orientation. We will march in step with our clients as we

6

Privatizing DBJ

help them consider, and then achieve, the futures theyenvision. We use the phrase “design the future” to encapsulate this process.
Through creative financing, DBJ will work assiduously
to contribute to the future prosperity of local communities
as well as that of Japan.

FAQs on DBJ`s Privatization

Q
A

What is your corporate philosophy?

Under the New DBJ Law, we will maintain our core investment and loan functions, which involve long-term businessfunding. We will become a joint-stock corporation thatapplies sophisticated financial functions toward the smoothprovision of long-term business funding. We aim to be afinancial institution that helps resolve client-specific issues.
DBJ’s four corporate values are a long-term perspective, neutrality, public mindedness and reliability.
Throughout its businesses, DBJ will share these values
with its clients.

DBJ’s Four Corporate Values
Operate froma long-term
perspective

Maintainneutrality
Form a reliableorganization

Be publicminded

Q
A

What will be your business categories?

Initially, we will operate as a special stock corporation conducting business that involves a wide variety ofintegrated investment and loan activities. In this interval, we will consider how to meet the needs of thebroadest range of clients. We will ultimately determine our business categories after due consideration andby taking into account the functional strengths of each Group company.

Q
A

Will you receive policy-based financing?

The Administrative Reform Promotion Law stipulates that “The functions of policy-based financing are to be
performed by a single newly established policy-based financial institution.” Accordingly, DBJ will not receive
policy-based financing after privatization. Going forward, we will endeavor the meet clients’ needs as a
private-sector financial institution.
However, it has been stated that “In conditions that the national government deems true necessity, a
new institution may be employed, taking into consideration its equal footing with other private-sector
financial institutions.” Article 67 of the Supplementary Provisions to the New DBJ Law states, “In the eventthe new DBJ employs investment and loan functions that involve long-term business funding after October
1, 2008, necessary measures may be implemented to enable these investment and loan functions to beotherwise applied, with due attention given to proper competitive relationships with other organizations.”
In Japan, certain financial institutions are designated to loan funds in crisis response situations, and DBJ
has been so designated. Consequently, in such situations DBJ may include a certain balance of such loans
in its risk portfolio and may provide interest subsidies. The financial backing for such activity is stipulated by
the Japan Public Finance Corporation Law.

Q
A

Will the Bank conduct business overseas?

DBJ is not legally restricted from conducting business overseas, and we will explore this possibility.

Privatizing DBJ7

29.7%

Percentage of our investment and loan balancethat employs new financial methods(Fiscal 2007)

The DBJ Difference
As a policy-based financial institution,
DBJ works to help resolve social issues. We apply
a long-term perspective, neutrality, public-mindedness andreliability, as well as the expertise and capabilities we haveaccumulated, to provide distinctive financial services that
help resolve the issues our clients face.

Providing investment and loans in the three areas ofcommunity development, environmental conservationand sustainable societies, and the creation of newtechnologies and industries¥1.1trillion(Fiscal 2007)

Financial institutions with which we haveconcluded operating agreements

106(As of March 31, 2007)

8

The DBJ DifferenceProviding Distinctive Financial
Services

Page 14
andelsewhere

Investments and Loans Employing
New Financial Methods(Billions of yen)500

In addition to providing advice from a long-term perspective andfinancial services that include investments and loans, we operate

400

32.5% 29.7%

in fields that ordinary financial institutions find difficult and we offer

25.7%

300

highly responsive financial tools.

20.1%
200

14.7%

● Development of new financial methods● Risk-taking from a sound financial base100

● Functioning as a financial platform● Cooperation among industry, government and financial

0
Fiscal 2003 Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007
In descending order
Funds
Non-recourse financing
Syndicated loans
Venture investment

institutions

Business revitalization financing
Note: Percentages indicate the ratio of investments and loansthat employ new financial methods.

Page 61
Deploying our accumulated
andelsewhere
expertise and capabilities tosupport the sustainable growth of society

In cooperation with local communities, DBJ applies its personnel andthe expertise accumulated through long experience and maximizes its
intellectual property in pioneering efforts to address the pressing matters that society faces.
● Working in harmony with regional financial institutions andcontributing to regional economies● Promoting environmentally friendly business and disaster response
initiatives● Contributing in such areas as industry and technical revitalization,
infrastructure development and financial market development● Serving as a safety net during earthquakes and other crises

A Financial Institution that Helps
Resolve Social Issues

Page 14
andelsewhere

DBJ is stepping up its efforts to resolve wide-ranging social issues as

Investments and Loans by Category(Billions of yen)
1,400
1,200

1,148.0

1,143.5

1,193.7

1,000
800
600
400
200

0
Fiscal 2005
Fiscal 2006
Fiscal 2007
In descending order
Community development
Environmental conservation and sustainable societies
Creation of new technologies and industries
Improvement of social capital

Total Operating Agreements withFinancial Institutions(Institutions)
120

103
100

106

93

it works to create both economic and social value.

82
80● At the core of our four corporate values are our will to succeed; our60

wisdom to develop screening expertise and employ new financial
methods; and our desire to work with clients, including regional
government bodies and the academic community in our quest to be

40

20

a financial institution that works toward the resolution of the issues
society faces.

70
Fiscal 2003 Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007

The DBJ Difference950.1%

Percentage of investments and loans forcommunity development(Fiscal 2007)

DBJ’s Role
DBJ meets the demands of the times by providing the long-term
funding and project support that underpin Japan’s sustained
economic growth. Our investment and loan operations currently
center on three categories: community development, environmental
conservation and sustainable societies, and creation of newtechnologies and industries. We also provide expeditious andappropriate survey, research and informational support of policy
planning and project design.

15.8%

Percentage of investments and loans forenvironmental conservation and sustainable societies(Fiscal 2007)

33.3%

Percentage of investment and loans for thecreation of new technologies and industries(Fiscal 2007)

10

DBJ’s RoleInvestment and Loans in Three Key Areas that
Target Socially Sustainable Economic GrowthPage 29
andelsewhere

In its three key investment and loan areas, DBJ provides long-term funding that supports the creation of new industries, abundant lifestyles andautonomous local communities.

Investment and Loans by
Key Area (Fiscal 2007)

Improvement ofsocial capital¥8.4 billion 0.7%

Community
development¥598.2 billion● Community development• Application of local community resources• Sophistication of financial functions in local
communities• Privatization of business of regional
government bodies• Development of attractive urban environments• Creation and maintenance of local transport
infrastructure

33.3%
Total:
合計¥1,193.7
11,307billion

50.1%

15.8%

● Environmental conservation andsustainable societies• Energy saving• Environmental impact reduction• Reduction of gases that cause global
warming• Promotion of waste reduction andrecycling● Creation of new technologies andindustries

Environmental conservationand sustainable societies¥189.0 billion
Creation of new technologies
and industries¥397.9 billion• Realization of new technologies• Use of intellectual property rights• Employment and dissemination of new
financial methods• Business and industrial revitalization,
emergency response

Using Our Broad Network to Deliver Quality
Information

Page 29
andelsewhere

Through our extensive network of domestic and overseas contacts, wedevelop economic, social, industrial and community surveys and research.
We use this growing store of information to improve our problem-solving
capacity and support planning, recommendation and project design.

Providing Multifaceted Project Support

Page 29
andelsewhere

From an effectiveness standpoint, using leading-edge financial methods toprovide investment and loans from a long-term perspective is a given, but
our activities go well beyond simply providing funds. DBJ takes a multifaceted approach to deliver meaningful economic and social project support
that extends to proposals, recommendations, operational design support
and advisory services. The synergy between our investment and loan functions and our information provision function plays a major role in our ability
to resolve social issues.
DBJ’s Role11

109,000

Employment Createdjobs(Results of policy-based financing evaluation of
investment and loans provided in fiscal 2006)

CSR at DBJ
DBJ’s mission is to provide investments and loans,
help Japanese people prosper and support
the self-sustaining development of local communities.
To achieve this mission,
DBJ takes CSR into consideration in all its activities.

Clean energy developed through the promotion ofwind- and hydro-power generation

230.7MW(Results of policy-based financing evaluation of
investments and loans provided in fiscal 2006)¥1.7trillion

Increase in revenues throughinvestment and loan businesses(Results of policy-based financing evaluation of
investments and loans provided in fiscal 2006)

12

CSR at DBJ

Page 14

CSR via Our Core Businessandelsewhere

Financial institutions play the role of shaping society in a harmonious
manner over generations by assessing and appropriately evaluatingrisk on projects that are truly meaningful to the economy and society

Policy Effectiveness of Investments
and Loans (Fiscal 2006)

and providing quality funding and financing solutions.

Society

DBJ considers the application of its intellectual assets andEnvironment

EconomyRevenue increase from target operations: ¥1.7 trillion

financial platforms for investment and loans, as well as the promotion

Employment created: 109,000 jobsof different activities in a host of fields, the most important com-

Barrier-free construction: 207,000 m2
Railway crossing removal: 206 locations

ponents of its CSR activities. This approach provides us witha clear understanding of the issues society faces. By keeping ourfinger on the pulse of society through our daily operations, we

Waste-processing facility construction: 627,000 tons
in annual waste-processing capacity
Promotion of wind- and hydro-power generation:
Generation capacity of 2,307 MW

conduct effective operational reviews of the management cycle.

Three Priority Areas for Investments andLoans and the Triple Bottom LineThe triple bottom line is a concept that considers people’s livelihoods
and corporate activity from the three vital perspectives of society,

Page 29
andelsewhere

Relationship among the Three Priority
Investment and Loan Areas andthe Triple Bottom Linethe environment and the economy, which coincide with DBJ’s threepriority areas.

Society(1) Revitalization Assistance for Regional Economies
Community development(Community development)

Environment

DBJ provides investments and loans in a balanced manner from thehn Crea
olo tiogie n os a f ne
nd w
ind
ust
r

(Creation of new technologies and industries)

Buildinga sustainable
society

Economytec(3) Technology: A Creative Force that Drives Economic Growthnatio
erv esons ieti
al c soc
ent blenm inaviro sta
En d suan(Environmental conservation and sustainable societies)

ies(2) Environmental Conservation and Building Social Infrastructure

perspectives of society, the environment and the economy andupholds its current mission of working toward a sustainable society.

Responsibilities as a Member of Society

Page 53
andelsewhere

As a policy-based financial institution, DBJ conducts CSR activities
through all of its operations. In addition, as a member of society DBJ
must be a trustworthy entity.
Each of DBJ’s executives and employees must remain aware ofsocial, environmental and economic elements throughout theireveryday activities. This focus enables us to remain an entity thatsociety trusts.

CSR at DBJ

13

DBJ’s Management Functions

As a financial institution, DBJ’s mostimportant public social responsibility
is to maintain the trust of society. We
employ an operations management
cycle that reflects the voice of society,particularly in terms of addressing theissues society faces from a long-term
perspective, at the appropriate time andin the appropriate manner. We undertakeprojects that are meaningful from both
economic and social perspectives andwork to offer superior investment andloan solutions. DBJ considers sincerity
and fairness in its investments and loans,
as well as all of its other operations, apart of its CSR efforts.

14

■ Management System
rules and regulations, and operates fairly in good faith andin accordance with social standards.

A fundamental principal of DBJ’s management is thoroughcompliance with the current DBJ Law and various
corporate laws. The Bank complies strictly with all laws,■ Corporate Governance(1) Complementing and Encouraging Private-Sector
Financial Institutions
DBJ Law prohibits the Bank from competing withprivate-sector financial institutions. Rather, our aim is
to complement and encourage these institutions.

DBJ carries out its activities in accordance with three-year
policies prepared by the competent ministers (the Ministerof Finance and the Minister of Land, Infrastructure andTransport). Based on these Medium-Term Policy Principles,
DBJ prepares and publishes Investment and Finance
Guidelines for each fiscal year. We have also establishedthe Management Council, which consists of experts fromoutside the Bank. These entities consider and publicize theimplementation status of the Bank’s operations as recorded
in its Medium-Term Policy Principles.
The characteristics of DBJ’s business management aredescribed below.

(2) Ensuring Sound Finance
DBJ maintains a strong risk management capacity
and conducts asset/liability management to ensure
a balance between revenues and expenditures andenhance the certainty of repayment from our client.
As a policy-based financial institution, we strive toward
sound and efficient operations.
(3) Evaluating Policy Effectiveness
DBJ endeavors to evaluate the policy effectiveness of
its financing and maintain its accountability as afinancial institution.

Operations Management Cycle Based on the DBJ Law

Society

Plan
Competent Ministers

Publication

Medium-Term
Policy Principles(every three years)

Reviews and reports on
implementation ofMedium-Term Policy Principles

Investment and Finance Guidelines(annual)DBJ

Evaluation results
reflected in Investment
and Finance Guidelines

Policy-based
financing evaluation

External evaluation

Internal evaluation=

Management Council

See

Execution of
investments
and loans

Do

DBJ’s Management Functions

15

DBJ follows the Plan, Do, See, Feedback management
cycle to boost accountability for the appropriateness of its
operations and their results. This cycle encourages
ongoing improvement.

We also strive to manage effectively the wide range ofrisks we face as a financial institution, and to earn the trustof our clients and society as a whole.

The “Plan” Process
The “plan” process consists of two steps: preparing andpublicizing Investment and Finance Guidelines based on
governmental Medium-Term Policy Principles.
(1) Prepare Medium-Term Policy Principles
The competent ministers formulate three-year policies.
These policies form the basis for economic and social
measures that clarify the basic stance for DBJ’s
operations.

(2) Create Investment and Finance Guidelines
DBJ establishes Investment and Finance Guidelines foreach fiscal year based on the Medium-Term Policy
Principles. The guidelines describe DBJ’s basic investment and loan directions and include details of DBJ’s
investment and loan systems as well as target areas.

The “Do” Process
The “do” process corresponds to the execution of
investments and loans in line with the Investment and
Finance Guidelines formulated during the “plan” process.
Rather than simply applying guidelines and systems

mechanically, DBJ takes a broader and more tailoredapproach toward individual project evaluation that includes
the provision of business structures and information, as
well as monitoring.

The “See” and “Feedback” Processes
The “see” process takes place in two stages. First, DBJ
conducts internal evaluations, and then the Management
Council conducts external evaluations.
(1) Internal Evaluation (Operations Evaluation)
DBJ’s internal evaluations evaluate the individual policy
effectiveness of all investments and loans, the effectiveness of investment and loan systems and include
detailed evaluations of individual projects, taking into
account specific project categories, fields and themes.
The Bank combines the results obtained through theseevaluations into operations evaluation documents. DBJ
submits its overall evaluations, which include the evaluation documents and financial statements that describe
the financial soundness of projects, to the Management
Council and publicizes its internal evaluation results.
To protect its internal evaluation results fromarbitrariness, DBJ has established the Operations

16

DBJ’s Management Functions

Evaluation Office. This office conducts special sessions
on in-house evaluations and confirms that evaluation
systems are employed properly. The office has also
formed a committee of academic experts with a view
toward improving DBJ’s evaluation system.
(2) External Evaluation (Management Council)
DBJ’s Management Council, which consists of outside
experts, evaluates operations stated in the MediumTerm Policy Principles. To improve transparency, we
publicize the findings of the Council.
The DBJ budget also is submitted to the Japanese Diet
for approval each year. Diet approval is also required for
the Bank’s financial statements. Overall operations arereviewed by the Board of Audit, the Ministry of Finance,
and the Financial Services Agency.

Internal Evaluation System
Management Council
External evaluation
Internal evaluation

ReportingCorporate Coordination
Department

Overall evaluation
Summary of the evaluation results
obtained, as described below
Operations Evaluation
OfficeRe-evaluation
Evaluation of individual
investment, plus checking
of balance and logicalconsistency with theinvestment and loan system
individual project evaluation

Supervisory departments(Note)

Investment andloan system evaluation
Compilation of individual project
evaluations for each investment andloan system, to improve the systems.

Operations Evaluation
OfficeInvestment and loan
departments/offices

Project evaluation

Evaluation ofindividual investments

Detailed evaluation for projects
with diverse policy results, where
DBJ plays various roles.

Corporate Coordination
Department, etc.

Individual project evaluation
Preliminary evaluation:
Investment and loan stage
Follow-up evaluation:
After the start of operation andmanagement of the target business

Evaluation of
Financial Soundness: Sections performing internal evaluations within DBJ
Note: Supervisory departments are sections in charge of drafting policies and plans for investment and loans for each investment
and loan system. For example, the Department for Urban Development supervises the investment and loan system dealing
with urban development (see the organization chart on page 143).

Factors Evaluated
1 Policy aspects of target business: Whether the target business for an investment and loan can realize the policy objectives; whatkind of validity it has for the people of Japan and local residents; and what level of results can be achieved
2 Role of investment and loans: Whether DBJ investment and loans continue to be based on the principles of supplementing andencouraging private-sector investments, and what kind of role they play at the time of a target business’s implementation■ Internal Audits
Internal Audits
Internal audits are carried out independently from othermanagement and operational departments, and comprisea series of processes involving not only a comprehensive
and objective evaluation of the organization’s internal management conditions but proposals and follow-up
measures to improve the issues identified.

DBJ must fulfill its mission as a policy-based financial
institution of the Japanese government, while maintaining
its fiscal soundness. Therefore, internal audits are essential
if the Bank is to secure proper internal management anddeal with the increasing diversity and sophistication of its
operations.

Internal Audit Systems
To facilitate audits, DBJ has established an Operations
Audit Committee and an Internal Audit and Inspection
Department, which serve as internal audit departments
under the direct supervision of the DBJ governor and are
independent from other departments. The Internal Audit
Department, as its name suggests, performs internal
auditing and inspections to ensure effective and efficient risk
management, reliable financial reports, and compliance withlaws and regulations.
Under the Bank’s fair and appropriate internal audit
system, the governor determines the basic policy forauditing and inspection upon on consultation with theBoard of Directors. Important matters relating to audits

and inspections results are reported to the governor after
discussion with the Operations Audit Committee.
Overview of Internal Audit Systems
Governor

Board of Directors

Operations Audit
Committee

Internal Audit Department
Internal Audit andInspection Department

Risk management; investment andloan departments/offices

DBJ’s Management Functions

17

■ Compliance
Basic Stance
DBJ’s compliance policies are outlined below.
(a) DBJ’s executives and employees are keenly aware of
the Bank’s social mission and responsibilities as a publicsector bank and recognize that illegal acts or improper
business operations harm the reputation of the Bank andinterfere significantly with the Bank’s ability to fulfill its
objectives. We also realize the Bank’s need to always

conduct activities appropriately and in compliance with thelaw.
(b) DBJ’s executives and employees are well aware thatthe DBJ must conduct its businesses legally and appropriately and be responsible for explaining its actions to thegeneral public.

Compliance system
DBJ has established the Legal and ComplianceDepartment to take overall responsibility for planning,
preparing and adjusting compliance activities.
In addition, DBJ has established the General Risk
Management Committee to reflect on legal compliancematters, determine the extent of compliance, and discuss

improvements to the Bank’s internal system. In addition,
all departments of each individual branch have complianceofficers responsible for verifying their section’s legal
compliance, reporting on compliance-related matters andserving as liaisons.

Compliance Activities
DBJ has prepared a Compliance Manual, which contains
specific behavioral guidelines that ensure legal compliance.
The manual includes related laws and regulations and is
distributed to all executives and employees. To thoroughly
educate all executives and employees on basic legal matters, the Bank also holds training seminars and briefings.

In addition, DBJ formulates detailed complianceprograms for each fiscal year. After discussion in the
General Risk Management Committee the “action plans”
are officially approved by the governor.

Declaration on Personal Information Protection
When handling personal information from business partners,
DBJ complies with laws concerning the protection of personal
information by independent administrative institutions, handling thisinformation as described below.
DBJ requests that any opinions or complaints concerning its
handling of personal information be directed to the Development
Bank of Japan Personal Information Desk.
1. Purpose of Using Personal Information
DBJ is entrusted by its business partners with necessary
information, and the Bank uses this information to perform
properly the operations defined by the DBJ Law.
2. Limiting the Purpose of Use for Personal Information
DBJ uses the personal information of its business partners only
for the purposes described above. The specific purposes forsuch information are published on the Bank’s website. Use forany other purpose will be clearly indicated at the time that
information is obtained.
3. Obtaining Personal Information Appropriately
When entrusted with personal information from its business
partners, DBJ does not obtaine it under false pretenses or
through improper methods.
4. Managing Personal Information Content
DBJ endeavors to verify the validity of personal information fromits business partners and requests that the partners cooperate.

18

DBJ’s Management Functions

5. Storing Personal Information Safely
To prevent leakage of the information received from its business
partners, the Bank has established measures to manage thisinformation safely and will continue to improve these measures.
DBJ endeavors to maintain strict information-handlingprocedures, supervising and training its executives and regular
employees on the handling of personal information andconcluding non-disclosure agreements with subcontractors.
6. Providing Personal Information to Third Parties
The Bank releases personal information to outside parties only if
the providers, its business partners, agree, or it can be inferredto have agreed to such use. However, such information isprovided to third parties in certain legally defined situations
deemed to be in an individual’s own or the public’s interest.
7. Disclosing Personal Information
If an individual requests the disclosure of personal information
entrusted to the Bank by its business partners, the proceduresfor such disclosure are as specified in relevant laws concerning
the protection of personal information held by independentadministrative institutions.
8. Revising or Discontinuing the Use of Personal Information
If an an individual requests the discontinuation of the use of personal information, the procedures employed for such a request
are as specified in laws concerning the protection of personal
information held by independent administrative institutions.

■ Risk Management
Continuing financial liberalization and advances in computer technology drive the computerization of finance, andinnovation in financial technologies creates an increasingly
diverse and complex risk environment for financial
institutions. Therefore, we expect risk management tobecome an increasingly important theme.

To ensure management soundness and safety, as wellas raise corporate value, DBJ works to manage risk
appropriately in line with specific business and risk characteristics. Controlling risk is an issue of utmost importance,
and we have established risk management processes andmethods accordingly.

Asset/Liability and Risk Management System
DBJ conducts asset/liability and risk management fromthe perspectives of maintaining financial soundness andimproving operational efficiency-prerequisites to ongoing
operational viability. To ensure appropriate management of
individual risk categories, DBJ has developed an asset/liability and risk management system that clarifies which
department is responsible for each type of risk. The
Corporate Strategy Department oversees comprehensive
asset/liability and risk management activities. The ALM
Committee, consisting of executives and the DBJ
governor, determines basic policies related to comprehensive asset/liability and risk management, and conducts
regular monitoring.

Asset/Liability and Risk Management System Overview
Audit and Inspection
Operations
Audit Committee

Auditors
Governor
Board ofDirectors
ALM Committee

Internal
Audit Department
Internal Audit
and Inspection
Department

Corporate Strategy
Department

Credit Analysis
Department

Treasury
Department

Investment and Loan Departments/Offices

Credit Risk Management
Credit risk refers to the risk of sustaining losses resulting
from a decline in the value of assets due to deteriorationin the financial condition of the borrower. Credit risk
management requires credit management of individualloans as well as bankwide portfolio management.
(1) Credit Administration of Individual Loans
When making an investment or loan, DBJ examines theentity’s project viability and the project’s profitability froma fair and neutral standpoint, in addition to considering the
project’s policy significance and benefits. We also have aninternal borrower rating system. DBJ is not subject to the
Banking Law or the Law concerning Emergency Measures
for the Revitalization of the Functions of the Financial
System (Financial Revitalization Law), but carries out
independent asset assessments in line with internal

policies for self-assessment of credit quality based on the
Financial Services Agency’s Financial Inspection Manual.
The results of self-assessments are subject to an audit
by an auditing corporation and are reported to the ALM
Committee. Credit risk and amounts are monitored toconfirm they are within the limits established for individual
borrowers.
The sales and credit analysis departments holdseparate roles in the screening and administering of credit
for individual loans and each department keeps the other’soperations in check. The Lending Committee, Loan Fund
Committee, and Investing Committee meet as needed todeliberate important issues concerning the management
and governance of individual loans. These mutual checking
functions serve to ensure the appropriateness of lending
operation and management environment.

DBJ’s Management Functions

19

(a) Borrower rating system
DBJ’s borrower rating system measures creditworthinessby combining an evaluation point rating and a borrower
category rating, with the result efficiently determining a
potential client’s credit circumstances. The evaluation
point rating selects indicator/evaluation categories that arecommon across all industries, scoring the creditworthinessof the potential borrower quantitatively and qualitatively.
On the other hand, the borrower category rating measures
specific items related to the borrower, looking at theborrower’s realistic financial condition, cash flows anddebt repayment history. By putting the ratings together,
the system generates a comprehensive assessment of aborrower’s repayment capacity.

(b) Asset self-assessment system
Assets self-assessments are used to define asset
classifications that will offset recoverability risk or the
degree of risk of value loss, based on the borrower rating,the corresponding borrower category and the collateral or
guarantee status. Such assessments help DBJ establish
timely and appropriate amortization schedules and reserve
levels.

Borrower Rating Classifications
Borrower category

Borrower rating

Definition
Debt history demonstrates an extremely high degree of reliability, withseveral outstanding factors. DBJ accords these borrowers the highest rating.
Debt history demonstrates a very high degree of reliability with outstanding
factors.

1
2
3

Debt history demonstrates high reliability.

4

Normal borrowers

5
6

Borrowers with favorable
business conditions and who
have been confirmed to have noparticular problematic financial
circumstances.

7

Under current circumstances, financial conditions indicate the need forattention in some aspects but an established capacity for debt has been
confirmed. As the business is in its startup phase, no business conditions
are available for rating, but the debt history indicates no problems.

8
Borrowers requiringcaution A
Borrowers requiringcaution B

9

No major losses or substantial financial issues exist, but these borrowers
should be treated with caution.

Borrowers requiringcaution C

11

Borrowers experiencing weakbusiness conditions, are unstableor have issues with their finances.
These borrowers are likely torequire management intervention
in the future.

Substandard
borrowers

12

Either some or all of the debts of these borrowers requiring caution are under management.

13

Borrowers in this category are having financial difficulties but are not bankrupt. Management improvement loans
and the like are progressing poorly, and these borrowers are highly likely to fall into bankruptcy. Although theyremain in business, these borrowers are financially overextended. As business conditions are also lackluster,
the likelihood of these borrower’s loans becoming delinquent or of principal or interest becoming ultimately
unrecoverable is high. Consequently, these borrowers are highly likely to continue sustaining significant losses.

Effectively
bankrupt
borrowers

14

Although not legally or formally in bankruptcy, these borrowers are experiencing severe financial difficulties andare realistically falling into bankruptcy, as their lack of potential for restructuring has been confirmed. Theseborrowers remain in business formally, but their finances reveal large amounts of non-performing assets or they
have excessive long-term borrowings outstanding from the Japanese government. Liabilities have effectively
exceeded assets for a long period of time. There is little hope of a business turnaround, they have suffered amajor loss due to a natural disaster, an accident or a sharp change in economic conditions, or they are in
circumstances similar to these. As there is no potential for restructuring, these borrowers are effectively
substantially delinquent in their principal and interest payments.

Bankrupt
borrowers

15

These borrowers are in bankruptcy, legally and formally. Specifically, these borrowers are in bankruptcy or
liquidation, under corporate reorganization, bankruptcy proceedings or civil rehabilitation, or have hadtransactions suspended by a bill clearinghouse.

Borrowers indanger ofbankruptcy

20

Debt history demonstrates sufficient reliability, but these borrowers are more
vulnerable to the impact of potential changes in the operating environment
than are borrowers with higher ratings.
Debt history demonstrates no reliability issues, but the impact of thepotential worsening of the operating environment is likely to reduce theirdebt repayment capabilities.
Debt history demonstrates no immediate reliability issues, but the impact ofthe potential worsening of the operating environment is highly likely to
reduce their debt repayment capabilities.
Under current circumstances, financial conditions indicate no major
problems, but if the operating environment or financial conditions worsen in
the future, debt repayment capability is likely to decline.

10

DBJ’s Management Functions

Business conditions are sluggish or financial problems are present.
The borrower is arrears to DBJ for less than one year, conditions are likely tochange, or the borrower is in arrears to another financial institution or conditions
are currently changing. Financial support is confirmed, although liabilities are
effectively in excess of assets.

(2) Portfolio Management
DBJ performs a comprehensive analysis of data fromborrower ratings and self-assessment such as loan
defaults, and calculates the loan portfolio’s overall
exposure to credit risk. Credit risk exposure can beclassified as 1) expected loss (EL), the average loss
expected during a specific loan period, and 2) unexpected

loss (UL), the maximum loss that could incur at a certain
rate of probability. The EL and UL calculations arereported to the Asset and Liability Management (ALM)
Committee. Monitoring the situation and consideringcountermeasures allow DBJ to control risk and devise
effective measures to improve risk return.

Market and Liquidity Risk Management(1) Market Risk
Market risk can be broadly classified into interest rate risk,
exchange risk and stock market risk.
Market risk describes the risk of loss from fluctuationsin the value of assets or liabilities (including off-balancesheet items), owing to changes in interest rates, exchange
rates, stock markets and various other markets. DBJ
divides these risks broadly into interest rate risk andexchange risk.
(a) Interest Rate Risk
Interest rate fluctuations can create mismatches on rates
of interest on assets and liabilities or on interest periods,
creating the risk of reduced profits or the risk of losses.
Interest rate risk can reduce the economic value of DBJ’s
assets or interest income. DBJ calculates and analyzes
risk exposure with cash flow ladder analyses (gapanalysis), value at risk (VaR), interest rate sensitivity
analyses (basis point value), and other methods. A portionof the interest rate risk associated with lending operations
is covered through interest rate swaps, which are usedsolely for hedging purposes. DBJ does not have any
trading-related risk because it does not engage in trading(specified transactions).
(b) Exchange Risk
Exchange risk is the risk of loss due to unexpected shifts
in exchange prices, and this risk affects entities holding a
net excess of assets or liabilities denominated in foreign
currencies. Exchange risk entails the possibility of adecline in the economic value of DBJ’s assets due to theimpact of changes in currency exchange rates. DBJ’s
exchange risk derives from issuing foreign currency bonds
and the extension of foreign currency loans. DBJ uses
currency swaps to hedge this risk. The Bank manages
counterparty risk in swap transactions, the risk that thecounterpart in the swap transaction will be unable to fulfill

its obligations, by continually monitoring the creditworthiness of all parties, and by diversifying transactions among
several institutions.
(2) Liquidity Risk
Liquidity risk is the risk of a mismatch occurring in the periods when funds are used and raised, causing unexpecteddifferences in the flow of funds (cash flow risk). Thissituation makes securing funds difficult and creates
situations in which interest rates on borrowed funds aresubstantially higher than usual rates. At such times,
because of market complexities entities in these circumstances may become unable to participate in market
transactions, compelling them to conduct transactions
under substantially less favorable terms than otherwise
would be the case. The risk of losses for these reasons is
known as market liquidity risk.
With regard to these risks, As its main method ofacquiring funds, DBJ relies on the stable procurement oflong-term funds from the government’s Fiscal Investment
and Loan Program (FILP) , government-guaranteedbonds, and FILP agency bonds, rather than on short-term
funds such as deposits. To meet unexpected short-term
funding requirements, funds on hand are placed primarily
in short-term investments, taking security and liquidity
into consideration. Overdraft lines of credit have been
established with multiple private financial institutions. DBJ
also maintains daytime liquidity by using the Bank ofJapan’s Real Time Gross Settlement (RTGS), whereby
settlements are made instantly for each transaction. Everyeffort is made to ensure that settlement conditions aremanaged appropriately.
In addition to credit risk, the ALM Committee
deliberates DBJ’s market risk and liquidity risk.

DBJ’s Management Functions

21

Operational Risk Management
DBJ defines operational risk as the risk of loss arising frominternal processes, people or systems that are inappropriate or non-functioning, or from external events. DBJ works
to establish a risk management system to minimize risk
and prevent potential risks from materializing.
The General Risk Management Committee has been
established to deliberate topics concerning operationalrisk management. Within operational risk management,
DBJ conducts operational risk management and systems
risk management as described below.
(1) Operational Risk Management
Operational risk refers to the risk of sustaining losses
resulting from employees neglecting to perform theirduties correctly or from accidents, fraud, and the like. To
reduce or prevent operational risk, DBJ prepares manuals,
performs checks on administrative procedures, provides
education and training, and uses systems to reduce theburden of administrative duties.

(2) Systems Risk Management
Systems risk refers to the risk of loss due to a breakdown
or malfunction of computer systems, system defects, or
improper computer usage. To properly manage systems
risk, DBJ has implemented the following internal
processes to optimize systems risk management.
DBJ has formulated an Information Security Policy tosafeguard the Bank’s information systems. Additionally,
the Bank has established a General Risk Management
Committee to deliberate on matters related to systems
risk. DBJ also set up the General Security Management
Division to integrate the maintenance and management of
information security. Information asset officers have been
appointed to take responsibility for security measures ineach department and branch office, thus ensuring policy
compliance.
As part of its effort to promote systems risk management, DBJ is taking measures to prevent problems andenhance reliability by standardizing systems development
procedures, forestalling fraudulent access through the
management of access privileges and passwords, and by
preventing information leaks with thorough information
asset management. In addition to setting up a two-tiersystem for hardware and software, DBJ has created abackup center and formulated a business continuity plan
(BCP) in preparation for a malfunction or natural disaster.

Responding to the New Capital Adequacy Requirements (Basel II)
A new capital adequacy requirement, Basel II, was introduced inJapan on March 31, 2007. Basel II applies to financial institutions
that handle deposits, including banks, credit associations, credit
cooperatives and other institutions. Although DBJ is not directly
subject to these requirements, the Bank has elected to comply,
with a view to enhancing risk management.
Basel II consists of the following three pillars.
Pillar 1: Minimum Capital Requirements
Using the method defined by Basel II to calculate risk-weighted
assets, a capital ratio of 4% or more is required for banks that
operate only in Japan, while the international standard is a ratio of
8% or higher. Under Basel II, the calculation for credit risk-weighted
assets has become more elaborate, and regulations on operationalrisk have been introduced. DBJ’s capital ratio on a consolidated
basis is 18.90%, indicating sustained soundness of capital.

22

DBJ’s Management Functions

Pillar 2: Verification of Self-Management and Supervision of
Financial Institutions
Financial institutions themselves are required to comprehend the
major risks that affect them, including risks not covered under Pillar
1, and to evaluate the capital required to cover such risks from amanagement standpoint. The Financial Services Agency verifies
such preparations. DBJ conducts its own comprehensive risk
management and responds to these requirements.
Pillar 3: Market Discipline through Information Disclosure
Financial institutions must thoroughly disclose their risks and their
methods for calculating those risks, with the aim of raising the levelof market discipline and consequently raising the level of risk management at financial institutions. Disclosure items are provided in
the section entitled “Financial Condition,” beginning on page 111.

■ Disclosure
Through enhanced communications, DBJ discloses
information impartially, swiftly and appropriately to raisemanagement transparency and to promote further
understanding of the Bank among its various

stakeholders, including clients, local communities, privatesector financial institutions, regional government bodies
and the national government.

Disclosure System
DBJ has prepared a system for the appropriate disclosureof information based on the Law Concerning theDisclosure of Information Held by Independent
Administrative Institutions. The Bank indicates clearly theroles of each department in disclosing information to

specific audiences. In principle, the Treasury Department
discloses information targeting investors, the Corporate
Coordination Department discloses news information to
the mass media and the Corporate Strategy Department
discloses public relations information to the general public
via the Internet and various publications.

Information Disclosure Materials
As shown below, DBJ offers a wide range of information,using such media as newsletters and its website.
(1) Materials legally required for disclosure
Operation report
Financial statements
Administrative cost report(2) Voluntarily disclosed information
CSR Annual Report
Financial Report, in accordance with the Securities andExchange Law of Japan(3) Others
DBJournal (newsletter)
Website: http://www.dbj.go.jp/english/

Download Center (Japanese only)
Various information for downloading

Project & Loans
Introductions to various DBJ projects

Publications
Various information for downloading

About the Privatization of
DBJ (Japanese only)
Explanation of DBJ’s privatization

Other available information

DBJ’s Management Functions

23

Overview of Investment and
Loan Activities

DBJ meets the needs of the times
by focusing on investment and loan
activities in three main categories:
community development, environmental
conservation and sustainable societies,
and the creation of new technologies
and industries. We will continue taking
advanced approaches to provide support
for projects that have environmental, andurban and community revitalization anddisaster response projects, as well as
projects that have economic elements. In
this manner, we will continue to support
the ongoing growth of society from afinancial perspective.

24

■ DBJ’s Investments and Loans
Our Mission as a Comprehensive Policy-Based Financial Institution
As an integrated policy-based financial institution, DBJ
complements and encourages lending by ordinary
financial institutions. We invest in and provide long-term
financing for projects that• invigorate and encourage the sustainable
development of the Japanese economy and society;• enhance the quality of life for the people of Japan; and• foster the self-sustaining development of local
economies.
DBJ’s mission is to contribute to the Japanese
economy and society by providing financial support forsuch projects.

Services
As an integrated policy-based financial institution, DBJ
supports projects that are desirable from the standpoint ofJapan’s economic and social policies through thefollowing functions:1) Supplying long-term financing (investments, loans,debt guarantees and other services)
DBJ supports the funding provided by private-sector
financial institutions by supplying long-term, fixed-rate,high-quality financing for projects closely linked topolicy objectives.

2) Providing project support
DBJ applies diverse skills and financing functions toensure the smooth progress of projects closely linked
to policy objectives, providing detailed support from initial conceptualization through the planning andcommercialization stages.
3) Supplying information
DBJ uses its domestic and overseas networks toresearch and study important economic, social andindustrial themes, supply a host of information on developments overseas and in Japan, including those inlocal communities.

Changing Roles and Functions to Meet the Needs of the Times
In a variety of fields, DBJ meets the needs of the changing
times by fulfilling its role and functions as an integrated
policy-based financial institution. In recent years, we have
employed leading-edge financing such as setting up
funds for business revitalization, venture company
development to create markets and project financing. We
have introduced new approaches to provide financing for
local communities, such as community credit and theunderwriting of private-placement bonds. As part of ourchanging role, we now provide safety nets to protect
communities in the event of natural disasters or outbreaksof terrorism. In short, we support Japan’s continued
economic and social development in three main areas:
community development, environmental conservation andsustainable societies, and the creation of technologies andindustries.

Overview of Investment and Loan Activities

25

Policy Issues and DBJ’s Response
1945

1970

EconomicrecoveryRapid
growth1990
Stablegrowth2000

Economic
bubblePost-bubble

Provide financial support foreconomic reconstruction andautonomy

Encourage revitalization andinvigoration of companies inlocal communities
Supply social development financing to raise
the quality of life of the Japanese people
Put pollution
countermeasures in place

Major Policy
Requirements
to which
DBJ Responds

Structural reform towardsustainable development

Ensure disaster
response

Respond to environmental issues toform a sustainable society

Ensure energy security
Build the foundations for rapid growth andsocial development

Create industries and maintain international
competitiveness to ensure sustainable
development
Respond to financial market dysfunctions,such as credit crunches and halt ofbond issuanceCounter lack of preparation anddevelopment of financial markets
Support financial restructuringof local government bodies;
Support public-sector restructuring

Provide quantitative support for private-sector financial institutions

DBJ’ s Rolesand Functions

Complement financial and service markets by providing long-term funding and offsetting risk
Provide safety nets (Financial market assistance,
disaster response, severe acute respiratory syndrome)
Create and cultivate newfinancial and capital markets

Formulation and Publication of Investment and
Finance Guidelines Based on Medium-Term Policy Principles
DBJ’s Medium-Term Policy Principles for fiscal 2006
through fiscal 2008 call for the Bank to provide long-term
financing in line with the following three principles:(1) Create Economic Vitality
Reform the economic structure and encourage theintellectual foundations to prevent the hollowing out ofindustry, and help future industries evolve by cultivating
new technical development and promoting the smooth
restructuring and revitalization of existing industries.
(2) Build Prosperous Lifestyles
Promote environmentally friendly management, recycling
and the realization of a safe society by supporting environmental measures; energy security measures; measures
addressing social welfare and the aging of society; andmeasures to create traffic, distribution and communication
networks.

26

Overview of Investment and Loan Activities(3) Form Autonomous Local Communities
In local communities, help build social infrastructure,
support the development of dynamism, collaboration andself-reliance by emphasizing local communities’ distinctive
characteristics, encouraging local community reinvigoration and urban renaissance programs, creating social
capital and employment opportunities and re-energizing
communities. To these ends, deepen relations between
regional public-sector entities and regional financial institutions, emphasizing private finance initiatives and similar
methods.
DBJ also responds appropriately and effectively to fill
the gaps that form when financial and capital markets failto function adequately, as in times of natural disaster orwhen policy requirements result from domestic or overseas
economic or social emergencies.

Fund-Raising Structure

FILP agency bonds, long-term debt
Fiscal investment andloan program
Government-guaranteed bonds
Financialmarkets

DBJ

Specialaccountbonds

Loans, etc.

Fiscal loan fundspecial accountPrivateSociety
sectorServices, etc.
businesses,
etc.

Industrial investment
special accountInvestment and Loan Plans, by Fiscal Year
(Billions of yen)

Fiscal 2006

Fiscal 2007

Investment and
Loan Balances asof March 31, 2007

624.9

598.2

6,622.0

Revitalization of local economies

239.9

265.3

1,371.4

Development of regional social
infrastructure

159.9

120.1

1,877.6

Creation of a widespread network

225.0

212.7

3,372.8

240.2

189.0

3,691.4

240.2

189.0

3,691.4

Creation of Technologies and Industries

265.6

397.9

1,918.2

Advanced technology and economic
revitalization

102.8

156.9

421.2

Development of a socio-economic base

162.8

241.0

1,497.0

1,130.8

1,185.3

12,231.7

12.6

8.4

433.2

1,143.5

1,193.7

12,665.0(Capital subscription)

55.8

113.3

405.7

Debt guarantees

70.1

203.1

334.9

Community Development

Environmental Conservation andSustainable Societies
Environmental protection; energy,
disaster prevention and welfare measures

Subtotal
Improvement of social capital
Total

Notes: 1. Investment and loan balances for fiscal 2006 have been reclassified into the segments used for fiscal 2007.
2. Investment in funds is based on the agreed amount.
3. In addition to the above-mentioned items, in fiscal 2007 DBJ undertook debt obligations involving default
swaps. As of March 31, 2007, these obligations totaled ¥697.9 billion in credit risk acceptance agreementsand ¥614.8 billion in delivery contracts.
4. The fiscal 2007 year-end balance includes ¥40.9 billion in stock from the Tomakomai East Development
Corporation, and Mutsu Ogawara Development Corporation.

Overview of Investment and Loan Activities27

■ Fiscal 2008 Investment and Loan Plans
Major Characteristics of Fiscal 2008 Investment and Loan Plans
In line with policy finance reforms, in fiscal 2008 DBJ will
strive to supplement the private sector by employing new
financial methods and providing the financing to promote
growth, enhance competitiveness and revitalize urban andlocal communities. We will also provide financing to help
ensure the safety of Japan’s people by supporting fire
reduction and disaster relief measures.

Fiscal 2008 Investment and Loan Plans and Sample Projects(Billions of yen)
Initially Planned
AmountCommunity Development

590.0

Revitalization of regional economies

170.0

Development of regional social
infrastructure
Creation of a widespread network

160.0
260.0

Environmental Conservation andSustainable Societies
Environmental protection; energy,
disaster prevention andwelfare measures
Creation of Technologies and Industries

Chief Loan Targets (Examples)

Regional revitalization, strengthening of regional competitiveness, encouragementof cold-winter region business activities, employment promotion, support forcommunity renewal based on local character, promotion of tourism
Urban renaissance program, improvement of social capital using PFI, promotionof the privatization of public enterprises, redevelopment of urban areas
Construction of core transportation networks, air-transport systems, andinformation and telecommunication networks

300.0
300.0

Promotion of environmentally friendly management using environmental ratings,
promotion of stronger disaster prevention measures via disaster prevention
ratings, promotion of businesses utilizing the Kyoto Protocol mechanisms,
energy and security measures, development of new energy sources and urban
flood control businesses

360.0

New technology development, new industry creation and revitalization

Advanced technology andeconomic revitalization

150.0

Business revitalization and industry revitalization, facilitation of easier accessto Japan, support for security measures, promotion of the spread of financing
for risk management

Development of a socio-economic base

210.0

Subtotal

1,250.0

Promotion of social capital creation
Total

—

1,250.0

Fund-Raising
Fiscal investment and loans

744.0(FILP borrowing segment)

364.0(Domestic bonds)

190.0(Overseas bonds)

190.0

Self-financing, etc.

506.0

(FILP bond segment)

290.0(Private-sector borrowings)

100.0

Note: The initial fiscal 2008 plan includes the following business activities—¥128.8 billion for the former Hokkaido-Tohoku Development FinancePublic Corporation, ¥10.0 billion for the former lending business of the Japan Regional Development Corporation, and ¥7.5 billion for the former
lending business of the Japan Environment Corporation.

Characteristics of the Fiscal 2008 Loan Plan
To promote the smooth transition to a new postprivatization fund-raising structure, in addition to issuinggovernment-guaranteed and FILP agency bonds, DBJ will
make anticipatory moves to borrow funds from other28

Overview of Investment and Loan Activities

private-sector financial institutions and work to diversify its
fund-raising methods. The Bank will also expand the scaleof its FILP agency bond issues.

Providing Financial Services to
Resolve the Issues Society Faces

To resolve the various issues that society
faces, DBJ supplies long-term funds,
supports the formation of business andtakes a host of other approaches toensure that useful projects operatesmoothly. We are committed to creating
financial markets that allow funds to beraised more efficiently, and in recent
years we have developed and introduced
new financing methods to expand thefunctions of financial markets.
By linking society, the environment
and the economy through its activities,
DBJ endeavors to fulfill its corporatesocial responsibilities through its
mainstay financial business.

29

Revitalization Assistance for Regional Economies

This section presents excerpts of cases that showcase DBJ’s activities, in partnershipwith communities and businesses, to confront such societal issues as reorganizing
businesses, assuring efficient transportation, revitalizing regional economies andcreating business opportunities.

Contributions to revitalizing regional economies include the following:●Assistance to core regional businesses that hire and employ local youth●Assistance to businesses that work to increase opportunities for employment in regions withdeclining populations●Promoting regional development that respects landscapes and other pre-existing land use●Collaborating with local financial institutions to invest in mid-sized regional businesses in waysthat promote restructuring and efficiency

Stimulating
Regional Economies

Promoting industries with local color, as well as businesses

Building Local
Infrastructure

Building Wide-Ranging
Networks

30

Providing Financial Services to Resolve the Issues Society Faces

that contribute to local economic development

Utilizing PFIs/PPPs for municipal/
regional revitalization

Building national transit/transportation/
telecommunications infrastructureManagement Buyouts (MBO): Responding to the Need forBusiness Reorganization and Succession
Societal Concernson their own. Management buyouts, or MBOs, areincreasingly considered an effective measure for helping
companies remain in business. MBOs involve current
management entering into a group with an outside investment fund or other organization, whereupon the groupbuys the business from the main or parent company.

Businesses operate in situations where change comes at
an ever-increasing pace, thanks in large part to globalization. Such changes spur managerial decision-making andfocus at big companies. Many group companies that are
spun off in the process face hard choices of their own:
liquidate the company or find new shareholders and walk

Case History: Kahoku Lighting Solutions Corp.
Kahoku Lighting Solutions of Ishinomaki, Miyagi Prefecture,
specializes in industrial lighting. When a change in strategy
pertaining to the lighting business resulted in Philips
Electronics spinning off Kahoku in August 2006, Kahoku
opted for an MBO, the better to leverage its world-classtechnology development know-how and solid customer
base.

1. Current Status

DBJ
Corporate
Strategy
Department Advice
andRecommendations•Philips spins off Kahoku,
which had been a wholly
owned subsidiary

2. Establish a Special Purpose Company (SPC),
Acquire Stock in Same
•Management (employees) fund the SPC•The SPC acquires 100% of Kahoku stock from Philips

Capital investment

KahokuSharesof stock

Capital investment

100%

SPC

PhilipsManagement(Employees)

Capital loans

Cash

3. SPC acquires Kahoku•SPC acquires Kahoku immediately upon stockbuyoutFinancial
institutions,
DBJ included

Management(Employees)

Philips100%

When actually executing the MBO, however,management at Kahoku found itself stymied. They could
not find any buyout funds that were inclined to go alongwith their vision of building solid growth by investing intechnology with a long-term view, rather than chasing
short-term growth. They would also have to finance a partof the buyout on their own.

KahokuFinancial
institutions,
DBJ included
Capital loans

Kahoku(post-Philips)
Note: Kahoku: Kahoku Lighting Solutions;
Philips: Philips Electronics.

The DBJ Initiative
In this case, DBJ performed a detailed assessment of thebusiness of the spun-off company and recommended an
MBO scheme whereby Kahoku would solicit investment
from employees as well as management, avoiding ill-suitedinvestment funds. DBJ assisted Kahoku in finding suitablefinancing by arranging a loan for a portion of the buyout
capital in association with local financial institutions.
MBOs can ease managerial transitions withincompanies, a problem that frequently arises with locallyowned and operated businesses. We foresee increasing
demand for MBOs, and will continue to serve these needs
for measures that deal with business restructuring andbusiness succession.

Kahoku Lighting Solutions reborn as an independent,
technology-driven company.

Providing Financial Services to Resolve the Issues Society Faces

31

Using Project Finance to Assist the Adoption of Interchangeable IC Card Tickets

Societal Concerns
The Tokyo Metropolitan Area has a public transit networkof numerous bus and train companies and a growing
need to simplify transfers between different lines.

PASMO, an IC card ticket system that works across all
participating bus and train lines was introduced to meetthis demand.

Case History: PASMO Co., Ltd.
PASMO is a very convenient ticketing system,
interchangeable with the Japan Railways (JR) Suica IC
ticketing system, with an automatic top-up service thatallows commuters to top up the value of their PASMO
ticket simply by passing it over a ticket gate sensor.
Commuters can also shop with PASMO, using it as aform of electronic money. The large amount of data that a
PASMO card can store, combined with its strong security,
raises hopes that it can be used for an increasingly wide
range of lifestyle-oriented applications, through partnerships with the credit cards issued by the various conglomerates that operate the bus and train companies, as well
as by other businesses and local shopping malls.

The PASMO system, with tickets issued and managed by
PASMO Co., Ltd., was formed in February 2004 throughjoint investment by bus and train companies. Since its
establishment, the company has built a common, interoperable program, with its primary task being to provide a
centralized processing system for computing fares acrossparticipating vendors. Some of the program’s features
include building the sensor system that reads the tickets,
as well as hardware in the various bus and train stations
that facilitate this service, making the system dramaticallymore useful to customers. The service commenced operation in March 2007, allowing people to travel on morethan 100 bus and train lines with a single ticket.

User
Deposit/Charge/Card Value

Train and Bus Service

101 Participating Businesses
Direct Negotiations

26 Railway
Companies

Payment of Fees andCommissions
Loan Repayment

Financial Institutions:
DBJ, etc.
Loan

Paymentof Fares

75 BusCompanies

Suica Operators:

Charge/Recharge
Card Value via Bank Deposit

PASMO Co., Ltd.
Issues and Manages
PASMO IC Card Tickets

Interchangeable•East Japan Railways(Tokyo Metropolitan Suica Zone)•Tokyo Monorail•Tokyo Waterfront Area
Rapid Transit (TWR)•Saitama New Shuttle•JR Bus Kanto

The DBJ Initiative
DBJ has long tackled structured finance projects using
its project building and business assessment know-how,long-term perspective, together with its uniquely neutral
position, to manage the interests of various parties in agiven project.
In the case of PASMO, the sheer size of the operationand the large number of participants proved to be a stumbling block to devising a scheme for distributing costs
fairly and equitably among the participants. DBJ assistedin building a structure capable of stable, sustained
operations, as well as procuring necessary and sufficientdevelopment funds, by drawing on its strategic financecapabilities and participating in the establishment of the
project as a neutral member.

32

Providing Financial Services to Resolve the Issues Society Faces

PASMO interchangeable IC card tickets
went into circulation in March 2007.

Assisting Japan’s First PFI-Structured Prison
Societal Concerns
Private finance initiatives (PFIs) draw on private-sector
capital and managerial competence, as well as technology, to build, operate and maintain infrastructure that has
traditionally been the province of municipal and regional
public-sector administrative bodies. First introduced in
the United Kingdom, regulations pertaining to PFIs in
Japan were enacted in 1999, and their use has grownsince then. Advantages include reduced operating costson the part of local governments, while taking advantage

of private-sector knowledge to provide high-quality
public services, and business opportunities created for
private-sector enterprises. Problems confronting PFIs
include such practical operating concerns as distributing
responsibility and accountability across multiple vendors.
Numerous financing problems arise as well, and the ability to negotiate with, and manage, the various participantsis also important.

Case History: Mine Inmate Rehabilitation Center
Located in the city of Mine, Yamaguchi Prefecture, theMine Inmate Rehabilitation Center is the first new prison
in Japan to be built and operated under PFI. The Mine
Secom Group founded the Mine Inmate Rehabilitation
Support Co., Ltd., an SPC to operate the facility.
Efficiencies in building and operation were achievedby taking advantage of the company’s accumulated
knowledge, starting with automating the security systems.
As a result, the company expects to reduce overall costs,
including construction and operating expenses, by some
¥4.8 billion over the life of its 20-year contract. Plans also
call for renovating re-education programs and inmate

conditions, which contribute to rehabilitation efforts.
Promoting the rehabilitation of inmates through suchinitiatives cuts down on repeat offenses and prison
overcrowding.
The company operates its facilities in a transparent andenvironmentally friendly manner, by using local resourcesin an effective manner. Its objective is to conduct its
business in collaboration with the regional government
and economy, in accordance with its guiding precept ofrunning prisons in a manner accepted and supported by
the citizenry.

Mine Inmate Rehabilitation Center Business Scheme
Ministry of JusticeDirect Agreement
Lenders

Operating Contract

DBJ

Repayment

Tokyo Mitsubishi UFJ Bank
Local Area Financial Institutions

Loan

Supervising of
Design andConstruction

Construction

Maintenance

Investments andSubordinated Loans

Sponsor SPC: Mine Inmate
Rehabilitation Support Co., Ltd.

Administration

Sponsors
Dividends andRepayments

IT Systems

Security

InmateServices

PrisonOperations

Education/
Classification
Support

MedicalFacilities

The DBJ Initiative
DBJ had introduced PFIs to Japan prior to governmental
regulation. The Bank has drawn on its accumulated
knowledge of structured finance and its extensive publicand private-sector networks to assist in a variety of PFIs,
including water and sewage, housing, hotels and otherlodging, and school lunch programs. DBJ’s projectbuilding and business assessments, which derive fromits distinctive long-term perspective, are well-suited for
the PFI business, because long-term contracts are thefoundation of PFIs.
In the case of the Mine Inmate Rehabilitation Center,
DBJ worked with the Mine Secom Group, in association
with Tokyo Mitsubishi UFJ Bank, on a series of collaborations and investigations, that formed the basis for

efforts to build an optimal financing structure. With added
participation from local financial institutions, DBJ led theexecution of a PFI loan agreement worth ¥15 billion.

Overview of the finishedinstallation
Mine Inmate Rehabilitation Center

Providing Financial Services to Resolve the Issues Society Faces

33

Building Attractive Local Communities: Assistance for Businesses in
Accordance with Local Revitalization Projects
Societal Concerns
Revitalization of the country as a whole begins withbalanced regional development and building upon thequalities that make each region unique. Circumstances
differ by region, however, starting with declining birthrates and increasing growth of elderly populations, aswell as economic differences. Hence, a uniform plan foreconomic recovery has only limited applicability. For thisreason, the Japanese government founded the Regional
Reconstruction Center in October 2003 to revitalize local

regions, primarily by rebuilding their economies andcreating local opportunities for employment. The government’s purpose in founding the center is to revitalize thecountry’s local regions by authorizing and assisting with
regional reconstruction plans that various regional administrative bodies devise. The center’s menu of options
includes DBJ loans. As of March 31, 2007, the center had
authorized 802 such plans since April 2005, when the
Regional Revitalization Law went into effect.

Case History: Hakodate
The city of Hakodate faces a severe environment for
employment, owing primarily to downsizing by local
businesses and a withdrawal from the area by major
concerns. The city has taken a variety of steps to deal withthe situation, in accordance with the Hakodate Regional
High Technology Industry Integration and Promotion Plan
and the city’s plans to promote tourism—all authorized by
the Hokkaido prefectural government. Such measures

include attracting businesses to the area; encouraging
local industry; and instigating initiatives to promote its
primary industry, namely, tourism. A plan for creating
employment opportunities in Hakodate was added tothese initiatives in July 2005 to spur development.
DBJ’s menu of loan options was included in the planin December 2005, upon approval of the plan by the
Regional Reconstruction Center.

The DBJ Initiative
Investments and Loans Made Under the Auspices ofRegional Reconstruction Plans:

23

Goryokaku is one of the tourist landmarks of Hakodate.
Goryokaku Tower Co., Ltd., operates Goryokaku Tower,
a combination of an observation deck and food andsouvenir concessions. The company built a new 107-meter
tower that affords a view over the Goryokaku grounds toreplace the original 60-meter tower, which was falling into
disrepair. The new tower incorporates a courtyard, gift
shop and a curry shop affiliated with an established local
restaurant that specializes in Western cuisine. With its new
facilities, the tower is involved with Hakodate’s tourism
industry and thus promotes regional recovery. For thisreason, DBJ made a loan to Goryokaku Tower in cooperation with Hokuyo Bank and other regional financial
institutions.

Amount Loaned to Businesses in Accordancewith Reconstruction Plans as of March 31, 2007:¥8.8 billion

The new tower, which offers a much better view thanits predecessor, has attracted more visitors than originally
expected. Further plans call for expanding the tourist
areas, and the city, in anticipation of the 2015 opening of
the Hokkaido Shinkansen (bullet train) line between ShinHakodate and Shin-Aomori. Further initiatives aimed
specifically at Goryokaku include making the courtyard
into a full-fledged meeting and conference facility, as well
as restoring the Edo-Period Hakodate Magistrate’s Officeon the Goryokaku grounds within three years. DBJ willcontinue to support other businesses that promote regional revitalization in accordance with recovery plans andplans for loans tied to local area development, in
association with local financial institutions.
Aerial view of Hakodate and Goryokaku Tower

34

Providing Financial Services to Resolve the Issues Society Faces

Using Asset Liquidation Methods to Rebuild Hospitals

Societal Concerns
Managing and administrating hospitals involves
confronting a wide range of issues, including an
increasingly elderly population, advances in medical
procedures, mergers and acquisitions by medical

corporations, and rebuilding aging hospitals. Offering
uninterrupted medical services involves solving fiscal andadministrative problems and improving the skills of medical personnel and the quality of medical equipment.

Case History: JR Sapporo Railway Hospital
JR Sapporo Railway Hospital is a general hospital owned
and operated by the JR Sapporo Railway. The hospitalprovides primary care to the Sapporo area, with particularcompetencies in internal medicine; respiratory and circulatory medicine; and ear, nose and throat medicine. In

Scheme for Rebuilding the JR Sapporo
Railway Hospital

response to the increasing age of the building, Lifetime
Partners, Inc., and other members of the Mitsubishi Group
have partnered with the hospital to rebuild the facility
and manage the hospital once the reconstruction iscomplete.

Building Lease Agreement
Trust Bank

Hospital Management:
JR Hokkaido

Assignment of New Hospital Building
Mezzanine
Loan

Construction by
Mitsubishi Corporation

Through LTP
Asset Management Inc.,
A Mitsubishi Group Company

DBJ

GeneralConstruction
Contract

Asset
Management

Banking Group:

Consulting

Senior Loan
Two Local Area BanksSPC:
JH Hospital
Asset Holdings Inc.

Land Lease
Supporting Funds for Construction
Anonymous Investment

Lifetime Partners, Inc.,a Mitsubishi Group
Company

The DBJ Initiative
In this case, a method of asset liquidation was used for
procuring capital, namely, project financing, which uses
an SPC to convert the new hospital into cash. As the coarranger, DBJ executed a mezzanine loan and with local
area financial institutions established senior loans for a
combined total of ¥4 billion. A mezzanine loan refers tocapital that has lower repayment priority than senior debt
and thus involves higher risk. Despite this risk, such loans
play a vital role in markets such as the United States,
which have a broad investor base. DBJ engages inmezzanine loans to contribute to the growth of markets
that comprise diverse means of procuring capital.
A conceptual illustration of the completed reconstruction of
JR Sapporo Railway Hospital

Providing Financial Services to Resolve the Issues Society Faces

35

Environmental Conservation and Building Social InfrastructureThis section presents case histories that showcase DBJ’s efforts in dealing with suchvaried societal concerns as conducting business in environmentally responsible ways,
assisting companies with business continuity plans in case of disaster, responding to
global warming, improving traffic conditions, and securing reliable energy supplies.

DBJ Initiatives for Responding to Environmental and Other Concerns;
these include the following:●Assistance to Businesses that Respond to Global Warming●Support for Comprehensive Energy Conservation Initiatives●Expanding the Range of Areas to Which Environmental Scoring Systems Are Applied●Ensuring Safety and Security in Citizens’ Lives through Promoting Disaster Planning

Environmental
Protection
Initiatives

Economic
GrowthSustainable Economy

Disaster
Planning
for
Safe and
Secure Living

Social Welfare
EnergySecurity

36

Providing Financial Services to Resolve the Issues Society Faces

Initiatives for
Responding to
Declining Birthrates
and the Increasing
Elderly Population

Promoting Environmentally Responsible Management
based on Environmental Ratings
Societal Concerns
The environment is a matter of global concern, andcorporations across all industrial sectors are responsible
for conducting their businesses in an environmentally
responsible manner. Financial institutions are no

exception, being tasked with a mission to assist
companies in environmentally responsible ways, thereby
contributing to a sustainable economy.

Case History: Nippon Film Corporation
Founded in 1972 in the city of Oita, Nippon Film manufacturers a wide range of plastic products, including garbage
bags used in jurisdictions across Japan. Nippon Film is aleader in production that duly considers the environmentand safety, in line with its philosophy, “ingenuity knows nobounds.” The Company’s products include garbage bagswith safety grips on the top and bottom to improve safety
in handling by garbage collectors, a feature that received
the Good Design Award 2003, and “Rabbit Pack,” a plastic wrapping bag for toilet paper that can be recycled into
garbage bags. This product received the Good DesignAward 2005.

The DBJ Initiative
Total Environmental Responsibility Rankings:

94

DBJ made a loan to Nippon Film in February 2007 under
the auspices of its program for promoting environmentally
responsible business management. The program, the firstof its kind in the world, is based on a specialized methodof rating environmental responsibility, wherein companies
are scored on their environmental management policies
according to a screening system developed by DBJ. For
companies with the best scores, interest rates are set ona sliding scale according to their scores.
When first screened by DBJ in January 2005 Nippon
Film’s score did not meet DBJ’s cutoff for receiving anenvironmentally responsible rating, as the company was
still putting together its environmental policies and assembling an environmental management team that would set
targets and draft plans. Since that time, however, thecompany has reduced its environmental footprint throughmodal shift to partnerships with outside vendors. The
company has achieved essentially zero emissions at its
plants by effectively managing its use of resources. In
addition, Nippon Film has assembled its environmental
management team, set medium- and long-term
environmental targets and made plans to raise

Total Loans as of March 31, 2007:

Approximately ¥120 billion

environmental awareness among its employees throughits corporate governance policies and procedures. After
implementing these measures, Nippon Film applied foranother DBJ environmental responsibility ranking
assessment, which it passed.
The Nippon Film case is a textbook example of how
DBJ’s environmental responsibility rankings inspired acompany to become more environmentally aware andtake steps to manage its operations in an environmentally
responsible manner. At DBJ, we believe that providing
assistance to environmentally responsible corporate initiatives is the best way to reduce global warming and build
a sustainable economy. To that end, we will continue tooffer financial support to companies that engage in suchinitiatives.

Nippon film’s primary products:
garbage bags with safety grips (Top)
Rabbit Packs (Bottom)
Environmental rating logo

Providing Financial Services to Resolve the Issues Society Faces

37

Support for Corporate Disaster Management through Disaster Management
Ratings
Societal Concerns
Such recent disasters as the Kobe Earthquake and the
Niigata Earthquake caused tremendous damage to theeconomy, with many businesses forced to suspend
operations for extended periods. In addition to plans forprotecting personnel and property, companies face theneed to draft business continuity plans (BCPs) to hedge

themselves against lost revenue and protect their customers in the event of disaster. Protecting their operations
from disaster and reinforcing their operations with
continuity in mind has grown an increasingly important
issue for companies.

Case History: Okuwa Co., Ltd.
Based in Wakayama City, Okuwa develops supermarkets
and shopping centers in the Kinki Region of Japan. Given
that its business is to offer essential products to people
living in the region, the company treats contributing to theregion as part of its mission and is thus heavily involved
in disaster planning. In 2005, the company established a
project team that answered directly to top management.
This team conducted a wholesale investigation of disasterplanning in the event of an earthquake in the Nankai andEast Nankai regions. The investigation covered four

primary topics: buildings and infrastructure, insurance andcapital, IT and crisis management. As part of its companywide initiative, Okuwa conducted a risk assessment on astore-by-store basis, which allowed it to devise a plan tomaximize cost-effectiveness. In addition, the company
rewrote its corporate disastermanagement manual andimplemented an action planchecklist for its departments.
Okuwa’s disaster response manual

The DBJ Initiative
In fiscal 2006, DBJ inaugurated a loan program topromote disaster management. The program uses a
proprietary DBJ method of rating disaster preparedness
that is based on a self-assessment of corporate plans for
dealing with disasters formulated by the Central Disaster
Planning Committee of the Japanese Cabinet Office.
The rating method—another first of its kind in the world—
assesses and selects companies with excellent disasterplanning and offers loans at preferential interest rates toimplement these plans.
At Okuwa, these plans chiefly consisted of earthquake
reinforcements to its buildings, as well as building
redundancy into its IT system connections.

Implementation is anticipated to further improve Okuwa’s
disaster response, enabling the company to continue
supplying needed products to customers throughout andensure customer safety in the event of a disaster.
The assessment sheet rating helps companies performself assessments and provides an impetus to make
improvements that should lead to better future ratings.
Such external ratings also inspire better internal disasterawareness and investor relations. Publicizing the fact thata company has been assessed under the program helps
to promote awareness of a company’s excellent disasterplans, potentially raising community awareness of theimportance of disaster planning.

Disaster Preparedness Promotion Loan Program, Based on Disaster Preparedness Ratings
Corporations

Loan

New Initiatives

Operations Eligible for Loans: Disaster Plans Undertaken as Part of the Disaster Plan Assessment, Including Non-Infrastructure Capital:●Planning and Management, i.e., Drafting BCPs
●Reducing Susceptibility to Structural Damage, i.e., Earthquake Reinforcement, Other Renovations●Ensuring against Harm to Life and Limb, i.e., Secondary Disaster Prevention Plans●Creating a Backup Plan for IT and Other Essential Information

DBJ
Excellent Initiatives: Policy Interest Rate I

Up to 50% of Operating
Costs Incurred for the Purpose

Superior Initiatives: Policy Interest Rate II

Disaster Response
Initiatives in Place

Satisfactory
Areas for response centered on core or essential
Items on the self-assessment checklist: One of thesix condition must be satisfied as well as the four
essential items

Satisfactory

Areas for response centered on core or
recommended items on the self-assessment
checklist: Four of the six condition must be satisfied

Unsatisfactory
Ineligible for Loan

DBJ: Proprietary Assessment System that Complies withJapanese Government Guidelines

Central Disaster Planning Committee, Japanese Cabinet Office
Corporate Disaster Preparedness Self-Assessment Checklist

38

Providing Financial Services to Resolve the Issues Society Faces

Initiatives for Dealing with Global Warming

Societal Concerns
Some predict that climate change caused by global
warming will significantly impact the environment in suchareas as ecology, agriculture, human health and social
order. Initiatives are thus underway to devise internationalframeworks to reduce greenhouse gases. The Kyoto
Protocol, adopted in December 1997, set a target forJapan to reduce its greenhouse gases by an average of
6% compared with 1990 levels by 2012. Japan’s greenhouse gas emissions in fiscal 2005, however, actually
exceeded the 1990 baseline by some 8%. Consequently,

Japan must reduce greenhouse gas emissions by anannual average of approximately 14%.
Industry accounts for one-third of Japan’s total
carbon dioxide emissions. Accordingly, in 1997 Nippon
Keidanren, a federation that represents Japaneseindustry in national politics, announced a plan forvoluntary environmental action and has been striving to
reduce greenhouse gas emissions. However, as theJapanese industry is already among the world’s mostenergy-efficient, there is little room for further reduction.

The Kyoto Mechanism, as Defined by the Kyoto Protocol
The Kyoto Mechanism is a supplementary means bywhich countries can meet their targets under the Kyoto
Protocol, with the core being the Clean Development
Mechanism and Joint Investment (CDM/JI). These mechanisms allow developed nations to use technology support
or loans to reduce greenhouse gas emissions and countthe amount of such reductions as credits toward domestic
targets. Given the circumstances mentioned above,
the Kyoto Mechanism is increasingly seen as a highly

cost-effective means for developed countries to meet theirgoals, while contributing to sustained growth by developing countries. For all of its advantages, the CDM/JI
business is still new, and all of the risks that typicallyaccrue to doing business in the developing world are likely
to apply, whether risks in dealing with governments orwith construction. Hence, individual corporations are still
uneasy about engaging in such operations on their own.

The DBJ Initiative
With reductions in greenhouse gas emissions a matter ofparamount concern for Japanese corporations, DBJ has
put forth two possible structures for obtaining large quantities of adequate and reliable emissions credits: the Japan
Greenhouse Gas Reduction Fund (JGRF) and Japan
Carbon Finance, Ltd. (JCF). The fund framework identifies
the most efficient projects and distributes risk by investingin dozens of projects at a time. Sandwiching a fundbetween corporate investors and operators in developing
countries helps eliminate risk of litigation that might betargeted at the excess capital in the developed world.
Since their inauguration in late 2004 as a collaboration
between the public and private sectors, JGRF and JCF
have leveraged to the fullest DBJ’s knowledge and experience of fund operations, as well as its knowledge andexperience of private-sector businesses in reducing
greenhouse gases. To date, these organizations haveassembled an extensive portfolio in China, India andelsewhere in Asia, Latin America and Africa.

Emissions Credit Transfer Scheme
Developing
Nations
Implement Project for
Dealing with Global Warming

Estimated
Emissionsif Project
Is NotCarriedOut

Japan
Transferred to
Developing
Nations in Form ofEmissions Credits

Amountof Reductions

Emissions

Project Assistance:
JGRF/JCF

Total
Emissions
Frameworkfor Investor
Nations

Amount ofEmissionsCredits Purchased+
Emissions
Reductions
within Japan Proper↓
EmissionsTargets Achieved

Ricogen, a Sri Lankan manufacturer of charcoal:
Traditional charcoal manufacturing methods and a newly
developed charcoal manufacturing plant

Providing Financial Services to Resolve the Issues Society Faces

39

Assistance for Businesses Building Disaster Prevention Programs Based on
a Plan of Reserving Loans Issued When Disaster Strikes
Societal Concerns
As supply chains and IT networks grow bigger, it is
impossible to imagine the impact that businesses may
suffer if these lines are cut. Enterprise risk managementfor dealing with emergencies such as accidents or natural
disasters is thus a crucial concern for stakeholdersinvestors in a given company, its business associates or
its local community. While the world looks at disasterprone Japan and sees advanced knowledge andcountermeasures, many of these plans emphasize prevention, while measures responding to an accident or disasterare often inadequate. At long last, businesses are realizing
the importance of business continuity plans (BCPs).
However, equal awareness of the importance of prior risk
financing has yet to emerge, although companies mustarrange operating, post-disaster recovery and restoration
capital to minimize damage and continue operations.

Case History: Suzuyo & Co., Ltd.
With its headquarters in the city of Shizuoka, Suzuyo is amajor shipping firm dealing with port transportation and is
implementing disaster prevention plans to reinforce its
shipping and storage facilities against earthquake damage.
The company is building a business continuity system
across all of its group companies in accordance with its
BCP strategy. In addition, the company is involved in initiatives to deal with disasters. These include working with
communities to build systems for loading and delivering

emergency supplies, as well as conducting tsunami evacuation drills with local populations. All of these measuresleverage the company’s operating characteristics, whileeasing the damage in post-disaster recovery periods andcontributing to community rebuilding efforts. The company
has investigated a variety of options to find the most effective means of ensuring sufficient capital in the wake ofdisaster.

The DBJ Initiative
In partnership with Mitsubishi UFJ Trust Bank and Nikko
Citigroup Securities, DBJ has assembled a system known
as EQ-LINE to reserve loans for issuance in the event ofa major earthquake.
In this case, DBJ provided Suzuyo a new option for
securing capital post-disaster, in the form of EQ-LINE.
The Bank also employed its program of offering loans topromote disaster preparedness in business, i.e., its disaster preparedness rating loan program, to support theearthquake reinforcement construction of Suzuyo’s

shipping facilities and other buildings and cover BCP planning costs.
The ability for one trust organization to serve manybusinesses makes EQ-LINE attractive to local companies
in many regions. DBJ will contribute to the creation of asustainable economy by providing comprehensive support
for diverse businesses in establishing disaster preparedness policies and procedures through this combinationof its disaster preparedness rating loan program and
EQ-LINE.

EQ-LINE: Prearranged Loans Issued in
the Aftermath of an Earthquake
Arranged by DBJ,
with earthquake risk
assessments performed
by OYO RMS Corporation
Company A

Nikko Citigroup Limited
Earthquake Occurs andSupplemental Liquidity Is Provided

Trust
Organization,i.e., Mitsubishi
UFJ Trust andCashBanking
Corporation Trust/Company B

Company C

Earthquake Occurs andLoans Are Issued

SPC

Loan Provider/
Investor, i.e.,
DBJ,
Private-Sector
Financial
Loan
Institutions）

CreditCapital Management and Investment
during Regular Times, i.e.,
Other than Emergencies

Investment of Capital

40

Providing Financial Services to Resolve the Issues Society Faces

Earthquake reinforcement construction is underway at
a Suzuyo shipping facility

Railroad Crossing Overpass/Underpass Project

Societal Concerns
Overpasses and underpasses at railroad crossings would
resolve a wide range of problems that currently plaguesuch intersections, such as chronic traffic jams andpedestrians pushing through crossing gates due toprolonged waiting times. Resolving such issues would
make foot and automobile traffic, as well as the railroads
themselves, safer, and would also bring the communities
now cut off by the railways closer together.

Case History: Tokyu Corporation
Number of Crossing Gates Removed on Meguro Line Due to Changeover
to Overpasses or Underpasses:

18

Total Construction Cost:

The rail lines operated by Tokyu Corporation’s railroad
division are a lifeline for residents primarily located inTokyo and Kanagawa Prefectures. The company isreplacing ground-level railroad crossings with overpasses
and underpasses, in association with local governments,
in an effort to eliminate accidents at these locations.

The DBJ Initiative¥87.8 billion

After the underpass,facilitated in this instanceby moving the train line
and the station
underground
Before theoverpass/underpass

Although safety measures and disaster preparedness
plans such as overpasses and underpasses at railroad
crossings require significant investment for railroad
companies, they do not boost revenue. DBJ is helping
such socially useful projects become reality throughsteady, long-term streams of capital.

Project to Build a Nuclear Fuel Cycle

Societal Concerns
Japan depends on imports for most of its energy
supplies, so ensuring an energy supply that will be stable
over the long term is a crucial policy issue. Building a

nuclear fuel cycle that will allow reuse of plutonium andother materials that are obtained from reprocessed spent
nuclear fuel was therefore hotly anticipated.

Case History: Japan Nuclear Fuel Limited (JNFL)Founded with the objective of creating a commercially
viable nuclear fuel cycle, Japan Nuclear Fuel Limited(JNFL), which is headquartered in Rokkasho, Aomori
Prefecture, is engaged in such activities as enrichinguranium, reprocessing spent nuclear fuel and processing
radioactive waste.

The DBJ Initiative
Building a nuclear fuel cycle demands a tremendous
amount of money and construction time. DBJ is helping toadvance the project by providing a reliable stream of longterm capital, thus contributing to implementing effective
use of uranium resources, as well as disposing of radioactive waste in an appropriate manner, and supporting theestablishment of an energy source that will be reliable overthe long term.

The Rokkasho Nuclear Fuel Reprocessing Facility

Providing Financial Services to Resolve the Issues Society Faces

41

Technology: A Creative Force that Drives Economic GrowthThis section presents examples of initiatives that DBJ is undertaking to deal withsuch socioeconomic problems as corporate restructuring, rebuilding of finances
and the practical application of technology. To this end, DBJ uses a variety of tools
to leverage technology.

Promoting economic growth through such measures as assistance for technology
development, as well as stimulation of industry:●Assistance for stimulation of industry through such measures as creation of new industries anddeveloping new technologies:●Enhancing indirect market financing functions aimed at fostering economic growth●Assistance for plans to use IT and other high technology to make life easier and safer

42

Using Leading-Edge
Technology to Promote
Economic Growth

Building Socioeconomic
Infrastructure:

DBJ promotes the development of technologies that willsustain a new era of economic
progress, and serve as acommon global legacy withripple effects spreading fromindustry into both public andprivate spheres of society.

DBJ strives to encourage
economic growth throughreorganizing both individual
businesses and wholeindustries, utilizing such tools
as leading-edge financial
instruments for the task.

Providing Financial Services to Resolve the Issues Society Faces

Corporate Revitalization Employing Asset-Based Lending

Societal Concerns
Following non-performing loans’ emergence as a major
problem in Japan in the late 1990s, many efforts havebeen made to revitalize corporations. After filing underJapan’s Civil Rehabilitation Law or Corporate Rehabilitation
Law, companies frequently faced difficulties in receiving
financial support, as they found it hard to remain in operation and had few assets as collateral. The rehabilitationof these companies, even as they face legal liquidation,is an important issue for them, entities supporting theirrevitalization and financial institutions. Bankruptcy cases
in Japan during the first half of fiscal 2006 (from April 1,
2006, to September 30, 2006) numbered 6,531, up 2.2%
from the same period of fiscal 2005. Total indebtednessof these companies fell 12.6%, to ¥2,530.5 billion.

Case History: Nakamura Jozo Co., Ltd.
Nakamura Jozo, headquartered in Fujisaki-cho, Aomori
Prefecture, is a soy sauce producer with 140-year history
from the late Edo Period. The company’s lineup of popular
products includes Konbu (kelp-flavored soy sauce) thatenjoys favorable sales in Hokkaido and the richly flavored
Kanekame soy sauce, which is a favorite of renowned

chef Toshiro Kandagawa. Facing cash flow difficulties
created by past capital overinvestment, in January 2006
this long-standing company applied for assistance under
the Civil Rehabilitation Law. Even with a new sponsor, thecompany found it difficult to secure working capital.

The DBJ Initiative
DBJ is an active proponent of debtor-in-possession (DIP)
financing, which allows the borrower to continue
operations during the period between the request for
application under Civil Rehabilitation Law or Corporate
Rehabilitation Law and the approval of rehabilitation plansor following legal proceedings. The Bank has also actively
extended the range of assets used as collateral to include
intellectual property rights, accounts receivable, design
rights and other intangible assets.
In Nakamura Jozo’s case, the Bank provided DIP
financing using the company’s inventory of unpasteurized
soy sauce as collateral. Although the use of product inventories as collateral is increasing, inventories are typicallyconsidered supporting collateral for companies in strong
financial condition. However, DBJ accepted the inventory
as primary collateral after obtaining an objective assessment of its value. With the support of DBJ’s financing, thepeople involved in the project and the efforts of NakamuraJozo, the company emerged from civil rehabilitation in
November 2006.

The use of product inventories for asset-based
lending still has a number of issues, but DBJ’s continued
successes has prompted the Bank to push forward in thecultivation of this new market. In July 2006, DBJ andGoldman Sachs of the United States jointly establishedGordon Brothers Japan Co., Ltd., which performs inventory valuation and disposal services. In this manner, DBJ
is working to expand its asset-based lending.

Nakamura Jozo’s soy sauce
goes through a uniquesix-stage fermentation
process. The unpasteurized
soy sauce that results isslowly squeezed to produce
the final product.

Providing Financial Services to Resolve the Issues Society Faces

43

Refinancing Plan Results in Successful Theme Park Restructuring

Societal Concerns
Hotels, ryokan (Japanese-style inns), theme parks andother tourist infrastructure have a huge impact on local
communities. Successful theme parks have a major
impact on their communities by attracting customers
to local lodging and food and beverage establishments
as well as the theme park. The economic impact ontransportation and other industries is substantial, as well.
However, such facilities require major initial investment
and regular maintenance investment. Forecasting theability of a theme park to attract customers over the longterm and introducing measures to counter a slump in
business are typically difficult.

Case History: USJ Co., Ltd.
The motion picture theme park Universal Studios Japan™,
located in Konohana-ku, Osaka, was established throughthird-party financing by Osaka. Six years have elapsed
since the park opened, and the number of visitors has
increased continuously over the past three years, reaching
8.7 million visitors in the fiscal year ended March 31, 2007.
The theme park was highly regarded as a local community
invigoration project, as its growing name recognition

attracted visitors from across Japan, as well as fromoverseas. Financially, however, USJ was facing several
issues, such as securing cash flow needed to redeem abond issue, over-reliance on debt financing, independence
from its current shareholders—the city of Osaka andUniversal Studios of the United States. The company wasconsidering an independent public offering of its shares toface these issues.

The DBJ Initiative
In this case, DBJ teamed up with the Goldman Sachs
Group, Inc., to formulate an innovative refinancing planthat combined an injection of capital through the issuanceof preferred stock with long-term borrowings. Although
the company was generating substantial cash flow, it had
little room to make additional investment because of a

UNIVERSAL STUDIOS JAPAN™
Universal Studios Japan™ & © Universal Studios

44

Providing Financial Services to Resolve the Issues Society Faces

mismatch in loan periods. Upon resolving that issue, thecompany successfully listed its shares in March 2007 andinvested in additional theme park attractions. The end
result was positive for visitors, the city of Osaka andshareholders alike.

The Bank that Uses Technology: Activities of DBJ’s Practical Application
Support Center for Technology
Societal Concerns
The manufacturing of automobiles, electrical products
and other items is a core activity underpinning the
success of the Japanese economy. However, manufacturers face a staggering number of challenges, including
technical diversification; highly varied small-volume
production; international competition with Brazil, Russia,

India, China and other countries; and the problem ofpassing expertise on to future generations. In today’s
economic climate, technical expertise alone is insufficient
to ensure a company’s success. Instead, companies
need to raise their overall level of expertise, bothtechnological and managerial.

DBJ’s Manufacturing Management Index®
DBJ developed the Manufacturing Management Index®
to make hidden strengths and weaknesses visible and toproperly judge the technological and managerial expertiseessential to the success of a manufacturing company.
The Manufacturing Management Index® consists ofapproximately 100 factors, such as quality, cost, delivery

times, technological responsiveness, and management
capability. The index provides an objective picture of theconnection between a company’s technical operations
and its management structure, as well as unique businessmodel characteristics and management issues that need
to be resolved.

Case History: Itoh Precision Co., Ltd.
Itoh Precision, headquartered in Kaitsu, Gifu Prefecture,
specializes in the precision cutting and processing of suchmetals as brass, aluminum and stainless steel, centeredon parts for communication, electronic and gas equipment.
In recent years, the company has begun processing
automotive parts and responding to the need for thesmall-volume production of widely diverse parts. Althoughworking to enhance its production management, startingwith the acquisition of ISO 9001 certification, the company
realized the need to reexamine its technical expertise andimprovement measures from a management strategy
perspective to accelerate further corporate growth.

The DBJ Initiative
DBJ has opened a Practical Application Support Centerat its head office, as well as at its Kansai and Tohoku
branches, to assist commercialization of corporate
technological developments along with regional financial
institutions. In this case, DBJ teamed up with Ogaki
Kyoritsu Bank, Ltd., to conduct a “technical management
skills diagnosis” of Itoh Precision. This diagnosis provided
an objective view of efforts to build a corporate culture,such as the effective use of development facilities tocreate process designs and a management style involving
full employee participation. The diagnosis also reconfirmed
Itoh Precision’s perceived strengths and issues. Based on
this diagnosis, the management of Itoh Precision, Ogaki
Kyoritsu Bank and DBJ held a three-way exchange to
examine Itoh Precision’s improvement goals and targets,management focuses and business diversification
initiatives, analyzing and considering these issues fromtechnological, managerial and financial standpoints.
Using the results of our diagnosis as a basis for discussion, Itoh Precision encouraged an internal discussion of
its current situation, sharing issues it faced as well as
management goals, including its aim of training employees
to boost technological management and linking its

technologies and business activities. Ogaki Kyoritsu Bank
plans to use the Manufacturing Management Index® topursue an avenue of corporate growth that differs fromfinancial analysis, boosting its ability to provide financingthat is closely linked to local communities. As a bank that
employs technology, DBJ plans to enhance the value it
provides to manufacturing companies.

Itoh Precision uses “technical management skills
diagnosis” to enhance technological management
and promote human resource training

Providing Financial Services to Resolve the Issues Society Faces

45

■ Promoting Foreign Direct Investment in Japan and Supporting
the Internationalization of Local Communities
Societal Concerns
DBJ believes that the investment of foreign capital, theexchange of technologies and expertise with advanced
nations and the potential to generate employment work
to energize the Japanese economy and foster thedevelopment of local economies. However, foreigncapitalized firms encounter various issues when promoting
their operations in Japan. These include their low level ofrecognition within Japan, lack of a local track record,
language issues, lack of infrastructure for handling thechildcare needs of their local employees, and numerous
other non-tariff barriers. Securing investment funds inJapan, and finding necessary information can also provedifficult. Ultimately, such factors act as barriers to foreign
direct investment in Japan.

Case History: IKEAThe IKEA Group, founded in Sweden, is one of the world’s
largest furniture retailers, operating 256 stores in 35
countries (as of July 31, 2007). Parlaying its expertisein logistics and innovative design into a solid worldwide
brand, IKEA provides quality products at affordable prices
to consumers throughout the world. Furthermore, IKEA’s
business model is unlike any other in Japan.
Once before, in the 1970s, IKEA entered the market
with a Japanese partner, but because of the characteristic
difficulties of the market and the need to rely on its
Japanese partner for operations, the company was unable
to cultivate its correct brand image. As a result, IKEA
decided to pull out of Japan in the 1980s. Remaining
nevertheless intrigued by the size of the Japanese market,
IKEA continued to study the market carefully and conductdetailed surveys. Some 20 years later, almost to the day,
IKEA returned to Japan, this time operating entirely on its
own.

The decision to operate on its own meant that IKEA
needed to create its own logistics network, requiring asubstantial investment. The fact that the company had
already operated in-and pulled out of-Japan once became
an issue when IKEA sought to raise funds from Japanesefinancial institutions.

The DBJ Initiative
To promote investment in Japan, DBJ provides thefinancial and information support that foreign-capitalizedcompanies require to build their operations in Japan.
Centering on its head office Department for International
Affairs and overseas representative offices, DBJ promotes
investment in Japan and contributes to the internationalization of local communities by providing advice on investment plans and other consulting services to foreigncompanies and utilizing its networks with municipal
government bodies and institutions such as the Japan
External Trade Organization, which promotes investment
in Japan.
In this case, DBJ was able to apply an understandingof foreign companies cultivated over many years, as wellas its financial acumen, to prime the pump accessing
Japan’s pool of financial market funds and aide IKEA’s
return to Japan. DBJ helped IKEA raise ¥10 billion to46

Providing Financial Services to Resolve the Issues Society Faces

construct a logistics center in Yatomi, Aichi Prefecture,and introduce its unique business model and logistics
expertise to Japan. In cases such as this in which a large
amount of funds is required by a foreign company without
a proven track record in Japan, DBJ provides the pumppriming mechanism to enable smooth fund-raising.
In addition to encouraging foreign direct investment inJapan, DBJ promotes efforts to provide the infrastructureand environment that facilitates such investment. The
financing of international schools is one such activity,
as the infrastructure for the education of employees’
children is an important consideration when encouraging
companies to invest in Japan. In fiscal 2006, DBJ
supported initiatives to enhance facilities at the CanadianAcademy, an international school in Kobe, and the SaintMary’s International School in Tokyo.

■ Providing a Safety Net
DBJ acts as a social safety net by providing investments
and loans to support the rehabilitation and rebuilding ofareas affected by earthquakes, typhoons or other largescale natural disasters, the outbreak of severe acute respiratory syndrome (SARS), bovine spongiform encephalopathy(BSE) and other illnesses, as well as terrorist attacks andother emergency situations that cause widespread anxiety
about the financial system. In this way, we act as an emergency response unit to fill the gap that emerges when
peacetime financial platforms fail to function (see page 65).

Responding to Financial Crises
Societal Concerns
Some responses required during financial crises are to(1) put up financial firebreaks to prevent a spreading
chain of bankruptcies, (2) prevent damage to large andmedium-sized companies from spreading to small
companies and (3) provide fair and neutral screening thatprevents companies from capitalizing on financial crises.

The DBJ Initiative
DBJ provides capital investment funds for industries hit
hardest by credit crunches—automotive, iron and steel,energy, commerce, and rail sectors—and assists them inrepaying capital investments to private-sector financial

institutions by helping them raise long-term working capitaland redeem corporate bond issues.
Factoid: DBJ’s cumulative financing in response tocredit crunches: ¥1,610.6 billion

Disaster Recovery
Societal Concerns
Required responses to natural disaster are to (1) ensurethat people who provide information to local communities
beset by a natural disaster have sufficient knowledge
about those communities and take that knowledge into
consideration and (2) provide rapid responses to help
rebuild important infrastructure that was destroyed. Whatis required is an entity that through its everyday business
relationships has accumulated know-how on theindustries and businesses that provide this core
infrastructure. This entity also must have a wealth ofexpertise in supplying long-term funds.

The DBJ Initiative
DBJ has provided assistance in response to suchdisasters as the Kobe Earthquake in January 1995 andthe Niigata Chuetsu Earthquake in October 2004. In
addition to the electrical, gas, rail, communications, broadcasting, urban development, and other infrastructureindustries, DBJ provided assistance to retail sales, foodproducts and other everyday businesses. These efforts

played a major role in revitalizing the employment andeconomic situations of local communities, prompting
a revival in many fields.
Factoid: DBJ’s cumulative disaster recovery financing
Kobe Earthquake:¥184.8 billion
Niigata Chuetsu Earthquake: ¥20.3 billion

Emergency Financing
Societal Concerns
Society requires institutions whose day-to-day operations
provide a solid foundation for financing in response to
terrorist attacks, natural disasters and other emergency

situations. These institutions must also have the working
capital and funding expertise to respond quickly to thesesituations.

The DBJ Initiative
In the year ended March 31, 2002, DBJ established an
emergency response support system that provided financing to the Japanese airline industry, which was immediately
effected by a downturn in business following September

11, 2001, terrorist attacks on the United States and the
SARS outbreak.
Factoid: DBJ’s cumulative emergency financing provided
during terrorism and SARS outbreaks: ¥437.0 billion

Providing Financial Services to Resolve the Issues Society Faces

47

■ Case Studies of Other Initiatives

DBJ applies its expertise in forming andevaluating businesses, as well as its developmentof new financial methods, to provide detailed
assistance at every stage of a project, delivering
total solutions, including funding from a positionof neutrality. In addition to the activities describedon pages 30 through 46 of this report, DBJ
provides a variety of financial services throughout
Japan.

Community Development◆ Business Revitalization of a Local Company:
The Former Niigata Tekkosho Co., Ltd.
Through such methods as DIP financing, mergers and acquisitions, and business
revitalization funds, DBJ supports local companies, helping communities maintainexcellent supplies of technical expertise and employment opportunities.

◆ Business Revitalization of Onsen Ryokan Operators
Kutsurogi Yado Co., Ltd.
DBJ helped revitalize the business of an onsen ryokan (hot springs hotel) operator
in the middle of the Aizu Higashiyama onsen area through the integration of threeryokans. We contributed to the substantial renovation of the onsen area andhelped enhance the foundation for the local tourism industry.

◆ Local Community Child-Rearing Support Plan Promotion:
Fukushima Printing Co., Ltd.
The Bank worked with regional financial institutions to establish a collaborative
financing scheme to help a local operator put in place a new child-rearing support
plan through cooperation between companies and the local community that wasformulated by Ishikawa Prefecture.

◆ Effective Utilization of Social Infrastructure Assets:
Hakone Turnpike Co., Ltd.
Working with Macquairie Bank Limited of Australia, DBJ established Japan’s first
fund specializing in infrastructure investment, injecting capital to transfer operationof the Hakone Turnpike.

◆ Introducing Barrier-Free Streetcars:
Hiroshima Electric Railway Co., Ltd.
Hiroshima Electric Railway required financing to introduce barrier-free low-floor
streetcars. DBJ provided a wide range of support for this community resident
welfare project.

48

Providing Financial Services to Resolve the Issues Society Faces

Environmental Conservation and Sustainable
Societies◆ Building Japan’s Largest Wind-Power Generation Facility:
Green Power Koriyama-Nunobiki Co., Ltd.
DBJ provided financing for a project by the Electric Power Development Co., Ltd., tobuild Japan’s largest wind-powered generation facility. This large-scale, clean-energy
project is designed to reduce CO 2 emissions.

◆ Introducing an Environmentally Friendly System: Mazda Motor Corporation
One of DBJ’s objectives is to provide financing for measures that encourage
environmentally sound management. Through this project, we helped raise the levelof environmental activity within a local community and an entire industry.

◆ Creating an Intermediate Processing Plant for Industrial Waste:
Sanko Co., Ltd.
This project involved building an intermediate processing plant to handle industrial
waste in response to restrictions on dioxin emissions. By financing the project, DBJ
enabled the appropriate processing of industrial waste and a reduction of thiscompany’s impact on the environment.

◆ Introducing a Facility to Recycling Difficult-to-Process Paper:
Kyushu Paper Co., Ltd.
DBJ financed the installation of equipment to process difficult-to-recycle paper for thismanufacturer. The project helped improve the circulation of resources within the paperindustry, thereby reducing its environmental impact and contributing to a recyclingoriented society.

◆ Promoting Urban Design that Reduces CO2:
District Cooling and Heating System in East Ikebukuro
The Bank supports the reduced emission of greenhouse gases by financing projects
designed to help Japan meet the targets outlined by the Kyoto Protocol. Helping cooling and heating suppliers is one way to support global warming preventative measures.

Creation of Technologies and Industries◆ Developing and Commercializing Carbon Fiber Composites:
Sakai Ovex Co., Ltd.

DBJ supported this company’s joint development project with a publicsector research institution that aims to commercialize this project. This
project has the dual goals of enhancing industry competitiveness andpromoting Fukui Prefecture’s local community revitalization plan.

◆ Enhancing High-Value-Added Lens Plant: Tamron Co., Ltd.
By providing financing for the capital investment earmarked for the
introduction of precision fine-processing technology at a lens plant, DBJ
helped cultivate advanced expertise within the community.

◆ Providing Startup Support for Japan Entity:
Shanghai Newtouch Software Company, Ltd.

The Bank helped this Shanghai-based IT venture establish a presence inJapan by helping it find the funds for the deposit on an office lease, as
well as for software development.

◆ Conducting Training in the Content Business: Anime Innovation Tokyo LLP
In cooperation with the city of Tokyo, DBJ supported the formation of ascheme to finance the first limited liability partnership for the pilot production of anime (animation) programs.

◆ Aiding Design Evaluations: h concept, inc.
Marking a first in Japan, design rights were used as collateral for DBJ’s
financing of this company, which designs animal-shaped rubber bands
and other novelties and is expanding its product lineup.
Providing Financial Services to Resolve the Issues Society Faces

49

■ Making Use of Information Functions
Information Provision Activities
Through its varied activities, DBJ comes into contact withmany aspects of society. In addition to companies, DBJ’s
information channels and human networks include domestic and overseas governments, international institutions,regional government bodies and universities. Throughthese contacts, DBJ extracts a variety of information on
economic and societal issues, boosting its ability to supply
quality information from a neutral standpoint.

● Industry Research
In a broad range of industrial circles, DBJ researches conditions in various sectors and among different types ofbusinesses, conducting surveys and performing researchon such topics as international competitiveness. The Bank
also prepares reports on conditions in individual industries,
technical development trends, and new industries andinnovation. We provide feedback on these reports to ourclients, as well as other parties.

Survey Examples• “Trends Involving the Introduction and Expansion of
Bioethanol Fuels and Other New Energy Sources”
DBJ Monthly Overview, No. 105, February 1, 2007
This survey looks at long-term energy supply and demand
forecasts; the status of introducing alternative fuels forautomobiles; Japan's introduction of ethanol; and theglobal status of bioethanol, which is gaining groundworldwide.
• “Internet-Related Business Trends”
DBJ Monthly Overview, No. 107, February 22, 2007
DBJ conducted a survey to explore various aspects of therapid expansion of Internet-related businesses in recent
years, such as the size of the market, changes in Internet
advertising and alliances among Internet companies.

● Economic Surveys
One of DBJ’s main businesses is the provision of funds
for long-term capital investment. In the process, the Bank
has accumulated a host of information and conducted
research on corporate capital investment. This information
concerning domestic and overseas economic conditions
and developments is highly valued by a variety of entities.
One of these documents, the “Capital Investment Planning
Survey (Questionnaire-Based)” has a history of more than
50 years, back to 1956. This survey looks at communityspecific investing trends and provides analyses of raw corporate information. This information is used in a host ofways, including the operation of the Japanese economy,

corporate management and research and training
activities at institutions and universities.
Survey Examples• “Report on June 2006 Survey of Capital Investment
Plans for Fiscal Years 2005, 2006 and 2007,” Surveys,
No. 92, September 2006
After commencing our questionnaire-based survey on
corporate capital investment activity, the “Survey ofCapital Investment Plans,” we publicized our analysis,
as well as research results.
• “Economic Globalization from an Investing Viewpoint”
DBJ Monthly Overview, No. 106, February 22, 2007
This survey looks at the state of direct investment inJapan and throughout the world, as well as investment
agreements in place, against the background of an
expansion in direct investing. The survey also analyzes the
future prospects of countries considered to be ripe forinvestment.

50

Providing Financial Services to Resolve the Issues Society Faces

● Combining Surveys, Research and Investment and Loan Activities
In addition to publicizing the results of its surveys,
research activities and other materials, DBJ introduces its
information at speaking engagements and seminars. In
addition, by reflecting the results of its investment and loanfunctions, DBJ provides new financial solutions for corporate CSR activities and commercial technologies.
(1) Environmental
The Bank conducts survey reports on various environmental activities in Japan and overseas, under such themes
as global warming prevention measures, promotion of arecycling-oriented society and sustainable corporate management. DBJ also conducts and contributes to specialty
journals, newspapers and magazines. In fiscal 2004, these
activities culminated in an environmental rating system,
Promoting Environmentally Conscious Management.
We also developed a financing menu for global warming
countermeasures that many companies employ.

(2) Disaster Response
In the event of an earthquake or other natural disaster,
responding to the situation and continuing operations is acommon theme for every company. Companies need toput disaster response measures in place. DBJ conducts
surveys covering corporate business continuity plans. In
fiscal 2007, we incorporated the survey results into ourdisaster prevention ratings loan program.
(3) Technology
The Bank’s activities in technology-related fields include
conducting trend surveys on bioethanol and other topics.
DBJ’s Practical Application Support Center for Technology
provides technical evaluations and conducts otheractivities to help companies realize their potential fortechnological commercialization.

● Providing Information to Local Communities(1) Supplying Information to Help Local Community
Development
Local communities are experiencing increasingly difficult
environmental circumstances, such as a declining
birthrate; an aging population; the amalgamation of towns,
cities and villages; and financial difficulties. These issues
require a greater degree of expertise and more ingenuity
than ever. DBJ addresses these issues by analyzing theinformation it accumulates through its network of 19
domestic and six overseas locations and communicateswith the economic agencies of regional governments andlocal communities and companies in Japan and abroad.
DBJ uses this information to encourage public/private
partnerships, promote tourism, build up local communities, and contribute to local government financing by
sharing its analysis results through reports, publications,contributions, lectures, and various other formats.

DBJ publications(2) Building Local Communities
One way DBJ puts its expertise to work in building up
local communities is by conducting “local communitybuilding diagnoses.” In this process, a DBJ local
community diagnosis team analyzes publicly available data
to determine the current state of a local community, andthen conducts interviews in that community before preparing an independent diagnosis that interprets its results. We
then discuss the diagnosis results with people in the local
community, which helps them to understand what issues
they may be able to address on their own and provides anopportunity to consider future directions.

Interaction with local communities by conducting seminars

Providing Financial Services to Resolve the Issues Society Faces

51

● Supporting Collaboration among Industry, Academia and the Government
DBJ supported the establishment of the Technology
Licensing Organization, which promotes the transfer oftechnology from universities to the private sector. We also
encourage cooperation among industry, academia andthe public sector in a broad range of fields, including
environment-related and disaster response areas. As of
March 31, 2007, the Bank had collaboration agreements
in place with 21 national and private universities. Thesearrangements enable each of us to pool our resources toachieve even greater results.

Collaboration Agreements with Universities andOther Institutions
Cooperating Institutions

Date Agreement
Concluded

Ritsumeikan Asia Pacific University

January

2004

Kanazawa University Technology Licensing Organization

January

2004

Iwate University, Iwate Prefectural University,
Iwate Prefecture, four other research institutions
and three financial institutions

May

2004

Hokkaido University

July

2004

Tohoku Fukushi University, City of Sendai,
Sendai City Industrial Promotion Organization

August2004

Kyushu University

October

2004

Toyo University

December 2004

Urban Land InstituteFebruary2005

Ritsumeikan University Graduate School of Management

April

2005

Niigata University

July

2005

Shinshu University

August2005

Asia University

August2005

Center for Cooperative Research at Kanazawa
University, City of Komatsu

November 2005

Nagoya City University

December 2005

Hiroshima University

January

2006

Toyama Prefectural University

February

2006

Mie University

March

2006

Kagoshima University

June

2006

Osaka University Center for the Study ofFinance and Industry

June

2006

Utsunomiya University

June

2006

International University of Health and Welfare
Graduate School

February

2007

International Cooperation Activities
The ongoing globalization of financial activities is
prompting all members of the financial sector, including
development financing institutions, to review theiroperations. As part of a worldwide trend, public- andprivate-sector institutions are also reconsidering theirrespective roles in economic development.
Against this backdrop, DBJ has played a significant
role in cultivating self-sustaining economic developmentin the private sector of developing countries, particularly
those in Asia. From the standpoint of policy planning andDevelopmental Finance Course

52

Providing Financial Services to Resolve the Issues Society Faces

financing, DBJ is deeply involved in infrastructuredevelopment to invigorate the private sector and handle
environmental issues. In these areas, DBJ employs for the
benefit of other countries the expertise it has accumulated
in Japan.
Taking this view, since 1967 DBJ has held an annual
Developmental Finance Course for development financeinstitutions, which has been attended by delegates fromSouth Korea, China, the ASEAN region, Latin America,
Africa, and Eastern Europe. Here, the Bank provides
quality research and training.
In May 2006, DBJ received a Performance Award forInternational Cooperation Activities in the regional development financing division of the Association of Development
Financing Institutions in Asia and the Pacific (AFDIAP).
This award was in recognition of the Bank’s International
cooperation activities.
The ADFIAP Awards provide an opportunity to raise
the level of awareness of excellent regional projects. The
awards are also designed to share information regarding
financing methods and technologies.

Responsibilities as
a Member of Society

DBJ considers CSR as not only
contributing to society through theBank’s principal financial activities,
but also taking societal needs seriously
and living up to its responsibilities asa member of society. This requires allof the Bank’s executives and regular
employees to conduct their daily
activities with a constant awarenessof society, the environment and theeconomy. We believe our efforts willbuild DBJ into a financial institution
trusted, favored and chosen by the public.

53

■ Communicating with the Public
DBJ believes that today’s social and environmental
problems can best be resolved by communication andthe exchange of opinions. Accordingly, the Bank strives
to communicate with as many people as possible throughseminars, symposiums and lectures, and Internet(www.dbj.go.jp/japanese/environment/commu/index.html).
DBJ will continue working with communities to createa sustainable society.

Communication Focused on the Environment
Environmental problems such as global warming must be
resolved, starting with individual awareness of the severityof the issue.
DBJ promotes understanding of the relationshipbetween the environment and financial and business activities by participating in the Eco-Products exhibit—Japan’slargest environmental event—and holding seminars andsymposiums in conjunction with relevant organizations.
In fiscal 2002, DBJ was the first bank to participate
in Eco Products and has since participated in the exhibit
every year. In fiscal 2007, the Bank worked to deepen
understanding through a variety of environmental reports
in its booth. Such reports included panels that introduced
DBJ’s environmental efforts, including its Promoting
Environmentally Conscious Management financing systemand coordination with the United Nations Environment
Programme (UNEP) Finance Initiative (refer to page 58).
DBJ also devised panels with related quizzes and othermaterial to help elementary school and junior and seniorhigh-school students understand the role finance plays inenvironmental issues.

At the same time, DBJ co-hosted a symposium with
Nikkei Inc., entitled New Social Trends Resulting from
Environmental Finance. The event included the keynote
speech, The Environmental and Social Roles of Finance,by Takejiro Sueyoshi, special advisor to the UNEP FinanceInitiative and a panel discussion concerning how financial
institutions should employ CSR in their principal businessactivities.
To promote environmentally friendly corporate
management, DBJ holds joint seminars and symposiums
with relevant organizations about how environmental
issues relate to corporations. These include a special
seminar, “Global Warming Prevention Measures andCorporate Management: Carbon Risk Information
Disclosure and Corporate Global Warming Countermeasures,” held jointly with the Carbon Disclosure Project(CDP) and the UNEP Finance Initiative in September 2006,
as well as a joint symposium, “Principles for Responsible
Investment: Toward a Sustainable Society,” held with a
non-profit organization, Social Investment Forum Japan(SIF-Japan), in November 2006.

Communication with Local Communities for Revitalization
DBJ considers working with local citizens to build communities that suit each region an important part of supporting
independent community development. To this end, theBank holds seminars and symposiums in collaboration
with local authorities and universities.
In DBJ’s Community Diagnosis Program, ouremployees use objective indicators and original analyticalmethods to hold discussions with residents and help them

54

Responsibilities as a Member of Society

identify their community’s issues and potential. DBJ
employees interview community stakeholders in advance;
study the region’s resources; and on the final day, hold aparticipatory workshop with residents.
In addition to these activities, DBJ is strengthening its
cooperation with financial institutions in local communities.
These successes feed into the local community development activities described in the Bank’s medium-term vision.

Communication in International Cooperation
In developing countries and those transitioning to a market
economy, policy-based finance is emphasized in promoting
economic development. Through training and research incooperation with internal and external international organizations, DBJ brings to these countries its policy-based
finance expertise gleaned from its experience with Japan’s
rapid economic growth.
DBJ held the 10th Seminar on Development Finance(SDF) in August 2005. The training session presented theBank’s accumulated development finance expertise andenvironmental activities to top management at the central
banks and development finance organizations of Cambodia,
Laos, Vietnam and Myanmar. Participants presented eachcountry’s economic and financial status at workshops.
This exchange of information helped further mutual understanding among Asia’s financial organizations.

Other Communication Efforts●Providing Information
Issuing Corporate Social Responsibility (CSR) Reports
To expand communication with all stakeholders, in 2003
DBJ issued the Environmental Report 2003 for a
Sustainable Society, the first report of its kind by aJapanese policy-based financial institution. This wasfollowed by similar reports in 2004 and 2005. In 2006,
DBJ published the CSR Report. This year, DBJ has●Participating in Local Community Activities
Flower Hospitality Program
DBJ participates in the Flower Hospitality Program, abeautification effort in central Nagoya. Employing theSponsorship System, a cooperative government andprivate-sector effort, the Bank works with the Chubu
Association of Corporate Executives to beautify the urban
landscape by planting and tending flowers.

merged the CSR Report into this Annual Report &CSR Report following the concept of “disclosure froma CSR perspective.” DBJ will continue publishing CSR
information introducing the Bank’s initiatives to help realize
a sustainable society.

Support for the Operation of Environmentally Friendly Buses
Since fiscal 2003, DBJ has co-sponsored the operation ofenvironmentally friendly buses carrying passengers free ofcharge on a route in the Otemachi, Marunouchi and
Yurakucho area of Tokyo’s business district. These buses
help raise awareness about environmental issues. Not only
do the buses reduce environmental impact and noise but
they are also barrier-free with a low-floor design, ensuring
easy access for disabled users.

Responsibilities as a Member of Society

55

■ Fostering Human Resources and Creating a Comfortable
Work Environment
Developing Employee Potential
DBJ is proudest of its human resources assets. The Bank
actively works to build a systematic human resource
development system and a comfortable work environment

to bring out the best in every employee. The Bank’s superior employee performance resulting from such efforts iswhat drives DBJ to be a pioneer in Japan’s finance sector.

Human Resources Development Vision
DBJ’s role has evolved and developed substantially tomeet the needs of the times. The Bank considers suchinnovation crucial to maintaining its leadership position in
the constantly advancing financial field.
To develop its all-important human resources assets,
DBJ encourages autonomous and pioneering behavior inits employees as financial professionals through the visionof “generalists who can be specialists in many fields.”

Although gaining specialist skills is certainly important,responding to the constantly changing demands of thetimes requires broad experience, deep knowledge and theability to see the big picture. DBJ has therefore created ahuman resource development system that incorporates
job rotation, performance evaluation, education, andtraining.

Introduction of the Target Management System
DBJ is implementing a Target Management System toencourage employees to work autonomously and reformtheir actions and to accurately evaluate such efforts.
The Bank is working to enrich this system by having
subordinates meet individually with superiors to set goals
and receive feedback, autonomously running through thePlan-Do-Check-Act (PDCA) cycle. Particularly in goalsetting, DBJ emphasizes enhancing medium- and longterm value internally and externally, while motivating

employees byoffering bonuses andother benefits basedon performance.

Creating a Comfortable Work Environment
DBJ actively strives to cultivate a comfortable work
environment.
To maintain an environment in which all employees canfeel secure, DBJ has notified employees of its campaign
to prevent sexual harassment and has set up a hotline todeal with such issues. Furthermore, to support mental
and physical health, the Bank has created systems with

56

Responsibilities as a Member of Society

training and self-assessment, in addition to regular
medical examinations.
DBJ has also introduced pioneering programs to give
motivated employees better opportunities for long-term
employment by allowing leave for childbirth, childcare
and nursing care, as well as a system for continued
employment after retirement.

A Solid Human Resource Development System
DBJ’s financial professionals are supported by a welldeveloped education and training system. The Bank’s
combination of mandatory training by level and elective
self-training according to skills and interests enables each
employee to plan his or her career.
In addition to practical on-the-job training (OJT), which
gives employees responsibility regardless of age, DBJ’s
job rotation system positions employees for the mediumto long-term according to skills and career choices, after
having worked in several departments. This systemenables employees to build practical experience anddevelop skills with a medium- to long-term vision.
In step with globalization, DBJ cultivates employees
able to perform in domestic and international settings. To
achieve this, the Bank actively assigns employees to awide variety of external organizations, including graduate
schools in Europe and the United States, overseas
research institutes, international institutions, related
government agencies, and domestic research institutes,
thereby supporting skill development and network
expansion.

DBJ’s Human Resource Development System
Mandatory Training by Level

Elective Training

Business-Related (Self-Training)

Careerdevelopment
plan training

Secondarytraining after
joining DBJ
Introductory
training for
new employees
Autonomous
careerdevelopment

Cultivation ofmanagement andleadership skills

Planned and continuous HR development•Practical
legal
training•Training in
corporateandfinanciallaw, etc.

•Practical business
revitalization
training•Structured financetraining•Training in
syndicated loans•Seminars on
creation ofindustries•Environmental
and disasterprevention
seminars, etc.

Accounting
system andrelated training

Legal
training

Financialanalysis training

Mastery of DBJ
procedures andbasic processes

Mastery offinance and law

Strategic and focus
areas, such as
financial skills

Mastery of knowledge andskills needed for work

Addressing strategic
and focus areas•Finance theory
training•Finance casestudy training•Valuation training•Equity-related
training•Practical risk
management
training, etc.

Basicknowledge
areas•Accounting•Finance,etc.

Commonskill areas•Problemsolving andcommunication•Logicalthinking,
etc.

Domestic and overseas exchange
students, trainees, etc.

Management
training•Practicaltraining ininvestment
and loans•Rating
and asset
assessment
training•Basic loaninterest
training•Trainingin debt
management,
etc.

External seminars, lectures, etc.

PositionLife Plan
training

Distance learning, night courses, acquiring public qualifications

Top management
training

External
Assignments, etc.

Basic financetraining for
new employees
Focus enhancement Acquisition ofMastery of
Financialfinancialareas, such as financial
basic business knowledge,
accounting
skills for privatization
execution
skillsetc.
knowledge
Preparing forprivatization

Mastery of knowledge andskills needed for work

Cultivation ofwork-related
knowledge,
mastery of
specialized
knowledge, HR
development

Seeking Higher Ethical Standards
For half a century, DBJ has led Japan’s economy as a
general policy-based financial institution. As the Banktransforms into a private-sector financial institution thatvalues the long-term perspective, neutrality, publicmindedness, and reliability it has cultivated, each
employee is being held to a higher ethical standard.
DBJ has long sought to enhance employees’ ethicalstandards by requiring training to assure legal compliance,
ISO training to deepen ISO 14001 understanding andpromote eco-friendly conduct, and information security
training to address the risk of fraudulent access andinformation leaks.
DBJ will henceforth devote even more resources
toward such efforts.

Responsibilities as a Member of Society

57

■ DBJ’s Environmental Management
DBJ not only strives to reduce the environmental impact of
its operations but also actively pursues environmental

activities with full member participation in the projects it
supports.

Alignment with UNEP FI
In June 2001, DBJ became the first Japanese bank tosign the UNEP Statement by Financial Institutions on theEnvironment and Sustainable Development. In doing so,
DBJ joined other financial institutions in the UNEP FI(Financial Initiatives), a voluntary organization. In November

2002, we became Japan’s first government-affiliatedfinancial institution to received ISO 14001 certification.
This certification is part of the Bank’s efforts to protect theenvironment and work toward a sustainable society.

Environmental Management System
Top management(governor)
Environmental
management officer*(deputy governor)

Internal environmental
audit team
General audit
supervisor
Auditors

Implementation
division
Heads of each department
and office
EMS promotion officer(deputy officer)

General Risk
Management Committee

ISO Secretariat(Corporate Coordination
Department)* One member of the ISO Secretariat will
be appointed as deputy environmental
management officer to handle affairs
on behalf of the environmental
management officer.

EMS working members
EMS promoter(officer or generalstaff member)
Employees(including temporary employees
and resident contractors)

EMS: Environmental Management System

The Environmental Policy
DBJ established its environmental policy in July 2002
(page 60). The Bank’s environmental policy is distinct inthat it includes not only environmental activities to reduce
the usage of paper, energy use and waste emissions
in the Bank’s operations, but also reflects on facilitating

environmental activities through its investment and loan
operations, knowledge dissemination and other activities.
Based on these principles, DBJ introduced its Loan
Program for Promotion of Environmentally Conscious
Management (page 67) in April 2004.

Alignment with the UNEP FI
In June 2001, DBJ became the first Japanese bank tosign the UNEP Statement by Financial Institutions on theEnvironment and Sustainable Development, promising to
strive for harmony between economic development andenvironmental conservation and to cooperate in resolving
environmental problems. Since joining the UNEP FI, theBank has continued to work with the UNEP FI and otherinstitutions to pursue measures in accordance with the
UNEP Statement’s intent.

58

Responsibilities as a Member of Society

As part of these efforts, the UNEP FI 2003 Global
Roundtable in Tokyo was held in October 2003. DBJ
co-sponsored the meeting under the theme, “Sustaining
Value: Finance’s Roles in a Creating a Sustainable Society
and Realizing Value,” as a representative of the Japanesefinancial institutions that have joined the UNEP FI. The
Tokyo Principles were issued in the form of a conference
statement for this meeting.

The conference served as a good opportunity to raise
Japanese and other Asian financial institutions’ awarenessof environmental problems. In January 2005, the Asia
Pacific Task Force was founded as a parent organization
for independent activities at the regional level. DBJ playsa pivotal role, having served as chairman of the task
force until October 2006 and continuing to serve as thechairman of its Japan Group. The Bank also displayed
its proactive stance by hosting a Tokyo press conferencein May 2006 for the announcement of the Principles for
The Tokyo Principles
1. Select investment, lending and insurance activities desirable forsociety and the environment.
2. Endeavor to develop and sell financial products that contribute to
the environment and society.
3. Incorporate the most appropriate governance structures, including management policy.
4. Endeavor to achieve a sustainable society through dialogue withstakeholders.

Responsible Investment and its signatory institutions andby helping prepare the necessary public relations
materials.
Moreover, at the UNEP FI 2005 Global Roundtable
held in New York in October 2005, DBJ presented
Japan’s efforts to tackle the issue of global climatechange. The Bank is striving to actively provide information
to the UNEP FI by participating in the Climate Change
Working Group, representing the Asia region.

Principles for Responsible Investment
These principles were established with the goal of ensuring thatissues related to the environment, society and governance arereflected in the investment decision-making processes of theworld’s institutional investors. Signatory institutions of these principles are working together for their implementation worldwide.
Visit http://www.unpri.org for more details.

Efforts to Conserve Resources and Energy
As part of its environmental management system, DBJ
sets numerical targets and uses posters and other means
to enlighten employees. This entails reducing paper waste(e.g., making double-sided copies, using the reverse sideof remaining single-sided copies and printing only as many
copies as needed); reducing energy use (e.g., minimizing
elevator use); and utilizing recycled boxes (e.g., separating
recyclables such as plastics and cans).

Green Purchasing
Following the Green Purchasing Law (official title: Law
Concerning the Promotion of Procurement of Eco-Friendly
Goods and Services by the State and Other Entities),
which went into effect in April 2001, DBJ has set annual
numerical goals for purchasing products and services
effective in reducing environmental impacts.

In 2001, DBJ also became the first governmentaffiliated financial institution to join the Green Purchasing
Network, which was formed to promote the purchase of
products with low environmental impact. The Bank has
since run voluntary initiatives inspired by the network’s
guidelines.

Refer to the following link for DBJ’s procurement policy and past performance.
http://www.dbj.go.jp/japanese/environment/office/enviro01.html

Achievements of the Green Procurement Program for
Typical Items

Resource- and Energy-Saving Efforts

Fiscal 2007
Fiscal 2007
Procurement Procurement
Achievements
Targets

Fiscal 2007
TargetPaper

Copy paper, etc.

100%

100%

Stationery

Files, office envelopes, notebooks, etc.

100%

100%

Equipment

Chairs, desks, shelves, whiteboards, etc.

100%

100%

Officeequipment

Copiers, printers, fax machines, etc.

100%

100%

Lighting

Fluorescent lighting, etc.

100%

100%

100%

100%

Interior items Tile carpeting, etc.

ResultFiscal 2008
TargetCopy paper usage

2% savings

2.4% savings(50.1 tons)

2.5% savings

Printing paper usage

4% savings

15.5% savings (39.4 tons)

5% savings

Waste emissions

5% savings

18.1% savings (101.5 tons)

10% savings

Energy consumption

0% decrease 1.7% savings (4,333 MWh)0% decrease

Note: Targets and performance figures for fiscal 2007 and targets for fiscal 2008 arebased on comparison with fiscal 2005.

JQA-EM2770

Responsibilities as a Member of Society

59

DBJ’s Primary Achievements in the Environmental Sector since its Establishment
October
April
June

1999: The new Bank’s stipulated objective is explicitly stated as “sustainable development.”
2001: Starts green procurement and environmental training.
2001: Becomes first Japanese bank to sign the UNEP Statement by Financial Institutions on theEnvironment and Sustainable Development.
October
2001: Forms the Social Environment Committee and Social Environment Group; hosts discussions
between UNEP and Wa no Kuni Financial Institutions on Environmental Considerations for
Financial Institutions.
March
2002: Attends UNEP FI 2002 Global Roundtable in Rio de Janeiro, Brazil.
July
2002: Launches Development Bank of Japan Environmental Policy.
November 2002: Obtains ISO 14001 certification.
October
2003: Publishes Environmental Report 2003 for a Sustainable Society (first annual edition).
October
2003: Jointly sponsors UNEP FI 2003 Global Roundtable in Tokyo, an international conference on
finance and the environment.
April
2004: Starts Loans for Promoting Environmentally Conscious Management.
September 2004: Issues the second annual Sustainability Report.
November 2004: Establishes Japan Carbon Finance, Ltd. (JCF).
December 2004: Establishes Japan Greenhouse Gas Reduction Fund (JGRF).
January
2005: Assumes chairmanship of the UNEP FI Asia Pacific Task Force.
April
2005: Starts program to promote the spread of equipment meeting Top Runner standards inaccordance with the Energy Conservation Law.
September 2005: Issues the third annual Sustainability Report.
October
2005: Presents at the UNEP FI 2003 Global Roundtable.
November 2005: Renews ISO 14001 certification.
April
2006: Starts program to support projects in line with the Kyoto Protocol Target Achievement Plan.
May
2006: Holds press conference to announce DBJ status as a signatory institution to the Principles for
Responsible Investment.
August2006: Publishes CSR Report 2006 (fourth annual Sustainability Report).
April
2007: Starts interest subsidy system for the global warming countermeasure portion of thePromoting Environmentally Conscious Management financing system.

Development Bank of Japan Environmental Policy
Having been given the mission to contribute to the sustainable development of the economy and society by the Development Bank of Japan
Law, a goal that echoes the UNEP FI Statement, DBJ assists in theformation of an eco-friendly economy and society in the following ways:
1. Facilitation of environmental measures through loan andinvestment activities
As a policy-based financial institution, DBJ supports projects
beneficial to the environment in light of Japan’s environmental
policies.
• Provision of long-term funds for projects to accelerate the formationof the closed-loop material society and the solution to global
environmental problems• Sustained qualitative improvement in loan and investment activities
through assessment of individual projects and loan and investment
programs• Assessment of environmental risk caused by loan and investment
activities

2. Promotion of environmental awareness through environmental
communication
DBJ raises environmental awareness and contributes to the solutionof problems by performing such knowledge accumulation functions
as contributing and sharing information.
• Continuous research and wide-ranging advisory activities relating
to environmental issues• Activities to promote international cooperation, including the
distribution of information about environmental initiatives by Japan• Sharing of information about DBJ’s environmental efforts, including
the Environment Policy
3. Promotion of environmental awareness activities in offices
DBJ complies with environmental laws and regulations and promotes
activities to reduce the environmental impact of our operations.
• Promotion of resource and energy conservation and recycling
activities• Promotion of environmentally friendly sourcing of supplies under
the Green Purchasing Law and other systems• Prevention of environmental pollution
To achieve the above objectives and continuously improve on them, DBJ
operates its Environmental Management System, ensuring that anyone
working at or for DBJ is familiar with the Environmental Policy and strives
to raise environmental awareness.

60

Responsibilities as a Member of Society

Intellectual Asset Report

DBJ’s executives and regular employees
continually take on new challenges, whileremaining firmly committed to the Bank’sfour core values: a long-term perspective, neutrality, public-mindedness andreliability. The intellectual assets the
Bank has built up over the years helps
form the financial platform and enables
DBJ to provide services that extend
beyond merely providing funds.
Employing these assets, we endeavor toaddress the needs of the times and fulfill
our role in enhancing socially responsible
activities among companies.

61

Intellectual Asset Management■ Corporate Value and Intellectual Asset Management
Intellectual Assets
Companies ensure ongoing prosperity and profit byconsistently differentiating themselves from competitors.
In this process, companies must enhance their operations
and increase the differentiation of the products and services they offer. Identifying their important management
resources and sources of competitiveness is also essential.
Specific technologies, expertise, human resources andbusiness models are some factors that lead todifferentiation but are invisible to the casual observer.
Determining an entity’s true corporate value requires theevaluation of these company-specific strengths. DBJ’s
activities related to intellectual assets are designed tofoster the application of these intangible sources of corporate value, which underpin a company’s future economic
performance.

Intellectual Asset Management Essential to Enhancing Corporate Value
Although intellectual assets are intangible in the sense thatthey are not recorded on a company’s financial statements,
they are a core component of corporate value. Managing
intellectual assets effectively clarifies corporate awarenessof key areas of effectiveness and encourages increases incorporate value.

Listed companies are finding that aggressively disclosing intellectual asset information helps markets value themmore appropriately. For this reason, the introduction ofregulatory frameworks to encourage or require listed companies to disclose non-financial information has grown into
a global trend, beginning from Europe.

■ DBJ’s View on Intellectual Assets
Dating back to the time of our predecessor institutions, wehave considered maintaining the trust of our clients andsociety at large to be our most important objective. From
this standpoint, we have created a wide variety of
networks spanning both the public and private sectors.
Based on the our four core values, our executives andregular employees have developed the ability to evaluate
companies and projects over the long term. We haveaccumulated a wealth of expertise in long-term screening
and evaluation of such projects and a keen awareness of
their ability to address issues that are products of thetimes and the issues faced by local communities.
In the process, we have become a repository ofintellectual assets. Our expertise in resolving issues

through the application of new financial methods, thewidespread use of our financial platform and our economic
and social contributions have created a new DBJ asset.
This asset has also led to the development of the financial
methods described below. This asset enables us torespond quickly to changing policy requirements andplays a major role in our ability to continue adding
economic and social value.
In the future, we aim to maintain our economic andsocial contributions as a private-sector financial institution.
We believe that the ability to clearly identify and make useof intellectual assets will be an increasingly importantfactor in achieving this goal.

Relationships among Intellectual Assets, Business Models and Corporate Value
Corporate ValueBusiness Model

Financial
AssetsTangible
Fixed Assets

Created by DBJ from Ministry of
Economy, Trade and Industry materials

62Intellectual Asset Management

Related
Structural
AssetsHuman
Resources

Intellectual Assets

Organizational
Structural
Assets■ DBJ’s Utilization of Intellectual Assets
One school of thought defines intellectual assets as theunderstanding of and reporting on an entity's networks
and customer bases (related structural assets),management team and employees (human resources) andintellectual assets and business processes (organizational
structural assets). Below, we introduce DBJ's intellectual
assets and activities according to this segmentation.

Related Structural Assets
As part of our system of planning and making investments
and extending loans, we cooperate with central government agencies and regional government bodies, share
their awareness of issues and support projects that havepolicy significance. As a financial institution, DBJ disseminates various information concerning the screeningof investments and loans and the provision of funds. This
information benefits private-sector companies by distillingout the issues that face them directly and serves as
feedback to the government. The information helps
improve and raise the effectiveness of measures

introduced by central government agencies and regional
government bodies.
DBJ also works to create and develop financial
platforms that make use of new financial methods. To
construct these platforms, we collaborate with public- andprivate-sector financial institutions in Japan and overseas
and maximize our networks of university professors, attorneys, certified public accountants and other professionals.
This multifaceted combination of networks consisting ofprofessionals in a host of fields in industry, academia andthe government constitute DBJ’s related structural assets.

Human Resources
Appropriately judging medium- to long-term investments
and loans requires all of DBJ’s executives and regular
employees to maintain a long-term perspective and makefinancial decisions from a neutral, as well as a policybased, standpoint. In an era characterized by increasingly
complex economic and social issues and increasingly
sophisticated business skills, this perspective has a major
impact on DBJ’s ability to contribute to business formationand the financial structure. Our ability to provide solutions
that are appropriate for companies, as well as for the
economy and society in a broader sense, depends on theability of our human resources-executives and regular
employees who are professionals in various fields-to takea public-minded view as they consider such issues. Their
success in these endeavors wins the trust of clients andsociety at large.
To impart various technical skills, DBJ maintains
training menus that include a 2.5-month corporate financetraining program. This program, for all new employees,
helps develop screening expertise. This menu, combinedwith on-the-job training, raises the level of specialist
expertise among DBJ executives and regular employees.
We maintain a number of personnel exchange anddispatch programs with domestic and overseas universities
and research institutions, as well as other international
institutions, that help form our networks. These programs
help DBJ develop and introduce new financial methods,
as well as strengthen network ties. DBJ has also established the Research Institute of Capital Formation, which
carries out financial research, as well as research on global
warming countermeasures and other efforts to create asustainable society. The research that the center producesfrom a neutral and long-term perspective is highly regarded
by the academic community and other experts. This
research is another intangible asset for DBJ.

Organizational Structural Assets
Unlike manufacturing companies, DBJ has no explicit
intellectual assets, such as patent rights. At the sametime, we introduce new financial methods to Japan, workwith private-sector financial institutions to create financial
platforms and contribute to the economy and society in a
number of other unique ways. These activities rely on ourorganizational adeptness-our ability to ascertain emerging
issues quickly and deploy appropriate personnel quickly.
This ability, combined with the long-term financial data wehave accumulated over 50 years of investment and loan
operations and a corporate culture of always considering
projects in an economically rational manner, as well as interms of their broader economic and social significance,
constitute DBJ's organizational structural assets, as does
the smooth and rapid communication process resulting
from the common language that has evolved throughcorporate financing training and other channels.

Intellectual Asset Management63

■ Advanced Initiatives Involving New Financial Methods
That Utilize Intellectual Assets
We are a leader in leveraging our intellectual assets tointroduce new financial methods into Japan. Our
pioneering efforts come from maximizing our intellectual
assets—cooperation with local communities, in-househuman resources and expertise cultivated through longexperience. Operating within complex financial markets,
DBJ will maintain these activities while continuing tocontrol and distribute risk as effectively as possible.
The United Kingdom introduced the Private FinanceInitiative (PFI) scheme in 1992 to encourage privatecompanies to fund or manage projects that are typicallyoperated by the public sector. As a leader in absorbing
and accumulating this expertise, DBJ has participated innumerous PFI projects in Japan. By shifting to the private
sector the responsibility for constructing, maintaining andoperating public facilities, the country benefits fromprivate-sector management expertise and technical capabilities. By appropriately allocating risks among the private
and public sectors, PFI is an efficient and effective way toprovide public services. With PFI, project financing is themethod generally used to raise funds, as project roles areallocated appropriately and long-term business is assured.
DBJ provides a full range of financing options in thearea of business revitalization. After filing applications
according to Civil Rehabilitation Law or Corporate
Rehabilitation Law procedures, companies typically require
working capital during the period when the viability of theirplans is being reviewed. To meet this need, DBJ provides
debtor-in-possession (DIP) financing as temporary working
capital to enable such companies to continue operating
and maintain value in the best portions of their businesses.
In addition, the Bank creates business revitalization funds
to help companies normalize their operations through aprocess of operational selection and focus, and reduce
their debt levels. We also apply our expertise through suchfinancial methods as asset financing to raise the value of
operations. Such financing plays an important role in helping companies revitalize their businesses and reinvigorates
the financial sector.

■ Relationship between Intellectual Assets and CSR at DBJ
The figure at the lower right-hand corner contrasts intellectual assets as viewed by DBJ and DBJ’s role as seen bysociety. Evaluated in this sense, intellectual assets andCSR are two sides of the same coin.
For example, we fully mobilize our intellectual assetsnetworks with central government agencies and regional
government bodies, experts and clients; our humanresources comprising executives and regular employees;
and our accumulation of experience and expertise-toserve a vital CSR role through our system for promoting
environmentally conscious management and our loan program for promoting disaster management. At the sametime, our systems provide a strong backup to the CSR
activities of our business partners.
Companies that access these systems via the ourloans based on environmental ratings or our loan programfor promoting disaster prevention have cause to reconsider their conformance with various laws and regulations,ensure safe and secure workplace working and surrounding environments and provide quality products and services through fair competition. These activities reinforce a64Intellectual Asset Managementcompany’s customer base and raise corporate value by
fulfilling social responsibilities.
By employing our intellectual asset in these ways, wego beyond merely providing financing. We also play a rolein promoting increasingly sophisticated corporate CSR
management.
Relationship between Intellectual Assets and CSRIntellectual Asset
Elements

CSR Elements

Related
Structural Assets
Networks andcustomer base

Customer Satisfaction
Maintaining
Service Quality
Fair Competition

Human
Resources
Management teamand employees

Human Resource Education
Labor Standards
Human Rights
Working Environment

Organizational
Structural Assets
Intellectual assets andbusiness processes

Legal and Regulatory
Conformance
Corporate Ethics

Created by DBJ from Ministry of Economy, Trade and Industry materials

Financial Platform that Enables DBJ to Meet the Needs of the Times■ Defining “Financial Platform”
In DBJ's definition, “financial platform” refers to theamount and quality of funds to which corporate and otherclients have access, the systematic formulation of basesthat affect the diversity of fund-raising methods, financial
expertise and practices, market transparency and degreeof market participation.
The more complete the financial platforms, which are
indispensable to financial system soundness and macroeconomic vigor, the greater is their effectiveness at
promoting the revitalization of businesses and urban andlocal communities and the creation of new industries.
However, financial platforms, which are an institutional,
general-access capital good, are not formed overnight.

Creating the framework of systems and laws that support
corporate economic activity involves the application ofexperienced and real-world expertise of financial institutions and businesses, as well as an accumulated body ofresults that can be used for future reference (precedents,
transaction cases and the like). Furthermore, as financial
platforms function inadequately if they are used by only aminority of participants, a catalyst is needed to encourage
participation from a broad range of players.
Owing to our neutral position and advanced-player
status, we are perfectly suited to serve as the catalyst
for developing and maintaining financial platforms incooperation with private-sector financial institutions.

■ Activities Involving Financial Platforms
Example 1: Structured Financing
We support the development of Japan’s financial markets
through our early involvement and building the base forstructured financing. Structured financing includes project
financing, such as PFI, in which financing is repaid throughproject cash flows, as well as real estate liquidization.
Given our experience at forming projects andevaluating operational viability from our characteristicallylong-term perspective, we are ideally situated to participate
in structured financing based on long-term contracts. We
play an important role in ensuring the long-term successof projects without being swayed by short-term profitability
considerations. DBJ’s position of neutrality enables it toprovide advice and arrange structured financing, to whichinterwoven interests are key, without being affected by
special-interest relationships. Our contributions to theformation of legal systems and regulations, as well as tobusiness creation, make us a trustworthy moderator
between public and private interests. By applying ourdistinctive status to structured financing activities andmaximizing our wide-ranging network in the industrial,academic and public communities, we collaborate withother financial institutions to help build and maintain thefinancial platform for structured financing.

Project Financing Example: Electric Power Generation ProjectSponsor A

FundingSponsor B

Electric Power
Generation Company

Electric power supply
contract (15 years)

Power Plant G

Special-Purpose
Company (SPC)

Banking Syndicate

Trading Company F
Fuel (coal, gas)
supply contract

FinancingConstruction contract

Plant COperational repair and maintenance contract

Factory E

Plant D
Plant delivery contract

Technical guidance contract

Financial Platform that Enables DBJ to Meet the Needs of the Times

65

Example 2: Venture Company Support
DBJ has supported venture companies for more than adecade and in a variety of ways. In addition to providing
financing and guarantees, we support financing throughincubation funds and fostered successful technicaldevelopment through our Practical Application Support
Center for Technology. We have also developed a numberof risk evaluation and support measures suited for venturecompanies. In terms of financing methods, from the time
we began supporting venture companies we provided

financing that used intellectual property rights as collateral.
Responding dexterously to changing economic and financial circumstances, as well as legal reforms, we also introduced the acceptance of bonds with stock transfer rights
and loans with new share options.
Our success in this sector reflects our distinctive ability
to screen companies and projects from a long-term
perspective, as well as our wide-ranging networks, which
include venture capitalists and technical specialists.

DBJ’s Venture Company Support System
Investment via
New Business
Investment Co., Ltd.

Corporate
Value

Exit
(IPO, M&A,
other methods)

Financing using intellectual
property rights as collateral
Loans with newshare options

Financing systems for new
industry creation and invigoration

Generalfinancing

Incubation Funds
Business Stage
SeedingStartup

Early

MiddleLater

Collaboration between industry,
academia and the public sector

Example 3: Business Revitalization
Since the late 1990s, which were characterized by anincreasing number of bankruptcies and underperforming
companies, the bad-debt issue and financial system
uncertainty have beleaguered the Japanese economy, but
the redistribution of resources has played a key role in its
reinvigoration. We believe that our creation of a framework
to support underperforming companies in developing andmaintaining valuable areas of business has helped resolvethese issues, and that our myriad tools have supported
business revitalization. One such tool is early debtor-inpossession (DIP) financing, which provides funding tocompanies that have filed for bankruptcy protection in the

period while their revitalization plans are being reviewed.
Another tool is business revitalization funds, which support
capital restructuring by acquiring shares in underperforming
companies. We also provide exit financing, which provides
companies that are restructuring with the cash to operateas ordinary companies. Serving as our background forsuch endeavors is our accumulation of unique knowledge
concerning capital policies for structured financing,derived through years of experience in policy-based
financing. By applying our experience and expertise inbusiness revitalization, we raise corporate value by usinga host of methods.

Using Business Revitalization Funds to Support Restructuring(4)

Company to be Revitalized(Revitalize in line with restructuring plans)

(2)

(3)
Acquisition of debt,
shares following debt-equity
swap, in-kind funding, etc.

Monetaryfunding

Relisting, M&A,
Other Fund, etc.

(5)Business Revitalization Fund
Operated by managementcompanies, centering on
private-sector specialists

Income from
Disposal of
Shares, Dividends

Restructuring Plan

Restructuring
Support

Disposalof shares

Funding(6)
Current creditors

66(1) Formulate economically rational restructuring plan
( Guidelines on legal or private liquidation)(2) Investors providing monetary funding

(4)

(3)
(1)

Banking
SyndicateInvestors (including DBJ)

Financial Platform that Enables DBJ to Meet the Needs of the Times(3) Debt reduction through financial restructuring and funding
Example: Sale of shares (or use of in-kind funding) following
debt-equity swap
( Due diligence on corporate value)(4) Promote business restructuring of corporate revitalization target
through restructuring support (including new funding) and DIP
financing through banking syndicate(5) Raise value of assets invested in fund by enhancing corporate
value(6) Distribute fund investment returns

Example 4: Environmental and Disaster Response
From early on, DBJ has supported efforts aimed at achieving harmony with the environment and creating a safe andsecure society. In fiscal 2005, we introduced a system forpromoting environmentally conscious management. Thisfinancing method uses a DBJ-developed screening
system to score companies on their degree of environmentally conscious management. Companies that score
particularly well in these ratings are offered preferential
interest rates at three levels depending on their rating. This
environmental rating system is the first such financial certification system in the world. Furthermore, in fiscal 2007
we introduced a loan program for promoting disastermanagement. This financing system is a proprietary rating

system based on the Japanese Cabinet Office Central
Disaster Prevention Council’s Self-Evaluation Indicators ofCorporate Initiatives on Disaster Prevention. In this new
financing method, we use our specialized disaster prevention ratings to evaluate corporate disaster response activities and offer preferential financing to companies involved
in disaster response businesses.
Through informational feedback and monitoring of
our rating processes, we provide companies with useful
information. At the same time, we work to develop new
financial methods and support businesses throughwin-win relationships.

Overview of Program for Promoting Environmentally Responsible Business Management
DBJ

Company
Screening

CreditRatingConclusionof Contract,
Extensionof Credit

Creditdecision

Company
Creditinquiry

Environmental
Screening

Environmental
RatingInterest rate,
reflecting resultsof four-stage
evaluation

126 Items*1(1) General management (corporate
governance, etc.)(2) Operations related (capital investment, etc.)(3) Environmental performance*2(Global warming countermeasures, etc.)
Taking into account industry-specificcharacteristics

Four-Stage Evaluation• Particularly impressive:
Policy-based rate II• Impressive: Policy-based rate I• Adequate: Regular interest rate
• Inadequate: Ineligible

Financing andprivately
subscribedbondguarantees

Monitoring,
Exercise of
RightsContractual
covenants*1: For manufacturers*2: In accordance with Ministry of the Environment
Environmental Performance Indicators for Businesses

Example 5: EQ-LINE
As awareness of the need for disaster preparedness
grows among Japan’s leading corporations, an increasing
number of companies are creating business continuity
plans. In the past, companies had few options in preparing
for the financial impact of earthquakes other than to takeout earthquake insurance. As an alternative, DBJ is creating EQ-LINE, which allows companies to reserve financing
to become available in the event of a large-scale
earthquake.
For companies that sign up for such financing
beforehand, EQ-LINE is designed to provide financing thatenables companies to continue operating even if impacted
by an earthquake of a specified magnitude and to rebuildin the wake of such an earthquake. In this sense, EQ-LINEis a type of risk financing that effectively provides companies with a degree of certainty that they will be able tocontinue business. Creating this system requires the evaluation of earthquake risk, and collaboration to create asystem of funding for access when an earthquake strikes.
DBJ is working with Mitsubishi UFJ Trust and Banking
Corporation, Nikko Citigroup Limited and several otherpartner companies to formulate an appropriate schemethat will operate efficiently.
In the future, we will continue our proactive support ofcorporate disaster preparedness measures as part of ourcontribution to achieving a sustainable society.

Financial Platform that Enables DBJ to Meet the Needs of the Times

67

Example 6: M&A Advisory Services
Amid an increasingly diverse range of corporate development options, business restructuring that involves
operational selection and focus, as well as industry
restructuring, M&A activity is increasingly prevalent.
Although M&A activity sometimes connotes hostile
takeovers, mergers and acquisitions can be a method forachieving better employment stability and a stronger competitive position. As negotiating the value of a target entity
is burdensome, in the past large corporations were themain participants in M&A activities. However, to meet agrowing interest in M&A by regional companies and theincreasing desire of overseas companies to develop operations in Japan, we have begun offering M&A advisory
services that make use of our own information

infrastructure. These services utilize the wide-ranging networks that DBJ has cultivated through other operations
and include networks involving cooperation with regional
financial institutions, as well as legal and accounting firms
and other organizations. Through our M&A advisory
services, we provide clients of all sizes in a wide range ofbusinesses with strategic consulting, long-term advice forcompanies on the buying or selling end of M&A activities,
financing and various other services.
DBJ’s position of neutrality and long-term perspective
provides the background of trust that enables it to serve
as a moderator of interests among transaction parties andpromote M&A business that is socially and economicallybeneficial.

Overview of M&A Advisory Services
Regional Bank
M&A Networks
M&A information

DBJ

JETRO
Investment Banks
Law Firms
Accounting Firms
OthersCommercial
Banks

Matching andAdvisory Services

Financing

M&A information

DBJ’s Clients
DBJ’s Practical Application
Support Center for Technology

DBJ DIP Financing
DBJ Financing
DBJ Investing

DBJ’s Networks• Transactions with more than 4,000 entities• Financing of more than 700 foreign-capitalizedcompanies• Operations at 19 locations in Japan and six overseas• Regional bank M&A service networks with 75
financial institutions, overseas network with JETRO• Relationships with Japanese and overseas
accounting firms, law firms, financial institutions andinvestment funds

Example 7: Safety Net Functions
In addition to earthquakes, typhoons and other large-scale
natural disasters, financial system stability can be affectedby the spread of SARS, BSE and other diseases, theoutbreak of terrorism or myriad other factors. In suchtimes of crisis, when unexpected financial needs arise
peacetime financial platforms may cease to function,
resulting in direct consequences for businesses thatprovide economically and socially important services.
In preparation for such eventualities, we play the role ofa safety net for businesses of economic and social importance by drawing upon aspects that remain unchanged
from our peacetime persona—the ability to evaluate risk
based on a long-term perspective and substantial
intellectual assets.

Recent Activities
1995 Rebuilding after the Kobe Earthquake

2004 Rebuilding after the Niigata Chuetsu Earthquake

1997 Response to credit crunch2005 Rebuilding after Fukuoka Seiho Oki Earthquake

2000 Rebuilding following Mt. Usu eruption

2006 Asbestos-related measures

Recovery support following flooding in Tokai region
2001 Response to effects of terrorist attacks on United States
Responses to effects of SARS and BSE outbreaks

68

Financial Platform that Enables DBJ to Meet the Needs of the Times

Measures to counter sharp rise in crude oil prices
2007 Rebuilding after Noto Peninsula Earthquake

Financial Condition69

• Compliance with Corporate Accounting Standards
The consolidated financial statements of the preceding consolidated
accounting period (April 1, 2005 to March 31, 2006) have been audited
and certified by ChuoAoyama Pricewaterhouse Coopers and the current
consolidated accounting period (April 1, 2006 to March 31, 2007) havebeen audited and certified by Misuzu Audit Corporation. The financial
statements of the preceding accounting period (April 1, 2004 to March
31, 2005) have been audited and certified by ChuoAoyama
Pricewaterhouse Coopers and the current accounting period (April 1,2005 to March 31, 2006) have been audited and certified by Misuzu
Audit Corporation.

• Compliance with Accounting Standards for Special Agencies, etc.
The Japanese financial statements of the preceding accounting period(April 1, 2005 to March 31, 2006) have been audited and certified by
ChuoAoyama Pricewaterhouse Coopers and the current accounting
period (April 1, 2006 to March 31, 2007) have been audited and certified
by Misuzu Audit Corporation.

70

Financial Condition

Accounts Based on
Corporate Accounting Standards

71

Report of Independent Auditors

A network firm ofMisuzu Audit Corporation
Kasumigaseki Bldg., 32nd Floor
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo 100-6088, JAPAN
Telephone 81-3-5532-2100
Facsimile 81-3-5532-2901

Report of Independent Auditors

To the Governor ofDevelopment Bank of Japan

We have audited the accompanying consolidated balance sheets of Development Bank of Japan and its
subsidiaries as of March 31, 2007 and 2006, and the related consolidated statements of operations, changes in
net assets, and cash flows for the years then ended, all expressed in Japanese yen. These consolidated financial
statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Development Bank of Japan and its subsidiaries as of March 31, 2007 and 2006,
and the consolidated results of their operations and their cash flows for the years then ended in conformity withaccounting principles generally accepted in Japan.

The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader, have beentranslated on the basis set forth in Note 1 to the accompanying consolidated financial statements.

Misuzu Audit Corporation
Tokyo, Japan
June 26, 200772

Accounts Based on Corporate Accounting Standards (Consolidated)

Consolidated Balance Sheets
Millions of yen

At March 31

AssetsCash and Due from banks (Note 3(a))
Reverse Repurchase Agreements (Note 4)
Money Held in Trust (Note 27)
Securities (Notes 4, 13 and 27)
Loans (Note 5)
Other Assets (Note 6)
Tangible Fixed Assets (Note 7)
Intangible Fixed Assets (Note 7)
Deferred Charges on Bonds and Notes
Customers’ Liabilities for Acceptances andGuarantees
Allowance for Loan Losses (Note 8)
Allowance for Investment Losses
Total Assets

Thousands of U.S. dollars

2007

2006

¥

40,264
223,82990,805
420,860
12,089,812
53,26235,7781—¥

28,187150,003
28,422433,021
12,873,226
203,896
36,16912,610$

273,965(146,626)(3,093)¥13,078,861

161,567(199,702)(31,462)¥13,685,943

2,320,756(1,242,067)(26,205)$110,790,860

Millions of yen

Liabilities and Net Assets
Liabilities
Bonds and Notes (Note 9)
Borrowings (Note 10)
Other Liabilities (Notes 11 and 24)
Allowance for Bonus Payments
Allowance for Employee Retirement Benefits (Note 22)
Acceptances and Guarantees (Note 12)
Total Liabilities
Net Assets
CapitalRetained Earnings (Note 14)
Total Equity
Net Unrealized Gain on Available-for-sale Securities,
Net of Taxes (Note 27(3))
Net Deferred Hedge Losses on hedges,
Net of Taxes (Note 6)
Total Revaluation and Translation Adjustments
Minority Interests
Total Net Assets
Total Liabilities and Net Assets

2007

341,083
1,896,058
769,2123,565,101
102,412,647
451,183
303,077
15—

Thousands of U.S. dollars

2007

2006

2007

¥ 2,671,644
7,923,935
192,475
1,617
29,558273,965¥11,093,197¥ 2,261,799
9,004,474
211,104
1,658
30,887
161,567¥11,671,492$ 22,631,468
67,123,556
1,630,459
13,703250,386
2,320,756$ 93,970,328¥ 1,272,286
809,898¥ 2,082,184¥ 1,272,286
734,637¥ 2,006,923$ 10,777,518
6,860,636$ 17,638,154¥21,539¥3,415(122,294)(100,754)
4,234¥ 1,985,663¥13,078,861

—
3,415
4,111
¥ 2,014,450¥13,685,943

¥

¥

$

182,463(1,035,957)(853,494)
35,872$ 16,820,532$110,790,860$

Accompanying notes are an integral part of these financial statements.

Accounts Based on Corporate Accounting Standards (Consolidated)73Consolidated Statements of Operations
Millions of yen

For the Fiscal Years ended March 31

Revenue
Interest Income
Interest on Loans
Interest and Dividends on Securities
Interest on Reverse Repurchase Agreements
Interest on Due from banks
Other Interest Income
Fees and Commissions (Note 15)
Other Operating Income (Note 16)
Other Ordinary Income (Note 17)
Collection of Written-off Claims
Gains on Sales of Fixed Assets
Total Revenue
Expenses
Interest Expense
Interest on Bonds and Notes
Interest on Borrowings
Other Interest Expense
Fees and Commissions (Note 18)
Other Operating Expenses (Note 19)
General and Administrative Expenses
Other Ordinary Expenses (Note 20)
Losses on Impairment of Fixed Assets (Note 21)
Losses on Sales of Fixed Assets
Total Expenses
Earnings before Income Taxes
Income Taxes (Note 3(n))
Current
Deferred
Minority Interests in Net Earnings
Net Earnings
Accompanying notes are an integral part of these financial statements.

74

Accounts Based on Corporate Accounting Standards (Consolidated)Thousands of U.S. dollars

2007

2006

2007

¥329,480
325,844
2,450
707
92
385
4,051
—
62,3255,875
0¥401,732¥367,600
365,949
1,640
6
4
0
2,430
4
33,7827,414
653¥411,885$2,791,021
2,760,220
20,757
5,992
784
3,268
34,321—
527,961
49,7691$3,403,073¥236,812
33,973
179,674
23,16465
2,038
25,35461,445—56¥325,772¥ 75,960
¥
672
661
10
27
¥ 75,260¥271,421
30,920221,070
19,43054
1,737
25,82520,368337
12¥319,757¥ 92,128
¥
23
2
20
(125)
¥ 92,231$2,006,034
287,792
1,522,017
196,225554
17,271
214,774
520,504—479$2,759,616$ 643,457
$
5,696
5,607
89
233
$ 637,528

Consolidated Statements of Cash Flows
Millions of yen

For the Fiscal Years ended March 31

Cash Flows from Operating Activities
Earnings before Income Taxes
Depreciation and Amortization
Losses on Impairment of Fixed Assets (Note 21)
Amortization of Goodwill
Change in Allowance for Loan Losses
Change in Allowance for Investment Losses
Change in Allowance for Bonus Payments
Change in Allowance for Employee Retirement Benefits
Interest Income—Accrual BasisInterest Expense—Accrual Basis
Net Gains and Losses on Securities
Net Gains and Losses on Money Held in Trust
Net Gains and Losses on Foreign Exchanges
Net Gains and Losses on Sale of Fixed Assets
Net Change in Loans
Net Change in Bonds and Notes
Net Change in Borrowings
Net Change in Reverse Repurchase Agreements
Interest Income—Cash BasisInterest Expense—Cash BasisOther
Sub-total
Refund of (Payments for) Income Taxes
Net Cash provided by (used in)Operating Activities
Cash Flows from Investing Activities
Payments for Purchases of Securities
Proceeds from Redemption of Securities
Payments for Money Held in Trust
Proceeds from Money Held in Trust
Payments for Purchases of Fixed Assets
Proceeds from Sale of Fixed Assets
Payments for Purchases of Subsidiaries(affecting the scope of consolidation)
Net Cash (used in) provided by
Investing Activities
Cash Flows from Financing Activities
Capital Contribution from the Japanese Government
Payment to National Treasury
Dividends Paid to Minority Interests
Net Cash provided by Financing Activities
Effect of Exchange Rate Changes on Cash andCash Equivalents
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at the Beginning of
the Fiscal YearNet Increase in Cash and Cash Equivalents
Resulted from the newly Consolidation ofSubsidiary
Cash and Cash Equivalents at the End of
the Fiscal Year (Note 3(a))

Thousands of U.S. dollars

2007

¥

¥

2006

75,960779—(20)(47,168)(44)(40)(1,329)(329,480)
236,71347,077(1,349)(0)56773,633
410,555(1,080,539)(73,825)
334,315(236,130)(80,579)
28,583
294

¥

2007

92,128851
337(1)(17,699)
10,847
6(1,330)(367,600)
271,421(1,411)
(965)
(0)
(641)
918,698
266,582(1,210,325)(42,004)
375,742(274,817)(1,011)18,807(795)$

643,457
6,606
—
(175)
(399,562)
(378)
(342)
(11,265)(2,791,021)
2,005,200
398,794(11,429)(4)477
6,553,438
3,477,808(9,153,233)(625,378)
2,831,979(2,000,254)(682,586)
242,132
2,493

28,87718,012

244,625(314,948)
357,050(64,674)
3,609
(445)
2

(89,980)
50,349(25,525)
2,205
(188)
700

(2,667,926)
3,024,566(547,857)
30,575(3,774)
18

90

7

762

(19,317)(62,431)(163,636)—(1,179)—(1,179)56,825(2,836)(129)
53,858—(9,990)—(9,990)

0
8,381

0
9,439

1
70,99927,86918,429236,079———

36,250¥27,869$307,079

Accompanying notes are an integral part of these financial statements.

Accounts Based on Corporate Accounting Standards (Consolidated)75

Consolidated Statements of Changes in Net Assets
Millions of yen

For the Fiscal Year ended March 31, 2006

Balance at March 31, 2005

CapitalBalance at March 31, 2006

Revaluation and translation adjustments

Retained
Earnings

Net Unrealized Net Deferred
Total
Gain (Loss) on
Hedge
Revaluation
Available-for-saleLossesandSecurities,
on hedges,
Translation
Net of Taxes
Net of Taxes Adjustments¥1,215,461 ¥653,043

Total
EquityMinority
Interests

Total
Net Assets¥1,879,917¥1,868,504¥ 6,915¥—¥ 6,915¥4,498—92,231

92,231————

92,231

56,825(10,636)

46,189(3,499)—(3,499)(387)

842,303¥1,272,286 ¥734,637¥2,006,923¥ 3,415¥—¥ 3,415¥4,111¥2,014,450

Minority
Interests

Total
Net Assets¥2,014,450

Net Earnings
Net Changes in Items other than Equity

EquityMillions of yen

For the Fiscal Year ended March 31, 2007

Balance at March 31, 2006

CapitalEquityRevaluation and translation adjustments

Retained
Earnings

Net Unrealized Net Deferred
Total
Gain (Loss) on
Hedge
Revaluation
Available-for-saleLossesandSecurities,
on hedges,
Translation
Net of Taxes
Net of Taxes Adjustments¥2,006,923¥3,415

3,415¥4,111Net Earnings—

75,26075,260————75,260Net Changes in Items other than Equity

—

—

—

18,124(122,294)(104,170)

122(104,047)¥1,272,286 ¥809,898¥2,082,184¥21,539¥(122,294)¥(100,754)¥4,234¥1,985,663

Minority
Interests

Total
Net Assets

Balance at March 31, 2007

¥1,272,286 ¥734,637

Total
Equity¥—¥Thousands of U.S. dollars

For the Fiscal Year ended March 31, 2007

Balance at March 31, 2006
Net Earnings
Net Changes in Items other than Equity
Balance at March 31, 2007

CapitalEquityRevaluation and translation adjustments

Retained
Earnings

Net Unrealized Net Deferred
Total
Gain (Loss) on
Hedge
Revaluation
Available-for-saleLossesandSecurities,
on hedges,
Translation
Net of Taxes
Net of Taxes Adjustments

Total
Equity$10,777,518 $6,223,108 $17,000,626—$ 28,933$34,832$17,064,391

—

—

—

637,528

637,528———

153,530(1,035,957)(882,427)

1,040(881,387)$10,777,518 $6,860,636 $17,638,154$182,463$(1,035,957)$(853,494)$35,872$16,820,532

Accounts Based on Corporate Accounting Standards (Consolidated)—$

637,528

Accompanying notes are an integral part of these financial statements.

76$ 28,933—

Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying consolidated financial statements have been prepared from the accounts maintained by Development Bank ofJapan (“DBJ”) and its consolidated subsidiaries in accordance with accounting principles and practices generally accepted inJapan, which are different in certain respects as to the application and disclosure requirements of International Financial ReportingStandards.
The consolidated financial statements are not intended to present the financial position and the result of operations inaccordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan.
The amounts indicated in millions of yen are rounded down by omitting the figures less than one million yen. Accordingly, thesum of each amount appearing in the accompanying financial statements and the notes thereto may not be equal to the sum of
the individual account balances. Amounts in U.S. dollars are presented solely for the convenience of readers outside Japan. The
rate of ¥118.05=$1.00, the effective exchange rate prevailing as of March 31, 2007, has been used in the conversion. The
presentation of such amounts is not intended to imply that Japanese yen amounts have been or could have been readilytranslated, realized or settled in U.S. dollars at that rate or any other rate.

2. Basis of Consolidation(a) Scope of Consolidation
The consolidated financial statements include the accounts of DBJ and its consolidated subsidiaries, DBJ Business
Investment Co.,Ltd, DBJ Corporate Investment Fund (formerly DBJ Business Restructuring Fund prior to March, 2007), DBJ
Technology and New Business Creation Fund, DBJ VALUE UP FUND, DBJ Structured Investment Fund, DBJ Corporatemezzanine partners Co.,Ltd., DBJ Credit Line Ltd., New Business Investment Co.,Ltd. and one limited liability partnership. The
number of consolidated subsidiaries as of March 31,2007 and 2006 was 9 and 3, respectively.
In the fiscal year ended March 31, 2007, DBJ Corporate Investment Fund, DBJ Technology and New Business Creation
Fund, DBJ VALUE UP FUND and DBJ Structured Investment Fund were newly consolidated, as DBJ adopted the new
accounting standard, “Practical Solution on Application of Control Criteria and Influence Criteria to Investment Association”(Accounting Standards board of Japan Report No.20, September 8, 2006) commencing with this period. Also, DBJ Credit
Line, Ltd. and one limited liability partnership were newly consolidated on their establishment in the current year.
As of March 31, 2007, DBJ has 8 subsidiaries, Asuka DBJ Investment LPS, GAD financial Service Limited and certain
other subsidiaries, which are neither consolidated nor accounted for by the equity method, because underlying interests intheir assets, net earnings, retained earnings and deferred hedged gains and losses have no material impact on the
consolidated financial statements of DBJ. As of March 31, 2006, the number of such subsidiaries was 2.
As of March 31, 2007, DBJ invests in 5 companies, Tomatoh, Inc., Shin Mutsu-Ogawara, Inc. and certain othercompanies, in which DBJ has over 50% ownership interest. These companies are not considered to be subsidiaries andconsequently not consolidated because DBJ made those investments as part of its financing operations, which are DBJ’s
primary business, and did not intend to obtain control over their operating and financing policies. As of March 31, 2006, thenumber of such companies was 2.
Though DBJ has 15 affiliates as of March 31, 2007, Technology Alliance Investment, Ltd., Japan Energy Investment Inc.,
Asuka DBJ Partners Co.,Ltd., Intellectual Properties Development & Investment, Bridgehead Co.,Ltd and certain otheraffiliates, the equity method is not applied to them, since underlying interests in their net earnings, retained earnings anddeferred hedged gains and losses have no material impact on the consolidated financial statements of DBJ. As of March 31,
2006, the number of such affiliates was 4.
As of March 31, 2007, DBJ owns greater than 20% but less than a majority of voting stock of Nihonkai LNG Co., Ltd. and36 other companies. These companies, however, are not considered to be affiliates because DBJ made these investments aspart of its financing operations, which are DBJ’s primary business, and did not intend to obtain the ability to exercise
significant influence on their operating and financing policies. As of March 31, 2006, the number of such companies was 31.
On consolidation, significant intercompany accounts, transactions and unrealized intercompany profits have been eliminated.
(b) Year-end Date of Consolidated Subsidiaries
Fiscal year-end of the consolidated subsidiaries is March 31.
(c) Valuation of Consolidated Subsidiaries’ Assets and Liabilities
Assets and liabilities of newly consolidated subsidiaries are measured at fair value as at the date of acquisition of control.

Accounts Based on Corporate Accounting Standards (Consolidated)

77

(d) Amortization of Goodwill
The differences between the fair value of net assets and the cost of the acquired subsidiary are being amortized on a straightline basis over the estimated beneficial period. Minor differences are charged to income in the year of acquisition.
Effective from the year ended March 31, 2007, DBJ applied “Accounting standard for business combinations” (AccountingStandards issued on October 31, 2003 by the Business Accounting Council in Japan), “Accounting standard for businessdivestitures” (Accounting Standards Board of Japan Statement No.7) and “Implementation guidance on Accounting standard
for business combinations and Accounting standard for business divestitures” (Accounting Standards Board of Japan
Guidance No.10) both issued on December 27, 2005 by the Accounting Standards Board of Japan.

3. Summary of Significant Accounting Policies(a) Cash and Cash Equivalents“Cash and Cash Equivalents” in the consolidated statements of cash flows consist of cash on hand and due from banks.
The reconciliation between “Cash and Cash Equivalents” and “Cash and Due from banks” is as follows:
Millions of yen

Thousands of U.S. dollars

At March 31

2007

2006

2007

Cash and Due from BanksTime Deposits with Banks
Trust Money to Financial Agencies
Cash and Cash Equivalents¥40,264(4,000)(14)¥36,250¥28,187(300)(18)¥27,869$341,083(33,884)(120)$307,079(b) Securities
Held-to-maturity debt securities are stated at amortized cost on a straight-line basis, computed using the weighted averagemethod. Available-for-sale securities with readily available market quotations are stated at market value (cost is calculated
principally using the weighted average method), and other securities without market quotations are stated at cost or amortizedcost computed using the weighted average method. Investments in limited partnerships and other similar partnerships areaccounted for at the net amounts of DBJ’s underlying interests in their net earnings based on their most recent financial
statements.
Unrealized gain and loss on available-for-sale securities are included in net assets, net of income taxes.
Securities which are held as trust assets in money held in trust accounts are valued in the same way as securities above.
Effective in the fiscal year ended March 31, 2006, DBJ applied the accounting treatment for other compound instruments
which do not have the ability to increase paid-in capital (Guidelines on Implementation of Business Accounting Standard No.
12 issued by the Accounting Standards Board of Japan on March 30, 2006).
(c) Valuation Method for Derivative Financial Instruments
All derivative financial instruments are carried at market value, except for certain derivatives that are designated as hedging
instruments as discussed below.
(d) Hedge Accounting(i) Hedge Accounting
DBJ applies the deferral method of hedge accounting. Foreign currency swaps, which are used to hedge foreign currency
fluctuations are translated not at market values but at contractual rates, as the foreign currency swap contracts meet thehedging criteria under the Accounting Standards for Financial Instruments.
(ii) Hedging Instruments and Hedged Items• Hedging Instruments: Interest Rate Swaps
Hedged Items:
Bonds and Notes, Borrowings, and Loans• Hedging Instruments: Foreign Currency Swaps
Hedged Items:
Foreign currency denominated Loans and Bonds and Notes(iii) Hedging Policy
DBJ utilizes hedging instruments to hedge interest rate and foreign currency fluctuations on its assets and liabilities.
(iv) Evaluation of Hedge Effectiveness
DBJ evaluates the effectiveness of the hedges by testing whether the derivatives are effective in reducing the risks
associated with the hedged items.

78

Accounts Based on Corporate Accounting Standards (Consolidated)In regards to both interest rate swap contracts which meet the hedging requirements of accrual method*1 and foreign
currency swap contracts which meet the hedging requirements of assignment method*2, under the Accounting Standards for
Financial Instruments at the inception date, DBJ is not required to evaluate their hedge effectiveness periodically.
*1
If interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount tobe paid or received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities
for which the swap contract was executed.
*2
In cases where foreign currency swaps are used as hedges and meet certain hedging criteria, forward foreign exchange
contracts and hedged items are accounted for in the following manner;
1) If a foreign currency swap is executed to hedge an existing foreign currency asset or liability, a) the difference, if any,
between the Japanese yen amount of the hedged foreign currency asset or liability translated using the spot rate at the
inception date of the contract and the book value of the asset or liability is recognized in the statement of operations in the
period which includes the inception date, and b) the discount or premium on the contract (that is, the difference between
the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot
rate at the inception date of the contract) is recognized over the term of the contract.
2) If a foreign currency swap is executed to hedge a future transaction denominated in a foreign currency, the futuretransaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreign exchange
contract are recognized.
(e) Fixed Assets(i) Depreciation of Tangible Fixed Assets
Tangible Fixed Assets are depreciated using the declining-balance method, except for buildings (excluding installedfacilities) that are depreciated on a straight-line basis.
The estimated useful lives are principally as follows:
Buildings:
22 years to 50 years
Equipment:
3 years to 20 years(ii) Amortization of Intangible Fixed Assets
Intangible Fixed Assets are amortized using the straight-line method.
(iii) Accounting standard for impairment of fixed assets
On August 9, 2002, the Business Accounting Council in Japan issued “the Accounting Standard for Impairment of Fixed
Assets”. The standard requires that fixed assets be reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses shall berecognized in the statement of operations by reducing the carrying amount of impaired assets or a group of assets to therecoverable amount to be measured as the higher of net selling price and value in use.
DBJ has applied this standard from the fiscal year beginning April 1, 2005. In the banking industry, fixed assets arestated at cost less accumulated depreciation pursuant to the Enforcement Ordinance of the Banking Law for long term
credit banks and the accumulated impairment losses are also deducted from the book value of each asset.
(f) Amortization of deferred charges“Discounts on Bonds and Notes”, accounted as “Deferred Charges on Bonds and Notes” and “Premium on Bonds andNotes”, included in “Other Assets” on consolidated balance sheets respectively are amortized under the straight-line method
over the term of bonds and notes, and “Bonds and Notes Issuance Costs” are charged to income as incurred.
Although, the new standard, “Tentative Solution on Accounting for Deferred Assets” (ASBJ Report No. 19, August 11,2006), is effective from the year ended March 31, 2007, discounts and premium on bonds and notes as of March 31, 2007
are amortized under the straight-line method over the term of the bonds and notes continuously by applying the tentative
measure stipulated in this standard.
In accordance with the partial revision of “Accounting Standards for Financial Instruments” (the Business Accounting
Deliberation Council, January 22, 1999) as of August 11, 2006(ASBJ Statement No. 10) and the application effective from thefiscal year and interim period ending upon or after the public announcement of such, DBJ adopted the revised accounting
standard commencing in this fiscal year, and “Bonds and Notes” were stated at amortized cost (straight line method). As aresult, “Discounts on Bonds and Notes”, accounted as “Deferred Charges on Bonds and Notes” decreased ¥3,951 million

Accounts Based on Corporate Accounting Standards (Consolidated)79

($33,475 thousand), and “Premium on Bonds and Notes”, included in “Other Assets” decreased ¥1,632 million ($13,828
thousand), and “Bonds and Notes” increased and decreased such amounts.
(g) Foreign currency translation and revaluation method
Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the market exchange rates
prevailing at the fiscal year end.
(h) Allowance for Loan Losses
DBJ provides for “Allowance for Loan Losses” as detailed below pursuant to the internal policies for self-assessment of credit
quality and loan losses.
The allowance for claims on debtors who are legally bankrupt, in special liquidation or effectively bankrupt is provided forbased on the amount of claims, after the write-off described below, net of amounts expected to be collected through disposalof collateral or execution of guarantees.
The allowance for claims on debtors who are not legally bankrupt at the moment, but likely to become bankrupt, and forwhich future cash flows cannot reasonably be estimated, is provided for at the amount considered to be necessary based onan overall solvency assessment performed on the claims, net of amounts expected to be collected through disposal ofcollateral or execution of guarantees.
With respect to the claims on debtors who are likely to become bankrupt or to be closely monitored, and for which future
cash flows can reasonably be estimated, the allowance is provided for as the difference between the present value of
expected future cash flows discounted at the contracted interest rate and the carrying value of the claims.
The allowance for claims on debtors other than those described above is provided for based on the historical default rate,
which is calculated based on the actual defaults over a certain historical period (the average financing period for DBJ).
All claims are assessed initially by the investment and lending departments and then by the Credit Risk Management
Department, which is independent from the investment and lending departments based on internal policies for selfassessment of credit quality. The allowance is provided based on the results of the self-assessment.
With respect to the claims on debtors who are legally or substantially bankrupt with collateral or guarantees, the amount ofclaims exceeding the estimated market values of collateral or guarantees which are deemed uncollectible, have been writtenoff, and totaled ¥56,267 million ($476,643 thousand) and ¥95,546 million for the years ended March 31, 2007 and 2006,
respectively.
The allowance for claims on debtors other than those described above was previously provided for using the estimatedprobability of default. From the March 31, 2007 fiscal year, the default rate is used to provide for the allowance, which is
calculated based on the actual value of default experiences of the company. The calculation method has been changed
because the historical data of actual default loans value have been accumulated.
As a result of this change, net earnings increased by ¥17,738 million ($150,263 thousand).
(i) Allowance for Investment Losses“Allowance for Investment Losses” is provided for based on the estimated losses on investments.
(j) Allowance for Bonus Payments“Allowance for Bonus Payments” is calculated and provided for based on the estimated amounts of future payment
attributable to the services that have been rendered by employees and executive directors to the date of the balance sheets.
(k) Allowance for Employee Retirement Benefits“Allowance for Employee Retirement Benefits” represents future payments for pension and retirement benefits to employees
and executive directors, and is accrued based on the projected benefit obligations and estimated pension plan assets at eachfiscal year end. The actuarial gain or loss is recognized during the year it arises.
(l) Equipment Used under Finance Lease Agreements
Equipment used under finance lease agreements is accounted for as equipment leased under operating leases, except for
those in which the ownership of leased equipment is substantially transferred to the lessee.
(m) Consumption tax
Income and expenses subject to consumption tax exclude related consumption taxes paid or received.
(n) Income Taxes
DBJ is exempt from taxes based on income, however, DBJ is subject to parity taxes among local taxes. On the other hand,the consolidated subsidiaries are subject to income and local taxes.

80

Accounts Based on Corporate Accounting Standards (Consolidated)Deferred income taxes are recorded based on differences between the tax bases of assets and liabilities and those asreported in the consolidated financial statements, using enacted tax rates which will be in effect when the differences are
expected to reverse. The asset and liability method is used to determine deferred income taxes.
(o) Change of Accounting Policy
Effective from the year ended March 31, 2007, DBJ has applied “Accounting standards for presentation of net assets in thebalance sheet (Accounting Standards Board of Japan Statement No.5)”, and “Implementaion guidance for Accounting
standards for presentation of net assets in the balance sheet (Accounting Standards of Japan Guidance No.8)” both issued by
the Accounting Standard Board of Japan on December 9, 2005.
The amounts corresponding to the conventional “Equity” in the consolidated balance sheet is ¥2,103,723 million($17,820,617 thousand). DBJ presented its net assets in the consolidated balance sheet using the new standard as of March
31, 2006, retrospectively.
Furthermore, “Minority Interests” previously presented on the consolidated balance sheet between the liabilities section
and the equity section is presented in “Net Assets”.
Additionally, the consolidated statements of changes in net assets for the fiscal year ended March 31, 2006 are presented
under the new standard, retrospectively.

4. Securities
Securities as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

Japanese Government Bonds
Corporate Bonds
Equities
Other securities

Thousands of U.S. dollars

2007

2006

2007

¥120,705
96,374
114,865
88,914¥420,860¥189,645
48,961
139,591
54,822¥433,021$1,022,495
816,387
973,024
753,195$3,565,101

Notes: 1. Investments in subsidiaries and affiliates included in “Equities” as of March 31, 2007 and 2006 are ¥468 million ($3,969 thousand) and ¥205 million,
respectively. And investments in subsidiaries and affiliates included in “Other securities” as of March 31, 2007 and 2006 are ¥13,498 million ($114,345
thousand) and ¥1,339 million, respectively.
2. Contingent liabilities for guarantees on corporate bonds, included in securities, which were issued by private placement (Article 2 Paragraph 3 of the
Securities and Exchange Law) amounted to ¥130 million ($1,101 thousand) as of March 31, 2007.
3. There are no securities repledged as of March 31, 2007 and 2006 respectively, although securities accepted under repurchase agreements, can be sold or
repledged. Securities neither sold nor repledged are ¥223, 829 million ($1,896,058 thousand) and ¥150,003 million, respectively.

5. Non-performing Loans
The amounts of non-performing loans included in “Loans” on the consolidated balance sheets as of March 31, 2007 and 2006
are as follows:
Millions of yen

At March 31

Loans to Bankrupt Debtors
Delinquent Loans
Loans Past Due Three Months or More
Restructured Loans

Thousands of U.S. dollars

2007

2006

7,562
64,06528
73,624¥145,280¥ 4,313111,720—
89,301¥205,335

¥

2007

$

64,064
542,696237
623,672$1,230,669

Notes: 1. The amounts of loans indicated above are stated at gross amounts, before reduction of allowance for loan losses.
2. “Loans to Bankrupt Debtors” represent non-accrual loans to debtors who are legally bankrupt as defined in Article 96-1-3 and 4 of the Japanese Tax Law
Enforcement Regulation.
3. “Delinquent Loans” represent non-accrual loans other than (i) Loans to Bankrupt Debtors and (ii) Loans whose interest payments are deferred in order toassist or facilitate the restructuring efforts of borrowers in financial difficulty.
4. “Loans Past Due Three Months or More” are loans whose principal or interest payment is three months or more past due and do not fall under the categoryof “Loans to Bankrupt Debtors” or “Delinquent Loans”.
5. “Restructured loans” are loans whose repayment terms have been modified to the advantage of debtors through means such as reduction or exemption ofinterest rates, postponement of principal and interest payments, and forgiveness of loans to support or restructure the debtors’ businesses, and do not fallunder the category of “Loans to Bankrupt Debtors”, “Delinquent Loans”, or “Loans Past Due Three Months or More”.

Accounts Based on Corporate Accounting Standards (Consolidated)

81

DBJ provides commitment lines under which it lends, upon the borrowers’ request, necessary funds up to the pre-determinedamount that is within the borrowers’ financing needs for the projects and up to the agreed maximum amount to lend, provided
that their requests meet terms and conditions for disbursement prescribed in the loan agreements. The total balance of unused
commitment lines as of March 31, 2007 and 2006 are ¥331,130 million ($2,805,222 thousand), including ¥97,695 million($827,578 thousand) being financed within one year and ¥214,022 million, including ¥53,636 million being financed within one
year, respectively.

6. Other Assets
Other assets as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

2007

Prepaid Expenses
Accrued Income
Derivatives
Deferred Hedge Losses
Guarantee Deposits
Other

¥
99
48,068
3,316
—
426
1,350
¥53,262

Thousands of U.S. dollars

2006

¥

103
52,155
3,083
146,698411
1,444¥203,896

2007

$
844
407,188
28,095—
3,613
11,443$451,183

Notes: 1. Deferred Hedge Losses are net unrealized losses from hedging instruments. The gross amounts of deferred hedge gains and losses before netting are¥10,138 million and ¥156,837 million as of March 31, 2006, respectively.
2. From the year ended March 31, 2007, Deferred Hedge Losses are reclassified to “Net Assets”.
3. From the year ended March 31, 2007, Guarantee Deposits are reclassified from “Premises and Equipment” to “Other Assets”. Guarantee Deposits as ofMarch 31, 2006 is presented using the new presentation standard, retrospectively.

7. Fixed Assets
Tangible fixed assets and intangible fixed assets as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

Tangible Fixed Assets
Land
Buildings
Equipment
Less—Accumulated Depreciation
Net Book Value
Intangible Fixed Assets
Other
Less—Accumulated Amortization
Net Book Value

Thousands of U.S. dollars

2007

2006

2007

¥20,386
33,8201,926¥56,133(20,355)¥35,778¥20,386
33,813
1,973¥56,173(20,003)¥36,169$172,695
286,495
16,320$475,510(172,433)$303,077

¥
¥

¥
¥

$
$

¥

12
12
(10)
1

¥

11
11
(10)
1

$

107
107
(92)
15

Notes: From the year ended March 31, 2007, Premises and Equipment are reclassified to Tangible and Intangible Fixed Assets. Tangible Assets and Intangible Fixed
Assets as of March 31, 2006 are presented using the new presentation standard, retrospectively.

82

Accounts Based on Corporate Accounting Standards (Consolidated)8. Allowance for Loan Losses
Allowance for Loan Losses as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

General Allowance for Loan Losses
Specific Allowance for Loan Losses

Thousands of U.S. dollars

2007

2006

2007

¥ 96,933
49,692¥146,626¥120,170
79,532¥199,702$ 821,124
420,943$1,242,067

9. Bonds and Notes
Bonds and notes as of March 31, 2007 and 2006 are as follows:
At March 31
Description of Bonds
and Notes

Japanese Government-

Thousands ofCurrency andMillions of yen

Issue dateAmounts 2007
(In millions)Interest rate (%)

Maturity dateNovember 1996

—

2.90

November 2006

August 2000–

JPY613,000

0.80~2.10

August 2010–

2007

¥

—

guaranteed Bonds 186*1
Japanese Government-

U.S. dollars

2006

¥

10,0002007$—[10,000]

guaranteed Bonds 1-16 February 2007

612,132

423,000

5,185,363

25,08775,000212,516

December 2021

Japanese Government-

December 1996– JPY 25,000

guaranteed Foreign

September 1998

1.81~2.875

December 2006–
September 2028

[50,000]

Bonds 65,67*2
Japanese Government-

November 1999– JPY846,906

guaranteed Foreign

February 2007

Bonds 1-12

1.05~6.875

USD2,350

June 2010–

846,906

664,389

7,174,131

May 2005–

72,766

109,410616,397

December 2008

[33,250][36,600][281,660]

November 2026

EUR750Japanese Government-

May 1995–

underwritten Bonds

December 1998

JPY72,810

1.10~3.60

186-211*1
FILP Agency Bonds

September 2001– JPY1,115,000 0.40~2.63

September 2006–

1,114,753

980,000

9,443,061

1-31*3

March 2007

December 2036

[150,000][100,000][1,270,648]¥2,671,644¥2,261,799$22,631,468

Notes: 1. These bonds are government-guaranteed bonds and government-underwritten bonds issued by the Hokkaido-Tohoku Development Finance Public
Corporation prior to the merger with the Japan Development Bank that formed DBJ.
2. These bonds are government-guaranteed bonds issued by the Japan Development Bank prior to the merger with the Hokkaido-Tohoku Development
Finance Public Corporation that formed DBJ.
3. Fiscal Investment and Loan Program (FILP) Agency Bonds issued in Japanese domestic markets are not government-guaranteed.
4. Figures indicated in brackets [ ] represent the amounts to be redeemed within one year.

Scheduled redemptions of Bonds and Notes for each of the next five years as of March 31, 2007 are as follows:
Fiscal year ending on March 31, 2008
2009
2010
2011
2012

¥183,250 million
169,560
110,000
370,000
423,621$1,552,308 thousand
1,436,341
931,809
3,134,265
3,588,488

Accounts Based on Corporate Accounting Standards (Consolidated)8310. Borrowings
Borrowings as of March 31, 2007 and 2006 are as follows:
Thousands of

At March 31

Average interest
rate (%)

Borrowings
Long-term borrowings from

Millions of yen

Due date of
repayment

2007

U.S. dollars
2006

2007

December 2007–
1.92

November 2026

Japanese government¥7,923,935¥9,004,474$67,123,556¥7,923,935¥9,004,474$67,123,556

Borrowings with maturities for each of the next five years as of March 31, 2007 are as follows:
Fiscal year ending on March 31, 2008
2009
2010
2011
2012

¥1,229,184 million
1,149,792
977,618
866,367
832,097$10,412,409 thousand
9,739,881
8,281,390
7,338,984
7,048,689

11. Other Liabilities
Other liabilities as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

Accrued Expenses
Unearned Income
Deposits from Employees
Derivatives
Other

Thousands of U.S. dollars

2007

2006

2007

¥ 34,031
17,913
153
133,847
6,529¥192,475¥ 33,049
19,008150
156,5902,306¥211,104$ 288,278
151,747
1,300
1,133,820
55,314$1,630,459

12. Acceptances and Guarantees
Acceptances and guarantees as of March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

At March 31

2007

2006

2007

Guarantees¥273,965¥273,965¥161,567¥161,567$2,320,756$2,320,756

13. Assets Pledged as Collateral
Securities pledged as collateral in Real Time Gross Settlement for bank deposits at the Bank of Japan are ¥120,705 million($1,022,495 thousand) as of March 31, 2007, and ¥119,652 million as of March 31, 2006.

14. Retained Earnings
A portion of net earnings of the parent company calculated pursuant to Article 4 of the Development Bank of Japan Law (“DBJLaw”) was appropriated to Statutory Reserve and for payment to the National Treasury as stipulated by Article 41 of the DBJ Law.
There were no payments to the National Treasury attributable to the year ended March 31, 2006.
At May 31, 2007, DBJ was to pay to the National Treasury, ¥2,499 million ($21,177 thousand), attributable to the year ended
March 31,2007, this was resolved at the board meeting held on May 10, 2007.

84

Accounts Based on Corporate Accounting Standards (Consolidated)15. Fees and Commissions (Income)Fees and commissions (income) for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

For the fiscal years ended March 31

2007

2006

2007

Commissions¥4,051¥4,051¥2,430¥2,430$34,321$34,321

16. Other Operating Income
Other operating income for the fiscal years ended March 31, 2007 and 2006 is as follows:
Millions of yen

For the fiscal years ended March 31

Foreign exchange gains

2007

Thousands of U.S. dollars

2006

¥—
¥—

2007

¥ 4
¥ 4

$—
$—

17. Other Ordinary Income
Other ordinary income for the fiscal years ended March 31, 2007 and 2006 is as follows:
Millions of yen

For the fiscal years ended March 31

2007

Reversal of allowance for loan losses
Gains on sales of equities and other securities
Gains on money held in trust
Other¥47,133
1,508
1,350
12,333¥62,325

Thousands of U.S. dollars

2006¥17,6992,979
966
12,135¥33,7822007$399,266
12,778
11,437
104,480$527,961

18. Fees and Commissions (Expenses)
Fees and commissions (expenses) for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

For the fiscal years ended March 31

Wire transfer service charges
Commissions

2007

Thousands of U.S. dollars

2006

¥ 5
59
¥65

¥ 5
49
¥54

2007

$ 49
505
$554

19. Other Operating Expenses
Other Operating Expenses for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

For the fiscal years ended March 31

2007

2006

2007

Foreign exchange losses
Bonds and notes issuance costs
Losses on derivative instruments
Other

¥ 129
1,521
30
356
¥2,038¥$ 1,100
12,887260
3,024$17,271

3
777
687
268
¥1,737

Accounts Based on Corporate Accounting Standards (Consolidated)85

20. Other Ordinary Expenses
Other ordinary expenses for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

For the fiscal years ended March 31

2007

2006

2007

Provision for investment losses
Write-off of Loans
Losses on sales of equities andOther securities
Write-off of equities
Losses on money held in trust
Other

¥

112
2,982

¥10,8025,350$

147,7130
10,635¥61,445

—
1,568
0
2,646
¥20,3689404,179
8
90,092$520,504

953
25,263

Notes: Losses on sale of loans included in “Other” are ¥890 million ($7,540 thousand) and ¥591 million for the fiscal years ended March 31, 2007 and 2006,
respectively.

21. Losses on Impairment of Fixed Assets
Losses on impairment of fixed assets for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

For the fiscal years ended March 31

2007

Losses on impairment of fixed assets

Thousands of U.S. dollars

2006

¥—
¥—

2007

¥337
¥337

$—
$—

The differences between the recoverable amount and the book value of the following assets were recognized as losses on
impairment of fixed assets in the fiscal year ended March 31, 2006
Principal purpose of use

Type

Area

Losses (Millions of yen)

Idle assets

Land and premises, etc.

Nagano prefecture
Kanagawa prefecture

¥

4
332

DBJ recognize losses on impairment of fixed assets for idle assets. For the purpose of identifying impaired assets in suchcases, the individual asset is assessed as a unit. The recoverable amount is calculated based on net realizable value. Net
realizable value is calculated based on the appraisal value less estimated cost of disposal.

22. Employee Retirement Benefits
DBJ has defined benefit pension plans, which consist of welfare pension fund plan and lump-sum severance indemnity plan.
(a) The funded status of the pension plans is as follows:
Millions of yen

At March 31

2007

Projected Benefit Obligation(A)
Fair Value of Plan Assets(B)
Unfunded Pension Obligation(C)=(A)+(B)
Unrecognized Net Obligation at Transition(D)
Unrecognized Net Actuarial Gains/Losses(E)
Unrecognized Prior Service Cost(F)
Net Amount Recognized on the Balance Sheet (G)=(C)+(D)+(E)+(F)Prepaid Pension Cost
(H)
Allowance for Employee Retirement Benefits (G)-(H)¥(44,460)
14,902(29,558)———(29,558)—¥(29,558)

Thousands of U.S. dollars

2006¥(45,000)
14,112(30,887)———(30,887)—¥(30,887)

2007$(376,621)
126,235(250,386)———(250,386)—$(250,386)

Notes: The above Projected Benefit Obligations include a portion in which the pension fund manages on behalf of the Japanese Government welfare program.

86

Accounts Based on Corporate Accounting Standards (Consolidated)

(b) Component of Pension Cost
Millions of yen

Thousands of U.S. dollars

At March 31

2007

2006

2007

Service Cost
Interest Cost
Expected Return on Plan Assets
Amortization of Prior Service Cost
Amortization of Net Actuarial Gains/Losses
Amortization of Net Obligation at Transition
Other Costs
Net Pension Cost

¥1,400
897
(493)
—
(861)
—
—
¥0,942¥1,417880(119)—(1,315)——¥0,864$11,866
7,606(4,184)—(7,302)——$07,986(c) Principal Assumptions Used
At March 31

2007

Discount Rate
Expected Rate of Return on Plan Assets
Method of Attributing the Projected Benefits to Periods of Services
Amortization Period of Actuarial Gains/Losses

2006

2.0%
3.50%
Straight-line basis
Gains/losses are charged toincome immediately

2.0%
1.0%
Straight-line basis
Gains/losses are charged toincome immediately

23. Lease Transactions(a) Finance Lease Transactions(Excluding leases where the ownership of the property is substantially transferred to the lessee)
Millions of yen

2007
At March 31

Acquisition Cost Equivalents
Less—Accumulated
Depreciation Equivalents
Book Value Equivalents

2006

Equipment

Others

Total

Equipment

Others

Total

¥ 724

¥ 277

¥1,002

¥ 773

¥ 277

¥1,051

(430)
¥ 294

(151)
¥ 125

(582)
¥ 419

(362)
¥ 410

(127)
¥ 149

(490)
¥ 560

Thousands of U.S. dollars

2007
At March 31

Equipment

Others

Total

Acquisition Cost Equivalents
Less—Accumulated
Depreciation Equivalents
Book Value Equivalents$6,141$2,347$8,488(3,650)$2,491(1,281)$1,066(4,931)$3,557

Future lease payments subsequent to the end of the fiscal years for finance leases (including the interest portion thereon) aresummarized below:
Millions of yen

At March 31

Due in One Year or Less
Due after One Year

2007

¥215
210
¥426

Thousands of U.S. dollars

2006

¥227
339
¥566

2007

$1,825
1,786$3,611

Accounts Based on Corporate Accounting Standards (Consolidated)87

Lease expense, depreciation equivalents and interest expense equivalents relating to finance leases for the fiscal year ended
March 31, 2007 amount to ¥246 million ($2,084 thousand), ¥237 million ($2,014 thousand) and ¥8 million ($70 thousand),
respectively. The corresponding amounts for the fiscal year ended March 31, 2006 are ¥305 million, ¥296 million and ¥10 million,
respectively.
Notes: 1.Depreciation equivalents are calculated using the straight-line method, assuming that useful life is equal to the lease term and the residual value at the end of
the lease term is zero.
2. Interest expense equivalents are defined as the difference between total lease payments and acquisition equivalents, which are allocated over the lease termusing the effective interest method.

(b) Operating Lease Transactions
DBJ has no future lease payments subsequent to the end of fiscal year for operating lease transactions as of March 31, 2007
and 2006.

24. Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities as of March 31, 2007 and 2006 consisted of the following:
Millions of yen

At March 31

2007

Thousands of U.S. dollars

2006

2007

Deferred Tax Assets:
Net Losses Carryforwards
Enterprise Tax Payable
Allowance for Investment Losses
Losses on Available-for-sale Securities
Other
Sub Total
Less—Valuation Allowance
Total Deferred Tax Assets

¥ —
57
259
406
51
774
(767)
¥ 7

¥ 180
0
142
—
62
386
(386)
¥ 0

—
484
2,195
3,443
438
6,560
(6,500)$60

Deferred Tax Liabilities:
Net Unrealized Gain on
Available-for-sale Securities
Other
Total Deferred Tax Liabilities
Net Deferred Tax Assets (Liabilities)

(66)
0
(66)
¥ (59)

(29)
(20)
(50)
¥ (50)

(565)
0
(565)
$ (505)$

25. Segment Information(a) Segment Information by Type of Business
DBJ and its consolidated subsidiaries are engaged in business such as private equity investment and fund management andother activities as well as banking business. Such segment information, however, is not presented, as the percentages of
those activities are insignificant.
(b) Segment Information by Geographic Area
Segment information classified by geographic area is not presented, as there are no consolidated subsidiaries and offices
located in countries or areas other than Japan.
(c) Ordinary Income from Overseas Entities
Ordinary income from overseas entities is omitted because the amount is below 10 percent of the consolidated ordinary
income.

88

Accounts Based on Corporate Accounting Standards (Consolidated)26. Derivative Transactions
1. Details Related to Transactions(a) Details of Transactions
DBJ utilizes derivative financial instruments, which comprise interest rate swaps, currency swaps, forward foreign exchange
contracts and credit default swaps.
(b) Policy for Derivative Transactions
DBJ utilizes interest rate swaps, currency swaps and forward foreign exchange contracts to reduce its exposure to market
risks from fluctuations in interest rates and foreign currency exchange rates, and does not hold or issue derivative financial
instruments for trading purposes. DBJ also utilizes credit default swaps as part of its “acceptances and guarantees oncustomers’ debt” business within the limit of a certain definite amount of risk.
(c) Purposes of Transaction
DBJ utilizes interest rate swaps to reduce its exposure to the risk of interest rate fluctuations associated with fundingtransactions, and foreign currency swaps to reduce its exposure to the risks of foreign currency exchange rate fluctuations
associated with its loans and bonds denominated in foreign currencies. DBJ also utilizes credit default swaps as part of its“acceptances and guarantees on customers’ debt” business.
DBJ adopted the Japanese accounting standards for hedge accounting to interest rate swaps and foreign currency swaps
as described below:(i) Hedge Accounting
DBJ applies the deferral method of hedge accounting. Foreign currency swaps, which are used to hedge the foreign
currency fluctuations as the foreign currency swap contracts meet the hedging criteria under the Accounting Standard for
Financial Instruments, are translated not at market but at contractual rates.
(ii) Hedging Instruments and Hedged Items•Hedging Instruments: Interest Rate Swaps
Hedged Items:
Bonds and Notes, Borrowings, and Loans•Hedging Instruments: Foreign Currency Swaps
Hedged Items:
Foreign currency denominated Loans and Bonds and Notes(iii) Hedging Policy
DBJ utilizes hedging instruments to hedge interest rate and foreign currency fluctuations of the hedged assets andliabilities.
(iv) Evaluation of Hedge Effectiveness
DBJ evaluates the effectiveness of the hedges by testing whether the derivatives are effective in reducing the risks
associated with the hedged items.
In regard to both interest rate swap contracts which meet the hedging requirements of accrual method*1 and foreign currency
swap contracts which meet the hedging requirements of assignment method*2 under the Accounting Standards for Financial
Instruments at the inception date, DBJ is not required to evaluate their hedge effectiveness periodically.
*1
If interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received
under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap
contract was executed.
*2
In cases where foreign currency swap are used as hedges and meet certain hedging criteria, forward foreign exchange
contracts and hedged items are accounted for in the following manner;

Accounts Based on Corporate Accounting Standards (Consolidated)

891) If a foreign currency swap is executed to hedge an existing foreign currency assets or liabilities, a) the difference, if any,
between the Japanese yen amount of the hedged foreign currency asset or liability translated using the spot rate at the
inception date of the contract and the book value of the asset or liability is recognized in the statement of operations in the
period which includes the inception date, and b) the discount or premium on the contract (that is, the difference between theJapanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at
the inception date of the contract) is recognized over the term of the contract.
2) If a foreign currency swap is executed to hedge a future transaction denominated in a foreign currency, the futuretransaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreign exchange
contract are recognized.
(d) Risks Involved in Derivatives Transactions
Derivatives involve the following risks:(i) Market Risk
Potential loss from changes in the market value of financial products due to fluctuations in interest rates or exchange rates.
(ii) Credit Risk
Potential loss from the failure of a counterparty to perform its obligations in accordance with the terms and conditions ofcontract governing the transactions due to the counterparty’s bankruptcy or deteriorating business conditions.
With regards to derivative transactions for hedging purpose, the market risk on derivatives is offset against the hedgedtransactions. As for credit risk, DBJ limits the counterparty to financial institutions highly rated by the credit rating agencies,and constantly monitors the cost of restructuring its transactions and creditworthiness of each counterparty. In addition, DBJ
transacts with multiple counterparties to reduce credit risk. With regards to credit derivative transactions, DBJ holds credit
risk of target debt itself in the transaction.
(e) Risk Management Policies for Derivatives
The treasury department enters into and monitors derivative transactions in accordance with the internal management policy,
which defines the authorization procedures, including pre-approval by authorized personnel, and limits on derivativetransactions. Also, total contract amount, total amount of risk, market value, and total amount of counterparties’ credit risk inthe derivative transactions are reported to the directors in charge periodically.
(f) Supplementary explanation on Market Value of Derivatives
It should be noted that ‘Contract Value’ represents nominal contract value or notional principal amount used in determining
the value of receipts or payments of interest, but this does not necessarily reflect the risks of derivative transactions
themselves.

2. Information on Market Value of Derivatives
The market values of derivatives at March 31, 2007 and 2006 are as follows:(a) Interest Rate-related Transactions
Millions of yen

2007
Contract ValueAt March 31

Over-the-Counter
Swaps
Receive Fixed/ Pay Float
Receive Float/ Pay Fixed

90

Total

Over one year

Market Value

Unrealized Gain
(Loss)¥1,863,361
1,863,361¥—¥1,813,361
1,813,361¥—¥(13,458)
4,219¥ (9,239)¥(13,458)
4,219¥ (9,239)

Accounts Based on Corporate Accounting Standards (Consolidated)

Millions of yen

2006
Contract ValueAt March 31

Over-the-Counter
Swaps
Receive Fixed/Pay Float
Receive Float/Pay Fixed

Total

Over one year

Market Value

Unrealized Gain
(Loss)¥1,604,155
1,604,155¥—¥1,504,155
1,504,155¥—¥(44,226)
37,654¥ (6,572)¥(44,226)
37,654¥ (6,572)

Thousands of U.S. dollars

2007
Contract ValueAt March 31

Over-the-Counter
Swaps
Receive Fixed/Pay Float
Receive Float/Pay Fixed

Total$15,784,507
15,784,507$—

Over one year

Market Value

Unrealized Gain
(Loss)$15,360,957
15,360,957$—$(114,011)
35,741$ (78,270)$(114,011)
35,741$ (78,270)

Notes: 1. The above transactions are marked to market and changes in unrealized gain (loss) are included in the Consolidated Statements of Operations. Derivativetransactions qualifying for hedge accounting are excluded from the tables above.
2. Market values for the over-the-counter transactions are based primarily on discounted present values.

(b) Currency-related Transactions
Millions of yen

2007
Contract ValueAt March 31

Over-the-Counter
Swaps
Forwards
Sold
BoughtTotal

Unrealized Gain
(Loss)

Over one year

Market Value

—

¥—

¥—

¥—

¥ —
2,410
¥ —

¥—
—
¥—

¥—
53
¥53

¥—
53
¥53

¥

Millions of yen

2006
Contract ValueAt March 31

Over-the-Counter
Swaps
Forwards
Sold
BoughtTotal

Unrealized Gain
(Loss)

Over one year

Market Value

¥—

¥—

¥—

¥—

¥—
—
¥—

¥—
—
¥—

¥—
—
¥—

¥—
—
¥—

Accounts Based on Corporate Accounting Standards (Consolidated)91Thousands of U.S. dollars

2007
Contract ValueAt March 31

Over-the-Counter
Swaps
Forwards
Sold
BoughtTotal

Unrealized Gain
(Loss)

Over one year

Market Value

—

$—

$ —

$ —

$
—
20,418
$
—

$—
—
$—

$ —
450
$450

$ —
450
$450

$

Notes: 1. The above transactions are marked to market and changes in unrealized gain (loss) are included in the Consolidated Statements of Operations. Derivativetransactions qualifying for hedge accounting are excluded from the tables above.
2. Market values for the over-the-counter transactions are based primarily on discounted present values.

(f) Credit Derivatives Transactions
Millions of yen

2007
Contract ValueAt March 31

Over-the-Counter
Credit Default Swap
Sold
Bought

Total

Over one year

Market Value¥697,877
579,827¥—¥697,877
579,827
¥
—

¥130
130
¥261

Unrealized Gain
(Loss)

¥130
130
¥261

Millions of yen

2006
Contract ValueAt March 31

Over-the-Counter
Credit Default Swap
Sold
Bought

Total

¥—
—
¥—

Over one year

Market Value

¥—
—
¥—

¥—
—
¥—

Unrealized Gain
(Loss)¥——¥—

Thousands of U.S. dollars

2007
Contract ValueAt March 31

Over-the-Counter
Credit Default Swap
Sold
Bought

Total

Over one year

Market Value

Unrealized Gain
(Loss)$5,911,714
4,911,714$—$5,911,714
4,911,714$—$1,1091,102$2,211$1,1091,102$2,211

Notes: 1. The above transactions are marked to market and changes in unrealized gain (loss) are included in the Consolidated Statements of Operations.
2. Market values are based on the counterparties’ tendered price.
3. ‘Sold’ means the underwriting of credit risk and ‘Bought’ means the transferring of credit risk.

92

Accounts Based on Corporate Accounting Standards (Consolidated)27. Market Value of Securities and Money Held in Trust
Market value of Securities and Money held in Trust as of March 31, 2007 and 2006 are summarized below. The information about
investments in subsidiaries and affiliates with market value is reported in the notes to non-consolidated financial statements.
1. Securities(a) Trading Securities
Not applicable(b) Held-to-maturity Debt Securities with market values
Millions of yen

2007
Unrealized Gain (Loss)
At March 31

Book Value

Market Value

Net

Gain

(Loss)

Japanese Government Bonds
Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Other

¥

¥

¥ —
—
—
178
—
¥178

¥ —
—
—
282
—
¥282

¥ —
—
—
(103)
—
¥(103)———
44,280—¥44,280———
44,458—¥44,458

Millions of yen

2006
Unrealized Gain (Loss)
At March 31

Book Value

Market Value

Japanese Government Bonds
Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Other

¥

¥

—
—
—
43,230—¥ 43,230———
43,089—¥43,089

Net

Gain(Loss)

¥ —
—
—
(140)
—
¥(140)

¥ —
—
—
185
—
¥185

¥ —
—
—
(326)
—
¥(326)

Thousands of U.S. dollars

2007
Unrealized Gain (Loss)
At March 31

Book Value

Market Value

Japanese Government Bonds
Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Other

$

$

—
—
—
375,095—$375,095———
376,609—$376,609

Net

$

—
—
—
1,514
—
$1,514

Gain(Loss)

—
—
—
2,390
—
$2,390

$ —
—
—
(876)
—
$(876)$

Note: Market value is based on the closing price at the respective fiscal year ends.

Accounts Based on Corporate Accounting Standards (Consolidated)

93

(c) Available-for-sale Securities with market values
Millions of yen

2007
Unrealized Gain (Loss)
At March 31

Acquisition Cost

Market/Book Value

Net

Gain

(Loss)

Equities
Bonds
Japanese Government Bonds
Japanese Local Government
Bonds
Short-term Corporate Bonds
Corporate Bonds
Other¥ 18,375
128,902120,902¥ 31,936
128,682
120,705¥13,561
(219)
(196)

¥13,617282
282¥ (55)
(502)
(479)

—
—
8,000
—
¥147,277

—
—
7,977
—
¥160,619

—
—
(22)
—
¥13,341————¥13,899——(22)—¥(558)

Millions of yen

2006
Unrealized Gain (Loss)
At March 31

Acquisition Cost

Market/Book Value

Net

Gain

(Loss)

Equities
Bonds
Japanese Government Bonds
Japanese Local Government
Bonds
Short-term Corporate Bonds
Corporate Bonds
Other

¥
110
194,226
191,226¥
95
192,543
189,645¥ (15)(1,683)(1,580)¥—32
32¥ (15)(1,715)(1,613)

—
—
3,000
—
¥194,337

—
—
2,897
—
¥192,638

—
—
(102)
—
¥(1,698)

—
—
—
—
¥32

—
—
(102)
—
¥(1,730)

Thousands of U.S. dollars

2007
Unrealized Gain (Loss)
At March 31

Acquisition Cost

Market/Book Value

Net

Gain

(Loss)

Equities
Bonds
Japanese Government Bonds
Japanese Local
Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Other$ 155,657
1,091,929
1,024,161$ 270,535
1,090,069
1,022,494$114,878(1,860)(1,667)$115,351
2,396
2,396

$ (473)(4,256)(4,063)——67,768—$1,247,586——
67,575—$1,360,604

—
—
(193)
—
$113,018————$117,747

—
—
(193)
—
$(4,729)

Note: Book value above represent the market values determined based on the closing price at the respective fiscal year ends.

94

Accounts Based on Corporate Accounting Standards (Consolidated)

(d) Held-to-maturity Debt Securities soldMillions of yen

2007
For the Fiscal Year ended March 31

Corporate Bonds

Cost of securities soldProceeds from sales

Net Gain (Loss)on sales

¥—
¥—

¥—
¥—

¥—
¥—

Millions of yen

2006
For the Fiscal Year ended March 31

Corporate Bonds

Cost of securities soldProceeds from sales

Net Gain (Loss)on sales

¥349
¥349

¥349
¥349

¥—
¥—

Thousands of U.S. dollars

2007
For the Fiscal Year ended March 31

Corporate Bonds

Cost of securities soldProceeds from sales

Net Gain (Loss)on sales

$—
$—

$—
$—

$—
$—

(e) Available-for-sale Securities soldMillions of yen

2007
For the Fiscal Year ended March 31

Proceeds from Sales

Total amount of Gain on Sales

Total amount of Lossof SalesAvailable-for-sale Securities¥4,372¥4,372¥1,543¥1,543¥34¥34

Millions of yen

2006
For the Fiscal Year ended March 31

Proceeds from Sales

Total amount of Gain on Sales

Total amount of Lossof SalesAvailable-for-sale Securities¥13,096¥13,096¥2,982¥2,982¥3¥3

Thousands of U.S. dollars

2007
For the Fiscal Year ended March 31

Proceeds from Sales

Total amount of Gain on Sales

Total amount of Lossof SalesAvailable-for-sale Securities$37,042$37,042$13,072$13,072$295$295

Accounts Based on Corporate Accounting Standards (Consolidated)

95

(f) Held-to-maturity Debt Securities and Available-for-sale Securities whose market values are not readily determinable
Millions of yen

At March 31

Thousands of U.S. dollars

2007

Held-to-maturity Debt Securities
Unlisted Corporate Bonds
Available-for-sale Securities
Unlisted Equities
Unlisted Corporate Bonds
Other

2006

2007

¥ 15,620¥

783$ 132,324

91,43021,496
98,344¥226,890

139,495—
56,873¥197,152

774,511
182,095
833,078$1,922,008(g) Change in Classification of Securities
Not applicable(h) Redemption Schedule of Available-for-sale Securities with maturities and Held-to-maturity Debt Securities
Millions of yen

2007
Maturity
At March 31

Within 1 year

1 to 5 years

5 to 10 years

More than 10 years

Bonds
Japanese Government Bonds
Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Other¥43,181
19,995—
2,996
20,189—¥43,181¥93,062
50,575——42,486—¥93,062¥69,859
50,134——
19,724—¥69,859¥4,000
—
—
—
4,000
—
¥4,000Millions of yen

2006
Maturity
At March 31

Within 1 year

1 to 5 years

5 to 10 years

More than 10 years

Bonds
Japanese Government Bonds
Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Other¥ 99,154
90,120
—
—
9,033
2,049
¥101,203¥80,340
50,360——29,980—¥80,340¥54,165
49,165——5,000—¥54,165¥2,897
—
—
—
2,897
—
¥2,897

Thousands of U.S. dollars

2007
Maturity96

At March 31

Within 1 year

1 to 5 years

5 to 10 years

More than 10 years

Bonds
Japanese Government Bonds
Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Other$365,789
169,382—
25,382
171,025—$365,789$788,327
428,424——
359,903—$788,327$591,778
424,689——
167,089—$591,778$33,884———
33,884—$33,884

Accounts Based on Corporate Accounting Standards (Consolidated)2. Money Held in Trust
There is no Money Held in Trust held for the purpose of investment or held to maturity. Market value of Other Money Held in Trust(Money Held in Trust other than that stated above) is summarized below:
Millions of yen

2007
Unrealized Gain (Loss)
At March 31

Other Money Held in Trust

Acquisition Cost

Market/Book Value

Net

Gain

(Loss)¥90,836¥90,805

¥(31)

¥58

¥(90)

Millions of yen

2006
Unrealized Gain (Loss)
At March 31

Other Money Held in Trust

Acquisition Cost

Market/Book Value

Net

Gain

(Loss)¥28,422¥28,422

¥—

¥—

¥—

Thousands of U.S. dollars

2007
Unrealized Gain (Loss)
At March 31

Other Money Held in Trust

Acquisition Cost

Market/Book Value

Net

Gain

(Loss)$769,478$769,212$(266)$498$(764)

3. Net Unrealized Gain on Available-for-sale Securities
The breakdown of net unrealized gain on Available-for-sale Securities is as follows:
Millions of yen

At March 31

Net Unrealized Gain
Available-for-sale Securities
Other Money Held in Trust
Add: Deferred Tax Assets(Less: Deferred Tax Liabilities)
Amount corresponding to Minority Interests
Net Unrealized Gain on Available-for-sale
Securities, Net of Taxes

Thousands of U.S. dollars

2007

2006

2007

¥21,696(62)¥3,453—$183,788
(524)

(66)
¥21,566(26)(29)¥3,423(8)(565)$182,689(226)¥21,539¥3,415$182,463

Note: Net unrealized gain included foreign currency translation adjustments on non-marketable securities denominated in foreign currencies.

Accounts Based on Corporate Accounting Standards (Consolidated)

97

Report of Independent Auditors

A network firm ofMisuzu Audit Corporation
Kasumigaseki Bldg., 32nd Floor
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo 100-6088, JAPAN
Telephone 81-3-5532-2100
Facsimile 81-3-5532-2901

Report of Independent Auditors

To the Governor ofDevelopment Bank of Japan

We have audited the accompanying non-consolidated balance sheets of Development Bank of Japan as of March
31, 2007 and 2006, and the related non-consolidated statements of operations, changes in net assets for theyears then ended, all expressed in Japanese yen. These non-consolidated financial statements are the responsibilityof the Bank’s management. Our responsibility is to express an opinion on these non-consolidated financial statements
based on our audits.

We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the non-consolidated
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the non-consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall
non-consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects,
the non-consolidated financial position of Development Bank of Japan and its subsidiaries as of March 31, 2007
and 2006, and the non-consolidated results of their operations for the years then ended in conformity withaccounting principles generally accepted in Japan.

The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader, have beentranslated on the basis set forth in Note 1 to the accompanying non-consolidated financial statements.

Misuzu Audit Corporation
Tokyo, Japan
June 26, 200798

Accounts Based on Corporate Accounting Standards (Non-Consolidated)Non-Consolidated Balance Sheets
Millions of yen

At March 31

AssetsCash and Due from banks
Reverse Repurchase Agreements (Note 3(3))
Money Held in Trust
Securities (Notes 3 and 10)
Loans (Note 4)
Other Assets (Note 5)
Tangible Fixed Assets (Note 6)
Intangible Fixed Assets (Note 6)
Deferred Charges on Bonds and Notes
Customers’ Liabilities for Acceptances and Guarantees
Allowance for Loan Losses (Note 7)
Allowance for Investment Losses
Total Assets

Thousands of U.S. dollars

2007

2006

¥

34,110223,829
27,836366,469
12,146,462
53,74035,7630—334,965(146,742)(2,456)¥13,073,980¥

27,804150,003
28,422429,587
12,873,226
203,545
36,1611
2,610
161,567(199,702)(31,111)¥13,682,117

Millions of yen

At March 31

2007

2007

$

288,953
1,896,059
235,805
3,104,358
102,892,524
455,234
302,955
6—
2,837,486(1,243,050)(20,811)$110,749,518

Thousands of U.S. dollars

2006

2007

Liabilities and Net Assets
Liabilities
Bonds and Notes
Borrowings
Other Liabilities (Note 8)
Allowance for Bonus Payments
Allowance for Employee Retirement Benefits
Acceptances and Guarantees (Note 9)
Total Liabilities¥ 2,671,644
7,862,935
191,683
1,617
29,558334,965¥11,092,404¥ 2,261,799
9,004,474
211,045
1,658
30,887
161,567¥11,671,432$ 22,631,468
66,606,826
1,623,746
13,703250,386
2,837,486$ 93,963,615

Net Assets
CapitalRetained Earnings (Note 11)
Other Retained Earnings
Statutory Reserve
Accumulated Deficit
Total Equity
Net Unrealized Gain on Available-for-sale Securities
Net Deferred Hedge Losses on hedges (Note 5)
Total Revaluation and Translation Adjustments
Total Net Assets
Total Liabilities and Net Assets¥ 1,272,286
810,163
810,163
1,076,594(266,430)¥ 2,082,449¥
21,493(122,367)(100,873)¥ 1,981,575¥13,073,980¥ 1,272,286
734,997
734,997
1,068,918(333,921)¥ 2,007,283
¥
3,401
—
3,401
¥ 2,010,684¥13,682,117$ 10,777,518
6,862,883
6,862,883
9,119,816(2,256,933)$ 17,640,401$
182,072(1,036,570)(854,498)$ 16,785,903$110,749,518

Accompanying notes are an integral part of these financial statements.

Accounts Based on Corporate Accounting Standards (Non-Consolidated)99Non-Consolidated Statements of Operations
Millions of yen

For the Fiscal Years ended March 31

Revenue
Interest Income
Interest on Loans
Interest and Dividends on Securities
Interest on Reverse Repurchase Agreements
Interest on Due from banks
Other Interest Income
Fees and Commissions (Note 12)
Other Operating Income (Note 13)
Other Ordinary Income (Note 14)
Collection of Written-off Claims
Gains on Sales of Fixed Assets
Total Revenue
Expenses
Interest Expense
Interest on Bonds and Notes
Interest on Borrowings
Interest on Swaps (net)Other Interest Expense
Fees and Commissions (Note 15)
Other Operating Expenses (Note 16)
General and Administrative Expenses
Other Ordinary Expenses (Note 17)
Losses on Impairment of Fixed Assets (Note 18)
Losses on Sales of Fixed Assets
Total Expenses
Net Earnings

2006

2007

¥329,710
326,472
2,449
707
80
0
3,405
—
59,9895,875
0¥398,982¥367,824
365,949
1,864
6
4
0
2,430
4
33,2777,414
653¥411,604$2,792,976
2,765,547
20,7515,992
679
728,849—508,175
49,7692$3,379,771¥236,720
33,973
179,674
23,0674
65
2,025
25,01559,933—56¥323,815¥ 75,166¥271,421
30,920221,070
19,3834754
1,737
25,602
19,758337
12¥318,924¥ 92,679$2,005,256
287,792
1,522,017
195,40740
554
17,155211,902507,695—
478$2,743,041$ 636,730

Accompanying notes are an integral part of these financial statements.

100

Thousands of U.S. dollars

2007

Accounts Based on Corporate Accounting Standards (Non-Consolidated)Non-Consolidated Statements of Changes in Net Assets
Millions of yen

For the Fiscal Year ended March 31, 2006

Balance at March 31, 2005

CapitalEquityRevaluation and translation adjustments

Retained Earnings

Net Unrealized Net Deferred
Total
Gain (Loss) on
Hedge
Revaluation
Available-for-saleLossesand Translation
Total
Total Equity
Securities
on hedges
Adjustments Net Assets

Statutory
Reserve

Accumulated
Deficit¥1,215,461 ¥1,027,021 ¥(374,067)¥1,868,415¥ 6,662¥—¥ 6,662¥1,875,077

Transfer from net earnings accounted
under the DBJ Law to Statutory
Reserve (Note 11)—41,896(41,896)

—

—

—

—

—

Net Earnings——

92,67992,679———92,67956,825—(10,636)

46,189(3,261)—(3,261)

42,928¥1,272,286 ¥1,068,918 ¥(333,921)¥2,007,283¥ 3,401¥—¥ 3,401¥2,010,684

Net Changes in Items other than Equity
Balance at March 31, 2006

Millions of yen

For the Fiscal Year ended March 31, 2007

Balance at March 31, 2006

CapitalEquityRevaluation and translation adjustments

Retained Earnings

Net Unrealized Net Deferred
Total
Gain (Loss) on
Hedge
Revaluation
Available-for-saleLossesand Translation
Total
Total Equity
Securities
on hedges
Adjustments Net Assets

Statutory
Reserve

Accumulated
Deficit¥1,272,286 ¥1,068,918 ¥(333,921)¥2,007,283¥ 3,401

¥

—

¥

3,401

¥2,010,684

Transfer from net earnings accounted
under the DBJ Law to Statutory
Reserve (Note 11)

—

7,675

(7,675)

—

—

—

—

—

Net Earnings——

75,16675,166———75,166————18,092(122,367)(104,275)(104,274)¥1,272,286 ¥1,076,594 ¥(266,430)¥2,082,449¥21,493¥(122,367)¥(100,873)¥1,981,575

Net Changes in Items other than Equity
Balance at March 31, 2007

Thousands of U.S. dollars

For the Fiscal Year ended March 31, 2007

Balance at March 31, 2006

CapitalEquityRevaluation and translation adjustments

Retained Earnings

Net Unrealized Net Deferred
Total
Gain (Loss) on
Hedge
Revaluation
Available-for-saleLossesand Translation
Total
Total Equity
Securities
on hedges
Adjustments Net Assets

Statutory
Reserve

Accumulated
Deficit$10,777,518 $9,054,794 $(2,828,642)$17,003,670$ 28,811$—$ 28,811 $17,032,481

Transfer from net earnings accounted
under the DBJ Law to Statutory
Reserve (Note 11)—

65,022(65,022)

—

—

—

—

—

Net Earnings——

636,730

636,730———

636,730

Net Changes in Items other than Equity

—

—

—

—

153,262(1,036,570)(883,308)(883,308)$10,777,518 $9,119,816 $(2,256,933)$17,640,401$182,072$(1,036,570)$(854,498) $16,785,903

Balance at March 31, 2007

Accompanying notes are an integral part of these financial statements.

Accounts Based on Corporate Accounting Standards (Non-Consolidated)101

Notes to Non-Consolidated Financial Statements
1. Basis of Presentation
The accompanying financial statements have been prepared from the accounts maintained by Development Bank of Japan(“DBJ”) in accordance with accounting principles and practices generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements of International Financial Reporting Standards.
The financial statements are not intended to present the financial position and the result of operations in accordance withaccounting principles and practices generally accepted in countries and jurisdictions other than Japan.
The amounts indicated in millions of yen are rounded down by omitting the figures less than one million yen. Accordingly, thesum of each amount appearing in the accompanying financial statements and the notes thereto may not be equal to the sum of
the individual account balances.
Amounts in U.S. dollars are presented solely for the convenience of readers outside Japan. The rate of ¥118.05=$1.00, theeffective exchange rate prevailing as of March 31, 2007, has been used in the conversion. The presentation of such amounts is
not intended to imply that Japanese yen amounts have been or could have been readily translated, realized or settled in U.S.
dollars at that rate or any other rate.

2. Summary of Significant Accounting Policies(a) Securities
Held-to-maturity debt securities are stated at amortized cost, on a straight-line basis, computed using the weighted averagemethod. Investments in subsidiaries are stated at cost computed using the weighted average method. Available-for-salesecurities with readily available market quotations are stated at market value (cost is calculated principally using the weighted
average method), and other securities without market quotations are stated at cost or amortized cost computed using theweighted average method. Investments in limited partnerships and other similar partnerships are accounted for at the net
amounts of DBJ’s underlying interests in their net earnings based on their most recent financial statements.
Unrealized gains and losses on available-for-sale securities are included in net assets.
Securities which are held as trust assets in Money Held in Trust accounts are valued in the same way as securities above.
Effective in the fiscal year ended March 31, 2006, DBJ applied the accounting treatment for other compound instruments
which do not have the ability to increase paid-in capital (Guidelines on Implementation of Business Accounting Standard No.
12 issued by the Accounting Standards Board of Japan on March 30, 2006).
(b) Valuation Method for Derivative Financial Instruments
All derivative financial instruments are carried at market value, except for certain derivatives that are designated as hedging
instruments as discussed below.
(c) Hedge Accounting(i) Hedge Accounting
DBJ applies the deferral method of hedge accounting. Foreign currency swaps, which are used to hedge the foreign
currency fluctuations are translated not at market values but at contractual rates, as the foreign currency swap contracts
meet the hedging criteria under the Accounting Standards for Financial Instruments.
(ii) Hedging Instruments and Hedged Items• Hedging Instruments: Interest Rate Swaps
Hedged Items:
Bonds and Notes, Borrowings, and Loans• Hedging Instruments: Foreign Currency Swaps
Hedged Items:
Foreign currency denominated Loans and Bonds and Notes(iii) Hedging Policy
DBJ utilizes hedging instruments to hedge interest rate and foreign currency fluctuations on its assets and liabilities within
the outstanding asset and liability amounts.
(iv) Evaluation of Hedge Effectiveness
DBJ evaluates the effectiveness of the hedges by testing whether the derivatives are effective in reducing the risks
associated with the hedged items.

102

Accounts Based on Corporate Accounting Standards (Non-Consolidated)In regards to both interest rate swap contracts which meet the hedging requirements of accrual method*1 and foreign
currency swap contracts which meet the hedging requirements of assignment method*2 under the Accounting Standards for
Financial Instruments at the inception date, DBJ is not required to evaluate their hedge effectiveness periodically.
*1
If interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received
under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap
contract was executed.
*2
In cases where foreign currency swap are used as hedges and meet certain hedging criteria, forward foreign exchange
contracts and hedged items are accounted for in the following manner:
1) If a foreign currency swaps is executed to hedge an existing foreign currency asset or liability, a) the difference, if any,
between the Japanese yen amount of the hedged foreign currency asset or liability translated using the spot rate at the
inception date of the contract and the book value of the asset or liability is recognized in the statement of operations in the
period which includes the inception date, and b) the discount or premium on the contract (that is, the difference between
the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot
rate at the inception date of the contract) is recognized over the term of the contract.
2) If a foreign currency swap is executed to hedge a future transaction denominated in a foreign currency, the futuretransaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreign exchange
contract are recognized.
(d) Fixed Assets(i) Depreciation of Tangible Fixed Assets
Tangible Fixed Assets are depreciated using the declining-balance method, except for buildings (excluding installedfacilities) that are depreciated on a straight-line basis.
The estimated useful lives are principally as follows:
Buildings:
22 years to 50 years
Equipment:
3 years to 20 years(ii) Amortization of Intangible Fixed Assets
Intangible Fixed Assets are amortized using the straight-line method.
(iii) Accounting standard for impairment of fixed assets
On August 9, 2002, the Business Accounting Council in Japan issued “the Accounting Standard for Impairment of Fixed
Assets”. The standard requires that fixed assets be reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses shall berecognized in the statement of operations by reducing the carrying amount of impaired assets or a group of assets to therecoverable amount to be measured as the higher of net selling price and value in use.
DBJ has applied this standard from the fiscal year beginning April 1, 2005. In the banking industry, fixed assets are statedat cost less accumulated depreciation pursuant to the Enforcement Ordinance of the Banking Law for long term credit
banks and the accumulated impairment losses are also deducted from the book value of each asset.
(e) Amortization of deferred charges“Discounts on Bonds and Notes”, accounted as “Deferred Charges on Bonds and Notes” and “Premium on Bonds andNotes”, included in “Other Assets” on non-consolidated balance sheets respectively are amortized under the straight-line
method over the term of bonds and notes, and “Bonds and Notes Issuance Costs” are charged to income as incurred.
Although, the new standard, “Tentative Solution on Accounting for Deferred Assets” (ASBJ Report No. 19, August 11,2006), is effective from the year ended March 31, 2007, discounts and premium on bonds and notes as of March 31, 2007
are amortized under the straight-line method over the term of the bonds and notes continuously by applying the tentative
measure stipulated in this standard.
In accordance with the partial revision of “Accounting Standards for Financial Instruments” (the Business Accounting
Deliberation Council, January 22, 1999) as of August 11, 2006(ASBJ Statement No. 10) and the application effective from thefiscal year and interim period ending upon or after the public announcement of such, DBJ adopted the revised accounting
standard commencing in this fiscal year, and “Bonds and Notes” were stated at amortized cost (straight line method). As aresult, “Discounts on Bonds and Notes”, accounted as “Deferred Charges on Bonds and Notes” decreased ¥3,951 million($33,475 thousand), and “Premium on Bonds and Notes”, included in “Other Assets” decreased ¥1,632 million ($13,828
thousand), and “Bonds and Notes” increased and decreased such amounts.

Accounts Based on Corporate Accounting Standards (Non-Consolidated)

103

(f) Foreign currency translation and revaluation method
Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the market exchange rates
prevailing at the fiscal year end.
(g) Allowance for Loan Losses
DBJ provides for “Allowance for Loan Losses” as detailed below pursuant to the internal policies for self-assessment of credit
quality and loan losses.
The allowance for claims on debtors who are legally bankrupt, in special liquidation or effectively bankrupt is provided forbased on the amount of claims, after the write-off described below, net of amounts expected to be collected through disposalof collateral or execution of guarantees.
The allowance for claims on debtors who are not legally bankrupt at the moment, but likely to become bankrupt for which
future cash flows cannot reasonably be estimated, is provided for at the amount considered to be necessary based on an
overall solvency assessment performed on the claims, net of amounts expected to be collected through disposal of collateralor execution of guarantees.
With respect to the claims on debtors who are likely to become bankrupt or to be closely monitored, and for which future
cash flows can reasonably be estimated, the allowance is provided for as the difference between the present value of
expected future cash flows discounted at the contracted interest rate and the carrying value of the claims.
The allowance for claims on debtors other than those described above is provided for based on the historical default rate,
which is calculated based on the actual defaults over a certain historical period (the average financing period for DBJ).
All claims are assessed initially by the investment and lending departments and then by the Credit Risk Management
Department, which is independent from the investment and lending departments based on internal policies for selfassessment of credit quality. The allowance is provided based on the results of the self-assessment.
With respect to the claims on debtors who are legally or substantially bankrupt with collateral or guarantees, the amount ofclaims exceeding the estimated market values of collateral or guarantees which are deemed uncollectible, have been writtenoff, and totaled ¥56,267 million ($476,643 thousand) and ¥95,546 million for the years ended March 31, 2007 and 2006,
respectively.
The allowance for claims on debtors other than those described above was previously provided for using the estimatedprobability of default. From the March 31, 2007 fiscal year, the default rate is used to provide for the allowance, which is
calculated based on the actual value of default experiences of the company. The calculation method has been changed
because the historical data of actual default loans value have been accumulated.
As a result of this change, net earnings increased by ¥18,900 million ($160,103 thousand).
(h) Allowance for Investment Losses“Allowance for Investment Losses” is provided for based on the estimated losses on investments.
(i) Allowance for Bonus Payments“Allowance for Bonus Payments” is calculated and provided for based on the estimated amounts of future payment
attributable to the services that have been rendered by employees and executive directors to the date of the balance sheets.
(j) Allowance for Employee Retirement Benefits“Allowance for Employee Retirement Benefits” represents future payments for pension and retirement benefits to employees
and executive directors, and is accrued based on the projected benefit obligations and estimated pension plan assets at eachfiscal year end. The actuarial gain or loss is recognized during the year it arises.
(k) Equipment Used under Finance Lease Agreements
Equipment used under finance lease agreements is accounted for as equipment leased under operating leases, except for
those in which the ownership of leased equipment is substantially transferred to the lessee, in which case the equipment is
capitalized.
(l) Consumption tax
Income and expenses subject to consumption tax exclude related consumption taxes paid or received.
(m) Income taxes
DBJ is exempt from taxes based on income, however, DBJ is subject to parity taxes among local taxes.

104

Accounts Based on Corporate Accounting Standards (Non-Consolidated)

(n) Change of Accounting Policy
Effective from the year ended March 31, 2007, DBJ has applied “Accounting standards for presentation of net assets in thebalance sheet (Accounting Standards Board of Japan Statement No.5)”, and “Implementaion guidance for Accounting
standards for presentation of net assets in the balance sheet (Accounting Standards of Japan Guidance No.8)” both issued by
the Accounting Standard Board of Japan on December 9, 2005.
The amounts corresponding to the conventional “Equity” in the non-consolidated balance sheet is ¥2,103,942 million($17,822,473 thousand). DBJ presented its net assets in the non-consolidated balance sheet using the new standard as ofMarch 31, 2006, retrospectively.
Furthermore, “Minority Interests” previously presented on the non-consolidated balance sheet between the liabilities
section and the equity section is presented in “Net Assets”.
Additionally, the non-consolidated statements of changes in net assets for the fiscal year ended March 31, 2006 arepresented under the new standard, retrospectively.

3. Securities
Securities as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

Japanese Government Bonds
Corporate Bonds
Equities
Other securities

Thousands of U.S. dollars

2007

2006

2007

¥120,705
61,75397,804
86,206¥366,469¥189,645
46,911
142,553
50,477¥429,587$1,022,495
523,111
828,498730,254$3,104,358

Notes: 1. Investments in subsidiaries and affiliates included in “Equities” as of March 31, 2007 and 2006 are ¥23,809 million ($201,693 thousand) and ¥7,612 million,
respectively.
2. Contingent liabilities for guarantees on corporate bonds, included in securities, which were issued by private placement (Article 2 Paragraph 3 of the
Securities and Exchange Law) amounted to ¥130 million ($1,101 thousand) as of March 31, 2007.
3. There are no securities repledged as of March 31, 2007 and 2006 respectively, although securities accepted under repurchase agreements can be sold or
repledged, securities neither sold nor repledged are ¥223, 829 million ($1,896,058 thousand) and ¥150,003 million, respectively.

4. Non-performing Loans
The amounts of Non-Performing Loans included in “Loans” on the non-consolidated balance sheets as of March 31, 2007 and2006 are as follows:
Millions of yen

At March 31

Loans to Bankrupt Debtors
Delinquent Loans
Loans Past Due Three Months or More
Restructured Loans

Thousands of U.S. dollars

2007

2006

7,562
64,06528
73,624¥145,280¥ 4,313111,720—
89,301¥205,335

¥

2007

$

64,064
542,696237
623,672$1,230,669

Notes: 1. The amounts of Loans indicated above are stated at gross amounts, before reduction of allowance for loan losses.
2. “Loans to Bankrupt Debtors” represent non-accrual loans to debtors who are legally bankrupt as defined in Article 96-1-3 and 4 of the Japanese Tax Law
Enforcement Regulation.
3. “Delinquent Loans” represent non-accrual loans other than (i) Loans to Bankrupt Debtors and (ii) loans whose interest payments are deferred in order to assist
or facilitate the restructuring efforts of borrowers in financial difficulty.
4. “Loans Past Due Three Months or More” are loans whose principal or interest payment is three months or more past due, and do not fall under the categoryof “Loans to Bankrupt Debtors” or “Delinquent Loans”.
5. “Restructured loans” are loans whose repayment terms have been modified to the advantage of debtors through means such as reduction or exemption ofinterest rates, postponement of principal and interest payments, and forgiveness of loans to support or restructure the debtors’ businesses, and do not fallunder the category of “Loans to Bankrupt Debtors”, “Delinquent Loans”, or “Loans Past Due Three Months or More”.

Accounts Based on Corporate Accounting Standards (Non-Consolidated)

105

DBJ provides commitment lines under which it lends, upon the borrowers’ request, necessary funds up to the pre-determinedamount that is within the borrowers’ financing needs for the projects and up to the agreed maximum amount, provided that theirrequests meet terms and conditions for disbursement prescribed in the loan agreements. The total balance of unused
commitment lines as of March 31, 2007 and 2006 are ¥331,113 million ($2,804,862 thousand), including ¥97,695 million($827,578 thousand) being financed within one year and ¥214,022 million, including ¥53,636 million being financed within one
year, respectively.

5. Other Assets
Other Assets as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

2007

Prepaid Expenses
Accrued Income
Derivatives
Deferred Hedge Losses
Guarantee Deposits
Other

¥

Thousands of U.S. dollars

2006

92
48,610
3,316
—
382
1,338
¥53,740¥

99
52,155
3,083
146,698380
1,127¥203,545

2007

$

781
411,777
28,095—
3,242
11,339$455,234

Notes: 1. Deferred Hedge Losses are net unrealized losses from hedging instruments. The gross amounts of deferred hedge gains and losses before netting are¥10,138 million and ¥156,837 million as of March 31, 2006, respectively.
2. From the year ended March 31, 2007, Deferred Hedge Losses are reclassified to “Net Assets”.
3. From the year ended March 31, 2007, Guarantee Deposits are reclassified from “Premises and Equipment” to “Other Assets”. Guarantee Deposits as ofMarch 31, 2006 is presented using the new presentation standard, retrospectively.

6. Fixed Assets
Tangible Fixed Assets and Intangible Fixed Assets as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

Tangible Fixed Assets
Land
Buildings
Equipment
Construction in Progress
Less—Accumulated Depreciation
Net Book Value
Intangible Fixed Assets
Other

2006

2007

¥20,386
33,8091,915—¥56,111(20,347)¥35,763¥20,386
33,802
1,970—¥56,159(19,997)¥36,161$172,695
286,400
16,223—$475,318(172,363)$302,955¥
Less—Accumulated Amortization
Net Book Value

Thousands of U.S. dollars

2007

¥

11
11
(10)
0

¥
¥

11
11
(10)
1

$
$

96
96
(90)
6

Notes: From the year ended March 31, 2007, Premises and Equipment are reclassified to Tangible and Intangible Fixed Assets. Tangible Assets and Intangible Fixed
Assets as of March 31, 2006 are presented using the new presentation standard, retrospectively.

106

Accounts Based on Corporate Accounting Standards (Non-Consolidated)7. Allowance for Loan Losses
Allowance for Loan Losses as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

General Allowance for Loan Losses
Specific Allowance for Loan Losses

Thousands of U.S. dollars

2007

2006

2007

¥ 97,049
49,692¥146,742¥120,170
79,532¥199,702$ 822,107
420,943$1,243,050

8. Other Liabilities
Other Liabilities as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

Accrued Expenses
Unearned Income
Deposits from Employees
Derivatives
Other

Thousands of U.S. dollars

2007

2006

2007

¥ 33,346
17,913
153
133,847
6,421¥191,683¥ 33,042
19,008150
156,590
2,253¥211,045$ 282,482
151,747
1,300
1,133,820
54,397$1,623,746

9. Acceptances and Guarantees
Acceptances and Guarantees as of March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

At March 31

2007

2006

2007

Guarantees¥334,965¥334,965¥161,567¥161,567$2,837,486$2,837,486

10. Assets Pledged as Collateral
Securities pledged as collateral in Real Time Gross Settlement for bank deposits at the Bank of Japan are ¥120,705 million($1,022,494 thousand) as of March 31, 2007 and ¥119,652 million as of March 31, 2006, respectively.

11. Retained Earnings
A portion of net earnings calculated pursuant to Article 4 of the Development Bank of Japan Law (“DBJ Law”) was appropriatedto provision of Statutory Reserve and for payment to the National Treasury as stipulated by Article 41 of the DBJ Law.
Unappropriated Accumulated deficit, losses carryforwards to the following fiscal years, are the amounts which are notappropriated under the DBJ Law for each fiscal year.

12. Fees and Commissions (Income)Fees and Commissions (Income) for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

For the fiscal years ended March 31

2007

2006

2007

Commissions¥3,405¥3,405¥2,430¥2,430$28,849$28,849

Accounts Based on Corporate Accounting Standards (Non-Consolidated)10713. Other Operating Income
Other Operating Income for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

For the fiscal years ended March 31

2007

Foreign Exchange Gains

Thousands of U.S. dollars

2006

¥—
¥—

2007

¥4
¥4

$—
$—

14. Other Ordinary Income
Other Ordinary Income for the fiscal years ended March 31, 2007 and 2006 is as follows:
Millions of yen

For the fiscal years ended March 31

2007

Reversal of Allowance for Loan Losses
Reversal of Allowance for Investment Losses
Gains on Sales of Equities and Other Securities
Gains on Money Held in Trust
Other¥47,017
330
776
1,350
10,515¥59,989

Thousands of U.S. dollars

2006¥17,699—
2,718
966
11,892¥33,2772007$398,283
2,801
6,576
11,43789,078$508,175

15. Fees and Commissions (Expenses)
Fees and Commissions (Expenses) for the fiscal years ended March 31, 2007 and 2006 is as follows:
Millions of yen

For the fiscal years ended March 31

2007

Wire Transfer Service Charges
Commissions

Thousands of U.S. dollars

2006

¥ 5
59
¥65

¥ 5
49
¥54

2007

$ 49
505
$554

16. Other Operating Expenses
Other Operating Expenses for the fiscal years ended March 31, 2007 and 2006 is as follows:
Millions of yen

108

Thousands of U.S. dollars

For the fiscal years ended March 31

2007

2006

2007

Foreign Exchange Losses
Bonds and Notes Issuance Costs
Losses on derivative instruments
Other

¥ 116
1,521
30
356
¥2,025¥$ 983
12,887261
3,024$17,155

Accounts Based on Corporate Accounting Standards (Non-Consolidated)

3
777
687
268
¥1,737

17. Other Ordinary Expenses
Other Ordinary Expenses for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

For the fiscal years ended March 31

2007

Provision for Investment Losses
Write-off of Loans
Losses on Sales of Equities and Other Securities
Write-off of Equities
Losses on Money Held in Trust
Other

¥

Thousands of U.S. dollars

2006

—
2,982
1
47,71309,235¥59,933

2007¥10,710
5,350
—
1,568
0
2,127
¥19,758$—
25,263
9404,1798
78,236$507,695

18. Losses on Impairment of Fixed Assets
Losses on Impairment of Fixed Assets for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

For the fiscal years ended March 31

2007

Losses on Impairment of Fixed Assets¥—¥—

Thousands of U.S. dollars

2006

2007

¥337
¥337

$—
$—

The differences between the recoverable amount and the book value of the following assets were recognized as Losses on
Impairment of Fixed Assets in the fiscal year ended March 31, 2006
Principal purpose of use

Type

Area

Idle assets

Land and premises, etc.

Nagano prefecture
Kanagawa prefecture

Losses (Millions of yen)

¥

4
332

DBJ recognize Losses on Impairment of Fixed Assets for idle assets. For the purpose of identifying impaired assets in suchcases, the individual asset is assessed as a unit. The recoverable amount is calculated based on net realizable value. Net
realizable value is calculated based on the appraisal value less estimated cost of disposal.

Accounts Based on Corporate Accounting Standards (Non-Consolidated)10919. Lease Transactions(a) Finance Lease Transactions(Excluding leases where the ownership of the property is substantially transferred to the lessee)
Millions of yen

2007
At March 31

Acquisition Cost Equivalents
Less—Accumulated
Depreciation Equivalents
Book Value Equivalents

2006

Equipment

Others

Total

Equipment

Others

Total

¥ 716

¥ 273

¥ 990

¥ 765

¥ 273

¥1,039

(427)
¥ 289

(149)
¥ 124

(576)
¥ 413

(361)
¥ 404

(126)
¥ 147

(487)
¥ 551

Thousands of U.S. dollars

2007
At March 31

Equipment

Others

Total

Acquisition Cost Equivalents
Less—Accumulated
Depreciation Equivalents
Book Value Equivalents$ 6,071$ 2,316$ 8,387(3,622)$ 2,449(1,264)$ 1,052(4,886)$ 3,501

Future lease payments subsequent to the end of the fiscal year for finance leases (including the interest portion thereon) aresummarized below:
Millions of yen

At March 31

2007

Due in One Year or Less
Due after One Year

¥212
206
¥419

Thousands of U.S. dollars

2006

¥224
332
¥557

2007

$1,803
1,751$3,554

Lease expense, depreciation equivalents and interest expense equivalents relating to finance leases for the fiscal year ended
March 31, 2007 amount to ¥243 million ($2,061 thousand), ¥235 million ($1,992 thousand) and ¥8 million ($69 thousand),
respectively. The corresponding amounts for the fiscal year ended March 31, 2006 are ¥303 million, ¥293 million and ¥10 million,
respectively.
Notes: 1. Depreciation equivalents are calculated using the straight-line method, assuming that useful life is equal to the lease term and the residual value at the end of
the lease term is zero.
2. Interest expenses are defined as the difference between total lease payments and acquisition equivalents, which are allocated over the lease term using theeffective interest method.

(b) Operating Lease Transactions
DBJ has no future lease payments subsequent to the end of fiscal year for operating lease transactions as of March 31, 2007
and 2006.

20. Market Value of Securities
Market value of Securities, excluding investments in subsidiaries and affiliates, is reported in the notes to consolidated financial
statements. DBJ holds no investments in subsidiaries with market value as of March 31, 2007 and 2006.

110

Accounts Based on Corporate Accounting Standards (Non-Consolidated)

V. Capital Adequacy Status
Capital adequacy ratios were calculated in accordance with the guidelines stipulated by Article 14-2 of the Banking Law of Japan(March 27, 2006, Financial Services Agency Notification No. 19, hereinafter, the “Capital Adequacy Ratio Notification”). Capital
adequacy ratios have been calculated on both a consolidated and non-consolidated basis, and both to uniform international
standards.
As of this disclosure (July 2007), DBJ has not yet applied Article 14-2 of the Banking Law of Japan, but for reference thecapital adequacy ratio has been disclosed in accordance with the Capital Adequacy Ratio Notification.
With regard to the measuring the capital adequacy ratio, credit risk was calculated using the standardized approach, andoperational risk was calculated using the basic indicator approach. Also, as the Bank does not conduct trading (specifictransactions) operations, and as Article 4 and Article 16 of the Capital Adequacy Ratio Notification apply, the market risk
equivalent amount was not calculated.

[1] Capital Adequacy Ratio Status (Consolidated)
Settlement of the consolidated accounts for the 8th business term.

Qualitative Disclosure
1. Scope of Consolidation

The DBJ’s consolidated capital adequacy ratio is calculated for the corporate group, as stipulated in
Article 3 and Article 26 of the Capital Adequacy Ratio Notification (hereinafter, the “Consolidated Group”).
For companies that belong to the Consolidated Group, no differences exist in the wording of theconsolidated financial statements or regulations pertaining to shares and preparation methods (Ministry of
Finance Directive No. 28 of 1976 (hereinafter, the “Consolidated Financial Statement Regulations”) ofcompanies included in the scope of consolidation. The Consolidated Group has nine consolidated
subsidiaries, including New Business Investment Co., Ltd., (invests in unlisted venture companies) andDBJ Credit Line Ltd. (acquires beneficial interests in trust, operates and directs trusts on a commissioned
basis, etc.).
No affiliated companies conduct financial business to which Article 9 or Article 32 of the Capital
Adequacy Ratio Notification applies; no companies are subject to exclusion items under Item 2 (a) to (c),Paragraph 1, Article 8, of this Notification; and no companies conduct business in accordance with Item
11, Paragraph 1, Article 16-2 of the Banking Law of Japan (Law No. 59 of 1981, hereinafter, the “Law”)
or in accordance with Item 12 of this Paragraph that do not belong to the Consolidated Group.
No companies in the Consolidated Group are undercapitalized, and at the present no particular
restrictions are in place to limit the movement of assets or capital.

2. Overview of FundRaising Methods

All capital is funded by the government of Japan

3. Overview of Methods
for Evaluating the
Degree of Capital
Adequacy of theConsolidated GroupRegarding the degree of capital adequacy, the Consolidate Group quantifies credit risk, interest rate risk
and operational risk, compares the total risk amount with total capital and measures the capital surplus.
This surplus enables the Consolidated Group to respond to unquantifiable risks and unforeseen events,
decide whether to take new financing risks and establish the operating directions.

4. Credit Risk(a) Overview of Risk Management Policies and Procedures
Credit risk refers to the risk of loss to the Bank resulting from the decline in or disappearance of thevalue of credit assets, owing to the worsening credit standing of clients for loans or debt guarantees.
These risks include expected losses (UL), or losses that on average can be expected to occur within acertain measurement period; and unexpected losses (UL), which go extend beyond the boundaries oflosses that, on average, are expected within a period of time. The Bank periodically compares UL andcapital to measure the amount of capital in surplus.
(b) Rating Agencies Eligible to Weight Risks
The rating agencies that the Bank uses for weighting risk are among the four that the FSA has named
eligible to perform such weighting. Rating agency eligibility is not selected depending on the type of
exposure.
The rating agencies are Rating and Investment Information, Inc. (R&I), Japan Credit Rating Agency,
Ltd. (JCR), Moody’s Investors Service, Inc. (Moody’s), and Standard & Poor’s Corp. (S&P).

5. Overview of Risk
Management Policies
and Procedures for
Reducing Credit Risk

In principal, credit extended by the Bank requires collateral. If collateral is required, the effectiveness ofcollateral is determined from the perspective of the amount that could be reasonably expected to resolve
the situation through liquidation.
In principal, collateral valuation is performed by the Credit Analysis Department, based on the requestof investment and loan departments/offices. Investment and loan departments/offices and the Credit
Analysis Department manage credit risk based on valuation results. In principle, the valuation of all
collateral property is reviewed once or twice each year to ensure the Bank is aware of the current statusof its collateral property.

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)

111

112

6. Overview of Risk
Management Policies
and Procedures Related
to Risk Involving
Counterparties in
Derivative ProductTransactions andTransactions with Long
Settlement Periods

The Bank regularly refers to the ratings and credit amounts of transaction counterparties to determine theadvisability of entering a transaction or to understand the risks of existing transactions.

7. Securitization Exposure(a) Overview of Risk Management Policies and Procedures
Excluding credit derivatives, the majority of DBJ’s securitization exposure falls into the category of
specialized lending (Item 47, Article 1, of the Capital Adequacy Ratio Notification) employing internalrating methods. Different from the internal ratings that are applied to standard corporate credit, thisexposure is given a rating by using a grading system applied to match the characteristics of specialized
lending. The Bank conducts risk management in line with changes in rating level. In addition to rating
its exposure when making new acquisitions, the Bank reviews these ratings periodically.
The Bank’s involvement in securitized transactions is typically that of an investor, and in principle
the exposure acquired through such transactions continues until the instrument’s maturity.
(b) Methods Used to Calculate Credit Risk Asset Amount of Securitization Exposure
DBJ employs the standardized approach for these calculations.
(c) Method of Accounting for Securitization Transactions
Securitized transactions are recognized from an accounting standpoint at the time of inflows or
outflows of cash, such as when selling assets or raising funds.
(d) Rating Agencies Eligible to Weight Risks by Type of Securitization
The rating agencies that DBJ uses for weighting risk are among the four that the FSA has named
eligible to perform such weighting. Eligible rating agencies are not selected according to investment
type.
The rating agencies are Rating and Investment Information, Inc. (R&I), Japan Credit Rating Agency,
Ltd. (JCR), Moody’s Investors Service, Inc. (Moody’s), and Standard & Poor’s Corp. (S&P).

8. Market Risk

In accordance with Article 4 of the Capital Adequacy Ratio Notification, the Bank includes in its
calculation method no market risk equivalent amount. Consequently, this topic is not applicable.

9. Operational risk(a) Overview of Risk Management Policies and Procedures
DBJ defines operational risk as the risk of loss arising from internal processes, people or systems thatare inappropriate or non-functioning, or from extrinsic events. DBJ works to ensure its risk
management preparedness to prevent potential risks from materializing.
The Bank establishes its management structure and basic risk management policy pertaining tomanagement methods after considering the wide range of operational risks that it potentially faces,such as operational risk, systems risk, legal risk, human risk and tangible asset risk.
The Bank designates operational risk officers at each of its offices. These personnel are charged
with establishing data collection procedures, remaining aware of risks and creating risk databases.
In line with the increasing level of sophistication and complexity of the financial business, the Bank
addresses various operational risks by establishing or reinforcing management methods andpreparations to appropriately identify, evaluate, measure, monitor and control these risks.
(b) Method Used to Calculate Operational Risk Equivalent Amount
The Bank uses the basic indicator approach to calculate these risks.

10. Overview of Risk
Management Policies
and Procedures
Regarding Exposure
to Shares and Other
Equity Investments
and Capital Injections
into the Banking Book

The Bank defines investment risk as its risk of sustaining a partial or total loss on the value of aninvestment, owing to such factors as the worsening of an investee’s profitability or financial conditions or
to fluctuations in the market environment. For newly acquired exposure, DBJ considers the balance
between investment risk and potential return in each field of investment. Thereafter, the Bank regularly
conducts performance evaluations on its exposure.

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)11. Interest Rate Risk on
the Banking Book(a) Overview of Risk Management Policies and Procedures
Long-term, fixed-rate funding makes up the majority of the DBJ’s borrowings, and the Bank seeks tominimize its interest rate risk by raising funds featuring similarly long-term, fixed rates. We measureinterest rate risk by simulating future profit-and-loss distributions due to potential interest rate
fluctuations on earnings at risk (EaR). We also employ the value at risk (VaR) and the Basel IIstandardized interest rate shock* method to compute various risks from the standpoint of theireconomic value.
* Measurement methods are described in (ii) and (iii) of (b).
We regularly compare VaR and 200bpValue against capital to ensure that interest rate risk remains
within a specified range of capital.
(b) Overview of Methods for Calculating Interest Rate Risk Used by the Bank for Internal Control of
the Banking Book
The Bank calculates interest rate risk based on the following viewpoints.
<Economic Value Viewpoints>(i) VaR: Use a historical method of measurement with a one-year holding period, a five-year time
horizon and a 99.0% confidence level(ii) Measure interest rate fluctuations in the 1st percentile and 99th percentile, using a one-year holding
period and a five-year time horizon(iii) 200bpValue: Use a 2% parallel shift in a standardized interest rate shock to measure the change ineconomic value((ii) and (iii) are methods for measuring the standardized interest rate shock under Basel II.)
<Profit and Loss Viewpoint>
EaR: After setting such parameters as the future asset and liability composition, measure profits andlosses over a specific period assuming future interest rate fluctuations

Quantitative Disclosure
1. Of companies covered under the deductions from capital provided by Article 8, Paragraph 1, Item 2 (a) to (c) or by Article 31,
Paragraph 1, Item 2 (a) to (c) of the Capital Adequacy Ratio Notification, names of companies that fall below legislatively required
capital adequacy and the total amount by which they fail to meet the required capital adequacy.
Not applicable
2. Items Constituting Capital Adequacy(Millions of yen)March 31, 2007

Minority interests
CapitalRetained earnings
Other
Total Tier I capital

March 31, 2006

4,208

4,103

1,272,286

1,272,286

809,898734,637(2,563)—2,083,829

2,011,027

Total of Tier II stipulated in Article 6 and Article 30 of the Capital Adequacy
Ratio Notification, and Tier III stipulated in Article 7 and Article 30 ofthis same Notification

106,668

Total of deductions from capital stipulated in Article 8 and Article 30 of
the Capital Adequacy Ratio Notification

18,897(The amount for deductions
from capital includes all“capital deductions forsecuritization exposure”
stipulated in Item 1, Article
247, of this Notification)

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)

113

3. Items Related to Capital Adequacy Level(Millions of yen)March 31, 2007(a) Capital requirement to total credit risk

March 31, 2006

923,356(1) Exposure by portfolio to which standardized approach applied

859,455(i) Japanese government and regional municipal entities

0(ii) Exposure to financial institutions

11,872(iii) Exposure to corporations

712,046(iv) Equity exposure

130,619(v) Other exposure

4,917(2) Securitization risk exposure

63,901(b) Capital requirement to market risk—(c) Capital requirement to operational risk

14,975(d) Consolidated total capital requirement ((a) + (b) + (c))

938,331(e) Consolidated capital ratio and consolidated Tier I ratio

Capital ratio 18.90%
Tier I ratio

18.13%

4. Items Related to Credit Risk (Excluding Securitization Exposure)(a) Fiscal year-end credit risk exposure and breakdown by principal categories(Millions of yen)March 31, 2007

Loans

11,884,802

Equities

238,364

Commitments and customers’ liabilities for acceptances and guarantees

560,065

Bonds (JGBs and publicly offered bonds)

225,676

Other

417,196

Total

13,326,104

March 31, 2006(b) Fiscal year-end credit risk exposure, broken down as follows(1) By region(Millions of yen)March 31, 2007

Domestic total

13,294,157

Overseas total

31,947(2) Breakdown by industry and transaction counterparty(Millions of yen)March 31, 2007

Manufacturing

1,570

Mining29,079Construction

18,672Wholesale and retail614,060

Real estate114

2,430,120

Forestry and fisheries

Finance and insurance

753,473
1,084,019

Transportation and communications

4,544,855

Electrical, gas and water

2,515,177

Services

1,009,150

Other

325,924

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)

March 31, 2006

March 31, 2006

(3) Breakdown by period to maturity(Millions of yen)March 31, 2007

Five years or lessMarch 31, 2006

2,913,063

More than five years, up to 10

4,962,861

More than 10 years, up to 15

3,431,991

More than 15 years

1,395,425

No maturity date622,763(c) Breakdown of exposure by risk weight (after accounting for credit risk mitigations)(Millions of yen)March 31, 2007

Risk weight 0%

122,473

Risk weight 20%

3,062,781

Risk weight 50%

1,966,766

Risk weight 100%

7,255,393

Risk weight 150%

503,809

Risk weight, other418,879

Capital deductions

18,897

March 31, 2006

5. Items Related to the Effect of Credit Risk Mitigations
Exposure to Items to Which Effect of Credit Risk Mitigations Applied(Millions of yen)March 31, 2007

Eligible financial collaterals

March 31, 2006

218,389

Guarantees or credit derivatives

1,908,266

6. Transaction Counterparties’ Risk on Derivative Product Transactions and Transactions with Long Settlement Periods (Millions of yen)

Equivalent credit calculation method
Gross restructuring cost
Equivalent credit amount before accounting for effect of credit risk
mitigations using collateral

Hypothetical holdings of credit derivatives for calculated credit
equivalent amount
Hypothetical holdings of credit derivatives taking into accountcredit risk mitigations

March 31, 2007

March 31, 2006

Current exposure method
85,697
Interest rate transactions
47,611
Foreign exchangetransactions
25,673
Reducing credit equivalentamounts through netting
33,010Credit default swaps
697,777

Current exposure method

732,777

Notes: 1. Collateral is not used to reduce credit risk on derivative product transactions.
2. Credit derivatives used to compute the credit equivalent amount are included in securitization exposure; there is some data overlap with securitization
exposure indicated elsewhere

7. Securitization Exposure(a) Securitization exposure in which the Consolidated Group is the originator
Not applicable.
(b) Securitization exposure in which the Consolidated Group is an investor(1) Retained securitization exposure amount and breakdown by major underlying asset type
March 31, 2007

Project finance

114,568

Loans for commercial real estate

164,092

Other (loans, etc.)

727,604(Millions of yen)March 31, 2006

Note: Excluding credit derivatives, the majority of DBJ’s securitization exposure falls into the category of specialized lending (Item 47, Article 1, of the Capital
Adequacy Ratio Notification) employing internal rating methods. Therefore, the separation of specialized lending in accordance with the Capital Adequacy
Notification is applied for underlying asset categories from (1) above to (3), mentioned later.

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)

115

(2) Balance of retained securitization exposure by risk weight and required capital amounts(Millions of yen)March 31, 2007

Risk weight 20% or less

Balance

March 31, 2006

706,777

Capital requirement 11,308
Risk weight 20% up to 100%

Balance

268,510

Capital requirement 20,531
Risk weight of more than 100%

Balance

30,975

Capital requirement 13,164
Note: When applying to securitization exposure the transitional measures indicated in Article 15 of the Supplementary Provision to the Capital Adequacy Ratio
Notification, risk weight was calculated for each exposure item as stipulated by the transitional measures.

(3) Breakdown of securitization exposure amounts and underlying asset categories deducted from capital in accordance with Article
247 of the Capital Adequacy Ratio Notification(Millions of yen)March 31, 2007

Project finance

4,770

Loans for commercial real estate

14,127

March 31, 2006

(4) Amount of credit risk assets calculated with application of Article 15 of the Supplementary Measure (Interim Measure for
Securitization Exposure) to the Capital Adequacy Ratio Notification(Millions of yen)March 31, 2007

Credit risks and assets

March 31, 2006

88,0838. Items Related to Market Risk
The Bank falls into the category indicated in Article 4 of the Capital Adequacy Ratio Notification. Consequently, calculation of themarket risk equivalent amount indicated in Article 2 was not performed, and this item does not apply.
9. Items Related to Shares and Other Equity Investments and Capital Injections into the Banking Book
March 31, 2007

(Millions of yen)March 31, 2006(a) Market value of below-listed items as included within categories in
the consolidated balance sheets.
(1) Exposure to listed shares

28,670

Exposure to other equity investments and capital injections

317,486(2) Shares in subsidiaries and affiliated companies, andother marketable securities

89,383(b) Gains or losses on the sale of equity investments or shares

1,509

Gain or loss on amortization of exposure on equity investments or shares

47,713(c) Gains or losses from valuation recognized on the consolidated balance sheets
but not recognized on the consolidated statements of income statements

21,539Notes: 1. The Group has no overseas sales locations.
2. The Group has no exposure to shares to which Article 13 of the Supplementary Provisions to the Capital Adequacy Ratio Notification applies.

10. Exposure Applied for the Deemed Calculation of Credit Risk Assets
As the Bank employs the standardised approach for calculating credit risk, this item does not apply.
11. Interest Rate Risk in the Banking Book
March 31, 2007

Decrease in economic value resulting from interest rate shock

116

Decrease in economic value
resulting from an interest
rate shock measuring
interest rate fluctuations in
the 1st percentile and 99th
percentile, using a one-year
holding period and a fiveyear time horizon¥89.4 billion

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)

March 31, 2006

[2] Capital Adequacy Ratio Status (Non-Consolidated)
Settlement of the non-consolidated accounts for the 8th business term.

Qualitative Disclosure
1. Overview of FundRaising Methods

All capital is funded by the government of Japan

2. Overview of Methods
for Evaluating the
Degree of Capital
Adequacy of the Bank

Regarding the degree of capital adequacy, the Bank quantifies credit risk, interest rate risk andoperational risk, compares the total risk amount with total capital and measures the capital surplus. This
surplus enables the Bank to respond to unquantifiable risks and unforeseen events, decide whether totake new financing risks and establish the operating directions.

3. Credit Risk(a) Overview of Risk Management Policies and Procedures
Credit risk refers to the risk of loss to the Bank resulting from the decline in or disappearance of thevalue of credit assets, owing to the worsening credit standing of clients for loans or debt guarantees.
These risks include expected losses (UL), or losses that on average can be expected to occur within acertain measurement period; and unexpected losses (UL), which go extend beyond the boundaries oflosses that, on average, are expected within a period of time. The Bank periodically compares UL andcapital to measure the amount of capital in surplus.
(b) Rating Agencies Eligible to Weight Risks
The rating agencies that the Bank uses for weighting risk are among the four that the FSA has named
eligible to perform such weighting. Rating agency eligibility is not selected depending on the type of
exposure.
The rating agencies are Rating and Investment Information, Inc. (R&I), Japan Credit Rating Agency,
Ltd. (JCR), Moody’s Investors Service, Inc. (Moody’s), and Standard & Poor’s Corp. (S&P).

4. Overview of Risk
Management Policies
and Procedures for
Reducing Credit Risk

In principal, credit extended by the Bank requires collateral. If collateral is required, the effectiveness ofcollateral is determined from the perspective of the amount that could be reasonably expected to resolve
the situation through liquidation.
In principal, collateral valuation is performed by the Credit Analysis Department, based on the requestof investment and loan departments/offices. Investment and loan departments/offices and the Credit
Analysis Department manage credit risk based on valuation results. In principle, the valuation of all
collateral property is reviewed once or twice each year to ensure the Bank is aware of the current statusof its collateral property.

5. Overview of Risk
Management Policies
and Procedures
Related to Risk
Involving Counterparties in Derivative
Product Transactions
and Transactions withLong Settlement
Periods

The Bank regularly refers to the ratings and credit amounts of transaction counterparties to determine theadvisability of entering a transaction or to understand the risks of existing transactions.

6. Securitization
Exposure(a) Overview of Risk Management Policies and Procedures
Excluding credit derivatives, the majority of DBJ’s securitization exposure falls into the category of
specialised lending (Item 47, Article 1, of the Capital Adequacy Ratio Notification) employing internalrating methods. Different from the internal ratings that are applied to standard corporate credit, thisexposure is given a rating by using a grading system applied to match the characteristics ofspecialised lending. The Bank conducts risk management in line with changes in rating level. In
addition to rating its exposure when making new acquisitions, the Bank reviews these ratings
periodically.
The Bank’s involvement in securitized transactions is typically that of an investor, and in principle
the exposure acquired through such transactions continues until the instrument’s maturity.
(b) Methods Used to Calculate Credit Risk Asset Amount of Securitization Exposure
DBJ employs the standardized approach for these calculations.
(c) Method of Accounting for Securitization Transactions
Securitized transactions are recognized from an accounting standpoint at the time of inflows or
outflows of cash, such as when selling assets or raising funds.
(d) Rating Agencies Eligible to Weight Risks by Type of Securitization
The rating agencies that DBJ uses for weighting risk are among the four that the FSA has named
eligible to perform such weighting. Eligible rating agencies are not selected according to investment
type.
The rating agencies are Rating and Investment Information, Inc. (R&I), Japan Credit Rating Agency,
Ltd. (JCR), Moody’s Investors Service, Inc. (Moody’s), and Standard & Poor’s Corp. (S&P).

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)

117

118

7. Market Risk

In accordance with Article 16 of the Capital Adequacy Ratio Notification, the Bank includes in its
calculation method no market risk equivalent amount. Consequently, this topic is not applicable.

8. Operational risk(a) Overview of Risk Management Policies and Procedures
DBJ defines operational risk as the risk of loss arising from internal processes, people or systems thatare inappropriate or non-functioning, or from extrinsic events. DBJ works to ensure its risk
management preparedness to prevent potential risks from materializing.
The Bank establishes its management structure and basic risk management policy pertaining tomanagement methods after considering the wide range of operational risks that it potentially faces,such as operational risk, systems risk, legal risk, human risk and tangible asset risk.
The Bank designates operational risk officers at each of its offices. These personnel are charged
with establishing data collection procedures, remaining aware of risks and creating risk databases.
In line with the increasing level of sophistication and complexity of the financial business, the Bank
addresses various operational risks by establishing or reinforcing management methods andpreparations to appropriately identify, evaluate, measure, monitor and control these risks.
(b) Method Used to Calculate Operational Risk Equivalent Amount
The Bank uses the basic indicator approach to calculate these risks.

9. Overview of Risk
Management Policies
and Procedures
Regarding Exposure
to Shares and Other
Equity Investments andCapital Injections into
the Banking Book

The Bank defines investment risk as its risk of sustaining a partial or total loss on the value of aninvestment, owing to such factors as the worsening of an investee’s profitability or financial conditions or
to fluctuations in the market environment. For newly acquired exposure, DBJ considers the balance
between investment risk and potential return in each field of investment. Thereafter, the Bank regularly
conducts performance evaluations on its exposure.

10. Interest Rate Risk on
the Banking Book(a) Overview of Risk Management Policies and Procedures
Long-term, fixed-rate funding makes up the majority of the DBJ’s borrowings, and the Bank seeks tominimize its interest rate risk by raising funds featuring similarly long-term, fixed rates. We measureinterest rate risk by simulating future profit-and-loss distributions due to potential interest rate
fluctuations on earnings at risk (EaR). We also employ the value at risk (VaR) and the Basel IIstandardized interest rate shock* method to compute various risks from the standpoint of theireconomic value.
* Measurement methods are described in (ii) and (iii) of (b).
We regularly compare VaR and 200bpValue against capital to ensure that interest rate risk remains
within a specified range of capital.
(b) Overview of Methods for Calculating Interest Rate Risk Used by the Bank for Internal Control of
the Banking Book
The Bank calculates interest rate risk based on the following viewpoints.
<Economic Value Viewpoints>(i) VaR: Use a historical method of measurement with a one-year holding period, a five-year time
horizon and a 99.0% confidence level(ii) Measure interest rate fluctuations in the 1st percentile and 99th percentile, using a one-year holding
period and a five-year time horizon(iii) 200bpValue: Use a 2% parallel shift in a standardized interest rate shock to measure the change ineconomic value((ii) and (iii) are methods for measuring the standardized interest rate shock under Basel II.)
<Profit and Loss Viewpoint>
EaR: After setting such parameters as the future asset and liability composition, measure profits andlosses over a specific period assuming future interest rate fluctuations

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)

Quantitative Disclosure
1. Items Constituting Capital Adequacy(Millions of yen)March 31, 2007

March 31, 2006

CapitalOther retained earnings
Other

1,272,286
810,163(2,563)

1,272,286—
734,997

Total Tier I capital

2,079,886

2,007,283

Total of Tier I stipulated in Article 18 and Article 41 of the Capital Adequacy
Ratio Notification, and Tier II stipulated in Article 19 and Article 42 of
this same Notification
Total of deduction from capital stipulated in Article 20 and Article 43 of
the Capital Adequacy Ratio Notification

106,721
18,897(The amount for deductions
includes all “capital deductions for securitization
exposure” stipulated in
Item 1, Article 247, of thisNotification)

2. Items Related to Capital Adequacy Level(Millions of yen)March 31, 2007(a) Capital requirement to total credit risk

March 31, 2006

907,744(1) Exposure by portfolio to which standardized method applied

851,004(i) Japanese government and regional municipal bodies0(ii) Exposure to financial institutions

10,866(iii) Exposure to corporations

724,898(iv)Equity exposure

110,728(v) Other exposure

4,510(2) Securitization risk exposure

56,740(b) Capital requirement to market risk—(c) Capital requirement to operational risk

14,970(d) Non-consolidated total capital requirement ((a) + (b) + (c))

922,714(e) Non-consolidated capital ratio and non-consolidated Tier I ratio

Capital ratio 19.19%
Tier I ratio

18.41%

3. Items Related to Credit Risk (Excluding Securitization Exposure)(a) Fiscal year-end credit risk exposure and breakdown by principal categories(Millions of yen)March 31, 2007

Loans

11,927,864

Equities

215,591

Commitments and customers’ liabilities for acceptances and guarantees

573,002

Bonds (JGBs and publicly offered bonds)

176,676

Other

392,896

Total

13,286,031

March 31, 2006

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)119

(b) Fiscal year-end credit risk exposure, broken down as follows(1) By region(Millions of yen)March 31, 2007

Domestic total

13,255,087

Overseas total

30,943(2) Breakdown by industry and transaction counterparty

March 31, 2006

(Millions of yen)March 31, 2007

Manufacturing

March 31, 2006

2,430,120

Forestry and fisheries

1,570

Mining29,079Construction

18,672Wholesale and retail614,060

Finance and insurance

791,993

Real estate

1,084,019

Transportation and communications

4,544,855

Electrical, gas and water

2,515,177

Services

1,009,150

Other

247,330(3) Breakdown by period to maturity(Millions of yen)March 31, 2007

Five years or lessMarch 31, 2006

2,928,063

More than five years, up to 10

4,969,460

More than 10 years, up to 15

3,443,391

More than 15 years

1,395,425

No maturity date549,690(c) Breakdown of exposure by risk weight (after accounting for credit risk mitigations)(Millions of yen)March 31, 2007

Risk weight 0%

122,473

Risk weight 20%

3,062,781

Risk weight 50%

1,966,766

Risk weight 100%

7,281,455

Risk weight 150%

503,809

Risk weight, other348,743

Capital deductions

18,897

March 31, 2006

4. Items Related to the Effect of Credit Risk Mitigations
Exposure to Items to Which Effect of Credit Risk Mitigations Applied(Millions of yen)March 31, 2007

Eligible financial collaterals
Guarantees or credit derivatives

120

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)

218,389
1,908,266

March 31, 2006

5. Transaction Counterparties’ Risk on Derivative Product Transactions and Transactions with Long Settlement Periods (Millions of yen)

Equivalent credit calculation method
Gross restructuring cost
Equivalent credit amount before accounting for effect of credit risk
mitigations using collateral

Hypothetical holdings of credit derivatives for calculated credit
equivalent amount
Hypothetical holdings of credit derivatives taking into accountcredit risk mitigations

March 31, 2007

March 31, 2006

Current exposure method
85,697

Current exposure method

Interest rate transactions
47,611
Foreign exchangetransactions
25,673
Reducing credit equivalentamounts through netting
33,010Credit default swaps
697,777
732,777

Notes: 1. Collateral is not used to reduce credit risk on derivative product transactions.
2. Credit derivatives used to compute the credit equivalent amount are included in securitization exposure; there is some data overlap with securitization
exposure indicated elsewhere

6. Securitization Exposure(a) Securitization exposure in which the Bank is the originator
Not applicable.
(b) Securitization exposure in which the Bank is an investor(1) Retained securitization exposure amount and breakdown by major underlying asset type(Millions of yen)March 31, 2007

March 31, 2006

Project finance

114,568

Loans for commercial real estate

164,092

Other (loans, etc.)

697,777

Note: Excluding credit derivatives, the majority of DBJ’s securitization exposure falls into the category of specialized lending (Item 47, Article 1, of the Capital
Adequacy Ratio Notification) employing internal rating methods. Therefore, the separation of specialized lending in accordance with the Capital Adequacy
Notification is applied for underlying asset categories from (1) above to (3), mentioned later.

(2) Balance of retained securitization exposure by risk weight and required capital amounts(Millions of yen)March 31, 2007

Risk weight 20% or less

Balance

March 31, 2006

706,777

Capital requirement 11,308
Risk weight 20% up to 100%

Balance

244,900

Capital requirement 19,587
Risk weight of more than 100%

Balance

24,759

Capital requirement

6,947

Note: When applying to securitization exposure the transitional measures indicated in Article 15 of the Supplementary Provision to the Capital Adequacy Ratio
Notification, risk weight was calculated for each exposure item as stipulated by the transitional measures.

(3) Breakdown of securitization exposure amounts and underlying asset categories deducted from capital in accordance with Article
247 of the Capital Adequacy Ratio Notification(Millions of yen)March 31, 2007

Project finance

4,770

Loans for commercial real estate

14,127

March 31, 2006

(4) Amount of credit risk assets calculated with application of Article 15 of the Supplementary Measure (Interim Measure for
Securitization Exposure) to the Capital Adequacy Ratio Notification(Millions of yen)March 31, 2007

Credit risks and assets

March 31, 2006

88,083

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)

1217. Items Related to Market Risk
The Bank falls into the category indicated in Article 4 of the Capital Adequacy Ratio Notification. Consequently, calculation of themarket risk equivalent amount indicated in Article 2 was not performed, and this item does not apply.
8. Items Related to Shares and Other Equity Investments and Capital Injections into the Banking Book
March 31, 2007

(Millions of yen)March 31, 2006(a) Market value of below-listed items as included within categories in
the non-consolidated balance sheets.
(1) Exposure to listed shares
Exposure to other equity investments and capital injections

28,670(2) Shares in subsidiaries and affiliated companies, andother marketable securities

293,654(b) Gains or losses on the sale of equity investments or shares

777

Gain or loss on amortization of exposure on equity investments or shares

47,713(c) Gains or losses from valuation recognized on the non-consolidated balance sheets
but not recognized on the non-consolidated statements of income statements

21,493

Notes: 1. The Group has no overseas sales locations.
2. The Group has no exposure to shares to which Article 13 of the Supplementary Provisions to the Capital Adequacy Ratio Notification Applies

9. Exposure Applied for the Deemed Calculation of Credit Risk Assets
As the Bank employs the standardised approach for calculating credit risk, this item does not apply.
10. Interest Rate Risk in the Banking Book
March 31, 2007

Decrease in economic value resulting from interest rate shock

122

Decrease in economic value
resulting from an interest
rate shock measuring
interest rate fluctuations in
the 1st percentile and 99th
percentile, using a one-year
holding period and a fiveyear time horizon¥89.4 billion

Accounts Based on Corporate Accounting Standards (Capital Adequacy Status)

March 31, 2006

Accounts Based on
Accounting Standards for Special Agencies, etc.

123

Report of Auditors

Mr. Takeshi Komura, Governor
Development Bank of Japan
9-1, Otemachi 1-chome
Chiyoda-ku, Tokyo

We have audited the balance sheets of Development Bank of Japan (“DBJ”) as of March 31, 2006 and 2007 andthe related statements of earnings for the two fiscal years ended March 31, 2007. Our audit was made in accordance with the Development Bank of Japan Law and the regulations thereunder.

The accounting principles and procedures followed by DBJ are those generally followed by special public corporations in Japan, and the aforesaid balance sheets and statements of earnings have been prepared in conformity
with such accounting principles and procedures applied on a consistent basis in all material respects.

The accompanying balance sheets of DBJ as of March 31, 2006 and 2007 and statements of earnings for the two
fiscal years ended March 1, 2007 have been prepared by reclassifying the aforesaid financial statements. We havereviewed the reclassifications made in preparing such financial statements and, in our opinion, such statements, as
reclassified, fairly present on a consistent basis the financial position of DBJ as of March 31, 2006 and 2007 andthe results of its operations for the two fiscal years ended March 31, 2007.

Tsuyoshi Inoue
AuditorDevelopment Bank of Japan

Ryo Ishimori
AuditorDevelopment Bank of JapanTokyo, June 21, 2007

124

Accounts Based on Accounting Standards for Special Agencies, etc.

Non-Consolidated Balance Sheets
Millions of yen

At March 31

AssetsCash and Due from banks (Note 3)
Securities (Note 4)Loans (Note 5)
Less—Allowance for Loan Losses
Equity Investments
Premises and Equipment (Note 6)
Less—Accumulated depreciation
Accrued Income Receivable (Note 7)
Other Assets (Note 8)
Discounts on Bonds and Notes
Customers’ Liabilities for Acceptances and Guarantees
Total Assets

Thousands of U.S. dollars

2007

2006

¥

33,979406,533
12,197,441(36,592)
12,160,849
291,470
56,357(20,436)
35,92049,162
1,679
3,951
334,993¥13,318,541¥

27,572
388,254
12,968,029(38,904)
12,929,124
235,250
56,380(20,074)
36,30652,745454
2,618
161,605¥13,833,932

Millions of yen

At March 31

2007

2007

$

287,8363,443,741
103,324,367(309,973)
103,014,394
2,469,047
477,402(173,117)
304,285
416,456
14,23033,475
2,837,728$112,821,192

Thousands of U.S. dollars

2006

2007

Liabilities, Capital and Statutory Reserve
Liabilities
Bonds and Notes
Long-term Borrowings (Note 9)
Accrued Expenses Payable (Note 10)
Other Liabilities (Note 11)
Acceptances and Guarantees
Total Liabilities¥ 2,673,964
7,862,935
37,456
21,219334,993
10,930,569¥ 2,261,799
9,004,474
35,967
21,205
161,605
11,485,051$ 22,651,115
66,606,826
317,293
179,746
2,837,728
92,592,708

Capital and Statutory Reserve
Capital (Note 12)
Statutory Reserve (Note 2 (j))
Total Capital and Statutory Reserve
Total Liabilities, Capital and Statutory Reserve

1,272,286
1,115,686
2,387,972¥13,318,541

1,272,286
1,076,594
2,348,880¥13,833,932

10,777,518
9,450,966
20,228,484$112,821,192

Accompanying notes are an integral part of these financial statements.

Accounts Based on Accounting Standards for Special Agencies, etc.

125Non-Consolidated Statements of Earnings
Millions of yen

For the Fiscal Years ended March 31

2006

2007

¥327,345
2,752
335
330,434¥368,336
1,451
469
370,257$2,772,943
23,3162,844
2,799,103

43,441
192,697
236,138

39,325
231,639
270,964

367,996
1,632,334
2,000,330

94,29599,293

798,773

3,526
15,692
19,2182,494
8,527
11,021

29,871
132,930
162,801

16,3519,789
789
14
45,543
4,245
76,733

16,5239,825
864
40
72,061
6,315
105,631

138,51282,9266,690
121385,797
35,961
650,007

Earnings before Allowance for Loan Losses
Reversal of Allowance for Loan Losses
Net Earnings (Note 2(i))

36,7802,311¥ 39,092

¥

4,683
2,992
7,675

311,567
19,583$ 331,150

Appropriation of Net Earnings (Note 2(j))
Statutory reserve
Payment to National Treasury
Total Appropriation of Net Earnings

36,592
2,499¥ 39,092

¥

7,675
—
7,675

309,973
21,177$ 331,150

Interest Income
Interest on Loans
Interest on Securities
Other Interest Income

Interest Expenses
Interest on Bonds and Notes
Interest on Borrowings

Net Interest Income
Other Income
Fees and Commissions (Note 13)
Other (Note 14)

Administrative and Other Expenses
Salaries and related expenses
Other administrative expenses
Depreciation
Fees and Commissions (Note 15)
Write-off of Claims (Note 16)
Other (Note 17)

Accompanying notes are an integral part of these financial statements.

126

Thousands of U.S. dollars

2007

Accounts Based on Accounting Standards for Special Agencies, etc.

Non-Consolidated List of Assets

March 31, 2007

Cash and Due from banks
Cash
Due from banks¥

Securities
Japanese Government Bonds

Millions ofThousands ofyen

U.S. dollars

33,979 $3
33,975406,533
344,731

287,83633
287,8033,443,741
2,920,220

Remarks (Millions of yen/ Thousands of U.S. dollars)

Current deposits: 24 banks,¥16,210including Bank of Japan
Ordinary deposits: 2 banks, including ¥17,765
Sumitomo Mitsui Banking Corporation$137,315

IssuesBook value

Face value$150,488

Financing bills: 1 holding¥12,020¥12,004$101,821$101,692
Coupon-bearing government bonds ¥329,820¥332,727(2,5,10 years): 33 holdings$2,793,901 $2,818,528
Corporate Bonds
Other securities

53,776
8,025

455,536
67,98535 holdingsBook value

Secured debt obligations: 2 holdings
Equity acquired by excising of
warrants, etc.: 3 holdings
Loans
Yen loans
Direct loans
Agency loans
Foreign currency loans
Allowance for Loan Losses
Equity Investments
Premises and Equipment
Premises and Equipment for
Business

12,197,441 103,324,367
12,130,302 102,755,635
12,129,386 102,747,876
915
7,759
67,138568,732(36,592)(309,973)
291,4702,469,047
35,920304,285¥8,000$67,768¥25$217

13,727 holdings
13,690 holdings
13,684 holdings
6 holdings
37 holdings
802 holdingsBook value

35,920304,285(1) Land: 88 properties/ 65% of 43,966m2,
and 131,600m2¥20,414(2) Buildings: 204 buildings/ 95% of 2,242m2,
65% of 846m2, and 106,183m2
15,206(Gross floor area)(3) Equipment: 1,945 items
296(4) Petty sum depreciable assets: 135 items 2(depreciated over three years asprescribed by tax code)(5) Key money and other: 2 holding
0$172,932
128,817
2,509
21

6

* Accumulated depreciation amounted to ¥20,436 million ($173,117 thousand).

Accrued Income Receivable
Accrued Interest on Loans
Accrued Interest on Securities
Accrued Guarantee Fees

49,162
48,569517
75

416,456
411,4344,386
636

Interest accrued on loans but not yet received at the end of the fiscal year
Interest accrued on securities but not yet received at the end of the fiscal year
Fees accrued on guarantees but not yet received at the end of the fiscal year

Other Assets
Suspense payments
Guarantee deposits

1,679
100
382

14,230848
3,240

25 holdings
73 holdings

Estimated prepayments
1,179
9,990
Other
17
152
Discounts on Bonds and Notes
3,951
33,475
Customers’ Liabilities for
Acceptances
334,993
2,837,728
Total Assets¥13,318,541 $112,821,192

Deposits and guarantees relating to land andbuildings leased for business use
Estimated payment to the National Treasury
98 holdings
Difference between face value and proceeds from bonds
75 cases

Note: Amounts in U.S. dollars are presented solely for the convenience of readers outside Japan. The rate of ¥118.05=$1.00, the effective exchange rate prevailing asof March 31, 2007, has been used in conversion. The presentation of such amounts is not intended to imply that Japanese yen amounts have been or could
have been readily translated, realized or settled in U.S. dollars at that rate or any other rate.

Accounts Based on Accounting Standards for Special Agencies, etc.

127Notes to Non-Consolidated Financial Statements
1. Basis of Presentation
Development Bank of Japan (“DBJ”) maintains its records and prepares its statutory financial statements in accordance with
Development Bank of Japan Law (“DBJ Law”) and the regulations thereunder and in accordance with accounting principles
generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements from theInternational Financial Reporting Standards. The financial statements are not intended to present the financial position and resultsof operations in accordance with accounting principles and procedures generally accepted in countries and jurisdictions otherthan Japan.
Consolidated financial statements are not prepared because DBJ has no subsidiaries under the DBJ Law.
The amounts indicated in millions of yen are rounded down by omitting the figures less than one million yen. Accordingly, the sumof each amount appearing in the accompanying financial statements and the notes thereto may not be equal to the sum of theindividual account balances.
Amounts in U.S. dollars are presented solely for the convenience of readers outside Japan. The rate of ¥118.05=$1.00, theeffective exchange rate prevailing as of March 31, 2007, has been used in conversion. The presentation of such amounts is notintended to imply that Japanese yen amounts have been or could have been readily translated, realized or settled in U.S. dollars
at that rate or any other rate.

2. Summary of Significant Accounting Policies(a) Securities
Securities are stated at cost, which is determined by the moving average method.
Under the DBJ Law, DBJ cannot invest surplus funds except in Japanese Government Bonds or other bonds permitted by
the DBJ Law, or in deposits at the Fiscal Loan Fund, Bank of Japan or the financial institutions specified by the Ministry of
Finance.
(b) Derivatives
Derivative transactions are not recorded on the non-consolidated balance sheets. Income and expenses from derivativetransactions are recognized in the non-consolidated statements of earnings on a cash basis.
(c) Translation of accounts denominated in foreign currencies
DBJ holds foreign currency swaps to hedge exchange rate risks on its loans, bonds and notes that are denominated inforeign currencies. These foreign currency swaps are not recognized in the non-consolidated balance sheets. The foreign
currency denominated loans, bonds and notes that are being hedged are measured at the contract rates of the respective
foreign currency swaps designated as hedging instruments.
(d) Depreciation method for Premises and Equipment
In accordance with certain provisions set forth in the Corporation Tax Law, depreciation is provided based on the decliningbalance method for all Premises and Equipment except for buildings and key money, which are depreciated based on thestraight-line method.
(e) Discounts on Bonds and Notes
Discounts on bonds and notes are amortized using the straight-line method over the average period of redemption inaccordance with an ordinance defined by the Ministry of Finance.
(f) Bonds and Notes issuance costs
Bonds and Notes issuance costs are recorded as expenses in the period they are incurred in accordance with a provision
defined by the Ministry of Finance.
(g) Allowance for Loan Losses
A provision for loan losses is established in accordance with the requirements set forth by the Ministry of Finance pursuant to
the DBJ Law. Under the provision, the allowance for loan losses is limited to 0.3% of loans outstanding at the end of eachfiscal year.
(h) Employee retirement benefits
In accordance with the DBJ Law and regulations thereunder, employee retirement benefits to employees (including payment
to employees reaching retirement age) are included in DBJ’s budget of revenues and expenditures on the basis of anticipatedpayments to be made during the relevant year and are included in “Salaries and related expenses” in the non-consolidated
statements of earnings when paid.

128

Accounts Based on Accounting Standards for Special Agencies, etc.

(i) Income taxes
DBJ is exempt from taxes based on income, however DBJ is subject to parity taxes of the inhabitants’ taxes among local
taxes.
(j) Appropriation of net earnings
In accordance with provisions of the DBJ Law and a related law, DBJ is required to set aside out of net earnings as a
statutory reserve, the larger of (i) an amount equivalent to 20% of net earnings or (ii) an amount equivalent to 0.3% of loans
outstanding at the end of each fiscal year (if this amount is in excess of the amount of net earnings for the year, then theamount of such net earnings). The reserve provided may only be used to cover net losses. The balance of net earnings
remaining each year, after providing for this reserve, is to be paid to the National Treasury by May 31 of the following fiscal
year. Interim payments are provided for under the Cabinet Order.
As for the fiscal year ended March 31, 2007, the payment to the National Treasury was made, because the amount of net
earnings was in excess of such required amounts.
(k) Consumption tax
Income and expense subject to consumption tax include related consumption taxes paid or received.

3. Cash and Due from banks
Cash and Due from banks as of March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

At March 31

2007

2006

2007

Cash
Due from banks¥
3
33,975¥33,979¥
3
27,569¥27,572$33
287,803$287,836

4. Securities
Securities as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

Japanese Government Bonds
Corporate Bonds
Other securities

Thousands of U.S. dollars

2007

2006

2007

¥344,731
53,776
8,025¥406,533¥341,230
44,0133,010¥388,254$2,920,220
455,536
67,985$3,443,741

5. Loans
Loans as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

Yen loans
Direct loans
Agency loans
Foreign currency loans

2007¥12,130,302
12,129,386
915
67,138¥12,197,441

Thousands of U.S. dollars

2006¥12,887,481
12,886,406
1,074
80,547¥12,968,029

2007$102,755,635
102,747,876
7,759
568,732$103,324,367

Accounts Based on Accounting Standards for Special Agencies, etc.

129

Pursuant to the DBJ Law and regulations thereunder, loans in arrears are defined as the loans for which the principal payments
are overdue by six months or more. This categorization is different from the categorization of non-performing loans as defined
under the Banking Law and the Financial Revitalization Law. The amounts of the loans in arrears included in “Loans” on the nonconsolidated balance sheets as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

Loan past-due for six months or more as toprincipal payments

Thousands of U.S. dollars

2007

2006

2007

¥17,841¥17,841¥43,845¥43,845$151,134$151,134

6. Premises and Equipment
Premises and Equipment as of March 31, 2007 and 2006 is as follows:
Millions of yen

At March 31

Premises and Equipment for Business
Less—Accumulated Depreciation
Net Book Value

2007

Thousands of U.S. dollars

2006¥ 56,357¥ 56,357(20,436)¥ 35,920¥ 56,380¥ 56,380(20,074)¥ 36,306

2007$ 477,402$ 477,402(173,117)$ 304,285

7. Accrued Income Receivable
Accrued Income Receivable as of March 31, 2007 and 2006 is as follows:
Millions of yen

Thousands of U.S. dollars

At March 31

2007

2006

2007

Accrued Interest on Loans
Accrued Interest on Securities
Accrued Guarantee Fees

¥48,569517
75¥49,162¥52,276451
17¥52,745$411,434
4,386
636$416,456

8. Other Assets
Other Assets as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

2007

Suspense payments
Guarantee deposits
Estimated Payments
Other

¥ 100
382
1,179
17
¥1,679Thousands of U.S. dollars

2006

¥ 51
380
—
22
¥454

2007

$

848
3,240
9,990
152
$14,230

9. Long-term Borrowings
DBJ borrows funds from the Japanese Government in order to meet funding requirements for the conduct of operations specified
in the DBJ Law. DBJ also accepts other funds received from government sources in order to apply them to the sources of funds
necessary to financially contribute to a particular government policy with respect to the operations provided in the DBJ Law, as
provided in the Cabinet Order.

130

Accounts Based on Accounting Standards for Special Agencies, etc.

Long-term Borrowings as of March 31, 2007 and 2006 are as follows:
Millions of yen

At March 31

Fiscal Loan FundReserve Funds of the Postal Life Insurance
Special AccountIndustrial Investment Special AccountFunds entrusted

Thousands of U.S. dollars

2007

2006

2007

¥7,519,403¥8,566,149$63,696,766

58,900269,342
15,289¥7,862,935

98,464
321,384
18,476¥9,004,474

498,941
2,281,601
129,518$66,606,826

10. Accrued Expenses Payable
Accrued Expenses Payable as of March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

At March 31

2007

2006

2007

Accrued interest on Bonds and Notes
Accrued interest on Long-term Borrowings
Other accrued expenses¥ 6,456
30,997
1¥37,456¥ 6,299
29,6652¥35,967$ 54,696
262,58215$317,293

11. Other Liabilities
Other Liabilities as of March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

At March 31

2007

2006

2007

Loan Redemption
Suspense receipts
Unearned income
Other

¥

¥ 1,687442
19,00866¥21,205

$

517
1,118
19,54637¥21,219

4,380
9,476
165,575
315$179,746

12. Capital
The Japanese Government is the sole owner of the equity interest, which is not evidenced by documents such as stock
certificates, but is evidenced at the Registration Office of the Legal Affairs Bureau of Japan.

13. Fees and Commissions (Income)Fees and Commissions (Income) for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

For the fiscal year ended March 31

2007

2006

2007

Commissions received
Guarantee Fees

¥2,713812¥3,526¥2,218275¥2,494$22,984
6,887$29,871

Accounts Based on Accounting Standards for Special Agencies, etc.

131

14. Other (Income)
Other (Income) for the fiscal years ended March 31, 2007 and 2006 is as follows:
Millions of yen

Thousands of U.S. dollars

For the fiscal year ended March 31

2007

2006

2007

Miscellaneous Interest received
Collection of written-off claims
Income from Equity Investments
Other

¥

¥ 736
144
1,733
5,912
¥8,527$484
62—
15,145¥15,692

4,107
529
—
128,294$132,930* “Other” in above table includes “income from investment fund” which amounts to ¥14,662 million ($124,205thousand) and ¥5,154 million for the fiscal years ended
March 31, 2007 and 2006, respectively.

15. Fees and Commissions (Expenses)
Fees and Commissions (Expenses) for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

For the fiscal year ended March 31

Commissions paid

2007

Thousands of U.S. dollars

2006

¥14
¥14

¥40
¥40

2007

$121
$121

16. Write-off of Claims
DBJ writes off loans past-due, equity investments and securities which have declined in value drastically, only after exhausting all
available remedies including realization on any collateral and disposal by sale of claims. Write-offs are recorded at fiscal year end
only with the approval of the Ministry of Finance. The amounts of Loans, Equity Investments and Securities written off for the fiscal
years ended March 31, 2007 and 2006 are as follows:
Millions of yen

For the fiscal year ended March 31

2007

Securities written off
Loans written off
Equity Investments written off¥—
43,331
2,212¥45,543

Thousands of U.S. dollars

2006

¥

18
68,612
3,429¥72,0612007$—
367,057
18,740$385,797

17. Other (Expenses)
Other (Expenses) for the fiscal years ended March 31, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

For the fiscal year ended March 31

2007

2006

2007

Miscellaneous Interest paid
Amortization of Discount on Bonds and Notes
Bonds and Notes issuance cost
Other

¥ 279
456
1,521
1,987
¥4,245

¥ 652
415
777
4,470
¥6,315$ 2,370
3,864
12,887
16,840$35,961* “Miscellaneous Interest paid” is mainly composed of payments for credit derivative transactions.

18. Credit Derivative Transactions
DBJ utilizes credit default swaps as part of its “acceptances and guarantees on customers’ debt” business within the limit of acertain definite amount of risk. Contract values as of March 31, 2007 and 2006 are as follows:
Millions of yen

132

Thousands of U.S. dollars

At March 31

2007

2006

2007

Sold
Bought¥697,877
614,827¥—
20,000$5,911,714
5,208,199

Accounts Based on Accounting Standards for Special Agencies, etc.

Appendices
Outline of Fiscal 2007 Operations Evaluation Report
Excerpt from the Development Bank of Japan Law(Law No. 73 of 1999)
Excerpt from the New DBJ Law (Law No. 35 of 2007)133

Outline of Fiscal 2007 Operations Evaluation Report

Operations evaluations reports are performed to evaluate the individual loan and investment projects of the preceding term andthe investment and loan system during the year under review. This report, which summarizes the status of evaluations performed
during the most recent year, is prepared and publicized each year. The characteristics of DBJ’s evaluation systems and an outlineof the fiscal 2007 report are described below.

1. Overview of DBJ’s Evaluation Systems and Management Cycle
DBJ’s evaluation of operations consists of three elements. Together, these three evaluations form an overall evaluation of financial
soundness and invigorate the management cycle. At the same time, the Bank receives external evaluations from the outside
experts that make up the Management Council, thereby ensuring accountability. External evaluation results are reported to thecompetent ministers (the Minister of Finance and the Minister of Land, Infrastructure and Transport) and publicized for the citizens
of Japan.
1. Evaluation of individual loan and investment projects
Investing and loan departments perform two evaluations of individual loan and investment projects: a preliminary evaluationand follow-up evaluation. The Operations Evaluation Department conducts re-evaluations.
2. Evaluation of the investment and loan system
In line with the evaluation results of individual loan and investment projects, the Planning Section evaluates the overall
investment and loan system and incorporates selected results in its evaluations. The Operations Evaluation Department
performs re-evaluations.
3. Evaluation of projects
The Operations Evaluation Department conducts detailed evaluations of specific projects, operating areas or themes.
These evaluations help in evaluating individual loan and investment projects and the investment and loan system.

SocietyCompetent Ministers
Medium-Term Policy Principles

Plan
Reviews and reports on
the implementation of
the Medium-Term Policy Principles

Management
Council
External evaluation

See

Do

Policy-based
financing evaluation
Internal evaluation

Execution of
investments
and loans

Advice and recommendations

Re-evaluation

Operations Evaluation
Inspection Committee

3. Evaluation of projects
Operations Evaluation
Department

Kanemoto Yoshitsugu, Professor, Tokyo University
Yoshitaka Kurosawa, Professor, Nihon University
Makoto Saito, Professor, Hitotsubashi University
Akira Morita, Professor, Tokyo University
Kiyoshi Yamamoto, Professor, Center for
National University Finance and Management

134

Investment and
Finance Guidelines

Outline of Fiscal 2007 Operations Evaluation Report

Evaluation ofsound financeCorporate Coordination
Department

2. Evaluation of theinvestment and loan system
Planning Section

1. Evaluation of individualloan and investment projects
Investing and loan departments2. Outline of Fiscal 2007 Report(1) Evaluation of Individual Loan and Investment Projects
1. Preliminary evaluation• The Bank reported an aggregate evaluation from the evaluations performed on all fiscal 2006 loan and investment projects atthe time each loan or investment was made.
Projects: 939; Loan and investment amount: ¥1,300.0 billion; Overall project spending: ¥7,500.0 billion• Projects included in the fiscal 2006 preliminary evaluation suggested a broad range of potential results.
Increase inrevenues

Barrier-freeconstruction

Promotion ofwaste processing

Employment
created

¥1,700.0 billion
The projects in which the Bank isinvolved were expected to result inrevenue increases amounting toapproximately ¥1,700.0 billion.

109,000 jobs
The projects in which the Bank invested
provided employment opportunities for
109,000 people.

Railway crossing
removal207,000 m2
Projects promoting barrier-freeconstruction of “people-friendly
buildings” reached a total area of
207,000 m2.

627,000 tons

Introduction ofnatural energy

As part of environmental measures toreduce, reuse and recycle materials, theBank participated in projects involving
the construction of waste-processing
facilities capable of handling 627,000
tons of waste per year.

206 locations
DBJ supported the removal of railway
crossings at 206 additional locations.
These efforts are expected to ease traffic
congestion and improve safety.

2,307 MWThe Bank’s
Bank’s involvement in projects
promoting wind and water-powered
generation resulted in the introduction of
2,307 MW of natural energy generation
capacity.

• The table below breaks down DBJ’s loan and investment role into eight types of assistance to foster a better understandingof loan and investment projects.
(Percentage figures indicate projects of each type within the total number of projects for which fiscal 2006 preliminary
evaluations were performed. Some projects are included in more than one assistance category.)

Complementary function

Percentage
Role in Project Guidance or Promotion
Fiscal 2003

Financial market
complementaryfunctions
Directassumptionof risk

Information
application
functions
Easingdifficulties inassessing risk

Fiscal 2006

Providing loans withlonger durations

74%

51%

Support projects that require a long period of time to recover
initial investment or entail refinancing or interest rate risk

Taking on business
risks

28%

38%

Support projects that entail risks that private-sector
institutions are unable to carry, such as operational risk thatcannot be easily quantified

Providing a stablesource of funds

33%

34%

Support projects that involve long construction periods andrequire a stable supply of funds

Responding in timesof emergency

4%

1%

Provide funds during downturns in the financial environment
and for emergency evaluation in times of large-scale disaster

Assessing credit risk

21%

12%

Smooth business operators’ ability to raise funds by using
DBJ’ s assessment functions to assess credit risk

Use of advanced
financial methods

12%

12%

Use DBJ’s accumulated expertise in new and advanced
financing methods to promote efficient project operation
while appropriately controlling risk

Supporting businessformation

4%

5%

Promote smooth operation of projects from planning throughimplementation by arranging and advising from a neutral position

Disseminating
information2%

6%

Promote smooth operation of projects through the use of
information for such purposes as creating screening-based
countermeasures

Outline of Fiscal 2007 Operations Evaluation Report1352. Follow-up evaluations• These evaluations are performed to determine whether projects had the policy effectiveness and DBJ fulfilled its loan andinvestment role as initially expected. Projects evaluated in fiscal 2006 were loan and investment projects that had been
evaluated in the past and were in their second year after completion. Three levels of project effectiveness were determined,
ranging from A to C
Projects: 624; Loan and investment amount: ¥1,100.0 billion; Overall project spending: ¥3,800.0 billion• In more than 90% of the projects evaluated, the initially expected level of policy effectiveness was met or exceeded, andDBJ’s expected loan and investment role was fulfilled.
Policy Effect based on
Application System

DBJ’s Loan and
Investment Role

A

B

C

A

B

C

Total (624 projects)

6%

85%

9%

8%

87%

5%

Of which, community
development
Of which, environmental conservationand sustainable societies
Of which, creation of newtechnologies and industries

2%

91%

7%

5%

92%

3%

2%

92%

6%

3%

94%

3%

24%

53%

23%

25%

60%

15%

Meaning of the Three Levels
A: Projects meeting the B standard that also
demonstrated a particularly favorable policy effect orin which DBJ’s loan and investment role wasparticularly important
B: Met the level of policy effectiveness and DBJ fulfilled
its loan and investment role as anticipated bypreliminary evaluations
C: Fell below the level of policy effectiveness or DBJ’s
fulfillment of its loan and investment role was lower
than anticipated by preliminary evaluations(2) Evaluation of the Investment and Loan System• In the fiscal 2006 evaluation of the investment and loan system, “some questions about improvements” were raised for 20
systems, and nine systems were indicated as requiring some degree of reconsideration. As a result, budget requests for 12
operations were discontinued or consolidated.
• In the fiscal 2007 evaluation of the investment and loan system, two operations were specified as requiring “consideration of
improvements and enhancement,” and nine systems were indicated as requiring some degree of reconsideration.

Discontinued or consolidated: 12 operations

Results of Fiscal 2006 Evaluation of
Investment and Loan System
Consideration of improvements andenhancement required
Should be continued
Some questions about improvements

Results of Fiscal 2007 Evaluation of
Investment and Loan System

Should be continued

60

Some questions about improvements

20

Major reconsideration required

6

Thorough reconsideration required

3

Total

Consideration of improvements andenhancement required

21
operations

9

110

2
operations
68
23

Major reconsideration required

6

Thorough reconsideration required

3

Total

Reflection

Fiscal 2008
budgetrequests

9

102

New additions: 4 operations

3. Evaluation of Projects (Detailed Evaluations of Specific Projects, Operating Areas andThemes)In fiscal 2007, an empirical verification was performed of DBJ’s overall evaluation systems, based on evaluation performanceaccording to the three levels indicated by follow-up evaluations. In particular, the reasons for evaluations at the A and C levels
were analyzed both qualitatively and quantitatively.
Principal reasons for A-level evaluations included significant knock-on effects into surrounding regions and strong operating
performance or technical development results. Principal reasons for C-level ratings included lackluster business conditions. In the
majority of cases, revenue result and financial indicators reflected these factors.
Of the common indicators used for all projects, a particularly high correlation in preliminary and follow-up levels was evident
for revenues and increase in revenues of projects with C-level evaluations.

136

Outline of Fiscal 2007 Operations Evaluation Report

Excerpt from the Development Bank of Japan Law (Law No. 73 of 1999)
Article 1
PurposeThe purpose of the Development Bank of Japan (the “Bank”) is, inprinciple, to supplement or encourage functions such as the credit
operations of commercial financial institutions in order to contribute to
the promotion of energy and the sustainable development of theeconomy and society, the realization of affluent national life andthe independent development of local economies and financial
contributions to Japan’s economic and social policy through the
supply of long-term funds or other operations.
Article 4
Capital1. The capital of the Bank shall be the aggregate of the amounts
deemed invested by the Government in accordance with theprovisions of Paragraph 4, Article 6 and Paragraph 4, Article 7 of
the Supplementary Provisions.
2. The Government may, when it deems necessary, make additional
investments in the Bank in amounts set forth in a budget.
3. In the case of the Government’s investment in accordance with theprovisions of the preceding paragraph, the Bank shall increase its
capital by the amount of such investment.
Article 8
Officers
The Bank shall have as its officers one Governor, two Deputy
Governors, not more than 12 Senior Executive Directors and not morethan two Auditors.
Article 20
Scope of Operations
1. To attain the purpose prescribed in Article 1, the Bank shall conduct
the following operations:(1) To make loans of the funds listed below, which funds shall benecessary for operations that contribute to the promotion ofenergy and the sustainable development of the economy andsociety, the realization of affluent national life and the
independent development of local economies, to provide
guaranties (including any action to incur obligations that is
analogous to guaranties of obligations, hereinafter being thesame) of obligations related to such funds; to acquire corporate
bonds (including bonds issued by corporations establishedunder special statutes that are not private corporations,
hereinafter being the same) issued to procure such funds, by
subscription or otherwise; to acquire by assignment, in entirety
or in part, claims of loans related to such funds; provided,
however, that the term of repayment of such loans, the term of
performance of the obligations so guaranteed (measured fromthe date of guaranty of such obligations), the term of redemptionof the corporate bonds so acquired (measured from the date ofsuch acquisition), and the term of repayment of the loans soacquired (measured from the date of such acquisition) shall not
be less than one year.
(i) Funds necessary for acquisition (including the acquisition ofleasehold rights or other rights of use), improvement or repair(hereinafter referred to as “acquisition, etc.” in this Item) offacilities, funds related to acquisition, etc. of such facilities,
funds necessary for creation of land (including acquisition ofland necessary for such creation), or funds necessary forconstruction or maintenance of facilities related to businesses
that will significantly contribute to maintenance and(Unofficial translation)

improvement of built-up urban areas (excluding those related
to housing construction and specified in a Cabinet Order) or
facilities that will significantly contribute to reinforcing
infrastructures of local economies and societies.
(ii) In addition to those listed in (i) above, funds necessary for theacquisition of intellectual property rights or other similar rights,
procurement of personnel, receipt of service or purchase ofgoods, etc. necessary for the smooth execution of business(such funds being limited to those to be specified by the
Minister of Finance as specifically contributing to thepromotion of energy and the sustainable development of theeconomy and society, the realization of affluent national life
and the independent development of local economies) andfunds necessary for research and development of advanced
and new technology.
(iii)Funds necessary for the repayment of the funds listed in (i) or(ii) above (including the funds necessary for redemption of
corporate bonds issued to procure such funds listed in (i) or (ii)above).
(2) To make investments of funds necessary for businesses that willcontribute to the promotion of energy and the sustainable
development of the economy and society, the realization of
affluent national life and the independent development of local
economies.
(3) In addition to those listed in the preceding two items, to engage
in any operations necessary to smoothly and efficiently conduct
the operations provided in the preceding two items (suchoperations being limited to those specified by a Cabinet Orderas being closely related to operations provided in the preceding
two items).
(4) To engage in operations incidental to the operations specified in
the preceding three items.
2. Making loans of funds, guaranties of obligations, acquisitions ofcorporate bonds, acquisitions of claims by assignment orinvestments (hereinafter referred to as “making loans, etc.”)
provided in the preceding paragraph may be conducted only when
the repayment of funds so loaned, the performance of obligations
so guaranteed, the redemption of corporate bonds so acquired, thecollection of claims so acquired, or the realization of profits that will
enable payment of dividends resulting from businesses so invested
are, in each case, deemed certain.
3. Interest rates on loans and charge rates for guaranties of obligations
undertaken in accordance with the provisions of paragraph 1
above, and interest rates on corporate bonds acquired or claims ofloans acquired by assignment in accordance with the provisions of
the same paragraph shall be determined in consideration ofcustomary terms of loans or guaranties of obligations of commercial
financial institutions or conditions of monetary markets so thatrevenues of the Bank will be sufficient to cover its expenses.
Article 21
Conditions of Operations
1. In conducting its operations the Bank shall supplement or
encourage financing, etc., activities by commercial financial
institutions and shall not compete with them.
2. The Bank may make loans, etc. (excluding acquisition of claims ofloans by assignment), only when the execution of such business isdifficult but only through the acceptance of loans or guaranties ofobligations under customary terms from commercial financial
institutions, the procurement of funds by issue of corporate bonds
to be acquired by subscription or otherwise by any person otherExcerpt from the Development Bank of Japan Law

137

than the Bank, or the acceptance of investment by any person
other than the Bank.
Article 22
Mid-Term Government Policy Principles
1. The Bank shall make loans, etc. in accordance with the three-year
mid-term government policy principles (hereinafter referred to as the“mid-term government policy principles”) to be prepared by thecompetent minister.
2. The Bank may state an opinion to the competent minister in
preparation of the mid-term government policy principles by such
minister.
3. The mid-term government policy principles shall state the mattersconcerning Japan’s economic and social policy to be contributedby the Bank and other important matters concerning its operations.
4. The competent minister shall consult with a chief of the relevant
administrative organization when preparing the mid-term
government policy principles.
Article 23
Investment and Finance Guidelines
1. The Bank shall prepare investment and finance guidelines (theseare, the guidelines for each fiscal year with respect to making loans,etc., which state the Government policy underlying such loans, etc.,
the targeted businesses and other matters, hereinafter being thesame) as prescribed in a Cabinet Order in order to execute thematters stated in the mid-term government policy principles.
2. The Bank shall report the investment and finance guidelines for the
relevant fiscal year to the competent minister by the day to be set
by such minister for each fiscal year and shall publish them.
Article 24
Management Council
1. The Bank shall have a Management Council.
2. The Management Council shall review the status of execution ofoperations with respect to the matters stated in the mid-term
government policy principles and report the results of such review
to the Governor.
3. When the Governor receives a report on the results of the review inaccordance with the provisions of the preceding paragraph, he or
she shall report such results to the competent minister and publish it.
4. The Management Council shall consist of not more than eightcounselors.
5. Such counselors shall be appointed by the Governor withauthorization of the Minister of Finance from among persons
qualified by learning or experience.
6. The term of office of counselors shall be four years.
Article 28
Budget1. The Bank shall, for each fiscal year, prepare a budget of revenues
and expenditures and submit it to the Minister of Finance.
2. The revenues referred to in the preceding paragraph shall consist ofinterest on loans, charges for guaranties of obligations, interest on
corporate bonds, dividends from investments, other income
accruing from the operation of assets, and miscellaneous incidental
income; and the expenditures referred to in the same paragraphshall consist of expenses for operations, expenses for delegation ofoperations, interest on borrowings prescribed in Paragraph 1 orParagraph 2 of Article 42, interest on other funds received from
Government sources prescribed in Paragraph 5 of the same Article,

138

Excerpt from the Development Bank of Japan Law

interest on Bank Bonds issued in accordance with the provisions ofParagraph 1 or Paragraph 4 of Article 43, and miscellaneous
incidental expenses.
3. Upon receipt of the budget submitted in accordance with theprovisions of Paragraph 1, the Minister of Finance shall examine it,
make necessary adjustments thereto, and obtain the Cabinet’s
decision thereon.
4. After a decision has been made under the provisions of thepreceding paragraph, the Cabinet shall submit the budget to theDiet together with the national budget.
Article 41
Disposition of Profits and Payment into The National Treasury
1. If upon the settlement of income and expenses for each fiscal year
a profit is found to exist, the Bank shall set aside as a reserve anamount to be calculated in accordance with the standard
prescribed in a Cabinet Order.
2. The reserve provided for in the preceding paragraph shall not be
disposed of except for the purpose of covering losses.
3. The Bank shall pay the remaining balance after deducting a reservefrom any profit found to exist upon the settlement of income andexpenses for each fiscal year in accordance with the provisions ofParagraph 1, into the National Treasury by May 31 of the following
fiscal year.
4. The Government may, as prescribed by a Cabinet Order, make the
Bank pay a part of the payment specified in the preceding
paragraph into the National Treasury on an estimated basis during
the fiscal year in which the profit is earned.
Article 42
Borrowing of Funds, etc.
1. The Bank may borrow funds from the Government in order to meetfunding requirements for the conduct of operations specified in
Paragraph 1, Article 20.
2. In addition to those provided in the preceding paragraph, the Bank
may borrow short-term funds from banks and other financial
institutions to meet cash flow requirements or in other cases
prescribed by a ministerial ordinance of the Ministry of Finance.
5. The Bank may accept other funds received from Government
sources to apply them to the sources of funds necessary tofinancially contribute to a particular Government policy with respect
to the operations provided in Paragraph 1, Article 20 as provided ina Cabinet Order.
Article 43
Issue of Development Bank of Japan Bonds
1. The Bank may issue Development Bank of Japan Bonds(hereinafter referred to as “Bank Bonds,” except for Paragraph 4,
Article 45) in order to provide funds necessary for operations
provided in Paragraph 1, Article 20.
4. In addition to those provided in Paragraph 1, the Bank may, as
provided in a Cabinet Order, issue Bank Bonds when necessary todeliver substitute bonds to anyone who has lost Bank Bonds.

This is an unofficial English translation. Only the original Japanese
texts of the law have legal effect and prevail over this translation.
This translation has been prepared solely for reference purposes.
The reader of this translation should consult the original Japanese
text for the purposes of interpreting and applying the law to any
legal issues or disputes.

Excerpt from the New DBJ Law (Law No. 85 of 2007)
Article 1
PurposeThe Development Bank of Japan, Inc. (hereinafter referred to as the“Corporation”) shall be a joint stock company (kabushiki-kaisha)
whose object is to maintain the foundations of investment andfinancing functions of long-term business funds as the Development
Bank of Japan by conducting business activities utilizing the methodsof combining investments and financing and other sophisticatedfinancial methodologies, while maintaining the autonomy ofmanagement with the goal of realizing full-scale privatization, thereby
contributing to smooth supply of funds to those who need long-termbusiness funds, as well as to the sophistication of financial functions.
Article 3
Scope of Business Operations
1. The Corporation shall engage in the following business operations
to attain its objectives:(1) To accept deposits (limited to certificates of deposit (CDs) andother deposits stipulated in the Cabinet Order);(2) To lend money;(3) To make capital contributions;(4) To guarantee the due performance of debts and obligations;(5) To sell and purchase Securities (other than those that fall withinmonetary claims represented by certificates set forth in Item (7),
Short-term Notes, Etc.; the same in Item (8)) (other than thosethat fall within securities-related derivatives transactions (whichmean the securities-related derivatives transactions set forth in
Article 28, Paragraph 8, Item (6) of the Financial Instruments
and Exchange Law (Law No. 25 of 1948, as amended);hereinafter in this Item and Item 11 the same), or enter into
securities-related derivatives transactions (limited to those madefor investment purposes), except in cases where thesebusiness operations fall within those operations referred to in
Item (3);(6) To lend Securities;(7) To acquire or transfer monetary claims (including claims
represented by certificates stipulated in the Ministry of FinanceOrdinance such as negotiable bank deposit certificates);(8) To subscribe for Specified Debentures or Preferred Investment
Securities issued by a Specified Purpose Company (limited tothe cases where the Specified Purpose Company acquires only
designated monetary claims or beneficial interests in trusts withwhich designated monetary claims are entrusted with cash
proceeds derived from issue of those Specified Debentures orPreferred Investment Securities as set forth in the Asset
Liquidation Plans, and except for, in case of Specified
Debentures, Specified Short-term Notes), and other similar
securities stipulated in the Ministry of Finance (hereinafter in this
Item referred to as the “Specified Debentures”) (except in cases
where it is intended for secondary distribution (uridashi)), or tohandle primary offering (boshu) of the Specified Debentures so
subscribed;(9) To acquire or transfer Short-term Notes, Etc.;(10) To act as an agent or intermediary for execution of agreements
which provides for lending money on behalf of banks (the banks
set forth in Article 2, Paragraph 1 of the Banking Act (Law No.
59 of 1981, as amended); hereinafter the same) and otherentities engaged in the financial business stipulated in the
Cabinet Order;(11) To enter into derivatives transactions set forth in Article 2,
Paragraph 20 of the Financial Instruments and Exchange Law(other than those that fall within the securities-related derivatives
transactions), except in cases where these business operations
fall within those operations referred to in Item (7);(12) To do the activities referred to in Article 2, Paragraph 8, Item (7)of the Financial Instruments and Exchange Law;

(Unofficial translation)(13) To do the activities referred to in Article 2, Paragraph 8, Item (9)of the Financial Instruments and Exchange Law (limited, inthe case of the handling of primary offering or secondary
distribution, to those to be conducted upon entrustment byfinancial instruments dealers engaged in the type I financial
instruments trading business set forth in Article 28, Paragraph 1of the Financial Instruments and Exchange Law (the financial
instruments dealers set forth in Article 2, Paragraph 9 of the
Financial Instruments and Exchange Law; hereinafter the same),and for such financial instruments dealers);(14) To do the activities referred to in Article 2, Paragraph 8, Item
(11) of the Financial Instruments and Exchange Law;
(15) To do the activities referred to in Article 2, Paragraph 8, Item(13) of the Financial Instruments and Exchange Law;
(16) To do the activities referred to in Article 2, Paragraph 8, Item(15) of the Financial Instruments and Exchange Law;
(17) With respect to securities (including, if such securities are notissued, rights to be represented by such securities) ortransactions referred to in each Item of Paragraph 2 of Article
33 of the Financial Instruments and Exchange Law, to do theactivities set forth in each Item of said Paragraph (other thanthose referred to in Items 3, 5, 7 through 9, 11 and 13);(18) To provide other entities with consulting services regarding
business transfer, merger, corporate split, share-for-shareexchange (kabushiki kokan) or share transfer (kabushiki iten), or
to act as a broker for these transactions;(19) To provide other entities with consulting services regarding
management, and to conduct investigations or provide
information as required for the business operations of otherentities;(20) To conduct investigations, research or training regarding
financial and other economic issues; and(21) To do activities incidental to each of the foregoing Items.
Article 5
Issue of the Development Bank of Japan Bonds
1. The Corporation may issue the Development Bank of Japan Bonds.
Article 9Special Rules When Starting Acceptance of Deposits, Etc.
1. If the Corporation intends to start acceptance of deposits set forthin Article 3, Paragraph 1, Item (1) or issue of the Development Bankof Japan Bonds, the Corporation shall obtain the prior approval of
the Minister of Finance.
2. If the Minister of Finance intends to give the approval referred to in
the preceding Paragraph, the Minister of Finance shall, in advance,
have a discussion with the Prime Minister and obtain his/her
consent.
Article 12
Shares
1. If the Corporation intends to solicit those who will subscribe forshares offered for sale set forth in Article 199, Paragraph 1 of theCompanies Act (Law No.86 of 2005, as amended) (hereinafter in
Article 34, Item (4) referred to as the “Shares Offered for Sale”) or
stock acquisition rights offered set forth in Article 238, Paragraph 1of the Companies Act (hereinafter in Article 34, Item (4) referred to
the “Stock Acquisition Rights Offered”), or to deliver shares orstock acquisition rights in connection with a share-for-shareexchange, the Corporation shall obtain authorization of the Ministerof Finance.
Article 13
Corporate Debentures, Development Bank of Japan Bonds and Borrowings
1. Prior to the beginning of each fiscal year, the Corporation shallprepare its basic policy regarding the issue of corporate debentures

Excerpt from the New DBJ Law

139

(shasai) (other than the Development Bank of Japan Bonds,“Corporate Debentures”; hereinafter the same) and the Development
Bank of Japan Bonds (excluding the short-term notes set forth in
Article 66, Item (1) of the Law Concerning the Central Depositary
System of Corporate Debentures (Law No. 75 of 2001, as amended)from both the Corporate Debentures and the Development Bank ofJapan Bonds, respectively; hereinafter in this Article and Article 18
the same), as well as regarding the borrowings (limited to those withmore than one year to maturity; hereinafter in this Article and Article
18 the same), which provides for matters relating to the issue of the
Corporate Debentures and the Development Bank of Japan Bonds,
and the borrowing of money, such as the amounts of issue andborrowings, denominated currency of the Corporate Debentures, theDevelopment Bank of Japan Bonds and the borrowings, as
stipulated in the Ministry of Finance Ordinance, and obtain
authorization of the Minister of Finance. If the Corporation intends torevise it, the same shall apply.
Article 15
Resolution for Election of Representative Directors and Other Officers
Resolutions for appointment and dismissal of the representative
directors or representative executive officers of the Corporation,
appointment and dismissal of statutory auditors, or appointment anddismissal of audit committee members (kansaiin) shall not become
effective without authorization of the Minister of Finance.
Article 16
Authorization of Concurrent Positions of Directors
1. Except in cases where the provision of Article 4, Paragraph 2
applies, any director (or, if the Corporation is a company
maintaining committees (iinkai secchi kaisha), any executive officer)
who performs the day-to-day business of the Corporation shall not
perform the day-to-day business of any other corporation withoutauthorization of the Minister of Finance.
2. The Minister of Finance shall, upon receipt of an application for theauthorization referred to in the preceding Paragraph, grant his/herauthorization, except in cases where it is determined that any
matter so applied may interfere with sound and proper
management of the Corporation.
Article 17
Business Plan
Prior to the beginning of each fiscal year, the Corporation shall drawout a business plan for the new fiscal year and obtain authorization of
the Minister of Finance, as stipulated in the Ministry of FinanceOrdinance. If the Corporation intends to revise it, the same shallapply.
Article 18
Redemption Plan
Prior to the beginning of each fiscal year, the Corporation shall drawout redemption plans for the Corporate Debentures, the Development
Bank of Japan Bonds and the borrowings and obtain authorization of
the Minister of Finance, as stipulated in the Ministry of FinanceOrdinance. If the Corporation intends to revise it, the same shall apply.
Article 19
Subsidiaries Subject to Authorization
1. If the Corporation intends to make any of the following entities(other than individuals in the cases of those referred to in Items (3),(4) and (7); hereinafter referred to as the “Subsidiaries Subject toAuthorization”) its subsidiary (the subsidiary set forth in Article 2,
Item (3) of the Companies Act), the Corporation shall obtain
authorization of the Minister of Finance in advance:(1) Banks;(2) Long-term credit banks (the long-term credit banks set forth in140

Excerpt from the New DBJ Law

(3)

(4)

(5)

(6)

(7)

Article 2 of the Long-Term Credit Bank Law (Law No.187 of1952, as amended));Financial Instruments Dealers (limited to those who engage intype I financial instruments trading business set forth in Article
28, Paragraph 1 of the Financial Instruments and Exchange
Law);
Money lenders (the money lenders set forth in Article 2,
Paragraph 2 of the Money Lending Business Law (Law No. 32
of 1983, as amended), and exclude those who concurrently
conduct the business referred to in the preceding Items or fallwithin other requirements stipulated in the Ministry of FinanceOrdinance);
Trust companies (the trust companies set forth in Article 2,
Paragraph 2 of the Trust Business Law (Law No. 154 of 2004,
as amended));Insurance companies (the insurance companies set forthin Article 2, Paragraph 2 of the Insurance Business Law (Law
No. 105 of 1995, as amended)); andThose stipulated by the Ministry of Finance Ordinance as those
who are similar to each of the foregoing.

Article 20
Amendment to the Articles of Incorporation, Etc.
1. Resolutions for amendment to the Articles of Incorporation of the
Corporation, disposition of surplus funds (other than disposition oflosses) such as distribution, merger, corporate split, and dissolution
shall not become effective without authorization of the Minister ofFinance.
Article 22Special Exemptions from Management of Fiscal Loan Funds
Notwithstanding the provisions of Article 10, Paragraph 1 of the Fiscal
Loan Funds Law (Law 100 of 1951, as amended), the fiscal loan funds(which means the fiscal loan funds set forth in Article 2 of the Fiscal
Loan Funds Law; hereinafter the same) may be appropriated for loans(hereinafter in Article 24 referred to simply as the “Loans”) to the
Corporation when the Corporation borrows money for appropriationfor expenses required for its operations set forth in Article 3,
Paragraphs 1 and 2.
Article 23
1. Notwithstanding the provision of Article 10, Paragraph 1 of the
Fiscal Loan Funds Law, the fiscal loan funds may be appropriatedfor the Corporate Debentures and the Development Bank of Japan
Bonds (hereinafter in the following Paragraph, immediately following
Article and Article 25, Paragraph 1 referred to as the “Debentures,
Etc.”) to be issued by the Corporation to appropriate the resulting
proceeds for expenses required for its operations set forth in Article
3, Paragraphs 1 and 2.
Article 25
Guarantee of Obligations
1. Notwithstanding the provision of Article 3 of the Law Concerning
Restrictions on Fiscal Assistance by the Government to
Corporations (Law No. 24 of 1946, as amended), the Government
may enter into a guarantee agreement for the obligations relating to
the Debentures, Etc., to the extent of the amount approved by the
resolutions of the Diet.
Article 29
Competent Ministers
1. The competent minister under this Law shall be the Minister ofFinance provided, however, that in the case that the Corporation
obtains the approval referred to in Article 9, Paragraph 1, thecompetent ministers for the following matters shall be the Ministerof Finance and the Prime Minister.

Supplementary Provisions
Article 2
Disposition of Government-Owned Shares
1. Pursuant to Article 6, Paragraph 2 of the Law Concerning
Promotion of Administrative Reform for Realizing the Simple andEffective Government (Law No. 47 of 2006, as amended), theGovernment shall make efforts to reduce the number of shares heldby it in the Corporation (hereinafter in the following Paragraph andthe immediately following Article referred to as “Government-Owned
Shares”), taking into account the market situation, and shall dispose
all of them in approximately five to seven years from the date set
forth in Item (3) of the preceding Article.
2. For a period from the effectuation of this law until the Government
disposes of all of the Government-Owned Shares, the Government
shall from time to time review matters, such as matters regarding
the method in which the Government-Owned Shares should be
disposed of and take the required measures based on the result ofsuch review, so that the foundation of the Corporation’s investment
and financing functions for long-term business funds will bemaintained.
Article 3
Abolition of This Law and Other Measures
If the Government disposes of all of the Government-Owned Shares,
the Government shall immediately take measures to abolish this law,as well as measures necessary to smoothly assign the business
operations, functions, and rights and obligations of the Corporation to
any organization to be formed as a bearer of the functionscommensurate with the investment and financing functions held by
the Corporation.
Article 4Special Rules for Business Operations during the Preparatory Period
1. In order for the Corporation to smoothly start the business
operations as soon as it is duly organized, The Development Bankof Japan (hereinafter referred to as “DBJ”) may borrow Long-term
Loans, in addition to those set forth in Article 42, Paragraphs 1 and
2 of the Development Bank of Japan Law (Law No. 73 of 1999, as
amended; hereinafter, except for Article 26 of the Supplementary
Provisions, referred to as the “DBJ Law”), during the Preparatory
Period (the period from the date on which this law comes into force
up to September 30, 2008; the same in Paragraph 5).
Article 9
Capital Contribution
Upon the incorporation of the Corporation, DBJ shall contribute all of
its properties, except assets to be assumed by Japan pursuant to
Article 15, Paragraph 2 of the Supplementary Provisions, to the
Corporation.
Article 15
Dissolution of DBJ, Etc.
1. DBJ shall be dissolved at the time of establishment of the
Corporation, whereupon any and all rights and obligations of DBJ
shall be taken over by the Corporation, except for those assets tobe assumed by the Government as set forth in the following
Paragraph.
2. Of the rights actually held by DBJ at the time of establishment of the
Corporation, the assets which will be considered no longer
necessary for the Corporation to smoothly perform its futurebusiness operation shall be assumed by Japan at the time ofestablishment of the Corporation.

Article 16
Values of Properties Assumed
1. The values of assets and liabilities assumed by the Corporation from
DBJ (in the immediately following Paragraph referred to as the“Assumed Properties”) shall be as evaluated by evaluation officers(hyoka iin).
Article 18
Competent Ministers
The competent ministers under Article 26, Paragraph 2 and Article 27,
Paragraph 1 for management of assets to be assumed by the
Corporation pursuant to Article 15, Paragraph 1 of the Supplementary
Provisions (hereinafter in this Article referred to as the “Assumed
Assets”) shall, notwithstanding the provisions of Article 29, Paragraph
1, be as follows:(1) For management of the Assumed Assets set forth in the Cabinet
Order in the Hokkaido or the Tohoku Region (which means theareas of Aomori, Iwate, Miyagi, Akita, Yamagata, Fukushima andNiigata prefectures): Minister of Finance and Minister of Land,
Infrastructure and Transport; and(2) For management of the Assumed Assets other than the Assumed
Assets set forth in the preceding Item: Minister of Finance.
Article 66
Examinations
On or prior to the date set forth in Article 1, Item (3) of the
Supplementary Provisions, the Government shall examine measures tosecure the equal competitive conditions with other business entities,
with respect to the systems for which the investment and financing
functions of DBJ are utilized pursuant to the provisions of relevant laws(including ordinances under those laws), such as the Law Concerning
Collaterals for Borrowings of Electricity Companies from The
Development Bank of Japan (Law No. 145 of 1950, as amended), the
Law Concerning the Securement of Oil Reserves, Etc. (Law No. 96 of1975, as amended), the Law Concerning Promotion of Development
and Promotion of Introduction of Alternative Energy to Oil (Law No. 71
of 1980, as amended), the Special Measures Law Concerning
Promotion of Private Urban Development (Law No. 62 of 1987, as
amended), the Extraordinary Measures Law Concerning Promotion ofBusiness Activities for Rationalization of Usage of Energy and Effective
Use of Resources (Law No. 18 of 1993, as amended) and the Law
Concerning Facilitation of the Improvement, Etc. of Public Facilities,
Etc. by Private Fund, Etc. (Law No. 117 of 1999, as amended), whileconsidering the convenience of users of those systems, and take therequired measures based on the results of such examination.
Article 67
Utilization of the Corporation’s Investment and Financing Functions
for Long-term Business Funds
If the Government utilizes the Corporation’s investment and financing
functions for long-term business funds on or after the date set forth in
Article 1, Item (3) of the Supplementary Provisions, the Government
shall take measures necessary to secure the equal competition
conditions, as well as other measures necessary for utilization of suchinvestment and financing functions, paying attention to the
Corporation’s appropriate competitive relationships with otherbusiness entities.
This is an unofficial English translation. Only the original Japanese
texts of the law have legal effect and prevail over this translation.
This translation has been prepared solely for reference purposes.
The reader of this translation should consult the original Japanese
text for the purposes of interpreting and applying the law to any
legal issues or disputes.

Excerpt from the New DBJ Law

141

Corporate Data
■Board of Directors and Auditors (As of July 1, 2007)

GovernorTakeshi Komura
Deputy Governor

Deputy Governor

Kimio Yamaguchi

Mikio Araki

Senior Executive Director

Senior Executive Director

Keiji Taga

Kenichi Fukaya

Senior Executive Director

Senior Executive Director

Hisato Nagaoka

Atsushi Oi

Senior Executive Director

Senior Executive Director

Hiroyuki Hoshi

Takeshi Abe

Senior Executive Director

Senior Executive Director

Yo Takeuchi

Masanori Yanagi

Senior Executive Director

Senior Executive Director

Tetsuhiko Shindo

Hiroshi Takahashi

Senior Executive Director

Akiyoshi Horiuchi

142

Corporate Data

Auditor

AuditorTsuyoshi Inoue

Ryo Ishimori

■Organization Chart (As of April 1, 2007)

Internal Audit Department
Office of the Secretariat
Human Resource Management Department

Corporate Strategy Department

Operations Evaluation Office

Corporate Coordination Department

Office of Financial Planning &Risk Management

Information Resources Department
Accounting Department

Credit Analysis Department
Department of Legal and Compliance Affairs

SeniorExecutive Director

Governor

Treasury Department
Business Planning & Coordination Department

Deputy Governor

Department for Urban Development
AuditorDepartment for Public Sector Solutions

Office for Corporate Social Responsibility

Manufacturing & Technology Department
Information & Telecommunications Department
Commerce & Logistics Department
Transportation Department
Environment & Energy Department
Department for International Affairs
Kanto Business Department
Office for Investment Strategy
Planning Department for Investment Banking
Project Finance Department
Strategic Finance Department
Department for Business Development
Department for Technology & Growth BusinessEconomic & Industrial Research Department
Department for Regional Development

Research Institute of Capital Formation

Branch offices, representative offices
Branch offices: Hokkaido, Tohoku, Niigata, Hokuriku, Tokai, Kansai, Chugoku, Shikoku, Kyushu, Minami-kyushu
Representative offices: Hakodate, Kushiro, Aomori, Toyama, Matsue, Okayama, Matsuyama, Oita
Overseas representative offices
Washington, New York, Los Angeles, London, Frankfurt, Singapore

Corporate Data

143

■Timeline
1951 April

Japan Development Bank established1956 June

Hokkaido Development Finance Public Corporation established1957 April

Hokkaido Development Finance Public Corporation reorganized as the Hokkaido-Tohoku Development
Finance Public Corporation; branches opened in Sapporo and Sendai (currently, the Tohoku Branch)

1964 MarchPartial revision of Hokkaido-Tohoku Development Finance Public Corporation Law (including creation ofcapital provision)

1972 June

Japan Development Bank Law revised
1) Objective revised to “promote both industrial and socio-economic progress”
2) Addition of investment and subdivided facility financing function involving large-scale industrial park
construction business1985 June

Japan Development Bank Law revised
1) Addition of investment function pertaining to business in such areas as research and development, urban
development and energy use stipulated by government ordinance2) Addition of R&D fund investment function

1986 September

Partial revision of Hokkaido-Tohoku Development Finance Public Corporation Law (including stipulation of
zero-interest loans)1991 April

Japan Development Bank Law revised
1) Expansion of scope of operations to include business using the transfer method
2) Issuance of Euroyen bonds3) Creation of low interest rate loan system funded partially by sale of NTT shares1991 April

Partial revision of Hokkaido-Tohoku Development Finance Public Corporation Law (including creation of low
interest rate financing for the improvement of social capital)

1992 December

Japan Development Bank Law revised (creation of facility for additional government investment)

1997 September

Cabinet approval of bill entitled “Pertaining to Consolidation and Rationalization of Special-Purpose
Companies, etc.” (decision to dissolve Japan Development Bank and Hokkaido-Tohoku Development
Finance Public Corporation and consolidate into new bank)1998 December

Japan Development Bank Law revised (establishment of end-of-fiscal-2003 sunset clause on measures forresponding to financial market dysfunctions)
1) Addition to scope of funding of long-term working capital unrelated to facility acquisition
2) Addition to scope of operations of funds from redemption of corporate bonds
3) Addition of such functions as acquisition of publicly offered bonds

1998 December

Partial revision of Hokkaido-Tohoku Development Finance Public Corporation Law (establishment of end-offiscal-2003 sunset clause on measures for responding to financial market dysfunctions)
1) Addition to scope of funding of long-term working capital unrelated to facility acquisition
2) Addition of funds, including those from redemption of corporate bonds, to scope of operations

1999 June

Development Bank of Japan Law established1999 OctoberTransfer of approval of all rights and responsibilities of Japan Development Bank and Hokkaido-Tohoku
Development Finance Public Corporation to the Development Bank of Japan
Transfer of financing operations from Japan Regional Development Corporation and Japan Environment
Corporation

2002 May

Partial revision of Development Bank of Japan Law (introduction of spot inspections by the Financial
Services Agency)

2005 December

Cabinet approval of The Important Policy of Administrative Reform (decisions on such items as our
privatization as an single entity)

2006 May

Establishment of the Law for Advancing Administrative Reform to Realize a Streamlined and Efficient
Government

2006 June

Policy-Based Financing Reform Plan decided upon by the Headquarters for the Implementation of Policy
Finance Reform

2007 June

144

Corporate Data

Establishment of Development Bank of Japan, Inc. Law (New DBJ Law)■Locations and Directory (As of April 1, 2007)
Head Office

Domestic Branch Offices,
Representative Offices

To Kanda

9-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-0004, Japan
Tel: +81-3-3270-3211
http://www.dbj.go.jp/english/index.html

Shuto Expressway

Development Bank of Japan

JR LineNikkei Bldg.

Koko Bldg.

Japan Business
Federation(Keidanren)

Hibiya Dori (St.)

NTT

Chiyoda Line
Otemachi Sta.
(Exit C1)

Marunouchi Line
Otemachi Sta.
(Exit A1)

To TokyoMItsui MutualLife Inssurance

JA Bldg.

KDDI

Representative Offices:
Hakodate
KushiroAomoriToyamaMatsueOkayamaMatsuyama
Oita

Branch Offices:
Hokkaido
TohokuNiigata
Hokuriku
Tokai
Kansai
Chugoku
Shikoku
KyushuMinami-kyushu

Overseas Representative Offices
London Representative Office

New York Representative OfficeFrankfurt Representative Office

Los Angeles Representative Office

Washington, D.C. Representative Office

Singapore Representative Office

Washington, D.C. Representative Office1101-17th Street, N.W., Suite 1001,
Washington, D.C. 20036, U.S.A.
Tel: +1-202-331-8696

Los Angeles Representative Office
601 South Figueroa Street, Suite 2190,
Los Angeles, CA 90017-5748, U.S.A.
Tel: +1-213-362-2980

Frankfurt Representative OfficeFrankfurter Buero Center, Mainzer Landstrasse 46,60325 Frankfurt am Main,
Federal Republic of Germany
Tel: +49-69-7191760
Development Bank of Japan

W 4th St.

olfe

Wilshire BoulevardFrankfurt
Hauptbahnohof

rstr.

The Capital Hilton Hotel

W 7th St.
Mannheimerstr.

New York Representative Office1251 Avenue of the Americas, Suite 830,
New York, N.Y. 10020, U.S.A.
Tel: +1-212-221-0708

London Representative Office
Level 12 City Tower, 40 Basinghall Street,
London, EC2V 5DE, United Kingdom
Tel:+44-20-7638-6210

Weserstr.

e
St ent7th etro cMElbestr.

r

Wilshire Grand Hotel

Moselstr.

Development Bank of Japan

Taunusstr.
Kaiserstr.

Ba
se
le

L St.

r.

lst

r
Ka

.
rstr

Development Bank of Japan

K St.

W 6th St.

Madison Hotel

The Mayflower Hotel

Niddastr.

seld

Los Angeles
Central Library

Mainzer Landstr.

W 5th St.
Düs

National Geographic Gallery

S Grand Ave

deFlower St.

Rho

S. Figueroa St.

Pasadena Fwy

e.
t Av

u
ctic

15th Ave.

16th Ave.

17th Ave.

nne
Co
M St.

ve.

dA
Islan

Münchenerstr.

Singapore Representative Office
9 Raffles Place, #30-03 Republic Plaza,
Singapore 048619
Tel: +65-6221-1779

St

4Radio City Music Hall

S
9th

t

Rockefeller Center

49th St

Gresham St.

ChUOB Plaza

55 Market Street

ur
c

h

Raffles PlaceSt.

Lothbury St.

St.

5th Ave.

6th Ave.

7th Ave.

PrinceDevelopment Bank of Japan

Guildhall

50th St

Basinghall St.

51st Stth50

Market St.

London Wall
52nd St

MoorgateWay

Sheraton New York Hotel and Towers

Coleman St.

Broad

Development Bank of Japan
Hilton New YorkBank

Golden Shoe Park

Bharat Bldg
Ocean Bldg

Equity Plaza
Cecil St.

Development Bank of Japan

Locations and Directory145continuously changing socio-economic needs. The emerging egg shape illustrates our efforts to shape a continuously unfolding future.

DBJ chose environmentally friendly paper and printing methods for the production of this report. Pages 1–68 and 143–146 are madeof paper certified by the Forest Stewardship Council (FSC) as being made from sustainably managed forests. Cover pages, page
1–2 and 71–170 are made of recycled paper. All pages are printed with soy ink certified by the American Soybean Association.

Printed in Japan

Development Bank of Japan

http://www.dbj.go.jp/english/

Annual Report & CSR Report 2007

The shape and coloring of DBJ’s logo seeks to convey the sense of creativity, energy and youthful vigor with which the Bank strives to meet

Annual Report & CSR Report 2007