Annual ReportAnnual Report

2004

Contents■Message from the Governor

2■DBJ in Profile3■Introduction to Finance Projects

6■Optimal Operations Management Framework

17■Business Areas

23■Financial Condition

30■Accounts Based on Corporate Accounting Standards

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

70

■Trends in Capital81■Board of Directors

82■Organization Chart

83■Location of Head and Branch Offices and Directory

84

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

1Message from the Governor
The Development Bank of Japan（DBJ）takes a precise, scientific approach to identifying the challenges facing
contemporary society and collaborates with private-sector financial institutions to support projects that achieve higher
policy goals of great socioeconomic significance. Using a wide range of methods, including direct financing and various
project funding schemes, DBJ strives to fulfill its responsibility of breathing new life into financial markets.
,
DBJ s top priorities are community development, environmentally sustainable societies, and the future of technology andnew industry.

,
These are the areas that we have determined are most crucial for the revitalization and ongoing development of Japan s
economy.
Community development: Cooperating with local communities
DBJ works in cooperation with local communities on a variety of efforts such as business revitalization and private
finance initiatives（PFI）. We spare no effort in applying both finances and knowledge to help communities energize theireconomies.
Environmentally sustainable societies: Building a sustainable society
DBJ strives to address social problems from a broad, interdisciplinary perspective that can contribute to building asociety of true harmony that is worthy of being passed down to future generations. In its unique role as a policy-based
financial institution, DBJ is proactive about using environmental ratings and other advanced means to contribute to therealization of a sustainable society.
The future of technology and new industry: Making the most of technology
The creation of new industries that capitalize on the latest technological advances is essential to strengthening thecompetitiveness of the Japanese economy. DBJ contributes to enterprises and projects that maximize the potential oftechnology by providing fine-tuned investments and loans, with a special focus on assistance for the commercializationof manufacturing technologies and the promotion of innovative workmanship.
Many issues remain as Japan faces the challenge of fully revitalizing its economy and ensuring its continued
development. The knowledge and insight of a diverse range of people must be brought together to envision and then,execute the most effective solutions. DBJ s part in this process is to serve as a catalyst for the synthesis of new value by
helping to bring the right resources together at the right time and place.
On behalf of everyone at DBJ, please let me request your continued support and good will.
Takeshi Komura
Governor

2

DBJ in Profile

The Development Bank of Japan (DBJ) was established based on theDevelopment Bank of Japan Law on October 1, 1999, as the successor to allrights and obligations of the Japan Development Bank and the HokkaidoTohoku Development Finance Public Corporation. The finance functions of theJapan Regional Development Corporation and the Japan Environment
Corporation were also transferred to DBJ.

Objectives
DBJ provides long-term financing and other policy-based schemes to qualified projects as asupplement and inducement to the lending and other services provided by ordinary financial
institutions, and, by doing so, promotes the following:
Upgrading vitalization and sustainable development of the economy and society,the realization of enhanced quality of life, and the creation of self-reliant regions.

Capitalization (as of the end of March 2004)
DBJ is capitalized at ¥1,194.2 billion (wholly owned by the government).

Number of Employees (as of the end of March 2004)
DBJ employs 1,362 workers.

Services
As an integrated policy-based financial institution, DBJ’s composite implementation of the following functions supports desirable projects in line with Japan's economic and social policy.
Supply of long-term funds (providing loans, debt guarantees, and others):
DBJ supplies long-term, fixed-interest, good-quality funds, which, in collaboration withprivate-sector financial institution funding, support projects that have high policy content.
Project support:
Practical application is made of a variety of know-how and financing functions, for the
purpose of promoting smooth formulation of projects that have high policy content. This
support is provided comprehensively at every stage, from concept and planning tocommercialization.
Information supply:
Using its domestic and overseas networks, DBJ carries out study and research related toimportant economic, social, industrial, and local trends, and furnishes a wide range of
information.

3

Creating and publicly disclosing investment guidelines based on its Medium-Term Policy Principles:
DBJ conducts its work according to the Medium-Term Policy Principles of the Development Bank of Japan prepared by the competent ministers.
Investment and Finance Guidelines is prepared and publicly disclosed for each fiscal year. In
addition, the Management Council, consisting of independent experts, has been formed fordeliberation on and public disclosure of the progress of work related to matters in theMedium-Term Policy Principles.
Complementing and encouraging private financial institutions:
The Development Bank of Japan Law prohibits competition with private financial institutions. DBJ’s role is to complement and encourage their financing.
Ensuring sound finance:
In managing its work as a policy-based financial institution, DBJ is working toward soundand efficient operations based on the principles of certainty of repayment and balanced
revenues and expenditures, while also strengthening its risk management capacity andupgrading its ALM (asset/liability management) system.
Evaluating policy effectiveness:
DBJ works to ensure its accountability as a governmental institution by evaluating objectively
the contribution of its financing to policy effectiveness.

DBJ in Profile

Characteristics of Business Management

Business Scale
The scale of lending and the target fields correspond to each year’s policy requirements, and,
together with fiscal investment plans, are determined by debate and decision of the Diet. Annual
settlement is also reported to the Diet. DBJ’s business scale in fiscal year 2004 is ¥1,178 billion.

■ Principles of Work Management

Government

competent ministers[Medium-Term Policy Principles](e.g., 3-year policy items)

DBJ[Investment and Finance Guidelines]
Prepared each fiscal year in accordancewith Medium-Term Policy Principles･ Complementing and encouraging Implementation of the budget
Operations evaluation
private financial institutions･ Ensuring sound finance･ Evaluating policy effectiveness ofpolicy finance(Disclosure)Management Council
Outside experts’ study and reporton the implementation of theMedium-Term Policy Principles

Inspection by
specialist agency(e.g.,board of audit)

CreditManagement
Asset assessment

External audit

Accountability to the public

4

DBJ in Profile■ Structure of Fund Procurement

FILP Agency Bonds
Fiscal Investment
and Loan Program
Government-Guaranteed
Bonds
FinancialMarkets

Special
Account
Bonds

DBJ
Fiscal Loan Fund
Special AccountLoans,
etc.

Private-Sector
Businesses,
etc.

CitizensandResidentsof JapanServices,
etc.

Industrial Investment
Special Account■ Ratings for Development Bank of Japan (as of June 2004)
Ratings on FILP Agency Bonds

Ratings on Government-Guaranteed Bonds

Moody’s

S&P

R&I

JCR

A2

AA−

AAA

AAA

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

5

Moody’s

S&P

Foreign currency-denominatedforeign bonds
Yen-denominated foreign bonds

Aaa

AA−

Domestic bonds

A2−

DBJ is a catalyst for the creationof the new value required to build
a prosperous tomorrow.
DBJ builds and supports highly significant projects that will provide
new solutions both for contemporary society and the next generation.
,
This defines the approach of DBJ s policy-based financing.

DBJ works closely with local communities to assist them withovercoming various challenges, helping to enhance regional financial
functions and revitalize local industries.

DBJ contributes to the realization of a sustainable society bysupporting companies that fulfill their social responsibilities.

DBJ provides know-how and funds to create new industries built ontechnology in order to revitalize the Japanese economy.

Everything DBJ does is aimed at developing a sustainable society andcreating a prosperous life for the citizens of Japan. DBJ is actively
involved in projects needed now and for the future.
6Creating disaster-prepared cities whilerevitalizing downtown areas
Urban redevelopment and downtown revitalization
Akashi Regional Promotion Development Co., Ltd.

■This project sought to redevelop urban areas andupgrade commercial facilities in downtown Akashi City.
■Urban redevelopment projects generally require massive
capital investment, but these projects are not very
profitable, and it takes a long time to recover theinvestment. DBJ facilitates project success by advisingbusinesses based on past experience and providing
financing through long-term loans.

7

Train cars that anyone can easily board or exit,
creating cities that are friendly to people
Introduction of barrier-free train cars for regional transportation
Iyo Railway Co., Ltd.

■This project introduced train cars with street-level floors
in Matsuyama City, Ehime Prefecture. Barrier-free traincars with low floors reduce the height of the step toallow people in wheelchairs or with baby carriages to
get on and off smoothly.
■Low floor streetcars are more expensive than regularstreetcars. DBJ financing provides incentive to carry out
similar types of projects that have high policy significance.

8

Developing the energy of the futureby channeling the power of nature
Project financing for construction of wind power plants
Eurus Energy Iwaya Corp.

■This project built twenty-five 1,300kW wind power

venture, and after a careful study of wind conditions,generators in Higashidori-mura, Aomori Prefecture.

DBJ prepared a financing plan based on an

Clean electric power will be sold to power companies

understanding of wind direction, wind speed, and otherfor a 17 year period starting in 2001.

factors.

■DBJ provided project finance loans in conjunction withprivate financial institutions. Wind power is a high-risk

Photo credit: Eurus Energy Japan Corp.

9

Protecting the rich natural environment of Tateyama Kurobe
by introducing low-emission vehicles
Introducing low-emission vehicles at national parks
Tateyama Kaihatsu Tetsudo Co., Ltd.

■In order to protect and conserve the rich natural
resources of the Tateyama Kurobe Alpine Route in
Chubu Sangaku National Park, this project has been
gradually introducing hybrid low-emission buses to thehighland roads since 1998.
■Hybrid buses are more expensive than regular buses,
and replacing all vehicles will take a long time. DBJ
allowed this project to be implemented in a stable andsystematic manner by providing long-term loans.

10Achieving zero waste with eco-cement
Environment-friendly recycling
Project to develop eco-cement
Ichihara Ecocement Corp.

■A project to develop eco-cement using the ash fromincinerating waste is underway in Ichihara City in Chiba
Prefecture.
■The eco-cement project is the core focus of the Chiba
Prefecture Western and Central Region Eco Town
Plan, which is based on the concept of zero emissions

11

resources,easing the problem of insufficient disposalsites and addressing the issue of dioxins.

and aims to eliminate waste. By recycling waste that

■DBJ has provided long-term funds to aid the,commercialization of Japan s first eco-cement, which

previously would have been buried in landfills, thisaims to achieve zero emissions, thus putting the projectproject helps to build a society based on renewable

on stable footing.

Elevating railroad crossings
Restoring safety and speed to everyday life
Elevated crossing project
Tokyu Corp.

■This project removed ground level railroad crossings at
18 points along an approximately 2.8km stretch of the
Tokyu Meguro Line between Meguro and Senzoku
Stations by elevating the railroad above the roadway.
■The project costs for elevating railroad crossings areenormous. Moreover, because an increase in revenue is
not expected, the investment must be recovered over along period of time. DBJ cooperated in achieving thissocially beneficial project by providing long-term (20-year)
fixed-rate loans.
Before elevated crossing

12Support for technology used for next-generation lenses
New product line revitalizes community,
Strengthening communities technological foundation
Tamron Co., Ltd.

■A plant manufacturing high value-added lenses in,
Aomori Prefecture s Tsugaru region carried out
construction work to upgrade the plant.

,■This project is expected to strengthen the company stechnological foundation, create employment in theregion, and enhance the regional economy by securing
orders for local companies.
■This project is part of efforts to strengthen the,company s production system for the medium to longterm, given the recent diversity in products such as
13

digital cameras. DBJ provides continual support for thistype of technology-based effort by providing long-term
fixed-rate loans.

Rendering
Rendering: Courtesy of JAXA & Lockeed Martin

Advanced science and technology creating businesson the vast stage of space
Space technology R&D project
Galaxy Express Corp.

■This project is Japan's first joint public and privatesector■Rocket development is generally a high-risk venture as aventure in rocket development. The two-stage liquid

result of massive development costs and a long investment

fuel rocket under development is intended mainly forrecovery period. DBJ is helping to facilitate this project bycommercial launches and will have the capacity toproviding long-term loans.

launch 2-ton satellites into a sun-synchronous orbit atan altitude of 800km.

14Creating new industry based on passion and experience intaking on new challenges on the human frontierCommercializing high power diode laser
Hamamatsu Photonics K.K.

■This project commercialized high power diode laser byapplying original cooling and condensing technology
acquired through years of research and development.
■Commercializing high power diode laser is a pioneering
venture that generally entails high business risk as aresult of the need to establish production lines, maintainyield rates, and forecast demand. DBJ provides quality,
long-term financing in support of companies willing toaccept the challenge of blazing new trails.

15

Developing new engines to help revitalize
the local economy
Technological development at a leading regional company
Mazda Motor Corp.

■Hiroshima has a flourishing automobile manufacturingindustry, and in this project, Mazda developed an allaluminum gasoline engine that achieves superior power
performance, fuel efficiency, and low noise.
■This project required massive investment over several
fiscal years. The project was key to revitalizing the local
community, and DBJ provided support in the form of
stable long-term financing.

16

DBJ strives to achieve optimal operations management within the Plan, Do, See cycle

Optimal Operations Management Frameworkoutlined below. The Bank is also working to manage the various risks associated withbeing a financial institution and to earn the trust of the general public.
Plan

Preparation and publication of Investment and Finance Guidelines
based on the Medium-Term Policy Principles

Do
See

Execution of investments and loans
External evaluation: Management Council
Internal evaluation: Operations evaluation

Operations Management Cycle
Preparation and Publication of Investment and Finance Guidelines based on theMedium-Term Policy Principles
DBJ carries out its activities in accordance with three-year policies prepared by the competent
ministers (Medium-Term Policy Principles) and prepares and publishes Investment and Finance
Guidelines for each fiscal year.

Management Council
DBJ established a Management Council comprised of outside experts in accordance with Article 24of the Development Bank of Japan Law. Council members examine the status of operations related
to the items stated in the Bank’s Medium-Term Policy Principles. The results of this examination
are published with a view to enhancing transparency.
Management Council profile
Membership limit: Eight members
Appointment: The Bank Governor appoints scholars and experts subject to approval by the
Minister of Finance.
Term of office: Four years
Chair: The Chair is designated by the Governor and presides over council affairs.
Management Counselors (As of the end of June 2004. *Chairman)
Satoru Kishi
Senior Advisor, The Bank of Tokyo-Mitsubishi, Ltd.
Professor, Department of Civil Engineering, Division of Engineering,
Shigeru Morichi
Graduate School, University of Tokyo
Shinobu Shimizu
Chairman of the Board and Representative Director, Tokyu Corp.
Former Chairman, The Association of Japanese Private Railways
Honorary Chairman and Director, Toyota Motor Corp.
*Shoichiro Toyoda
Honorary Chairman, Nippon Keidanren
Yasuko Niimura
Chief Economist and Managing Director, Sumitomo-Life ResearchInstitute, Inc.
Yasuo Shingu
Honorary Chairman, Sumitomo Metal Industries, Ltd.
Former Chairman of the Board of Directors, Kansai Economic
Federation
Yoichi Kaya
Director General, Research Institute of Innovative Technology for
the Earth (RITE)
Yoshio Matsui
Chairman, The Yomiuri Shimbun
Report of the Management Council of the Development Bank of Japan (December 2001)
In accordance with Article 24 of the Development Bank of Japan Law, the Management
Council prepared a report on the results of its examination of the implementation status of
the current Medium-Term Policy Principles. DBJ passed this report on to the competent
ministers.

17

Citizens and Residents
of JapanPl a nCompetent Cabinet Ministers
Medium-Term Policy Principles(every three years)

Publication

Investment and
Finance Guidelines (annual)

Review and report on implementation ofMedium-Term Policy Principles
Evaluation results
reflected in Investment
and Finance Guidelines(annual)Management Council
External evaluation

Operations evaluation
Internal evaluation

See

DBJ

Optimal Operations Management Framework■ Operations Management Cycle Based on the DBJ Law

Execution of investments
and loans

Do

Operations Evaluation
As with national and local public bodies, DBJ is required to undertake proactive reform to ensureaccountability and better operations management. To achieve this goal, DBJ has introduced an
operations evaluation system.
Mechanism for operations evaluation
DBJ conducts its operations in line with the Medium-Term Policy Principles formulated by thecompetent ministers. The law also stipulates that the Management Council discuss the status of theimplementation of these policies. In order for this framework to work effectively, DBJ mustevaluate its own operations and maintain an internal evaluation mechanism enabling it to provide
the Management Council with the information needed for these deliberations. The operations
evaluation mechanism assesses individual investment and loan proposals (individual proposals) as
well as the internal investment and loan system, and then reports the results to the Management
Council. This information is also useful to DBJ in reviewing its own operations (see figure above,“Operations Management Cycle Based on the DBJ Law”). Specifically, the procedure consists of (1)evaluation of individual investment and loan projects (an assessment of individual proposals’ policy
significance); (2) evaluation of the investment and loan system (an assessment of the effectiveness of
the investment and loan system); (3) evaluation of projects (a detailed evaluation of specificproposals); and (4) compilation of the results in an Operations Evaluation Report (comprehensive
evaluation) and release of the report after the Management Council has been informed.
DBJ has established the Operations Evaluation Office as an internal organization dedicated toensuring that internal evaluations generate accurate and reliable results. The office ensures optimalfunctioning of the evaluation system. DBJ also established a committee consisting of scholars andexperts to solicit suggestions on how to improve the evaluation system.

18

Optimal Operations Management Framework

Internal Management System
The Diet approves DBJ’s budget every year, and DBJ must submit its financial statements to theDiet, as well. In addition, overall operations are reviewed by the Board of Audit, the Ministry of
Finance and the Financial Services Agency. Under the DBJ Law, the executive serving as the auditor
monitors operations, and the organization-wide measures described below are applied to internalmanagement.

Legal Compliance System
DBJ positions the formulation of a legal compliance system as one of management’s mostimportant tasks in fulfilling the Bank’s social mission and responsibilities as a policy-based financial
institution. DBJ is currently undertaking the following organization-wide efforts.
Development of a compliance system
DBJ has established a general risk management committee to serve as the body to deliberateon compliance matters, as well as to ascertain the extent to which compliance is practiced anddiscuss improvements to the Bank’s internal system. In addition, the compliance officers
appointed in all departments and branch offices are responsible for verifying compliance intheir assigned department or branch office as well as reporting on compliance-related mattersand serving as liaisons.
Internal dissemination of compliance information
DBJ has prepared a Compliance Manual containing specific behavior guidelines to ensurecompliance, as well as related laws and regulations. This manual is distributed to all
executives and employees. Moreover, the Bank is holding training seminars and briefings inan effort to thoroughly educate all executives and employees about basic matters related tointernal compliance.
Formulation of compliance programs
DBJ formulates compliance programs for each fiscal year as detailed action plans to achievecompliance. These programs are discussed and adopted by the Compliance Committee.

ALM and Risk Management System
DBJ has developed an asset/liability and risk management system that clarifies which department is
responsible for each type of risk in order to ensure appropriate management of individual risk, andplaces the Finance Planning & Coordination Department in charge of overseeing comprehensive
asset/liability and risk management activities. The ALM Committee, consisting of executives andthe DBJ Governor, determines basic policies related to comprehensive asset/liability and risk
management and conducts regular monitoring for each type of risk.
Credit risk
Credit risk refers to the risk of sustaining losses resulting from a decline or complete loss inthe value of assets due to deterioration in the financial condition of the borrower. Credit risk
management requires monitoring of individual loans as well as Bank-wide portfolio
management.
• Monitoring of individual loans
When making investments and loans, DBJ examines the primary entity’s project viability
and profitability from a neutral and fair standpoint, in addition to considering the project’s
policy significance and benefits. The loan amounts are determined using ratings. 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 the Self-Assessment Criteria based on
the Financial Services Agency’s Financial Inspection Manual. The results of selfassessments are subject to an audit by an audit corporation in accordance with thePractical Guidelines for Verifying Internal Regulations Covering the Self-Assessment of
Assets by Banks and Other Financial Institutions and for Auditing Bad Debt Write-offs and19

Optimal Operations Management Framework

Bad Debt Reserves (Fourth Report of the Special Committee on Bank Auditing of theJapanese Institute of Certified Public Accountants).
• Portfolio management
DBJ reports on the internal ratings, the results of the self-assessment, and the status of
unexpected losses to the ALM Committee. This monitoring and consideration ofcountermeasures allows DBJ to control risk and carefully review measures to improve riskreturn.
Market risk
Market risk can be broadly classified into interest rate risk and exchange risk. DBJ is taking
the following steps to control market risk.
• Interest rate risk
DBJ employs cash flow ladder analysis (gap analysis), present value analysis, interest ratesensitivity analysis, and other methods to manage its assets and liabilities. The Bank covers
a portion of interest rate risk associated with lending operations through interest rate
swaps, which are used solely for hedging purposes. DBJ does not have any trading-related
risk because it does not engage in trading (specified transactions).
• Exchange risk
Exchange risk results from extending foreign currency loans and issuing foreign currency
bonds. DBJ uses currency swaps to hedge this risk. The Bank manages counterparty risk inswap transactions (risk that the other party to the swap transaction will be unable to fulfill
its obligations) by continually monitoring the creditworthiness of counterparties to swap
transactions and by diversifying transactions across several institutions.
Liquidity risk
DBJ has a robust system for controlling liquidity risk. In addition to rigorous management ofprojected cash flows, the Bank relies on the stable procurement of long-term funds from thegovernment’s Fiscal Investment and Loan Program (FILP), government-guaranteed bonds,
and FILP agency bonds rather than short-term funds such as deposits.
To meet unexpected short-term funding requirements, funds on hand are placed primarily inshort-term investments, taking security and liquidity into consideration, and overdraft lines ofcredit have been established with multiple private financial institutions. DBJ also maintains
daytime liquidity by using the Bank of Japan’s settlement system, Real Time Gross Settlement(RTGS), a system whereby settlements are made instantly for each transaction. DBJ does its
utmost to manage its settlement position appropriately.
■ Asset/Liability and Risk Management System
Audit and Inspection
Auditors

Governor
Operations Audit Committee

Board of Directors
Internal Audit Department
ALM Committee
Inspection Department

Finance Planning &Coordination Department

Credit Analysis Department

Credit Risk
Management Department

Treasury Department

Investment and Loan Departments and Branches

20

Optimal Operations Management Framework

Operational Risk Management
Operational risk refers to the risk of sustaining losses resulting from employees neglecting toperform their operational duties correctly or from accidents, fraud, and so forth. DBJ is working to
reduce and prevent the actualization of operational risk by preparing manuals, performing mutual
checks on administrative procedures, providing education and training, and employing computer
systems to reduce the burden of administrative duties. Inspection Department led by senior
executives under the direct authority of the Governor perform independent inspections. These onsite inspections are conducted once yearly for each department and branch office to confirm thatadministrative duties are being carried out in an appropriate manner and in compliance with laws
and regulations as well as internal Bank rules.

Systems Risk Management
Systems risk refers to the risk of sustaining losses resulting from the breakdown or malfunction ofcomputer systems, system defects, or improper computer usage. DBJ recognizes the growing
importance of systems risk management for financial institutions as a result of the ongoing spreadof networks and other factors. In response to the Special Action Plan on Countermeasures to
Cyberterrorism of Critical Infrastructure issued by the IT Security Promotion Committee of theGovernment of Japan, the Bank is taking the following steps to develop internal systems to manage
systems risk.
Formulation of an Information Security Policy
DBJ has formulated an Information Security Policy as a uniform policy to ensure the securityof the Bank’s information systems.
Establishment of a System Risk Management Committee
A System Risk Management Committee has been established to deliberate on matters related
to system risk. The Committee discusses policies for formulating basic policies for the systemrisk management system and internal rules.
Establishment of an Information Security Management Division
DBJ has established an Information Security Management Division to provide integrated
maintenance and management of information security. The division is responsible for
confirming on a daily basis that system usage complies with internal rules.
Appointing of Information Assets Officers
DBJ has appointed information assets officers for each department and branch office as the
persons responsible for implementing security measures.

Internal Audit Systems

21

Internal audits involve a comprehensive and objective assessment of the appropriateness andeffectiveness of the organization’s internal management stance from a position independent of the
managing divisions and the operation divisions, and also involve a series of work processes ranging
from advice on problem correction to follow-up. As a policy-based financial institution, DBJ fulfills
its social mission as a government-affiliated institution through its operations. As a financial
institution, DBJ must maintain its health through governance based on principles of selfresponsibility. Its internal monitoring functions, which aim to ensure the effectiveness of internalmanagement while addressing the greater diversity and sophistication of operations, are becoming
increasingly important.
To facilitate this internal monitoring process, DBJ has established an Internal Audit Department
under the direct supervision of the Governor, independent of the operational departments, tocomplement the business audits. This department is working to facilitate internal monitoring inorder to achieve and maintain appropriate and effective risk management, reliable financial reports,
and compliance with laws and regulations—the primary objectives of internal control. Specifically,
the department verifies the appropriateness and effectiveness of operations management withrespect to compliance with laws and regulations and to risk management in each department andbranch office, and also performs both internal rating audits and self-assessment of assets. Further,an Operations Audit Committee was established under the Governor to deliberate on important
issues related to internal audits.

DBJ’s website offers a variety of timely information, including an introduction to the Bank, news
releases, and research reports.

Website address: http://www.dbj.go.jp/english/index.html

Optimal Operations Management Framework

Website Information

Top page

Investor relations

22

Business Areas

DBJ’s Business Areas and Fiscal 2004 Investment and Loan Plan
Business Areas and Investment and Loan Plan
In fiscal 2004, DBJ’s activities focused on the following three main areas:
1. Restructuring and Economic Revitalization
2. Revitalization of Local Economies
3. Environmental Measure and Infrastructure
In order to promote investment in these areas, as explained below, DBJ focuses on investment andloan activities while conducting surveys and research and providing information in support ofpolicy proposals and project formulation.
Restructuring and Economic Revitalization• Economic structural reform, including assistance of new entrants in deregulated industries,
support for the revitalization of financial and capital markets, support for industrial revitalization
and business rehabilitation, and facilitation of access by overseas corporations to Japan• Enhancement of intellectual infrastructure, including the development of new technologies andbusinesses that contribute to the improvement of technology standards in Japan
Revitalization of Local Economies• Development of regional social infrastructure through implementing urban renewal projects,
enhanced utilization of existing urban areas, improvement of regional transportation
infrastructure and so forth• Regional economic revitalization through the promotion of regional location of industries,
regional industrial development and employment creation, enhancement of regional financial
capabilities, and so forth
Environmental Measures and Infrastructure• Environmental conservation, energy, disaster prevention, and welfare measures, including
promotion of the creation of a recycling society, urban disaster prevention initiatives, andmeasures for welfare and the aging society• Development of transportation and physical distribution networks, including the improvement ofcore metropolitan transportation networks and air transportation systems, and the enhancementof distribution efficiency• Formulation of telecommunications networks, including the promotion of telecommunications
network development, enhancement of utilization, and the introduction of advanced information
technology

23

(billions of yen)

Fiscal Year
Item

2001

2002

2003

(Reference)
Fiscal 2003
year-end balance

Structural reform and economic revitalization

354.8

379.6

416.0

2,192.1

Economic structural reform

330.5

349.7

400.3

1,898.1

Development of intellectual infrastructure

24.2

29.8

15.7

294.0

247.8

253.2

275.5

3,639.4

Development of regional social infrastructure

115.7

147.4

182.4

2,301.2

Revitalization of regional economies

132.1

105.8

93.0

1,338.2

606.2

573.3

448.1

8,748.3

Environmental protection, energy,
disaster prevention, and welfare measures

339.5

269.9

252.1

4,607.2

Transport and distribution networks

171.4

176.7

186.2

3,491.6

Telecommunications networks

95.2

126.7

9.7

649.4

1,208.9

1,206.2

1,139.7

14,580.0

46.7

55.7

43.3

641.5

1,255.6

1,262.0

1,183.1

15,221.6(of which capital subscription)(5.1)(101.8)(61.6)(311.4)

Debt guarantees

11.1

2,272.2

15.4

2,216.6

Creation of self-reliant regions

Enhancement of quality of life

Sub-total
Improvement of social capital
Total

Business Areas■ Loans and Investments by Fiscal Year

Notes: 1. Investment and loan categories were revised effective fiscal 2004. Investment and loan amounts in fiscal 2001 and 2002 were adjusted forconvenience to conform to fiscal 2003 categories.
2. Investment in funds is recorded on the basis of the agreement amount.
3. In fiscal 2001, the figures include ¥75.5 billion corresponding with the business activities of the former Hokkaido-Tohoku Development Finance Public
Corporation, ¥5.8 billion corresponding with the former lending business of the Japan Regional Development Corporation, and ¥16.0 billion
corresponding with the former lending business of the Japan Environment Corporation.
4. In fiscal 2002, the figures include ¥81.6 billion corresponding with the business activities of the former Hokkaido-Tohoku Development Finance Public
Corporation, ¥3.1 billion corresponding with the former lending business of the Japan Regional Development Corporation, and ¥17.7 billion
corresponding with the former lending business of the Japan Environment Corporation.
5. In fiscal 2003, the figures include ¥63.7 billion corresponding with the business activities of the former Hokkaido-Tohoku Development Finance Public
Corporation, ¥0.5 billion corresponding with the former lending business of the Japan Regional Development Corporation, and ¥11.5 billion
corresponding with the former lending business of the Japan Environment Corporation.
6. The fiscal 2003 year-end balance does not include ¥36.1 billion in stock from Tomakomai East Development Corporation and the Mutsu Ogawara
Development Corporation.
7. Debt guarantees, etc., in fiscal 2002 include ¥21.0 billion in debt guarantees for borrowings, etc., from private financial institutions, and ¥2,251.1
billion in debts for collateralized loan obligations using credit derivatives (bonds issued by special purpose companies totaling ¥10.0 billion and credit
default swap transactions totaling ¥2,241.1 billion) etc.

Features of the Fiscal 2004 Investment and Finance Plan
Fiscal 2004 Investment and Finance AmountIn light of the reform of special public (Reference) Comparison of fiscal 2000 investment and loan plan andinitial amounts planned in recent years
corporations, DBJ plans to invest or lend a total(billions of yen)Comparison withof ¥1,178.0 billion in fiscal 2004, as in fiscal
Fiscal year
Initial amount planned
fiscal 2000 plan
2003, in an effort to provide financing in--2,230
2000
cooperation with private financial institutions in
1,600
2001
▲ 630
areas critical to the achievement of national
1,200
2002
▲ 1,030
economic and fiscal policies addressing regional
1,178
2003
▲ 1,052
economies, the environment, technology, and
1,178
2004
▲ 1,052
other issues.
Accordingly, the balance of loans is expected to decrease about ¥4.3 trillion compared to the time of
DBJ’s founding (from ¥18.8 trillion at the end of March 2000 to an estimated ¥14.5 trillion at theend of March 2005).
24

Business Areas

DBJ decreases borrowings from the Fiscal Loan Fund and continues to raise
its own capital through FILP agency bonds
DBJ decreased its borrowings from the Fiscal Loan Fund by ¥26 billion compared to the initialfiscal 2003 plan, to ¥577 billion (an approximately ¥1 trillion decrease compared to the fiscal 2000
initial plan) and accordingly reduced its dependence on the Fiscal Loan Fund. On the other hand,
DBJ plans to issue ¥240 billion in FILP agency bonds, as in fiscal 2003, so that the Bank can raise
funds independently. As a result, capital raised in the market (FILP agency bonds, government
guaranteed bonds, foreign bonds) will make up 45.9% of the funds raised externally in fiscal 2004,
excluding capital contributions.

Greater Focus on Three Priority Areas
In light of policies developed by the Council on Economic and Fiscal Policy and other government
bodies, DBJ will focus on investment and loan programs intended to promptly address pressing
matters among policy issues in fields such as regional economies, the environment, and technology.
Particular emphasis was laid on the issues listed below.
Contributions to Regional Revitalization• Enhancing measures in high risk areas by augmenting fund functions
DBJ will increase risk-taking and the provision of financial know-how through capital
contributions to funds that can contribute to regional revitalization such as urban renewal
funds, business and industrial rehabilitation funds, and venture funds.
• Greater support of regional midsized companies through relationship banking
DBJ utilizes relationship banking functions in cooperation with regional financial
institutions to provide the necessary funds so that the midsized companies that play such acentral role in regional industry and employment are able to continue to advance theirbusiness by streamlining and improving management efficiency.
• Aid for businesses in structural reform areas
To support regional revitalization, DBJ provides aid for businesses in special structuralreform regions that have been designated as such in light of their particular characteristics.
• Continued active efforts with PFI
DBJ will continue to adopt a flexible approach to the percentage of loans it allocates toprivate finance initiatives.
• Stronger aid for funds addressing security issues such as disaster prevention
DBJ will increase its support for funds necessary to prevent disasters in public facilities
such as train stations and airports used by large numbers of people.
Active Efforts to Address Environmental Issues• Increased aid for environment-friendly companies through an environmental scoring system
DBJ has created Japan’s first system to encourage companies’ environmental efforts byusing an environmental scoring system to select companies striving to employ advanced
measures to address environmental problems and providing support for those companies’
efforts to raise funds to cover environmental expenses.
• Support for the Kyoto mechanism
To improve the effectiveness of the Kyoto Protocol, DBJ has set up a system to provide aid
in a timely manner through a fund intended to reduce greenhouse gases using the Kyoto
mechanism.
• Promotion of energy conservation
DBJ attempts to facilitate energy conservation by including energy conserving building
projects in its support, which corporations need to implement medium-term plans toachieve energy conservation targets developed for such building structures including
offices, department stores, and hotels.

25

Business Areas

Promotion of Economic Revitalization Through Technological Advancement: Enhancing Industrial
Financial Functions• Creation and revitalization of new industries by facilitating supply of funds for businessdevelopment in venture and midsized companies
Although venture and midsized companies have the technological capacity and knowledge
to develop new industrial fields, it has become difficult for these companies to raisebusiness capital due to the recent financial environment and inadequate credit strength. By
facilitating the supply of these funds to venture and midsized companies, DBJ helps tocreate new industries that can support the next generation and revitalize Japan’s economy.
• Operations supporting effective use of intellectual property
Japan has not developed the full market potential of intellectual property such as patents,
copyrights, and various types of content. Accordingly, DBJ uses methods to mobilize andpromote the effective use of intellectual property.
• Support to facilitate fundraising that focuses on a company’s cash flow
DBJ supplies the funds needed by midsized companies to conduct businesses that serve
valuable socioeconomic purposes. The Bank facilitates companies’ fundraising by offering
diverse financing technologies with an emphasis on cash flow. Among its measures areloans secured by accounts receivable and other assets—not only by real estate—and loans
with covenants for risk control, available without depending on conventional financing
methods such as real estate collateral.
• Promotion of industrial revitalization
DBJ attempts to prevent the loss of advanced technological resources by assisting
businesses to rehabilitate themselves in a timely fashion through business reconstructionplans, by including a rehabilitation plan with its funding in support of industrial
revitalization.
■ Examples of Projects Covered by the Fiscal 2004 Investment and Loan Plan(billions of yen)

Initial amount
Structural reform and economic revitalization

Chief loan targets (sample)

318

Economic structural reform

280

Support to facilitate fundraising using collateral other than real estate,business and industrial rehabilitation, promotion of access to Japan, support
for businesses in areas targeted for structural reform

Development ofintellectual infrastructure

38

New technology development, creation and revitalization of new industries,
support for effective use of intellectual property

Support for regional economies

300

Development of regionalsocial infrastructure

170

Promotion of the privatization of public enterprises, improvement of social
capital through private finance initiatives (PFI), urban redevelopment andrenewal projects, establishment of disaster prevention projects for congested
regions

Revitalization of regional economies

130

Enhanced support for regional midsized companies through relationshipbanking, advancement of regional financial functions, strengthening of regional
competitiveness, revitalization of industrial activities in cold areas

Environmental measures and infrastructure

513

Environmental protection, energy,
disaster prevention,
and welfare measures

270

Promotion of environmentally friendly management using environmental
scoring, promotion of businesses utilizing the Kyoto mechanisms, energy andsecurity measures, urban flood control businesses to develop new energy

Transport and distribution networks

165

Construction of core transportation networks and air transportation systems

Telecommunications networks

78

Installation of communications networks including fiber optic cable,
improvements to information security, e-commerce

Sub-total
Improvement of social capital
Total

1,131
47

Operations to install advanced television broadcasting facilities

1,178

Note: The initial budget for fiscal 2004 includes ¥121.4 billion for the former Hokkaido-Tohoku Development Finance Public Corporation, ¥9.5 billion for the former
lending business of the Japan Regional Development Corporation, and ¥7.1 billion for the former lending business of the Japan Environment Corporation.

26

Business Areas

Efforts to promote investment in Japan and bring the benefits ofglobalization to Japan’s regional economies
The investment of foreign capital in Japan is
expected to facilitate exchange of advanced
technology and knowledge and to create jobs,
as well as to vitalize the Japanese economy.
Department for International Affairs of DBJ andits Overseas Representative Offices support
inward investment and brings the benefits ofglobalization to Japan’s regional economies in avariety of ways: information provision byholding seminars and issuing of reports by
Overseas Representative Offices, consulting
services for corporations’ investment plans, andthrough alliances with regional public institutions
and organizations.

Promotion of investment in Japan
Bringing the benefits of globalization
to Japan’s regional economies

Providinginformation

Consulting

Support･ Information onsites andmarkets･ Seminars andlectures･ Reports by
Overseas
Representative
Offices･ Referral toprecedents･ Advice on
investment plans･ Provision ofexpertise･ Referral ofpartners･ Alliances with
regional publicorganizations･ Alliances withorganizations
involved withinvestment inJapan

Example initiative: Finnish Well-being Center (FWBC) ProjectThis project endeavors to introduce health and welfare equipment utilizing IT that is commonly usedin Finland to Japan’s nursing homes. The goal is to create a new type of elderly care business thatprovides an environment in which the elderly can live independently within a community. Currently,
special homes for the elderly and R&D facilities are being developed, as the core of the project.
The project is particularly notable for the alliances and cooperation between Finland and Sendai
City’s administration, academic organizations and companies. Requests for cooperation from the
Finnish government resulted in DBJ’s support for this project from its initial stage throughcompletion.

Illustration of project at completion27

Significance of international cooperation
The importance of sound policy-based financing and development finance in addressing various
economic development challenges that cannot be met adequately by private-sector finance is beingemphasized in developing countries, primarily in Asia. Accordingly, official development assistanceorganizations, related government agencies, and international development finance organizations
ask DBJ for intellectual cooperation that draws on the experience, knowledge, and domestic
network built up in the process of assisting Japan’s postwar economic growth.
In response, DBJ has held the “Developmental Finance Course” in Tokyo every year since 1967,
inviting development finance organizations from South Korea, China, the Association of Southeast
Asian Nations, Latin America, Africa, and Eastern Europe. As part of its function as a knowledgebank, DBJ aims to provide international cooperation based on high-quality training and surveys,
and strives to contribute to enhancing Japan’s presence in the international community.

Business Areas

International Cooperation Activities■ Primary organizations participating in training and locations of local training

28

Business Areas

Status of fiscal 2003 activities
Since the 1990s, intellectual technology cooperation for countries around the world that are
making the transition to a market economy has been a priority issue for DBJ. The Bank has focusedparticularly on four countries in Southeast Asia making this shift—Cambodia, Laos, Myanmar, andVietnam. Independently or through Japan’s official development assistance, DBJ has held training
sessions in Tokyo and around the world in cooperation with the Ministry of Finance andinternational cooperation organizations.
At the same time, DBJ also has conducted surveys and held seminars on setting up infrastructure,quality management and regional finance using the private sector—issues that Japan, South Korea,
China, and ASEAN member countries have in common—either independently or with thecooperation of the World Bank or Inter-American Development Bank. Also, DBJ has arranged
opportunities for dialogue with Kreditanstalt für Wiederaufbau (German development bank) andthe China Development Bank on shared policy issues.
■ Specialized areas and areas of activity

Know-how in specialized areas
Economic policy
and enterprise development

International cooperation
activities
Training, seminars

Financial sector, policy-based finance,development finance
Infrastructure development
Urban development,
regional development

International forums, workshops

Surveys, consulting

Environmental measures

Enterprise development

Fiscal 2003 training for countries making the transition to amarket economy
Finance ministries, central banks, and development financeorganizations from Cambodia, Laos, Myanmar, andVietnam were invited.

29

Publishing and PR activities

Executive Officer Conference with the China Development
Bank
Opinions on common policy issues such as establishingtransportation infrastructure and developing regional
economies were exchanged.

DEVELOPMENTBANK OFJAPAN

Financial Condition

30

•Compliance with Corporate Accounting Standards
The consolidated financial statements of the preceding
consolidated accounting period (April 1, 2002 to March
31, 2003) and the current consolidated accounting period(April 1, 2003 to March 31, 2004) have been audited andcertified by ChuoAoyama Pricewaterhouse Coopers.
The financial statements of the preceding accounting
period (April 1, 2002 to March 31, 2003) and the current
accounting period (April 1, 2003 to March 31, 2004)
have been audited and certified by ChuoAoyama
Pricewaterhouse Coopers.
•Compliance with Accounting Standards for Special
Agencies, etc.
The financial statements of the preceding accounting
period (April 1, 2002 to March 31, 2003) and the current
accounting period (April 1, 2003 to March 31, 2004)
have been audited and certified by ChuoAoyama
Pricewaterhouse Coopers.

31

DEVELOPMENTBANK OFJAPAN

Accounts Based on
Corporate AccountingStandards

32

33

CONSOLIDATED BALANCE SHEETSMillions of yen
2004

March 31

Thousands of U.S. dollars
2003

2004

AssetsCash and Due from banks
Reverse Repurchase Agreements¥

Money Held in Trust (Note 25)
Securities (Notes 4, 13 and 25)
Loans (Note 5)
Other Assets (Note 6)
Premises and Equipment (Note 7)
Deferred Charges on Bonds and Notes
Customers' Liabilities for Acceptances and Guarantees
Allowance for Loan Losses (Note 8)
Allowance for Investment Losses
Total Assets¥

19,30539,787¥$

182,659

77,166

192,880

730,125

4,893
426,9711,969
439,063

46,2994,039,851

14,785,724
304,750

15,713,160
320,403

139,897,100
2,883,439

38,081
2,249

38,862
1,808

360,312
21,28776,812

87,715

726,772(395,881)(13,903)(474,603)(11,237)(3,745,681)(131,550)

15,326,171¥

16,349,810

145,010,613

Thousands of U.S. dollars

Millions of yen
2004

$

2004

2003

Liabilities and Equity
Liabilities
Bonds and Notes (Note 9)
Borrowings (Note 10)¥

1,780,606¥

1,596,630$

16,847,443

11,403,450

12,664,024

107,895,263

Other Liabilities (Note 11)
Allowance for Bonus Payments

277,824
1,659

357,808
1,775

2,628,669
15,703

Allowance for Employee Retirement Benefits (Note 20)

32,172
76,81232,88887,715

304,400
726,772

Acceptances and Guarantees (Note 12)
Total Liabilities¥

13,572,524¥

14,740,843$

128,418,250

EquityCapital¥1,194,286¥

1,182,286$

11,299,896

Retained Earnings

540,403426,416

5,113,103

Net Unrealized Gain on Available-for-sale Securities,
Net of Taxes(Note 25)

18,956

264

179,364

Total Equity
Total Liabilities and Equity¥¥

1,753,646
15,326,171¥¥

1,608,967
16,349,810$$

16,592,363
145,010,613

Accompanying notes are an integral part of these financial statements.

34

CONSOLIDATED STATEMENTS OF OPERATIONS
Thousands of U.S. dollars

Millions of yen
For the Fiscal Years ended March 31

2003

2004

2004

Revenues
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 14)
Other Operating Income (Note 15)
Other Ordinary Income (Note 16)
Collection of Written-off Claims¥

543,179$

4,589,827

483,195

540,870

4,571,818

1,890
12

2,297
7

17,885
120

0
0

4
0

4
0

2,757
−

1,659
1,020

26,091−

38,768214366,814

2,048
217

470
246

19,3792,059

Gains on Sales of Premises and Equipment
Total Revenues¥

528,890¥546,791$

5,004,170

Expenses
Interest Expenses¥

373,924¥439,932$

3,537,935

Interest on Bonds and Notes
Amortization of Discounts on Bonds and Notes (Note 3(f))

31,615−33,562
354

299,130−

Interest on Borrowings

329,073
13,235

397,690
8,324

3,113,575
125,230

Other Interest Expenses
Fees and Commissions (Note 17)

21

48

199

Other Operating Expenses (Note 18)
General and Administrative Expenses

2,466
26,765

1,977
31,65323,337253,249

Other Ordinary Expenses (Note 19)

11,483242

151,789264

108,648
2,297

Losses on Sales of Premises and Equipment
Total Expenses¥

414,903¥625,665$

3,925,665

Earnings (Loss) before Income Taxes
Income Taxes¥¥

113,987
0¥¥(78,874)0$$

1,078,505
1

Current
Deferred
Net Earnings (Loss)
Accompanying notes are an integral part of these financial statements.

35

485,098

0−¥

113,987

0−¥(78,874)

1−$

1,078,504

CONSOLIDATED STATEMENTS OF EQUITY
Millions of yen
Retained
Earnings

CapitalFor the Fiscal Year ended March 31, 2003
Balance at March 31, 2002
Net Change in Unrealized Gain on¥

1,122,286

the Japanese Government
Net Loss¥

505,291869¥

Total Equity¥

1,628,446

−

(605)

60,000−−60,000−1,182,286(78,874)
426,416−
264(78,874)
1,608,967−

Available-for-sale Securities, Net of Taxes
Capital Contribution from

Balance at March 31, 2003¥

Net Unrealized Gain on
Available-for-sale
Securities, Net of Taxes

¥

¥

(605)

¥

Millions of yen
Retained
Earnings

CapitalFor the Fiscal Year ended March 31, 2004
Balance at March 31, 2003
Net Change in Unrealized Gain on

1,182,286¥

Net Earnings
Balance at March 31, 2004

264

¥

¥

1,608,967−

18,692

18,692

12,000−−12,000−¥426,416

Total Equity−

Available-for-sale Securities
Capital Contribution fromthe Japanese Government¥

Net Unrealized Gain on
Available-for-sale
Securities

1,194,286−

113,987¥

540,403

18,956¥113,987¥

1,753,646

Thousands of U.S. dollars
CapitalFor the Fiscal Year ended March 31, 2004
Balance at March 31, 2003
Net Change in Unrealized Gain on$

11,186,356

Available-for-sale Securities
Capital Contribution fromthe Japanese Government
Net Earnings
Balance at March 31, 2004$$

Retained
Earnings

Net Unrealized Gain on
Available-for-sale
Securities

4,034,599

$

2,506

Total Equity$

15,223,461−−

176,858

176,858

113,540−−
1,078,504−−

113,540
1,078,504

11,299,896$

5,113,103$

179,364$

16,592,363

Accompanying notes are an integral part of these financial statements.

36

CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of U.S. dollars

Millions of yen
For the Fiscal Years ended March 31

2004

2004

2003

Cash Flows from Operating Activities
Earnings (Loss) before Income Taxes
Depreciation and Amortization¥¥(78,874)$

1,078,505

969

1,106

9,172

Change in Allowance for Loan Losses
Change in Allowance for Investment Losses(37,787)
2,665

104,107
9,411(357,528)
25,222

Change in Allowance for Bonus Payments

(115)
(716)

1,775
3,371

(1,097)(6,781)(485,098)
373,924(543,179)
439,932(4,589,827)
3,537,935

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 Premises and Equipment
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 Basis
OthersSub-total
Payments for Income Taxes

589

8,607

5,573

(147)
1

15
1

(1,392)14

25
882,66817
955,764238
8,351,486

183,218

253,072

1,733,546(1,260,573)
115,713(1,192,003)(177,882)(11,927,088)
1,094,842

474,911(387,216)

545,606(450,590)

4,493,437(3,663,697)(36,318)(8,832)(343,631)(59,299)(0)(128,572)(0)(561,071)(0)

Net Cash used in Operating Activities¥(59,299)¥(128,572)$(561,071)

Cash Flows from Investing Activities
Payments for Purchases of Securities¥(60,006)¥(115,271)$(567,759)

Proceeds from Redemption of Securities
Payments for Money Held in Trust
Payments for Purchases of Premises and Equipment
Proceeds from Sale of Premises and Equipment
Net Cash used in Investing Activities
Cash Flows from Financing Activities
Capital Contribution from the Japanese Government
Net Cash provided by Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at the Beginning of the Fiscal Year
Cash and Cash Equivalents at the End of the Fiscal Year
Accompanying notes are an integral part of these financial statements.

37

113,987¥

90,000(2,946)112,138(1,984)

851,547(27,874)

(893)
679

(641)
465

(8,449)6,433

26,834¥(5,294)$

253,898¥

12,000¥60,000$113,540¥¥

12,000(1)¥¥

60,000(0)$$

113,540(13)¥¥(20,466)
39,718¥¥(73,867)
113,585$$(193,646)
375,798¥

19,251¥

39,718$

182,152

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements have been prepared from the accounts maintained by the Development Bank of Japan (“DBJ”)
and its consolidated subsidiary in accordance with accounting principles and practices generally accepted in Japan, which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards.
The consolidated 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, the sum of each amountappearing 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 ¥105.69=$1.00, the effective exchange rate
prevailing as of March 31, 2004, 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.

2. Principles of Consolidation(a) Scope of Consolidation
The consolidated financial statements include the accounts of DBJ and its consolidated subsidiary, DBJ Business Restructuring Investment Co., Ltd.
DBJ does not have any other subsidiaries. Tomatoh Inc. and Shin Mutsu-Ogawara Inc., in which DBJ has over 50% ownership interest are
not considered to be subsidiaries and consequentially 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.
DBJ does not have affiliates. As of March 31, 2004, DBJ owns greater than 20% but less than a majority of voting stock of Nihonkai LNG
Co., LTD. and 32 other companies. These companies, however, are not considered to be affiliates because DBJ made these investments as partof its financing operations, which are DBJ’s primary business, and did not intend to obtain ability to exert significant influence on their operating
and financing policies.
On consolidation, significant intercompany accounts and transactions have been eliminated.
(b) Year-end Date of Consolidated Subsidiary
Fiscal year-end of the consolidated subsidiary is March 31.
(c) Appropriation of Retained Earnings
Consolidated Statements of Equity are presented based on the approved appropriation of Retained Earnings for the fiscal year ended March
31, 2004.

3. Summary of Significant Accounting Policies(a) Cash and Cash Equivalents“Cash and Cash Equivalents” in the consolidated statements of cash flows consists of cash on hand and due from banks, excluding trust money
to financial agencies related to principal or interest payments on bonds, that is included in “Cash and Due from Banks” as presented in the
consolidated balance sheets.
The reconciliation between “Cash and Cash Equivalents” and “Cash and Due from Banks” is as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Cash and Due from Banks

2004¥

19,305(53)¥

39,787(69)$

182,659(507)¥

19,251¥

39,718$

182,152

Trust Money to Financial Agencies
Cash and Cash Equivalents

2004

2003

38

(b) Securities
Held-to-maturity Debt Securities are stated at amortized cost on a straight-line basis, computed using the moving-average method.
Available-for-sale Securities whose current values can be estimated are stated at market value (cost is calculated principally using themoving-average method), and other non-marketable securities are stated at cost or amortized cost computed using the moving-average method.
Unrealized gain and loss on Available-for-sale Securities are included in Equity, net of income taxes.
(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(¡) 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 Japanese Accounting Standards for Financial Instruments.
(™) Hedging Instruments and Hedged Items
・Hedging Instruments
Hedged Items
・Hedging Instruments
Hedged Items: Interest Rate Swaps: Bonds and Notes, Borrowings: Foreign Currency Swaps: Foreign currency dominated Loans and Bonds and Notes(£) Hedging Policy
DBJ utilizes hedging instruments to hedge interest rate and foreign exchange fluctuations on its assets and liabilities.
(¢) Evaluation of Hedge Effectiveness
DBJ evaluates effectiveness of the hedges by testing periodically whether the derivatives are effective in reducing the risks associated withthe hedged items.
(e) Premises and Equipment(¡) Depreciation
Premises and Equipment are depreciated using the declining-balance method, except for buildings (excluding installed facilities) 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(™) Accounting standard for impairment of fixed assets
On August 9, 2002, the Business Accounting Council in Japan issued “Accounting Standard for Impairment of Fixed Assets”. The standard
requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount ofan asset may not be recoverable. An impairment loss shall be recognized in the income statement by reducing the carrying amount of
impaired assets or a group of assets to the recoverable amount to be measured as the higher of net selling price and value in use.
The standard shall be effective for fiscal years beginning April 1, 2005. However, an earlier adoption is permitted for fiscal years beginning
April 1, 2004 and for fiscal years ending between March 31, 2004 and March 30, 2005.
DBJ has not yet applied this new standard nor has determined the effect of applying it on the consolidated financial statements.
(f) Amortization of deferred charges“Discounts on Bonds and Notes” are amortized over the life of Bonds and Notes, and “Bonds and Notes Issuance Costs” are charged to income
as they are incurred.
Until the fiscal year ended March 31, 2003, the amounts of amortization of discounts on bonds and notes had been presented in “Amortization of
Discounts on Bonds and Notes” as their own account. From April 1, 2003, they are presented in “Interest on Bonds and Notes”
combined with interest, in accordance with the amendment of the applicable law which regulates the reporting standards.
(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.

39

(h) Allowance for Loan Losses
DBJ provides for “Allowance for Loan Losses” as detailed below pursuant to the internal rules 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 based on the amountof claims, after the write-off described below, net of amounts expected to be collected through disposal of collateral or execution ofguarantees.
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 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 collateral 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 canreasonably be estimated, the allowance is provided for 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 based on the historical default rate, which is calculated basedon the actual defaults over a certain historical period (the average financing period for DBJ).
All claims are assessed initially by investment and lending departments and then by the Credit Risk Management Department, which is
independent from the investment and lending departments based on internal rules for self-assessment 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 of claims
exceeding the estimated market values of collateral or guarantees, which are deemed uncollectible, have been written-off, and totaled ¥55,184
million ($522,132 thousand) and ¥77,016 million for the years ended March 31, 2004 and 2003, respectively.
(i) Allowance for Investment Losses“Allowance for Investment Losses” is provided based on the estimated losses on non-marketable debt securities.
(j) Allowance for Bonus Payments“Allowance for Bonus Payments” is calculated and provided for based on estimated amounts of future payment attributable to theservices 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 andexecutive directors, and is accrued based on the projected benefit obligations and estimated pension plan assets at fiscal 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 theownership of leased equipment transfer to the lessee.
(m) Consumption tax
Income and expense 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, theconsolidated subsidiary is subject to income taxes and local taxes.
Deferred income taxes are recorded for income taxes based on differences between the tax bases of assets and liabilities and those as reported
in the consolidated financial statements, using enacted tax rates which will be in effect when the differences are expected to reserve. The assets
and liabilities method is used to determine deferred income taxes.

40

4. Securities
Securities as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Japanese Government Bonds

2004¥

Corporate Bonds

171,488
79,320Equities
Other securities

176,012
150
¥

2004

2003

426,971¥204,027
79,051$

155,834150¥

439,063

1,622,557
750,505
1,665,363
1,426$

4,039,851

5. Non-performing Loans
The amounts of Non-Performing Loans included in “Loans” on the consolidated balance sheets as of March 31, 2004 and 2003 are as follows:
Millions of yen
March 31
Loans to Bankrupt Debtors
Delinquent Loans

2004¥

Loans Past Due Three Months or More
Restructured Loans¥

23,705

Thousands of U.S. dollars
2003¥

54,692

271,472270

341,115
6,707

193,210488,658

182,724585,240¥$

2004
224,289
2,568,573
2,559
1,828,083$

4,623,504

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 (¡) Loans to Bankrupt Debtors and (™) Loans whose interest payments are deferred in order to assist or facilitate the restructuring
efforts of borrowers in financial difficulties.
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 category of “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 of interest rates,
postponement of principal and interest payments, and forgiveness of loans to support or restructure the debtors’ businesses, and do not fall under the category of “Loans to Bankrupt
Debtors”, “Delinquent Loans” or “Loans Past Due Three Months or More”.

DBJ provides commitment lines under which it lends necessary funds up to the pre-determined amount, that is within the borrowers’ financing needs
for the projects and up to the agreed maximum amount to lend upon borrowers’ request, provided that the request meets terms and conditions for
disbursement prescribed in the loan agreements. The total balance of unused commitment lines as of March 31, 2004 and 2003 are ¥90,985 million($860,867 thousand), including ¥49,517 million ($468,512 thousand) being financed within one year and ¥129,003 million, including ¥87,221 million
being financed within one year, respectively.

41

6. Other Assets
Other Assets as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Prepaid Expenses
Accrued Income

2004
54

¥

Derivatives
Deferred Hedge Losses
Others
¥

2003
¥

89

67,967923

73,393
5,872

183,92251,882

225,383
15,664

304,750¥

320,403

$

2004
515
643,083
8,739
1,740,211$

490,891
2,883,439

Note: Deferred Hedge Losses are net realized or unrealized losses from hedging instruments. The gross amounts of deferred hedge gains and losses before netting are ¥3,704 million ($35,052 thousand)and ¥187,627 million ($1,775,263 thousand) as of March 31, 2004, respectively. The corresponding amounts as of March 31, 2003 are ¥5,203 million and ¥230,587million, respectively.

7. Premises and Equipment
Premises and Equipment as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Tangible Fixed Assets
Land

2004
¥

Buildings
Equipment

20,424
34,168¥20,70534,188$193,253
323,290
19,097

2,053
263

2,018
141

Construction in Progress

2004

2003

1,338

¥

56,753(19,057)¥

57,210(18,732)$

536,978(180,320)

Net Book Value¥

37,695¥38,477$356,658

Intangible Fixed Assets
Guarantee Deposits

¥

384
18

¥

382
18

$

3,633
171

¥

402

¥

400

$

3,804

¥

(15)
386

¥

(14)
385

$

(150)
3,654

Less-Accumulated Depreciation

OthersLess-Accumulated Amortization
Net Book Value

8. Allowance for Loan Losses
Allowance for Loan Losses as of March 31, 2004 and 2003 are as follows:
Millions of yen
March 31
General Allowance for Loan Losses
Specific Allowance for Loan Losses

2003

Thousands of U.S. dollars
2004¥

289,191$

2,359,881¥

185,412474,603$

1,385,800
3,745,681

2004¥

249,415¥

146,465
395,88142

9. Bonds and Notes
Bonds and Notes as of March 31, 2004 and 2003 are as follows:
March 31
Description of Bonds andIssue date

Notes
Japanese Governmentguaranteed Bonds

February
1996-

185-186*1

November
1996

Japanese Government-

Augustguaranteed Bonds
1-7

2000February

Japanese Government-

2004
January

guaranteed Foreign Bonds
63-67*2

1995September

Currency andAmounts
2004(In millions)Interest
rate (%)

JPY

2.90〜

20,000

3.10

Maturity
date
February
2006-

Thousands of U.S. dollars

Millions of yen¥

2004
20,000¥2003
20,000$2004
189,233

November
2006
JPY
330, 000

JPY75, 000
GBP2500.80〜

August1.90

2010February

1.81〜
9.12

1998

2014
January
2005September

330,000

300,000

3,122,339

114,225

146,359

1,080,755[39,225][32,134][371,133]

2028

Japanese Governmentguaranteed Foreign Bonds

August
1993-

5-9*1

March
1998

Japanese Government-

Novemberguaranteed Foreign Bonds
1-7

1999June 2003

Japanese Government-

May

EUR750JPY

underwritten Bonds

1994-

237,250

163-211*1

December
1998

FILP Agency Bonds
1-12

September
2001-

SF190
DM150

3.00〜
7.50

January
2005-

25,51047,140241,367[25,510][21,630][241,367]

513,621438,621

4,859,695

March
2005
JPY
355,000

1.05〜
6.87

USD750
1.10〜
4.70

June
2010September
2023
May

237,250

344,5102,244,772

2004-[86,070][107,260][814,363]

540,000

300,000

5,109,282

1,596,630$ 16,847,443

December
2008
JPY
540,000

0.41〜
1.83

September
2006-

February

September

2004

2018
¥

1,780,606¥

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, 2004 are as follows:
Fiscal year ended in March 31, 2005

43¥

150,805 million$ 1,426,863 thousand

2006

51,770489,8292007

196,600

1,860,157

2008

183,250

1,733,844

2009

139,560

1,320,466

10. Borrowings
Borrowings as of March 31, 2004 and 2003 are as follows:

March 31

Averageinterest
rate (%)

Borrowings
Long-term Borrowings
from JapaneseDue date of
repayment

Thousands of U.S. dollars

Millions of yen
2004

2003

2004

April
2.46

Government

2004December
2023¥

11,403,450¥

12,664,024$

107,895,263¥

11,403,450¥

12,664,024$

107,895,263

Borrowings with maturities for each of the next five years as of March 31, 2004 are as follows:
Fiscal year ended in March 31, 2005

¥ 1,399,632 million$ 13,242,811 thousand

2006

1,381,170

13,068,126

2007

1,365,853

12,923,205

2008

1,307,868

12,374,575

2009

1,113,799

10,538,359

11. Other Liabilities
Other Liabilities as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Accrued Expenses¥

2004
49,960¥2003
63,542$

2004
472,713

Unearned Income
Deposits from Employees

31,714
153

49,826
181

300,068
1,456

Derivatives

187,1278,867

232,013
12,244

1,770,535
83,897

Others¥277,824¥

357,808$2,628,669

2003

Thousands of U.S. dollars
2004
$
−

12. Acceptances and Guarantees
Acceptances and Guarantees as of March 31, 2004 and 2003 are as follows:
Millions of yen
March 31
Acceptances
Guarantees

2004
¥
¥

−
76,812¥

76,812¥−
87,71587,715

726,772$

726,77244

13. Assets Pledged as Collateral
Securities collateralized in foreign currency transactions are ¥121,693 million ($1,151,415 thousand) as of March 31, 2004and ¥204,027 million as of March 31, 2003.

14. Fees and Commissions (Income)Fees and Commissions (Income) for the fiscal years ended March 31, 2004 and 2003 are as follows:

For the Fiscal Years ended March 31
Commissions¥¥

Millions of yen
2004
2003
2,757
¥
1,659
2,757

¥

1,659

Thousands of U.S. dollars
2004$
26,091$

26,091

15. Other Operating Income
Other Operating Income for the fiscal years ended March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
For the Fiscal Years ended March 31
Gains on derivative instruments

2004
¥

−

¥

¥

−

¥

2004

2003
1,020

$

−

1,020

$

−

16. Other Ordinary Income
Other Ordinary Income for the fiscal years ended March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
For the Fiscal Years ended March 31
Reversal of Allowancefor Loan Losses

2004
¥

2004

2003

37,787−¥$357,528

Gains on Sales of Equities andOther Securities

31

8

294

Gains on Money Held in Trust
Others

149
801

−

1,411

206
214

7,581
366,814¥

38,768¥$

17. Fees and Commissions (Expenses)
Fees and Commissions (Expenses) for the fiscal years ended March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars
2004

Millions of yen
For the Fiscal Years ended March 31
Wire Transfer Service Charges
Commissions

45

2004

2003

¥

5

¥

15
21

¥

5

¥

42
48

$

48

$

151
199

18. Other Operating Expenses
Other Operating Expenses for the fiscal years ended March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
For the Fiscal Years ended March 31
Foreign Exchange Losses

2004
1

¥

Bonds and Notes Issuance Costs
Losses on derivative instruments
Others
¥

2004

2003
¥

1

$

15

1,201

1,518

11,367

871
392

−
457

8,242
3,713

2,466

¥

1,977

$

23,337

19. Other Ordinary Expenses
Other Ordinary Expenses for the fiscal years ended March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
For the Fiscal Years ended March 31
Provision for Loan Losses
Provision for Investment Losses

2004¥

Write-off of Loans
Losses on Sales of Equities andOther Securities
Write-off of Equities
Losses on Money Held in Trust
Others
¥

2004

2003
−

¥

104,107

$

−

4,075
3,836

9,432
23,68038,56036,297

16
589

−
8,607

156
5,573

1
2,963

15
5,946

19
28,043

11,483¥

151,789$

108,648

Note: Losses on sale of loans included in “Others” are ¥2,070 million ($19,589 thousand) and ¥5,554 million for the fiscal years ended March 31, 2004 and 2003, respectively.

46

20. 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

March 31
Projected Benefit Obligation
Fair Value of Plan Assets

(A)
(B)

Unfunded Pension Obligation
Unrecognized Net Obligation at Transition(C)=(A)+(B)(D)

Unrecognized Net Actuarial Gains/Losses(E)

Unrecognized Prior Service Cost
Net Amount Recognized on the Balance(F)(G)=(C)+(D)+(E)+(F)Prepaid Pension Cost
Allowance for Employee Retirement Benefits(H)(G)-(H)¥¥Millions of yen
2004
2003
¥
(42,043)(43,396)

Thousands of U.S. dollars
2004$(410,606)

11,224

9,154

106,206(32,172)−(32,888)−(304,400)
−

−
−

−
−

−
−

(32,172)(32,888)(304,400)−(32,172)−(32,888)−(304,400)¥$

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

(b) Component of Pension Cost
Thousands of U.S. dollars

Millions of yen
March 31
Service Cost

¥

2004
1,525

¥

2003
1,640

2004
14,437$

Interest Cost
Expected Return on Plan Assets

838
(91)

996
(206)

7,934
(866)

Amortization of Prior Service Cost

−
(807)

−
3,007

−
(7,637)

Amortization of Net Actuarial Gains/Losses
Amortization of Net Obligation at Transition
Other Costs
Net Pension Cost

¥

−

−

−

−
1,465

−
5,438

−
13,868¥$(c) Principal Assumptions Used
March 31
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

47

2004

2003
2.0%
1.0%

2.0%
2.0%

Straight-line basis

Straight-line basis

Gains/losses are charged toincome immediately

Gains/losses are charged toincome immediately

21. Lease Transactions(a) Finance Lease Transactions(Excluding leases where the ownership of the property is deemed to have transferred to the lessee)
Millions of yen
2004
March 31
Acquisition Cost Equivalents

Equipment¥
761

Less-Accumulated
Depreciation Equivalents
Book Value Equivalents

(367)
¥

2003

Others
¥
204

¥

(51)

393

¥

Total
965

Equipment
871
¥

(418)

153

¥

547

Others
120
¥

(413)
¥

457

¥

(43)
¥

77

Total
991
(456)

¥

535

Thousands of U.S. dollars
2004
March 31
Acquisition Cost Equivalents$

Less-Accumulated
Depreciation Equivalents
Book Value Equivalents

Equipment
7,202$

Others
1,933

$

1,451

(3,476)
$

3,726

$

(482)

Total
9,135
(3,958)$5,177

Future lease payments subsequent to the end of the fiscal year for finance leases (including the interest portion thereon) are summarized below:
Millions of yen
March 31
Due in One Year or Less
Due after One Year

¥

2004
216
335

¥

2003
211
328

¥

552

¥

540

Thousands of U.S. dollars
2004
2,050
$
3,177
$

5,227

Lease expense, depreciation equivalents and interest expense equivalents relating to finance leases for the fiscal year ended March 31, 2004 amountto ¥239 million ($2,269 thousand), ¥231 million ($2,193 thousand) and ¥7 million ($74 thousand), respectively. The corresponding amounts forthe fiscal year ended March 31, 2003 are ¥255 million, ¥246 million and ¥9 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 the 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, 2004 and 2003.

48

22. Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities as of March 31, 2004 and 2003 consisted of the followings:
Thousands of U.S. dollars

Millions of yen
March 31
Deferred Tax Assets:
Enterprise Tax Payable

2004
¥
¥

0
0

¥
¥

−
−

$
$

0
0

¥

(0)
−

¥

−
−

$

(0)
−

Less-Valuation Allowance
Net Deferred Tax Assets

2004

2003

23. Segment Information(a) Segment Information by Type of Business
DBJ and its consolidated subsidiary are engaged in business such as private equity investment and fund management and other activities aswell 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 incountries 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.

49

24. Derivative Transactions
1. Details Related to Transactions(a) Details of Transactions
DBJ utilizes derivative financial instruments, which comprise interest rate swap, currency swap and credit default swap.
(b) Policy for Derivative Transactions
DBJ utilizes interest rate swaps and currency swaps 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. Also DBJ utilizes credit default swaps as partof its “acceptances and guarantee on customers’ debts” 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 funding transactions, and foreign
currency swaps to reduce its exposure to the risks of foreign currency exchange rate fluctuations associated with its loans and bonds denominatedin foreign currencies. DBJ also utilizes credit default swaps as part of its “acceptances and guarantee on customers’ debts” business.
DBJ adopted the Japanese accounting standards for hedge accounting to interest rate swaps and foreign currency swaps as described below:(¡) 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 Japanese Accounting Standard for Financial
Instruments, are translated not at market but at contractual rates.
(™) Hedging Instruments and Hedged Items
・Hedging Instruments
Hedged Items
・Hedging Instruments
Hedged Items: Interest Rate Swaps: Bonds and Notes, Borrowings: Foreign Currency Swaps: Foreign currency dominated Loans and Bonds and Notes(£) Hedging Policy
DBJ utilizes hedging instruments to hedge interest rate and foreign exchange fluctuations of the hedged assets and liabilities.
(¢) Evaluation of Hedge Effectiveness
DBJ evaluates effectiveness of the hedges by testing periodically whether the derivatives are effective in reducing the risks associated withthe hedged items.
(d) Risks Involved in Derivatives Transactions
Derivatives involve the following risks:(¡) Market Risk
Potential loss from changes in the market value of financial products due to fluctuations in interest rates or exchange rates.
(™) Credit Risk
Potential loss from the failure of a counterparty to perform its obligations in accordance with terms and conditions of contract
governing the transactions due to the counterparty’s bankruptcy or deteriorating business conditions.
Concerning derivative transactions for hedging purpose, the market risk on derivatives is offset against the hedged transactions. As for credit
risk, DBJ limits the counterparty to financial institutions highly rated by the credit rating agencies, and monitors consistently the cost ofrestructuring its transactions and creditworthiness of each counterparty. In addition, DBJ transacts with multiple counterparties to reduce credit
risk. Also, concerning 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 derivative transactions. Also, total contract
amount, total amount of risk, market value, and total amount of counterparties’ credit risk in the derivative transactions are reported to thedirectors in charge periodically.

50

2. Information on Market Value of Derivatives
The market values of derivatives at March 31,2004 and 2003 are as follows:(a) Interest Rate-related Transactions
Millions of yen
2004
Contract Value
March 31Over-the-Counter
Swaps
Receive Fixed/ Pay Float

Total

Unrealized Gain
(Loss)

Market Value

Over one year¥

571,000¥

571,000¥(5,409)¥(5,409)¥571,000
1,142,000¥

571,000
1,142,000¥(1,130)(6,540)¥(1,130)(6,540)Receive Float/ Pay Fixed

Millions of yen
2003
Contract Value
March 31

Total

Unrealized Gain
(Loss)

Market Value

Over one year

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

197,000¥

197,000

197,000¥

394,000¥

197,000¥

394,000

8,065

¥

8,065

(6,726)¥

1,339(6,726)¥

1,339

Thousands of U.S. dollars
2004
Contract Value
March 31

Total

Unrealized Gain
(Loss)

Market Value

Over one year

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

5,402,592
5,402,592$

5,402,592
5,402,592$(51,182)(10,700)$(51,182)(10,700)$

10,805,184$

10,805,184$(61,882)$(61,882)

Receive Float/ Pay Fixed

Notes: 1.The above transactions are marked to market and changes in unrealized gain (loss) are included in the Consolidated Statements of Operations. Derivative transactions 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
There is no currency-related derivative transactions whose unrealized gains and losses are recognized currently in income.
(c) Equity-related Transactions
Not applicable(d) Bond-related Transactions
Not applicable(e) Commodity-related Transactions
Not applicable51

(f) Credit Derivatives Transactions
Millions of yen
2004
Contract Value
March 31

Total

Unrealized Gain

Market Value

Over one year

(Loss)

Over-the-Counter
Credit Default Swap
Sold
Bought¥2,129,857¥

2,129,857

2,113,457

¥

456

¥

507

2,113,457

¥

456

¥

507

51

51

Millions of yen
2003
March 31

Total

Contract Value
Over one year

Unrealized Gain
(Loss)

Market Value

Over-the-Counter
Credit Default Swap
Sold¥

Bought2,241,169
2,224,769¥

2,241,169
2,224,769

¥

676
167

¥

676
167

¥

843

¥

843

Thousands of U.S. dollars
2004
Contract Value
March 31Over-the-Counter
Credit Default Swap
Sold
BoughtTotal$

20,151,928
19,996,757$

20,151,928

Unrealized Gain

Market Value

Over one year

(Loss)

$

4,314

$

4,314

$

489
4,803

$

489
4,803

19,996,757

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.

5225. Market Value of Securities and Money Held in Trust
Market value of Securities and Money held in Trust as of March 31, 2004 and 2003 are summarized below. The information about investments in
subsidiary 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
2004
March 31
Japanese Government Bonds

Book Value¥

Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Others¥−

Unrealized Gain (Loss)

Market Value
¥

¥

−

Net
−

¥

Gain
−

¥

(Loss)
−

−
−

−
−

−
−

−
−

−
−

60,100−61,018
−

918
−

938
−

(19)
−

60,100¥¥61,018

¥

918

938

¥

(19)

Millions of yen
2003
March 31
Japanese Government Bonds

Book Value¥

Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Others¥−

Unrealized Gain (Loss)

Market Value
¥

¥

−

Net
−

¥

Gain
−

¥

(Loss)
−

−
−

−
−

−
−

−
−

−
−

60,100−61,312
−

1,212
−

1,277
−

(64)
−

60,100¥¥61,312

¥

1,212

1,277

¥

(64)

Thousands of U.S. dollars
2004
March 31
Japanese Government Bonds

Book Value$

Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Others$Note:Market value is based on the closing price at the fiscal year end.

53−

Unrealized Gain (Loss)

Market Value
$

−

$

Net
−

$

Gain
−

$

(Loss)
−

−
−

−
−

−
−

−
−

−
−

568,644−577,337
−

8,693
−

8,879
−

(185)
−

568,644$577,337

$

8,693

$

8,879

$

(185)

(c) Available-for-sale Securities with market values
Millions of yen
2004
March 31
Equities
Bonds

Acquisition Cost¥−

Unrealized Gain (Loss)

Book Value
¥

¥

−

Net
−

¥

Gain
−

¥

(Loss)−

181,420

181,498

78

99

(20)

Japanese Government Bonds
Japanese Local Government Bonds

171,420−

171,488
−

67
−

88
−

(20)
−

Short-term Corporate Bonds
Corporate Bonds−
10,000−10,010

−
10

−
10

−
−

Others−¥181,420−¥−¥

181,498

−
¥

78

99

−
¥

(20)

Millions of yen
2003
March 31
Equities
Bonds

Acquisition Cost¥

Japanese Government Bonds
Japanese Local Government Bonds−
213,752¥

Corporate Bonds
Others¥¥−214,027

Gain

Net
¥

−
274

−
309

(Loss)¥−(34)

204,027
−

274
−

309
−

(34)
−

−

−

−

−

−

10,000−10,000
−

0
−

0
−

−
−

203,752−

Short-term Corporate Bonds

Unrealized Gain (Loss)

Book Value

213,752¥¥

214,027

¥

274

309

¥

(34)

Thousands of U.S. dollars
2004
March 31
Equities
Bonds
Japanese Government Bonds
Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
OthersAcquisition Cost$−

Unrealized Gain (Loss)

Book Value
$

−

$

Net
−

$

Gain
−

$

(Loss)−

1,716,530

1,717,271

741

939

(198)

1,621,914−

1,622,557
−

643
−

841
−

(198)
−

−
94,616−
94,714

−
98

−
98

−
−

−
$ 1,716,530−$ 1,717,271

−
$

741

−
$

939

−
$

(198)

Note: Book value equals to market value based on the closing price at the fiscal year end.

54

(d) Held-to-maturity Debt Securities soldNot applicable(e) Available-for-sale Securities soldMillions of yen
2004
For the Fiscal Year ended March 31
Available-for-sale Securities

Total amount ofLoss of Sales

Total amount ofGain on Sales

Proceeds from Sales
¥

235

¥

−

¥

16

¥

235

¥

−

¥

16

Millions of yen
2003
For the Fiscal Year ended March 31
Available-for-sale Securities

Total amount ofGain on Sales

Proceeds from Sales
¥
¥

0
0

¥
¥

0
0

Total amount ofLoss of Sales
¥
¥

−
−

Thousands of U.S. dollars
2004
For the Fiscal Year ended March 31
Available-for-sale Securities

Total amount ofLoss of Sales

Total amount ofGain on Sales

Proceeds from Sales
$

2,226

$

$

2,226

$

−
−

$

156

$

156

(f) Held-to-maturity Debt Securities and Available-for-sale Securities whose market values are not readily determinable
Millions of yen
2004

March 31
Held-to-maturity Debt Securities
Unlisted Corporate Bonds¥

Available-for-sale Securities
Unlisted Equities

9,070

¥

150
¥

185,373

8,951

2004
$

155,834−

176,012140

Unlisted Corporate Bonds
OthersThousands of U.S. dollars
2003

1,665,364
1,325

150
¥

164,935

85,822

1,426$

1,753,936(g) Change in Classification of Securities
For the fiscal year ended March 31, 2004 , DBJ has changed the classification of the securities amounted to ¥140 million ($1,325 thousand) from
“Held-to-maturity Debt Securities” to “Available-for-sale Securities” due to the deteriorating credit quality of the issuers. There are no impacts on
the consolidated financial statements due to this change of classification.

55

(h) Redemption Schedule of Available-for-sale Securities with maturities and Held-to-maturity Debt Securities
Millions of yen
2004
Maturity
March 31
Bonds
Japanese Government Bonds¥

Within 1 year
179,968¥

Corporate Bonds
Others¥¥5 to 10 years
500

10,171−

161,317−

Japanese Local Government Bonds
Short-term Corporate Bonds

1 to 5 years
70,340

−
−

−
−
−
−

−

−

−

18,651150

60,169−500−

180,118¥

70,340¥More than 10 years
¥
−

500

−
¥

−

Millions of yen
2003
Maturity
March 31
Bonds
Japanese Government Bonds
Japanese Local Government Bonds

Within 1 year¥
90,52990,288

Short-term Corporate Bonds
Corporate Bonds
Others¥¥1 to 5 years
192,549
113,739

−

−

−
241

−
78,810−90,529150
192,699¥

5 to 10 years¥−−

More than 10 years
¥
−
−
−
−

−
−

¥

−

−

−
−

−
−

¥

Thousands of U.S. dollars
2004
Maturity
March 31
Bonds
Japanese Government Bonds$

Japanese Local Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Others$Within 1 year
1,702,791$

1 to 5 years
665,536$

5 to 10 years
4,731

1,526,322

96,234

−

−
−

−
−

−
−

176,469
1,419

569,302−

4,731−

1,704,210$

665,536$

4,731

More than 10 years
$
−
−
−
−
−
−
$

−

56

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 Heldin Trust other than that stated above) is summarized below:
Millions of yen
2004
March 31
Other Money Held in Trust

Acquisition Cost
¥

4,910

Unrealized Gain (Loss)

Book Value
¥

Gain

Net

4,893

¥

¥

−

−

(Loss)¥−

Millions of yen
2003
March 31
Other Money Held in Trust

Acquisition Cost
¥

1,984

Unrealized Gain (Loss)

Book Value
¥

Gain

Net

1,969

¥

¥

−

−

(Loss)¥−

Thousands of U.S. dollars
2004
March 31
Other Money Held in Trust

Acquisition Cost$

46,463

Unrealized Gain (Loss)

Book Value
$

Gain

Net

46,299$−$−(Loss)$−

3. Net Unrealized Gain on Available-for-sale Securities
The breakdown of net unrealized gain on Available-for-sale Securities is as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Net Unrealized Gain
Available-for-sale Securities
Other Money Held in Trust

2004

2004

2003

¥

18,956
−

¥

264
−

$

179,364¥

18,956¥

264$

179,364

Add: Deferred Tax Assets(Less: Deferred Tax Liabilities)

¥

−

¥

−

$

−

Net Unrealized Gain on Available-for-sale
Securities, Net of Taxes¥

18,956¥

264$

179,364−

Note: Net unrealized gain and loss on ‘Interest in Limited Partnership’ accounted in “Other Assets”, which amounts to ¥18,878 million ($178,623 thousand) / gain and ¥9 million / loss are includedin the “Net Unrealized Gain on Available-for-sale Securities, Net of Taxes” noted above as of March 31, 2004 and 2003, respectively.

57

58

NON-CONSOLIDATED BALANCE SHEETS
Thousands of U.S. dollars

Millions of yen
March 31

2004

2004

2003

AssetsCash and Due from banks
Reverse Repurchase Agreements¥

Money Held in Trust
Securities (Notes 3 and 10)
Loans (Note 4)
Other Assets (Note 5)
Premises and Equipment (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¥

19,29839,778¥$

182,595

77,166

192,880

730,125

4,893
426,9811,969
439,073

46,2994,039,943

14,785,724
304,750

15,713,160
320,402139,897,100
2,883,436

38,081
2,249

38,862
1,808

360,312
21,28776,812

87,715

726,772(395,881)(13,903)(474,603)(11,237)(3,745,681)(131,550)

15,326,174¥

16,349,810

145,010,638

Thousands of U.S. dollars

Millions of yen
2004

$

2003

2004

Liabilities and Equity
Liabilities
Bonds and Notes
Borrowings¥

1,780,606¥

1,596,630$

16,847,443

11,403,450

12,664,024

107,895,263

Other Liabilities (Note 8)
Allowance for Bonus Payments

277,826
1,659

357,808
1,775

2,628,694
15,703

Allowance for Employee Retirement Benefits

32,172
76,81232,88887,715

304,400
726,772

Acceptances and Guarantees (Note 9)
Total Liabilities¥

13,572,527¥

14,740,842$

128,418,275¥

1,194,286
540,403¥

1,182,286
426,417$

11,299,896
5,113,103

EquityCapitalRetained Earnings (Note 11)
Statutory Reserve
Accumulated Deficit
Net Unrealized Gain on Available-for-sale Securities
Total Equity
Total Liabilities and Equity
Accompanying notes are an integral part of these financial statements.

59

¥
¥

1,000,908

982,478

9,470,226(460,504)
18,956(556,061)
264(4,357,123)
179,364

1,753,646
15,326,174¥¥

1,608,968
16,349,810$$

16,592,363
145,010,638

NON-CONSOLIDATED STATEMENTS OF OPERATIONS
Thousands of U.S. dollars

Millions of yen
2004

For the Fiscal Years ended March 31

2003

2004

Revenues
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

485,098¥

543,179$

4,589,827

483,195

540,870

4,571,818

1,890
12

2,297
7

17,885
120

0
0

4
0

4
0

2,757
−

1,659
1,020

26,091−

38,768214366,814

2,048
217

470
246

19,3792,059

Gains on Sales of Premises and Equipment
Total Revenues¥

528,890¥546,791$

5,004,170

Expenses
Interest Expenses¥

373,924¥439,932$

3,537,935

Interest on Bonds and Notes
Amortization of Discounts on Bonds and Notes (Note 2(e))

31,615−33,562
354

299,130−

Interest on Borrowings

329,073
13,234

397,690
8,316

3,113,575
125,220

Interest on Swaps (net)Other Interest Expenses

1

8

10

Fees and Commissions (Note 15)
Other Operating Expenses (Note 16)

21
2,466

48
1,977

199
23,337

General and Administrative Expenses

26,766
11,482

31,653
151,789

253,254
108,648

Other Ordinary Expenses (Note 17)
Losses on Sales of Premises and Equipment
Total Expenses
Net Earnings (Loss)

414,904
113,986

2,297

264

242
¥
¥

¥
¥

625,665(78,874)$$

3,925,670
1,078,500

Accompanying notes are an integral part of these financial statements.

60

NON-CONSOLIDATED STATEMENTS OF EQUITY
Millions of yen
CapitalFor the Fiscal Year ended March 31, 2003
Balance at March 31, 2002

¥ 1,122,286

Net Change in Unrealized Gain on
Available-for-sale Securities

Retained Earnings
Accumulated
Statutory
Reserve
Deficit¥ 937,734¥ (432,443)

Net Unrealized Gainon Available-for- sale
Securities¥

869

Total Equity¥

1,628,446

−

−

−

(605)

(605)

−

44,743(44,743)−−

60,000
−

−
−

−

−

60,000¥(78,874)(556,061)−
264(78,874)
1,608,968¥¥(18,429)(574,490)

Transfer from net earnings accounted
under the DBJ Law to Statutory
Reserve (Note 11)
Capital Contribution from the Japanese
Government
Net Earnings (Loss)
Balance at March 31, 2003

¥ 1,182,286

Appropriations:
Provision for Statutory Reserve
Total
Unappropriated Accumulated Deficit

−
−

¥
¥

−

¥

¥
¥

982,478

18,42918,429−¥¥−(18,429)
¥
¥

−
−

−
¥
¥

−
−

Millions of yen
Retained Earnings
Net Unrealized Gain
CapitalFor the Fiscal Year ended March 31, 2004
Balance at March 31, 2003

¥ 1,182,286

Net Change in Unrealized Gain on
Available-for-sale Securities¥

Statutory
Reserve

Accumulated
Deficit982,478¥(556,061)

on Available-for- sale
Securities¥

264

Total Equity¥

1,608,968−−−

18,692

18,692−

18,429(18,429)−−

12,000
−

−
−

−

−
−

12,000113,986¥ 1,194,286¥ 1,000,908

¥

−
−

¥

−

Transfer from net earnings accounted
under the DBJ Law to Statutory
Reserve (Note 11)
Capital Contribution from the Japanese
Government
Net Earnings (Loss)
Balance at March 31, 2004
Appropriations:
Provision for Statutory Reserve
Total
Unappropriated Accumulated Deficit

Accompanying notes are an integral part of these financial statements.

61

113,986¥(460,504)¥

26,113
26,113¥−¥

18,956¥(26,113)(26,113)¥(486,617)¥

1,753,646

¥

−
−

¥

−
−

¥

−

¥

−

Thousands of U.S. dollars
Retained Earnings
CapitalFor the Fiscal Year ended March 31, 2004
Balance at March 31, 2003

Net Unrealized Gain
Total Equity

Statutory
Reserve

Accumulated
Deficit

9,295,851$ (5,261,248)

−

−

−

176,858

176,858−

174,375(174,375)−−

113,540
−

−
−

−

−
−

113,540
1,078,500$ 11,186,356

Net Change in Unrealized Loss on
Available-for-sale Securities$

on Available-for- sale
Securities
$
2,506

$

15,223,465

Transfer from net earnings accounted
under the DBJ Law to Statutory
Reserve (Note 11)
Capital Contribution from the Japanese
Government
Net Earnings (Loss)
Balance at March 31, 2004

$ 11,299,896

Appropriations:
Provision for Statutory Reserve
Total
Unappropriated Accumulated Deficit

$
$

−
−
−

$

$
$

9,470,226

247,077
247,077−

1,078,500$ (4,357,123)$(247,077)$(247,077)$ (4,604,200)$$

179,364

−
−
−

$

$
$

16,592,363−−−

Accompanying notes are an integral part of these financial statements.

62

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements have been prepared from the accounts maintained by the Development Bank of Japan (“DBJ”) in
accordance with accounting principles and practices generally accepted in Japan, which are different in certain respects as to 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 with accounting principles andpractices 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, the sum of each amountappearing 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 ¥105.69=$1.00, the effective exchange rate
prevailing as of March 31, 2004, 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.

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 moving-average method.
Investments in subsidiary are stated at cost computed using the moving-average method. Available-for-sale Securities whose current values canbe estimated are stated at market value (cost is calculated principally using the moving-average method), and other non-marketablesecurities are stated at cost or amortized cost computed using the moving-average method. Unrealized gains and losses on Available-for-sale
Securities are included in Equity.
(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(¡) 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 Japanese Accounting Standards for Financial Instruments.
(™) Hedging Instruments and Hedged Items
・Hedging Instruments
Hedged Items
・Hedging Instruments
Hedged Items: Interest Rate Swaps: Bonds and Notes, Borrowings: Foreign Currency Swaps: Foreign currency dominated Loans and Bonds and Notes(£) Hedging Policy
DBJ utilizes hedging instruments to hedge interest rate and foreign exchange fluctuations on its assets and liabilities within theoutstanding asset and liability amounts.
(¢) Evaluation of Hedge Effectiveness
DBJ evaluates effectiveness of the hedges by testing periodically whether the derivatives are effective in reducing the risks associated withthe hedged items.

63

(d) Premises and Equipment(¡) Depreciation
Premises and Equipment are depreciated using the declining-balance method, except for buildings (excluding installed facilities) 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(™) Accounting standard for impairment of fixed assets
On August 9, 2002, the Business Accounting Council in Japan issued “Accounting Standard for Impairment of Fixed Assets”. The standard
requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment loss shall be recognized in the income statement by reducing thecarrying amount of impaired assets or a group of assets to the recoverable amount to be measured as the higher of net selling price andvalue in use.
The standard shall be effective for fiscal years beginning April 1, 2005. However, an earlier adoption is permitted for fiscal years beginning
April 1, 2004 and for fiscal years ending between March 31, 2004 and March 30, 2005.
DBJ has not yet applied this new standard nor has determined the effect of applying it on the non-consolidated financial statements.
(e) Amortization of deferred charges“Discounts on Bonds and Notes” are amortized over the life of Bonds and Notes, and “Bonds and Notes Issuance Costs” are charged to income
as they are incurred.
Until the fiscal year ended March 31, 2003, the amounts of amortization of discounts on bonds and notes had been presented in“Amortization of Discounts on Bonds and Notes” as their own account. From April 1, 2003, they are presented in “Interest on Bonds andNotes” combined with interest, in accordance with the amendment of the applicable law which regulates the reporting standards.
(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 rules 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 based on the amountof claims, after the write-off described below, net of amounts expected to be collected through disposal of 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 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 collateral 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 canreasonably be estimated, the allowance is provided for 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 based on the historical default rate, which is calculated basedon the actual defaults over a certain historical period (the average financing period for DBJ).
All claims are assessed initially by investment and lending departments and then by the Credit Risk Management Department, which is
independent of the investment and lending departments based on internal rules for self-assessment 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 of claims
exceeding the estimated market values of collateral or guarantees, which are deemed un-collectible, have been written-off, and totaled ¥55,184
million ($522,132 thousand) and ¥77,016 million for the years ended March 31, 2004 and 2003, respectively.
(h) Allowance for Investment Losses“Allowance for Investment Losses” is provided based on the estimated losses on non-marketable debt securities.
(i) Allowance for Bonus Payments“Allowance for Bonus Payments” is calculated and provided for based on estimated amounts of future payment attributable to theservices that have been rendered by employees and executive directors to the date of the balance sheets.

64

(j) Allowance for Employee Retirement Benefits“Allowance for Employee Retirement Benefits” represents future payments for pension and retirement benefits to employees andexecutive directors, and is accrued based on the projected benefit obligations and estimated pension plan assets at fiscal 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 theownership of leased equipment transfer to the lessee, in which case the equipment is capitalized.
(l) Consumption tax
Income and expense 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.

3. Securities
Securities as of March 31, 2004 and 2003 are as follows:
Millions of yen
March 31
Japanese Government Bonds
Corporate Bonds¥

2004
171,488¥

79,320176,021Equities
Other securities

426,9812003
204,027$150¥

439,073

2004
1,622,557
750,505
1,665,455

79,051
155,844

150¥

Thousands of U.S. dollars

1,426
$

4,039,943

Notes:Investments in subsidiary, in the total amount of ¥10 million ($95 thousand) are included in “Equities” as of March 31, 2004 and 2003, respectively.

4. Non-performing Loans
The amounts of Non-Performing Loans included in “Loans” on the non-consolidated balance sheets as of March 31, 2004 and 2003 are as follows:

March 31
Loans to Bankrupt Debtors
Delinquent Loans¥

Loans Past Due Three Months or More
Restructured Loans¥

Millions of yen
2004
2003
54,692
23,705¥

Thousands of U.S. dollars$

2004
224,289

271,472

341,115

2,568,573

270
193,210

6,707
182,724

2,559
1,828,083

488,658¥

585,240$

4,623,504

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 (¡) Loans to Bankrupt Debtors and (™) loans whose interest payments are deferred in order to assist or facilitate therestructuring efforts of borrowers in financial difficulties.
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 category of “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 of interest rates,
postponement of principal and interest payments, and forgiveness of loans to support or restructure the debtors’ businesses, and do not fall under the category of “Loans toBankrupt Debtors”, “Delinquent Loans” or “Loans Past Due Three Months or More”.

DBJ provides commitment lines under which it lends necessary funds up to the pre-determined amount, that is within the borrowers’ financing needs
for the projects and up to the agreed maximum amount to lend upon borrowers’ request, provided that the request meets terms and conditions for
disbursement prescribed in the loan agreements. The total balance of unused commitment lines as of March 31, 2004 and 2003 are ¥90,985 million($860,867 thousand), including ¥49,517 million ($468,512 thousand) being financed within one year and ¥129,003 million, including¥87,221 million being financed within one year, respectively.

65

5. Other Assets
Other Assets as of March 31, 2004 and 2003 are as follows:
Millions of yen
2004

March 31
Prepaid Expenses
Accrued Income¥

Derivatives

54
67,967¥923
183,922

Deferred Hedge Losses
Others

51,881¥89
73,393Thousands of U.S. dollars
2004
515
$
643,083

5,872
225,383

8,739
1,740,211

2003

304,750

15,664¥

320,402490,888$2,883,436

Notes: Deferred Hedge Losses are net realized or unrealized losses from hedging instruments. The gross amounts of deferred hedge gains and losses before netting are ¥3,704 million ($35,052 thousand)and ¥187,627 million ($1,775,263 thousand) as of March 31, 2004, respectively. The corresponding amounts as of March 31, 2003 are ¥5,203 million and ¥230,587million,
respectively.

6. Premises and Equipment
Premises and Equipment as of March 31, 2004 and 2003 are as follows:
Millions of yen
2004

March 31
Tangible Fixed Assets
Land¥

Buildings
Equipment¥

20,705

2004$

34,1882,053

193,253
323,290
19,097¥

141
56,753¥263
57,210$1,338
536,978¥(19,057)
37,695¥(18,732)
38,477$(180,320)
356,658

¥

384

¥

382

$

3,633

¥

18
402

¥

18
400

$

171
3,804

$

3,654

Less- Accumulated Depreciation
Net Book Value

20,424
34,1682,018

Construction in ProgressThousands of U.S. dollars
2003

Intangible Fixed Assets
Guarantee Deposits
OthersLess - Accumulated Amortization
Net Book Value

(15)
¥

386

(14)
¥

385

(150)

7. Allowance for Loan Losses
Allowance for Loan Losses as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
General Allowance for Loan Losses

2004¥

249,415¥

2003
289,191¥

146,465
395,881¥

185,412474,603

Specific Allowance for Loan Losses$

2004
2,359,881$

1,385,800
3,745,681

66

8. Other Liabilities
Other Liabilities as of March 31, 2004 and 2003 are as follows:
Millions of yen
March 31
Accrued Expenses¥

Unearned Income
Deposits from Employees
Derivatives
Others¥2004
49,96331,714¥

Thousands of U.S. dollars
2003
63,542
49,826$

2004
472,738
300,068

153

181

1,456

187,1278,867

232,013
12,244

1,770,535
83,897

277,826¥

357,808$2,628,694

9. Acceptances and Guarantees
Acceptances and Guarantees as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Acceptances

2004
¥

−

¥

76,812
76,812

Guarantees

2004

2003
¥

−

¥

87,71587,715$−$

726,772
726,772

10. Assets Pledged as Collateral
Securities collateralized in foreign currency transactions are ¥121,693 million ($1,151,415 thousand) as of March 31, 2004 and ¥204,027
million as of March 31, 2003.

11. Retained Earnings
A portion of net earnings calculated pursuant to Article 4 of the Development Bank of Japan Law (“DBJ Law”) was appropriated to Statutory Reserveas stipulated by Article 41 of the DBJ Law. Unappropriated Accumulated deficit, losses carried forward to the following fiscal years, are the amounts
which are not appropriated under the DBJ Law for each fiscal year.

12. Fees and Commissions (Income)Fees and Commissions (Income) for the fiscal years ended March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
For the Fiscal Years ended March 31
Commissions

¥

2004
2,757

¥

2,757

¥

2003
1,659

$

2004
26,091

¥

1,659

$

26,091

13. Other Operating Income
Other Operating Income for the fiscal years ended March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
For the Fiscal Years ended March 31
Gains on derivative instruments

67

2004

2004

¥

−

¥

2003
1,020

$

−

¥

−

¥

1,020

$

−

14. Other Ordinary Income
Other Ordinary Income for the fiscal years ended March 31, 2004 and 2003 are as follows:
Millions of yen
2004

For the Fiscal Years ended March 31
Reversal of Allowancefor Loan Losses
Gains on Sales of Equities and¥Other Securities
Gains on Money Held in Trust

Thousands of U.S. dollars
2003

37,787

¥

−

31
149

Others¥801
38,768

2004
$

294
1,411

8
−
206
¥

214

357,528$7,581
366,814

15. Fees and Commissions (Expenses)
Fees and Commissions (Expenses) for the fiscal years ended March 31, 2004 and 2003 are as follows:
Millions of yen
For the Fiscal Years ended March 31
Wire Transfer Service Charges

2004

Thousands of U.S. dollars
2004

2003

¥

5
15

¥

5
42

$

48

¥

21

¥

48

$

199

Commissions

151

16. Other Operating Expenses
Other Operating Expenses for the fiscal years ended March 31, 2004 and 2003 are as follows:
Millions of yen
For the Fiscal Years ended March 31
Foreign Exchange Losses
Bonds and Notes Issuance Costs

2004
1

¥

¥

1,201
871

Losses on derivative instruments
Others

2004

2,466

1

11,367
8,242

457
¥

1,977

15

$

1,518
−

392
¥

Thousands of U.S. dollars
2003

3,713
$

23,337

17. Other Ordinary Expenses
Other Ordinary Expenses for the fiscal years ended March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
For the Fiscal Years ended March 31
Provision for Loan Losses

2004¥

Provision for Investment Losses
Write-off of Loans

−

¥

2003
104,107

2004
$

9,432
23,680

4,075
3,836

−
38,56036,297

Losses on Sales of Equities andOther Securities
Write-off of Equities
Losses on Money Held in Trust
Others

16

−

156

589

8,607
15

5,573

1
2,963
¥

11,482

19
28,043

5,946¥

151,789$

108,648

Note: Losses on sale of loans included in “Others” are ¥2,070 million ($19,589 thousand) and ¥5,554 million for the fiscal years ended March 31, 2004 and 2003, respectively.

6818. Lease Transactions(a) Finance Lease Transactions(Excluding leases where the ownership of the property is deemed to have transferred to the lessee)
Millions of yen
2004
March 31
Acquisition Cost Equivalents

Equipment¥
761

Less-Accumulated Depreciation
Equivalents
Book Value Equivalents

(367)
¥

2003

Others
¥
204

¥

(51)

393

¥

Total
965

Equipment
¥
871

(418)

153

¥

547

Others
¥
120

(413)
¥

457

¥

(43)
¥

77

Total
991
(456)

¥

535

Thousands of U.S. dollars
2004
March 31
Acquisition Cost Equivalents
Less-Accumulated Depreciation
Equivalents
Book Value Equivalents$

Equipment
7,202$

Others
1,933

$

Total
9,135

$

(3,476)
3,726

$

(482)
1,451

$

(3,958)5,177

Future lease payments subsequent to the end of the fiscal year for finance leases (including the interest portion thereon) are summarized below:
Millions of yen
March 31
Due in One Year or Less

¥

2004
216
335

¥

2003
211
328

¥

552

¥

540

Due after One Year

Thousands of U.S. dollars
2004
2,050
$
3,177
$

5,227

Lease expense, depreciation equivalents and interest expense equivalents relating to finance leases for the fiscal year ended March 31, 2004
amount to ¥239 million ($2,269 thousand), ¥231 million ($2,193 thousand) and ¥7 million ($74 thousand), respectively. The
corresponding amounts for the fiscal year ended March 31, 2003 are ¥255 million, ¥246 million and ¥9 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 the 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, 2004 and 2003.

19. Market Value of Securities
Market value of Securities, excluding investments in subsidiary and affiliates, are reported in the notes to consolidated financial statements.
DBJ holds no investments in subsidiary with market value as of March 31, 2004 and 2003.

69

DEVELOPMENTBANK OFJAPAN

Accounts Based on
Accounting Standards forSpecial Agencies, etc.

70

71

NON-CONSOLIDATED BALANCE SHEETS
Thousands of U.S. dollars

Millions of yen
March 31

2004

2003

2004

AssetsCash and Due from banks (Note 3)¥

Securities (Note 4)

19,206¥38,209$181,729

327,918

475,734

3,102,641

14,840,881

15,790,022

140,418,976(44,522)
14,796,358(47,370)
15,742,652(421,257)
139,997,719

Equity Investments

244,077

197,5972,309,373

Premises and Equipment (Note 6)

57,029(19,101)

57,317(18,777)

539,592(180,729)

37,92838,539358,863

68,89875,241

651,888

533

786

5,046

Unamortized discount on Bonds and Notes

2,296

1,876

21,725

Customers’ Liabilities for Acceptances and Guarantees

76,82187,715

726,852

Loans (Note 5)
Less-Allowance for Loan Losses

Less-Accumulated depreciation

Accrued Income Receivable (Note 7)
Other Assets (Note 8)

Total Assets¥

15,574,038¥

16,658,353

147,355,836

Thousands of U.S. dollars

Millions of yen
2004

$

2004

2003

Liabilities, Capital and Statutory Reserve
Liabilities
Bonds and Notes¥

Long-term Borrowings (Note 9)

1,780,606¥

1,596,630$

16,847,443

11,403,450

12,664,024

107,895,263

Accrued Expenses Payable (Note 10)51,12664,536

483,737

Other Liabilities (Note 11)40,72662,252

385,342

Acceptances and Guarantees

76,82187,715

726,852

13,352,730

14,475,158

126,338,637

Capital (Note 12)

1,194,286

1,182,286

11,299,896

Statutory Reserve (Note 2 (j))

1,027,021

1,000,908

9,717,303

Total Liabilities
Capital and Statutory Reserve

Total Capital and Statutory Reserve
Total Liabilities, Capital and Statutory Reserve
Accompanying notes are an integral part of these financial statements.

2,221,307¥

15,574,038

2,183,194¥

16,658,353

21,017,199$

147,355,836

72

NON-CONSOLIDATED STATEMENTS OF EARNINGS
Thousands of U.S. dollars

Millions of yen
2004

For the Fiscal Years ended March 31

2003

2004

Interest Income
Interest on Loans
Interest on Securities¥

482,935¥

541,247$

4,569,356

1,700

2,074

16,087

232
484,867243
543,566

2,196
4,587,639

Interest Expenses
Interest on Bonds and Notes

37,572

36,208355,494

Interest on Borrowings

336,034

403,0113,179,435

373,606

439,2193,534,929

111,260

104,346

1,052,710

Other Interest Income

Net Interest Income
Other Income
Fees and Commissions (Note 13)

2,839

1,705

26,868

4,204
7,044

1,874
3,580

39,78566,653Administrative and Other Expenses
Salaries and related expenses

16,92817,386160,169

Other administrative expenses
Depreciation

9,966
982

10,451
1,119

94,2989,297

Fees and Commissions (Note 15)

1661,50328
58,612

159
581,923

Others (Note 14)

Write-off of Claims (Note 16)
Others (Note 17)

Earnings before Provision for Loan Losses
Provision for Loan Losses
Net Earnings (Note 2(i))

¥

5,641

4,939

53,381

95,03992,539899,227

23,266
2,847

15,387
3,041

220,136
26,941

26,113¥

18,429$247,077

Appropriation of Net Earnings (Note 2(j))
Statutory Reserve
Payment to National Treasury
Total Appropriation of Net Earnings
Accompanying notes are an integral part of these financial statements.

73¥

26,113

18,429−−26,113¥

18,429247,077−$

247,077

NON-CONSOLIDATED LIST OF ASSETSMarch 31, 2004
Cash and Due from banks
Cash
Due from banks

Millionsof yen19,206¥2
19,204

Securities
Japanese Government Bonds

327,918
248,586

Thousands of
U.S. dollars
181,729$
23
181,706

3,102,641
2,352,039

Remarks(Millions of yen/ Thousands of U.S. dollars)

Current deposits: 22 banks,including
Bank of Japan
Ordinary deposits: 2 banks, including
Sumitomo Mitsui Banking Corporation

IssuesFinancing bills: 4 holdings
Coupon-bearing government bonds(4,5,6,10 years): 11 holdings
Treasury bills: 3 holdings

Corporate Bonds
Other securities

69,31010,020655,790
94,812¥2,304$21,805¥16,900$159,901

Face value¥40,000$378,465¥193,600$1,831,772¥9,800$92,724

Book value¥39,999$378,462¥198,787$1,880,853¥9,799$92,72437 holdings
Collateralized debt obligations: 2 holdings
Equity acquired by excising the warrant,
etc.: 2 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

Construction in progress
Accrued Income Receivable
Accrued Interest on Loans
Accrued Interest on Securities
Accrued Guarantee Fees
Other Assets
Suspense payments
Guarantee deposits
OthersUnamortized discount on Bonds and Notes
Customers’ Liabilities for Acceptancesand Guarantees
Total Assets¥

14,840,881
14,733,869
14,732,453
1,415
107,012(44,522)244,077
37,92837,786140,418,976
139,406,462
139,393,067
13,395
1,012,514(421,257)
2,309,373
358,863357,525

141
68,89868,051
835
10

1,338
651,888643,883
7,906
99

533
95
384

5,046
902
3,636

53
2,296
76,821

508
21,725
726,852

15,574,038$ 147,355,836

Book value¥10,000$94,616¥20$196

15,560 holdings
15,526 holdings
15,512 holdings
14 holdings
34 holdings
375 holdingsBook value$193,768¥20,479(1) Land: 91 properties/ 65% of 43,966g,
and 139,906g
16,900159,906(2) Buildings: 216 buildings/ 95% of 2,244g,
65% of 846g, and 108,579g(Gross floor area)
402
3,813
(3) Equipment: 2,016 items
118(4) Petty sum depreciable assets: 101 items(depreciated over three years as prescribed by
tax code)220(5) Key money and other: 4 holdings* Accumulated depreciation amounted to ¥19,101 million ($180,729 thousand).
5 holdingsInterest accrued on loans but not yet received
Interest accrued on securities but not yet received
Fees accrued on guarantees but not yet received

39 holdings
84 holdings

Deposits and guarantees relating to land and buildings
leased for business use

123 holdings
Difference between face value and proceeds from bonds
44 cases

Note: Amounts in U.S. dollars are presented solely for the convenience of readers outside Japan. The rate of ¥105.69=$1.00, the effective exchange rate prevailing as of March 31, 2004, has beenused 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.

74

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 the Development Bankof 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 the International Financial Reporting Standards. The
financial statements are not intended to present the financial position and results of operations in accordance with accounting principles and procedures
generally accepted in countries and jurisdictions other than 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 sum of each amountappearing 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 ¥105.69=$1.00, the effective exchange rate
prevailing as of March 31, 2004, 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.

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 indeposits at the Fiscal Loan Fund, Bank of Japan or the financial institutions specified by the Minister of Finance.
(b) Derivatives
Derivative transactions are not recorded on the non-consolidated balance sheets. Income and expenses from derivative transactions are recognizedin the non-consolidated statements of earnings on a cash basis.
(c) Translation of accounts denominated in foreign currencies
DBJ holds foreign currency swap to hedge exchange rate risks on its loans, bonds and notes that are denominated in foreign currencies. These
foreign currency swaps are not recognized in the non-consolidated balance sheets. The foreign currency denominated loans, bonds and notesthat 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 the Corporation Tax Law, depreciation is provided based on the declining balance method for
all Premises and Equipment except for buildings and key money, which are depreciated based on the straight-line method.
(e) Unamortized discounts on Bonds and Notes
Discounts on bonds and notes are amortized using the straight-line method over the average period of redemption in accordance 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 Ministryof Finance.
(g) Allowance for Loan Losses
A provision for loan losses is established in accourdance 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 end of each fiscal 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 anticipated payments to be made during
the relevant year and are included in “Salaries and related expenses” in the non-consolidated statements of earnings when paid.
(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.

75

(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 largerof (¡) an amount equivalent to 20% of net earnings or (™) 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 the amount 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 May31 of the following fiscal year. Interim payments are provided for under the Cabinet Order.
Since none of the amounts of net earnings for the fiscal years ended March 31, 2004 and 2003 were in excess of such required amounts, thepayment to National Treasury was not made.
(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, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Cash

2004

2003

¥

2

¥

19,204
19,206Due from banks

2004

¥

2

¥

38,207
38,209$23$

181,706
181,729

4. Securities
Securities as of March 31, 2004 and 2003 are as follows:
Millions of yen
2004

March 31
Japanese Government Bonds
Corporate Bonds¥

Other securities
¥

¥

2003
396,633

69,31069,081

10,020327,918¥

10,020475,734

248,586

Thousands of U.S. dollars
2004$
2,352,039
655,790$

94,812
3,102,641

5. Loans
Loans as of March 31, 2004 and 2003 are as follows:
Millions of yen
March 31
Yen loans

2004¥

Direct loans
Agency loans
Foreign currency loans¥

14,733,869
14,732,453¥

Thousands of U.S. dollars

2003
15,667,815
15,665,055$

2004
139,406,462
139,393,067

1,415

2,760

13,395

107,012
14,840,881

122,207
15,790,022

1,012,514
140,418,976¥$

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 non-consolidated balance sheets as of March 31, 2004 and 2003
are as follows:
Millions of yen
2004

March 31

2003

Thousands of U.S. dollars
2004

Loan past-due for six months or more as toprincipal payments¥

95,466¥

168,593$903,272¥

95,466¥

168,593$903,272

76

6. Premises and Equipment
Premises and Equipment as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Premises and Equipment for Business

2004

$

2004
538,254
1,338

56,888141¥¥

57,029¥57,317$539,592¥(19,101)
37,928¥(18,777)
38,539$(180,729)
358,863

2003
74,216
1,010

Thousands of U.S. dollars
2004$
643,883
7,906¥

Construction in progressLess- Accumulated Depreciation
Net Book Value

2003
57,054263

7. Accrued Income Receivable
Accrued Income Receivable as of March 31, 2004 and 2003 are as follows:
Millions of yen
2004

March 31
Accrued Interest on Loans
Accrued Interest on Securities¥

Accrued Guarantee Fees¥

68,051835
1068,898¥¥15
75,241$

99
651,888

8. Other Assets
Other Assets as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
2004

March 31
Suspense payments¥

Guarantee deposits
Others
¥

77

95
384
53
533

¥

¥

2003
270
382
133
786

$

$

2004
902
3,636
508
5,046

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 financiallycontribute to a particular government policy with respect to the operations provided in the DBJ Law, as provided in the Cabinet Order.
Long-term Borrowings as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Fiscal Loan Fund

2004¥

10,755,891¥

2003
11,881,686$

2004
101,768,301

Reserve Funds of the Postal Life Insurance
Special Account219,838

301,9362,080,026

Industrial Investment Special AccountFunds entrusted

402,869
24,851

452,363
28,0383,811,804
235,132¥

11,403,450¥

12,664,024$

107,895,263

10. Accrued Expenses Payable
Accrued Expenses Payable as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Accrued interest on Bonds and Notes

2004¥

Accrued interest on Long-term Borrowings

7,204

¥

43,918
2

Other accrued expenses¥

51,126

2003
9,662

$

415,54127

54,8685¥

64,536

2004
68,169$483,737

11. Other Liabilities
Other Liabilities as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Loan Redemption

2004¥

Suspense receipts

6,038

¥

2,845
31,714

Unearned income
Others40,726$2,276
49,826

128¥

2003
10,07526,926300,06874¥

62,252

2004
57,134

1,214$

385,342

12. Capital
The Japanese Government is the sole owner of the equity interest, which is not evidenced by documents such as stock certificates, but isevidenced at the Registration Office of the Legal Affairs Bureau of Japan.

7813. Fees and Commissions (Income)Fees and Commissions (Income) for the fiscal years ended March 31, 2004 and 2003 are as follows:
Millions of yen
For the Fiscal Years ended March 31
Commissions received

2004

Thousands of U.S. dollars

¥

2,257

¥

2003
1,200

¥

582
2,839

¥

505
1,705

Guarantee Fees$

2004
21,355$

5,513
26,868

14. Others (Income)
Others (Income) for the fiscal years ended March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
2004

For the Fiscal Years ended March 31
Collection of written-off claims¥

Income from Equity Investments
Others
¥

2003
71
27

4,105
4,204

¥

¥

40
1
1,832
1,874

$

$

2004
676
260
38,84939,785＊ “Others” in the above table includes “income from credit derivative transactions” which amounts to ¥ 2,846 million ($26,932 thousand) and ¥ 1,265 million for the fiscal years ended

March 31, 2004 and 2003, respectively.

15. Fees and Commissions (Expenses)
Fees and Commissions (Expenses) for the fiscal years ended March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
For the Fiscal Years ended March 31
Commissions paid

79

2003

¥

16

¥

28

$

2004
159

¥

16

¥

28

$

159

2004

16. Write-off of Claims
DBJ writes-off loans past-due, equity investments and securities 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 Ministerof Finance. The amounts of Loans, Equity Investments and Securities written off for the fiscal years ended March 31, 2004 and 2003 are as follows:
Millions of yen
For the Fiscal Years ended March 31
Securities written off
Loans written off¥

Equity Investments written off¥−
57,912Thousands of U.S. dollars
2004
$
284
541,150

700
58,612

$

2003

2004
30
57,194
4,279
61,503¥¥40,489581,923

17. Others (Expenses)
Others (Expenses) for the fiscal years ended March 31, 2004 and 2003 are as follows:
Millions of yen
2004

For the Fiscal Years ended March 31
Amortization of Discount on Bonds and
Notes

¥

Bonds and Notes issuance cost

2003

337

¥

¥

5,641

$

1,518

1,201
4,102

Others391

Thousands of U.S. dollars
2004

3,030
¥

4,939

3,197
11,36738,817$53,381＊ “Others” in the above table includes “expense from credit derivative transactions” which amounts to ¥ 2,484 million ($ 23,509 thousand) and ¥1,089 million for the fiscal year ended

March 31, 2004 and 2003, respectively.

18. Credit Derivative Transactions
DBJ utilizes credit default swap as part of its “Acceptances and Guarantees on Customers’ Debts” business within the limit of a certain definite amountof risk. Contract value as of March 31, 2004 and 2003 are as follows:
Thousands of U.S. dollars

Millions of yen
March 31
Sold
Bought¥2004
2,129,857¥

2,113,457¥

2003
2,241,169$

2004
20,151,928¥

2,224,769$

19,996,757

80

TRENDS IN CAPITAL(Millions of yen)
Date

CapitalIncrease (decrease)

Application

October 1999 to March 2000

110,900

Balance
976,286

April 2000 to March 2001

63,10082,9001,039,386
1,122,286

Loans from the government
Loans from the government

60,00012,0001,182,286
1,194,286

Loans from the government
Loans from the government

April 2001 to March 2002
April 2002 to March 2003
April 2003 to March 2004

Loans from the government(Reference)
Trends in capital of the Japan Development Bank
Date
April 1996 to March 1997
April 1997 to March 1998
April 1998 to March 1999
April 1999 to September 1999

(Millions of yen)
CapitalIncrease (decrease)

Application

Balance332,275

Loans from the government

347,850

341,775
689,625

Loans from the government
Loans from the government

9,500

699,125

Loans from the government

9,000
9,500

Trends in capital of Hokkaido-Tohoku Development Finance Public Corporation
Date

Application

April 1996 to March 1997

4,000

Balance
71,061

April 1997 to March 1998

4,000
59,00075,061
134,061

Loans from the government

32,200166,261

Loans from the government

April 1998 to March 1999
April 1999 to September 1999

81

CapitalIncrease (decrease)(Millions of yen)

Loans from the government
Loans from the government

BOARD OF DIRECTORS (as of July 15, 2004)

Sumihito Okawa

Takeshi Komura

Kimio Yamaguchi

GovernorTakeshi Komura
Deputy Governor

Deputy Governor

Kimio Yamaguchi

Sumihito Okawa

Senior Executive Director

Senior Executive Director

Kozo Isshiki

Fumio Inui

Senior Executive Director

Senior Executive Director

Hiroaki Ito

Mikio Araki

Senior Executive Director

Senior Executive Director

Takashi Ando

Fumiyuki Kashima

Senior Executive Director

Senior Executive Director

Kozo Oikawa

Keiji Taga

Senior Executive Director

Senior Executive Director

Kenichi Fukaya

Fumio Matsubara

Senior Executive Director

Senior Executive Director

Keimei Kaizuka

Toshiharu Kitamura

Auditor

Auditor

Hiroyuki Hoshi

Shigeru Kobayashi

82

ORGANIZATION CHART (as of April 1, 2004)[ Head Office ]Internal Audit Department
Inspection Department
Office of Secretariat
Human Resources Management Department
Credit Analysis Department

Corporate Planning Department

Operations Evaluation OfficeFinance Planning & Coordination Department

Office of Financial Planning &Risk Management

Credit Risk Management Department
Information Resources Department
Treasury Department
General Affairs Department[ Community Revitalization Support Division ]Governor

SeniorExecutive
Director

Planning Department for Regional Development
Department for Urban Development

Office of Planning & Researchfor Metropolitan Area

Department for Regional Development

DeputyGovernor[ Environment and Infrastructure Support Division ]Policy Planning Department
Environment & Energy Department
Commerce & Logistics Department
Transportation Department

Auditor[ Technology and Industry Creation Division ]Department for Technology & Growth Business
Manufacturing & Technology Department
Information & Telecommunications Department
Project Finance Department
Planning Department for Investment Banking
Business Restructuring Department
Department for Business Development
Department for International Affairs

6 Overseas Representative Offices＊3

Economic & Industrial Research Department
Research Institute of Capital Formation

Research Center for Regional Policy[ Domestic Branches & Offices ]10 Branches＊1＊ 1 Branches : Hokkaido

Tohoku Niigata Hokuriku Tokai Kansai Chugoku Shikoku Kyushu Minami-Kyushu＊ 2 Representative Offices : Hakodate

Kushiro Aomori Toyama Matsue Okayama Matsuyama Oita

＊ 3 Overseas Representative Offices : Washington, D.C.

83

8 Representative Offices＊2

New York Los Angeles London Frankfurt Singapore

Location of Head and Branch Offices and Directory
Hokkaido Branch

Hakodate office

Aomori office
Kushiro Office

HEAD OFFICE
Domestic Branches
Representative Offices

Niigata Branch

Toyama Office
Hokuriku Branch
Tohoku Branch
Okayama Office
Matsue Offce
Chugoku Branch

HEAD OFFICE

Kyushu Branch
Tokai Branch
Kansai Branch
Shikoku Branch
Matsuyama OfficeLondonRepresentative OfficeFrankfurt
Representative Office

Oita Office

New York
Representative Office

Minami-Kyushu Branch

Los Angeles
Representative Office

Washington, D.C.
Representative Office

Singapore
Representative Office

Head Office

Overseas Representative Offices

9-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-0004, Japan
Tel: +81-3-3244-1900
http://www.dbj/go.jp/english/index.html• Washington, D.C. Representative Office1101-17th Street, N.W., Suite 1001,
Washington, D.C. 20036, U.S.A.
Tel: +1-202-331-8696

To Kanda

Shuto Expressway• Los Angeles Representative Office
601 South Figueroa Street, Suite 2190,
Los Angeles, CA 90017-5748, U.S.A.
Tel: +1-213-362-2980

Development Bank of Japan
Japan Business
Federation (Keidanren)
Nikkei Bldg.
Koko Bldg.
NTT
JA Bldg.

KDDI• New York Representative Office1251 Avenue of the Americas, Suite 830,
New York, N.Y. 10020, U.S.A.
Tel: +1-212-221-0708

Mitsui MutualLife Insurance• London Representative Office
Level 12, City Tower, 40 Basinghall Street,
London, EC2V 5DE,
United Kingdom
Tel:+44-20-7638-6210• Frankfurt Representative OfficeFrankfurter Buero Center,
Mainzer Landstrasse 46,60325 Frankfurt am Main,
Federal Republic of Germany
Tel: +49-69-7191760• Singapore Representative Office
36 Robinson Road, #07-04 City House,
Singapore 068877
Tel: +65-6221-1779

Marunouchi Line
Otemachi Sta.
(Exit A1)

Sankei Bldg.
Yomiuri Bldg.

JR LineHibiya Dori (St.)

Chiyoda Line
Otemachi Sta.
(Exit C1)

Hanzoumon Line
Otemachi Sta.
Otemachi Bldg.

Otemachi First
Square Bldg.
To TokyoTozai Line
Otemachi Sta.

Published: September 2004
By: Development Bank of Japan,
Corporate Planning Department (Head Office)84

Printed in Japan