DBJ provides both financial and knowledge-based solutions to support
development that will make life brighter and more rewarding for,today s citizens and their children.

Community Development
Contributing to the revitalization of local
economies by joining regions in
supporting solutions that draw on
the advantages of each area

Environmental Conservationand Sustainable Societies
Helping to realize a sustainable,
safe and secure society
by supporting businesses that are committed
to social responsibility

Creation of
New Technologies and Industries
Stimulating the Japanese economy
by utilizing knowledge and innovative financial
methods to create new industries that will be
the source of future prosperity

6

Aid for joint development efforts by local companies
Suwa Community Pillar FundDBJ has created an independent financing scheme called the

Corporation, a venture capital firm that invests in local

Suwa Community Pillar Fund in cooperation with the Shinkin

companies; five major shareholding companies; and Nagano

Trust Bank, Ltd., local government bodies and other financial,
institutions. The Fund s goal is to support joint development

Prefecture. Hachijuni Bank, Ltd., Suwa Shinkin Bank and DBJ,
provided financing for the fund s principal. This platform eased

projects carried out by small and medium-sized enterprises,
based in Nagano Prefecture s Suwa region, which has built up an

the difficulties that companies had been facing in developing newexpertise in precision machinery. This scheme supports thecontinue to encourage the independent development of local

initiative of small and medium-sized companies which pool theireconomies through joint development projects by local

technologies to develop and commercialize new products.
,
To make the most of Nagano Prefecture s support system, a jointcompanies.

products and entering new markets on their own. DBJ willfund（trust）was structured in collaboration with the S.I.V.
Suwa Community Pillar Fund・Development and sale of small compressors

S.I.V. Corporation

・Development and sale of mobile oxygen generators

New investment（common stock）

Nagano Prefecture

Nakamura Manufacturing, Yamato, Nagano Sankoh, Kyoyu Denzai Kogyo, Kokuei Kogyo（Support for grassroots start-ups）＊［mutual joint guaranty］

Joint instruction authorization
Dividends

Cash trust

Dividends

Cash trust

Loan

Repayment

Hachijuni Bank
Trust account（Shinkin Trust Bank）

Repayment［Suwa Community Pillar Fund］

Joint financing

Suwa Shinkin Bank
DBJ

＊Having the five relevant companies adopt partial joint guaranties clarifies therisk exposure of those involved and facilitates the smooth supply of funds.

7

Support for business based on a community development plan
Product development and production through the affiliation of Sakai Ovex Co., Ltd.,
with academia, business and government,
In accordance with Fukui Prefecture s Plan to Reinforce
Productivity in Fukui, DBJ adopted a community development

production of new products based on cutting-edge technology,
devised in this partnership and to reinforce Fukui Prefecture s

support system to provide loans for the establishment of Sakai,
Ovex s new site for the development and production of highly

competitiveness in the industry.

functional textiles, such as carbon fibers. Sakai Ovex iscommunity development plans. Investment and loans tocapitalizing on its strong technical skills in dye processing tobusinesses conforming with the intent of these plans is expected

promote collaborative R&D by industry, government andto encourage the spread of such community development

academia in a variety of fields. Entities taking part include theprojects throughout the nation.

DBJ will continue to work with local public bodies in establishing

Industrial Technology Center of Fukui Prefecture, the Universityof Fukui and the Japan Science and Technology Agency. The
capital investment is intended to result in the development andLoans for Community Development Support

Approval,
Fukui Prefecture s

Community Development Headquarters,
Cabinet Officecommunity development plan
Plan to Reinforce Productivity in Fukui,
DBJ s support through loans forms an integral part ofSupportcommunity development plans

Sakai Ovex

Community development support loans

DBJ

Capital investment in site for the development
and production of highly functional textiles

Joint financing

Strengthening manufacturing skills
in cutting-edge fields

Private financial
institutions

Progress in community development
To promote further community development, DBJ is using its
to Encourage Community Development,

Programwhich systemizes the methods

it has developed for supporting community projects, to provide,■ DBJ s Program to Encourage Community Development

Framing stage

Planning stage

Operation stage

Support for
project formation

Support for
project operation

Financial support
for projectcomprehensive support from framing through operation. As part of thisprocess, DBJ plays an active role in community development plansapproved by the Community Development Headquarters. These services
include:1. Advice on project formation and operation
DBJ provides advice on business plans, cash flow plans and fundraising plans,
to projects consistent with approved plans that include the Bank s support

Implementation of community development projectmeasures.
2. Fund support
DBJ provides financial support to the aforementioned projects.

Community development

8

Creation of business revitalization fund
Revitalization of long-established Ochiairo inn
In cooperation with Suruga Bank Ltd., DBJ established theusing shareholder agreements, with the goal of rejuvenating

Ochiairo Business Revitalization Fund to provide support for the

Ochiairo and improving corporate value. This old and long-renewal of Ochiairo, a Japanese-style inn of long standing in Izu

established inn has a large impact on the local economy and its

Amagi Yugashima. Ochiairo filed to begin civil rehabilitation

revitalization will go far in energizing the region. In order toprocedures in May 2002, aiming to renew its business byfacilitate smooth business reconstruction in Japan, DBJ willtransferring it to Orion Corporation. The Ochiairo Business,
Revitalization Fund undertook Orion s allocation of new shares tocontinue using DIP finance and reconstruction fund schemes toa third party in September 2003. DBJ became a shareholder intheir local communities, and will continue to work with local banks

the company, providing advice and monitoring operations by

toward the same goal.

provide funds to businesses that have the potential to revitalize■ Ochiairo Business Revitalization Fund

Suruga Bank

Suruga BankDBJManagement team

Ochiairo Business
Revitalization Fund

Conclusion of agreements between shareholders
Loans

Individuals

Capital increase through common voting stock
Capital increase through nonvoting stock

Company taking on Ochiairo（Orion）

9

Client companies

Business revitalization for local companies
Business revitalization of Niigata Tekkosho Co., Ltd.
Comprehensive support measures like those used here arebusiness divisions, and as a result of these efforts the Tokyo

important means of revitalizing local economies.

District Court approved the reorganization plan. DBJ supported

DBJ used the methods of DIP finance, M&A and businessthe reorganization of some of these business divisions（newrevitalization funds to support the business revitalization efforts ofcompanies）with equity participation（the conclusion of

Niigata Tekkosho, which had filed for corporate reorganization.
,
Since one of the company s business divisions was generating,
cash flow, DBJ provided DIP financing to maintain the company sshareholder agreements with private-sector sponsors）andbusiness value while it was being reorganized. Subsequently, thereorganization in Japan.

endeavored to sustain technology and employment at these local
companies. This project serves as a model for businessadministrator found companies to sponsor almost all of theBusiness Revitalization of Niigata Tekkosho

Niigata Tekkosho

DIP finance

Division of company by businessNiigata Power Systems

Loans

Manufacture and sale ofgenerating machinery

Equity participation＊
Shareholder
agreement

Niigata Transys

Private-sector sponsor

DBJ

Manufacture and sale of railway cars andsnow removal equipment; design, manufacture andconstruction of new transportation systems

Equity participation＊
Shareholder
agreement
Private-sector sponsor

Niigata Loading Systems
Loading arms（hydraulic material handling attachments）,
sale and manufacture of pipe connectors

Loans＊ DBJ made its investment throughthe DBJ Business Revitalization
Investment Association.

■ Schematic Diagram of DIP Finance＊Time elapsed pertains only to cases in which a petition has been made for civil rehabilitation.

Demand for funds
Commonobligations▲
OperatingcapitalTime elapsed▲
Restructuring
funds

Fluctuations in fund demand▲
Funds forequipment, etc.

DIP financeFiling ofprocedures

Decision tostart

Decision toapprove plan

Completionof plan

15 days to
one month
Six months

Three years（supervisory board members）

10

Efforts to enhance functions of community-oriented financing
Sophistication of local financial functions
DBJ has coordinated and collaborated with local banks to provide

concluded agreements for cooperative operations（93 as of thefinancial support for diverse initiatives in regions throughout

end of June 2005）. DBJ uses its accumulated knowledge to bring

Japan. In March 2003, the Financial Services Agency issued its

a greater sophistication to local financial services and works with

Action Program concerning Enhancement of Relationshipregional financial institutions to provide the capital andBanking Functions, followed in March 2005 by its Action Program

information so essential to community development.

for Ensuring Further Promotion of Region-based RelationshipBanking. In these programs the agency called on local banks to＊Principles of region-based relationship banking

strengthen their region-based relationship banking＊ services as

Utilizing information gained from long-standing client

well as their ties to government-affiliated financial institutions

relationships and a high standard of communicationsuch as DBJ. In light of this call to action, DBJ has establishedthat includes face-to-face discussions, financial institu-

liaison conferences with regional financial institutions andtions accurately assess the business status of theircorporate borrowers. This strengthens their role asmediators for small and medium-sized companies andCase Study: Support for Corporate Bond Issues by Local Companies

improves the revenue of the financial institutions,
themselves（from the FSA s promotion plan for regionbased relationship banking, the Action Program

Concerning Enhancement of Relationship Banking
Functions, March 2005）.

● Hokuriku Electric Industry● Takagi Seiko

Corporate bonds（local companies）

Special purpose company（company name: Thunderbird）

Special purpose bondInstitutional investors（primarily local Shinkin banks）

Hokuriku Bank:
Financial agent, other（local regional bank）

Pledging ofcollateral

Affiliation

Trusteeship and liquidity enhancement

Guarantee

DBJ

Affiliation

As part of its efforts to enhance the promotion of region-based

corporate bonds, which are then used as underlying assets whenrelationship banking, DBJ worked with Shinkin Central Bank andthe special purpose company issues new bonds. The bonds are

Hokuriku Bank, Ltd., to devise a new scheme for the issuance of

entrusted to the Shinkin Central Bank for sale primarily to local

corporate bonds by local companies. The scheme was used for

Shinkin banks（credit associations）. The money to purchasecorporate bonds issued by Hokuriku Electric Industry Co., Ltd.,

these corporate bonds comes primarily from local deposits held

an electronic component manufacturer with its headquarters in

by local Shinkin banks, resulting in capital generated by goods

Toyama City, Toyama Prefecture, and Takagi Seiko Co., Ltd., athat are produced and consumed locally. DBJ believes thatplastic component manufacturer based in Takaoka City, Toyama

similar schemes will ensure the self-sustaining development ofPrefecture. Under this scheme, DBJ guarantees the redemption

local economies.

of the corporate bonds issued by these companies. A newly
established special purpose company, Thunderbird, buys up the11

Shinkin Central Bank

Advice on local M&A
Yasufuku Rubber Industries Co., Ltd.
DBJ worked with San-in Godo Bank Ltd. in an advisory capacity

M&A was undertaken in an effort to reconstruct these businesses

to provide assistance for the purchase of Marusei Rubber
Industries Co., Ltd., a subsidiary of Fuji Kiko Co., Ltd., byand develop the community.
,
DBJ s Regional Bank M&A Network, used in regions in which

Yasufuku Rubber Industries Co., Ltd., a manufacturer ofcorporate information is unevenly distributed and specialized

industrial rubber and plastic products.

services are inadequate, is particularly effective in projects, likeIn this case, the seller, Fuji Kiko, wanted to split off its non-core

this one, which extend across several regions.

business, and the buyer, Yasufuku Rubber Industries, wanted to

DBJ plans to use similar projects to enhance the region-basedenhance its competitiveness by obtaining manufacturing bases,

relationship banking functions of local financial institutions and toenlarging its market area and utilizing its business expertise. This

promote wider access to its own expertise.

,
Yasufuku Rubber Industries Acquisition of Marusei Rubber Industries

Yasufuku Rubber Industries

Marusei Rubber Industries

Fuji Kiko〔headquarters: Hyogo Prefecture〕〔headquarters: Shizuoka Prefecture〕〔headquarters: Shizuoka Prefecture〕

90％（buyer）

Co-adviser

10％（eligible company）（seller）

AdviceYasufuku Rubber Industries acquired 90%
of Marusei stock（Marusei was a wholly-owned subsidiary of Fuji Kiko）,
DBJ s Regional Bank
M&A Network

San-in Godo Bank,
DBJ s Regional Bank
M&A Network

Shizugin Management
Consulting

DBJ■ Background of Project Formation and Significance（Schematic Diagram）

Fuji Kiko（seller）

Yasufuku Rubber Industries（buyer）
Expansion of industrial-use rubber businessPriority areas,
Acquisition of Marusei Rubber Industries trading areaand human resources
Maintenance of site in Hamamatsu, Shizuoka Prefecture
Building of cooperative relationships with customers（Fuji Kiko）

Selection of priority business areas in which to focus resources
Effective use of management
resources by selling business

Significance ofthe deal

Building of cooperative relationships with
manufacturers specializing in prime rubber

Creation of win-win relationships

12New efforts to establish urban redevelopment funds
MUZA Kawasaki Projectarranging non-recourse refinancing＊ using a special purpose

capital for scholarships. Financing methods such as this will,continue to be a part of DBJ s efforts to promote urban

company（SPC）for Muza Kawasaki Central Tower, one ofredevelopment projects in cooperation with private financial

several redevelopment projects at the west entrance of Kawasaki

institutions.

DBJ worked with Mizuho Corporate Bank, Ltd.（Mizuho CB）in

Station. Muza Kawasaki is a landmark multi-use facility that
includes a central office tower and a symphony hall. In this deal,
Mizuho CB handled the arrangements for the senior debt portion＊Non-recourse financing

while DBJ established an urban redevelopment fund,invested its

The parent company does not guarantee repayment on loans provided forown funds and provided financing for the riskier subordinateddebt（mezzanine）portion. Waseda University invested in the reala particular project. Rather, financing is extended in consideration of
the future cash flow and project assets that a subsidiary SPC will
generate from the project.

estate securitization instrument as a new means of generating
Urban Redevelopment Fund

Financial institutions〈 participatingin syndication 〉

WKC SPC＊

Private financial
institutions＊ A corporation established inaccordance with laws on asset liquidation

DBJ〈 project administrator 〉

Urban Development Corporation;
renamed the Urban Renaissance Agency,
an independent administrative agency〈 construction contractor 〉

Taisei Corporation

Equity in sectional
ownership of
MUZA Kawasaki landand buildings

trustee for disposal and〈 managementof special assets 〉

Mitsubishi Corporation

Mezzanine financing
Mezzanine financing refers to the supply of funds which have a relatively
high investment risk（ middle risk funds ）and will be repaid after thesenior financing typically arranged by financial institutions. The term
derives from the mezzanine floor that may exist between one floor of abuilding and the next. The introduction of these funds reduces the project,sponsor s financial burden and makes it easier to procure senior financing.
,
Japan s mezzanine finance market is not as developed as those in the US
and Europe, but developing this market ー by creating urban
redevelopment funds in cooperation with private financial institutions ー
would facilitate urban and community redevelopment in Japan.

13

Private financial
institutions

Seniordebt

DBJ

Subordinateddebt
Senior equity
participation

Mezzaninefinancing

Money trust

Urban redevelopment funds〈 Senior investor 〉

Waseda University

Project refinancing for PFI project,
PFI project for Ichikawa Middle School 7 s Gyotoku interactive facility
DBJ used the project financing method to provide loans for,
Ichikawa City s PFI Project for Building Improvements, including

entire community and promoted interaction among different

Ichikawa Middle School 7, a Cafeteria, a Town Hall, and a

the resourcefulness of the participants and financing groups andDaycare Center, with UFJ Bank Ltd. and Chiba Bank Ltd. as joint

ensured the appropriate allocation of risk exposure, primarily inlead managers.

Ichikawa City.

This project benefited from the ingenuity of the private sector in

DBJ will continue to form ties with regional financial institutions increating an educational environment which was accessible to theorder to best meet local needs.

PFI

generations. Use of the project refinancing method maximized

This is a method that utilizes private-sector capital, management abilities and technical skills inconstructing, maintaining and operating public facilities. The use of PFI reduces the business costs borne by
the government and local public organizations and results in higher-quality public services.

5th floor

Elder care center（capacity of 50 residents）

4th floor

Town hall

3rd floor（capacity of approximately 800）

Middle school（standard classrooms, classes for the handicapped, staff room, etc.）

2nd floor

Conference room

Cafeteria

1st floor（capacity of approximately 200）

Utility room

Daycare center Day service center（capacity of 50 children）（25 users）■ PFI Project for Ichikawa Middle School 7, Gyotoku Interactive Facility
Business contract

Ichikawa City

Direct contract

Facility
licensingagreement

Business contract

Daycaremanagement

Financing group

Chiba Bank
UFJ Bank
DBJ

Loan contract

SPC: Ichikawa Middle School 7,
Gyotoku Interactive Facility
Equity participation

Elder care center
management

Insurance contract

Insurancecompany

Construction contract agreement
O&M

Three corporate
sponsors

One corporate
sponsorThree corporate
sponsors

14

Public-private partnership（PPP）initiatives
Nakano Sun Plaza privatization financing

financing to privatize Nakano Sun Plaza, held by the independent

public nature and the economic efficiency of the project, one of,Japan s first examples of the private-sector outsourcing of public

administrative entity Employment and Human Resources

assets（PPP project）.

Development Organization of Japan. In this project, Town

DBJ uses the knowledge it has accumulated to help build

Development Nakano 21 Ltd., established by Nakano Ward andprivate companies, bought Nakano Sun Plaza and entrusted its

infrastructure from an impartial viewpoint, structures mezzanine,
financing and provides risk capital. With DBJ s support, PPP

overall operations to the private companies in the group while

projects show great promise for the future.

DBJ, Mizuho Bank and Seibu Shinkin Bank provided theretaining public involvement. This method ensured both the

PPP project to finance privatization of Nakano Sun Plaza

Nakano Sun Plaza
sales contract

Financing group

Nakano Sun Plaza owner Town
Development Nakano 21

Independent administrative entity
Employment and Human Resources
Development Organization of Japan

Senior lenders
Mizuho Bank andSeibu Shinkin Bank

Senior loan

Land andbuildings
Lump-sum lease management trust

Subordinatedloan

Mezzaninefinancing

Representative consignor:
DBJ and Nomura Securities

PreferredsharesStockinvestment

Rent
Continuation of operations
motivated by public good
Hotel, restaurants, cafes,
wedding ceremonies, banquets,
halls, offices, parking lot, etc.

New management team brought in,existing employees stay on

PPP（Public Private Partnership）projects use private entities to provide
social overhead capital and administrative services. Public-private
cooperation may take forms such as PFI, privatization and private-sector
consignment.

15

Nakano Ward
Signing of
direct agreement

Equity participation

Nakano Sun Plaza management company
Nakano Sun Plaza

PPP projects

Private mezzanine fundfor urban redevelopment

Equityparticipation

Eight local companies
representative company:
Business Bank ConsultingNew model for community development using vacant rooms
Support for "SOHO conversions" and caretaking operations
Corporate reorganization has resulted in a growing number ofprocess by providing sophisticated management skills, in realvacant rooms in small and medium-sized office buildings. This isestate and other areas; in recruiting lessees and assisting ina cause for concern due to its harmful effects on the local

establishing companies important to local industry; and ineconomy and on the safety and security of the community.

arranging the cooperative use of vacant space in multiple

SOHO conversions,in which unused space is renovated forbuildings. DBJ established the SOHO Conversion Support

use by start-up companies and other SOHOs ＊ , have been

Center in November 2003 to provide not only capital, but also

attracting considerable attention, not only for their role inassistance with business plans, technology, sales and capital

supporting the establishment of new companies and revitalizing

strategies. Creating safe, secure towns with vital local industries

communities, but also for their ability to ease environmental

is a key factor in community development.

burdens through the efficient use of existing office stock.
Caretaking（ yamori ）operations ＊ play a crucial role in the＊SOHO stands for

Small Office / Home Office.

＊Caretaking operations:,
During Japan s Edo period, caretakers（ yamori）acted as agents for

Structure of Traditional Caretaking Businesslandlords, taking care of matters related to their land and houses. As the,landlord s asset manager, the caretaker was responsible for choosing
lessees to ensure the proper collection of rents, supporting new,
businesses, and all other aspects of the town s management. A
present-day caretaker performs the modern version of these functions.

Exchange of opinions

Residents andlocal companies

Local governments
Various assistance

Various forms of assistance（including providing public facilities and recruitment）

Mutual exchange

Mutual exchange

Sub-lease

Building owner

Conversion construction

RentalCaretaker

Conversion construction

Local maintenance andconstruction businesses

Recruitment and nurturing

Offering of expertise and capital

Lessee〈SOHO business〉
Assistance with fund raising andstarting operations

Regional financial institutions

DBJ

Case study of a SOHO conversion loan: Setagaya Ward Manufacturing
School（former ward-administered Ikejiri Middle School）
・This project was undertaken to restore the former Ikejiri Middle School,
which had closed following its consolidation with another school.

・After the company consulted with the SOHO Conversion Support Center,
DBJ provided it with the capital required for the conversion project after,
reviewing the risk and refinancing involved in the project s development.

Private-sector expertise（in this case, IDEE R-project Co., Ltd.）was
used to restore the school as a center for design and manufacturing.
・The IDEE R-project was established as the core of R-project, a new
business that works to revitalize urban areas in cooperation with IDEE
Co., Ltd., a furniture retailer, and several designers and creators. This
project had many caretaking characteristics, in that the company was incharge of the entire project from its start through its operation.

16

Regional banking lease company adopts the Loan Program for
Promotion of Environmentally Conscious Management
Shigagin Lease Capital Co., Ltd.
In fiscal 2004, DBJ launched its Loan Program for Promotion ofenvironmental conservation NPO. With its lease transactions,

Environmentally Conscious Management, which utilizes

which function as a platform for regional financing, Shigagin

environmental rating methods. Shigagin Lease Capital Co., Ltd.,

Lease Capital actively supports the efforts of local small anda regional banking lease company headquartered in Otsu City,

medium-sized companies to protect the environment. A special

Shiga Prefecture, was the first to use this program to receive

point system（ engagement ）adopted for medium-sizedloans from DBJ. Shigagin Lease Capital set up a special

Ecocompanies was used in this program for the loans made to

Clean Lease program for use by companies which practice

Shigagin Lease Capital. DBJ will continue to provide support forenvironmentally conscious management, as well as leases forregional companies promoting environmentally conscious

equipment with minimal environmental impact. Some of the

management.

revenue generated by this program is donated to an
Schematic Diagram of Loan Program for Promotion of Environmentally Conscious Management

Company

Loan consultation

Corporate screening

Environmental screening
Positive and negative aspects

Credit rating

Environmental rating
Four-step evaluation reflected in interest rate

DBJ

Loan decisionCorporate bond guarantee in addition to loan

127 items ＊1
1. Overall management（corporate governance, etc.）
2. Business-related aspects（capital spending, etc.）
3. Environmental performance aspects＊2（global warming measures, etc.）
Consideration of particular attributes of industry
Four-step evaluation●Particularly advanced : Official interest rate Ⅲ●Advanced: Official interest rate Ⅱ●Adequate: Official interest rateⅠ●Inadequate: Ineligible

Conclusion of contract and credit execution
Covenants（contract clauses）

Monitoring and exercise of rights＊1. Manufacturing industry cases＊2. Compliance with
the Ministry of the,Environment s Guidelines for Integrating
Environmental and Financial Performanceat the Enterprise Level

Special point system ( engagement )17

DBJ evaluates aspects of overall management, such as corporate

Medium-sized companies that demonstrate a strong motivation to promote

governance and compliance; business factors, such as capital spending

environmental management by pledging to further improve theirand product and service development; and environmental performance,

environmental performance indicators receive higher scores in thesuch as measures to address global warming and promote the efficientevaluation. Shigagin Lease Capital pledged to DBJ that it would actively

use of resources.

promote Eco Leases and was thus able to take advantage of this program.

Guarantees on privately-placed bonds through the Loan Programfor Promotion of Environmentally Conscious Management
Kiyokawa Plating Industry Co., Ltd.
DBJ used the Loan Program for Promotion of Environmentallysuited to its corporate scale. The company boasts an impressive

Conscious Management to provide a 100% guarantee onlevel of environmental efficiency, linking environmental measuresprivately-placed bonds（fiscal agent: Fukui Bank Ltd.）issued bydirectly to the pursuit of high productivity and product yield.

Kiyokawa Plating Industry Co., Ltd., headquartered in Fukui City.

As part of its efforts to promote community-oriented financing,Founded in 1963, Kiyokawa Plating Industry is a manufacturer of

DBJ concluded an operations cooperation agreement with Fukui

special plating. The plating industry calls for sophisticatedBank. Utilizing guarantees for privately placed bonds. DBJ will

environmental measures, and the company was one of the first incontinue to collaborate with regional financial institutions in

the field to acquire ISO 14001 certification and develop an

promoting environmentally conscious management.

original management model（Kiyokawa Management System）

Guarantee of Privately-placed Bonds through the Loan Program for Promotion of Environmentally Conscious Management

Kiyokawa Plating Industry

Fukui Bank

local environmentallyconscious company

fiscal agent and agent for
privately-placed bonds［］ ［Collateral assignment andpayment of premiums］

Institutional
investors

Privately-placed bonds

Guarantee

Screening by
individual company

Environmental
screening

Monitoring

DBJ

18

Programs to promote global warming measures
Establishment of Japan GHG Reduction Fund and Japan Carbon Finance Ltd.
DBJ established the Japan GHG Reduction Fund（JGRF）and,
Japan s limited scope for reducing greenhouse gas emissions,Japan Carbon Finance Ltd.（JCF）with the Japan Bank for

the Kyoto Mechanism is a cost-effective means of contributing toInternational Cooperation（JBIC）and private Japanese banks.

the sustainable development of developing countries. On the

JGRF is the first greenhouse gas reduction fund in Asia that uses

other hand, this method has many potential risks, and both thethe Kyoto Mechanism to purchase credits for emissions rights,
earned in developing nations greenhouse gas reduction projects,
for distribution among the fund s investors（JCF buys the credits

private and public sector must learn more about it and its

and sells them to JGRF）.

environmental measures and fund operations, DBJ can play an

The Kyoto Protocol went into effect in February 2005. Given

important role in efforts to prevent global warming.

consequences. By taking full advantage of its network ofoverseas development finance organizations and its expertise in

Overview of Japan GHG Reduction Fund and Japan Carbon Finance（

Environmental
measures project inhost country

ResaleContract

Contract for
credit purchase

CDM/JI
project

Capital injection
contract

JCF

）

JGRF

Acquisition
costs

Resalecosts

CreditPurchase

Creditresale（voluntary
partnership

Equity partner（private companies））

Capital injection（call）＄141,500,000
CreditDBJManaging partner,
Development Bankof Japan

JBIC●Project funding using both banks, networks●Collaboration with international organizations and development finance organizations●Loans●Project monitoring

Programs promoting global warming measures
Global warming affects the atmosphere, which is a global public asset.

its research to cover shared social capital,

Resolving this problem requires a multi-faceted approach and responses that

includingextend decades and even hundreds of years into the future.

aspects of the natural environment, with

DBJ has been involved in this problem from an early stage. In 1993 it

the ultimate aim of creating a sustainable

launched the Research Center on Global Warming to build a model tosociety. DBJ itself pursues research

determine the impact that an environmental tax would have on the

aimed at promoting a wide range of global

Japanese economy. Recently the Center has broadened the scope ofwarming measures.

theatmosphere

and

other

「Study No. 64 」
Improving global warming measures through life cycle assessment

19

Project to build a nuclear fuel cycle
Japan Nuclear Fuel Limited
Japan depends on other countries for the majority of its energy

managing and disposing of radioactive waste during the building

resources. This is particularly true of oil, which is importedof a nuclear fuel cycle.

predominately from specific regions. Energy conservation isThis project was carried out in a massive facility requiring stable

important for Japan, as is the introduction of reusable energy

operations, and called for large amounts of capital and a longsuch as wind and solar power. But energy security measures areconstruction period. DBJ joined private financial institutions inalso essential to ensure a stable supply of energy for daily life.

providing assistance through the steady supply of long-term

To counteract global warming, Japan needs energy sources thatloans.
,,DBJ s support will be instrumental in implementing Japan semit low levels of carbon dioxide.
The spent fuel storage facility of Japan Nuclear Fuel Limited is,
responsible for ensuring Japan s energy security and for

Uranium mine

Smelting plantFinalundergroundrepository site

Uranium
hexafluoride

Uraniumenrichment plantmaintenance of supply functions
oil and LPG storage functions

Reprocessingplant

MOX fuel plant

Spent fuelUranium
hexafluoride

Uranium dioxide（Depleted uranium）

MOX fuel

Reconversion
plantInterim storage
facility

Uranium dioxide

Spent fuelNuclear power
plant
Fuel bundle

Nuclear power development
Nuclear power generation facilities, spent nuclear fuelreprocessing plant
Global environmental measures

Molding andprocessing plant
High-Level Radioactive
Waste Storage andManagement Center

Resource development andOffshore extraction of oil and natural gas, development of

Reuse（Recovered uranium and plutonium）
Radioactive waste●DBJ addresses energy security measures（main loans for related projects）

Conversion plant

Uranium ore
Reuse（Recovered uranium）

energy security measures for the future.

Thermal, wind, solar power generation facilities; fuelcell facilities; biomass energy facilities; liquid gas
generation sites; promotion of natural gas

Low-level Radioactive
Waste Storage andManagement Center

Radioactive waste

20Introduction of low-emission vehicles at national parks
Tateyama Kaihatsu Tetsudo Co., Ltd.
In order to protect and conserve the rich natural resources of theNOx, CO 2 and particulate matter. Hybrid buses are more

Tateyama Kurobe Alpine Route in Chubu Sangaku National

expensive than conventional ones, and replacing an entire fleet

Park, this project has been gradually introducing hybrid, low-

takes considerable time（as of the end of July 2005, 21 of the 40

emission buses to the highland roads since 1998.

buses had been replaced with hybrid vehicles）. By providing

Modes of transportation with low environmental impact are an

long-term loans, DBJ enables these replacements to be madeessential aspect of a sustainable society. Hybrid buses running

steadily and systematically. DBJ will continue to support suchon a combination of electricity and diesel fuel emit lower levels ofsignificant efforts.

Hybrid bus（23km route between Bijodaira and Murodo）

21

Aid in maintaining corporate activities after a natural disasterTomoegawa Paper Co., Ltd.
In cooperation with Mitsui Sumitomo insurance Co., Ltd.,
Shizuoka Bank, Ltd., and Mizuho Securities Co., Ltd., DBJ

DBJ provides debt guarantees on 3 billion yen of the syndicate,
loan. DBJ will actively support companies efforts to findstructured a contingent debt facility（CDF）to cover Tomoegawa

fundraising methods through diverse affiliations, utilizing its

Paper Co., Ltd., in the event of a large earth-quake. This projectexpert knowledge and networks to create earthquake measuresraises the certainty that Tomoegawa Paper, located in Shizuoka

appropriate for specific regions.

prefecture, would be able to raise funds for a quick recovery aftera large earthquake in the Tokai area. Given the difficulty insecuring earthquake insurance for companies in the Tokyo
Metropolitan and Tokai areas, part of the requisite earthquake
recovery funds will be provided in the form of preemptive,
borrowing, augmenting the company s cash flow.
Financing Contingent on Earthquake Damage

adviser（Mizuho Securities）

Risk-free assets

Earthquake risk
analysis＊
1 billion yen

Loan reservation

SPC

Tomoegawa Paper

Mitsui Sumitomo Insurance,
Shizuoka Bank

Syndicate loan
3 billion yen

General investors

Loan execution in
event of earthquake
Delegation of debt guarantee＊Earthquake risk analysis was developed by Stanford
University and uses the natural disaster loss prediction
system put into practical use by OYO RSM Corporation.

Guarantee

Proposal andcoordination of loan conditions

DBJ

Role of adviser and arranger●Mizuho Securities（adviser）
Mizuho Securities proposed the structure of this scheme to Tomoegawa●Shizuoka Bank（arranger）

Paper; the company led arrangements with the investors and other

Shizuoka Bank devised the loan application to be filed in the event of an,earthquake and arranged a cooperative system for the loan s execution.

parties involved.

Shizuoka Bank provided capital as an investor in the syndicate group.

●Mitsui Sumitomo Insurance（arranger）
A casualty insurance company, Mitsui Sumitomo offered its knowledge of●DBJ（arranger）

earthquake risk transaction markets and earthquake risk models to theBased on the earthquake risk analysis, DBJ ascertained the quantitative,
earthquake risk of Tomoegawa Paper s balance sheet and directed thestructuring of the scheme. Mitsui provided capital as an investor in theprocess of setting loan terms. In addition, DBJ guaranteed three-syndicate group.

quarters of the loan amount, thereby attracting capital from generalinvestors and helping to ensure that the required amount will beobtained.

22

Support for PPP for former local government-run hospital
Medical Corporation Koureikai
In cooperation with Saitama Resona Bank, Ltd., DBJ provided

improve business and was able to restore profitability in fiscalloans to fund the transfer and new construction of Yamanashi

2003. Work began on transferring the business and building a

Kyoutou Hospital（the former Isawa-cho National Healthnew hospital so as to further stabilize the enterprise and augment

Insurance Kyoutou Hospital）carried out by Ageo Central,
Healthcare System s Medical Corporation Koureikai.

acute care services. To complete the transfer, more hospital beds

Given worsening business conditions at the former Isawa-cho

DBJ provided a long-term, fixed-rate loan since it will takeNational Health Insurance Kyoutou Hospital due to a decline in,
the number of patients and a rise in expenses, the hospital s

considerable time for this particular project to yield an investment

business was transferred to the Ageo Central Healthcare Systemand social welfare projects that local communities will need in theon the condition that local residents would continue to receive

future.

were added than had initially been planned.

return. DBJ foresees active involvement in financing the medical

medical care. The System immediately implemented measures to〈 Diagram of completed building 〉〈 Current facilities 〉■ PPP for former local government-run hospital

Isawa-cho
National Health Insurance
Kyoutou Hospital【Transfer of control to private sector】

Yamanashi Kyoutou Hospital,
Ageo Central Healthcare System

Decision to transfer control toprivate sector on condition that
local residents continue toreceive medical care
Loans to encourage privatization of
publicly-managed enterprises

Money transferred by village

23

DBJ

Joint financing

Saitama Resona Bank

Generating liquidity from nursing care facilities
Hospitality Residence FundDBJ worked with Mizuho Corporate Bank, Ltd. in providing a non-,With a backup operator set up to ensure the facility s continued

recourse loan for a private placement real estate fund structured

operation, the fund was designed to best ensure regular services

by Mitsui Fudosan Co., Ltd. and the ORIX Group to facilitate

for nursing home residents. DBJ utilized its expertise ininvestment in nursing care facilities.

structuring funds to funds to assist in this scheme. Although

Assessing the business viability of funds is more difficult forcapital accumulation will be low, the popularization of this kind of

nursing care facilities than for general real estate investments,

fund will make it easier for management companies capable ofand there are only a few such funds in Japan. Nevertheless, theproviding high-quality services to lease facilities from a fund forparticipants in this project assessed the viability of the eligible

operation.

properties and structured a real estate fund on that basis.

Generating liquidity from nursing care facilities

Trust
dividends

Trust bank
Transfer of positionin trust formationand lease contracts

Companies
running nursing
care facilities
Lease
contract
Trust
beneficiaryright

Hospitality Residence

Trustbeneficiary
right

Borrowed
funds

Loans

MizuhoCorporate Bank

DBJ

CompanyA

Lease contract

Company

Trust beneficiary rightTrust
beneficiary
right

ORIX

B
CompanyC
Company

Purchase price forbeneficiary rights
Purchase price for beneficiary rights

D
Trust formation

Equityparticipationin dormant
partnership

Investors

Capital forestablishment

Limited liability
intermediate corporation

Trust beneficiary right
BackupBackup operator

Fund manager cum asset manager

Due diligence support operations

Mitsui Fudosan Investment Advisers

KPMG Healthcare Japan

Information on social welfare and healthcare
DBJ has prepared the following reports on social welfare and healthcare.
●The future of hospital management
Central role of fund-raising●Diagnostic imaging centers
Business models and issues for PET examination centers●Development of new for-profit nursing home business
Focus on use of nursing care insurance program●New developments in residences for the elderly,
America s active seniors : revitalizing communities by attracting the elderly

Nursing care facility Hyldemoer Kodomono Kuni

24

Support for technology-oriented development,
DBJ s Practical Application Support Center for Technology
Fostering technology is an important aim at DBJ. Working intechnology. In fiscal 2004, the Center carried out 43 studies andaffiliation with regional financial institutions, the Bank has opened

provided feedback to companies in 25 cases.

a Practical Application Support Center for Technology at both its

By supporting practical applications for technology and fund-headquarters and its Kansai branch. The center supports

raising through the Center, DBJ has helped enhance thepractical applications for the results of technological development

manufacturing capability of medium-sized companies, a vitalat medium-sized companies.

factor in creating new local industries. The Center also provides

The Center takes advantage of the networks and screening

an effective way for DBJ to share its expertise. By reinforcing ties

expertise that DBJ has built up over the years to evaluate thewith regional financial institutions in this way, DBJ helps totechnology-related business plans of local medium-sized

strengthen the functions of region-based relationship banking.

companies and provide consulting on practical applications for

Overview of Practical Application Support Center for Technology

Medium-sized companies attempting todevelop practical applications for technology

Loanconsultations

Regional financial institutions
Technology network
RequestDBJ
Practical Application
Support Center forTechnology

Evaluation of plans for developing practical applications for technology●Market trend surveys●Technology trend surveys,
DBJ s network●Independent network of technology advisers●Network of client companies nationwide●Networks with government,
communities and universities,
DBJ s expertise
Screening knowledge●Loans for new technology development●Loans for venture companies

Consulting on developing practical applications for technology●Marketing strategies, support in establishing marketing plans●Consultation on fund-raising

Financial expertise●Loans secured by intellectual property rights●Loans with new share option●Equity investments, M&A

Publiccompanies

Case study of use of Practical Application Support Center
for Technology: Cooperation with Minato Genki Fund

Publiccompanies

Publiccompanies

Minato Genki FundBusiness Investment Limited
Partnership

・To assist local companies founded after the Great Hanshin-Awaji Earthquake, DBJ
invested in the Minato Genki Fund structured by the Kobe-based Minato Bank Ltd.
Group, helping as well with business evaluations and marketing.
・DBJ used the expertise and networks of the Practical Application Support Center forTechnology to screen potential investments and evaluate businesses in cooperation
with the New Industry Research Organization（NIRO）and Kobe University. DBJ
also provided marketing support such as management guidance and fund-raisingconsultation after the investment.

Review board member
Kobe University

Review board member
New Industry Research
Organization（NIRO）

Technology review

Technology review

Financial assistance,
PR for identification of deals,
business guidance

Financial assistance,
support in marketing technology

・This project helped local companies develop applications for their technology andenhanced the functions of region-based relationship banking at local financial
institutions. DBJ will continue to participate in such efforts.

25

Minato Capital

Minato Bank

DBJ

Accelerating growth by carving out businesses
Carve-out Fund,
Corporation s wide-ranging network and its own expertise in

In cooperation with Mitsubishi Corporation, DBJ agreed to found,Japan s first carve-out fund to bolster the competitiveness of thebusiness marketing to manage the fund and nurture theelectronic and high-tech industries, and established Technology

investments. In addition, DBJ will work closely with theAlliance Investment, Ltd., to manage the fund.

companies in which it invests by seconding management

This fund focuses ona method by which a

specialists and devising business strategies. Through this fund,business that has been strategically separated from its company
is evaluated and invested in by third parties in order to accelerate

DBJ will help to cultivate superior technology and human,resources in Japan s highly competitive electronic and high-tech

its growth. DBJ plans to make diversified investments in about

sectors and thus make an important contribution to the creation

15 businesses over the next five years, utilizing Mitsubishi

of new industry.

carving out,

Overview of Carve-out Fund

Company from whichbusiness was carved out

Institutional investors

DBJ

Mitsubishi

Equity participation

Equity participation

Equity participation

Equity participation

50％

Innovation Carve-out Fund

Equity participation
Fund management

Investment and business support

Technology
Alliance
Investment

Technology
Alliance
Group

Other
External
resources

Investment support
agreement

Carve-out
company
Carve-out

50％

Full-fledged hands-on nurturing

Technology,
human resources

Technology,
human resources

Coordination

Internal
ventureSub-corebusinesses

Carve out
Carving out

is a method of fostering new business by strategicallysevering（carving out）a business from a company to accelerate its

Company from which business was carved out

growth. This is believed to be the best method of utilizing the,sophisticated technologies and personnel of Japan s major companies
to develop practical applications.

,
DBJ s support for new industry creation
DBJ uses the means and methods described below to provide seamlesssupport for a wide range of companies, from venture firms to large
corporations, through both capital and knowledge.
Investment Co., Ltd., a government-affiliated venture capital company cofinanced by DBJ and private-sector firms, boasts sophisticated technology andinnovative expertise in a wide range of industries and sectors including IT,
biology, nanotechnology, electronics and services. It invests in venturecompanies with high growth potential and an interest in going public.

●Funds to invest in venture and growth companies:
Incubation funds, loans secured by intellectual property rights, loans
with new share option, etc.
●For medium-sized companies:
Practical Application Support Center for Technology, loans to create
and activate new industries, etc.
●For medium-sized and large companies:
Carve-out fund, loans to develop new technology, etc.

26

New technology on the brink of realization
Tokki Corporation
DBJ provided loans to Tokki Corporation, which has its

used in mobile phones and portable audio equipment. They aremain factory in Mitsuke City, Niigata Prefecture, to develop

expected to play a major role, moreover, in the intelligent home

practical applications for the technology behind organic

appliance and illumination sectors in the future.

electroluminescence（EL）panel manufacturing equipment. TokkiIn general, there are many uncertainties in establishing aships its organic EL panel manufacturing devices to electric-

manufacturing line and determining demand when developing

appliance manufacturers for use in the research, development

practical applications for new technology, making business risks

and manufacture of organic EL displays.

particularly high. DBJ works with companies taking up these

Since organic EL displays are brighter, easier to see and thinnerchallenges to bring new technology to the market, create newthan previous liquid crystal displays, they are increasingly being

industries and bring greater convenience to daily life.

Organic EL panel manufacturing equipment

27

Loan with new share options for a manufacturing company
Works Corporation
DBJ provided a loan with new share options to Workssuperior manufacturing technology, DBJ extended a loan to

Corporation, a precision metal processing manufacturer with aWorks, using new share rights.

factory in Ongagun, Okagaki, Fukuoka Prefecture. Using metal

While growth companies attempting to enter new industries may

processing technology at the nano level, Works primarily

have advanced technology, some may encounter problems in

manufactures molds for semiconductors and ultra-small motors.

raising funds as it is difficult to evaluate the technologies andThis project aimed to develop molds for lenses using ultra-hardmaterials. These would be used in digital cameras and mobilerisks involved. DBJ offers a variety of fund-raising options based,on its review of a company s development and investments.

telephones equipped with high-definition cameras, for which

These reviews, which include technology evaluations, utilize thedemand is increasing sharply. Determining that this was a

wealth of knowledge DBJ has accumulated over the years.

Loan with new share options for a manufacturing company
It is not easy for venture companies lacking sufficient physical collateral（ such as land, buildings and other real estate） and credit strength toobtain loans from financial institutions. DBJ provides loans to thesecompanies in exchange for rights to their new shares.
These loans are thus called loans with new share options. DBJ took up
corporate bonds with warrant rights in fiscal 1998 as one means ofsupporting the fund-raising efforts of venture companies, but adopted
finance schemes using new share options in fiscal 2002 after they were
newly defined in the revised Commercial Law issued April 1, 2002. DBJ isbuilding a strong track record in financing with new stock options.

28Supporting content industry using intellectual property rights
Policy-based loans through SPC method
DBJ cooperated with the Bank of Tokyo-Mitsubishi, Ltd., in

introduction of non-recourse loans and outside investors, paving

providing loans to GONZO K.K. to produce a new animated film.

the way for the development of content businesses that canIn this project, GONZO transferred the intellectual property rights

compete on a global stage. The key factors behind the success,of this project were GONZO s digital technology for animatedto a special purpose company（SPC）. The SPC raised funds
from transferring the copyright to produce a new work. This new

productions and the motivation to find a new form for the,
licensing business run by GDH K.K., GONZO s parent company

fund-raising method - distinct from theand an investor in the project. DBJ will continue to support thefrom DBJ and others, and GONZO used the money it received

method,production committee

which involves equity - enables the consolidated

creation of finance schemes and other means.

management and use of the copyright by the SPC as well as theUse of System Supporting Business with Effective Use of Intellectual Property Rights（SPC method）【SPC】

Development of
new products

GONZO

Loan

Transfer ofIntellectual
property rights
Compensation

Fund-raising with loans
Payment with priority to others

DBJIntellectual
propertyrightsAnonymous investment incapital of partnership

Amountinvested

TV broadcast
DVD
Overseas, etc.

Sale
Collection ofreceivables

Videogram
distribution
sourceBank ofTokyo-Mitsubishi

Dividends

GDH
External investors

Commissioning software sales
Revenue from software sales

Loans using intellectual property rights as collateral
Venture companies lacking sufficient physical collateral, such as land,●Examples of intellectual property rights serving as collateralbuildings and other real estate, and credit strength find it difficult to・Patents that have been approved, patents that have been filed（ in principle,

obtain loans from financial institutions. In these cases, DBJ uses

・Program copyrights（computer programs）, copyrights applying to content

copyrights with market value.

・Other intellectual property rights

DBJ began offering these loans in fiscal 1995 and has since built up
considerable expertise in appraising intellectual property rights.

29

patents cannot be used as collateral before they have been filed for approval）

loans secured by intellectual property rights, such as patents andFostering ventures originating in universities
Tohoku Incubation Investment Limited Partnership
DBJ invested in the Tohoku Incubation Investment Limited
Partnership, a fund aiming to develop the seeds of new businessapplications for cutting-edge technology and the revitalization of,Japan s communities. DBJ will remain actively involved inat universities in the Tohoku region. The fund identifies promisingcreating and fostering new markets in this way.

fledgling technologies, particularly in the IT, nanotechnology, newmaterials, biology and advanced medical and welfare fields, thathave been developed at universities and research institutions in

Hands-on Investment
In

Hands-on Investment , the investor is closely involved in the

Tohoku. In this hands-on incubation fund, private-sector fundmanagement of the target company. The investor directs business

managers with strong expertise provide business advice to theplanning and financing by appointing executives.

companies that the fund invests in, thus supporting the launch of

Incubation fundventure companies originating at universities.

（ Primarily participation in business planning from the seed start-up,
stage）An investment fund that aims to foster the company s growth

DBJ invested in this fund to support the development of practicaland enhance its corporate value with hands-on investment andmanagement guidance.

Tohoku Incubation Investment Limited Partnership

General Partner（GP）

Limited Partner（LP）

Tohoku Innovation Capital

DBJ

Fund manager

Arranger, large LP

Equity participation

Equity participation

Regional financial institutions, private-sector companies,
local government bodies, Tohoku Economic Federation
Equity participation

Tohoku Incubation Investment Limited Partnership
Fund based on Small and Mid-size Limited Partnership Act for Investment

Equity participation and business advice from fund managers

Venture company

Venture company

Venture company

Human resources, technology, joint research
Universities and other organizations●Agreements on cooperation and collaboration
DBJ has signed a number of agreements with universities to form a

Collaboration with and support for universities

basis for cooperation and support.
・Academic Interaction Agreement, signed with the Graduate Schoolof Economics, Ritsumeikan University（April 15, 2005）

Universities play an important role in generating a talented workforce and・Agreement on comprehensive affiliation with Kyushu University

outstanding research results. DBJ supports and collaborates with

（September 30, 2004）

universities by offering lectures and courses, while also supporting・Agreement on academic, business and governmental affiliation

affiliations between academia, business and government.
Given the changes that universities are facing, such as the recent
incorporation of national universities, it is essential that they are managed

concluded with Tohoku Fukushi University, Sendai City and Sendai
City Industrial Promotion Organization（August 31, 2004）
・Agreement on comprehensive affiliation with Hokkaido University

efficiently and have a sound financial foundation and adequate facilities.

（July 21, 2004）

DBJ will work with universities and support their efforts by sharing the・Agreement with Iwate University and the Bank of Iwate, andknowledge and expertise in new financing methods that it has built up as aestablishment of the Iwate Conference on Promoting Affiliations

policy-based financial institution.

between Industry and Academia（Liaison Ⅰ）（May 28, 2004）
・Agreement on mutual exchange concluded with Kanazawa
University Technology Licensing Organization（April 1, 2004）
・Agreement concluded with Ritsumeikan Asia Pacific University（January 16, 2004）

30

Strengthening local technological foundations
Hamamatsu Photonics K.K.

Daito Co., Ltd.

Hamamatsu Photonics developed practical applications for ahigh-powered semiconductor laser using proprietary technology

Efficient snow removal and snow melting are major issues for,
Sapporo, the coldest and snowiest of Japan s major cities.

for refrigeration and light concentration created after long years

In light of these conditions, Hokkaido Technology Licensingof research and development. The laser can be used in a broad

Office Co., Ltd. worked with universities in Hokkaido to develop a

range of sectors and is expected to add new value to Japanese

steam-jet snow melting system, then patented the technology

industry.

and transferred it to Daito Co., Ltd. Daito succeeding in

Developing applications for this high-powered semiconductor

commercializing the technology.

laser was a pioneering venture, and was also extremely risky in

DBJ provided loans for the technology transfer andterms of establishing the manufacturing line, maintaining the yieldcommercialization project, helping to ensure the safety andrate and predicting demand.

comfort of daily life during the winter season and promoting
affiliations between industry and academia.

31

DBJ will assist in the creation of new industries through conti-

DBJ will continue to provide a support that promotes thenued support for companies that take up these challenges.

development of new businesses suited to local needs.

Space technology R&D project
Galaxy Express Corp.
,
This project is Japan s first joint public-and private-sector venture
in rocket development. The two-stage liquid fuel rocket underdevelopment uses an engine fueled by liquid natural gas ー thedevelopment is intended mainly for commercial launches and will

first such commercial use in the world. Denser and less costly,
than the conventional liquid hydrogen, LNG enables the rocket s

have the capacity to launch 2-ton satellites into a sun-body to be smaller and lighter in weight.

synchronous orbit at an altitude of 800km.

Owing to massive development costs and a long investment

Space technology is expected to be at the core of the next,
generation technologies which will be vital to Japan s national

recovery period, rocket development is generally a high-risk

interests. With a major trickle-down effect for the manufacturing

term loans.

venture. DBJ is helping to facilitate this project through its long-industry, it will promote both the accumulation and developmentof technology by domestic manufacturers. The rocket planned for

Rendering, courtesy of JAXA & Lockeed Martin.

32

Business Areas

DBJ’s Business Areas and Fiscal 2005 Investment and Loan Plan
Business Areas and Fiscal 2005 Investment and Loan Plan
In fiscal 2005, DBJ’s activities focused on the following three main areas:
1. Community development
2. Environmental conservation and sustainable societies
3. Creation of new technologies and industries
In order to promote investment in these areas, DBJ focuses on investment and loan activities,
conducting surveys and research and providing information in support of policy proposals andproject formulation.
Community Development• Implementing nationwide infrastructure building including transportation, distribution, andinformation networks• Carrying out revitalization using the private finance initiative (PFI) and public and private sector
partnership (PPP) methods for local redevelopment projects and cities in each region, andpromoting infrastructure building from the perspectives of both large regions and individual
communities• Promoting businesses that contribute to new employment and industries that are characteristic ofeach region
Environmental Conservation and Sustainable Societies• Working toward a sustainable, recycling-oriented society by strengthening initiatives to promote
environmental protection and ensure energy security along with economic development• Actively addressing social welfare and disaster prevention as next-generation policy issues, inorder to create a solid social infrastructure and ensure a safe and secure way of life in the face ofa declining birthrate and an aging population
Creation of New Technologies and Industries• Promoting technology development as a global social asset with a huge carry-over effect to everysocial and lifestyle area, as part of next-generation economic development• Using advanced finance methods to stimulate economic growth through business and industrial
redevelopment.

33

(billions of yen)
Fiscal Year
2002

2003

2004

(Reference)
Fiscal 2004
year-end balance

379.6

416.0

293.0

2,010.7

Economic structural reform

349.7

400.3

273.1

1,756.5

Development of intellectual infrastructure

29.8

15.7

19.8

254.2

253.2

275.5

369.6

3,577.4

Development of regional social infrastructure

147.4

182.4

164.0

2,233.0

Revitalization of regional economies

105.8

93.0

205.5

1,344.3

Environmental conservation and sustainable societies

573.3

448.1

453.0

8,148.3

Environmental protection, energy,
disaster prevention, and welfare measures

269.9

252.1

234.1

4,289.0

Transport and distribution networks

176.7

186.2

206.8

3,321.4

Telecommunication networks

126.7

9.7

12.0

537.8

1,206.2

1,139.7

1,115.6

13,736.5

55.7

43.3

32.3

584.0

Total

1,262.0

1,183.1

1,148.0

14,320.6(of which capital subscription)(101.8)(61.6)(58.7)(304.2)

Debt guarantees

2,272.2

15.4

23.3

1,962.6

Item
Structural reform and economic revitalization

Community development

Sub-total
Improvement of social capitalBusiness Areas■ Loans and Investments by Fiscal Year

Notes: 1. Investment and loan categories were revised effective fiscal 2005. Investment and loan amounts in fiscal
2002 and 2003 were adjusted for convenience to conform to fiscal 2004 categories.
2. Investment in funds is based on the agreement amount.
3. For fiscal 2002, the figures include ¥81.6 billion corresponding to the business activities of the former
Hokkaido-Tohoku Development Finance Public Corporation, ¥3.1 billion corresponding to the former lending
business of the Japan Regional Development Corporation, and ¥17.7 billion corresponding to the former
lending business of the Japan Environment Corporation.
4. For fiscal 2003, the figures include ¥63.7 billion corresponding to the business activities of the former
Hokkaido-Tohoku Development Finance Public Corporation, ¥0.5 billion corresponding to the former lending
business of the Japan Regional Development Corporation, and ¥11.5 billion corresponding to the former
lending business of the Japan Environment Corporation.
5. For fiscal 2004, the figures include ¥59.1 billion corresponding to the business activities of the former
Hokkaido-Tohoku Development Finance Public Corporation, and ¥16.6 billion corresponding to the former
lending business of the Japan Environment Corporation.
6. The fiscal 2004 year-end balance does not include ¥36.0 billion in stock from the Tomakomai East
Development Corporation and the Mutsu Ogawara Development Corporation.
7. Debt guarantees in fiscal 2002 include ¥21.0 billion in debt guarantees for borrowings, etc., from privatesector 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.

34

Business Areas

Features of the Fiscal 2005 Investment and Loan Plan
Fiscal 2005 Investment and Loan AmountIn keeping with the reform of special public (Reference) Comparison of Fiscal 2005 Investment and
Loan Plan and Initial Amounts Planned
corporations, DBJ plans to invest or lend a total
in Recent Years(billions of yen)of ¥1,168.0 billion in fiscal 2005, which is ¥10
Comparison
withbillion less than in the initial plan determined in
Fiscal year Initial amount planned
fiscal 2000 planfiscal 2004. These outlays are part of an effort--2,230.0
2000
to provide financing in cooperation with1,600.0
2001▲ 630.0
private-sector financial institutions in areas
1,200.0
2002▲ 1,030.0
critical to the achievement of national economic
1,178.0
2003▲ 1,052.0
and fiscal policies on regional economies, the1,178.0
2004▲ 1,052.0
environment, technology, and other issues.
1,168.0
2005▲ 1,062.0
Accordingly, the balance of loans is expected to
decline by about ¥5.0 trillion compared to thefigure at the time of DBJ’s founding (from ¥18.8
trillion at the end of March 2000 to an
estimated ¥13.8 trillion at the end of March 2006).

Decrease in Borrowing from the Fiscal Loan Fund andMarketization of Procurement
DBJ decreased its borrowings from the Fiscal Loan Fund by ¥9 billion compared to the initial fiscal
2004 plan, to ¥568 billion (a decrease of approximately ¥1 trillion compared to the initial fiscal
2000 plan) and accordingly reduced its dependence on the Fiscal Loan Fund to an investment andloan level of 50%. On the other hand, DBJ plans to issue ¥240 billion in Fiscal Investment and
Loan Program (FILP) agency bonds, as in fiscal 2004, so that the Bank can raise funds
independently. As a result, capital raised in the market (FILP agency bonds, government guaranteedbonds, and foreign bonds) will make up 46.3% of the funds raised externally in fiscal 2005,
excluding capital contributions.

Clarifying Initiatives for Three Priority Areas
In light of economic and financial policies developed by the government of Japan, DBJ continued toclarify pressing policy issues regarding regional economies, the environment, and technology, andprioritized the relevant investment and loan programs. Particular emphasis was placed on the
support measures below.

35

Business Areas

Contributions to Community Development• Employment creation initiatives
In addition to creating a support system for core regional businesses that contribute to theemployment of young people, DBJ extended the period of preferential treatment forbusinesses that help to expand employment opportunities in under-populated anddisadvantaged regional economies.
• Community renewal and tourism promotion initiatives based on regional characteristics
To promote community renewal focusing on landscapes and streetscapes, DBJ enhanced its
support for the construction of accommodation facilities to help bring in outside visitors. The
Bank also expanded its criteria for loan eligibility to include structures important for scenic
beauty under the Landscape Protection Law.
• In cooperation with local financial institutions, DBJ established a new system to provide
financing necessary to maintain credit payments for accounts receivable or payable inongoing transactions between regional companies.
• DBJ extended the deadline for an investment system administered in cooperation with
regional financial institutions to help rationalize and streamline regional medium-sizedcompanies.
• DBJ created a low-interest, limited-time financing system for terrestrial digital broadcastingand is taking appropriate measures for its promotion.
• Manufacturing businesses that utilize technology developed to take advantage of local
resources in cold-winter regions were made eligible for DBJ financing.
Initiatives for Environmental Conservation and Sustainable Societies• By focusing on a major government initiative, the Global Warming Mitigation Master Plan,
DBJ created a new system to assist all kinds of businesses that contribute to the prevention of
global warming.
• DBJ created a system that supports comprehensive measures for energy saving.
• DBJ expanded the scope of eligibility for interest rates based on an environmental scoring
system to include individual businesses that contribute to environmental efforts.
• DBJ improved support measures for companies that supply high-quality petroleum with low
sulfur content for environmental reasons.
• DBJ worked to ensure public safety and security through the promotion of disasterprevention.
After the major destruction caused by earthquakes in the Tokai, Tonankai, and Nankai
regions of Japan, DBJ improved it support measures for businesses that contribute to disasterprevention through means such as the earthquake-resistant reinforcement of buildings andharbors.
Promotion of Economic Revitalization through Technological Advancement• Industrial promotion through new industry creation and new technology development
・DBJ improved support measures for businesses with a significant potential to create
employment and technology in the seven priority fields relating to the new industry creation
strategy: (1) fuel cells, (2) home IT devices, (3) robots, (4) content, (5) health and welfare
devices and services, (6) environment and energy devices and services, and (7) businesssupport services.
・The deadline was extended for special interest rates on new technology.
• Further improvement of market-type indirect financing functions to generate economic revitalization
DBJ has extended loan eligibility to include securitization services by financial institutions.
Another means by which it is promoting market-type indirect finance transactions is throughthe broad undertaking of syndicate loans with attention to company-generated cash flow.
• Support measures for the use of information technology to a ensure safe and secure society
DBJ extended eligibility to businesses that, through the use of electronic tags and othermeans, improve product safety and consumer confidence through dedicated quality andproduct management from production to distribution.

36

Business Areas■ Fiscal 2005 Investment and Loan Plan and Examples of Target Businesses in Each Field(billions of yen)
Initial amount
Community Development

Chief loan targets (examples)

549
140

Strengthening of regional competitiveness,encouragement of cold-winter region business activities,
employment promotion

Development of regional social infrastructure170

Regional revitalization, urban redevelopment, improvementof social capital using private finance initiatives (PFI),
promotion of the privatization of public enterprises, urban
renewal projects, support for community renewal based on
local character

Creation of broad regional networks

239

Construction of core transportation networks, air transportsystems, and information and telecommunication networks

Revitalization of regional economies

Environmental Conservation and Sustainable Societies

300

Environmental protection, energy,
disaster prevention and welfare measures

300

Creation of New Technologies and Industries

300

Promotion of environmentally friendly management using
environmental scoring, promotion of businesses utilizing the
Kyoto mechanisms, energy and security measures,development of new energy sources, urban flood control
businesses

Advanced technology andeconomic revitalization

45

New technology development, new industry creation,
revitalization

Creation of socio-economic infrastructure

255

Business and industry rehabilitation, facilitation of access toJapan, creation of systems for improved product reliability
support for security measures

1,149

Sub-total
Promotion of social capital creation

1,168

Total

Procurement

19

Fiscal Loan Fund

848

(FILP borrowing portion)(568)(Government-guaranteed bond(domestic bond) portion)(60)(Government-guaranteed bond(overseas bond) portion)(190)

Self financing

320(FILP agency bond portion)(240)

Note: The initial fiscal 2005 plan includes the following business activities:¥120.4 billion for the former Hokkaido-Tohoku Development Finance Public Corporation, ¥9.4 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.

37

The investment of foreign capital in Japan
facilitates the exchange of advanced
technology and knowledge, creates jobs, andvitalizes the Japanese economy.
DBJ’s Department for International Affairs
and its Overseas Representative Offices
support inward investment that brings thebenefits of globalization to Japan’s regional
economies. This is done in a variety of ways:
information provided through seminars
and in reports issued by the Overseas
Representative Offices; consulting services forcorporate investment plans; and allianceswith regional public institutions andorganizations.

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 in
Japan

Business Areas

Efforts to promote investment in Japan and bring the benefits ofglobalization to Japan’s regional economies

Case study: SENDAI-FINLAND Wellbeing Center ProjectThis project aims at introducing IT-based health and welfare equipment commonly used in Finland
to Japan’s nursing homes. The goal is to create a new type of elder care business that provides anenvironment in which the elderly can live independently within a community. Special homes for theelderly and R&D facilities, the core of the project, were opened at the end of fiscal 2004. The projectis particularly notable for the alliances and cooperation created between Finland and theadministration, academic organizations and private companies of Sendai City. Requests forcooperation from the Finnish government resulted in DBJ’s supporting this project from its initialstage through completion.

Special home for the elderly

R&D center

38

Business Areas

International Cooperation Activities
Significance of International Cooperation
People in developing countries, especially in Asia, are becoming aware of the importance of soundpolicy-based financing and development finance in addressing economic development challenges thatcannot be met adequately by private-sector finance. Official development assistance organizations,related government agencies, and international development finance organizations ask DBJ for
intellectual cooperation that draws on the experience, knowledge, and domestic network built up by
the Bank in the process of assisting in Japan’s postwar economic growth.
To meet these needs, DBJ has held a Developmental Finance Course in Tokyo each 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 bases its international cooperation on high-quality training courses, surveys, and otherprograms which serve recipients while enhancing Japan’s presence in the international community.
■ Principal organizations participating in training and locations of local training

39

While addressing the theme of the global environment and sustainable development in the area ofdevelopment finance education, DBJ engaged in a diverse debate concerning the role to be playedby financial institutions in sustainable development. The Bank held lectures and workshops on
topics pertaining to small and medium enterprise promotion and bank management, which arecommon issues for the four Southeast Asian countries of Cambodia, Laos, Myanmar, and Vietnam(the “CLMV nations”) participating in its training program for nations transitioning to a market
economic system.
DBJ has carried out surveys in cooperation with numerous development assistance institutions andgovernment agencies, including the CLMV Industrial Cooperation Programs; provided economic
policy support for Laos and Cambodia; and mapped out Economic Development Strategies for the
Nations of the Mekong Basin: The Possibilities and Limits of Market Economy Transition, which
addresses the economic, industrial, and development issues of the CLMV nations. Separate
opportunities were created for the discussion of shared policy issues with Kreditanstalt fürWiederaufbau (the German Development Bank) and the China Development Bank.

Business Areas

Status of Fiscal 2004 Activities■ 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

Publishing and PR activities

Discussions on the environmental protection programs ofnational development banks.

40

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

Optimal Operations Management Frameworkoutlined below. The Bank works to manage the various risks associated with being afinancial institution and to earn and keep 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

Operation Management Cycle
Preparation and Publication of Investment and Finance Guidelines based on
the Medium-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
The Management Council is comprised of outside experts, assembled in accordance with Article 24of the Development Bank of Japan Law. Council members examine the status of operations inrelation to items stated in the Bank’s Medium-Term Policy Principles. The results of thisexamination are published with a view to enhancing transparency.
Management Council Profile
Membership :Maximum of eight members
Appointment :Scholars and other experts, appointed by the DBJ governor and subject toapproval by the Minister of FinanceTerm of office :Four years
Chair :
Designated by the Governor; presides over council affairs
Management Councilors (As of the end of June 2005. *indicates the Chairman)
Satoru Kishi
Senior Advisor, The Bank of Tokyo-Mitsubishi, Ltd.
Shigeru Morichi
Professor, National Graduate Institute for Policy Studies
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
Advisor, Niimura Law Office
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 2004)
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.

41

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

Publication

Investment and
Finance Guidelines (annual)

Reviews and reports 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

Execution of investments
and loans

Do

Operations Evaluation

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

As with national and local public bodies, DBJ is required to undertake proactive reform to ensureaccountability and improve operations management. The operations evaluation system wasintroduced to achieve this end.
Mechanism for operations evaluation
DBJ conducts its operations in line with the Medium-Term Policy Principles formulated by thecompetent ministers. The law 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 its deliberations. The operations
evaluation mechanism assesses individual investment and loan proposals (individual proposals) as
well as the internal investment and loan system, and 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 (anassessment of the policy significance of individual proposals); (2) evaluation of the investment andloan system (an assessment of its effectiveness); (3) evaluation of projects (a detailed evaluation of
specific proposals); and (4) compilation of the results in an Operations Evaluation Report(comprehensive evaluation) and release of the report after notification of the Management Council.
To ensure optimal functioning of the evaluation system, DBJ has established the Operations
Evaluation Office as an internal organization dedicated to ensuring that internal evaluations
generate accurate results. There is also a committee consisting of scholars and other experts toprovide suggestions on improving the system.

42

Optimal Operations Management Framework■ Evaluation System
External evaluation

Management Council
ReportingInternal evaluation

Finance Planning &Coordination Department

Overall evaluation
Summary of the evaluation results obtained, as described below

Finance Planning &Coordination Department

Supervisory departments (Note)

Re-evaluation

Investment and loan system evaluation

Individual project evaluation,plus checking of balance andlogical consistency with theinvestment and loan system

Compilation of individual project
evaluations for each investment andloan system, and application ofthese to the systems’ improvement

Department

Investment and loan offices

Project evaluation

Individual project evaluation

Evaluation of details for projects
where there are diverse investment
and loan roles and policy results,
including large-scale projects

Evaluation of individual target businesses for investment and loans
Preliminary evaluation: Investment and loan stage
Follow-up evaluation: After the start of operation and management of
the target business

Finance Planning &Coordination Department,etc
Evaluation offinancial soundness

Sections performing internal evaluations within DBJ【Note】 Supervisory departments: Sections that are in charge of drafting policies and plans for investment and loans foreach investment and loan system. For example, the Department for Urban Development is the supervisory department for the investment andloan system dealing with urban development.

Evaluation perspectives
・Policy aspects of target business:
Whether or not the target business for an investment and loan can actually realize the policy objectives; what kind of validity it
has for the people of Japan and local residents; and what level of results can be achieved
・Role of investment and loans:
Whether DBJ investment and loans continue to be based on the principles of supplementing and encouraging investment by theprivate sector, and what kind of role they play at the time of a target business’s implementation

Internal Management System
The DBJ budget is submitted to the Diet for approval each year. Diet approval is also required forthe bank’s financial statements. Overall operations are reviewed by the Board of Audit, theMinistry 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 internal management.

Legal Compliance System
DBJ regards the formulation of a legal compliance system as one of management’s most importanttasks in fulfilling the Bank’s social mission and responsibilities as a policy-based financial
institution. The Bank is currently undertaking the following organization-wide efforts.
Development of a compliance system
DBJ has established a general risk management committee to deliberate on compliancematters, as well as to ascertain the extent to which compliance is practiced and discuss
improvements to the Bank’s internal system. In addition, compliance officers in eachdepartments and branch office are responsible for verifying their section’s compliance,
reporting on compliance-related matters and serving as liaisons.
Internal dissemination of compliance information
DBJ has prepared a Compliance Manual containing specific behavior guidelines for ensuring
compliance. The manual, which also includes related laws and regulations, is distributed toall executives and employees. The Bank also holds training seminars and briefings in an effort
to thoroughly educate all executives and employees about basic matters related to internal
compliance.
Formulation of compliance programs
DBJ formulates detailed compliance programs for each fiscal year. These “action plans” areadopted after discussion by the Compliance Committee.
43In order to ensure appropriate management of individual risk categories, DBJ has developed an
asset/liability and risk management system that clarifies which department is responsible for eachtype of risk. The Finance Planning & Coordination Department is in charge of overseeing
comprehensive asset/liability and risk management activities. The ALM Committee, consisting ofexecutives and the 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 a deterioration in the financial condition of the borrower. Credit
risk management requires credit management of individual loans as well as bank-wide
portfolio management.
• Credit administration of individual loans
When making an investment or loan, DBJ examines the primary entity’s project viability
and profitability from a fair and neutral standpoint, in addition to considering the project’s
policy significance and benefits. Loan amounts are determined according to an internalrating system. DBJ is not subject to the Banking Law or the Law concerning Emergency
Measures for the Revitalization of the Functions of the Financial System (Financial
Revitalization Law), but carries out independent asset assessments in line with the SelfAssessment Criteria based on the Financial Services Agency’s Financial Inspection Manual.
The results of self-assessments are subject to an audit by an auditing corporation inaccordance with the Practical Guidelines for Verifying Internal Regulations Covering the
Self-Assessment of Assets by Banks and Other Financial Institutions and for Auditing Bad
Debt Write-offs and Bad Debt Reserves (Fourth Report of the Special Committee on Bank
Auditing of the Japanese Institute of Certified Public Accountants).
• Portfolio management
DBJ reports to the ALM Committee on the internal ratings, the results of the self-assessment,
and the status of unexpected losses. Thorough monitoring and consideration of countermeasures
allows DBJ to control risk and devise effective measures to improve risk return.
Market risk
Market risk can be broadly classified into interest rate risk and exchange risk. DBJ takes thefollowing 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. A portion of theinterest rate risk associated with lending operations is covered 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 derives from the extension of foreign currency loans and the issuing of
foreign currency bonds. DBJ uses currency swaps to hedge this risk. The Bank manages
counterparty risk in swap transactions (the risk that the counterpart in the swap transaction
will be unable to fulfill its obligations) by continually monitoring the creditworthiness of allparties to swap transactions and by diversifying transactions among several institutions.
Liquidity risk
As its main method of acquiring funds, DBJ relies on the stable procurement of long-term
funds from the government’s Fiscal Investment and Loan Program (FILP), governmentguaranteed bonds, and FILP agency bonds, rather than on short-term funds such as deposits.
To meet unexpected short-term funding requirements, funds on hand are placed primarily inshort-term investments, taking security and liquidity into consideration. Overdraft lines ofcredit have been established with multiple private financial institutions. DBJ also maintains
daytime liquidity by using the Bank of Japan’s Real Time Gross Settlement (RTGS), whereby
settlements are made instantly for each transaction. Every effort is made to ensure that
settlement conditions are managed appropriately.

Optimal Operations Management Framework

ALM and Risk Management System

44

Optimal Operations Management Framework■ Asset/Liability and Risk Management System
Audit and Inspection
Auditors

Governor
Operations Audit Committee

Board of Directors

Internal Audit andInspection Department
ALM Committee

Finance Planning & Coordination Department

Credit Analysis Department

Credit Risk Management Department

Treasury Department

Investment and Loan Departments and Branches

Operational Risk Management
Operational risk refers to the risk of sustaining losses resulting from employees neglecting toperform their duties correctly or from accidents, fraud, and so forth. To reduce or prevent
operational risk, DBJ prepares manuals, performs mutual checks on administrative procedures,provides education and training, and employs computer systems to reduce the burden of
administrative duties.

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 that the ongoinggrowth of networks, among other factors, is making systems risk management ever more importantfor financial institutions. 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 a uniform Information Security Policy to ensure the security of 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 basic policies for system risk 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 to be responsible for implementing security
measures in each department and branch office.

45

Independent from other management and operational departments, internal audits comprise aseries of processes involving not only a comprehensive and objective evaluation of theorganization’s internal management conditions, but proposals and follow-up measures to improve
the issues identified.
As a policy-based financial institution of the Japanese government, DBJ must fulfill a social mission
through its operations; as a financial institution, it must also maintain its fiscal soundness.
Therefore, internal audits are essential if the Bank is to secure proper internal management and deal
with the increasing diversity and sophistication of its operations.
To facilitate this process, DBJ has established an Internal Audit Department and an Inspection
Department under the direct supervision of the DBJ Governor and independent from theoperational departments. This department performs internal auditing and inspections in order toensure effective and efficient risk management, reliable financial reports, and compliance with laws
and regulations. Specifically, the department verifies the appropriateness and effectiveness ofoperations management with respect to risk management and to compliance with laws andregulations. This is done through onsite audits and inspections. Verification is also made ofcalculation procedures for assets self-assessment and allowance for loan losses.
Under the Bank’s fair and appropriate internal audit system, the Governor determines the basic
policy for auditing and inspection plans based on consultation with the Board of Directors, andimportant matters relating to audit, inspection and internal audit results are reported to theGovernor after discussion with the Operations Audit Committee.

Optimal Operations Management Framework

Internal Audit Systems■ Internal Audit System

Governor

Board of Directors

Operations Audit Committee

Internal Audit and Inspection Department

Risk management; investment and loan departments / offices

46

Optimal Operations Management Framework

Disclosure
DBJ strives to conduct proper information disclosure in order to ensure that all interested parties
can accurately determine the condition of the Bank. Information available for disclosure may beobtained from DBJ’s head office.
Materials legally required for disclosure
Balance sheets (June and November)Operation report (July)
Financial statements (August)Administrative costs report (June)
Principal information disclosed
Disclosure report (July)
Annual Report (August)Bank profile brochure
Bond report, based on the financial report (June and December)(Months in parentheses indicate the issue dates)

Website Information
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/

Top page

Investor relations

47