|  As filed with the Securities and Exchange Commission on September 28, 2010 |
|----------------------------------------------------------------------------------|

|  ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|--------------------------------------------------------------------------------------------------|

| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|--------------------------------------------------------------------------------------|

|  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------------|

|  ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|---------------------------------------------------------------------------------------------|

| Title of Each Class |                    | Name of Each Exchange On Which Registered |
|---------------------|-------------------------|-------------------------------------------|
| Common Stock        | The NASDAQ Stock Market |

----

| PART I                                                                                 |  2   |
|----------------------------------------------------------------------------------------|-----------|
| Item 1. Identity of Directors, Senior Management and Advisers.                         | 2         |
| Item 2. Offer Statistics and Expected Timetable.                                       | 2         |
| Item 3. Key Information.                                                               | 2         |
| Item 4. Information on the Company.                                                    | 13        |
| Item 5. Operating and Financial Review and Prospects.                                  |   29 |
| Item 6. Directors, Senior Management and Employees.                                    | 57        |
| Item 7. Major Shareholders and Related Party Transactions.                             | 61        |
| Item 8. Financial Information.                                                         | 63        |
| Item 9. The Offer and Listing.                                                         | 63        |
| Item 10. Additional Information.                                                       | 65        |
| Item 11. Quantitative and Qualitative Disclosures about Market Risk.                   | 74        |
| Item 12. Description of Securities Other than Equity Securities.                       | 74        |
|                                                                                   |      |
| PART II                                                                                | 76        |
| Item 13. Defaults, Dividend Arrearages and Delinquencies.                              | 76        |
| Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds. | 76        |
| Item 15. Controls and Procedures.                                                      | 76        |
| Item 16A.Audit Committee Financial Expert                                         | 78        |
| Item 16B.Code of Ethics.                                                          | 78        |
| Item 16C.Principal Accountant Fees and Services.                                  | 78        |
| Item 16D.Exemptions from the Listing Standards for Audit Committees.              | 79        |
| Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers.  | 80        |
| Item 16F.Change in Registrant's Certifying Accountant.                            | 80        |
| Item 16G.Corporate Governance.                                                    | 80        |
|                                                                                   |      |
| PART III                                                                               | 81        |
| Item 17. Financial Statements.                                                         | 81        |
| Item 18. Financial Statements.                                                         | 81        |
| Item 19. Exhibits.                                                                     | 82        |

----

| ·   | that we may not be able to achieve or sustain profitability in the near future, |
|--------------------|---------------------------------------------------------------------------------|

| ·   | that we may not be able to compete effectively against competitors which have greater financial, marketing and other resources, and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | that our investments in our subsidiaries and affiliated companies may not produce the returns that we expect or may adversely affect our results of operations and financial condition. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

PART 

Item 

Item 

Item 

----

|                                                                                                                  |   | As of and for the fiscal year ended March 31,    |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                                                                  |   | 2006                                             |   |   | 2007 |   |   | 2008 |   |   | 2009 |   |   | 2010 |   |   | 2010 |   |
|                                                                                                                  |   | (millions of yen, except per share and ADS data) |   |   |   |   |   | (thousands of U.S. dollars, except per share and ADS data (1) ) |   |
| Statement of Income Data:                                                                                             |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| REVENUES:                                                                                                             |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Connectivity and outsourcing services:                                                                                |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Connectivity services (corporate use)                                                                                 |   | ¥                                           | 11,179 |   |   | ¥ | 11,239 |   |   | ¥ | 12,149 |   |   | ¥ | 13,142 |   |   | ¥ | 13,847 |   |   | $ | 148,256 |   |
| Connectivity services (home use)                                                                                      |   |                                             | 2,120  |   |   |   | 1,969 |   |   |   | 5,430 |   |   |   | 6,538 |   |   |   | 6,854 |   |   |   | 73,386 |   |
| Outsourcing services                                                                                                  |   |                                             | 9,924  |   |   |   | 11,145 |   |   |   | 13,724 |   |   |   | 15,396 |   |   |   | 16,271 |   |   |   | 174,210 |   |
| Total                                                                                                                 |   |                                             | 23,223 |   |   |   | 24,353 |   |   |   | 31,303 |   |   |   | 35,076 |   |   |   | 36,972 |   |   |   | 395,852 |   |
| Systems integration:                                                                                                  |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Systems construction                                                                                                  |   |                                             | 12,296 |   |   |   | 16,660 |   |   |   | 18,021 |   |   |   | 14,658 |   |   |   | 11,354 |   |   |   | 121,559 |   |
| Systems operation and maintenance                                                                                     |   |                                             | 11,209 |   |   |   | 13,867 |   |   |   | 15,993 |   |   |   | 18,989 |   |   |   | 18,717 |   |   |   | 200,396 |   |
| Total                                                                                                                 |   |                                             | 23,505 |   |   |   | 30,527 |   |   |   | 34,014 |   |   |   | 33,647 |   |   |   | 30,071 |   |   |   | 321,955 |   |
| Equipment sales                                                                                                       |   |                                             | 3,085  |   |   |   | 2,175 |   |   |   | 1,514 |   |   |   | 985 |   |   |   | 756 |   |   |   | 8,100 |   |
| ATM operation business                                                                                                |   | -                                                |   |   | - |   |   |   | 4 |   |   |   | 23 |   |   |   | 207 |   |   |   | 2,213 |   |
| Total revenues                                                                                                        |   |                                             | 49,813 |   |   |   | 57,055 |   |   |   | 66,835 |   |   |   | 69,731 |   |   |   | 68,006 |   |   |   | 728,120 |   |
|                                                                                                                  |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COST AND EXPENSES:                                                                                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of connectivity and outsourcing services                                                                         |   |                                             | 20,078 |   |   |   | 20,545 |   |   |   | 26,040 |   |   |   | 29,318 |   |   |   | 30,533 |   |   |   | 326,914 |   |
| Cost of systems integration                                                                                           |   |                                             | 18,120 |   |   |   | 23,529 |   |   |   | 25,526 |   |   |   | 25,543 |   |   |   | 21,904 |   |   |   | 234,515 |   |
| Cost of equipment sales                                                                                               |   |                                             | 2,818  |   |   |   | 1,894 |   |   |   | 1,300 |   |   |   | 863 |   |   |   | 649 |   |   |   | 6,952 |   |
| Cost of ATM operation business                                                                                        |   | -                                                |   |   | - |   |   |   | 17 |   |   |   | 422 |   |   |   | 964 |   |   |   | 10,320 |   |
| Total cost                                                                                                            |   |                                             | 41,016 |   |   |   | 45,968 |   |   |   | 52,883 |   |   |   | 56,146 |   |   |   | 54,050 |   |   |   | 578,701 |   |
| Sales and marketing                                                                                                   |   |                                             | 3,080  |   |   |   | 3,439 |   |   |   | 4,329 |   |   |   | 4,631 |   |   |   | 5,405 |   |   |   | 57,870 |   |
| General and administrative                                                                                            |   |                                             | 3,147  |   |   |   | 3,971 |   |   |   | 4,624 |   |   |   | 5,622 |   |   |   | 4,826 |   |   |   | 51,670 |   |
| Research and development                                                                                              |   |                                             | 159    |   |   |   | 177 |   |   |   | 240 |   |   |   | 415 |   |   |   | 313 |   |   |   | 3,352 |   |
| Total cost and expenses                                                                                               |   |                                             | 47,402 |   |   |   | 53,555 |   |   |   | 62,076 |   |   |   | 66,814 |   |   |   | 64,594 |   |   |   | 691,593 |   |
| OPERATING INCOME                                                                                                      |   |                                             | 2,411  |   |   |   | 3,500 |   |   |   | 4,759 |   |   |   | 2,917 |   |   |   | 3,412 |   |   |   | 36,527 |   |
|                                                                                                                  |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSES):                                                                                              |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                                                                       |   |                                             | 13     |   |   |   | 23 |   |   |   | 63 |   |   |   | 45 |   |   |   | 29 |   |   |   | 307 |   |
| Interest expense                                                                                                      |   |                                             | (437   | ) |   |   | (397 | ) |   |   | (438 | ) |   |   | (408 | ) |   | (306 | ) |   |   | (3,279 | ) |
| Other — net                                                                                                     |   |                                             | 3,392  |   |   |   | 1,923 |   |   |   | (22 | ) |   |   | (520 | ) |   |   | (276 | ) |   |   | (2,944 | ) |
| Other income (expenses) — net                                                                                   |   |                                             | 2,968  |   |   |   | 1,549 |   |   |   | (397 | ) |   |   | (883 | ) |   |   | (553 | ) |   |   | (5,916 | ) |
|                                                                                                                  |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN NET INCOME (LOSS) OF EQUITY METHOD INVESTEES |   |                                             | 5,379  |   |   |   | 5,049 |   |   |   | 4,362 |   |   |   | 2,034 |   |   |   | 2,859 |   |   |   | 30,611 |   |
| INCOME TAX EXPENSE (BENEFIT)                                                                                          |   |                                             | 257    |   |   |   | (804 | ) |   |   | (861 | ) |   |   | 1,002 |   |   |   | 1,132 |   |   |   | 12,121 |   |
| EQUITY IN NET INCOME (LOSS) OF EQUITY METHOD INVESTEES                                                                |   |                                             | (14    | ) |   |   | (210 | ) |   |   | (143 | ) |   |   | 35 |   |   |   | 159 |   |   |   | 1,707 |   |
| NET INCOME (2)                                                                                                        |   |                                             | 5,108  |   |   |   | 5,643 |   |   |   | 5,080 |   |   |   | 1,067 |   |   |   | 1,886 |   |   |   | 20,197 |   |
| LESS: NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS (2)                                                  |   |                                             | (354   | ) |   |   | (233 | ) |   |   | 97 |   |   |   | 352 |   |   |   | 348 |   |   |   | 3,723 |   |
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC (2).                                                         |   | ¥                                           | 4,754  |   |   | ¥ | 5,410 |   |   | ¥ | 5,177 |   |   | ¥ | 1,419 |   |   | ¥ | 2,234 |   |   | $ | 23,920 |   |

----

|                                                                         |   | As of and for the fiscal year ended March 31,    |    |
|------------------------------------------------------------------------------|--------|--------------------------------------------------|---------|
|                                                                         |   | 2006                                             |    |   | 2007 |   |   | 2008 |   |   | 2009 |   |   | 2010 |   |   | 2010 |   |
|                                                                         |   | (millions of yen, except per share and ADS data) |    |   |   |   |   | (thousands of U.S. dollars, except per share and ADS data (1) ) |   |
|                                                                         |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per Share and ADS Data (3):                                             |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic net income attributable to IIJ per share                               |   | ¥                                           | 24,301  |   |   | ¥ | 26,519 |   |   | ¥ | 25,100 |   |   | ¥ | 6,918 |   |   | ¥ | 11,030 |   |   | $ | 118 |   |
| Diluted net income attributable to IIJ per share                             |   |                                             | 24,258  |   |   |   | 26,487 |   |   |   | 25,072 |   |   |   | 6,917 |   |   |   | 11,030 |   |   |   | 118 |   |
| Basic net income attributable to IIJ per ADS equivalent                      |   |                                             | 60.75   |   |   |   | 66.30 |   |   |   | 62.75 |   |   |   | 17.29 |   |   |   | 27.58 |   |   |   | 0.30 |   |
| Diluted net income attributable to IIJ per ADS equivalent                    |   |                                             | 60.75   |   |   |   | 66.22 |   |   |   | 62.68 |   |   |   | 17.29 |   |   |   | 27.58 |   |   |   | 0.30 |   |
|                                                                         |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividends declared per share:                                           |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Japanese Yen                                                                 |   |                                             | -       |   |   | ¥ | 1,500 |   |   | ¥ | 1,750 |   |   | ¥ | 2,000 |   |   | ¥ | 2,250 |   |   |   |   |   |
| U.S. Dollars                                                                 |   |                                             | -       |   |   | $ | 12.76 |   |   | $ | 17.53 |   |   | $ | 20.17 |   |   | $ | 24.09 |   |   |   |   |   |
| Basic weighted average number of shares                                      |   |                                             | 195,613 |   |   |   | 203,992 |   |   |   | 206,240 |   |   |   | 205,165 |   |   |   | 202,544 |   |   |   |   |   |
| Diluted weighted average number of shares                                    |   |                                             | 195,955 |   |   |   | 204,244 |   |   |   | 206,465 |   |   |   | 205,195 |   |   |   | 202,544 |   |   |   |   |   |
| Basic weighted average number of ADS equivalents (thousands)                 |   |                                             | 78,245  |   |   |   | 81,597 |   |   |   | 82,496 |   |   |   | 82,066 |   |   |   | 81,018 |   |   |   |   |   |
| Diluted weighted average number of ADS equivalents (thousands)               |   |                                             | 78,382  |   |   |   | 81,698 |   |   |   | 82,586 |   |   |   | 82,078 |   |   |   | 81,018 |   |   |   |   |   |
|                                                                         |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet Data:                                                          |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                                    |   | ¥                                           | 13,727  |   |   | ¥ | 13,555 |   |   | ¥ | 11,471 |   |   | ¥ | 10,188 |   |   | ¥ | 8,764 |   |   | $ | 93,838 |   |
| Total assets                                                                 |   |                                             | 50,705  |   |   |   | 47,693 |   |   |   | 55,703 |   |   |   | 52,301 |   |   |   | 51,115 |   |   |   | 547,275 |   |
| Short-term borrowings                                                        |   |                                             | 4,555   |   |   |   | 6,050 |   |   |   | 9,150 |   |   |   | 7,350 |   |   |   | 4,450 |   |   |   | 47,644 |   |
| Current portion of long-term borrowings, including capital lease obligations |   |                                             | 4,994   |   |   |   | 3,243 |   |   |   | 3,456 |   |   |   | 3,272 |   |   |   | 2,730 |   |   |   | 29,226 |   |
| Long-term borrowings, including capital lease obligations                    |   |                                             | 5,271   |   |   |   | 4,318 |   |   |   | 4,738 |   |   |   | 4,866 |   |   |   | 3,658 |   |   |   | 39,161 |   |
| Common stock                                                                 |   |                                             | 16,834  |   |   |   | 16,834 |   |   |   | 16,834 |   |   |   | 16,834 |   |   |   | 16,834 |   |   |   | 180,234 |   |
| Total IIJ shareholders’ equity                                         |   |                                             | 20,222  |   |   |   | 20,112 |   |   |   | 24,981 |   |   |   | 25,169 |   |   |   | 27,320 |   |   |   | 292,501 |   |
|                                                                         |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Data:                                                              |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures, including capitalized leases (4)                       |   | ¥                                           | 4,762   |   |   | ¥ | 3,953 |   |   | ¥ | 6,078 |   |   | ¥ | 7,006 |   |   | ¥ | 5,584 |   |   | $ | 59,783 |   |
|                                                                         |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating margin ratio (5)                                                   |   |                                             | 4.8     |  % |   |   | 6.1 |  % |   |   | 7.1 |  % |   |   | 4.2 |  % |   |   | 5.0 |  % |   |   |   |   |
|                                                                         |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in):                                         |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating activities                                                         |   | ¥                                           | 6,559   |   |   | ¥ | 7,402 |   |   | ¥ | 4,538 |   |   | ¥ | 8,631 |   |   | ¥ | 9,621 |   |   | $ | 103,010 |   |
| Investing activities                                                         |   |                                             | 1,805   |   |   |   | (3,014 | ) |   |   | (5,444 | ) |   |   | (3,328 | ) |   |   | (3,788 | ) |   |   | (40,554 | ) |
| Financing activities                                                         |   |                                             | 39      |   |   |   | (4,560 | ) |   |   | (1,152 | ) |   |   | (6,573 | ) |   |   | (7,238 | ) |   |   | (77,494 | ) |

| (1)   | The U.S. dollar amounts represent translation of yen amounts at the rate of ¥93.40 which was the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York prevailing as of March 31, 2010. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The Company adopted the new guidance on noncontrolling interests under ASC 810 on April 1, 2009. ASC810 requires noncontrolling interest held by parties other than the parent be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parent's equity. ASC810 also requires changes in parent's ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for as equity transactions. Upon the adoption of ASC810, “Net income” in the consolidated statements of income now includes net income attributable to noncontrolling interests, which was previously referred to as “Minority interests” and deducted. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | IIJ conducted a 1 to 5 stock split effective on October 11, 2005. The per share data is calculated based on the assumption that the stock split was made at the beginning of the fiscal year ended March 31, 2006. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Further information regarding capital expenditures, including capitalized leases and a reconciliation to the most directly comparable U.S. GAAP financial measure can be found in the following page. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Operating income as a percentage of total revenues. |
|-----------------|-----------------------------------------------------|

----

|                                                  |   | For the fiscal year ended March 31, |   |
|-------------------------------------------------------|--------|-------------------------------------|--------|
|                                                  |   | 2006                                |   |   | 2007 |   |   | 2008 |   |   | 2009 |   |   | 2010 |   |
|                                                  |   | (millions of yen)                   |   |
|                                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures:                                 |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Acquisition of assets by entering into capital leases |   | ¥                              | 3,843  |   |   | ¥ | 2,665 |   |   | ¥ | 4,222 |   |   | ¥ | 4,015 |   |   | ¥ | 2,330 |   |
| Purchases of property and equipment                   |   |                                | 919    |   |   |   | 1,288 |   |   |   | 1,856 |   |   |   | 2,991 |   |   |   | 3,254 |   |
| Total capital expenditures                            |   | ¥                              | 4,762  |   |   | ¥ | 3,953 |   |   | ¥ | 6,078 |   |   | ¥ | 7,006 |   |   | ¥ | 5,584 |   |
|                                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| Fiscal year ended March 31, (1)                                                                                                                                                                                                                                                                                                                    |   | High   |   |   | Low    |   |   | Average(2) |   |   | Period-end |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|------------|--------|
| 2006                                                            |   | ¥ | 120.93 |   |   | ¥ | 104.41 |       |   | ¥ | 113.67     |   |   | ¥ | 117.48 |   |
| 2007                                                            |   |   | 121.81 |   |   |   | 110.07 |       |   |   | 116.55     |   |   |   | 117.56 |   |
| 2008                                                            |   |   | 124.09 |   |   |   | 96.88  |       |   |   | 113.61     |   |   |   | 99.85 |   |
| 2009                                                            |   |   | 110.48 |   |   |   | 87.80  |       |   |   | 100.85     |   |   |   | 99.15 |   |
| 2010                                                            |   |   | 100.71 |   |   |   | 86.38  |       |   |   | 92.51      |   |   |   | 93.40 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |       |   |   |       |   |   |   |   |   |
| Calendar year 2010                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |       |   |   |       |   |   |   |   |   |
| January                                                         |   | ¥ | 93.31  |   |   | ¥ | 89.41  |       |   | ¥ | 91.10      |   |   | ¥ | 90.38 |   |
| February                                                        |   |   | 91.94  |   |   |   | 88.84  |       |   |   | 90.14      |   |   |   | 88.84 |   |
| March                                                           |   |   | 93.40  |   |   |   | 88.43  |       |   |   | 90.72      |   |   |   | 93.40 |   |
| April                                                           |   |   | 94.51  |   |   |   | 92.03  |       |   |   | 93.45      |   |   |   | 94.24 |   |
| May                                                             |   |   | 94.68  |   |   |   | 89.89  |       |   |   | 91.97      |   |   |   | 90.81 |   |
| June                                                            |   |   | 92.33  |   |   |   | 88.39  |       |   |   | 90.81      |   |   |   | 88.49 |   |
| July                                                            |   |   | 88.59  |   |   |   | 86.40  |       |   |   | 87.50      |   |   |   | 86.43 |   |
| August                                                          |   |   | 86.42  |   |   |   | 84.10  |       |   |   | 85.37      |   |   |   | 84.10 |   |
| September (through September 24, 2010)                                                                                                                                                                                                                                                                                                             |   |   | 85.77  |   |   |   | 83.75  |       |   |   | 84.35      |   |   |   | 84.24 |   |

| (1)   | For December 2008 and prior periods, the exchange rate refers to the noon buying rate as reported by the Federal Reserve Bank of New York. For January 2009 and later periods, the exchange rate refers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | For fiscal years, calculated from the average of the exchange rates on the last day of each month during the period. For calendar year months, calculated based on the average of daily exchange rates. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | a decrease in revenues from our connectivity services because of lower unit prices per bandwidth and cancellation of large accounts, due, for example, to severe price competition or a decrease in volume charge revenue due to the decrease in volume of Internet traffic, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease in revenues from our outsourcing services if we fail to successfully differentiate our services from those of our competitors, if the service prices falls dramatically, due, for example, to severe price competition, or if we fail to provide our customers with competitive total network solutions, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease in revenues from systems operation and maintenance if we fail to successfully differentiate our technical skills from those of our competitors, if the average revenue per project decreases or if there are cancellation or scale-down of large accounts, due, for example, to severe cost down requirement, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease in systems construction revenues and lower margins if we fail to successfully differentiate our services from those of our competitors, if corporate customers put off or stop placing orders with us, if  the number of systems construction projects decreases, if the average revenues for each projects decreases, or if there are trouble or problems during the systems construction phase and that systems construction becomes unprofitable or incurs a loss, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in backbone costs due to increased volume of Internet traffic and tightened demands for leasing backbone lines, or a decline in the profitability of connectivity services if we contract for more capacity than we actually require to serve our customers, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in expenses and investments for network infrastructure, research and development, back-office systems and other similar investments which we may be forced to make in the future in order to remain competitive, or an increase in expenses relating to the leasing of additional equipment and an increase in amortization and depreciation or loss in disposal, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | failure to control personnel and outsourcing costs, especially in our systems integration, if personnel and outsourcing costs increase, or we fail to manage personnel and outsourcing resource effectively or fail to cover outsourcing costs by raising enough revenues from outsourced projects, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in SG&A costs, such as personnel expenses, advertising expenses and office rent related expenses, in conjunction with our expected or planned or continued business expansion, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the recording of an impairment loss as a result of an impairment test on the non-amorting intangible assets such as goodwill that are recorded related to any mergers and acquisitions, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the recording of an impairment loss on amortized intangible assets such as customer relationships that are recorded in connection with any mergers and acquisitions, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decline in the value and trading volume of our holding of available-for-sale securities from which we expect gains on sale, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | impairment losses on available-for-sale securities, nonmarketable equity securities and funds, |
|--------------------|------------------------------------------------------------------------------------------------|

| ·   | the amount and timing of the recognition of deferred tax benefits or expenses resulting from a release or an increase of valuation allowance against deferred income tax assets related to tax operating loss carryforwards and other temporary differences, and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a negative effect on our revenues and profits if newly established consolidated subsidiaries cannot achieve our expected levels of revenues or manage costs and expenses in a timely and adequate manner. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | substantially greater financial resources, |
|--------------------|--------------------------------------------|

| ·   | more extensive and well-developed marketing and sales networks, |
|--------------------|-----------------------------------------------------------------|

| ·   | larger technology human resources including application development engineers, |
|--------------------|--------------------------------------------------------------------------------|

| ·   | higher brand recognition among consumers and corporate customers, |
|--------------------|------------------------------------------------------------------------|

| ·   | larger customer bases, and |
|--------------------|----------------------------|

| ·   | more diversified operations which allow profits from some operations to support operations with lower profitability, such as network services, for which we are a competitor. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | sustain downward pricing pressure, including pressure on low-price Internet connectivity services offered to corporate customers, which are our target customers, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | develop, market and sell their services, |
|--------------------|------------------------------------------|

| ·   | adapt quickly to new and changing technologies, |
|--------------------|-------------------------------------------------|

| ·   | obtain new customers, and |
|--------------------|---------------------------|

| ·   | aggressively pursue mergers and acquisitions to enlarge their customer base and market share. |
|--------------------|-----------------------------------------------------------------------------------------------|

----

----

----

| ·   | rapid technological change, including the shift to new technology-based networks such as IPv6 and cloud computing, |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | frequent new product and service introductions, |
|--------------------|-------------------------------------------------|

| ·   | continually changing customer requirements, and |
|--------------------|-------------------------------------------------|

| ·   | evolving industry standards. |
|--------------------|------------------------------|

----

----

----

Item 

| A.   | History and Development of the Company. |
|----------------|-----------------------------------------|

| B.   | Business Overview. |
|----------------|--------------------|

----

|                              |   | For the fiscal year ended March 31,(millions of yen except for percentage data) |   |
|-----------------------------------|--------|---------------------------------------------------------------------------------|--------|
|                              |   | 2008                                                                            |   |   | 2009 |   |   | 2010 |   |
| Connectivity services             |   | ¥                                                                          | 17,579 |   |   | 26.3 | % |   | ¥ | 19,680 |   |   | 28.2 | % |   | ¥ | 20,701 |   |   | 30.5 | % |
| Outsourcing services              |   |                                                                            | 13,724 |   |   | 20.5 | % |   |   | 15,396 |   |   | 22.1 | % |   |   | 16,271 |   |   | 23.9 | % |
| Systems construction              |   |                                                                            | 18,021 |   |   | 27.0 | % |   |   | 14,658 |   |   | 21.0 | % |   |   | 11,354 |   |   | 16.7 | % |
| Systems operation and maintenance |   |                                                                            | 15,993 |   |   | 23.9 | % |   |   | 18,989 |   |   | 27.3 | % |   |   | 18,717 |   |   | 27.5 | % |
| Equipment sales                   |   |                                                                            | 1,514  |   |   | 2.3 | % |   |   | 985 |   |   | 1.4 | % |   |   | 756 |   |   | 1.1 | % |
| ATM operation business            |   |                                                                            | 4      |   |   | 0.0 | % |   |   | 23 |   |   | 0.0 | % |   |   | 207 |   |   | 0.3 | % |
| Total revenues:                   |   | ¥                                                                          | 66,835 |   |   | 100.0 | % |   | ¥ | 69,731 |   |   | 100.0 | % |   | ¥ | 68,006 |   |   | 100.0 | % |

|                                                                                                                                                                                                                                                                                                                                                                               |   | As of March 31, |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                               |   | 2006            |    |   | 2007 |   |   | 2008 |   |   | 2009 |   |   | 2010 |   |
| Connectivity services (corporate use):                                                                                                                                                                                                                                                                                                                                             |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |
| IP Service (-99 Mbps)                                                                                     |   |            | 739     |   |   |   | 751 |   |   |   | 855 |   |   |   | 938 |   |   |   | 926 |   |
| IP Service (100 Mbps – 999 Mbps)                                                                                                                                                                                                                                                                                                                                             |   |            | 117     |   |   |   | 161 |   |   |   | 201 |   |   |   | 225 |   |   |   | 254 |   |
| IP Service (1 Gbps –)                                                                               |   |            | 40      |   |   |   | 63 |   |   |   | 70 |   |   |   | 94 |   |   |   | 125 |   |
| IIJ Data Center Connectivity Service                                                                                                                                                                                                                                                                                                                                               |   |            | 247     |   |   |   | 282 |   |   |   | 288 |   |   |   | 298 |   |   |   | 315 |   |
| IIJ FiberAccess/F and IIJ DSL/F (Broadband Services)                                                      |   |            | 13,297  |   |   |   | 16,418 |   |   |   | 23,539 |   |   |   | 26,023 |   |   |   | 28,663 |   |
| IIJ Mobile Service (1)                                                                                                                                                                                                                                                                                                                                                             |   |            | -       |   |   |   | - |   |   |   | 1,018 |   |   |   | 19,698 |   |   |   | 32,315 |   |
| Others                                                                                                    |   |            | 1,760   |   |   |   | 1,618 |   |   |   | 1,984 |   |   |   | 1,526 |   |   |   | 1,400 |   |
| Total connectivity service (corporate use) contracts                                                                                                                                                                                                                                                                                                                               |   |            | 16,200  |   |   |   | 19,293 |   |   |   | 27,955 |   |   |   | 48,802 |   |   |   | 63,998 |   |
| Connectivity services (home use) :                                                                                                                                                                                                                                                                                                                                                 |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Under IIJ Brand                                                                                           |   |            | 60,525  |   |   |   | 55,907 |   |   |   | 51,051 |   |   |   | 46,901 |   |   |   | 46,900 |   |
| hi-ho                                                                                                     |   |            | -       |   |   |   | - |   |   |   | 189,700 |   |   |   | 179,786 |   |   |   | 168,223 |   |
| OEM (2)                                                                                                   |   |            | 568,307 |   |   |   | 476,483 |   |   |   | 232,515 |   |   |   | 216,725 |   |   |   | 185,544 |   |
| Total connectivity service (home use) contracts                                                                                                                                                                                                                                                                                                                                    |   |            | 628,832 |   |   |   | 532,390 |   |   |   | 473,266 |   |   |   | 443,412 |   |   |   | 400,667 |   |

| (1) | IIJ Mobile Service is the number of total contracts of mobile data communication services for corporate use. |
|-----|--------------------------------------------------------------------------------------------------------------|

| (2) | OEM services provided to other service providers. |
|-----|---------------------------------------------------|

----

| ·   | IP Service and IIJ Data Center Connectivity Service. Our IP Service and Data Center Connectivity Service is a full-scale, high-speed access service that connects the customer’s network to our backbone with dedicated access lines. The services are used mainly for corporate headquarters or data centers, where reliable network service is indispensable. The customer chooses the level of service it needs based upon its bandwidth requirements. As of September 17, 2010, we offer service at speeds ranging from 64 kbps to 10 Gbps. We believe that as business customers continue to increase their use of the Internet as their business tool and increasingly rely on the Internet, our Internet connectivity service will continue to be the foundation of our total network solutions offerings. Subscribers pay a monthly fee for the leased local access line from the customer’s location to one of our POPs. The amount of this fee varies depending on the carrier, the distance between the customer’s site and our POPs and its contracted bandwidth. We collect the local access fee from the customer and pay the amount to the carrier. While we prepare and arrange the leased access lines on behalf of customers under our name, the usage fee collected from the customer and paid to the carriers is recorded gross in our consolidated financial statements. For our IP Service, we offer Service Level Agreements (“SLA”) to our customers to better define the quality of services our customers receive. We were the first ISP in Japan to introduce this type of agreement. We are able to offer these SLA due to our high quality and reliable network. Our SLA provides customers with credit against the amount invoiced for the services if our service quality fails to meet the prescribed standards. Subscribers to our IP Service receive technical support 24 hours a day and seven days a week. We guarantee the performance of the following elements under our SLA: ▪ 100% availability of our network, ▪ the maximum average latency, or time necessary to transmit a signal, between designated POPs, and ▪ prompt notification of outage or disruption. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | IIJ FiberAccess/F and IIJ DSL/F (Broadband Services). IIJ FiberAccess/F and IIJ DSL/F are broadband Internet connectivity services that uses “FLET’S” services for fiber optic access and ADSL access provided by NTT East and West and others allowing service on a best-efforts basis. The services are used mainly to connect branch offices and headquarters. We support this service by providing guarantees of latency rates under SLA. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | IIJ Mobile Service. This service, launched in January 2008, provides wireless broadband Internet connectivity exclusively for corporate customers as a MVNO. We use the wireless networks of NTT DoCoMo and EMOBILE Ltd. for mobile access network. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Dial-up Access Services. We offer a variety of dial-up access services for corporate use. Our dial-up services allow employees that are out of the office or frequent travelers, to access the Internet or their own internal networks through one of our POPs or through our roaming access points. When accessing their internal network, for security purposes, it is usually accessed using the VPN function that is provided by our outsourcing services or systems integration. Our main dial-up access services are our IIJ Dial-up Advanced, Enterprise Dial-up IP Service and IIJ Dial-up Standard. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other Internet connectivity services. We offer, other than the services mentioned above, IIJ ISDN/F and IIJ Line Management/F service, which the former provides dedicated Internet access for ISDN lines and the latter the procurement of “FLET'S” services on behalf of customers. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Security-related outsourcing services. We offer services that protect customers' internal network systems from unauthorized access and secure remote connections to the internal networks such as, IIJ DDoS Solution Service, IIJ Security Scan Service, IIJ Managed IPS Service, IIJ Managed Firewall Service and IIJ Secure Remote Access. We were the first ISP in Japan to provide firewall services, which we introduced in 1994. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Network-related outsourcing services. We offer Internet-VPN and router rental services such as, IIJ Internet-LAN Service, IIJ SMFsx Service, IIJ Managed VPN PRO Service, SEIL Rental Service and Managed Router Service. IIJ SMFsx Service is based on the patent technology, the SEIL Management Framework (“SMF”) which enables centralized management of network-configuration, administration and maintenance, reducing both configuration and maintenance time and costs for large-scale network construction. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Server-related outsourcing services. We offer services such as web hosting, e-mail hosting, document storage and streaming services. Currently, the main service line-ups are, IIJ Secure MX Service, IIJ Secure Web Gateway Service, IIJ Document Exchange Service, IIJ Download Site Service, IIJ URL Filtering Service, IIJ DNS Service and Streaming Service. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Data center-related services. We offer, IIJ data center facility services and management and monitoring services. Our Internet data center facility services are co-location services which allow companies to house their servers and routers off-site on our premises. Our Internet data center facilities are leased from third parties such as NTT Communications and are equipped with robust security systems, 24-hours-a-day non-stop power supplies and fire extinguishing systems, and have earthquake-resistant construction and high-speed Internet connectivity with IIJ backbones. We also offer basic monitoring and maintenance services for the equipment. This service enhances reliability because we provide 24-hours-a-day monitoring and have specialized maintenance personnel and facilities. We offer management and monitoring services tailored to our customers’ requirements. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cloud computing services. We provide our customers with a broad range of cloud computing services such as component service and platform service that are connected directly through IIJ's high-volume backbone network and application service. For component service, we provide servers and necessary features to construct a cost efficient and asset less network system over the Internet. Platform services include “IIJ GIO Hosting Package Service” and “IIJ GIO Storage”. Application services include “IIJ Invito Mobile”, “IIJ GIO Cyboze Galoon SaaS”, “IIJ GIO remote office” and “IIJ GIO CRM Service”. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other services. Other than the above, we offer WAN service, customer support and help desk solutions, IP Phone service and other services. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | connecting over a hundred locations such as gas stations, bank branches and retail shops via Internet-VPN, transmission of data over the Internet with an encryption feature and our proprietary SEIL Series routers and SMF, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | construction of large scale e-mail servers or systems to detect or delete e-mails with viruses or spam or record all e-mails incoming to and outgoing from customers, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | online brokerage systems for securities firms, |
|--------------------|------------------------------------------------|

| ·   | construction of websites for online businesses, re-construction of overall corporate network systems suited to increased traffic data, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | construction of voice over IP systems to transmit voice among customer branch offices over the Internet, |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | construction of wireless local area networks (“LAN”), and |
|--------------------|-----------------------------------------------------------------------|

| ·   | consultation on corporate network security. |
|--------------------|---------------------------------------------|

----

| ·   | our backbone, which includes leased lines and network equipment, such as advanced Internet routers, |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | POPs in major metropolitan areas in Japan, |
|--------------------|--------------------------------------------|

| ·   | Internet data centers, and |
|--------------------|----------------------------|

| ·   | a network operations center (“NOC”). |
|--------------------|--------------------------------------------------|

|                                                            |   | As of March 31, 2010 |   |
|-----------------------------------------------------------------|--------|----------------------|--------|
| Number of Contracts comprising the IIJ’s backbone network |   |                 |   |
| NTT                                                             |   |                 | 82     |   |
| KDDI                                                            |   |                 | 32     |   |
| Others                                                          |   |                 | 20     |   |
| Total                                                           |   |                 | 134    |   |

----

|                         |   | For the fiscal year ended March 31, |      |
|------------------------------|--------|-------------------------------------|-----------|
|                         |   | 2006                                |      |   | 2007 |   |   | 2008 |   |   | 2009 |   |   | 2010 |   |
| Backbone cost (thousand yen) |   | ¥                              | 3,516,322 |   |   | ¥ | 3,515,934 |   |   | ¥ | 3,469,717 |   |   | ¥ | 3,692,286 |   |   | ¥ | 3,698,901 |   |

----

| Company Name                  |   | Jurisdiction ofIncorporation |   | Proportion of ownershipand voting interest |
|-------------------------------|--------|------------------------------|--------|--------------------------------------------|
| Consolidated Subsidiaries:    |   |                         |   |                                       |
| Net Care, Inc.                |   | Japan                        |   | 100.0%                                     |
| Net Chart Japan Inc.          |   | Japan                        |   | 100.0%                                     |
| hi-ho Inc.                    |   | Japan                        |   | 100.0%                                     |
| IIJ Innovation Institute Inc. |   | Japan                        |   | 100.0%                                     |
| IIJ Global Solutions Inc.     |   | Japan                        |   | 100.0%                                     |
| Trust Networks Inc.           |   | Japan                        |   | 74.2%                                      |
| GDX Japan Inc.                |   | Japan                        |   | 62.3%                                      |
| IIJ America Inc.              |   | U.S.A.                       |   | 100.0%                                     |
| Equity method investees:      |   |                         |   |                                       |
| Taihei Computer Co., Ltd.     |   | Japan                        |   | 45.0%                                      |
| Internet Multifeed Co.        |   | Japan                        |   | 32.0%                                      |
| Internet Revolution Inc.      |   | Japan                        |   | 30.0%                                      |
| i-Heart Inc.                  |   | Republic of Korea            |   | 28.6%                                      |

----

----

|                                                         |   | For the fiscal year ended March 31, |   |
|--------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                         |   | 2008                                |   |   | 2009 |   |   | 2010 |   |
|                                                         |   | (millions of yen)                   |   |
| Capital expenditures, including capitalized leases (1)  |   | ¥                              | 6,078  |   |   | ¥ | 7,006 |   |   | ¥ | 5,584 |   |
|                                                         |   |                                |   |   |   |   |   |   |   |   |   |   |

----

| ·   | Enterprise business division 1, 2 and 3 focus on its total network solutions and work with large corporate clients, including manufacturers, retail companies and telecommunication carriers. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Financial Systems Business Division focuses on its total network solutions and work with financial institutions. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | Government, Public & Educational Organization Business Unit focuses on total network solutions and works with governmental institutions, and universities and other schools. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Regional Division focuses on developing and strengthening partnerships with customers in areas other than the Kanto-area. Sales personnel in the branch or sales offices are here in this division. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Business unit management division focuses on management and controlling the above six division. It is responsible for the planning and management on the sales figures, processes and other information. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Product Marketing Department, Market Development Department, GIO Marketing Department and Planning Department. It mainly sets the tariff pricing for each of IIJ’s services, makes and conducts promotion plans on its products and services as well as strengthening partnerships with sales agents such as systems integrators to expand our marketing reach. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | continued improvement of our SEIL router and SMF, systems which we developed specifically to be integrated into IIJ’s network-related services, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | research and development of the latest e-mail implementation technologies and spam countermeasures, |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | research and development of IPv6-based mobile communications technology, |
|--------------------|--------------------------------------------------------------------------|

| ·   | research relating to the methodology of configuration of routers and other servers, |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | research relating to the technology for next generation IP networks, |
|--------------------|----------------------------------------------------------------------|

| ·   | research relating to the behavior of Internet routing systems, |
|--------------------|----------------------------------------------------------------|

| ·   | research of the Internet traffic monitoring and management, |
|--------------------|-------------------------------------------------------------|

| ·   | research and development of the Distributed and Parallel Processing Platform for very large data sets, |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | research and development of the basic technologies for cloud computing, |
|--------------------|-------------------------------------------------------------------------|

| ·   | research and development of the outside-air-cooled container unit data center, |
|--------------------|--------------------------------------------------------------------------------|

| ·   | research and analysis of the characteristics of the captured malware and spam mails, and, |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | development relating to proprietary video distribution server software specifically designed for digital television. |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

----

----

|   (1)  | The Exempted Business is the business related to facilities supplying broadcast services, wire radio broadcasting, wire broadcast telephone services, wire television broadcasting services, or the acceptance of applications for the use of the cable television broadcasting facility. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   (2)   | The “telecommunications business” is defined as: |
|------------------------|--------------------------------------------------------------|

| (i)   | the telecommunications business which exclusively provides telecommunications services to a single person (except one being a telecommunications carrier); |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii)   |  the telecommunications business which provides telecommunications services with telecommunications facilities, a part of which is to be established on the same premises (including the areas regarded as the same premises) or in the same building where any other part there of is also to be established, or with  telecommunications facilities which are below the standards stipulated in the ministerial ordinance of the MIC; and |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii)   | the telecommunications business installing no telecommunications circuit facilities which provides telecommunications services other than the telecommunications services which intermediate communications of others by using telecommunications facilities; |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Registration |
|--------------------|--------------|

| ·   | Notification |
|--------------------|--------------|

----

| ·   | Our business is unregulated, in general, as IIJ does not fall under either Basic Telecommunications Services or Designated Telecommunications Services described below. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Prior notification to the Minister of the MIC is required for Basic Telecommunications Services (universal services specified by the ministerial ordinance of the MIC, i.e., analog or public fixed telephone services, analog or public remote island telephone services, and analog or public emergency call telephone services). Providing these telecommunications services other than pursuant to the terms and conditions and charges notified to the Minister of the MIC is prohibited. Provided that the charges may be discounted or waived pursuant to the exception criteria provided under the ministerial ordinance of the MIC (i.e., an emergency call for the safety of ships and airplanes, an emergency call for the safety of personal life and property in case of natural disaster, calls to police agencies regarding crimes, and calls to the fire brigade (“Emergency Exception”) |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Prior notification to the Minister of the MIC is required for Designated Telecommunications Services (i.e., services provided through Category I Designated Telecommunications Facilities and which meet the criteria provided by the ministerial ordinance of the MIC as the services for which the guarantee of the terms and conditions and charges are necessary for the protection of users, such as the basic fee). “Category I Designated Telecommunications Facilities” are the facilities which meet the criteria specified by the ministerial ordinance of the MIC as being the fixed telecommunications facilities used for the services which are offered to a substantial percentage of users in a given area, and which are currently only the facilities of NTT East and NTT West. Providing these telecommunications services other than pursuant to the terms and conditions and charges notified to the Minister of the MIC is prohibited, unless the telecommunications carrier and the user agree otherwise, provided that the charges may be discounted or waived in Emergency Cases, for emergency calls for injured persons in a ship, and for use by a police agency, fire brigade and broadcasting companies. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Minister of the MIC at least once a year notifies the telecommunications carrier providing the Specific Designated Telecommunications Services specified by the ministerial ordinance of the MIC (i.e., Designated Telecommunications Services other than voice services, except for telephone and general digital services and data transmission services) the price cap regarding such services. The telecommunications carriers will be required to obtain approval from the Minister of the MIC if a proposed change in charges exceeds the price cap. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our business is unregulated, in general, as IIJ does not fall under either Category I Designated Telecommunications Facilities or Category II Designated Telecommunications Facilities described below. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Approval from the Minister of the MIC required for Category I Designated Telecommunications Facilities. |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | Prior notification to the Minister of the MIC required for Category II Designated Telecommunications Facilities (i.e., the facilities which meet the criteria provided by the ministerial ordinance of the MIC as being the mobile telecommunications facilities used for the services which are offered to a substantial percentage of users in a given area, and which are currently NTT DoCoMo, Okinawa Cellular and KDDI). |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A telecommunications carrier that installs telecommunications circuit facilities must maintain its telecommunications facilities (except telecommunications facilities stipulated in the ministerial ordinance of the MIC as those having a minor influence on the users' benefit in the cases of damage or failure thereof) in conformity with the technical standards provided in the  ministerial ordinance of the MIC. Such telecommunications carriers shall confirm that its telecommunications facilities are in compliance with the technical standards specified in the ministerial ordinance of the MIC. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A telecommunications carrier that provides Basic Telecommunications Services must maintain its telecommunications facilities for provision of Basic Telecommunications Services in conformity with the technical standards provided in the ministerial ordinance of the MIC. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Telecommunications carriers that install telecommunications circuit facilities or provide Basic Telecommunications Services must establish their own administrative rules in accordance with the ministerial ordinance of the MIC in order to secure the reliable and stable provision of telecommunications services. These administrative rules must regulate the operation and manipulation of telecommunications facilities and the safeguarding, inspecting and testing regarding the construction, maintenance and administration of telecommunications facilities, etc. as provided for by the ministerial ordinance of the MIC. Such administrative rules must be submitted to the Minister of the MIC prior to the commencement of operations, and changes must be submitted to the Minister of the MIC once after they are implemented without delay. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | The Minister of the MIC may, if it is deemed that business activities of a telecommunications carrier fall under inappropriate cases set forth in the Telecommunications Business Law, insofar as it is necessary to ensure the users’ benefit or the public interest, order the telecommunications carrier to take actions to improve operations methods or other measures. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A telecommunications carrier which is engaged, or intends to engage, in the telecommunications business by installing telecommunications circuit facilities and which wishes to have the privileged use of land or other public utilities for circuit facilities deployment, must obtain the authorization on the entire or a part of the relevant telecommunications business by the Minister of the MIC. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Post facto notification to the Minister of the MIC without delay is required. |
|--------------------|-------------------------------------------------------------------------------|

| ·   | Post facto notification to the Minister of the MIC without delay is required. Prior announcement of withdrawals to service users is required in accordance with ministerial ordinances of the MIC. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Prior notification is required under the Foreign Exchange and Foreign Trade Law for the acquisition of shares of telecommunications carriers to which registration for start-up services is applicable. This is not applicable to purchasers of ADSs. The one-third foreign ownership restriction is applicable only to NTT East and NTT West. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                 |   | As of March 31    |    |
|----------------------------------------------------------------------|--------|-------------------|---------|
|                                                                 |   | 2009              |    |   | 2010 |   |   | 2010 |   |
|                                                                 |   | (millions of yen) |    |   | (thousand ofU.S. dollars) |   |
| Data Communications equipment                                        |   | ¥            | 1,010   |   |   | ¥ | 1,310 |   |   | $ | 14,023 |   |
| Office and other equipment                                           |   |              | 1,190   |   |   |   | 1,496 |   |   |   | 16,017 |   |
| Leasehold improvements                                               |   |              | 1,011   |   |   |   | 1,060 |   |   |   | 11,348 |   |
| Purchased software                                                   |   |              | 9,459   |   |   |   | 11,208 |   |   |   | 120,006 |   |
| Assets under capital leases, primarily data communications equipment |   |              | 16,947  |   |   |   | 15,549 |   |   |   | 166,480 |   |
|  Total                                                        |   |              | 29,617  |   |   |   | 30,623 |   |   |   | 327,874 |   |
| Less accumulated depreciation and amortization                       |   |              | (16,444 | ) |   |   | (17,653 | ) |   |   | (189,007 | ) |
| Property and equipment- net                                          |   | ¥            | 13,173  |   |   | ¥ | 12,970 |   |   | $ | 138,867 |   |

----

Item 

| A. | Operating Results. |
|----|--------------------|

----

|                                                                                                                                                                                                                                                                                               |   |   Fiscal year ended March 31,                             |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                               |   |  2008                                                     |   |  2009 |   |   |  2010 |
|                                                                                                                                                                                                                                                                                               |   |  (millions of yen except for percentage data)   |   |   | (thousands of U.S. dollars(1)) |
|                                                                                                                                                                                                                                                                                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| REVENUES:                                                                                                                                                                                                                                                                                          |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Connectivity and outsourcing services:                                                                                                                                                                                                                                                             |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Connectivity services (corporate use)                                                                                                                                                                                                                                                              |   | ¥                                                         | 12,149 |   |   |   | 18.2 | % |   | ¥ | 13,142 |   |   |   | 18.8 | % |   | ¥ | 13,847 |   |   |   | 20.4 | % |   | $ | 148,256 |   |
| Connectivity services (home use)                                                                                                                                                                                                                                                                   |   |                                                           | 5,430  |   |   |   | 8.1 |   |   |   | 6,538 |   |   |   | 9.4 |   |   |   | 6,854 |   |   |   | 10.1 |   |   |   | 73,386 |   |
| Outsourcing services                                                                       |   |                                                           | 13,724 |   |   |   | 20.5 |   |   |   | 15,396 |   |   |   | 22.1 |   |   |   | 16,271 |   |   |   | 23.9 |   |   |   | 174,210 |   |
| Total                                                                                           |   |                                                           | 31,303 |   |   |   | 46.8 |   |   |   | 35,076 |   |   |   | 50.3 |   |   |   | 36,972 |   |   |   | 54.4 |   |   |   | 395,852 |   |
| Systems integration:                                                                                                                                                                                                                                                                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Systems construction                                                                       |   |                                                           | 18,021 |   |   |   | 27.0 |   |   |   | 14,658 |   |   |   | 21.0 |   |   |   | 11,354 |   |   |   | 16.7 |   |   |   | 121,559 |   |
| Systems operation and maintenance                                                                                                                                                                                                                                                                  |   |                                                           | 15,993 |   |   |   | 23.9 |   |   |   | 18,989 |   |   |   | 27.3 |   |   |   | 18,717 |   |   |   | 27.5 |   |   |   | 200,396 |   |
| Total                                                                                           |   |                                                           | 34,014 |   |   |   | 50.9 |   |   |   | 33,647 |   |   |   | 48.3 |   |   |   | 30,071 |   |   |   | 44.2 |   |   |   | 321,955 |   |
| Equipment sales                                                                       |   |                                                           | 1,514  |   |   |   | 2.3 |   |   |   | 985 |   |   |   | 1.4 |   |   |   | 756 |   |   |   | 1.1 |   |   |   | 8,100 |   |
| ATM operation business                                                           |   |                                                           | 4      |   |   |   | 0.0 |   |   |   | 23 |   |   |   | 0.0 |   |   |   | 207 |   |   |   | 0.3 |   |   |   | 2,213 |   |
| Total revenues                                                                                                 |   |                                                           | 66,835 |   |   |   | 100.0 |   |   |   | 69,731 |   |   |   | 100.0 |   |   |   | 68,006 |   |   |   | 100.0 |   |   |   | 728,120 |   |
|                                                                                                                                                                                                                                                                                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COST AND EXPENSES:                                                                                                                                                                                                                                                                                 |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of connectivity and outsourcing services:                                                                                                                                                                                                                                                     |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Backbone cost                                                                              |   |                                                           | 3,470  |   |   |   | 5.2 |   |   |   | 3,692 |   |   |   | 5.3 |   |   |   | 3,699 |   |   |   | 5.4 |   |   |   | 39,603 |   |
| Local access line cost                                                                     |   |                                                           | 7,102  |   |   |   | 10.6 |   |   |   | 8,113 |   |   |   | 11.6 |   |   |   | 8,266 |   |   |   | 12.2 |   |   |   | 88,502 |   |
| Other connectivity cost                                                                    |   |                                                           | 370    |   |   |   | 0.6 |   |   |   | 473 |   |   |   | 0.7 |   |   |   | 544 |   |   |   | 0.8 |   |   |   | 5,824 |   |
| Depreciation and amortization                                                                                                                                                                                                                                                                      |   |                                                           | 2,928  |   |   |   | 4.4 |   |   |   | 3,468 |   |   |   | 5.0 |   |   |   | 3,303 |   |   |   | 4.9 |   |   |   | 35,365 |   |
| Other                                                                                      |   |                                                           | 12,170 |   |   |   | 18.2 |   |   |   | 13,572 |   |   |   | 19.5 |   |   |   | 14,721 |   |   |   | 21.6 |   |   |   | 157,620 |   |
| Total cost of connectivity and outsourcing services                                                                                                                                                                                                                                                |   |                                                           | 26,040 |   |   |   | 39.0 |   |   |   | 29,318 |   |   |   | 42.1 |   |   |   | 30,533 |   |   |   | 44.9 |   |   |   | 326,914 |   |
|                                                                                                                                                                                                                                                                                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of systems integration:                                                                                                                                                                                                                                                                       |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of equipment sales related to systems integration                                                                                                                                                                                                                                             |   |                                                           | 4,409  |   |   |   | 6.6 |   |   |   | 4,931 |   |   |   | 7.0 |   |   |   | 3,586 |   |   |   | 5.3 |   |   |   | 38,393 |   |
| Other                                                                                      |   |                                                           | 21,117 |   |   |   | 31.6 |   |   |   | 20,612 |   |   |   | 29.6 |   |   |   | 18,318 |   |   |   | 26.9 |   |   |   | 196,122 |   |
| Total cost of systems integration                                                                                                                                                                                                                                                                  |   |                                                           | 25,526 |   |   |   | 38.2 |   |   |   | 25,543 |   |   |   | 36.6 |   |   |   | 21,904 |   |   |   | 32.2 |   |   |   | 234,515 |   |
| Cost of equipment sales                                                          |   |                                                           | 1,300  |   |   |   | 1.9 |   |   |   | 863 |   |   |   | 1.2 |   |   |   | 649 |   |   |   | 1.0 |   |   |   | 6,952 |   |
| Cost of ATM operation business                                                                                                                                                                                                                                                                     |   |                                                           | 17     |   |   |   | 0.0 |   |   |   | 422 |   |   |   | 0.6 |   |   |   | 964 |   |   |   | 1.4 |   |   |   | 10,320 |   |
| Total cost                                                                                                     |   |                                                           | 52,883 |   |   |   | 79.1 |   |   |   | 56,146 |   |   |   | 80.5 |   |   |   | 54,050 |   |   |   | 79.5 |   |   |   | 578,701 |   |
| Sales and marketing                                                    |   |                                                           | 4,329  |   |   |   | 6.5 |   |   |   | 4,631 |   |   |   | 6.6 |   |   |   | 5,405 |   |   |   | 7.9 |   |   |   | 57,870 |   |
| General and administrative                                             |   |                                                           | 4,624  |   |   |   | 6.9 |   |   |   | 5,622 |   |   |   | 8.1 |   |   |   | 4,826 |   |   |   | 7.1 |   |   |   | 51,670 |   |
| Research and development                                               |   |                                                           | 240    |   |   |   | 0.4 |   |   |   | 415 |   |   |   | 0.6 |   |   |   | 313 |   |   |   | 0.5 |   |   |   | 3,352 |   |
| Total cost and expenses                                                                                                                                                                                                                                                                            |   |                                                           | 62,076 |   |   |   | 92.9 |   |   |   | 66,814 |   |   |   | 95.8 |   |   |   | 64,594 |   |   |   | 95.0 |   |   |   | 691,593 |   |
| OPERATING INCOME                                                                                                                                                                                                                                                                                   |   |                                                           | 4,759  |   |   |   | 7.1 |   |   |   | 2,917 |   |   |   | 4.2 |   |   |   | 3,412 |   |   |   | 5.0 |   |   |   | 36,527 |   |
|                                                                                                                                                                                                                                                                                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSES):                                                                                                                                                                                                                                                                           |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                                  |   |                                                           | 63     |   |   |   | 0.1 |   |   |   | 45 |   |   |   | 0.1 |   |   |   | 29 |   |   |   | 0.0 |   |   |   | 307 |   |
| Interest expense                                                                 |   |                                                           | (438   | ) |   |   | (0.6 | ) |   |   | (408 | ) |   |   | (0.6 | ) |   |   | (306 | ) |   |   | (0.4 | ) |   |   | (3,279 | ) |
| Foreign exchange gains (losses)                                                                                                                                                                                                                                                                    |   |                                                           | 2      |   |   |   | 0.0 |   |   |   | (29 | ) |   |   | (0.0 | ) |   |   | (0 | ) |   |   | (0.0 | ) |   |   | (4 | ) |
| Net gains on sales of other investments                                                                                                                                                                                                                                                            |   |                                                           | 218    |   |   |   | 0.3 |   |   |   | 16 |   |   |   | 0.0 |   |   |   | 49 |   |   |   | 0.1 |   |   |   | 530 |   |
| Losses on write-down of other investments                                                                                                                                                                                                                                                          |   |                                                           | (289   | ) |   |   | (0.4 | ) |   |   | (524 | ) |   |   | (0.8 | ) |   |   | (343 | ) |   |   | (0.5 | ) |   |   | (3,670 | ) |
| Other — net                                                                |   |                                                           | 47     |   |   |   | 0.0 |   |   |   | 17 |   |   |   | 0.0 |   |   |   | 18 |   |   |   | 0.0 |   |   |   | 200 |   |
| Other income (expenses) — net                                                                                                                                                                                                                                                                |   |                                                           | (397   | ) |   |   | (0.6 | ) |   |   | (883 | ) |   |   | (1.3 | ) |   |   | (553 | ) |   |   | (0.8 | ) |   |   | (5,916 | ) |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN NET INCOME (LOSS) OF EQUITY METHOD INVESTEES                                                                                                                                                                              |   |                                                           | 4,362  |   |   |   | 6.5 | % |   |   | 2,034 |   |   |   | 2.9 |   |   |   | 2,859 |   |   |   | 4.2 |   |   |   | 30,611 |   |
| INCOME TAX EXPENSE (BENEFIT)                                                                                                                                                                                                                                                                       |   |                                                           | (861   | ) |   |   | (1.3 | ) |   |   | 1,002 |   |   |   | 1.4 |   |   |   | 1,132 |   |   |   | 1.7 |   |   |   | 12,121 |   |
| EQUITY IN NET INCOME (LOSS) OF EQUITY METHOD INVESTEES                                                                                                                                                                                                                                             |   |                                                           | (143   | ) |   |   | (0.2 | ) |   |   | 35 |   |   |   | 0.0 |   |   |   | 159 |   |   |   | 0.3 |   |   |   | 1,707 |   |
| NET INCOME                                                             |   |                                                           | 5,080  |   |   |   | 7.6 |   |   |   | 1,067 |   |   |   | 1.5 |   |   |   | 1,886 |   |   |   | 2.8 |   |   |   | 20,197 |   |
| LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS                                                                                                                                                                                                                                            |   |                                                           | 97     |   |   |   | 0.1 |   |   |   | 352 |   |   |   | 0.5 |   |   |   | 348 |   |   |   | 0.5 |   |   |   | 3,723 |   |
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC                                                                                                                                                                                                                                           |   | ¥                                                         | 5,177  |   |   |   | 7.7 | % |   | ¥ | 1,419 |   |   |   | 2.0 | % |   | ¥ | 2,234 |   |   |   | 3.3 | % |   | $ | 23,920 |   |

| (1)   | The U.S. dollar amounts represent translation of yen amounts at the rate of ¥93.40 which was the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York prevailing as of March 31, 2010. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Connectivity services for corporate use. Revenues for connectivity service for corporate use depend on the increase in the number of contracts for connectivity services and the increase in customers’ bandwidth usage. For the fiscal year ended March 31, 2010, while there was price pressure for connectivity services, revenues increased by 5.4% to ¥13.8 billion from ¥13.1 billion for the previous fiscal year as a result of the increase in total contracts and contracted bandwidth. In particular, IIJ Mobile service increased by 120.9% to ¥1.4 billion for the fiscal year ended March 31, 2010 from ¥0.6 billion for the previous fiscal year. For IP services, while over 1Gbps IP reached 125 contracts at the end of fiscal year ended March 2010 driven by demands for higher bandwidth especially among content business operators and ISPs, IP connectivity service revenues slightly decreased by 0.7% to ¥9.2 billion from ¥9.3 billion for the previous fiscal year. Broadband services increased by 1.8% to ¥2.9 billion for the fiscal year ended March 31, 2010. Although we do not expect prices of connectivity services to increase significantly in the fiscal year ending March 31, 2011 due to continued competition, we believe that customer demand for higher bandwidth and the increase in the number of contracts will continue contributing to revenue growth as the use of broadband by corporate customers expands. We will also focus on acquiring new customers as well as increase the use bandwidth of existing customers by maintain the quality of our services to differentiate them from those of our competitors. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Connectivity services for home use. Revenues for connectivity services for home use depend on the size of our customer base and pricing. For the fiscal year ended March 31, 2010, revenues increased by 4.8% to ¥6.9 billion from ¥6.5 billion for the previous fiscal year. Revenues from hi-ho increased by 5.7% compared to the previous fiscal year, driven by the shift from ADSL to optical line services which charges higher monthly fees. Mobile data communication service also contributed to revenue growth. Revenues from IIJ brand and OEM also steadily increased. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Outsourcing services. For outsourcing services, we are currently offering security-related, network-related, server-related and data center-related outsourcing services, such as firewall service, email service and web hosting services mainly toward our internet connectivity customer base. Our revenues depend on our ability to cross-sell the existing outsourcing services, add new features to existing outsourcing services and introduce new services. During the fiscal year ended March 31, 2010, IIJ expanded features of major selling services such as the “IIJ SMX service”, “Secure Web Gateway Service” and “IIJ Direct Access Solution” and also introduced the new cloud computing service “IIJ GIO”. For the fiscal year ended March 31, 2010, our outsourcing services revenues increased by 5.7% to ¥16.3 billion from ¥15.4 billion for the previous fiscal year as a result of steady growth from each service line-up. We believe that corporate customers will increasingly rely on the expanding range of our outsourcing services to enhance their productivity and to reduce costs. As a result, we expect our revenue from outsourcing services to continue to grow. Further, while we focus on increasing revenues from existing customers, we will also make efforts to attract new customers by maintaining the quality of our services to differentiate them from those of our competitors. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|   | ・The release of valuation allowance of ¥213 million based on the increase in the expected future taxable income. |
|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | ・The decrease in valuation allowance of ¥99 million resulted from the increase in unrealized gains on available-for-sale-securities. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Connectivity services for corporate use. Revenues from connectivity services for corporate use increased by 8.2% to ¥13.1 billion for the fiscal year ended March 31, 2009 from ¥12.1 billion for the previous fiscal year. IP service revenues, the service mainly used for corporate headquarters and data centers, increased by 2.8% for the fiscal year ended March 31, 2009 compared to the previous year and broadband services increased by 8.7% for the fiscal year ended March 31, 2009 as a result of steady demands for network expansion and the shift to higher bandwidths. Contracts of over 1 Gbps increased to 94 contracts compared to 70 contracts at the end of March 2008, especially among content business operators and ISPs. IIJ Mobile service, a mobile data communication services for corporate use are performing well, contributing to revenue growth. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Connectivity services for home use. Despite the decrease in revenues from IIJ4U and OEM, revenues from connectivity services for home use increased by 20.4% to ¥6.5 billion for the fiscal year ended March 31, 2009 from ¥5.4 billion for the previous fiscal year. This significant increase was mainly due to additional revenues incurred by hi-ho, which we acquired in June 2007, of ¥5.0 billion (12 months) for the fiscal year ended March 31, 2009 compared to ¥3.8 billion for the fiscal year ended March 31, 2008 (10 months). |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Outsourcing services. Our outsourcing services revenues increased by 12.2% to ¥15.4 billion for the fiscal year ended March 31, 2009 from ¥13.7 billion for the previous fiscal year. This increase was mainly due to a steady increase in revenues from services such as security-related and e-mail related outsourcing services for anti-spam protection, data center services and network related solutions. The steady increase in outsourcing services revenues was affected by an increase in demand for outsourcing services by corporate customers. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | ・The increase in valuation allowance of ¥67 million resulted from the decrease in unrealized gains on available-for-securities. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                             |   | For the fiscal year ended March 31, |   |
|--------------------------------------------------|--------|-------------------------------------|--------|
|                                             |   |                                |   |   |   |   |   |   |   |   |   |   |
|                                             |   | 2008                                |   |   | 2009 |   |   | 2010 |   |   | 2010 |   |
|                                             |   | (millions of yen)                   |   |   | (thousands of U.S. dollars) |   |
| Net revenues:                                    |   |                                |   |   |   |   |   |   |   |   |   |   |
| Network service and systems integration business |   | ¥                              | 66,831 |   |   | ¥ | 69,961 |   |   | ¥ | 68,228 |   |   | $ | 730,495 |   |
| ATM operation business                           |   |                                | 4      |   |   |   | 23 |   |   |   | 207 |   |   |   | 2,213 |   |
| Elimination                                      |   |                                | -      |   |   |   | 253 |   |   |   | 429 |   |   |   | 4,588 |   |
| Total                                            |   |                                | 66,835 |   |   |   | 69,731 |   |   |   | 68,006 |   |   |   | 728,120 |   |
| Operating income (loss):                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Network service and systems integration business |   |                                | 4,854  |   |   |   | 3,663 |   |   |   | 4,435 |   |   |   | 47,486 |   |
| ATM operation business                           |   |                                | (89    | ) |   |   | (705 | ) |   |   | (1,001 | ) |   |   | (10,719 | ) |
| Elimination                                      |   |                                | 6      |   |   |   | 41 |   |   |   | 22 |   |   |   | 240 |   |
| Total                                            |   | ¥                              | 4,759  |   |   | ¥ | 2,917 |   |   | ¥ | 3,412 |   |   | $ | 36,527 |   |

----

|   | (a) | System Integration Services Arrangements That Include Software |
|--------|-----|----------------------------------------------------------------|

|   | ・ | System Construction Services – include all or some of the following elements depending on arrangements to meet each of our customers’ requirements: consulting, project planning, system design, and development of network systems. These services will also include the installation of the software as well as configuration and installation of the hardware. |
|--------|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ・ | Software – the Company resell to our customer third-party software such as, Oracle or Windows, which is installed by us during the system development process. These software products are developed by the third-party software vendors and are often sold by those vendors without hardware or other services. |
|--------|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ・ | Hardware – the Company also resell third-party hardware, primarily servers, switches and routers, which the Company install during the system development process. The hardware is generic hardware that is often sold by third party manufacturers and resellers without any software. That is, the functionality of the hardware is not dependent on the software. |
|--------|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ・ | Monitoring and Operating Service – the Company monitor our customer’s network activity and internet connectivity to detect and report problems. The Company also provide constant data backup services. |
|--------|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ・ | Hardware Maintenance Service – the Company repair or replace any malfunctioning parts of the hardware. |
|--------|----------|--------------------------------------------------------------------------------------------------------------|

----

|   | (b) | System Integration Arrangements That Do Not Include Software |
|--------|-----|--------------------------------------------------------------|

----

| Item                                            |   | Useful Lives       |
|-------------------------------------------------|--------|--------------------|
| Data communications, office and other equipment |   | 2 to 15 years |
| Leasehold improvements                          |   | 3 to 15 years |
| Purchased software                              |   | 5 years       |
| Capitalized leases                              |   | 4 to 7 years  |

----

| ·   | significant decline in the market value of an asset, |
|--------------------|------------------------------------------------------|

| ·   | current period operating cash flow loss, |
|--------------------|------------------------------------------|

| ·   | introduction of competing technologies or services, |
|--------------------|-----------------------------------------------------|

| ·   | significant underperformance of expected or historical cash flows, |
|--------------------|--------------------------------------------------------------------|

| ·   | significant or continuing decline in subscribers, |
|--------------------|---------------------------------------------------|

| ·   | changes in the manner or use of an asset, |
|--------------------|-------------------------------------------|

| ·   | disruptions in the use of network equipment under capital lease arrangements, and |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | other negative industry or economic trends. |
|--------------------|---------------------------------------------|

----

| ·   | the length of time and the extent to which the market value has been less than cost, |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment, and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. If a decline in value occurs and is deemed to be other-than-temporary, an impairment loss will be recorded to write-down the carrying value of the investment to fair value. If, after taking into account these considerations, the decline is judged to be other than temporary, the cost basis of the individual security is written down to a new cost basis and the amount of the write-down is accounted for as a realized loss. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Change in Assumption                                          | Pre-Tax PBO | Pension Expense         | Equity (Net of Tax) |
|---------------------------------------------------------------|-------------|-------------------------|---------------------|
|                                                          |        |  (millions of yen) |                |
| 50 basis point increase/decrease in discount rate             | (179)/199   | -(*)             | -(*)         |
| 50 basis point increase/decrease in expected return on assets | -    | (6)/6                   | -/(4)        |

----

|   |   |
|--------|--------|

|   | In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (codified in ASC Topic 805, “Business Combinations”). The Statement establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. This Statement also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This Statement is effective for fiscal years beginning on or after December 15, 2008 and was adopted by the Company in the first quarter of fiscal year beginning April 1, 2009. In April 2009, the FASB issued FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (codified in ASC Topic 805). This FSP amends the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. This FSP is effective for assets and liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The impact of the adoption of this FSP did not have an effect on the Company’s financial position or results of operations. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (codified in ASC Topic 810, “Consolidation”) (“SFAS No.160”). This Statement establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This Statement is effective on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, and was adopted by the Company in the first quarter of fiscal year beginning April 1, 2009. In accordance with the new guidance on noncontrolling interests, the Company revised all previous references to “minority interests” in the consolidated financial statements to “noncontrolling interests,” and made the following changes: |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (1) Consolidated Balance Sheets now present “Noncontrolling interests” as a component of “Total equity.” “Noncontrolling interests” is equivalent to the previously reported “Minority Interest.” “Total Internet Initiative Japan Inc. shareholders' equity” is equivalent to the previously reported “Total shareholders’ equity.”(2) Consolidated Statements of Income now present “Net income,” which includes “Net loss attributable to noncontrolling interests” and “Net income attributable to Internet Initiative Japan Inc.”(3) Consolidated Statements of Shareholder’ Equity now include a section for “Noncontrolling interests.”(4) Consolidated Statements of Cash Flows now begin with “Net Income” instead of “Net Income Attributable to Internet Initiative Japan Inc.” |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In April 2009, the FASB issued FSP No. FAS 115-2 and No. FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (codified in ASC Topic 320, “Investments – Debt and Equity Securities“). This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP is effective for fiscal years ending after June 15, 2009 and early adoption is permitted. The Company adopted this FSP in the first quarter of fiscal year beginning April 1, 2009. The adoption of this FSP did not have a material impact on the Company’s financial position and results of operations. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                         |   | For the fiscal year ended March 31, |   |
|--------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                         |   | 2008                                |   |   | 2009 |   |   | 2010 |   |
|                                                         |   | (millions of yen)                   |   |
| Capital expenditures, including capitalized leases (1)  |   | ¥                              | 6,078  |   |   | ¥ | 7,006 |   |   | ¥ | 5,584 |   |
|                                                         |   |                                |   |   |   |   |   |   |   |   |   |   |

|   | (1) Further information regarding capital expenditures, including capitalized leases and a reconciliation to the most directly comparable U.S. GAAP financial measure, can be found in Item 3.A., “Selected Financial Data— Reconciliation of the Disclosed Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures”. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                |   |                     |   |   | Payment due by period |   |
|-------------------------------------|--------|--------------------------|--------|--------|-----------------------|--------|
|                                |   |                     |   |   | (millions of yen)     |   |
|                                |   | Total contractual amount |   |   | Less than 1 year |   |   | 1 to 3 years |   |   | 4 to 5 years |   |   | More than 5 years |   |
| Connectivity lines operating leases |   | ¥                   | 1,451  |   |                  | ¥ | 1,179 |   |   | ¥ | 266 |   |   | ¥ | 6 |   |   | ¥ | - |   |
| Other operating leases              |   |                     | 5,983  |   |                  |   | 2,085 |   |   |   | 2,339 |   |   |   | 855 |   |   |   | 704 |   |
| Capital leases                      |   |                     | 6,678  |   |                  |   | 2,889 |   |   |   | 3,267 |   |   |   | 518 |   |   |   | 4 |   |
| Total minimum lease payments (1)    |   | ¥                   | 14,112 |   |                  | ¥ | 6,153 |   |   | ¥ | 5,872 |   |   | ¥ | 1,379 |   |   | ¥ | 708 |   |

| (1) | See Note 8 “Leases” to our consolidated financial statements included in this annual report. |
|-----|----------------------------------------------------------------------------------------------------------|

----

|                                                         |   | Fiscal year ended March 31, |   |
|--------------------------------------------------------------|--------|-----------------------------|--------|
|                                                         |   | 2008                        |   |   | 2009 |   |   | 2010 |   |
|                                                         |   | (millions of yen)           |   |
| Net cash provided by operating activities                    |   | ¥                      | 4,538  |   |   | ¥ | 8,631 |   |   | ¥ | 9,621 |   |
| Net cash used in investing activities                        |   |                        | (5,444 | ) |   |   | (3,328 | ) |   |   | (3,788 | ) |
| Net cash used in financing activities                        |   |                        | (1,152 | ) |   |   | (6,573 | ) |   |   | (7,238 | ) |
| Effect of exchange rate changes on cash and cash equivalents |   |                        | (26    | ) |   |   | (13 | ) |   |   | (19 | ) |
| Net decrease in cash and cash equivalents                    |   |                        | (2,084 | ) |   |   | (1,283 | ) |   |   | (1,424 | ) |
| Cash and cash equivalents at beginning of the year           |   |                        | 13,555 |   |   |   | 11,471 |   |   |   | 10,188 |   |
| Cash and cash equivalents at end of the year                 |   | ¥                      | 11,471 |   |   | ¥ | 10,188 |   |   | ¥ | 8,764 |   |

----

----

| ·   | Increased contracted bandwidth. Total contracted bandwidth for connectivity services for corporate user increased to 650.4 Gbps for the fiscal year ended March 31, 2010 from 530.5 Gbps for the previous fiscal year. The number of IP Service contracts for the bandwidth over 100Mbps increased to 379 for the fiscal year ended March 31, 2010 from 319 for the previous fiscal year. This increase is mainly due to an increase in customers' demand for higher bandwidth for their Internet connectivity. The total contracted bandwidth for connectivity services for corporate users are calculated by adding the contracted bandwidth for the each of the following service: IP Service, IIJ Data Center Connectivity Service and Broadband Services. The average monthly revenues per contract for IP Services were approximately ¥0.6 million at the end of March 2010, compared to the revenues per contract of ¥0.6 million at the end of March 2009. Though we do not expect revenue per contract to grow in the fiscal year ending March 31, 2011 due to continuing competition, we believe that customer demand for higher bandwidth will continue as the use of broadband by corporate customers expands, and we will try to acquire new customers and increase the bandwidth of existing customers as well as maintain the quality of our services to differentiate them from those of our competitors. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased demands for broadband services. Demand for broadband services such as IIJ FiberAccess/F, IIJ DSL/F and IIJ DSL/A are increasing steadily as the services are used more often to connect corporate branches and remote offices. The services uses ADSL lines at maximum 47 Mbps speed or optical lines at maximum 10 Mbps, 100 Mbps or 1Gbps as access lines. The number of contracts for IIJ FiberAccess/F and IIJ DSL/F increased to 28,663 for the fiscal year ended March 31, 2010 from 26,023 for the previous fiscal year. We also expect that it will also contribute to the increase of outsourcing services and systems integration revenues as usage and implementation of these connectivity services will increase the demand for outsourcing services such as security services and network systems integration. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased demands for Mobile Data Communications services. Demand for our mobile data communications service, IIJ Mobile Service, which is provided under MVNO is increasing rapidly after the introduction in January 2008. The number of contracts for IIJ Mobile Service increased to 32,315 for the fiscal year ended March 31, 2010 from 19,698 for the previous fiscal year. Corporate customers who are highly security conscious are looking for data communication services with high security features such as VPN access and private access. We also expect that it will also contribute to the increase of outsourcing services and systems integration revenues as usage and implementation of these connectivity services will increase the demand for outsourcing services such as security services and network systems integration. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| ·   | Increase in business usage. Our revenues will be affected by the extent and speed with which businesses in Japan exploit the Internet and network solutions to their full potential, including, for example, electronic transactions between businesses and expanding the range of devices that access the Internet. Such services require high-quality and high-capacity connectivity services for both businesses and individuals. Such services also require provision of total network solutions including various Internet connectivity services, systems integration and other outsourcing services which we believe we are well positioned to provide. The degree of business usage will also depend upon a variety of factors including: |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | technological advances, reliability of security systems and users’ familiarity with and confidence in new technologies, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | the rate at which Japanese companies in certain industries significantly increases their Internet usage, and |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | corporate budgets for information technologies, including Internet-related items. |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | Range of service offerings. To increase our revenues from business users, we provide a wide variety of services and are introducing new services. For Internet connectivity services, we added mobile access service. Additionally, we introduced security options for the mobile service which are accounted in outsourcing service revenues. We have also opened a new Internet data centers to strengthen our multi-site data center solutions. In November 2009, we launched our new cloud computing service “IIJ GIO”. We believe these steps will allow us to sell a greater variety of services to our high-end corporate users and to capture a greater amount of the current growth and demand. However, we will still be strongly dependent on Japanese companies and their Information Technology budgets. The weak Japanese economy is also expected to continue to affect our overall revenues, especially with respect to systems construction revenues. We expect Internet usage to continue to grow rapidly in Japan and that businesses will continue to diversify their uses of the Internet. Our ability to offer a broad range of services to meet our customers’ demands will significantly influence our future revenues. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Synergies between connectivity services, outsourcing services and systems integration. Most of our systems integration customers become Internet connectivity service customers as well, and we expect these relationships to continue. As part of our systems integration business, we offer solution services for corporate information network systems, consulting, project planning, system design and systems/operation outsourcing or Internet VPN solution services which combines the FLET’S Internet connectivity services with the SEIL, adopted by customers who have multiple locations, such as branches, offices and factories. The number of contracts concerning these services is steadily increasing and we seek to enlarge these network integration services with relatively high gross margin services. The ability to introduce a wide range of services, including solutions necessary to build corporate information network systems, like disaster recovery services and Internet VPN, Voice over IP (“VoIP”), SEIL, private mobile access solutions, SEIL/SMF and wireless LAN service, is an important competitive factor. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Synergies between group companies. The group works together as a team to provide network solutions to our customers, mainly corporate and governmental organizations. We expect to realize group synergy with IIJ-Global, a new subsidiary which became IIJ’s 100% owned consolidated subsidiary on September 1, 2010, by providing our network solution to the acquired customers through this acquisition, by providing WAN services to our client bases. Although how the revenue from this business will be accounted for is yet uncertain, we expect to expand the scale of our business through this acquisition. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Backbone cost. Backbone cost for the fiscal year ended March 31, 2010 was ¥3.7 billion, almost the same as the fiscal year ended March 31, 2009. We do not expect that our backbone cost will increase significantly as compared with recent fiscal years. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Dedicated local access line costs. We collect dedicated local access line fees from subscribers and pay these fees over to the carriers. Dedicated local access line costs for the fiscal year ended March 31, 2010 were ¥8.3 billion, increased by 1.9%, compared to the cost for the fiscal year ended March 31, 2009. This increase was mainly resulted from the increase in connectivity and outsourcing service revenues. Other connectivity costs were ¥0.5 billion for the fiscal year ended March 31, 2010, nearly the same as the previous fiscal year. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Interest expense. Most of our interest expense is from bank borrowing and capital leases. Interest income and interest expenses are also affected by the fluctuation of market interest rates and our total amount of outstanding borrowings. If we increase capital leases or borrowings in order to finance further development of our backbone, data centers and for other investments, interest expenses will increase. As we increased short-term bank borrowings relating to the acquisition of IIJ-Global from AT&T Japan on September 1, 2010, interest expenses will increase. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Impairment of other investments. We hold other investments comprised of available-for-sale securities, nonmarketable equity securities and funds. The book values of other investments are affected by the fluctuation in the market price or the decrease in fair values of nonmarketable investments and funds. If a decrease below cost in the market price or fair value of an investment is judged to be other than temporary, we will have impairment losses on other investments. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                        |   | Payments due by period (in millions of yen) |   |
|-----------------------------|--------|---------------------------------------------|--------|
| Contractual Obligations     |   | Total                                       |   |   | less than 1 year |   |   | 1-3 years |   |   | 3-5 years |   |   | more than 5 years |   |
| Capital lease obligations   |   |                                        | 6,678  |   |   |   | 2,889 |   |   |   | 3,267 |   |   |   | 518 |   |   |   | 4 |   |
| Operating lease obligations |   |                                        | 7,434  |   |   |   | 3,264 |   |   |   | 2,605 |   |   |   | 861 |   |   |   | 704 |   |
| Total (1) (2) (3) (4)       |   | ¥                                      | 14,112 |   |   | ¥ | 6,153 |   |   | ¥ | 5,872 |   |   | ¥ | 1,379 |   |   | ¥ | 708 |   |

| (1)   | In addition to the above; |
|-----------------|---------------------------|

| ·   | We plan to contribute ¥101 million to our defined benefit pension plan in the fiscal year ending March 31, 2011. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | In May 2006, in January 2007 and in January 2008, IIJ made agreements (three agreements in total) to invest in funds which invest mainly in unlisted stocks with an investment advisory company. IIJ committed to provide up to $5 million for each fund ($15 million in total) at its request in several future years. IIJ has provided a total of ¥650 million ($6,959 thousand) to them as of March 31, 2010.  (Please refer to Note 15 to our consolidated financial statements). |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The table above does not include short term borrowings. For short term borrowings, see Item 5.B “Liquidity and Capital Resource” and Note 9 “Borrowings” to our consolidated financial statements included in this annual report on Form-20F. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | The table above does not include obligations for interest payments on debt, as such payments are not material. For interest payments regarding capital lease, see Note 8 “Lease” to our consolidated financial statements included in this annual report on Form 20-F. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | The table above does not include an unrecognized tax benefit of ¥9 million. For unrecognized tax benefit, see Note 10 “Income Taxes” to our consolidated financial statements included in this annual report on Form 20-F. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | that we may not be able to achieve or sustain profitability in the near future, |
|--------------------|---------------------------------------------------------------------------------|

| ·   | that we may not be able to compete effectively against competitors which have greater financial, marketing and other resources, and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | that our investments in our subsidiaries and affiliated companies may not produce the returns that we expect or may adversely affect our results of operations and financial condition. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 

| Name                |   | Position                                                                |   | Date of birth           |   | Current term expires |   | Initial appointment date |   | Numbers of Shares Owned (1) |   | Percentage of Shares Owned (1) |
|---------------------|--------|-------------------------------------------------------------------------|--------|-------------------------|--------|----------------------|--------|--------------------------|--------|-----------------------------|--------|--------------------------------|
| Koichi Suzuki       |   | President, Chief Executive Officer and Representative Director          |   | Sep. 3, 1946            |   | June 2011            |   | Dec. 1992                |   | 12,893                      |   | 6.24%                          |
| Senji Yamamoto      |   | Executive Vice President                                                |   | Apr. 14, 1946           |   | June 2012            |   | June 2006                |   | 80                          |   | 0.04%                          |
| Hideshi Hojo        |   | Senior Managing Director                                                |   | Dec. 22, 1957           |   | June 2011            |   | June 2000                |   | 108                         |   | 0.05%                          |
| Takeshi Kikuchi     |   | Senior Managing Director                                                |   | Apr. 27, 1959           |   | June 2012            |   | June 2010                |   | 292                         |   | 0.14%                          |
| Hitoshi Imafuku     |   | Senior Managing Director                                                |   | Apr. 2,  1957 |   | June 2011            |   | June 2009                |   | 2                           |   | 0.00%                          |
| Takamichi Miyoshi   |   | Managing Director                                                       |   | May 5, 1963             |   | June 2012            |   | June 2002                |   | 393                         |   | 0.19%                          |
| Akihisa Watai       |   | Managing Director, Chief Financial Officer and Chief Accounting Officer |   | Sep. 30, 1965           |   | June 2012            |   | June 2004                |   | 52                          |   | 0.03%                          |
| Yasurou Tanahashi   |   | Director                                                                |   | Jan. 4, 1941            |   | June 2012            |   | June 2004                |   | 0                           |   | —                        |
| Takashi Hiroi       |   | Director                                                                |   | Feb. 13, 1963           |   | June 2012            |   | June 2004                |   | 0                           |   | —                        |
| Junnosuke Furukawa  |   | Director                                                                |   | Dec. 5, 1935            |   | June 2011            |   | June 2005                |   | 0                           |   | —                        |
| Shingo Oda          |   | Director                                                                |   | Nov. 8, 1944            |   | June 2012            |   | June 2008                |   | 0                           |   | —                        |
| Yoshifumi Nishikawa |   | Director                                                                |   | Aug. 3, 1938            |   | June 2012            |   | June 2005                |   | 0                           |   | —                        |
|                |   |                                                                    |   |                    |   |                 |   |                     |   |                        |   |                           |
| Kazuhiro Ohira      |   | Company Auditor                                                         |   | Dec. 26, 1957           |   | June 2012            |   | June 2010                |   | 0                           |   | —                        |
| Shunichi Kozasa     |   | Company Auditor                                                         |   | Jan. 11, 1949           |   | June 2013            |   | June 2010                |   | 100                         |   | 0.05%                          |
| Masaki Okada        |   | Company Auditor                                                         |   | Jan. 9, 1959            |   | June 2012            |   | June 2004                |   | 0                           |   | —                        |
| Masaaki Koizumi     |   | Company Auditor                                                         |   | Oct. 4, 1964            |   | June 2012            |   | June 2004                |   | 0                           |   | —                        |

| _________ |
|-----------|

| (1)   | The number of IIJ shares owned as of September 17, 2010. |
|-----------------|----------------------------------------------------------|

----

----

| Name              |   | Position                   |   | Responsibility                                                                                |
|-------------------|--------|----------------------------|--------|-----------------------------------------------------------------------------------------------|
| Tsutomu Yoshihara |   | Senior Executive Officer   |   | Chief Information Officer                                                                     |
| Chiaki Furuya     |   | Senior Executive Officer   |   | Senior Executive Officer of Administrative Division                                           |
| Masayoshi Tobita  |   | Executive Managing Officer |   | Executive Managing Officer of Administrative Division OperationManagement Department          |
| Kazuhiro Tokita   |   | Executive Managing Officer |   | Executive Managing Officer of Financial Systems Business Division                             |
| Junichi Shimagami |   | Executive Managing Officer |   | Executive Managing Officer of Service Division                                                |
| Kiyoshi Ishida    |   | Executive Officer          |   | Executive Officer of SEIL Business Unit                                                       |
| Yasumitsu Iizuka  |   | Executive Officer          |   | Executive Officer of Government, Public & Educational Organization Business Division |
| Kokichi Matsumoto |   | Executive Officer          |   | Executive Officer of Marketing Division                                                       |

| B. | Compensation. |
|----|---------------|

|                                                                                                                                                                                                                                                                                                               |   |                           |   | Breakdown of Compensation (in millions of yen) |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|------------------------------------------------|--------|--------|
| Position                                                                                                                                                                                                                                                                                                           |   |   Total Compensation |   | Base Salary                                    |   |   | Liability for Retirement Benefit |   |   | Others |   |   Number of Persons |
| Directors*                                                    |   | ¥225                      |   |                                           |   |   | ¥200 |   |   | ¥24 |   |   | ¥1 |   |  11 |
| Company Auditors**                                                 |   |  4                        |   |                                           |   |   | 4 |   |   | - |   |   | - |   |  1 |
| Outside Directors/ Outside Company Auditors                                                                                                                                                                                                                                                                        |   |  31                       |   |                                           |   |   | 30 |   |   | 1 |   |   | 0 |   |  6 |

|   | _________ |
|--------|-----------|

| (1)   | Starting with its annual securities report for the year ended March 31, 2010 filed with the Ministry of Finance, a Japanese listed company is required to disclose the individual compensation of any director, executive officer or corporate auditor if it is ¥100 million or more. For fiscal 2010, there were no director, executive officer or corporate auditor received compensation of over ¥100 million. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Upper limits on compensation for directors and company auditors are determined at a general meeting of shareholders of the Company. Within the upper limit approved by the shareholders' meeting, the Board of Directors will resolve the amount of compensation for each director and the Board of Company Auditors will determine the amount of compensation for each company auditor, respectively |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| C. | Board Practices. |
|----|------------------|

----

| D. | Employees. |
|----|------------|

|           | For the fiscal year ended March 31, |
|----------------|-------------------------------------|
|           | 2008                                | 2009 | 2010 |
|           | (number of employees)               |
| Engineering    | 941                                 | 1,075 | 1,136 |
| Sales          | 245                                 | 298 | 297 |
| Administration | 187                                 | 229 | 254 |
|           |                                |   |   |

| E. | Share Ownership. |
|----|------------------|

| ·   | June 2001 Stock Option Plan. In June 2001, we implemented a stock option plan under which 395 options to acquire a total of 1,975 shares or 790,000 ADS equivalents, or approximately 1.8% of total outstanding shares on that date, were granted to 44 directors and employees on August 2, 2001. The option exercise price for the shares was determined by setting the price 5% above the 30-days average of the closing market prices beginning 45 days prior to the date of the grant which was ¥403,661 per share and has been adjusted to ¥334,448 as a result of issuances of common shares. The options became fully vested on June 28, 2003 and are exercisable for eight years from that date. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | April 2000 Stock Option Plan. In April 2000, we implemented a stock option plan under which our directors and employees were granted 295 options to acquire a total of 1,475 shares or 590,000 ADS equivalents, or approximately 1.2% of total outstanding shares on that date. The options were granted to 34 directors and employees on May 31, 2000. The option exercise price was determined by setting the price at 5% above the 30-day moving average of closing market prices beginning 45 days prior to the date of grant, which was ¥2,611,112 per share and has been subsequently adjusted to ¥2,163,418 as a result of issuances of common shares. The options expired in April 2010, which were exercisable for eight years from April 8, 2002, the date on which the options became fully vested. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 

|                                                          |   | Outstanding Voting Sharesas of March 31, 2010 (3) |   |
|---------------------------------------------------------------|--------|---------------------------------------------------|--------|
|                                                          |   | Number                                            |   |   | Percentage |   |
| Nippon Telegraph and Telephone Corporation and affiliates (1) |   |                                              | 60,675 |   |   |   | 30.0 | % |
| Koichi Suzuki                                                 |   |                                              | 12,873 |   |   |   | 6.4 |   |
| Itochu Corporation                                            |   |                                              | 10,430 |   |   |   | 5.1 |   |
| Directors and executive officers as a group (2)               |   |                                              | 13,663 |   |   |   | 6.7 |   |

| ___________ |
|-------------|

| (1)   | Includes NTT, which owns 50,475 shares, or 24.9% of our outstanding voting shares and 24.4% of our total issued shares, and NTT Communications, which owns 10,200 shares, or 5.0% of our outstanding voting shares and 4.9% of our total issued shares. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Includes Koichi Suzuki’s holdings which are also separately set forth above. No other director or executive officer except for Koichi Suzuki is a beneficial owner of more than 5%. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | As of March 31, 2010, the Company held 3,934 shares of the Company as treasury stock. |
|-----------------|---------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                                                                                                                                    |   | millions of yen |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|--------|
| Accounts receivable                                               |   | ¥          | 68     |   |
| Accounts payable                                                  |   |            | 25     |   |
| Revenues                                                          |   |            | 676    |   |
| Costs and expenses                                                |   |            | 261    |   |

| ·   | any enterprise that directly or indirectly controls, is controlled by, or is in common control with us or any of our subsidiaries, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any director, officer, company auditor or family member of any of the preceding or any enterprise over which such person directly or indirectly is able to exercise significant influence, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any individual shareholder directly or indirectly having significant influence over us or any of our subsidiaries or a family member of such individual or any enterprise over which such person directly or indirectly is able to exercise significant influence, or their respective family members or enterprises over which they exercise significant influence, or |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any unconsolidated enterprise in which we have a significant influence or which has a significant influence over us. |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

----

Item 

----

Item 

|                               |   | Nasdaq (1)(per ADS) |   |   | TSE (1) (2)(per share of common stock) |   |
|------------------------------------|--------|---------------------|--------|--------|----------------------------------------|--------|
| Fiscal year ended/ending March 31, |   | High                |   |   | Low                                    |   |   | High |   |   | Low |   |
| 2006                               |   | $                   | 14.88  |   |                                   | $      | 3.04 |   |   | ¥ | 584,000 |   |   | ¥ | 409,000 |   |
| 2007                               |   |                | 10.65  |   |                                   |   | 6.41 |   |   |   | 517,000 |   |   |   | 296,000 |   |
| 2008                               |   |                | 11.00  |   |                                   |   | 6.21 |   |   |   | 490,000 |   |   |   | 270,000 |   |
| 2009                               |   |                | 9.72   |   |                                   |   | 1.80 |   |   |   | 428,000 |   |   |   | 71,800 |   |
| First Quarter                      |   |                | 9.72   |   |                                   |   | 7.80 |   |   |   | 428,000 |   |   |   | 315,000 |   |
| Second Quarter                     |   |                | 9.40   |   |                                   |   | 3.97 |   |   |   | 417,000 |   |   |   | 176,100 |   |
| Third Quarter                      |   |                | 5.38   |   |                                   |   | 1.82 |   |   |   | 251,900 |   |   |   | 71,800 |   |
| Fourth Quarter                     |   |                | 3.43   |   |                                   |   | 1.80 |   |   |   | 107,800 |   |   |   | 77,900 |   |
| 2010                               |   |                | 6.33   |   |                                   |   | 2.50 |   |   |   | 246,400 |   |   |   | 99,500 |   |
| First Quarter                      |   |                | 4.40   |   |                                   |   | 2.50 |   |   |   | 169,000 |   |   |   | 99,500 |   |
| Second Quarter                     |   |                | 6.33   |   |                                   |   | 3.65 |   |   |   | 246,400 |   |   |   | 137,800 |   |
| Third Quarter                      |   |                | 6.26   |   |                                   |   | 4.48 |   |   |   | 233,900 |   |   |   | 162,600 |   |
| Fourth Quarter                     |   |                | 5.84   |   |                                   |   | 4.09 |   |   |   | 219,500 |   |   |   | 150,700 |   |
| 2011                               |   |                |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| First Quarter                      |   |                | 7.66   |   |                                   |   | 5.13 |   |   |   | 288,900 |   |   |   | 194,100 |   |
| Month                              |   |                |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| March 2010                         |   |                | 5.84   |   |                                   |   | 4.84 |   |   |   | 219,500 |   |   |   | 171,000 |   |
| April 2010                         |   |                | 6.43   |   |                                   |   | 5.13 |   |   |   | 244,000 |   |   |   | 195,700 |   |
| May 2010                           |   |                | 6.46   |   |                                   |   | 5.45 |   |   |   | 259,300 |   |   |   | 194,100 |   |
| June 2010                          |   |                | 7.66   |   |                                   |   | 5.43 |   |   |   | 288,900 |   |   |   | 198,700 |   |
| July 2010                          |   |                | 8.37   |   |                                   |   | 6.70 |   |   |   | 292,000 |   |   |   | 235,000 |   |
| August 2010                        |   |                | 7.43   |   |                                   |   | 5.90 |   |   |   | 258,500 |   |   |   | 202,000 |   |
| September 2010(3)             |   |                | 6.82   |   |                                   |   | 6.14 |   |   |   | 234,700 |   |   |   | 206,700 |   |

| ___________ |
|-------------|

|   | (1) | Price data are based on prices throughout the sessions for each corresponding period at each stock exchange. |
|--------|-----|--------------------------------------------------------------------------------------------------------------|

|   | (2) | Our shares of common stock had been quoted on the Mothers market of the TSE since December 2, 2005 and were transferred to the First Section of the TSE on December 14, 2006. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | The high and low prices of our ADSs and shares of common stock were the prices quoted during the period, from August 1, 2010 to September 27, 2010. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 

| ·   | Telecommunications business under the Telecommunications Business Law, |
|--------------------|------------------------------------------------------------------------|

| ·   | Processing, mediation and provision of information and contents by using telecommunications networks, |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | Agency for the management business such as the management of networks and the management of information and telecommunications systems, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Planning, consulting service, development, operation and maintenance of or for information and telecommunications systems, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | Development, sales, lease and maintenance of computer software, |
|--------------------|-----------------------------------------------------------------|

| ·   | Development, sales, lease and maintenance of telecommunications machinery and equipment, |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | Telecommunications construction, |
|--------------------|----------------------------------|

| ·   | Agency for non-life insurance, |
|--------------------|--------------------------------|

| ·   | Research, study, education and training related to the foregoing, and |
|--------------------|-----------------------------------------------------------------------|

| ·   | Any and all businesses incidental or related to the foregoing. |
|--------------------|----------------------------------------------------------------|

----

| ·   | the right to receive dividends when the payment of dividends has been approved at a shareholders' meeting, with this right lapsing three full years after the due date for payment according to a provision in our Articles of Incorporation, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the right to receive interim dividends as provided for in our Articles of Incorporation, with this right lapsing three full years after the due date for payment according to a provision in our Articles of Incorporation, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the right to vote at a shareholders' meeting (cumulative voting is not allowed under our Articles of Incorporation), |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | the right to receive surplus in the event of liquidation, and |
|--------------------|---------------------------------------------------------------|

| ·   | the right to require us to purchase shares subject to certain requirements under the Corporation Law of Japan when a shareholder opposes certain resolutions including (i) the transfer of all or material part of the business, (ii) an amendment of the Articles or Incorporation to establish a restriction on share transfer, (iii) a share exchange or share transfer to establish a holding company, (iv) company split or (v) merger, all of which must in principle, be approved by a Special Resolution of Shareholders’ meeting. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a reduction of the stated capital, (expect when a company reduces the stated capital within certain amount provided for under the Corporation Law of Japan concurrently with a share issue), |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | amendment of our Articles of Incorporation (except amendments that the Board of Directors are authorized to make under the Corporation Law of Japan), |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | establishment of a 100% parent-subsidiary relationship through a share exchange or share transfer requiring shareholders’ approval, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a dissolution, merger or consolidation requiring shareholders’ approval, |
|--------------------|--------------------------------------------------------------------------------|

| ·   | a company split requiring shareholders’ approval, |
|--------------------|---------------------------------------------------------|

| ·   | a transfer of the whole or an important part of our business, |
|--------------------|---------------------------------------------------------------|

| ·   | the taking over of the whole of the business of any other corporation requiring shareholders’ approval, and |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| ·   | issuance of new shares at a specially favorable price, or issuance of stock acquisition rights or bonds with stock acquisition rights with specially favorable conditions to persons other than shareholders. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | dissolution, and |
|--------------------|------------------|

| ·   | commencement of reorganization proceedings as provided for in the Company Reorganization Law of Japan. |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | demand the convening of a general meeting of shareholders, |
|--------------------|------------------------------------------------------------|

| ·   | apply to a competent court for removal of a director or company auditor, |
|--------------------|--------------------------------------------------------------------------|

| ·   | apply to a competent court for removal of a liquidator, and |
|--------------------|-------------------------------------------------------------|

| ·   | apply to a competent court for an order to inspect our business and assets in a special liquidation proceeding. |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | examine our accounting books and documents and make copies of them, and |
|--------------------|-------------------------------------------------------------------------|

| ·   | apply to a competent court for appointment of an inspector to inspect our operation or financial condition. |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | the institution of an action to enforce the liability of one of our directors or company auditors, |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | the institution of an action to recover from a recipient the benefit of a proprietary nature given in relation to the exercise of the right of a shareholder, and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a director on our behalf for the cessation of an illegal or ultra vires action. |
|--------------------|---------------------------------------------------------------------------------|

----

|   | (i) through market transactions on a stock exchange on which our shares are listed or by way of tender offer (in either case pursuant to a resolution of the Board of Directors as currently authorized by our Articles of Incorporation); |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) from a specific shareholder other than any of our subsidiaries (pursuant to a special resolution of a general meeting of shareholders); or |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) from any of our subsidiaries (pursuant to a resolution of the Board of Directors). |
|--------|------------------------------------------------------------------------------------------|

----

----

|   | • | individuals who are Non-residents of Japan; |
|--------|---------|---------------------------------------------|

|   | • | corporations which are organized under the laws of foreign countries or whose principal offices are located outside of Japan; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | • | corporations (i) of which 50% or more of their voting rights are held by individuals who are Non-residents of Japan and/or corporations which are organized under the laws of foreign countries or whose principal offices are located outside of Japan or (ii) a majority of whose officers, or officers having the power of representation, are individuals who are Non-residents of Japan. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | the overall tax consequences of the acquisition, ownership and disposition of shares or ADSs, including specifically the tax consequences under Japanese law, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the laws of the jurisdiction of which they are resident, and |
|--------------------|--------------------------------------------------------------|

| ·   | any tax treaty between Japan and their country of residence, by consulting their own tax advisers. |
|--------------------|----------------------------------------------------------------------------------------------------|

----

| ·   | tax-exempt entities, |
|--------------------|----------------------|

| ·   | life insurance companies, |
|--------------------|---------------------------|

| ·   | dealers in securities, |
|--------------------|------------------------|

| ·   | traders in securities that elect to use a mark-to-market method of accounting for securities holdings, |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | investors liable for alternative minimum tax, |
|--------------------|-----------------------------------------------|

| ·   | investors that actually or constructively own 10% or more of the voting stock of IIJ, |
|--------------------|---------------------------------------------------------------------------------------|

| ·   | investors that hold shares or ADSs as part of a straddle or a hedging or conversion transaction, or |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | investors whose functional currency is not the U.S. dollar. |
|--------------------|-------------------------------------------------------------|

| ·   | a citizen or resident of the United States, |
|--------------------|---------------------------------------------|

| ·   | a domestic corporation, |
|--------------------|-------------------------|

| ·   | an estate whose income is subject to United States federal income tax regardless of its source, or |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | at least 75% of our gross income for the taxable year is passive income, or |
|--------------------|-----------------------------------------------------------------------------|

| ·   | at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | any gain you realize on the sale or other disposition of your shares or ADSs, and |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | any “excess distribution” that we make to you (generally, any distributions to you during a single taxable year that are greater than 125% of the average annual distributions received by you in respect of the shares or ADSs during the three preceding taxable years or, if shorter, your holding period for the shares or ADSs). |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the gain or excess distribution will be allocated ratably over your holding period for the shares or ADSs, |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | the amount allocated to the taxable year in which you realized the gain or excess distribution will be taxed as ordinary income, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year, and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

----

Item 

----

Item 

| Services                                                                                                                                                                                                                                                                                                                                                        |   | Fees (USD)                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|
| Taxes and other governmental charges                                                                                                                                                                                                                                                                                                                            |   | As applicable                 |
| Such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Shareholders’ register of the Issuer or Foreign Registrar and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder |   | As applicable                 |
| Such cable, telex and facsimile transmission expenses as are expressly provided in this Deposit Agreement                                                                                                                                                                                                                                                       |   | As applicable                 |
| Such expenses as are incurred by the Depositary in the conversion of Foreign Currency                                                                                                                                                                                                                                                                           |   | As applicable                 |
| The execution and delivery of Receipts and the surrender of Receipts                                                                                                                                                                                                                                                                                            |   | $5.00 or less per 100 ADR     |
| Any cash distribution made pursuant to the Deposit Agreement                                                                                                                                                                                                                                                                                                    |   | $.02 or less per ADR          |
| Receipt or Receipts for transfers made                                                                                                                                                                                                                                                                                                                          |   | $1.50 or less per certificate |
| The distribution of securities, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a results of the deposit of such securities, but which securities are instead distributed by the Depositary to Owners                                              |   | As applicable                 |

----

PART 

Item 

Item 

Item 

|   | ● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

Item 

Item 

Item 

|               | Fiscal year ended March 31, |
|--------------------|-----------------------------|
|               | 2009                        |   | 2010 |
|               | (millions of yen)           |
|               |                        |   |   |
| Audit fees (1)     | 97                          |   | 105 |
| Audit-related fees | -                    |   | - |
| Tax fees (2)       | 12                          |   | 23 |
| All other fees     | -                    |   | - |
| Total fees         | 109                         |   | 128 |

| __________ |
|------------|

| (1) | These are the aggregate fees billed for the fiscal year for professional services rendered by Deloitte Touche Tohmatsu for the audit of our annual financial statements, the audit of our internal control over financial reporting and services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | These are the aggregate fees billed for the fiscal year for professional services rendered by member firms of Deloitte Touche Tohmatsu, such as Deloitte Tax LLP, for tax compliance, tax advice and tax planning. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 

| ·   | The Board of Company Auditors must be established, and its members must be selected, pursuant to Japanese law expressly requiring such a board for Japanese companies that elect to have a corporate governance system with company auditors, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Japanese law must and does require the Board of Company Auditors to be separate from the Board of Directors, |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | None of the members of the Board of Company Auditors may be elected by management, and none of the listed company’s executive officers may be a member of the Board of Company Auditors, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Japanese law must and does set forth standards for the independence of the members of the Board of Company Auditors from the listed company or its management, and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Board of Company Auditors, in accordance with Japanese law or the registrant’s governing documents, must be responsible, to the extent permitted by Japanese law, for the appointment, retention and oversight of the work of any registered public accounting firm engaged (including, to the extent permitted by Japanese law, the resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the listed company, including its principal accountant which audits its consolidated financial statements included in its annual reports on Form 20-F. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Board of Company Auditors must establish procedures for (i) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls, or auditing matters, and (ii) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Board of Company Auditors must have the authority to engage independent counsel and other advisers, as it determines necessary to carry out its duties, and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The listed company must provide for appropriate funding, as determined by its Board of Company Auditors, for payment of (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us, (ii) compensation to any advisers employed by the Board of Company Auditors, and (iii) ordinary administrative expenses of the Board of Company Auditors that are necessary or appropriate in carrying out its duties. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Item 

Item 

----

Item 

----

PART 

Item 

Item 

----

Item 

| 1.1    |   | Articles of Incorporation, as amended (English translation)1                                                                                                                                                    |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.2    |   | Share Handling Regulations, as amended (English translation) 1                                                                                                                                                  |
| 1.3    |   | Regulations of the Board of Directors, as amended (English translation)                                                                                                                                         |
| 1.4    |   | Regulations of the Board of Company Auditors, as amended (English translation)2                                                                                                                                 |
| 2.1    |   | Bylaws of the IIJ Group Employee Shareholders’ Association (English translation)                                                                                                                          |
| 2.2    |   | Form of Deposit Agreement among IIJ, The Bank of New York Mellon as depositary and all owners and holders from time to time of American Depositary Receipts, including the form of American Depositary Receipt3 |
| 2.3    |   | Bylaws of the IIJ Group Director Stock Purchase Plan (English translation)                                                                                                                                      |
| 4.1    |   | Shareholders’ Agreement Relating to the Establishment of INTERNET MULTIFEED CO., dated August 20, 1997, between Nippon Telegraph and Telephone Corporation and the Registrant (English translation)4 |
| 4.2    |   | Basic Agreement to Delegate Services, dated April 1, 1998, between Internet Initiative Japan Inc. and Net Care, Inc. (English translation)4                                                                |
| 4.3    |   | Joint Venture Agreement, dated January 19, 2006, between Internet Initiative Japan Inc. and Konami Corporation (English translation)5                                                                           |
| 4.4    |   | Service Agreement, dated March 25, 2004, between Internet Initiative Japan Inc. and IIJ America Inc.6                                                                                                           |
| 4.5    |   | Agreement on Limited Liability, dated June 27, 2008, June 26, 2009 and June 25, 2010, between Internet Initiative Japan Inc. and outside directors and outside company auditors7                                |
| 4.6    |   | Stock Purchase Agreement, dated June 1, 2010, between Internet Initiative Japan Inc. and AT&T Japan LLC.8                                                                                                   |
| 4.7    |   | Solutions Engagement Agreement, dated May 31, 2010 between Communications Services KK (changed its trade name to IIJ-Global Solutions Inc. on September 1, 2010) and IBM Japan, Ltd.8                           |
| 4.8    |   | Guaranty Letter Related to the Solutions Engagement Agreement between IBM Japan Ltd and Communications Services KK, dated June 1, 2010.8                                                                        |
| 8.1    |   | List of Significant Subsidiaries (See “Our Group Companies” in Item 4.B. of this Form 20-F)                                                                                               |
| 11.1   |   | Internet Initiative Japan Code of Conduct9                                                                                                                                                                      |
| 12.1   |   | Certification of the principal executive officer required by 17 C.F.R. 240. 13a-14(a)                                                                                                                           |
| 12.2   |   | Certification of the principal financial officer required by 17 C.F.R. 240. 13a-14(a)                                                                                                                           |
| 13.1   |   | Certification of the chief executive officer required by 18 U.S.C. Section 1350                                                                                                                                 |
| 13.2   |   | Certification of the chief financial officer required by 18 U.S.C. Section 1350                                                                                                                                 |
|   |   |                                                                                                                                                                                                            |

| _____________ |
|---------------|

| (1) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on September 29, 2009. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on August 3, 2005. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Incorporated by reference to the Registration Statement on Form F-6 (File No. 333-110862) filed on December 2, 2003. |
|-----|----------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated by reference to the corresponding exhibit to our Form F-1 Registration Statement (File No. 333-10584) declared effective on August 3, 1999. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on July 11, 2006. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on July 23, 2004. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| (7) | We entered into a Limitation of Liability Agreement with Mr. Masaki Okada and Mr. Masaaki Koizumi as our outside company auditors on June 27, 2008, with Mr. Junnosuke Furukawa as our outside director on June 26, 2009 and with Mr. Yasurou Tanahashi, Mr. Takashi Hiroi and Mr. Shingo Oda as our outside directors on June 25, 2010. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Schedules, annexes and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. IIJ agrees to furnish supplementary copies of the omitted schedules, annexes and similar attachments to the SEC upon request. A list briefly describing the omitted schedules, annexes and similar attachments are contained in this exhibit. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on June 30, 2008. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

----

|   | By: | /s/ Koichi Suzuki |   |
|--------|-----|-------------------|--------|

|   | Name: | Koichi Suzuki |
|--------|-------|---------------|

|   | Title: | President, Chief Executive Officer |
|--------|--------|------------------------------------|

|   | and Representative Director |
|--------|-----------------------------|

----

|                                                                                                           | Page   |
|----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                           |   |
| Report of Independent Registered Public Accounting Firm                                                        | F-2    |
|                                                                                                           |   |
| Consolidated Balance Sheets as of March 31, 2009 and 2010                                                      | F-3    |
|                                                                                                           |   |
| Consolidated Statements of Income for Each of the Three Years in the Period Ended March 31, 2010               | F-5    |
|                                                                                                           |   |
| Consolidated Statements of Shareholders' Equity for Each of the Three Years in the Period Ended March 31, 2010 | F-7    |
|                                                                                                           |   |
| Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended March 31, 2010           | F-9    |
|                                                                                                           |   |
| Notes to Consolidated Financial Statements                                                                     | F-12   |

----

Report 

----

Internet 

----

|                                                                                                                                                                                                                                                                                                                                           |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars(Note 1) |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|----------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                           |   | 2009             |       |   | 2010                             |   |   | 2010 |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                         |   |             |       |   |                             |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |
| CURRENT ASSETS:                                                                                                                                                                                                                                                                                                                                |   |             |       |   |                             |   |   |   |   |
| Cash and cash equivalents (Note 16)                                                                                                                                                                                                                                                                                                            |   | ¥           | 10,187,724 |   |                             | ¥ | 8,764,415 |   |   | $ | 93,838 |   |
| Accounts receivable, net of allowance for doubtful accounts of ¥22,072 thousand and ¥37,178 thousand ($398 thousand) at March 31, 2009 and 2010, respectively (Notes 4, 5 and 20)                                                                                                                                               |   |             | 10,256,527 |   |                             |   | 11,396,597 |   |   |   | 122,019 |   |
|     Inventories (Note 2)                                                                                                                                                                                                                                                                                                   |   |             | 529,756    |   |                             |   | 807,803 |   |   |   | 8,649 |   |
| Prepaid expenses                                                                                                                                                                                                                                                                                                                               |   |             | 1,771,955  |   |                             |   | 1,593,000 |   |   |   | 17,056 |   |
|     Deferred tax assets – current (Note 10)                                                                                                                                                                                                                                                                          |   |             | 762,221    |   |                             |   | 1,570,746 |   |   |   | 16,817 |   |
| Other current assets, net of allowance for doubtful accounts of ¥11,720 thousand and ¥720 thousand ($8 thousand) at March 31, 2009 and 2010, respectively (Notes 4 and 8)                                                                                                                                                            |   |             | 848,586    |   |                             |   | 762,081 |   |   |   | 8,159 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| Total current assets                                                                                                                                                                                                                                                                                                                           |   |             | 24,356,769 |   |                             |   | 24,894,642 |   |   |   | 266,538 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| INVESTMENTS IN EQUITY METHOD INVESTEES (Note 5)                                                                                                                                                                                                                                                                                                |   |             | 947,626    |   |                             |   | 1,131,354 |   |   |   | 12,113 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| OTHER INVESTMENTS (Notes 3, 15, 16 and 17)                                                                                                                                                                                                                                                                                                     |   |             | 1,914,594  |   |                             |   | 2,581,610 |   |   |   | 27,640 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| PROPERTY AND EQUIPMENT—Net (Notes 6 and 8)                                                                                                                                                                                                                                                                                               |   |             | 13,172,891 |   |                             |   | 12,970,152 |   |   |   | 138,867 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| GOODWILL (Note 7)                                                                                                                                                                                                                                                                                                                              |   |             | 2,639,319  |   |                             |   | 2,639,319 |   |   |   | 28,258 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| OTHER INTANGIBLE ASSETS—Net (Note 7)                                                                                                                                                                                                                                                                                                     |   |             | 3,201,806  |   |                             |   | 2,819,187 |   |   |   | 30,184 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| GUARANTEE DEPOSITS (Notes 8)                                                                                                                                                                                                                                                                                                                   |   |             | 2,072,652  |   |                             |   | 2,003,862 |   |   |   | 21,455 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| DEFERRED TAX ASSETS – Noncurrent (Note 10)                                                                                                                                                                                                                                                                                               |   |             | 2,253,464  |   |                             |   | 685,370 |   |   |   | 7,338 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| OTHER ASSETS, net of allowance for doubtful accounts of ¥72,800 thousand and  ¥91,319 thousand ($978 thousand) at March 31, 2009 and 2010, respectively, and  net of loan loss valuation allowance of ¥16,701 thousand ($179 thousand) at March 31, 2009 and 2010, respectively (Notes 4, 5, 8 and 16) |   |             | 1,742,078  |   |                             |   | 1,389,954 |   |   |   | 14,882 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| TOTAL                                                                                                                                                                                                                                                                                                                                          |   | ¥           | 52,301,199 |   |                             | ¥ | 51,115,450 |   |   | $ | 547,275 |   |

----

----

|                                                                                                             |   | Thousands of Yen |        |   | Thousands ofU.S. Dollars(Note 1) |   |
|------------------------------------------------------------------------------------------------------------------|--------|------------------|-------------|--------|----------------------------------|--------|
|                                                                                                             |   | 2009             |        |   | 2010                             |   |   | 2010 |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                             |   |             |        |   |                             |   |   |   |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |
| CURRENT LIABILITIES:                                                                                             |   |             |        |   |                             |   |   |   |   |
| Short-term borrowings (Note 9)                                                                                   |   | ¥           | 7,350,000   |   |                             | ¥ | 4,450,000 |   |   | $ | 47,644 |   |
| Capital lease obligations—current portion (Note 8)                                                         |   |             | 3,272,257   |   |                             |   | 2,729,673 |   |   |   | 29,226 |   |
| Accounts payable (Notes 5 and 20)                                                                                |   |             | 6,064,829   |   |                             |   | 6,967,654 |   |   |   | 74,600 |   |
| Accrued expenses                                                                                                 |   |             | 1,069,310   |   |                             |   | 1,184,483 |   |   |   | 12,682 |   |
| Accrued retirement and pension costs-current (Note 11)                                                           |   |             | 11,959      |   |                             |   | 14,539 |   |   |   | 156 |   |
| Deferred income                                                                                                  |   |             | 1,255,749   |   |                             |   | 1,445,174 |   |   |   | 15,473 |   |
| Other current liabilities                                                                                        |   |             | 763,544     |   |                             |   | 922,345 |   |   |   | 9,875 |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| Total current liabilities                                                                                        |   |             | 19,787,648  |   |                             |   | 17,713,868 |   |   |   | 189,656 |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| CAPITAL LEASE OBLIGATIONS—Noncurrent (Note 8)                                                              |   |             | 4,866,120   |   |                             |   | 3,657,657 |   |   |   | 39,161 |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| ACCRUED RETIREMENT AND PENSION COSTS—Noncurrent (Note 11)                                                  |   |             | 1,399,592   |   |                             |   | 1,302,054 |   |   |   | 13,941 |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| DEFERRED TAX LIABILITIES – Noncurrent (Note 10)                                                            |   |             | 167,611     |   |                             |   | 212,773 |   |   |   | 2,278 |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| OTHER NONCURRENT LIABILITIES                                                                                     |   |             | 837,309     |   |                             |   | 865,395 |   |   |   | 9,266 |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| Total liabilities                                                                                                |   |             | 27,058,280  |   |                             |   | 23,751,747 |   |   |   | 254,302 |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| COMMITMENTS AND CONTINGENCIES (Note 15)                                                                          |   |             |        |   |                             |   |   |   |   |   |   |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| SHAREHOLDERS' EQUITY (Notes 3, 11, 12 and 13):                                                                   |   |             |        |   |                             |   |   |   |   |   |   |   |
| Common stock—authorized, 377,600 shares; issued and outstanding, 206,478 shares at March 31, 2009 and 2010 |   |             | 16,833,847  |   |                             |   | 16,833,847 |   |   |   | 180,234 |   |
| Additional paid-in capital                                                                                       |   |             | 27,611,737  |   |                             |   | 27,443,600 |   |   |   | 293,829 |   |
| Accumulated deficit                                                                                              |   |             | (18,549,142 | )      |                             |   | (16,720,092 | ) |   |   | (179,016 | ) |
| Accumulated other comprehensive income (loss)                                                                    |   |             | (320,711    | )      |                             |   | 168,769 |   |   |   | 1,807 |   |
| Treasury stock—3,934 shares at March 31, 2009 and 2010                                                     |   |             | (406,547    | )      |                             |   | (406,547 | ) |   |   | (4,353 | ) |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| Total Internet Initiative Japan Inc. shareholders' equity                                                        |   |             | 25,169,184  |   |                             |   | 27,319,577 |   |   |   | 292,501 |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| NONCONTROLLING  INTERESTS                                                                              |   |             | 73,735      |   |                             |   | 44,126 |   |   |   | 472 |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| Total equity                                                                                                     |   |             | 25,242,919  |   |                             |   | 27,363,703 |   |   |   | 292,973 |   |
|                                                                                                             |   |             |        |   |                             |   |   |   |   |   |   |   |
| TOTAL                                                                                                            |   | ¥           | 52,301,199  |   |                             | ¥ | 51,115,450 |   |   | $ | 547,275 |   |

----

Internet 

----

|                                                                                                                  |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars(Note 1) |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|----------------------------------|--------|
|                                                                                                                  |   | 2008             |       |   | 2009                             |   |   | 2010 |   |   | 2010 |   |
| REVENUES (Notes 5 and 20):                                                                                            |   |             |       |   |                             |   |   |   |   |   |   |   |
| Connectivity and Outsourcing services:                                                                                |   |             |       |   |                             |   |   |   |   |   |   |   |
| Connectivity services (corporate use)                                                                                 |   | ¥           | 12,148,490 |   |                             | ¥ | 13,142,393 |   |   | ¥ | 13,847,116 |   |   | $ | 148,256 |   |
| Connectivity services (home use)                                                                                      |   |             | 5,429,955  |   |                             |   | 6,537,370 |   |   |   | 6,854,258 |   |   |   | 73,386 |   |
| Outsourcing services                                                                                                  |   |             | 13,724,218 |   |                             |   | 15,395,833 |   |   |   | 16,271,256 |   |   |   | 174,210 |   |
| Total                                                                                                                 |   |             | 31,302,663 |   |                             |   | 35,075,596 |   |   |   | 36,972,630 |   |   |   | 395,852 |   |
| Systems integration                                                                                                   |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Systems construction                                                                                                  |   |             | 18,021,089 |   |                             |   | 14,658,502 |   |   |   | 11,353,598 |   |   |   | 121,559 |   |
| Systems operation and maintenance                                                                                     |   |             | 15,992,843 |   |                             |   | 18,988,595 |   |   |   | 18,716,978 |   |   |   | 200,396 |   |
| Total                                                                                                                 |   |             | 34,013,932 |   |                             |   | 33,647,097 |   |   |   | 30,070,576 |   |   |   | 321,955 |   |
| Equipment sales                                                                                                       |   |             | 1,514,543  |   |                             |   | 984,585 |   |   |   | 756,517 |   |   |   | 8,100 |   |
| ATM operation business                                                                                                |   |             | 4,161      |   |                             |   | 23,452 |   |   |   | 206,657 |   |   |   | 2,213 |   |
|                                                                                                                  |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Total revenues                                                                                                        |   |             | 66,835,299 |   |                             |   | 69,730,730 |   |   |   | 68,006,380 |   |   |   | 728,120 |   |
|                                                                                                                  |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| COST AND EXPENSES (Notes 5, 8, 11 and 20):                                                                       |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Cost of connectivity and Outsourcing services                                                                         |   |             | 26,039,660 |   |                             |   | 29,317,645 |   |   |   | 30,533,726 |   |   |   | 326,914 |   |
| Cost of systems integration                                                                                           |   |             | 25,526,033 |   |                             |   | 25,542,758 |   |   |   | 21,903,699 |   |   |   | 234,515 |   |
| Cost of equipment sales                                                                                               |   |             | 1,299,793  |   |                             |   | 863,031 |   |   |   | 649,315 |   |   |   | 6,952 |   |
| Cost of ATM operation business                                                                                        |   |             | 17,135     |   |                             |   | 422,285 |   |   |   | 963,862 |   |   |   | 10,320 |   |
| Total cost                                                                                                            |   |             | 52,882,621 |   |                             |   | 56,145,719 |   |   |   | 54,050,602 |   |   |   | 578,701 |   |
| Sales and marketing (Note 19)                                                                                         |   |             | 4,328,598  |   |                             |   | 4,630,579 |   |   |   | 5,405,075 |   |   |   | 57,870 |   |
| General and administrative (Note 6)                                                                                   |   |             | 4,624,293  |   |                             |   | 5,621,870 |   |   |   | 4,826,006 |   |   |   | 51,670 |   |
| Research and development                                                                                              |   |             | 240,423    |   |                             |   | 415,180 |   |   |   | 313,112 |   |   |   | 3,352 |   |
|                                                                                                                  |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Total cost and expenses                                                                                               |   |             | 62,075,935 |   |                             |   | 66,813,348 |   |   |   | 64,594,795 |   |   |   | 691,593 |   |
|                                                                                                                  |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME                                                                                                      |   |             | 4,759,364  |   |                             |   | 2,917,382 |   |   |   | 3,411,585 |   |   |   | 36,527 |   |
|                                                                                                                  |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSES):                                                                                              |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                                                                       |   |             | 63,030     |   |                             |   | 45,153 |   |   |   | 28,691 |   |   |   | 307 |   |
| Interest expense                                                                                                      |   |             | (438,163   | )      |                             |   | (408,152 | ) |   |   | (306,208 | ) |   |   | (3,279 | ) |
| Foreign exchange gains (losses)                                                                                       |   |             | 1,409      |   |                             |   | (28,515 | ) |   |   | (395 | ) |   |   | (4 | ) |
| Net gains on sales of other  investments (Note 3)                                                      |   |             | 217,957    |   |                             |   | 15,631 |   |   |   | 49,512 |   |   |   | 530 |   |
| Impairment of other investments(Note 3)                                                                               |   |             | (288,643   | )      |                             |   | (524,287 | ) |   |   | (342,796 | ) |   |   | (3,670 | ) |
| Other—net                                                                                                       |   |             | 46,715     |   |                             |   | 17,276 |   |   |   | 18,673 |   |   |   | 200 |   |
|                                                                                                                  |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Other expenses—net                                                                                              |   |             | (397,695   | )      |                             |   | (882,894 | ) |   |   | (552,523 | ) |   |   | (5,916 | ) |
|                                                                                                                  |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN NET INCOME (LOSS) OF EQUITY METHOD INVESTEES |   |             | 4,361,669  |   |                             |   | 2,034,488 |   |   |   | 2,859,062 |   |   |   | 30,611 |   |
|                                                                                                                  |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME TAX EXPENSE (BENEFIT) (Note10)                                                                                 |   |             | (861,414   | )      |                             |   | 1,002,711 |   |   |   | 1,132,093 |   |   |   | 12,121 |   |
|                                                                                                                  |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| FORWARD                                                                                                               |   | ¥           | 5,223,083  |   |                             | ¥ | 1,031,777 |   |   | ¥ | 1,726,969 |   |   | $ | 18,490 |   |

----

----

|                                                                               |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars(Note 1) |   |
|------------------------------------------------------------------------------------|--------|------------------|-----------|--------|----------------------------------|--------|
|                                                                               |   | 2008             |      |   | 2009                             |   |   | 2010 |   |   | 2010 |   |
| FORWARD                                                                            |   | ¥           | 5,223,083 |   |                             | ¥ | 1,031,777 |   |   | ¥ | 1,726,969 |   |   | $ | 18,490 |   |
|                                                                               |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| EQUITY IN NET INCOME (LOSS) OF EQUITY METHOD INVESTEES (Note 5):                   |   |             | (143,200  | )      |                             |   | 35,099 |   |   |   | 159,423 |   |   |   | 1,707 |   |
| NET INCOME                                                                         |   |             | 5,079,883 |   |                             |   | 1,066,876 |   |   |   | 1,886,392 |   |   |   | 20,197 |   |
| LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS                            |   |             | 96,706    |   |                             |   | 352,428 |   |   |   | 347,746 |   |   |   | 3,723 |   |
|                                                                               |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC.                          |   | ¥           | 5,176,589 |   |                             | ¥ | 1,419,304 |   |   | ¥ | 2,234,138 |   |   | $ | 23,920 |   |
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. PER SHARE (Note 14):     |   |             |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| BASIC WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                         |   |             | 206,240   |   |                             |   | 205,165 |   |   |   | 202,544 |   |   |   |   |   |
| DILUTED WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                       |   |             | 206,465   |   |                             |   | 205,195 |   |   |   | 202,544 |   |   |   |   |   |
|                                                                               |   | Yen              |      |   | U.S. Dollars                     |   |
|                                                                               |   |             |      |   |                             |   |   |
| BASIC NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. PER COMMON SHARE   |   | ¥           | 25,100    |   |                             | ¥ | 6,918 |   |   | ¥ | 11,030 |   |   | $ | 118 |   |
| DILUTED NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. PER COMMON SHARE |   | ¥           | 25,072    |   |                             | ¥ | 6,917 |   |   | ¥ | 11,030 |   |   | $ | 118 |   |

----

Internet 

----

|                                                                                                                                                               |   | Thousands of Yen |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|
|                                                                                                                                                               |   |             |       |   |   |   |   | Internet Initiative Japan Inc. shareholders’ equity |   |   |   |   |
|                                                                                                                                                               |   | TotalEquity      |       |   | ComprehensiveIncome (Loss) |   |   | AccumulatedDeficit(Note 12) |   |   | AccumulatedOtherComprehensiveIncome (Loss)(Notes 11 and 13) |   |   | Shares ofcommon stock outstanding |   |   | CommonStock |   |   | TreasuryStock(Note 12) |   |   | AdditionalPaid-inCapital |   |   | Noncontrolling Interests |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, APRIL 1, 2007                                                                                                                                             |   | ¥           | 20,927,186 |   |   |   |   |   | ¥ | (24,270,769 | ) |   | ¥ | 949,709 |   |   |   | 204,300 |   |   | ¥ | 16,833,847 |   |   | ¥ - |   |   | ¥ | 26,599,217 |   |   | ¥ | 815,182 |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of common stock for the purchase of    noncontrolling interests of consolidated subsidiaries,     net of issuance cost |   |             | 1,012,520  |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2,178 |   |   |   |   |   |   |   |   |   |   | 1,012,520 |   |   |   |   |   |
| Establishment of new consolidated subsidiaries                                                                                                                     |   |             | 390,906    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 390,906 |   |
| Purchase of noncontrolling interests of consolidated subsidiaries                                                                                                  |   |             | (815,280   | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (815,280 | ) |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss):                                                                                                                                       |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                                                                         |   |             | 5,079,883  |   |   | ¥ | 5,079,883 |   |   |   | 5,176,589 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (96,706 | ) |
| Other comprehensive loss, net of tax                                                                                                                               |   |             | (859,091   | ) |   |   | (859,091 | ) |   |   |   |   |   |   | (859,091 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income                                                                                                                                         |   |             | 4,220,792  |   |   | ¥ | 4,220,792 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                                                                                                                                                     |   |             | (461,309   | ) |   |   |   |   |   |   | (461,309 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2008                                                                                                                                            |   |             | 25,274,815 |   |   |   |   |   |   |   | (19,555,489 | ) |   |   | 90,618 |   |   |   | 206,478 |   |   |   | 16,833,847 |   |   | - |   |   |   | 27,611,737 |   |   |   | 294,102 |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subsidiary stock issuance                                                                                                                                          |   |             | 132,061    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 132,061 |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss):                                                                                                                                       |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                                                                         |   |             | 1,066,876  |   |   | ¥ | 1,066,876 |   |   |   | 1,419,304 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (352,428 | ) |
| Other comprehensive loss, net of tax                                                                                                                               |   |             | (411,329   | ) |   |   | (411,329 | ) |   |   |   |   |   |   | (411,329 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income                                                                                                                                         |   |             | 655,547    |   |   | ¥ | 655,547 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                                                                                                                                                     |   |             | (412,957   | ) |   |   |   |   |   |   | (412,957 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase of treasury stock                                                                                                                                         |   |             | (406,547   | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (406,547 | ) |   |   |   |   |   |   |   |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2009                                                                                                                                            |   |             | 25,242,919 |   |   |   |   |   |   |   | (18,549,142 | ) |   |   | (320,711 | ) |   |   | 206,478 |   |   |   | 16,833,847 |   |   |   | (406,547 | ) |   |   | 27,611,737 |   |   |   | 73,735 |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subsidiary stock issuance                                                                                                                                          |   |             | 150,000    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (168,137 | ) |   |   | 318,137 |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                                                                                                                              |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                                                                         |   |             | 1,886,392  |   |   | ¥ | 1,886,392 |   |   |   | 2,234,138 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (347,746 | ) |
| Other comprehensive income, net of tax                                                                                                                             |   |             | 489,480    |   |   |   | 489,480 |   |   |   |   |   |   |   | 489,480 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income                                                                                                                                         |   |             | 2,375,872  |   |   | ¥ | 2,375,872 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                                                                                                                                                     |   |             | (405,088   | ) |   |   |   |   |   |   | (405,088 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                               |   |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2010                                                                                                                                            |   | ¥           | 27,363,703 |   |   |   |   |   |   | ¥ | (16,720,092 | ) |   | ¥ | 168,769 |   |   |   | 206,478 |   |   | ¥ | 16,833,847 |   |   | ¥ | (406,547 | ) |   | ¥ | 27,443,600 |   |   | ¥ | 44,126 |   |

----

|                                   |   | Thousands of U.S. Dollars (Note 1) |        |
|----------------------------------------|--------|------------------------------------|-------------|
|                                   |   |                               |        |   |   |   |   |   |   | Internet Initiative Japan Inc. shareholder’s equity |   |   |   |   |   |
|                                   |   |                               | TotalEquity |   |   | ComprehensiveIncome |   |   |   | AccumulatedDeficit(Note 12) |   |   |   | AccumulatedOtherComprehensiveIncome (Loss)(Notes 11 and 13) |   |   |   | Shares ofcommon stock outstanding |   |   |   | CommonStock |   |   |   | TreasuryStock(Note 12) |   |   |   | AdditionalPaid-inCapital |   |   |   | Noncontrolling Interests |   |
|                                   |   |                               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2009                |   | $                                  | 270,266     |   |   |   |   |   | $ | (198,599 | ) |   | $ | (3,434 | ) |   |   | 206,478 |   |   | $ | 180,234 |   |   | $ | (4,353 | ) |   | $ | 295,629 |   |   | $ | 789 |   |
|                                   |   |                               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subsidiary stock issuance              |   |                               | 1,606       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,800 | ) |   |   | 3,406 |   |
|                                   |   |                               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss):           |   |                               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                             |   |                               | 20,197      |   |   | $ | 20,197 |   |   |   | 23,920 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (3,723 | ) |
| Other comprehensive income, net of tax |   |                               | 5,241       |   |   |   | 5,241 |   |   |   |   |   |   |   | 5,241 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income             |   |                               | 25,438      |   |   | $ | 25,438 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                   |   |                               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                         |   |                               | (4,337      | ) |   |   |   |   |   |   | (4,337 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                   |   |                               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, MARCH 31, 2010                |   | $                                  | 292,973     |   |   |   |   |   |   | $ | (179,016 | ) |   | $ | 1,807 |   |   |   | 206,478 |   |   | $ | 180,234 |   |   | $ | (4,353 | ) |   | $ | 293,829 |   |   | $ | 472 |   |

----

Internet 

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|                                                                                                               |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars(Note 1) |    |
|--------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|----------------------------------|---------|
|                                                                                                               |   | 2008             |       |   | 2009                             |    |   | 2010 |   |   | 2010 |   |
|                                                                                                               |   |             |       |   |                             |    |   |   |   |   |   |   |
| OPERATING ACTIVITIES:                                                                                              |   |             |       |   |                             |    |   |   |   |   |   |   |
| Net income                                                                                                         |   | ¥           | 5,079,883  |   |                             | ¥  | 1,066,876 |   |   | ¥ | 1,886,392 |   |   | $ | 20,197 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:                                  |   |             |       |   |                             |    |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                                                      |   |             | 4,774,804  |   |                             |    | 5,317,141 |   |   |   | 5,306,826 |   |   |   | 56,818 |   |
| Impairment loss on other intangible assets                                                                         |   | -                |       |   |                             | 113,360 |   |   | - |   |   | - |   |
| Provision for retirement and pension costs, less payments                                                          |   |             | 191,057    |   |                             |    | 127,662 |   |   |   | 225,915 |   |   |   | 2,419 |   |
| Provision for (reversal of) allowance for doubtful accounts                                                        |   |             | (416       | )      |                             |    | 26,020 |   |   |   | 40,467 |   |   |   | 433 |   |
| Loss on disposal of property and equipment                                                                         |   |             | 72,086     |   |                             |    | 443,019 |   |   |   | 639,160 |   |   |   | 6,843 |   |
| Net gains on sales of other investments                                                                            |   |             | (217,957   | )      |                             |    | (15,631 | ) |   |   | (49,512 | ) |   |   | (530 | ) |
| Impairment of other investments                                                                                    |   |             | 288,643    |   |                             |    | 524,287 |   |   |   | 342,796 |   |   |   | 3,670 |   |
| Foreign exchange losses, net                                                                                       |   |             | 10,415     |   |                             |    | 9,605 |   |   |   | 15,116 |   |   |   | 162 |   |
| Equity in net (income) loss of equity method investees, less dividends received                                    |   |             | 143,200    |   |                             |    | (4,719 | ) |   |   | (159,423 | ) |   |   | (1,707 | ) |
| Deferred income tax expense (benefit)                                                                              |   |             | (1,653,275 | )      |                             |    | 636,818 |   |   |   | 756,422 |   |   |   | 8,099 |   |
| Others                                                                                                             |   | -                |       |   |                             | 1,741   |   |   |   | 13,000 |   |   |   | 139 |   |
| Changes in operating assets and liabilities net of effects from acquisition of business and a company:             |   |             |       |   |                             |    |   |   |   |   |   |   |   |   |   |   |
| Decrease (increase) in accounts receivable                                                                         |   |             | (2,584,327 | )      |                             |    | 1,947,490 |   |   |   | (1,179,388 | ) |   |   | (12,627 | ) |
| Decrease (increase) in inventories, prepaid  expenses and other current and noncurrent  assets |   |             | (995,434   | )      |                             |    | 467,023 |   |   |   | 485,711 |   |   |   | 5,201 |   |
| Increase (decrease) in accounts payable                                                                            |   |             | (668,481   | )      |                             |    | (2,005,074 | ) |   |   | 808,845 |   |   |   | 8,660 |   |
| Increase (decrease) in income taxes payable                                                                        |   |             | (274,475   | )      |                             |    | (188,517 | ) |   |   | 95,819 |   |   |   | 1,026 |   |
| Increase in accrued expenses and other current and noncurrent liabilities                                          |   |             | 372,023    |   |                             |    | 163,768 |   |   |   | 392,948 |   |   |   | 4,207 |   |
| Net cash provided by operating activities—(Forward)                                                          |   | ¥           | 4,537,746  |   |                             | ¥  | 8,630,869 |   |   | ¥ | 9,621,094 |   |   | $ | 103,010 |   |

----

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|                                                                                                                    |   | Thousands of Yen |        |   |   | Thousands ofU.S. Dollars(Note 1) |        |
|-------------------------------------------------------------------------------------------------------------------------|--------|------------------|-------------|--------|--------|----------------------------------|-------------|
|                                                                                                                    |   |             | 2008        |   |   |                             | 2009        |   |   |   | 2010 |   |   |   | 2010 |   |
|                                                                                                                    |   |             |        |   |   |                             |        |   |   |   |   |   |   |   |   |   |
| Net cash provided by operating activities—(Forward)                                                               |   | ¥           | 4,537,746   |   |   | ¥                           | 8,630,869   |   |   | ¥ | 9,621,094 |   |   | $ | 103,010 |   |
|                                                                                                                    |   |             |        |   |   |                             |        |   |   |   |   |   |   |   |   |   |
| INVESTING ACTIVITIES:                                                                                                   |   |             |        |   |   |                             |        |   |   |   |   |   |   |   |   |   |
| Purchases of property and equipment                                                                                     |   |             | (1,856,249  | )      |   |                             | (2,991,378  | ) |   |   | (3,253,629 | ) |   |   | (34,835 | ) |
| Proceeds from sales of property and equipment                                                                           |   |             | -           |   |   |                             | -           |   |   |   | 205,548 |   |   |   | 2,201 |   |
| Purchases of available-for-sale securities                                                                              |   |             | (609,787    | )      |   |                             | (187,516    | ) |   |   | (73,236 | ) |   |   | (784 | ) |
| Purchases of other investments                                                                                          |   |             | (232,122    | )      |   |                             | (175,264    | ) |   |   | (875,016 | ) |   |   | (9,369 | ) |
| Investment in an equity method investee                                                                                 |   |             | (273,909    | )      |   |                             | -           |   |   |   | (22,834 | ) |   |   | (244 | ) |
| Purchases of subsidiary stock from minority shareholders                                                                |   |             | (1,975,123  | )      |   |                             | -           |   |   |   | - |   |   |   | - |   |
| Proceeds from sales of available-for-sale securities                                                                    |   |             | 616,920     |   |   |                             | 3,417       |   |   |   | 123,880 |   |   |   | 1,326 |   |
| Proceeds from sales of other investments                                                                                |   |             | 69,722      |   |   |                             | 111,509     |   |   |   | 78,250 |   |   |   | 838 |   |
| Payments of guarantee deposits                                                                                          |   |             | (353,911    | )      |   |                             | (109,929    | ) |   |   | (83,833 | ) |   |   | (898 | ) |
| Refund of guarantee deposits                                                                                            |   |             | 11,847      |   |   |                             | 66,124      |   |   |   | 128,192 |   |   |   | 1,372 |   |
| Payments for refundable insurance policies                                                                              |   |             | (49,753     | )      |   |                             | (52,364     | ) |   |   | (55,020 | ) |   |   | (589 | ) |
| Refund from insurance policies                                                                                          |   |             | 3,905       |   |   |                             | 7,382       |   |   |   | 39,959 |   |   |   | 428 |   |
| Acquisition of a newly controlled company, net of cash acquired                                                         |   |             | (788,608    | )      |   | -                                |        |   | - |   |   | - |   |
| Other                                                                                                                   |   |             | (6,698      | )      |   |                             | (53         | ) |   | - |   |   | - |   |
| Net cash used in investing activities                                                                                   |   |             | (5,443,766  | )      |   |                             | (3,328,072  | ) |   |   | (3,787,739 | ) |   |   | (40,554 | ) |
|                                                                                                                    |   |             |        |   |   |                             |        |   |   |   |   |   |   |   |   |   |
| FINANCING ACTIVITIES:                                                                                                   |   |             |        |   |   |                             |        |   |   |   |   |   |   |   |   |   |
| Proceeds from issuance of short-term borrowings with initial maturities over three months and long-term borrowings |   |             | 17,525,000  |   |   |                             | 10,750,000  |   |   |   | 6,000,000 |   |   |   | 64,240 |   |
| Repayments of short-term borrowings with initial maturities over three months and long-term borrowings                  |   |             | (15,940,000 | )      |   |                             | (12,125,000 | ) |   |   | (11,100,000 | ) |   |   | (118,844 | ) |
| Principal payments under capital leases                                                                                 |   |             | (3,506,842  | )      |   |                             | (3,953,833  | ) |   |   | (4,082,908 | ) |   |   | (43,714 | ) |
| Net increase (decrease) in short-term Borrowings                                                                        |   |             | 1,225,000   |   |   |                             | (425,000    | ) |   |   | 2,200,000 |   |   |   | 23,555 |   |
| Proceeds from issuance of subsidiary stock to minority shareholders                                                     |   |             | 6,000       |   |   |                             | -           |   |   |   | 150,000 |   |   |   | 1,606 |   |
| Dividends paid                                                                                                          |   |             | (461,309    | )      |   |                             | (412,957    | ) |   |   | (405,088 | ) |   |   | (4,337 | ) |
| Payments for purchase of treasury stock                                                                                 |   |             | -           |   |   |                             | (406,547    | ) |   |   | - |   |   |   | - |   |
| Net cash used in financing activities—(Forward)                                                                   |   | ¥           | (1,152,151  | )      |   | ¥                           | (6,573,337  | ) |   | ¥ | (7,237,996 | ) |   | $ | (77,494 | ) |

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|                                                         |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars(Note 1) |   |
|--------------------------------------------------------------|--------|------------------|------------|--------|----------------------------------|--------|
|                                                         |   | 2008             |       |   | 2009                             |   |   | 2010 |   |   | 2010 |   |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |
| Net cash used in financing activities—(Forward)        |   | ¥           | (1,152,151 | )      |                             | ¥ | (6,573,337 | ) |   | ¥ | (7,237,996 | ) |   | $ | (77,494 | ) |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |   |             | (25,393    | )      |                             |   | (12,716 | ) |   |   | (18,668 | ) |   |   | (200 | ) |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| NET DECREASE IN CASH AND CASH EQUIVALENTS                    |   |             | (2,083,564 | )      |                             |   | (1,283,256 | ) |   |   | (1,423,309 | ) |   |   | (15,238 | ) |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                 |   |             | 13,554,544 |   |                             |   | 11,470,980 |   |   |   | 10,187,724 |   |   |   | 109,076 |   |
|                                                         |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, END OF YEAR                       |   | ¥           | 11,470,980 |   |                             | ¥ | 10,187,724 |   |   | ¥ | 8,764,415 |   |   | $ | 93,838 |   |

|                                                                                                        |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars(Note 1) |   |
|-------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|----------------------------------|--------|
|                                                                                                        |   | 2008             |       |   | 2009                             |   |   | 2010 |   |   | 2010 |   |
| ADDITIONAL CASH FLOW INFORMATION:                                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |
| Interest paid                                                                                               |   | ¥           | 438,850    |   |                             | ¥ | 408,712 |   |   | ¥ | 307,045 |   |   | $ | 3,287 |   |
| Income taxes paid                                                                                           |   |             | 1,083,341  |   |                             |   | 772,533 |   |   |   | 160,398 |   |   |   | 1,717 |   |
|                                                                                                        |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| NONCASH INVESTING AND FINANCING ACTIVITIES:                                                                 |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Acquisition of assets by entering into capital leases                                                       |   |             | 4,221,807  |   |                             |   | 4,014,537 |   |   |   | 2,330,077 |   |   |   | 24,947 |   |
| Facilities purchase liabilities                                                                             |   |             | 72,966     |   |                             |   | 182,564 |   |   |   | 628,905 |   |   |   | 6,733 |   |
|     Purchase of minority interests of consolidated subsidiaries through share exchanges |   |             | 1,012,520  |   |                             |   | - |   |   |   | - |   |   |   | - |   |
|     Acquisition of a company:                                                           |   |             |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |
|          Assets acquired                                       |   |             | 2,319,277  |   |                             |   | - |   |   |   | - |   |   |   | - |   |
|         Cash paid                                                   |   |             | (1,715,450 | )      |                             |   | - |   |   |   | - |   |   |   | - |   |
|         Liabilities assumed                                         |   |             | 367,989    |   |                             |   | - |   |   |   | - |   |   |   | - |   |
|         Noncontrolling interests assumed                            |   |             | 235,838    |   |                             |   | - |   |   |   | - |   |   |   | - |   |

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Internet 

|   1. | DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|----------------|------------------------------------------------------------------------|

|   |   |
|--------|--------|

|   | Accounting Standards Codification-On July 1, 2009, the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification” or “ASC”) became the single source of authoritative U.S.GAAP (other than rules and interpretive releases of the U.S.Securities and Exchange Commission). The Codification is topically based with topics organized by ASC number and updated with Accounting Standards Update (“ASU”). The Codification and ASUs replace accounting guidance that was historically issued as Statements of Financial Accounting Standards (“SFAS”), FASB Interpretations (“FIN”), FASB Staff Positions (“FSP”), Emerging Issue Task Force (“EITF”) Abstracts and other types of accounting standards. The Codification became effective September 30, 2009 for the Company, and disclosures within this report on Form 20-F have been updated to reflect the change. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Reclassification- Certain reclassifications have been made to prior periods to conform to the current year presentations: Deferred tax asset-current, Deferred tax asset-noncurrent and Deferred tax liabilities-noncurrent, which had been previously included in Other current asset, Other asset and Other noncurrent liabilities, respectively, are now separately disclosed as they are deemed material. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Translation into U.S. Dollars—IIJ maintains its accounts in Japanese yen, the currency of the country in which it is incorporated and principally operates.  The U.S. dollar amounts included herein represent a translation using the noon buying rate in New York City for cable transfers in yen as certified for customs purposes by the Federal Reserve Bank of New York at March 31, 2010 of ¥93.4 = $1, solely for the convenience of the reader.  The translation should not be construed as a representation that the yen amounts have been, could have been, or could in the future be converted into U.S. dollars. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | Consolidation—The consolidated financial statements include the accounts of IIJ and all of its subsidiaries, Net Care, Inc. ("Net Care"), IIJ Technology Inc. ("IIJ-Tech"), IIJ America, Inc. ("IIJ-A"), IIJ Financial Systems Inc. ("IIJ-FS"), Netchart Japan Inc. (“NCJ”), GDX Japan Inc.("GDX"), which was invested in on April 9, 2007, hi-ho Inc.("hi-ho"), which was purchased from Panasonic network services Inc. on June 1, 2007, Trust network  Inc.("Trust"), which was established on July 17, 2007, On-Demand Solutions Inc. (“ODS”), which was established on April 4, 2008 and was liquidated on January 29, 2010, and IIJ Innovation Institute Inc. (“IIJII”), which was established on June 10, 2008, all of which except for IIJ America, have fiscal years ending March 31.  IIJ America's fiscal year end is December 31 and such date was used for purposes of preparing the consolidated financial statements as it is not practicable for the subsidiary to report its financial results as of March 31. There were no significant events that occurred during the intervening period that would require adjustment to or disclosure in the accompanying consolidated financial statements.  Intercompany transactions and balances have been eliminated in consolidation. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | System Construction Services – include all or some of the following elements depending on arrangements to meet each of customers’ requirements: consulting, project planning, system design, and development of network systems. These services will also include the installation of the software as well as configuration and installation of the hardware.  |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Software – the Company resell to customers third-party software such as, Oracle or Windows, which is installed by the Company during the system development process. These software products are developed by the third-party software vendors and are often sold by those vendors without hardware or other services.  |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Hardware – the Company also resell third-party hardware, primarily servers, switches and routers, which the Company install during the system development process. The hardware is generic hardware that is often sold by third party manufacturers and resellers without any software. That is, the functionality of the hardware is not dependent on the software.  |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Monitoring and Operating Service – the Company monitor it’s customer’s network activity and internet connectivity to detect and report problems. The Company also provide constant data backup services.  |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Hardware Maintenance Service – the Company repair or replace any malfunctioning parts of the hardware. |
|--------------------|--------------------------------------------------------------------------------------------------------------|

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|   |                                            | Range of Useful Lives         |
|--------|-------------------------------------------------|-------------------------------|
|   |                                            |                          |
|   | Data communications, office and other equipment | 2 to 15 years                 |
|   | Leasehold improvements                          | 3 to 15 years                 |
|   | Purchased software                              |  5 years                 |
|   | Capital leases                                  | 4 to   7 years |

|   | Impairment of Long-lived Assets—Long-lived assets consist principally of property and equipment, including those items leased under capital leases and amortized intangible assets. The Company evaluates the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Goodwill and Intangible Assets—Goodwill (including equity-method goodwill) and intangible assets that are deemed to have indefinite useful lives are not amortized, but are subject to impairment testing.  Impairment testing is performed annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company performs annual impairment tests on March 31. Intangible assets with finite useful lives, consisting of customer relationship and licenses, are amortized using the straight-line method over the estimated useful lives, which range from 3 to 25 years for customer relationship and 5 years for licenses. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (codified in ASC Topic 805, “Business Combinations”). The Statement establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. This Statement also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This Statement is effective for fiscal years beginning on or after December 15, 2008 and was adopted by the Company in the first quarter of fiscal year beginning April 1, 2009. In April 2009, the FASB issued FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (codified in ASC Topic 805). This FSP amends the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. This FSP is effective for assets and liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The impact of the adoption of this FSP did not have an effect on the Company’s financial position or results of operations. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (1) Consolidated Balance Sheets now present “Noncontrolling interests” as a component of “Total equity.” “Noncontrolling interests” is equivalent to the previously reported “Minority Interest.” “Total Internet Initiative Japan Inc. shareholders' equity” is equivalent to the previously reported “Total shareholders’ equity.” |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) Consolidated Statements of Income now present “Net income,” which includes “Net loss attributable to noncontrolling interests” and “Net income attributable to Internet Initiative Japan Inc.” |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) Consolidated Statements of Shareholder’ Equity now include a section for “Noncontrolling interests.” |
|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | (4) Consolidated Statements of Cash Flows now begin with “Net Income” instead of “Net Income Attributable to Internet Initiative Japan Inc.” |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| 2.         | INVENTORY |
|----------------------------------------------------|-----------|

|   | The components of inventories as of March 31, 2009 and 2010 are as follows: |
|--------|-----------------------------------------------------------------------------|

|                                   |   | Thousands of Yen |    |   | Thousands ofU.S. Dollars |   |
|----------------------------------------|--------|------------------|---------|--------|--------------------------|--------|
|                                   |   | 2009             |    |   | 2010                     |   |   | 2010 |   |
|                                   |   |             |    |   |                     |   |   |   |   |
| Network equipment purchased for resale |   | ¥           | 130,730 |   |                     | ¥ | 113,057 |   |   | $ | 1,211 |   |
| Work in process                        |   |             | 399,026 |   |                     |   | 694,746 |   |   |   | 7,438 |   |
|                                   |   |             |    |   |                     |   |   |   |   |   |   |   |
| Total inventories                      |   | ¥           | 529,756 |   |                     | ¥ | 807,803 |   |   | $ | 8,649 |   |

| 3. | OTHER INVESTMENTS |
|----|-------------------|

|   |  Pursuant to ASC Topic 320, all of the Company's marketable equity securities were classified as available-for-sale securities.  Information regarding the securities classified as available-for-sale at March 31, 2009 and 2010 is as follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                       |   | Thousands of Yen |    |
|--------------------------------------------|--------|------------------|---------|
| March 31, 2009                             |   | Cost             |    |   | UnrealizedGains |   |   | UnrealizedLosses |   |   | FairValue |   |
|                                       |   |             |    |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | ¥           | 507,391 |   |   | ¥ | 225,811 |   |   | ¥ | 58,948 |   |   | ¥ | 674,254 |   |
|                                       |   |             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2010                             |   |             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | ¥           | 485,960 |   |   | ¥ | 430,517 |   |   | ¥ | 49,481 |   |   | ¥ |  866,996 |   |

|                                       |   | Thousands of U.S. Dollars |   |
|--------------------------------------------|--------|---------------------------|--------|
| March 31, 2010                             |   | Cost                      |   |   | UnrealizedGains |   |   | UnrealizedLosses |   |   | FairValue |   |
|                                       |   |                      |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | $                         | 5,203  |   |   | $ | 4,610 |   |   | $ | 530 |   |   | $ | 9,283 |   |

|   | The following table provides the fair value and gross unrealized losses of the Company's investments, which have been deemed to be temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of March 31, 2009 and 2010: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                       |   | Thousands of Yen   |    |
|--------------------------------------------|--------|--------------------|---------|
|                                       |   | Less than12 Months |    |   | 12 Months or More |   |   | Total |   |
| March 31, 2009                             |   | FairValue          |    |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                                       |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | ¥             | 293,704 |   |   | ¥ | 48,136 |   |   | ¥ | 35,120 |   |   | ¥ | 10,812 |   |   | ¥ | 328,824 |   |   | ¥ | 58,948 |   |
|                                       |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2010                             |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | ¥             | 122,629 |   |   | ¥ | 48,747 |   |   | ¥ | 15,664 |   |   | ¥ | 734 |   |   | ¥ | 138,293 |   |   | ¥ | 49,481 |   |

----

|                                       |   | Thousands of U.S. Dollars |   |
|--------------------------------------------|--------|---------------------------|--------|
|                                       |   | Less than 12 Months       |   |   | 12 Months or More |   |   | Total |   |
| March 31, 2010                             |   | FairValue                 |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                                       |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale—Equity securities |   | $                         | 1,313  |   |   | $ | 522 |   |   | $ | 168 |   |   | $ | 8 |   |   | $ | 1,481 |   |   | $ | 530 |   |

|   | The aggregate cost of the Company’s cost method investments totaled ¥1,240,340 thousand and ¥1,714,614 thousand ($18,357 thousand) at March 31, 2009 and 2010, respectively. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In Japan, there is a market in which participants lend and borrow debt and equity securities without collateral from financial institutions under agreements known as lending and borrowing debt and equity securities contracts. Under the agreement, the Company loaned equity securities without collateral. Available-for-sale securities loaned to financial institutions amounted to ¥12,760 thousand and nil as of March 31, 2009 and 2010, respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   4. | ALLOWANCE FOR DOUBTFUL ACCOUNTS AND LOAN |
|----------------|------------------------------------------|

|   | An analysis of the allowance for doubtful accounts and loan for the years ended March 31, 2008, 2009 and 2010 is as follows: |
|--------|------------------------------------------------------------------------------------------------------------------------------|

|                      |   | Thousands of Yen           |    |
|---------------------------|--------|----------------------------|---------|
|                      |   | Balance atBeginning ofYear |    |   | CreditsCharged Off |   |   | Provision for (Reversal of)DoubtfulAccounts |   |   | Balance atEnd of Year |   |
|                      |   |                       |    |   |   |   |   |   |   |   |   |   |
| Year ended March 31, 2008 |   | ¥                     | 122,810 |   |   | ¥ | (8,750 | ) |   | ¥ | (416 | ) |   | ¥ | 113,644 |   |
|                      |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ended March 31, 2009 |   | ¥                     | 113,644 |   |   | ¥ | (16,371 | ) |   | ¥ | 26,020 |   |   | ¥ | 123,293 |   |
|                      |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ended March 31, 2010 |   | ¥                     | 123,293 |   |   | ¥ | (17,842 | ) |   | ¥ | 40,467 |   |   | ¥ | 145,918 |   |

|                      |   | Thousands of U.S.dollars   |
|---------------------------|--------|----------------------------|
|                      |   | Balance atBeginning ofYear |   |   | CreditsCharged Off |   |   | Provision forDoubtfulAccounts |   |   | Balance atEnd of Year |   |
|                      |   |                       |   |   |   |   |   |   |   |   |   |   |
| Year ended March 31, 2010 |   | $                          | 1,320 |   |   | $ | (190 | ) |   | $ | 433 |   |   | $ | 1,563 |   |

|                |   | Thousands of Yen |    |   | Thousands ofU.S. Dollars |   |
|---------------------|--------|------------------|---------|--------|--------------------------|--------|
|                |   | 2008             |    |   | 2009                     |   |   | 2010 |   |   | 2010 |   |
|                |   |             |    |   |                     |   |   |   |   |   |   |   |
| Accounts receivable |   | ¥           | -       |   |                     | ¥ | 66,880 |   |   | ¥ | 67,575 |   |   | $ | 724 |   |
| Accounts payable    |   |             | -       |   |                     |   | 23,373 |   |   |   | 24,921 |   |   |   | 267 |   |
| Revenues            |   |             | 582,290 |   |                     |   | 672,014 |   |   |   | 675,726 |   |   |   | 7,235 |   |
| Costs and expenses  |   |             | 207,670 |   |                     |   | 257,732 |   |   |   | 261,077 |   |   |   | 2,795 |   |

|    | On June 30, 2008, the Company received ¥30,380 thousand of dividends from Multifeed. |
|------------------|-------------------------------------------------------------------------------------------|

----

|   | The Company's investments in these equity method investees and respective ownership percentage at March 31, 2009 and 2010 consisted of the following: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|      |   | Thousands of Yen |   |   | Thousands ofU.S. Dollars |   |
|-----------|--------|------------------|--------|--------|--------------------------|--------|
|      |   | 2009             |   |   | 2010                     |   |   | 2010 |   |
|      |   |             |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Multifeed |   |             | 31.00  | %      |                     | ¥ | 713,375 |   |   |   | 32.00 | % |   | ¥ | 879,843 |   |   | $ | 9,420 |   |
| i-revo    |   |             | 30.00  |   |                     |   | 24,114 |   |   |   | 30.00 |   |   |   | 21,219 |   |   |   | 227 |   |
| TCC       |   |             | 45.00  |   |                     |   | 188,775 |   |   |   | 45.00 |   |   |   | 210,413 |   |   |   | 2,253 |   |
| i-Heart   |   |             | 28.57  |   |                     |   | 21,362 |   |   |   | 28.57 |   |   |   | 19,879 |   |   | 213 |   |
|      |   |             |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total     |   |             |   |   |                     | ¥ | 947,626 |   |   |   |   |   |   | ¥ | 1,131,354 |   |   | $ | 12,113 |   |

----

| 6. | PROPERTY AND EQUIPMENT |
|----|------------------------|

|   | Property and equipment as of March 31, 2009 and 2010 consisted of the following: |
|--------|----------------------------------------------------------------------------------|

|                                                                 |   | Thousands of Yen |        |   | Thousands ofU.S. Dollars |   |
|----------------------------------------------------------------------|--------|------------------|-------------|--------|--------------------------|--------|
|                                                                 |   | 2009             |        |   | 2010                     |   |   | 2010 |   |
|                                                                 |   |             |        |   |                     |   |   |   |   |
| Data communications equipment                                        |   | ¥           | 1,010,283   |   |                     | ¥ | 1,309,732 |   |   | $ | 14,023 |   |
| Office and other equipment                                           |   |             | 1,190,217   |   |                     |   | 1,495,993 |   |   |   | 16,017 |   |
| Leasehold improvements                                               |   |             | 1,010,805   |   |                     |   | 1,059,895 |   |   |   | 11,348 |   |
| Purchased software                                                   |   |             | 9,459,207   |   |                     |   | 11,208,522 |   |   |   | 120,006 |   |
| Assets under capital leases, primarily data communications equipment |   |             | 16,946,896  |   |                     |   | 15,549,281 |   |   |   | 166,480 |   |
| Total                                                                |   |             | 29,617,408  |   |                     |   | 30,623,423 |   |   |   | 327,874 |   |
| Less accumulated depreciation and amortization                       |   |             | (16,444,517 | )      |                     |   | (17,653,271 | ) |   |   | (189,007 | ) |
|                                                                 |   |             |        |   |                     |   |   |   |   |   |   |   |
| Property and equipment—net                                     |   | ¥           | 13,172,891  |   |                     | ¥ | 12,970,152 |   |   | $ | 138,867 |   |

| 7. | GOODWILL AND OTHER INTANGIBLE ASSETS |
|----|--------------------------------------|

|   | The components of intangible assets as of March 31, 2009 and 2010 are as follows: |
|--------|-----------------------------------------------------------------------------------|

|                                                                                                                                                  |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|-----------|--------|--------------------------|----------|
|                                                                                                                                                  |   | 2009             |      |   | 2010                     |     |   | 2010 |   |
|                                                                                                                                                  |   |             |      |   |                     |     |   |   |   |
| Intangible assets subject to amortization:                                                                                                            |   |             |      |   |                     |     |   |   |   |
| Licenses                                                                                                                                              |   | ¥           | 143,110   |   |                     | ¥   | 143,110 |   |   | $ | 1,532 |   |
|     Customer relationship                                                                                                         |   |             | 289,000   |   |                     |     | 2,703,471 |   |   |   | 28,945 |   |
|                         Total |   |             | 432,110   |   |                     |     | 2,846,581 |   |   |   | 30,477 |   |
| Less accumulated amortization                                                                                                                         |   |             |      |   |                     |     |   |   |   |   |   |   |
|   Licenses                                                                                                                              |   |             | (16,697   | )      |                     |     | (45,319 | ) |   |   | (485 | ) |
|   Customer relationship                                                                                                                 |   |             | (118,309  | )      |                     |     | (183,539 | ) |   |   | (1,965 | ) |
|                         Total |   |             | (135,006  | )      |                     |     | (228,858 | ) |   |   | (2,450 | ) |
|                                                                                                                                                  |   |             |      |   |                     |     |   |   |   |   |   |   |
| Intangible assets subject to amortization—net                                                                                                   |   |             | 297,104   |   |                     |     | 2,617,723 |   |   |   | 28,027 |   |
|                                                                                                                                                  |   |             |      |   |                     |     |   |   |   |   |   |   |
| Intangible assets not subject to amortization:                                                                                                        |   |             |      |   |                     |     |   |   |   |   |   |   |
| Telephone rights                                                                                                                                      |   | ¥           | 9,485     |   |                     | ¥   | 9,464 |   |   | $ | 101 |   |
|     Trademark                                                                                                                     |   |             | 192,000   |   |                     |     | 192,000 |   |   |   | 2,056 |   |
|     Customer relationship                                                                                                         |   |             | 2,703,217 |   |                     | - |   |   | - |   |
|     Goodwill                                                                                                                      |   |             | 2,639,319 |   |                     |     | 2,639,319 |   |   |   | 28,258 |   |
|                        Total       |   |             | 5,544,021 |   |                     |     | 2,840,783 |   |   |   | 30,415 |   |
|                                                                                                                                                  |   |             |      |   |                     |     |   |   |   |   |   |   |
| Total intangible assets                                                                                                                               |   | ¥           | 5,841,125 |   |                     | ¥   | 5,458,506 |   |   | $ | 58,442 |   |

----

|  Year Ending  March 31 |   | Thousands of yen |    |   | Thousands ofU.S. Dollars |   |
|---------------------------------------|--------|------------------|---------|--------|--------------------------|--------|
| 2011                                  |   | ¥           | 156,969 |   |                     | $      | 1,681 |   |
| 2012                                  |   |             | 153,803 |   |                     |   | 1,647 |   |
| 2013                                  |   |             | 153,803 |   |                     |   | 1,647 |   |
| 2014                                  |   |             | 119,050 |   |                     |   | 1,275 |   |
| 2015                                  |   |             | 103,514 |   |                     |   | 1,108 |   |

|                      |   | Thousands of Yen                                 |      | Thousands of U.S. Dollars |
|---------------------------|--------|--------------------------------------------------|-----------|---------------------------|
|                      |   | Network service and systems integration business |      |                      | ATM operation business |   |   | Total |   | Network service and systems integration business |   | ATM operation business |   | Total |
| Balance at March 31, 2008 |   | ¥                                           | 2,383,486 |                      |   | ¥ | 123,772 |   |   | ¥ | 2,507,258 |   |   |   |   |   |   |
|                      |   |                                             |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Acquisitions              |   |                                             | 20,282    |                      |   |   | 111,779 |   |   |   | 132,061 |   |   |   |   |   |   |
|                      |   |                                             |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at March 31, 2009 |   |                                             | 2,403,768 |                      |   |   | 235,551 |   |   |   | 2,639,319 |   |   |   |   |   |   |
|                      |   |                                             |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at March 31, 2010 |   | ¥                                           | 2,403,768 |                      |   | ¥ | 235,551 |   |   | ¥ | 2,639,319 |   | $ | 25,736 |   | $ | 2,522 |   | $ | 28,258 |

|   | A certain customer relationship was impaired for the year ended March 31, 2009 because it was expected that the volume of business with this specific customer could decrease in the near future. As a result of the decrease in the business, the fair value of the customer relationship became worthless and the Company recorded an impairment loss of ¥113,360 thousand  in Sales and marketing expenses in the Company’s statements of income for the year ended March 31, 2009. The amount of the impaired customer relationship was included in the Network service and Systems integration business segment. The Company applied the excess earnings method to evaluate the impairment loss on the customer relationship. No impairment on goodwill and intangible assets were recognized during the years ended March 31, 2008 and 2010. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

----

|                                |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |   |
|-------------------------------------|--------|------------------|-----------|--------|--------------------------|--------|
|                                |   | 2009             |      |   | 2010                     |   |   | 2010 |   |
|                                |   |             |      |   |                     |   |   |   |   |
| Head office                         |   | ¥           | 1,268,634 |   |                     | ¥ | 1,210,446 |   |   | $ | 12,960 |   |
| Sales and subsidiaries offices      |   |             | 754,987   |   |                     |   | 753,909 |   |   |   | 8,072 |   |
| Others                              |   |             | 49,031    |   |                     |   | 39,507 |   |   |   | 423 |   |
|                                |   |             |      |   |                     |   |   |   |   |   |   |   |
| Total refundable guarantee deposits |   | ¥           | 2,072,652 |   |                     | ¥ | 2,003,862 |   |   | $ | 21,455 |   |

|   | Capital Leases—The Company conducts its connectivity and other services by using data communications and other equipment leased under capital lease arrangements. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                               |   | Thousands of Yen                 |      |   | Thousands of U.S. Dollars |   |
|----------------------------------------------------|--------|----------------------------------|-----------|--------|---------------------------|--------|
|                                               |   | ConnectivityLinesOperatingLeases |      |   | OtherOperatingLeases      |   |   | CapitalLeases |   |   | ConnectivityLinesOperatingLeases |   |   | OtherOperatingLeases |   |   | CapitalLeases |   |
|                                               |   |                             |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ending March 31:                              |   |                             |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2011                                               |   | ¥                           | 1,178,681 |   |                      | ¥ | 2,084,907 |   |   | ¥ | 2,889,197 |   |   | $ | 12,619 |   |   | $ | 22,322 |   |   | $ | 30,934 |   |
| 2012                                               |   |                             | 259,111   |   |                      |   | 1,769,111 |   |   |   | 2,129,056 |   |   |   | 2,774 |   |   |   | 18,941 |   |   |   | 22,795 |   |
| 2013                                               |   |                             | 6,400     |   |                      |   | 569,802 |   |   |   | 1,137,984 |   |   |   | 69 |   |   |   | 6,101 |   |   |   | 12,184 |   |
| 2014                                               |   |                             | 6,400     |   |                      |   | 466,830 |   |   |   | 436,782 |   |   |   | 69 |   |   |   | 4,998 |   |   |   | 4,676 |   |
| 2015                                               |   |                             |      |   |                      |   | 388,480 |   |   |   | 80,865 |   |   |   |   |   |   |   | 4,159 |   |   |   | 866 |   |
| 2016 and thereafter                                |   |                             |      |   |                      |   | 703,600 |   |   |   | 4,686 |   |   |   |   |   |   |   | 7,533 |   |   |   | 50 |   |
|                                               |   |                             |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total minimum lease payments                       |   | ¥                           | 1,450,592 |   |                      | ¥ | 5,982,730 |   |   |   | 6,678,570 |   |   | $ | 15,531 |   |   | $ | 64,054 |   |   |   | 71,505 |   |
|                                               |   |                             |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less amounts representing interest                 |   |                             |      |   |                      |   |   |   |   |   | 291,240 |   |   |   |   |   |   |   |   |   |   |   | 3,118 |   |
|                                               |   |                             |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Present value of net minimum capitallease payments |   |                             |      |   |                      |   |   |   |   |   | 6,387,330 |   |   |   |   |   |   |   |   |   |   |   | 68,387 |   |
| Less current portion                               |   |                             |      |   |                      |   |   |   |   |   | 2,729,673 |   |   |   |   |   |   |   |   |   |   |   | 29,226 |   |
|                                               |   |                             |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noncurrent portion                                 |   |                             |      |   |                      |   |   |   |   | ¥ | 3,657,657 |   |   |   |   |   |   |   |   |   |   | $ | 39,161 |   |

|                                                       |   | Thousands of Yen |      |   | Thousands ofU.S. Dollars |    |
|------------------------------------------------------------|--------|------------------|-----------|--------|--------------------------|---------|
|                                                       |   | 2009             |      |   | 2010                     |    |   | 2010 |   |
|                                                       |   |             |      |   |                     |    |   |   |   |
| Year ending March 31:                                      |   |             |      |   |                     |    |   |   |   |
| 2011                                                       |   |             |      |   | ¥                   | 391,785 |   |   | $ | 4,195 |   |
| 2012                                                       |   |             |      |   |                     | 127,156 |   |   |   | 1,361 |   |
| 2013                                                       |   |             |      |   |                     | 104,103 |   |   |   | 1,115 |   |
| 2014                                                       |   |             |      |   |                     | 45,727  |   |   |   | 490 |   |
| 2015                                                       |   |             |      |   |                     | 22,182  |   |   |   | 237 |   |
|                                                       |   |             |      |   |                     |    |   |   |   |   |   |
| Total minimum lease payments to be received*               |   | ¥           | 839,707   |   |                     |    | 690,953 |   |   |   | 7,398 |   |
| Estimated residual value of leased property (unguaranteed) |   |             | 215,917   |   |                     |    | 215,917 |   |   |   | 2,312 |   |
| Less unearned income                                       |   |             | 35,764    |   |                     |    | 33,274 |   |   |   | 357 |   |
| Net investment in sales-type leases                        |   |             | 1,019,860 |   |                     |    | 873,596 |   |   |   | 9,353 |   |
| Less current portion                                       |   |             | 325,829   |   |                     |    | 372,699 |   |   |   | 3,990 |   |
| Non-current net investment in sales-type leases            |   | ¥           | 694,031   |   |                     | ¥  | 500,897 |   |   | $ | 5,363 |   |

----

| 9. | BORROWINGS |
|----|------------|

|   | Substantially all short-term borrowings are made under agreements which, as is customary in Japan, provide that under certain conditions the bank may require the borrower to provide collateral (or additional collateral) or guarantor with respect to the borrowings and that the bank may treat any collateral, whether furnished as security for short-term or long-term loans or otherwise, as collateral for all indebtedness to such bank. Also, provisions of certain loan agreements grant certain rights of possession to the lenders in the event of default.  The Company did not provide banks with any collateral for outstanding loans as of March 31, 2010. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10. | INCOME TAXES |
|-----|--------------|

|   | Income taxes imposed by the national, prefectural and municipal governments of Japan resulted in a normal statutory rate of approximately 41 percent for the years ended March 31, 2008, 2009 and 2010. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Income from operations before income tax expense (benefit) and equity in net income (loss) of equity method investees and income tax expense (benefit) for the years ended March 31, 2008, 2009, and 2010 consists of the following components: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                   |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |   |
|------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|--------------------------|--------|
|                                                                                                                   |   | 2008             |       |   | 2009                     |   |   | 2010 |   |   | 2010 |   |
|                                                                                                                   |   |             |       |   |                     |   |   |   |   |   |   |   |
| Income from operations before income tax expense (benefit) and equity in net income (loss) of equity method investees: |   |             |       |   |                     |   |   |   |   |   |   |   |
| Domestic                                                                                                               |   | ¥           | 4,382,741  |   |                     | ¥ | 2,060,855 |   |   | ¥ | 2,847,730 |   |   | $ | 30,490 |   |
| Foreign                                                                                                                |   |             | (21,072    | )      |                     |   | (26,367 | ) |   |   | 11,332 |   |   |   | 121 |   |
| Total                                                                                                                  |   | ¥           | 4,361,669  |   |                     | ¥ | 2,034,488 |   |   | ¥ | 2,859,062 |   |   | $ | 30,611 |   |
|                                                                                                                   |   |             |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Income taxes-current:                                                                                           |   |             |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Domestic                                                                                                               |   | ¥           | 778,152    |   |                     | ¥ | 359,143 |   |   | ¥ | 462,779 |   |   | $ | 4,955 |   |
| Foreign                                                                                                                |   |             | 13,709     |   |                     |   | 6,750 |   |   |   | (87,108 | ) |   |   | (933 | ) |
| Total                                                                                                                  |   | ¥           | 791,861    |   |                     | ¥ | 365,893 |   |   | ¥ | 375,671 |   |   | $ | 4,022 |   |
|                                                                                                                   |   |             |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Income taxes-deferred:                                                                                          |   |             |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Domestic                                                                                                               |   | ¥           | (1,653,275 | )      |                     | ¥ | 636,818 |   |   | ¥ | 756,422 |   |   | $ | 8,099 |   |
| Foreign                                                                                                                |   | -                |       |   | -                        |   |   | - |   |   | - |   |
| Total                                                                                                                  |   | ¥           | (1,653,275 | )      |                     | ¥ | 636,818 |   |   | ¥ | 756,422 |   |   | $ | 8,099 |   |

|   | In September 2007, the Company applied for the consolidated tax declaration and the application was approved by the national tax agency. The company started the consolidated tax declaration for the fiscal year ended March 31, 2009. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                              |   | Thousands of Yen  |       |   | Thousands ofU.S. Dollars |     |
|---------------------------------------------------|--------|-------------------|------------|--------|--------------------------|----------|
|                                              |   | 2009              |       |   | 2010                     |     |   | 2010 |   |
|                                              |   | DeferredTaxAssets |       |   | DeferredTaxLiabilities   |     |   | DeferredTaxAssets |   |   | DeferredTaxLiabilities |   |   | DeferredTaxAssets |   |   | DeferredTaxLiabilities |   |
|                                              |   |              |       |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized gains on available-for-sale securities |   | ¥       | -          |   |                     | ¥   | 79,392 |   |   | ¥  | - |   |   | ¥ | 178,456 |   |   | $  | - |   |   | $ | 1,910 |   |
| Capital leases                                    |   |              | 78,314     |   |                     | - |   |   |   | 58,710 |   |   | - |   |   |   | 628 |   |   | - |   |
| Accrued expenses                                  |   |              | 342,146    |   |                     | - |   |   |   | 382,626 |   |   | - |   |   |   | 4,097 |   |   | - |   |
| Retirement and pension cost                       |   |              | 578,616    |   |                     | - |   |   |   | 593,364 |   |   | - |   |   |   | 6,353 |   |   | - |   |
| Allowance for doubtful accounts                   |   |              | 19,997     |   |                     | - |   |   |   | 24,231 |   |   | - |   |   |   | 259 |   |   | - |   |
| Depreciation                                      |   |              | 44,077     |   |                     | - |   |   |   | 16,067 |   |   | - |   |   |   | 172 |   |   | - |   |
| Net loss on other investment                      |   |              | 811,120    |   |                     | - |   |   |   | 1,051,840 |   |   | - |   |   |   | 11,262 |   |   | - |   |
| Operating loss carryforwards                      |   |              | 5,157,278  |   |                     | - |   |   |   | 3,761,496 |   |   | - |   |   |   | 40,273 |   |   | - |   |
| Transactions in transit*                          |   | -                 |       |   |                     | 72,397   |   |   | - |   |   |   | 67,974 |   |   | - |   |   |   | 728 |   |
| Amortization of goodwill                          |   | -                 |       |   |                     | 108,663  |   |   | - |   |   |   | 106,477 |   |   | - |   |   |   | 1,140 |   |
| Impairment loss on telephone rights               |   |              | 85,923     |   |                     | -        |   |   |   | 87,003 |   |   | - |   |   |   | 932 |   |   | - |   |
| Accrued enterprise tax                            |   |              | 72,496     |   |                     | -        |   |   |   | 97,154 |   |   | - |   |   |   | 1,040 |   |   | - |   |
| Other                                             |   |              | 181,884    |   |                     |     | 97,609 |   |   |   | 248,638 |   |   |   | 212,642 |   |   |   | 2,662 |   |   |   | 2,277 |   |
| Total                                             |   |              | 7,371,851  |   |                     |     | 358,061 |   |   |   | 6,321,129 |   |   |   | 565,549 |   |   |   | 67,678 |   |   |   | 6,055 |   |
| Valuation allowance                               |   |              | (4,165,716 | )      |                     | -        |   |   |   | (3,712,237 | ) |   | - |   |   |   | (39,746 | ) |   | - |   |
|                                              |   |              |       |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                             |   | ¥            | 3,206,135  |   |                     | ¥   | 358,061 |   |   | ¥ | 2,608,892 |   |   | ¥ | 565,549 |   |   | $ | 27,932 |   |   | $ | 6,055 |   |

|   | As of March 31, 2009 and 2010, the valuation allowance for deferred tax assets which has been provided, related principally to operating loss carryforwards and net loss on other investment, at amounts which are not considered more likely than not to be realized. The net changes in the valuation allowance for deferred tax assets were a decrease of ¥2,455,640 thousand, an increase of ¥57,842 thousand and a decrease of ¥453,479 thousand ($4,855 thousand) for the years ended March 31, 2008, 2009 and 2010, respectively. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | As of March 31, 2010, IIJ and certain subsidiaries had tax operating loss carryforwards. These loss carryforwards are available to offset future taxable income, and will expire in the period ending March 31, 2016 in Japan and December 31, 2027 in the United States of America as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                |            |
|---------------------|-----------------|
|                | Thousand of Yen |   |
| Year EndingMarch 31 |            | Corporate tax subject to consolidation tax filing |   |   | Inhabitant and enterprise tax subject to consolidation tax filing |   |   | Others |   |
| 2011                |            | ¥ | 4,832,339 |   |   | ¥ | 7,353,136 |   |   | ¥  | - |   |
| 2012                |            |   | 415,384 |   |   |   | 415,384 |   |   | - |   |
| 2013                |            | - |   |   | - |   |   | - |   |
| 2014                |            | - |   |   | - |   |   | - |   |
| 2015 and thereafter |            | - |   |   |   | 146,146 |   |   |   | 3,068,252 |   |
|                |            |   |   |   |   |   |   |   |   |   |   |   |
| Total               |            | ¥ | 5,247,723 |   |   | ¥ | 7,914,666 |   |   | ¥ | 3,068,252 |   |

|                |   | Thousand of U.S. Dollars                          |   |
|---------------------|--------|---------------------------------------------------|--------|
| Year EndingMarch 31 |   | Corporate tax subject to consolidation tax filing |   |   | Inhabitant and enterprise tax subject to consolidation tax filing |   |   | Others |   |
|                |   |                                              |   |   |   |   |   |   |   |
| 2011                |   | $                                                 | 51,738 |   |   | $ | 78,727 |   |   | $  | - |   |
| 2012                |   |                                              | 4,447  |   |   |   | 4,447 |   |   | - |   |
| 2013                |   | -                                                 |   |   | - |   |   | - |   |
| 2014                |   | -                                                 |   |   | - |   |   | - |   |
| 2015 and thereafter |   | -                                                 |   |   |   | 1,565 |   |   |   | 32,851 |   |
|                |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Total               |   | $                                                 | 56,185 |   |   | $ | 84,739 |   |   | $ | 32,851 |   |

|                                                                              |   | Thousands of Yen |       |   |   Thousands ofU.S. Dollars |   |
|-----------------------------------------------------------------------------------|--------|------------------|------------|--------|---------------------------------|--------|
|                                                                              |   | 2008             |       |   | 2009                            |   |   | 2010 |   |   | 2010 |   |
|                                                                              |   |             |       |   |                            |   |   |   |   |   |   |   |
| Amount computed by using normal Japanese statutory tax rate                       |   | ¥           | 1,788,284  |   |                            | ¥ | 834,140 |   |   | ¥ | 1,172,215 |   |   | $ | 12,550 |   |
| Increase (decrease) in taxes resulting from:                                      |   |             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Expenses not deductible for tax purpose                                           |   |             | 81,117     |   |                            |   | 78,705 |   |   |   | 187,591 |   |   |   | 2,008 |   |
|     Provision for (reversal of) reserve for tax contingencies |   |             | 12,365     |   |                            |   | 6,707 |   |   |   | (86,298 | ) |   |   | (924 | ) |
|     Inhabitant tax-per capita                                 |   |             | 25,780     |   |                            |   | 27,475 |   |   |   | 26,679 |   |   |   | 286 |   |
| Realization of tax benefit of operating loss carryforwards                        |   |             | (769,583   | )      |                            | -      |   |   | - |   |   | - |   |
|     Expiration of operating loss carryforward                 |   | -                |       |   | -                               |   |   |   | 204,074 |   |   |   | 2,185 |   |
| Other change in valuation allowance                                               |   |             | (1,980,018 | )      |                            |   | 38,046 |   |   | (390,874 ) |   |   |   | (4,185 | ) |
|     Enterprise tax - not based on income                      |   |             | 45,283     |   |                            |   | 55,083 |   |   |   | 56,181 |   |   |   | 602 |   |
| Other—net                                                                   |   |             | (64,642    | )      |                            |   | (37,445 | ) |   | (37,475 ) |   |   |   | (401 | ) |
|                                                                              |   |             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense (benefit) as reported                                          |   | ¥           | (861,414   | )      |                            | ¥ | 1,002,711 |   |   | ¥ | 1,132,093 |   |   | $ | 12,121 |   |

----

|                                                                                                    |   | Thousands of Yen |    |   | Thousands ofU.S. Dollars |    |
|---------------------------------------------------------------------------------------------------------|--------|------------------|---------|--------|--------------------------|---------|
|                                                                                                    |   | 2009             |    |   | 2010                     |    |   | 2010 |   |
|                                                                                                    |   |             |    |   |                     |    |   |   |   |
| Balance at April 1                                                                                      |   | ¥           | 79,434  |   |                     | ¥  | 65,811 |   |   | $ | 705 |   |
| Increases related to positions taken on items from current year                                         |   |             | 2,801   |   |                     |    | 7,656 |   |   |   | 82 |   |
| Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations |   | -                |    |   |                     | (65,811 | ) |   |   | (705 | ) |
| Translation adjustment                                                                                  |   |             | (16,424 | )      |                     |    | 1,735 |   |   |   | 19 |   |
| Balance at March 31                                                                                     |   | ¥           | 65,811  |   |                     | ¥  | 9,391 |   |   | $ | 101 |   |

----

|                                          |   | Thousands of Yen |    |   | Thousands ofU.S. Dollars |     |
|-----------------------------------------------|--------|------------------|---------|--------|--------------------------|----------|
|                                          |   | 2008             |    |   | 2009                     |     |   | 2010 |   |   | 2010 |   |
|                                          |   |             |    |   |                     |     |   |   |   |   |   |   |
| Service cost                                  |   | ¥           | 325,065 |   |                     | ¥   | 372,954 |   |   | ¥ | 395,920 |   |   | $ | 4,239 |   |
| Interest cost                                 |   |             | 31,076  |   |                     |     | 36,307 |   |   |   | 34,473 |   |   |   | 369 |   |
| Expected return on plan assets                |   |             | (29,098 | )      |                     |     | (26,952 | ) |   |   | (17,128 | ) |   |   | (184 | ) |
| Amortization of transition obligation         |   |             | 402     |   |                     |     | 402 |   |   |   | 322 |   |   |   | 3 |   |
| Amortization of  net actuarial loss |   |             | 3,699   |   |                     |     | 8,098 |   |   |   | 18,093 |   |   |   | 194 |   |
| Effect of curtailment                         |   | -                |    |   |                     | (197,181 | ) |   |   | (6,860 | ) |   |   | (73 | ) |
| Effect of settlement                          |   | -                |    |   |                     | 70,466   |   |   |   | (23,374 | ) |   |   | (250 | ) |
| Other                                         |   | -                |    |   | -                        |     |   |   | 95,090 |   |   |   | 1,018 |   |
|                                          |   |             |    |   |                     |     |   |   |   |   |   |   |   |   |   |   |
| Net periodic pension cost                     |   | ¥           | 331,144 |   |                     | ¥   | 264,094 |   |   | ¥ | 496,536 |   |   | $ | 5,316 |   |

----

|   | Other changes in plan assets and benefit obligations recognized in other comprehensive income for the year ended March 31, 2010 are as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                 |   | Thousands of Yen |    |   | Thousands ofU.S. Dollars |    |
|--------------------------------------------------------------------------------------|--------|------------------|---------|--------|--------------------------|---------|
|                                                                                 |   | 2009             |    |   | 2010                     |    |   | 2010 |   |
|                                                                                 |   |             |    |   |                     |    |   |   |   |
| Net actuarial loss (gain)                                                            |   | ¥           | 250,029 |   |                     | ¥  | (118,967 | ) |   | $ | (1,274 | ) |
| Amortization of net actuarial loss in net periodic pension cost                      |   |             | (8,098  | )      |                     |    | (18,093 | ) |   |   | (194 | ) |
| Amortization of transition obligation in net periodic pension cost                   |   |             | (402    | )      |                     |    | (322 | ) |   |   | (3 | ) |
| Effect of curtailment                                                                |   |             | (561    | )      |                     |    | (76,413 | ) |   |   | (818 | ) |
| Effect of settlement                                                                 |   |             | (70,466 | )      |                     |    | (11,988 | ) |   |   | (129 | ) |
| Other                                                                                |   | -                |    |   |                     | (95,090 | ) |   |   | (1,018 | ) |
|                                                                                 |   |             |    |   |                     |    |   |   |   |   |   |   |
| Amounts recognized in other comprehensive income                                     |   |             | 170,502 |   |                     |    | (320,873 | ) |   |   | (3,436 | ) |
|                                                                                 |   |             |    |   |                     |    |   |   |   |   |   |   |
| Total net periodic pension cost and amounts recognized in other comprehensive income |   | ¥           | 434,596 |   |                     | ¥  | 175,663 |   |   | $ | 1,880 |   |

|   | The change in benefit obligation and plan assets for the years ended March 31, 2009 and 2010 and the amounts recognized in the consolidated balance sheets as of March 31, 2009 and 2010 are as follows: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                           |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |   |
|------------------------------------------------|--------|------------------|------------|--------|--------------------------|--------|
|                                           |   | 2009             |       |   | 2010                     |   |   | 2010 |   |
|                                           |   |             |       |   |                     |   |   |   |   |
| Change in benefit obligation:                  |   |             |       |   |                     |   |   |   |   |
| Benefit obligation at beginning of year        |   | ¥           | 2,044,301  |   |                     | ¥ | 2,189,092 |   |   | $ | 23,438 |   |
| Service cost                                   |   |             | 372,954    |   |                     |   | 395,920 |   |   |   | 4,239 |   |
| Interest cost                                  |   |             | 36,307     |   |                     |   | 34,473 |   |   |   | 369 |   |
| Actuarial loss (gain)                          |   |             | 122,069    |   |                     |   | (47,788 | ) |   |   | (512 | ) |
| Benefit paid                                   |   |             | (48,694    | )      |                     |   | (33,012 | ) |   |   | (353 | ) |
| Effect of curtailment                          |   |             | (197,742   | )      |                     |   | (83,273 | ) |   |   | (892 | ) |
| Effect of settlement                           |   |             | (140,103   | )      |                     |   | (109,885 | ) |   |   | (1,176 | ) |
|                                           |   |             |       |   |                     |   |   |   |   |   |   |   |
| Benefit obligation at end of year              |   | ¥           | 2,189,092  |   |                     | ¥ | 2,345,527 |   |   | $ | 25,113 |   |
|                                           |   |             |       |   |                     |   |   |   |   |   |   |   |
| Change in plan assets:                         |   |             |       |   |                     |   |   |   |   |   |   |   |
| Fair value of plan assets at beginning of year |   | ¥           | 1,171,804  |   |                     | ¥ | 1,070,521 |   |   | $ | 11,462 |   |
| Actual return on plan assets                   |   |             | (101,008   | )      |                     |   | 88,307 |   |   |   | 945 |   |
| Employer contribution                          |   |             | 167,433    |   |                     |   | 100,714 |   |   |   | 1,078 |   |
| Benefits paid                                  |   |             | (27,605    | )      |                     |   | (17,398 | ) |   |   | (186 | ) |
| Effect of settlement                           |   |             | (140,103   | )      |                     | -      |   |   | - |   |
|                                           |   |             |       |   |                     |   |   |   |   |   |   |   |
| Fair value of plan assets at end of year       |   | ¥           | 1,070,521  |   |                     | ¥ | 1,242,144 |   |   | $ | 13,299 |   |
|                                           |   |             |       |   |                     |   |   |   |   |   |   |   |
| Funded status at end of year                   |   | ¥           | (1,118,571 | )      |                     | ¥ | (1,103,383 | ) |   | $ | (11,814 | ) |

----

|                                             |   | Thousands of Yen |       |   | Thousands ofU.S. Dollars |   |
|--------------------------------------------------|--------|------------------|------------|--------|--------------------------|--------|
|                                             |   | 2009             |       |   | 2010                     |   |   | 2010 |   |
|                                             |   |             |       |   |                     |   |   |   |   |
| Accrued retirement and pension costs-current     |   | ¥           | (11,959    | )      |                     | ¥ | (14,539 | ) |   | $ | (156 | ) |
| Accrued retirement and pension costs-non current |   |             | (1,106,612 | )      |                     |   | (1,088,844 | ) |   |   | (11,658 | ) |
|                                             |   |             |       |   |                     |   |   |   |   |   |   |   |
| Net amount recognized                            |   | ¥           | (1,118,571 | )      |                     | ¥ | (1,103,383 | ) |   | $ | (11,814 | ) |

|                     |   | Thousands of Yen |    | Thousands ofU.S. Dollars |   |
|--------------------------|--------|------------------|---------|--------------------------|--------|
|                     |   | 2009             |    |                     | 2010   |   |   | 2010 |   |
|                     |   |             |    |                     |   |   |   |   |   |
| Net actuarial loss       |   | ¥           | 484,354 |                     |   | ¥ | 163,518 |   |   | $ | 1,751 |   |
| Obligation at transition |   |             | 2,249   |                     |   |   | 2,211 |   |   |   | 23 |   |
|                     |   | ¥           | 486,603 |                     |   | ¥ | 165,729 |   |   | $ | 1,774 |   |

|                                             |   | BenefitObligations |   |   | Net Periodic Costs |   |
|--------------------------------------------------|--------|--------------------|--------|--------|--------------------|--------|
|                                             |   | 2009               |   |   | 2010               |   |   | 2008 |   |   | 2009 |   |   | 2010 |   |
|                                             |   |               |   |   |               |   |   |   |   |   |   |   |   |   |   |
| Discount rate                                    |   |               | 1.6    | %      |               |   | 1.8 | % |   |   | 1.9 | % |   |   | 1.8 | % |   |   | 1.6 | % |
| Expected long-term rate of return on plan assets |   |               |   |   |               |   |   |   |   |   | 2.7 |   |   |   | 2.3 |   |   |   | 1.6 |   |
| Rate of increase in compensation                 |   |               | 3.5    |   |               |   | 3.5 |   |   |   | 3.5 |   |   |   | 3.6 |   |   |   | 3.5 |   |

----

| Year Ending March 31 |   | Thousands of yen |    |   | Thousands ofU.S. Dollars |   |
|----------------------|--------|------------------|---------|--------|--------------------------|--------|
| 2011                 |   | ¥           | 43,893  |   |                     | $      | 470 |   |
| 2012                 |   |             | 55,243  |   |                     |   | 591 |   |
| 2013                 |   |             | 66,346  |   |                     |   | 710 |   |
| 2014                 |   |             | 82,084  |   |                     |   | 879 |   |
| 2015                 |   |             | 79,729  |   |                     |   | 854 |   |
| 2016 -2020    |   |             | 625,300 |   |                     |   | 6,695 |   |
|                 |   |             |    |   |                     |   |   |   |
| Total                |   | ¥           | 952,595 |   |                     | $      | 10,199 |   |

----

|   |  Level 1 – | Inputs are quoted prices in active markets for identical assets or liabilities.  |
|--------|-----------------------|---------------------------------------------------------------------------------------|

|   |  Level 2 – | Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical  or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.  |
|--------|----------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  Level 3 – | Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity’s own assumptions about the assumptions that market participants would use in establishing a price. |
|--------|-----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Basis of Fair Value Measurement of Pension Plan Assets at March 31, 2010 |   | Thousands of Yen |    |   | Total   |    |
|-------------------------------------------------------------------------------|--------|-----------------------|---------|--------|---------|---------|
|                                                                          |   | Level 1               |    |   | Level 2 |    |   | Level 3 |   |   | 2010 |   |
| Equity securities:                                                            |   |                  |    |   |    |    |   |   |   |   |   |   |
| Japanese equity                                                               |   | ¥                | 177,008 |   |    | ¥  | - |   |   |   | - |   |   | ¥ | 177,008 |   |
| U.S.equity                                                                    |   |                  | 40,139  |   |    |    | - |   |   |   | - |   |   |   | 40,139 |   |
| Other equity -developed countries                                             |   |                  | 33,202  |   |    |    | - |   |   |   | - |   |   |   | 33,202 |   |
| Total equity securities                                                       |   |                  | 250,349 |   |    |    | - |   |   |   | - |   |   |   | 250,349 |   |
|                                                                          |   |                  |    |   |    |    |   |   |   |   |   |   |   |   |   |   |
| Debt securities:                                                              |   |                  |    |   |    |    |   |   |   |   |   |   |   |   |   |   |
| Japanese government and municipalities                                        |   | -                     |    |   |    | 298,707 |   |   |   | - |   |   |   | 298,707 |   |
| Japanese corporate bonds-investment grade                                     |   | -                     |    |   |    | 46,076  |   |   |   | - |   |   |   | 46,076 |   |
| U.S.government                                                                |   | -                     |    |   |    | 32,719  |   |   |   | - |   |   |   | 32,719 |   |
| Other government-developed countries                                          |   | -                     |    |   |    | 80,948  |   |   |   | - |   |   |   | 80,948 |   |
| Residential mortgage-backed                                                   |   | -                     |    |   |    | 14,323  |   |   |   | - |   |   |   | 14,323 |   |
| Total debt securities                                                         |   |                  | -       |   |    |    | 472,773 |   |   |   | - |   |   |   | 472,773 |   |
|                                                                          |   |                  |    |   |    |    |   |   |   |   |   |   |   |   |   |   |
| Other financial instruments*                                                  |   | -                     |    |   |    | 476,719 |   |   |   | - |   |   |   | 476,719 |   |
|                                                                          |   |                  |    |   |    |    |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                          |   |                  | 42,303  |   |    |    | - |   |   |   | - |   |   |   | 42,303 |   |
|                                                                          |   |                  |    |   |    |    |   |   |   |   |   |   |   |   |   |   |
| Total assets at fair value                                                    |   | ¥                | 292,652 |   |    | ¥  | 949,492 |   |   |   | - |   |   | ¥ | 1,242,144 |   |

----

| Basis of Fair Value Measurement of Pension Plan Assets at March 31,2010 |   | Thousands of U.S.Dollars |   | Total  |
|------------------------------------------------------------------------------|--------|-------------------------------|--------|--------|
|                                                                         |   | Level 1                       |   |   | Level 2 |   |   | Level 3 |   |   | 2010 |
| Equity securities:                                                           |   |                          |   |   |   |   |   |   |   |   |   |   |
|      Japanese equity                                |   | $                             | 1,895  |   |   | $  | - |   |   |   | - |   |   | $  | 1,895 |   |
|      U.S.equity                                     |   |                          | 430    |   |   |   | - |   |   |   | - |   |   |   | 430 |   |
|      Other equity -developed countries              |   |                          | 355    |   |   |   | - |   |   |   | - |   |   |   | 355 |   |
| Total equity securities                                                      |   |                          | 2,680  |   |   |   | - |   |   |   | - |   |   |   | 2,680 |   |
|                                                                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt securities:                                                             |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Japanese government and municipalities         |   | -                             |   |   |   | 3,198 |   |   |   | - |   |   |   | 3,198 |   |
|  Japanese corporate bonds-investment grade                            |   | -                             |   |   |   | 493 |   |   |   | - |   |   |   | 493 |   |
|     U.S.government                                       |   | -                             |   |   |   | 350 |   |   |   | - |   |   |   | 350 |   |
|     Other government-developed countries                 |   | -                             |   |   |   | 867 |   |   |   | - |   |   |   | 867 |   |
|     Residential mortgage-backed                          |   | -                             |   |   |   | 154 |   |   |   | - |   |   |   | 154 |   |
| Total debt securities                                                        |   |                          | -      |   |   |   | 5,062 |   |   |   | - |   |   |   | 5,062 |   |
|                                                                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other financial instruments*                                                 |   | -                             |   |   |   | 5,104 |   |   |   | - |   |   |   | 5,104 |   |
|                                                                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                         |   |                          | 453    |   |   |   | - |   |   |   | - |   |   |   | 453 |   |
|                                                                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets at fair value                                                   |   | $                             | 3,133  |   |   | $ | 10,166 |   |   |   | - |   |   | $ | 13,299 |   |

----

| 12. | SHAREHOLDERS' EQUITY |
|-----|----------------------|

----

|   | Stock Option Plans—In May 2000, IIJ granted 295 options to 34 directors and employees.  The options vested fully on April 8, 2002 and are exercisable for eight years from that date.  In August 2001, IIJ granted 395 options to 44 directors and employees.  The options became fully vested on June 28, 2003 and are exercisable for eight years from that date.  No options are available for additional grant as of March 31, 2010.  No compensation expense has been recognized in the consolidated statements of income pursuant to APB No. 25, because the exercise price was greater than the market price on the dates of grant. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The following table summarizes the transactions of IIJ's stock option plans for the year in the period ended March 31, 2010: |
|--------|------------------------------------------------------------------------------------------------------------------------------|

|                                                 |   |     |              |   |     |   |             |     |   | Thousands of Yen |
|------------------------------------------------------|--------|----------|-------------------|--------|----------|--------|------------------|----------|--------|------------------|
|                                                 |   |     | Number of Options |   |     |   | Number of Shares |     |   |             | Weighted AverageExercise Price perCommon Shares |   |
|                                                 |   |     |              |   |     |   |             |     |   |             |   |   |
| Unexercised options outstanding—March 31, 2009 |   |     | 515               |   |     |   | 2,575            |     |   | ¥           | 1,009 |   |
| Options granted                                      |   | - |              |   | - |   |             | - |   |
| Options exercised                                    |   | - |              |   | - |   |             | - |   |
| Options forfeited                                    |   |     | 15                |   |     |   | 75               |     |   |             | 944 |   |
|                                                 |   |     |              |   |     |   |             |     |   |             |   |   |
| Unexercised options outstanding—March 31, 2010 |   |     | 500               |   |     |   | 2,500            |     |   | ¥           | 1,011 |   |

|   | Due to the effect of the stock split in October 2005, grantees of options can purchase five shares by exercising one option. |
|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | Summarized information about stock options outstanding as of March 31, 2010 is as follows: |
|--------|--------------------------------------------------------------------------------------------|

|         |                                    |   |   Outstanding                         |   |       | Exercisable              |   |   |                               |
|--------------|-----------------------------------------|--------|--------------------------------------------|--------|------------|--------------------------|--------|--------|------------------------------------|
|         |   Exercise Price(Thousands of Yen) |   |   Number of Shares Underlying Options |   |       | Remaining Life(in Years) |   |   | Number of SharesUnderlying Options |   |   |  Total Intrinsic Value (Thousands of Yen) |   |
|         |                                    |   |                                       |   |       |                     |   |   |                               |   |   |   |   |
|  ¥ |  2,163                             |   | 925                                        |   |       |  0.02               |   |   | 925                                |   |   | - |   |
|         |  334                               |   | 1,575                                      |   |  1.24 |                     |   | 1,575  |                               |   | - |   |

----

| 13. | OTHER COMPREHENSIVE INCOME |
|-----|----------------------------|

|   | The changes in each component of other comprehensive income (loss) for the years ended March 31, 2008, 2009 and 2010 are as follows: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                |   |               |  Thousands of Yen   |     |
|-----------------------------------------------------------------------------------------------------|--------|--------------------|--------------------------|----------|
|                                                                                                |   |               | Before Tax               |     |   |   | Tax (Expense) |   |   |   | Net of Tax |   |
|                                                                                                |   |               | Amount                   |     |   |   | or Benefit |   |   |   | Amount |   |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |
| Year ended March 31, 2008:                                                                          |   |               |                     |     |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustments                                                            |   |  ¥  |                     | (20,029  | ) |   | ¥   | - |   |   |  ¥ |   | (20,029 | ) |
| Unrealized holding gain (loss) on securities:                                                       |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                                    |   |               |                     | (574,683 | ) |   |   |   | 235,620 |   |   |   |   | (339,063 | ) |
| Less:  Reclassification adjustments for gains included in net income                      |   |               |                     | (114,714 | ) |   |   |   | 47,032 |   |   |   |   | (67,682 | ) |
|         Increase in deferred tax asset valuation allowance* |   |               | -                        |     |   |   |   | (282,652 | ) |   |   |   | (282,652 | ) |
| Net unrealized holding gain (loss) during the period                                                |   |               |                     | (689,397 | ) |   |   | - |   |   |   |   | (689,397 | ) |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
| Loss on cash flow hedging derivative instruments:                                                   |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                                    |   |               | -                        |     |   |   | - |   |   |   | - |   |
| Less:  Reclassification adjustments for gains included in net income                      |   |               |                     | (45      | ) |   |   | - |   |   |   |   | (45 | ) |
| Loss on cash flow hedging derivative instruments                                                    |   |               |                     | (45      | ) |   |   |   | - |   |   |   | (45 | )  |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |
| Defined benefit pension plans:                                                                      |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                                    |   |               |                     | (167,746 | ) |   |   |   | 22,247 |   |   |   |   | (145,499 | ) |
| Less: Reclassification adjustments for losses included in net income                                |   |               | 4,101                    |     |   |   |   | (1,418 | ) |   |   |   | 2,683 |   |
| Less:  Other reclassification                                                             |   |               |   (11,522) |     |   |   |   | 4,718 |   |   |   |   | (6,804 | ) |
| Net defined benefit pension plans                                                                   |   |               | (175,167)                |     |   |   |   | 25,547 |   |   |   |   | (149,620 | ) |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss)                                                                   |   |  ¥  |                     | (884,638 | ) |   |  ¥ |   | 25,547 |   |   |  ¥ |   | (859,091 | ) |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
| Year ended March 31, 2009:                                                                          |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustments                                                            |   | ¥   | (80,588)                 |     |   |  ¥  | - |   |   | ¥   | (80,588) |   |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding gain (loss) on securities:                                                       |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                                    |   |               |                     | (354,330 | ) |   |   |   | 145,275 |   |   |   |   | (209,055 | ) |
| Less:  Reclassification adjustments for losses included in net income                     |   |               |                     | 165,884  |   |   |   |   | (68,012 | ) |   |   |   | 97,872 |   |
| Increase in deferred tax asset valuation allowance*                                                 |   |               | -                        |     |   |   |   | (77,263 | ) |   |   |   | (77,263 | ) |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
| Net unrealized holding gain (loss) during the period                                                |   |               |                     | (188,446 | ) |   |   | - |   |   |   |   | (188,446 | ) |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
|     Defined benefit pension plans:                                              |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                                    |   |               |                     | (250,029 | ) |   |   |   | 30,502 |   |   |   |   | (219,527 | ) |
| Less: Reclassification adjustments for losses included in net income                                |   |               |                     | 8,500    |   |   |   |   | (2,295 | ) |   |   |   | 6,205 |   |
| Less: Reclassification adjustments on effect of curtailment and settlement                          |   |               |                     | 71,027   |   |   |   | - |   |   |   |   | 71,027 |   |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
|     Net defined benefit pension plans                                           |   |               |                     | (170,502 | ) |   |   |   | 28,207 |   |   |   |   | (142,295 | ) |
|                                                                                                |   |               |                     |     |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss)                                                                   |   |  ¥  |                     | (439,536 | ) |   |  ¥ |   | 28,207 |   |   |  ¥  |   | (411,329 | ) |

----

|                                                                                  |   | Thousands of Yen |          |
|---------------------------------------------------------------------------------------|--------|------------------|---------------|
|                                                                                  |   | Before Tax       |          |   |   | Tax (Expense) |   |   | Net of Tax |   |
|                                                                                  |   | Amount           |          |   |   | or Benefit |   |   | Amount |   |
| Year ended March 31, 2010:                                                            |   |             |          |   |   |   |   |   |   |   |
| Foreign currency translation adjustments                                              |   | ¥           | 2,739         |   |   | ¥   | - |   |   | ¥ | 2,739 |   |
| Unrealized holding gain (loss) on securities:                                         |   |             |          |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                      |   |             | 243,390       |   |   |   |   | (99,789 | ) |   |   | 143,601 |   |
| Less:  Reclassification adjustments for  gains included in net income  |   |             | (29,217       | ) |   |   |   | 11,979 |   |   |   | (17,238 | ) |
| Release of deferred tax asset valuation allowance*                                    |   |             | -             |   |   |   |   | 87,810  |   |   |   | 87,810  |   |
| Net unrealized holding gain (loss) during the period                                  |   |             | 214,173  |   |   |   |   | - |   |   |   | 214,173  |   |
| Defined benefit pension plans:                                                        |   |             |          |   |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                      |   |             | 118,967       |   |   |   |   | (8,572 | ) |   |   | 110,395 |   |
| Less: Reclassification adjustments for losses included in net income                  |   |             | 18,415        |   |   |   |   | (3,402 | ) |   |   | 15,013 |   |
| Less:  Reclassification adjustments on effect of curtailment and settlement |   |             | 88,401        |   |   |   |   | (36,331 | ) |   |   | 52,070 |   |
| Less: Other                                                                      |   |             | 95,090        |   |   |   | - |   |   |   | 95,090 |   |
| Net defined benefit pension plans                                                     |   |             | 320,873       |   |   |   |   | (48,305 | ) |   |   | 272,568 |   |
|                                                                                  |   |             |          |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss)                                                     |   | ¥           | 537,785       |   |   | ¥ |   | (48,305 | ) |   | ¥ | 489,480 |   |

|                                                                                 |   | Thousands of U.S. Dollars |   |
|--------------------------------------------------------------------------------------|--------|---------------------------|--------|
|                                                                                 |   | Before Tax                |   |   | Tax (Expense) |   |   | Net of Tax |   |
|                                                                                 |   | Amount                    |   |   | or Benefit |   |   | Amount |   |
| Year ended March 31, 2010:                                                           |   |                      |   |   |   |   |   |   |   |
| Foreign currency translation adjustments                                             |   | $                         | 29     |   |   | $ | - |   |   | $ | 29 |   |
| Unrealized holding gain (loss) on securities:                                        |   |                      |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                     |   |                      | 2,606  |   |   |   | (1,068 | ) |   |   | 1,538 |   |
| Less:  Reclassification adjustments for losses included in net income |   |                      | (313   | ) |   |   | 128 |   |   |   | (185 | ) |
| Release of deferred tax asset valuation allowance*                                   |   | -                         |   |   |   | 940 |   |   |   | 940 |   |
| Net unrealized holding gain (loss) during the period                                 |   |                      | 2,293  |   |   | - |   |   |   | 2,293 |   |
| Defined benefit pension plans:                                                       |   |                      |   |   |   |   |   |   |   |   |   |   |
| Amount arising during the period                                                     |   |                      | 1,274  |   |   |   | (92 | ) |   |   | 1,182 |   |
| Less: Reclassification adjustments for losses included in net income                 |   |                      | 197    |   |   |   | (36 | ) |   |   | 161 |   |
| Less: Reclassification adjustments on effect of curtailment and settlement           |   |                      | 947    |   |   |   | (389 | ) |   |   | 558 |   |
| Less: Other                                                                          |   |                      | 1,018  |   |   | - |   |   |   | 1,018 |   |
| Net defined benefit pension plans                                                    |   |                      | 3,436  |   |   |   | (517 | ) |   |   | 2,919 |   |
|                                                                                 |   |                      |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss)                                                    |   | $                         | 5,758  |   |   | $ | (517 | ) |   | $ | 5,241 |   |

|   |  * The release of (increase in) the deferred tax asset valuation allowance has resulted from unrealized gain and (losses) on available-for-sale securities, respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The components of accumulated other comprehensive income (loss) at March 31, 2009 and 2010 are as follows: |
|--------|------------------------------------------------------------------------------------------------------------|

|                                     |   |             |     |         | Thousands of |
|------------------------------------------|--------|------------------|----------|--------------|--------------|
|                                     |   | Thousands of Yen |     | U.S. Dollars |
|                                     |   | 2009             |     |         | 2010         |   |   | 2010 |
|                                     |   |             |     |         |         |   |   |   |   |
|                                     |   |             |     |         |         |   |   |   |   |
| Foreign currency translation adjustments |   | ¥           | (83,928  | )            |         | ¥ | (81,189 | ) |   | $ | (869 | ) |
| Unrealized holding gain on securities    |   |             | 166,863  |         |         |   | 381,036 |   |   |   | 4,079 |   |
| Defined benefit pension plans            |   |             | (403,646 | )            |         |   | (131,078 | ) |   |   | (1,403 | ) |
|                                     |   |             |     |         |         |   |   |   |   |   |   |   |
|                                     |   | ¥           | (320,711 | )            |         | ¥ | 168,769 |   |   | $ | 1,807 |   |

|                                                                               |   | Thousands of Yen |      |         | Thousands of U.S. Dollars |
|------------------------------------------------------------------------------------|--------|------------------|-----------|--------------|---------------------------|
|                                                                               |   | 2008             |      |         | 2009                      |   |   | 2010 |   |   | 2010 |
|                                                                               |   |             |      |         |                      |   |   |   |   |   |   |   |
| Numerator:                                                                         |   |             |      |         |                      |   |   |   |   |   |   |   |
| Net income attributable to Internet Initiative Japan Inc.-basic and diluted        |   | ¥           | 5,176,589 |         |                      | ¥ | 1,419,304 |   |   | ¥ | 2,234,138 |   |   | $ | 23,920 |   |
|                                                                               |   |             |      |         |                      |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |             |      |         |                      |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   | Number of shares |      |         |                      |   |
|                                                                               |   |             | 2008      |         |                      |   | 2009 |   |   |   | 2010 |   |   |   |   |   |
| Denominator:                                                                       |   |             |      |         |                      |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average common shares outstanding-basic                                   |   |             | 206,240   |         |                      |   | 205,165 |   |   |   | 202,544 |   |   |   |   |   |
| Dilutive effect of stock options                                                   |   |             | 225       |         |                      |   | 30 |   |   |   |   |   |   |   |   |   |
| Weighted-average common shares outstanding-diluted                                 |   |             | 206,465   |         |                      |   | 205,195 |   |   |   | 202,544 |   |   |   |   |   |
|                                                                               |   |             |      |         |                      |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |             |      |         |                      |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   | Yen              |      | U.S. Dollars |
|                                                                               |   |             | 2008      |         |                      |   | 2009 |   |   |   | 2010 |   |   |   | 2010 |   |
|                                                                               |   |             |      |         |                      |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |             |      |         |                      |   |   |   |   |   |   |   |   |   |   |   |
| Basic net income attributable to Internet Initiative Japan Inc. per common share   |   | ¥           | 25,100    |         |                      | ¥ | 6,918 |   |   | ¥ | 11,030 |   |   | $ | 118 |   |
|                                                                               |   |             |      |         |                      |   |   |   |   |   |   |   |   |   |   |   |
| Diluted net income attributable to Internet Initiative Japan Inc. per common share |   | ¥           | 25,072    |         |                      | ¥ | 6,917 |   |   | ¥ | 11,030 |   |   | $ | 118 |   |

|   | For the years ended March 31, 2008, 2009 and 2010, potentially dilutive shares have been excluded from the computation of diluted net income attributable to Internet Initiative Japan Inc. because the exercise prices of the options were greater than the average market price of the common shares. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|                                |   | Year ended March 31 |
|-------------------------------------|--------|---------------------|
|                                |   | 2008                |   |   | 2009 |   |   | 2010 |   |
|                                |   |                |   |   |   |   |   |   |   |
| Shares issuable under stock options |   |                | 950 |   |   |   | 950 |   |   |   | 2,500 |   |

----

| 15. | COMMITMENTS AND CONTINGENT LIABILITIES |
|-----|----------------------------------------|

----

| 16.   | FINANCIAL INSTRUMENTS |
|-----------------|-----------------------|

|   | Fair Value—In the normal course of business, the Company invests in financial assets. To estimate the fair value of those financial assets, the Company used quoted market prices to the extent that they were available. Where a quoted market price is not available, the Company estimates fair value using primarily the discounted cash flow method. For certain financial assets and liabilities, such as trade receivables and trade payables, which are expected to be collected and settled within one year, the Company assumed that the carrying amount approximates fair value due to their short maturities. For guarantee deposits, which are fully refunded at the end of lease contracts, the remaining noncancellable lease terms are principally within two years and the Company assumed that the carrying amount approximates fair value. Investment for which it is not practicable to estimate fair value primarily consists of investments in a number of unaffiliated and unlisted smaller sized companies and the estimate of their fair values cannot be made without incurring excessive costs. Refundable insurance policies are carried at cash surrender value. The carrying amounts and fair value of financial instruments are summarized below: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                    |   |                   |      |   |         |   | Thousands of |     |
|---------------------------------------------------------|--------|------------------------|-----------|--------|--------------|--------|--------------|----------|
|                                                    |   |  Thousands of Yen |      |   | U.S. Dollars |   |
|                                                    |   | 2009                   |      | 2010   |         |   | 2010         |     |
|                                                    |   | Carrying               |      |   | Fair         |   |         | Carrying |   |   | Fair |   |   | Carrying |   |   | Fair |   |
|                                                    |   | Amount                 |      |   | Value        |   |         | Amount   |   |   | Value |   |   | Amount |   |   | Value |   |
| Other investments for which it is:                      |   |                   |      |   |         |   |         |     |   |   |   |   |   |   |   |   |   |   |
| Practicable to estimate fair value                      |   | ¥                 | 674,254   |   |         | ¥ | 674,254      |     |   | ¥ | 866,996 |   |   | ¥ | 866,996 |   |   | $ | 9,283 |   |   | $ | 9,283 |   |
| Not practicable                                         |   |                   | 1,240,340 |   |         | -      |         |     |   | 1,714,614 |   |   | - |   |   |   | 18,357 |   |   | - |   |
|                                                    |   |                   |      |   |         |   |         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noncurrent refundable insurance policies (other assets) |   |                   | 206,387   |   |         |   | 206,387      |     |   |   | 107,081 |   |   |   |   |   |   | $ | 1,146 |   |   | $ | 1,146 |   |

| 17. | FAIR VALUE MEASUREMENTS |
|-----|-------------------------|

|   | ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value as follows: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 1 – | Inputs are quoted prices in active |
|--------|-----------------|------------------------------------|

|   | Level 2 – | Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical  or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
|--------|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3 – | Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity’s own assumptions about the assumptions that market participants would use in establishing a price. |
|--------|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Assets Measured at Fair Value on a Recurring Basis |
|--------|----------------------------------------------------|

|   | The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2009 and 2010 respectively, consistent with the fair value hierarchy provisions of  ASC Topic 820. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                        |   | Thousands of Yen         |    | Total                                            |   |
|-------------------------------------------------------------|--------|-------------------------------|---------|--------------------------------------------------|--------|
| March 31, 2009                                              |   | Level 1                       |    | Level 2                                          |   | Level 3 |   | 2009 |   |
|                                                        |   |                          |    |                                             |   |   |   |   |   |
| Assets:                                                     |   |                          |    |                                             |   |   |   |   |   |
| Available‐for‐sale securities equity securities |   | ¥                        | 674,254 |                                             | -      |   | - |   | ¥ | 674,254 |   |
|                                                        |   |                          |    |                                             |   |   |   |   |   |   |   |
|                                                        |   |                          |    |                                             |   |   |   |   |   |   |   |
|                                                        |   |                          |    |                                             |   |   |   |   |   |   |   |
|                                                        |   | Thousands of Yen         |    |         Total |   |
| March 31, 2010                                              |   | Level 1                       |    | Level 2                                          |   | Level 3 |   |   | 2010 |   |
|                                                        |   |                          |    |                                             |   |   |   |   |   |   |   |
| Assets:                                                     |   |                          |    |                                             |   |   |   |   |   |   |   |
| Available‐for‐sale securities-equity securities |   | ¥                        | 866,996 |                                             | -      |   | - |   | ¥ | 866,996 |   |
|                                                        |   |                          |    |                                             |   |   |   |   |   |   |   |
|                                                        |   |                          |    |                                             |   |   |   |   |   |   |   |
|                                                        |   | Thousands of U.S Dollars |    |        Total       |   |
| March 31, 2010                                              |   | Level 1                       |    | Level 2                                          |   | Level 3 |   |   | 2010 |   |
|                                                        |   |                          |    |                                             |   |   |   |   |   |   |   |
| Assets:                                                     |   |                          |    |                                             |   |   |   |   |   |   |   |
| Available‐for‐sale securities-equity securities |   | $                             | 9,283   |                                             | -      |   | - |   | $ | 9,283 |   |

|   | Available-for-sale securities are comprised of marketable securities, which are listed on Japan, U.S. and Hong Kong securities market, which are valued using an unadjusted quoted market price in active markets with sufficient volume and frequency of transactions. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                    | Thousands of Yen |
|---------------------------------------------------------|------------------|
| March 31, 2009                                          | Level 1          |   | Level 2 |   |   | Level 3 |   | impairment loss |
|                                                    |             |   |   |   |   |   |   |   |   |
| Assets:                                                 |             |   |   |   |   |   |   |   |   |
| Non-marketable securities- equity  securities | -                |   | - |   | ¥ | 298,280 |   | ¥ | 360,451 |
|                                                    |             |   |   |   |   |   |   |   |   |
|                                                    |             |   |   |   |   |   |   |   |   |
|                                                    |             |   |   |   |   |   |   |   |   |
|                                                    | Thousands of Yen |
| March 31, 2010                                          | Level 1          |   | Level 2 |   |   | Level 3 |   | impairment loss |
|                                                    |             |   |   |   |   |   |   |   |   |
| Assets:                                                 |             |   |   |   |   |   |   |   |   |
| Non-marketable securities- equity  securities | -                |   | - |   | ¥ | 622,137 |   | ¥ | 322,501 |
|                                                    |             |   |   |   |   |   |   |   |   |

----

|                                                    | Thousands of  U.S Dollars |
|---------------------------------------------------------|-------------------------------------|
| March 31, 2010                                          | Level 1                             |   | Level 2 |   |   | Level 3 |   | impairment loss |
|                                                    |                                |   |   |   |   |   |   |   |   |
| Assets:                                                 |                                |   |   |   |   |   |   |   |   |
| Non-marketable securities- equity  securities | -                                   |   | - |   | $ | 6,661 |   | $ | 3,453 |

|   | In accordance with the provisions of ASC 325-20, “Cost Method Investments”, we review the carrying values of our investments when events and circumstances warrant. This review requires the comparison of the fair values of our investments to their respective carrying values. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 18. | BUSINESS SEGMENTS |
|-----|-------------------|

|                                              |   |   Thousands of Yen |       |   |   Thousands ofU.S. Dollars |    |
|---------------------------------------------------|--------|-------------------------|------------|--------|---------------------------------|---------|
|                                              |   |  2008              |       |   |  2009                      |    |   |  2010 |   |   |  2010 |   |
| Network service and systems integration business: |   |                    |       |   |                            |    |   |   |   |   |   |   |
| Customers                                         |   | ¥                  | 66,831,138 |   |                            | ¥  | 69,707,278 |   |   | ¥ | 67,799,723 |   |   | $ | 725,907 |   |
| Intersegment                                      |   | -                       |       |   |                            | 253,985 |   |   |   | 428,560 |   |   |   | 4,588 |   |
| Total                                             |   |                    | 66,831,138 |   |                            |    | 69,961,263 |   |   |   | 68,228,283 |   |   |   | 730,495 |   |
| ATM operation business                            |   |                    |       |   |                            |    |   |   |   |   |   |   |   |   |   |   |
| Customers                                         |   |                    | 4,161      |   |                            |    | 23,452 |   |   |   | 206,657 |   |   |   | 2,213 |   |
| Intersegment                                      |   | -                       |       |   | -                               |    |   | - |   |   | - |   |
| Total                                             |   |                    | 4,161      |   |                            |    | 23,452 |   |   |   | 206,657 |   |   |   | 2,213 |   |
|                                              |   |                    |       |   |                            |    |   |   |   |   |   |   |   |   |   |   |
| Elimination                                       |   | -                       |       |   |                            | 253,985 |   |   |   | 428,560 |   |   |   | 4,588 |   |
| Consolidated total                                |   | ¥                  | 66,835,299 |   |                            | ¥  | 69,730,730 |   |   | ¥ | 68,006,380 |   |   | $ | 728,120 |   |

----

|                                                                      |   |             |      |   |         |   |      |   |   |   | Thousands of |   |
|---------------------------------------------------------------------------|--------|------------------|-----------|--------|--------------|--------|-----------|--------|--------|--------|--------------|--------|
|                                                                      |   | Thousands of Yen |      |   | U.S. Dollars |   |
|                                                                      |   | 2008             |      |   | 2009         |   |      | 2010   |   |   | 2010         |   |
| Operating income (loss):                                                  |   |             |      |   |         |   |      |   |   |   |         |   |
|      Network service and systems integration business |   | ¥           | 4,854,309 |   |         | ¥ | 3,663,040 |   |   | ¥ | 4,435,207    |   |   | $ | 47,486 |   |
|      ATM operation business                           |   |             | (89,195   | )      |         |   | (704,431  | )      |   |   | (1,001,166   | )      |   |   | (10,719 | ) |
|      Elimination                                      |   |             | 5,750     |   |         |   | 41,227    |   |   |   | 22,456       |   |   |   | 240 |   |
| Consolidated operating income                                             |   | ¥           | 4,759,364 |   |         | ¥ | 2,917,382 |   |   | ¥ | 3,411,585    |   |   | $ | 36,527 |   |

|                                                                      |   |             |       |         |   |   |       |   |   | Thousands of |    |   |   |   |   |
|---------------------------------------------------------------------------|--------|------------------|------------|--------------|--------|--------|------------|--------|--------|--------------|---------|--------|--------|--------|--------|
|                                                                      |   | Thousands of Yen |       | U.S. Dollars |   |   |       |   |   |
|                                                                      |   |             | 2009       |         |   |   | 2010       |   |   |         | 2010    |   |   |   |   |   |
|                                                                      |   |             |       |         |   |   |       |   |   |         |    |   |   |   |   |   |
| Segment Assets:                                                           |   |             |       |         |   |   |       |   |   |         |    |   |   |   |   |   |
|      Network service and systems integration business |   | ¥           | 51,799,206 |         |   | ¥ | 50,462,478 |   |   | $            | 540,283 |   |   |   |   |   |
|      ATM operation business                           |   |             | 504,144    |         |   |   | 655,123    |   |   |         | 7,014   |   |   |   |   |   |
|      Elimination                                      |   |             | 2,151      |         |   |   | 2,151      |   |   |         | 23      |   |   |   |   |   |
| Consolidated total assets                                                 |   | ¥           | 52,301,199 |         |   | ¥ | 51,115,450 |   |   | $            | 547,274 |   |   |   |   |   |

|                                                                      |   |             |      |         |   |   |      |   |   |   |      |   |   | Thousands of |   |
|---------------------------------------------------------------------------|--------|------------------|-----------|--------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------------|--------|
|                                                                      |   | Thousands of Yen |      | U.S. Dollars |   |
|                                                                      |   |             | 2008      |         |   |   | 2009      |   |   |   | 2010      |   |   |         | 2010   |   |
|                                                                      |   |             |      |         |   |   |      |   |   |   |      |   |   |         |   |   |
| Depreciation and amortization:                                            |   |             |      |         |   |   |      |   |   |   |      |   |   |         |   |   |
|      Network service and systems integration business |   | ¥           | 4,771,468 |         |   | ¥ | 5,417,275 |   |   | ¥ | 5,287,887 |   |   | $            | 56,615 |   |
|      ATM operation business                           |   |             | 3,336     |         |   |   | 13,226    |   |   |   | 18,939    |   |   |         | 203    |   |
| Consolidated total                                                        |   | ¥           | 4,774,804 |         |   |   | 5,430,501 |   |   | ¥ | 5,306,826 |   |   | $            | 56,818 |   |

| 19. | ADVERTISING EXPENSES |
|-----|----------------------|

|   | Advertising expenses incurred during the years ended March 31, 2008, 2009 and 2010 related primarily to advertisements in magazines, journals and newspapers and amounted to ¥575,306 thousand, ¥459,679 thousand and ¥467,813 thousand ($5,009 thousand), respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 20. | RELATED PARTY TRANSACTIONS |
|-----|----------------------------|

|                |   |                   |      |         |   |         |          |   |   |         | Thousands of  |   |
|---------------------|--------|------------------------|-----------|--------------|--------|--------------|---------------|--------|--------|--------------|---------------|--------|
|                |   |  Thousands of Yen |      | U.S. Dollars |   |
|                |   | 2008                   |      |         | 2009   |         |          | 2010   |   |         | 2010          |   |
|                |   |                   |      |         |   |         |          |   |   |         |          |   |
|                |   |                   |      |         |   |         |          |   |   |         |          |   |
| Accounts receivable |   | ¥            | -         |         |   |  ¥ | 194,258  |   |   |  ¥ | 130,741  |   |   |  $ | 1,400 |   |
| Accounts payable    |   | -                      |      |         |   | 1,184,399    |          |   |   | 1,099,237    |          |   |   | 11,769 |   |
| Revenues            |   |                   | 1,186,771 |         |   |         | 1,129,160     |   |   |         | 911,622       |   |   |   | 9,760 |   |
| Costs and expenses  |   |                   | 9,437,253 |         |   |         | 10,689,937    |   |   |         | 11,304,222    |   |   |   | 121,030 |   |

|   | As for equity method investees, refer to Note 5, “INVESTMENTS IN EQUITY METHOD INVESTEES” |
|--------|-------------------------------------------------------------------------------------------------------|

| 21. | SUBSEQUENT EVENTS |
|-----|-------------------|

----

| 1.1    |   | Articles of Incorporation, as amended (English translation)1                                                                                                                                                    |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.2    |   | Share Handling Regulations, as amended (English translation) 1                                                                                                                                                  |
| 1.3    |   | Regulations of the Board of Directors, as amended (English translation)                                                                                                                                         |
| 1.4    |   | Regulations of the Board of Company Auditors, as amended (English translation)2                                                                                                                                 |
| 2.1    |   | Bylaws of the IIJ Group Employee Shareholders’ Association (English translation)                                                                                                                          |
| 2.2    |   | Form of Deposit Agreement among IIJ, The Bank of New York Mellon as depositary and all owners and holders from time to time of American Depositary Receipts, including the form of American Depositary Receipt3 |
| 2.3    |   | Bylaws of the IIJ Group Director Stock Purchase Plan (English translation)                                                                                                                                      |
| 4.1    |   | Shareholders’ Agreement Relating to the Establishment of INTERNET MULTIFEED CO., dated August 20, 1997, between Nippon Telegraph and Telephone Corporation and the Registrant (English translation)4 |
| 4.2    |   | Basic Agreement to Delegate Services, dated April 1, 1998, between Internet Initiative Japan Inc. and Net Care, Inc. (English translation)4                                                                |
| 4.3    |   | Joint Venture Agreement, dated January 19, 2006, between Internet Initiative Japan Inc. and Konami Corporation (English translation)5                                                                           |
| 4.4    |   | Service Agreement, dated March 25, 2004, between Internet Initiative Japan Inc. and IIJ America Inc.6                                                                                                           |
| 4.5    |   | Agreement on Limited Liability, dated June 27, 2008, June 26, 2009 and June 25, 2010, between Internet Initiative Japan Inc. and outside directors and outside company auditors7                                |
| 4.6    |   | Stock Purchase Agreement, dated June 1, 2010, between Internet Initiative Japan Inc. and AT&T Japan LLC. 8                                                                                                  |
| 4.7    |   | Solutions Engagement Agreement, dated May 31, 2010 between Communications Services KK (changed its trade name to IIJ-Global Solutions Inc. on September 1, 2010) and IBM Japan, Ltd.8                           |
| 4.8    |   | Guaranty Letter Related to the Solutions Engagement Agreement between IBM Japan Ltd and Communications Services KK, dated June 1, 2010.8                                                                        |
| 8.1    |   | List of Significant Subsidiaries (See “Our Group Companies” in Item 4.B. of this Form 20-F)                                                                                               |
| 11.1   |   | Internet Initiative Japan Code of Conduct9                                                                                                                                                                      |
| 12.1   |   | Certification of the principal executive officer required by 17 C.F.R. 240. 13a-14(a)                                                                                                                           |
| 12.2   |   | Certification of the principal financial officer required by 17 C.F.R. 240. 13a-14(a)                                                                                                                           |
| 13.1   |   | Certification of the chief executive officer required by 18 U.S.C. Section 1350                                                                                                                                 |
| 13.2   |   | Certification of the chief financial officer required by 18 U.S.C. Section 1350                                                                                                                                 |
|   |   |                                                                                                                                                                                                            |

| (1) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on September 29, 2009. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on August 3, 2005. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Incorporated by reference to the Registration Statement on Form F-6 (File No. 333-110862) filed on December 2, 2003. |
|-----|----------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated by reference to the corresponding exhibit to our Form F-1 Registration Statement (File No. 333-10584) declared effective on August 3, 1999. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on July 11, 2006. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on July 23, 2004. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| (7) | We entered into a Limitation of Liability Agreement with Mr. Masaki Okada and Mr. Masaaki Koizumi as our outside company auditors on June 27, 2008, with Mr. Junnosuke Furukawa as our outside director on June 26, 2009 and with Mr. Yasurou Tanahashi, Mr. Takashi Hiroi and Mr. Shingo Oda as our outside directors on June 25, 2010. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Schedules, annexes and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. IIJ agrees to furnish supplementary copies of the omitted schedules, annexes and similar attachments to the SEC upon request. A list briefly describing the omitted schedules, annexes and similar attachments are contained in this exhibit. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Incorporated by reference to the corresponding exhibit to our annual report on Form 20-F (File No. 0-30204) filed on June 30, 2008. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|