WHAT S NEW. The Ministry of Finance. This Month s Special! T h. 1. Holding of the 36 th Advisory Council on Government Debt Management.

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1 JAPANESE GOVERNMENT BONDS Monthly Newsletter of the Ministry of Finance, Japan This Month s Special! What s New Holding of the 36 th Advisory Council on Government Debt Management Monthly Topic. The employment situation shows a trend toward improvement. Wage growth is expected to reach the higher level than the previous year 3. A Joint Announcement of the New Model Portfolio (Public Pension Funds, Mar., 5) WHAT S NEW. Holding of the 36 th Advisory Council on Government Debt Management On April 7 5, the MOF held its 36th Advisory Council on Government Debt Management. The agenda of the meeting was as follows. () History of Debt Management Policy (presentation by Professor Tomita) () Maintaining and enhancing market liquidity a. Liquidity of the JGB market (by MOF) b. Measures to maintain and enhance the liquidity of the JGB market (by BOJ) (3) Current situation of overseas Investor Relations and international conference (by MOF) We explained agenda item (3) based on the following meeting materials. WHAT S Contents NEW T h May 5. What s New Monthly Topic IR Special Office P.. JGB Primary Market P.6 3. The Auctions for Enhanced-Liquidity and JGB Buy-Back P.7. JGB Secondary Market P.8 Policy and Objectives of Overseas IR Activities Objectives of Overseas IR Activities Foreign investors are trading JGBs actively in the Japanese secondary market. Current stable holdings of JGBs by domestic financial institutions may undergo changes in the future due to factors such as stagnant household savings. Therefore, the ratio of JGBs held by foreign investors may increase in the future. We are implementing overseas IR activities with a view to improving foreign investors awareness of JGBs, grasping trends in their investments and needs, and ensuring stable issuance of JGBs by diversifying the investor base, while continuing to acknowledge the importance of domestic holdings of JGBs. Implementation Policy of Overseas IR Activities To enhance communications with investors about Japanese economic policy and fiscal consolidation, as well as government debt management. To give priority to foreign central banks (foreign exchange reserves authorities), pension funds, life insurance companies, and other foreign investors expected to hold JGBs long-term. To further enhance IR activities in Asian and emerging countries, in addition to those in Europe and America. To gather and provide accurate information on JGB investors needs through interviews with investors, and to implement highly cost-effective overseas IR activities by holding seminars and issuing English newsletters, in addition to conducting conventional IR. To share information gathered from foreign investors with other relevant departments. To enhance relations with foreign debt management offices, international organizations, and foreign central banks. 5. Investor Trends and JGB Outstanding P. 6. Economic and Financial Trends P.3 7. Information P. ( The Advisory Council on Government Debt Management Key Points (June 8 th )) The Ministry of Finance

2 WHAT S NEW Proportion of JGB Foreign Investors (Source) Bank of Japan Flow of Funds (Reference) Foreign Investors Bondholding by region.9 Others Middle East Europe North America Asia (Source)Ministry of Finance, Bank of Japan Recent Trends of Foreign Investors in JGB Market Foreign Investors Presence in the JGB Secondary Market Cash market Futures market, 6% 3, 6% Total Total Foreign Investors Foreign Investors 5%, Percentage of Foreign Investors,79 Percentage of Foreign Investors 5%,5 5% Percentage of Foreign Investors (Short-term bonds) %, % 38% % % %, 38% % 35% , %,766,8,73 5% 3%,5,6 3% 8% 3% % % 6 % 9%,,353,375 %, % % 75 3% 6% 7% 9% % 5% 6% % 5 % % % (CY) (CY) (Note) Excluding repo transaction and T-Bills (Source) Japan Securities Dealers Association, Osaka Exchange, Inc Trends in JGB Transactions (by investor type) Foreigners City Banks Trust Banks Insurers Oct Jan Apr Jul Oct Jan Oct Jan Apr Jul Oct Jan Oct Jan Apr Jul Oct Jan Oct Jan Apr Jul Oct Jan 3 5 (Source) Japan Securities Dealers Association

3 WHAT S NEW Overseas IR Activities after the Establishment of the New IR Special Office (July ) 7 overseas visits ( countries, 3 cities, meetings) Interviews with central banks, pension funds, insurance companies, asset management companies, etc. North America: U.S., Canada Europe: U.K., Germany, France, Italy, herlands, Switzerland, Norway, Denmark Asia and Oceania: Hong Kong, Singapore, Thailand, Malaysia, Australia Other Emerging Countries: Turkey, Georgia. Mexico, Brazil, Chile, Peru 5 interviews in Japan (including video conferences) 3 3 visits to Tokyo offices of foreign central banks; visiting them on a regular basis ( times per a year) 7 lectures at seminars (domestic:, overseas: 5) 5 Holding video conferences as an attempt to further develop IR activities methods 6 Enhancing communications with investors by issuing monthly English newsletters (providing information promptly in English) containing useful information about Japanese macroeconomics etc. Investment Trends of Foreign Investors and Contents of IR Activities Investment trends of Foreign investors as indicated in IR meetings On the whole, many foreign JGB investors underweigh JGB against benchmarks. Some of them, however, continue to purchase JGBs to a certain extent, such as by investing in JGB with currency swap, maintaining a yen portfolio, and adopting JGB as a collateral etc. They invest mainly in Short-term bills, but they continue the net purchase of Medium- to long-term bills. They are interested in recent trends in the JGB market like its volatility. Foreign central banks continue to invest in JGB even in a low-interest environment. Other foreign investors like pension funds also continue to invest in JGBs to a certain extent. Many others are of the opinion that they would invest in JGBs again according to interest rates. Their JGBs investment decisions are usually based on medium- to long-term perspectives. Many investors are interested in Inflation Indexed Bonds. Some investors in emerging countries are expanding the size of their foreign investment, mainly because of relaxation of investment regulations. Explanation and main questions, opinions, and interests raised in IR meetings We explain Japanese economic policy and fiscal consolidation, as well as debt management policy. Foreign investors are interested in fiscal consolidation policy, QQE, and the current progress of Abenomics etc., as well as the JGB Issuance Plan and Policy and trends in the JGB market. Foreign investors appreciate our IR activities because they are able to communicate with us directly on a variety of topics. Future Direction For the Enhancement of Overseas IR Activities Enhancing communications Further enhancing IR activities in Asian and emerging countries Enhancing relations with long-term JGB holders Enhancing cooperation with foreign debt management offices and international organizations Explain the key points, points to be emphasized regarding IR activities and points to be highlighted as government debt management, by taking into account the trends of foreign investors and analysis of their views on Japanese economic policy. Provide investors who are very influential in the secondary market with a wide range of accurate information on JGBs. Improve the current English newsletters. Visit the Japan offices of foreign investors, and implement new IR activities such as video conferences. Further enhance IR activities for Asia in view of high growth potential in the area. Build a forward-looking network in a strategic manner with investors in emerging countries of great potential. Promote strategic IR activities by giving priority to foreign exchange reserves authorities, pension funds, and other foreign institutional investors expected to hold JGB over a long time. Exchange opinions regularly with foreign central banks and their Tokyo offices to enhance relations with them. Strengthen relations with foreign debt management authorities by exchanging information through IR activities and by attending international conferences. Enhance cooperation with international organizations by proactively implementing presentations for foreign authorities and investors at seminars and other meetings hosted by these organizations. -3-

4 MONTHLY TOPIC. The employment situation shows a trend toward improvement According to the Labour Force Survey of February 5, the unemployment rate was 3.5%, which was lower than the previous month s by.%. The number of employed persons in February 5 was 63. million, an increase of 39 thousand or.6% from the previous year. The number of unemployed persons in February 5 was.6 million, a decrease of 6 thousand or.6% from the previous year. Unemployment rate Number of employed and unemployed persons Source: Ministry of Internal Affairs and Communications Labour Force Survey Source: Ministry of Internal Affairs and Communications Labour Force Survey Job opening-to-application ratio As for Employment Referrals for General Workers, in February 5, the job opening-to-application ratio was.5 times, rising.pt on the previous month. This is the highest level since.9 times in March 99 and the figure has been above. times for 6 consecutive months. The effective job offers (seasonally adjusted) increased by.% and effective job applicants increased by.9% from the previous month. The employment situation is continuing an upward trend. Source: Ministry of Health, Labour and Welfare Employment Referrals for General Workers. Wage growth is expected to reach a higher level than the previous year In Japan, annual wage negotiations take place in spring, known as "Shunto" (the Spring Offensive ). Following this year s Shunto, the average monthly wage increase was.% based on the th survey as of April, which is higher than the previous year. This movement reflects the recovery of corporate earnings and the improvement of the employment situation. This trend is essential in order to overcome deflation and achieve sustainable economic growth. Change in average wages related to Shunto Source: Japanese Trade Union Confederation Note: All figures are calculated based on the number of union members weighted average growth. Note: The figure for 5 is cited from the th survey as of April while the others are cited from the results of the final survey. --

5 MONTHLY TOPIC 3. A Joint Announcement of the New Model Portfolio (Public Pension Funds, Mar., 5) On March, Government Pension Investment Fund (GPIF), Federation of National Public Service Personnel Mutual Aid Associations, Pension Fund Association for Local Government Officials and Promotion and Mutual Aid Corporation for Private Schools of Japan had a joint announcement of the new model portfolio which is a part of a government plan to consolidate Japan s pension system in October 5. The new model portfolio matches the new GPIF target allocation renewed from October. Asset Class Domestic bonds Domestic stocks International bonds International stocks Model Portfolio Range of Center Value 35% 5% 5% 5% ±% ±9% ±% ±8% (Note) Range of Center Value in this table means the permissible range of deviation in which each target allocation should be included. In other words, each pension fund has some leeway to select its target allocation in this range. IR SPECIAL OFFICE In March, Mr. Fujishiro, Deputy Director-General in charge of the Financial Bureau, made a keynote speech in Kyoto for foreign investors, such as pension funds, asset managers and central banks. His theme was the Challenge Aging Society in Japan. Some participants raised questions and opinions as follows, - What government programs encourage Japanese people to have more children? - Would you consider accepting more immigration to support the working population? - Can you speak more about the potential for greater participation by women in the labor market? Foreign investors are very conscious about population issues in Japan, which cannot be ignored. QUIZ: How old is the most populous age in Japan in 55?. 5 years old. 58 years old years old. 7 years old 5. 8 years old (The answer is at the bottom) Japan, as a front-runner aging society, needs to become a good, sustainable role model for this common challenge facing all advanced economies. Answer: 5 If you have any questions regarding the contents of this newsletter, please do not hesitate to contact us at: JGB-IR@mof.go.jp -5-

6 JGB PRIMARY MARKET Auction Date Type of Security Issue Number Maturity Date Auction Results (Bonds) Nominal Coupon Amounts of Competitive Bids Amounts of Bids Yield at the Lowest Price Yield at the Average Price Amounts of Non-Competitive Bids Tendered / Amounts of Bids at the Non-pricecompetitive Auction Ⅰ (Until April 5) Amounts of Bids at the Non-pricecompetitive Auction Ⅱ /3/5 -year 337 //.3% 5,88.,9..36%.33% /5/5 3-year 5 //.5%, %.6% /3/5 5-year //9.% 8,77.9,58.7.3%.% /7/5 -year 5 //3.% 3,87.6,3.8.75%.7% //5 -year 7 3//5.7%, % /6/5 -year 35 3/5/7.%,53.9,55..3%.7% /3/5 -year 338 3//5.% 6,.6,8.7.3%.396% /5/5 3-year 6 3//5.5%, %.5% //5 5-year 3 3//.% 8,939.,55.6.6%.% /8/5 -year 5 3//35.% 3,76.,87.9.%.99% /6/5 -year 35 /5/7.%,55.7,3.5.3%.3% //5 -year 338 3//5.% 6,3.6, %.369% /9/5 3-year 6 3//5.5%, %.375% //5 5-year 3 3//.% 7,78.3,85..83%.8% /6/5 -year 5 3//35.%,893.8, %.7% /3/5 -year 8 3//55.%, % Auction Date Type of Security Issue Number Maturity Date Auction Results (Treasury Discount Bills) Amounts of Competitive Bids Amounts of Bids Yield at the Lowest Price Yield at the Average Price (Until April 5) Amounts of Bids at the Non-pricecompetitive Auction Ⅰ /5/5 3-month 5 5//5 5, ,3.75.%.5% 8. /6/5 6-month 5 8//5,8. 3,66..%.% 33.5 //5 3-month 5 5/8/5 8,98. 5,6.5.%.% 7.5 /7/5 -year 53 //6 6,87.9,37.55.%.9% 8. /9/5 3-month 5 5/5/5 7,93.8 5,3.3.6%.36% 56.6 /6/5 3-month 55 6//5 7,55. 5,3.8.%.% 9. 3/5/5 3-month 56 6/8/5, ,7.93.%.%. 3/6/5 6-month 57 9//5,6.3 3,3.55.9%.59% 67. 3//5 3-month 58 6/5/5 6,655. 5,7..%.%.7 3/8/5 -year 59 3//6,33.8,39..%.9% 9.7 3/9/5 3-month 5 6//5, , %.% /6/5 3-month 5 6/9/5 3, ,3.8.3%.6% //5 3-month 5 7/6/5,836.95, %.9%.9 /7/5 6-month 53 /3/5,998. 3,33.5.%.9% 66.9 /9/5 3-month 5 7/3/5 6,57.9,99.95.%.3%. /3/5 Approx.-month 55 6/3/5 7,55.3,38.7.6%.63% 8.8 /5/5 -year 56 //6,9., %.59% 93. /6/5 3-month 57 7//5 7,98.8,996..%.% 3.7 /3/5 3-month 58 7/7/5 8,75.8, %.6%. Auction Calendar for Apr. Jun. 5 Auction Date Issue Auction Date Issue Auction Date Issue Auction Date Issue / (Thu) T-Bills (3-month) /3 (Thu) T-Bills (3-month) 5/9 (Tue) 5-year 6/ (Thu) T-Bills (3-month) / (Thu) -year /3 (Thu) -year 5/ (Thu) T-Bills (3-month) 6/ (Thu) -year /7 (Tue) T-Bills (6-month) /8 (Tue) T-Bills (3-month) 5/ (Thu) Auctions for Enhanced-liquidity 6/6 (Tue) 5-year /7 (Tue) Auctions for Enhanced-liquidity /8 (Tue) -year 5/6 (Tue) -year 6/7 (Wed) T-Bills (-year) /9 (Thu) T-Bills (3-month) 5/ (Fri) Auctions for Enhanced-liquidity 5/8 (Thu) T-Bills (3-month) 6/8 (Thu) T-Bills (3-month) /9 (Thu) 3-year 5/8 (Fri) T-Bills (3-month) 5/8 (Thu) -year 6/8 (Thu) -year /3 (Mon) T-Bills (Approx.-month) 5/8 (Fri) -year Inflation-Indexed Bonds 6/ (Tue) -year 6/3 (Tue) Auctions for Enhanced-liquidity / (Tue) 5-year 5/ (Tue) T-Bills (6-month) 6/ (Thu) T-Bills (3-month) 6/5 (Thu) T-Bills (3-month) /5 (Wed) T-Bills (-year) 5/ (Tue) -year 6/ (Thu) 3-year 6/5 (Thu) -year /6 (Thu) T-Bills (3-month) 5/ (Thu) T-Bills (3-month) 6/8 (Mon) T-Bills (6-month) /6 (Thu) -year 5/ (Thu) 3-year 6/9 (Tue) Auctions for Enhanced-liquidity / (Tue) Auctions for Enhanced-liquidity 5/8 (Mon) T-Bills (-year) 6/ (Wed) T-Bills (Approx.-month) Note.: The above calendar may be changed or added in light of changes in circumstances. In such cases, it will be announced in advance. Note.: Each issue amount will be announced about one week prior to each auction date. Note.3: The issue date of Treasury Discount Bills auctioned on April 3, 5 is April 5, 5 and, the maturity date is June 3, 5. Note.: The issue date of Treasury Discount Bills auctioned on June, 5 is June 5, 5 and, the maturity date is August, 5. Top PDs by Total Purchase in Auctions (Calculated by Duration) (Oct. ~ Mar. 5) Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. 6 SMBC Nikko Securities Inc. Nomura Securities Co., Ltd. 7 Goldman Sachs Japan Co., Ltd. 3 Daiwa Securities Co. Ltd. 8 Merrill Lynch Japan Securities Co., Ltd. Mizuho Securities Co., Ltd. 9 BNP Paribas Securities (Japan) Limited 5 The Bank of Tokyo-Mitsubishi UFJ, Ltd. Morgan Stanley MUFG Securities Co., Ltd. -6-

7 3 THE AUCTIONS FOR ENHANCED-LIQUIDITY AND JGB BUY-BACK Auction Date Amounts of Competitive Bids Results of Auctions for Enhanced-Liquidity Amounts of Bids Average Spread Highest Spread Issues Re-opened (Until April 5) // % +.% -year(,3,3,36,,) 3-year(,,5,6,7,8,,3,6,7,,) /9/5, %.3% -year(36,37,38,39,3,3,3) -year(,5,6,7) 3// % +.8% -year(,,6,8,3,38,,9,5) 3-year(,,,8,9,,6,7,3,3,3,3,35,36,37,39,,,) -year(,,6) 3//5, %.3% -year(36,37,38,39,3,3,3,36) -year(6,6,69,7,7,75,76,78,8,8,83,85,88,,3,5) /7/ % +.3% -year(5,6,3,3,36,,5) 3-year(,,9,,3,5,6,7,8,9,33,35,37,38,,,5) -year(,,6) //5, % +.6% -year(38,39,3,3,33,36,37,39,39,33,33,336) -year(6,67,73,76,83,86) Target Zones of the Auction for Enhanced-Liquidity for the First Quarter of FY 5 Remaining maturity : approx.5 ~5.5 year 7,5 7, 6,5 6, 5,5 5,,5, 3,5 3,,5,,5, 5 Outstanding amount in the market (excluding amount issued by the Auction for Enhanced-liquidity) JL6 3 3 JL7 3 JL JL9 JL JL JL JL53 JL5 3 3 JL JL56 JL57 35 JL JL59 JL6 38 JL6 39 JL6 JL JL6 33 JL65 JL JL67 JL68 JL69 33 JL7 JL7 335 JL JL73 JL7 JL75 JL76 JL77 JL78 JL79 JL8 JL8 JL8 JL83 JL8 JL85 JL86 JL87 JL88 JL89 JL9 JL9 JL9 JL93 JL9 JL95 JL96 JL97 JL98 JL99 JL JL JL JL3 JL JL5 JL6 JL7 JL8 JL9 JL JL JL JL3 JX JL JL5 JX JL6 JL7 JX3 JL8 JL9 JL JL JL (Remaining maturities) Remaining maturity : approx.5.5 ~39 year Outstanding amount in the market (excluding amount issued by the Auction for Enhanced-liquidity), 3,5 3,,5,,5, 5 Amount issued by the Auction for Enhanced-liquidity Amount issued by the Auction for Enhanced-liquidity JX JL3 JL JL5 JL6 JL7 JX5 JL8 JL9 JL3 JL3 JX6 JL3 JL33 JL3 JL35 JL36 JX7 JL37 JL38 JL39 JL JX8 JL JL JX9 JL3 JL JX JL5 JX JL6 JX JL7 JX3 JL8 JX JL9 JX5 JL5 JX6 JL5 JX7 JX8 JX9 JX JX JX JX3 JX JX5 JX6 JX7 JX8 JX9 JX3 JX3 JX3 JX33 JX3 JX35 JX36 JX37 JX38 JX39 JX JX JX JX3 JX JX5 JU JU JU3 JU JU5 JU6 JU (Remaining maturities) Note: JL shows year JGBs. JX shows 3 year JGBs. JU shows year JGBs. Outstanding amount is as of the end of March 5. Note: Based on the results of the consultations to the JGB Market Special Participants which takes place at the time of each auction,6 issues from each of the above groups are selected as targeted issues. Buy-back Results -Year Inflation-Indexed Amounts of Amounts of Bids Average Highest Auction Date Competitive Bids Spread (yen) Spread (yen) Issue Numbers /8/ /8/ ,7,8,9,,,,3,,5,6 /6/ ,8,9,,, 3/6/ ,8,,,,3,,5,6 (Until April 5) 5-Year Floating-Rate Amounts of Amounts of Bids Average Highest Auction Date Competitive Bids Issue Numbers Spread (yen) Spread (yen) /9/ ,9,,7,,,,6,8,9,3,3,3,33,3,35,36,37,38,39, /3/ ,,,,5,7 // ,,,,3,,5,6,7,8,9,,,,3,,8,3,3,33, 37,38,39,,3 3// ,9,,,,5,6,7,8,9,,,,3,,5,6,8,9,3, 3/5/ ,3,33,3,35,36,37,38,39,,,,3,,6,8-7- (Until 3 March 5)

8 JGB SECONDARY MARKET JGB Yield Curves.% 8% Yield and Volatility (Yr) (Until 3 March 5).6% 7%.%.5% 6% Volatility Yield (right scale).%.% 5%.% /3/3 %.8%.5%.% /6/3 /9/3 //3 5//3 5//7 5/3/3 3% % %.6%.%.% -.5% 5 5 Source: Japan Bond Trading Co.,Ltd. 3.%.5% 5 3 % 35 Jan- May- Sep- Jan-3 May-3 Sep-3 Jan- May- Sep- Jan-5 (years to maturity) Source: Bloomberg, Calculation by the Ministry of Finance Yields of JGB -year bond 5-year bond -year bond -year bond 3-year bond -year bond (Until 3 March 5).%.%.5%.%.5%.% -.5% Jan- Jan- Jan- Jan-3 Jan- Jan-5 Source: Bloomberg 5% Long - Term Interest Rates (Yr) (Until 3 March 5) % 3% Japan United Kingdom United States Germany % % % Jan- Jan- Jan- Jan-3 Jan- Jan-5 Source: Bloomberg Break-Even Inflation Rates % (Until 3 March 5) 3% % % % -% -% BEI (Japan : old JGBi) BEI (U.K. : year) BEI (Japan : year) BEI (U.S.A. : year) -3% Jan- Jan- Jan-3 Jan- Jan-5 Note: BEI (Japan : old JGBi) is calculated based on the compound interest rate of the old Inflation-Indexed Bonds (issue number 6 with current maturity of 3 years and 3 months) and the -Year Bonds (issue number 93 with current maturity of 3 years and 3 months). BEI (Japan : year) is calculated based on the compound interest rate of the new Inflation-Indexed Bonds and the -Year Bonds. Source: Japan: Calculation by the Ministry of Finance based on the information on interest rates offered by NIKKEI QUICK. U.S.A., U.K. : Bloomberg -8-

9 .6%.5%.% Short-Term Interest Rates (Until 3 March 5) Call Rate (Uncollateralized Overnight) TIBOR 3-months (Euro-Yen) Basic Loan Rate.3%.%.%.% Jan- Jan- Jan-3 Jan- Jan-5 Source: Bank of Japan, Japan Bankers Association,,, 9 Treasury Discount Bills Medium Term Bonds Long Term Bonds JGB Over-the-Counter Trading Volume (TOKYO) Jan- Jan- Jan- Jan-3 Jan- Jan-5 Source: Japan Securities Dealers Association Trading Volume of -Year JGB Futures Jan- Jan- Jan- Jan-3 Jan- Jan-5 Source: Tokyo Stock Exchange (until Mar.), Osaka Exchange (from Apr. ),5, Repurchase Transactions Bond-Lending Bond-Gensaki,5, 5 Jan- Jan- Jan- Jan-3 Jan- Jan-5 Source: Japan Securities Dealers Association -9-

10 5 INVESTOR TRENDS AND JGB OUTSTANDING Trends in JGBs Transactions (by investor type) Purchase City Banks..5 Purchase Regional banks Super long-term Long-term Medium-term T-bills -7. Sale -9. Jan. Apr. Jul. Oct. Jan. Apr. Jul. Oct. Jan Purchase Life and non-life insurance companies -.5 Sale -. Jan. Apr. Jul. Oct. Jan. Apr. Jul. Oct. Jan. 3 5 Source: Japan Securities Dealers Association Loans Cash and Deposits Government Bonds Municipal Bonds Corporate Bonds Equities Foreign Securities Source: Bank of Japan City Banks Jan-8 Jan-9 Jan- Jan- Jan- Jan-3 Jan- Jan-5 Apr 3 (Actual) Mar 5 (Actual) The pace of annual increase Monetary Base About 8 trillion JGBs 98. About 8 trillion CP. Corporate Bonds.9 3. Maintain the outstanding balance Maintain the outstanding balance BOJ Trends -.5 Sale -. Jan. Apr. Jul. Oct. Jan. Apr. Jul. Oct. Jan Purchase Trends in Bank Assets by Types Balance Sheet Monetary Base JGBs Foreigners. -. Sale Jan. Apr. Jul. Oct. Jan. Apr. Jul. Oct. Jan Regional Banks Jan-8 Jan-9 Jan- Jan- Jan- Jan-3 Jan- Jan-5 the Introduction of the "Quantitative and Qualitative Monetary Easing" Expansion of the "Quantitative and Qualitative Monetary Easing " +8 tril yen +8 tril yen ETFs.7.5 About 3 trillion 5 J-REITs.3. About 9 billion Total Assets Source: Bank of Japan Actual 5 Dec 5 Apr- Aug- Dec- Apr-3 Aug-3 Dec-3 Apr- Aug- Dec- Apr-5 Aug-5 Dec-5 --

11 Transactions of Foreign Securities by Residents (by Investor types) Banks(Banking Accounts) Life Insurance Companies 3 Short-term debt securities Long-term debt securities Equity and investment fund shares Purchase.5 Short-term debt securities Long-term debt securities Equity and investment fund shares Purchase Source: Ministry of Finance Sales - Jan- Jan- Jan- Jan-3 Jan- Jan Sales - Jan- Jan- Jan- Jan-3 Jan- Jan-5 Transactions of Domestic Securities by Non-Residents Outstanding of Repurchase Agreements (by Investor types) % City Banks Trust Banks Insurance Companies Foreigners Purchase Sales 5% -6 Short-term debt securities Long-term debt securities Equity and investment fund shares -8 % Jan- Jan- Jan- Jan-3 Jan- Jan-5 Jan- Jan-3 Jan- Jan-5 Source: Ministry of Finance Source: Japan Securities Dealers Association 35% 3% 5% % 5% % Foreign Investors Presence JGBs Holding by Foreign Investors 6% 5% % 3% % Market Share of Foreign Investors (JGB Futures Market) Market Share of Foreign Investors (JGB Market) 9.% 3.7% (trillilon yen) % 9.3 Amount of JGB Holdings (right) % Proportion of JGB Holdings (left) % % % % 6. % 3 % % 3JGB Holdings by Foreign Investors 9.3% % % % Mar-8 Mar-9 Mar- Mar- Mar- Mar-3 Mar- Note.: Quarterly basis. Note.: JGB includes T-Bills. The figures of excludes dealers transactions. Source: Bank of Japan, Japan Securities Dealers Association, Tokyo Stock Exchange, Osaka Exchange % Mar-8 Mar-9 Mar- Mar- Mar- Mar-3 Mar- Note: JGB includes T-Bills. Source: Bank of Japan --

12 Breakdown by JGB and T-Bill Holders (Dec. ) JGB and T-Bill Holders Pension Funds % Public Pensions % Households 8. Others.8%.3 Foreigners.% % General Government (ex Public Pensions).5 Fiscal Loan Fund.%..% BOJ % Pension Funds % Public Pensions % Households 8..% JGB Holders Foreigners 5. 5.% Others.3.% General Government (ex Public Pensions).5.3% BOJ 7. 3.% Fiscal Loan Fund..% Life and Non-life Insurance.3 9.7% Banks,etc % Total,3. trillion yen Foreigners % Households..% Others..% T-Bill Holders General Government (ex Public Pensions)..% Fiscal Loan Fund..% BOJ % Life and Non-life Insurance 98.7.% Banks,etc % Banks,etc % Pension Funds..% Total 885. trillion yen Public Pensions..% Life and Non-life Insurance.6.9% Total 38. trillion yen Note.: "JGB" includes FILP Bonds. "T-Bill" is the sum of "Treasury Bills (TBs)" and "Financial Bills (FBs)" with a maturity of year or less and TBs and FBs have been jointly issued since February 9. Note.: "Banks, etc." includes Japan Post Bank, "Securities investment trust " and "Securities Companies". Note.3: "Life and Nonlife insurance" includes Japan Post Insurance. Source: Bank of Japan Flow of Funds Accounts (Preliminary Figures) Breakdown of Outstanding Amount of General Bonds by Remaining Years to Maturity %.7% 99..3%.6%.%.% 3.8%.5%.8%.8% 5.6% 5.7% 5.% 5.5% 5.% 5.% 6.% 6.3% 5.9% 6.%.5%.8% 5.8% 6.% 5.5%.%.%.% 3.9%.8% 5.6% 5.6%.% 8.% 7.7%.6% 5.3% 8.5% 8.6% 8.%.9% 8.% 8.3% 9.% 9.%.9%.3% 8.3% 8.% 8.9%.8% 3.%.8% 3.%.5%.% % yrs % 5.8% - yrs 59..6% 6.5% 3.6%.9% 5.6% 9- yrs.%.6%.%.3% 8-9 yrs.%.8% 5.%.7% 5.6%.7%.5% 5.% 5.3% 7-8 yrs 5.%.8%.8% 5.%.5% 5.5%.6% 5.%.%.% 6-7 yrs.9%.9%.7% 7.8% 7.8% 5.% 7.8% 5-6 yrs 8.% 8.8% 8.% 8.% 8.6% -5 yrs 9.% 8.% 8.% 7.8% 7.9% 8.6% 3- yrs 8.5%.5%.9%.%.% -3 yrs - yrs.8%.7%.3% 8.6% 7.% 7.8% 8.3% 8.% 7.9% 7.3% - yr FY FY5 FY6 FY7 FY8 FY9 FY FY FY FY3 (at the end of FY) Average YTM * 5YM 5YM 5Y9M 6YM 6Y3M 6Y5M 6Y8M 7YM 7Y3M 7Y7M Average YTM * (excluding saving bonds) 5YM 5Y3M 5Y8M 6YM 6YM 6Y6M 6YM 7YM 7Y5M 7Y8M *years to maturity --

13 Source: Ministry of Finance Time-to-Maturity Structure of Outstanding JGB(Dec. ) Types The amount of redemption at maturity Scheduled redemption date -Year Bonds 3,.5 May 5 Treasury Bill,38.8 May Total 5, Average remaining years to maturity: 7 years and months Treasury Bills -yr bonds JGBs for retail investors (3-yr-Fixed-rate) JGBs for retail investors (5-yr-Fixed-rate) 5-yr bonds Inflation-Indexed bonds JGBs for retail investors (Floating-rate) -yr bonds 5-yr-floating-rate bonds -yr bonds 3-yr bonds -yr bonds (FY) Scheduled redemption of JGB at maturity in May, 5 Note: The figures are based on the outstanding JGBs at the end of March, 5. Note: The figures are the scheduled redemption at maturity and may be different from the actual redemption due to Buy-back of JGBs. Note3: The figures do not include "JGB for Retail Investors", "Inflation-Indexed Bonds" and "5-Year Floating-Rate Bonds". Note: If the redemption date coincides with bank holiday, the payment of redemption is carried out on the following business day. Note5: Figures may not sum up to total because of rounding. 8 Outstanding (right-hand scale) General Bonds Issuance Amount and Outstanding Issuance Amount (left-hand scale) Note : Issuance Amount: revenue basis, FY-3: actual, FY: supplementary budget, FY5: initial budget Note : Outstanding: nominal basis, FY-3: actual, FY-5: estimates Source: Ministry of Finance,,, Market-held Balance of the Inflation-Indexed Bonds (as of March 3, 5) Outstanding amount (excl. BOJ holding) BOJ holding Market BOJ Total Old,36,,37 New,67 93,56 Old type (without floor) (issue number) Source: Ministry of Finance, Bank of Japan JGB Holding by Retail Investors Total JGBs held by retail investors (left).6%.6%.%.3%.%.5%.5%.6%.5%.5% Outstanding "JGBs for retail investors" (left).%.3%.3% Ratio of JGBs held by retail investors (right).%.%.%3.9% 3.7% 3.8% % % 3.5% 3.6% % 3.% %3.% % 3.% 3.%.9%.7% 3..6% %.3%.6%.5%.%.% % %.%.%.%.% %.9% % % Mar - 3 Mar - Mar - 5 Mar - 6 Mar - 7 Mar - 8 Mar - 9 Mar - Mar - Mar - Mar - 3 Mar - Mar - 5 Note: Outstanding "JGBs for retail investors" at Mar-5 is calculated to aggregate issues of. trillion - redemption before maturity of 3. trillion - aggregate redemption money of 7. trillion. Other figures are based on Bank of Japan Flow of Funds statistics. Source: Ministry of Finance, Bank of Japan Flow of Funds. 5.%.% 3.%.%.%.% -.% Dec - -3-

14 6 ECONOMIC AND FINANCIAL TRENDS Real GDP Growth Rate (%) Annualized contributions to changes in real GDP from the previous quarter (seasonally adjusted) Private Demand Public Demand Foreign Demand Real GDP -5 Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ 3 Source: Cabinet Office "Quarterly Estimates of GDP" 6.% 5.5% 5.%.5%.% 3.5% Employment Conditions Jul, 9 5.5% Umemployment rate (left scale) 3.% Feb, 5.7.5% Aug, 9 3.5%.times.6.%.5% Job opening-to-application ratio (right scale).5.%. Jan-8 Jan-9 Jan- Jan- Jan- Jan-3 Jan- Jan-5 Source: Ministry of Health, Labour and Welfare Employment Referrals for General Workers, Ministry of Internal Affairs and Communications Labour Force Survey (ratio). Feb, 5.5times..9.8 (%) Change from the previous year CPI 3 Prices - Jan- Jul- Jan-3 Jul-3 Jan- Jul- Jan-5 Source: Ministry of Internal Affairs and Communications CPI CPI excluding food (excluding alcohilic beverages) and energy Changes in Current Account.3. Apr., 3 BOJ released QQE Source: Ministry of Finance Balance of Payments".7 Primary Income Services Current Account Trade Balance Secondary Income.6.5 7Q 7Q 7Q3 7Q 8Q 8Q 8Q3 8Q 9Q 9Q 9Q3 9Q Q Q Q3 Q Q Q Q3 Q Q Q Q3 Q 3Q 3Q 3Q3 3Q Q Q Q3 Q.%.% 3 Monetary Base ( average= Seasonally Adjusted Index) 6 Indices of Industrial Production 5 Banknotes in Circulation Coins in Circulation Current Account Balances 5 3 Production Inventory Shipments Inventory Ratio Source: Bank of Japan "Monetary Base" 7 Jan-8 Apr-8 Jul-8 Oct-8 Jan-9 Apr-9 Jul-9 Oct-9 Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan-3 Apr-3 Jul-3 Oct-3 Jan- Apr- Jul- Oct- Jan-5 Source: Ministry of Economy, Trade and Industry "Indices of Industrial Production (Diffusion index) 3% TANKAN (Business Conditions), Total Value of Machinery Orders (Private Sector exc. Volatile orders) % Monthly Quarter (Mean) %, % 9 -% -% 8-3% Large enterprises/manufacturing -% Large enterprises/non-manufacturing 7-5% -6% Small enterprises/manufacturing Small enterprises/non-manufacturing 6-7% Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan- May- Sep- Jan- May- Sep- Jan- May- Sep- Jan-3 May-3 Sep-3 Jan- May- Sep- Jan-5 5 Jan-8 Apr-8 Jul-8 Oct-8 Jan-9 Apr-9 Jul-9 Oct-9 Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan-3 Apr-3 Jul-3 Oct-3 Jan- Apr- Jul- Oct- Jan-5 Source: Bank of Japan Tankan Source: Cabinet Office, Government Japan "Orders Received for Machinery" --

15 7 INFORMATION English Publications on JGBs Frequency URL Debt Management Message from the Financial Bureau As needed About JGBs As needed About the Debt Management Policy As needed JGB Issuance Plan As needed Auction Calendar Auction Calendar Monthly Historical Data of Auction Results Each Auction Topics Product Characteristics of the JGB As needed Treasury Discount Bills (T-Bills) Annual Japanese Government Guaranteed Bonds Annual Interest Rate Swap Semiannual Taxation of Government Bonds As needed For Individual Investors As needed Data Central Government Debt Quarterly Interest Rate Daily STRIPS Monthly Dialogue with the market Advisory Councils on Government Debt Management Each Meeting Meeting of JGB Market Special Participants Each Meeting Meeting of JGB Investors Each Meeting Publications Debt Management Report Annual JGB Newsletter Monthly To subscribe to our Newsletter mailing list, please Debt Management Policy Division, Financial Bureau, Ministry of Finance 3-- Kasumigaseki, Chiyoda-ku, Tokyo -89 Japan Phone: Web: -5-