Recent FILP Initiatives

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Vincent Stewart
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Ⅱ Recent FILP Initiatives Japan Oil, Gas and Metals Corporation/Overseas Development Liability Guarantee/Sierra Gorda Copper Mine/Chile Region II (Photo provided by Sumitomo Metal Mining Co., Ltd.) 1.

The FY2016 FILP Plan outline is as follows.

1 Ⅱ Recent FILP Initiatives Japan Oil, Gas and Metals Corporation/Overseas Development Liability Guarantee/Sierra Gorda Copper Mine/Chile Region II (Photo provided by Sumitomo Metal Mining Co., Ltd.) 1. Formulating Initial FY2016 FILP Plan The FY2016 FILP Plan was submitted to the Cabinet Meeting on December 24, The FY2016 budget was enacted on March 29, The FY2016 FILP Plan outline is as follows. Basic Concept of FY2016 FILP Plan In formulating the FY2016 FILP Plan, we have tried to actively provide long-term risk money to catalyze investments from the private sector, in line with the al growth strategies, including promotion of infrastructure export, and the deepening of regional revitalization. We also tried to properly respond to the steady funding needs in such policy areas as education, welfare and medical services, while decreasing the total amount, reflecting the economy on a moderate recovery trend and the demand for policy finance as crisis measures being settled. As a result, we set the FY2016 FILP Plan size at 13,481.1 billion yen, down 7.8% from the FY2015 Plan. Of the total, Investment accounts for billion yen (up 7.8% from FY2015), covering such measures as accelerating investment in and loans for overseas infrastructure deals through proactive risk money provision and implementing relevant capital subscription to provide growth money through public-private funds. Outline of FY2016 FILP Plan Promoting strategy of global outreach Japan Bank for International Cooperation, Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development and Fund Corporation for the Overseas Development of Japan s ICT and Postal Services Inc. plan to catalyze private sector investments in infrastructure projects overseas by actively providing public sector risk money. Japan Oil, Gas and Metals Corporation plans to support the exploration and development of natural gas, coal, geothermal energy and metallic minerals from the viewpoint of ensuring stable resource and energy procurement. To these ends, the intends to accurately meet demand for relevant funds. Support for regional revitalization Japan Finance Corporation plans to support cash flow for SMEs and micro enterprises and regional revitalization initiatives such as business startups and turnaround. Development Bank of Japan Inc. plans to provide growth money to support enterprises proactive growth initiatives. To these ends, the intends to accurately meet demand for funds. Education, Welfare and Medical Services Japan Student Services Organization plans to expand its interest-bearing scholarship loan program, while Welfare and Medical Service Agency intends to enhance welfare and medical care service infrastructure. To these ends, the intends to accurately meet demand for funds. Support for Local Governments The FY2016 FILP Plan is designed to accurately meet demand for funds in order to contribute to local s smooth fundraising at a time when the scale of the Local Government Bond Program declines due to a decrease in extraordinary financial countermeasures bonds issue amount amid local revenue growth. FILP REPORT

24 FILP REPORT 2016ⅡRecent FILP Initiatives Planned Amount of FILP Bond Issuance FY2016 FILP bond issuance to provide financial resources FY2015 (Initial) FY2016 (Initial) for loans from the Fiscal

2 24 FILP REPORT 2016ⅡRecent FILP Initiatives Planned Amount of FILP Bond Issuance FY2016 FILP bond issuance to provide financial resources FY2015 (Initial) FY2016 (Initial) for loans from the Fiscal Fund is planned at 16.5 trillion yen based on the planned new Fiscal amount (10,087.6 billion yen) and estimated deposits. FILP bond issue amount (Unit: trillion yen) Fiscal Fund Financing Bills (FB) issuance to cover cash flow for the Fiscal Fund are planned at 2 trillion yen. Planned Amount of FILP Agency Bond Issuance As for FILP agency bonds to be issued by individual FILP agencies in the private financial market in FY2016, 16 agencies (15 agencies in FY2015) plan to issue 3,981.1 billion yen in total (4,685.5 billion yen under the FY2015 plan). Excluding Asset- Backed Securities, FILP agency bond issuance in FY2016 is planned to total 2,093.5 billion yen, down billion yen from FY2015. Main Points of FY2016 FILP Plan FY2015 (Initial Plan) FY2016 (Initial Plan) 1. Promoting strategy of global outreach 1, ,988.0 Japan Bank for International Cooperation (JBIC) ,300.0 Japan International Cooperation Agency (JICA) Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN) Fund Corporation for the Overseas Development of Japan's ICT and Postal Services Inc. (JICT) Cool Japan Fund Inc Japan Oil, Gas and Metals Corporation (JOGMEC) Support for regional revitalization 6, ,487.7 Japan Finance Corporation (JFC) 4, ,170.0 Development Bank of Japan Inc. (DBJ) The Shoko Chukin Bank, Ltd Agriculture, forestry and fisheries Fund corporation for Innovation, Value-chain and Expansion Japan (A-FIVE) Education, welfare and medical services 1, ,438.9 Japan Student Services Organization Welfare And Medical Service Agency Local s 3, ,393.5 Local s 3, , Other institutions 1, ,173.0 Japan Expressway Holding and Debt Repayment Agency 1, FILP plan 14, ,481.1 (Unit: billion yen) Scale of FILP Plan (Flow) (trillion yen) Welfare and Medical Service Agency/Welfare s Operation/Silver-pia Kariya/Kariya City, Aichi FILP for FY2016 is planned to actively provide long-term risk money to catalyze investments from the private sector, in line with the al growth strategies, including promotion of infrastructure export, and the deepening of regional revitalization (Amount of Investment : billion yen [up 21.6 billion yen from FY2015]). The Program properly responds to the steady funding needs in such policy areas as education, welfare and medical services, while decreasing its total amount, reflecting the economy on a moderate recovery trend and the demand for policy finance as crisis measures being settled as a whole. Total Amount of FILP Plan for FY ,621.5 billion yen for FY ,481.1 billion yen Initial plan Revision with supplementary budgets and follow-up funding by the flexible management clause 17.2 September, 2008 The Lehman Shock [16.6] 13.9 March, 2011 The Great East Japan Earthquake (FY) [23.9] 15.9 [18.6] 18.4 [20.6] 14.9 [19.0] [19.1] (Note) Figures are based on the initial plans. Figures in [ ] from FY2008 to FY2015 are total amounts after revision with supplementary budgets and follow-up funding by the flexible management clause [16.5] 16.2 [14.9]

3 Promoting strategy of global outreach Partnership for Quality Infrastructure Japan s public and private sectors will fully exploit their resources to cooperate with other Asian countries and international organizations in meeting massive infrastructure development demand in Asia. 4 Pillars 1. Expanding and accelerating JICA assistance 2. Cooperation with ADB 3. Expanding risk money supply by JBIC and others Announced by the Prime Minister on May 21, 2015 ( Specific measures Announced by the Prime Minister on November 21, 2015) 4. International standardization and global expansion of quality infrastructure investment <Japan International Cooperation Agency (JICA)> Expanding Yen s to developing countries s Expanding yen loans mainly to developing countries s to promote contributions to the Asian region by developing quality infrastructure that takes advantage of Japan s technologies for excellent economic efficiency and safety <Japan Bank for International Cooperation (JBIC)> Supporting Japanese companies overseas expansion JBIC will enhance its functions to support Japanese companies overseas expansion by increasing capital subscription and loans and Japanese company Local s, etc. establishing accounts for new services for more risk-taking to accelerate investment in and loans for overseas infrastructure projects (including, etc. investment in infrastructure projects without local guarantees) through proactive risk money provision. supply JBIC (Note: The JBIC Act was revised in May 2016.) Public generator power utility sector bank Principal repayment bill and interest payment payment Without guarantee Considering possible investment in or loans for projects expected to generate sufficient revenue even without guarantee Local s <Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN)> Hands-on support JOIN will implement hands-on support, including Government ( Investment) sector companies risk money supply (capital subscription) and the dispatch of experts, for entities engaging in overseas transport and urban development projects, providing funds for promoting the Japan Overseas Infrastructure Investment Corporation overseas expansion of transport and urban sector for Transport & Urban Development (JOIN) sector development infrastructure. companies banks, etc. (Founded on October 20, 2014) Integral implementation Local business entity (target business operator), etc. Partner country Capital subscription, etc. Project participation, etc.

26 FILP REPORT 2016ⅡRecent FILP Initiatives Support for regional revitalization Given the Overall Strategy on Vitalizing Local Economics (revised in 2015) (Cabinet Decision, December 24, 2015) and

<Japan Finance Corporation> Special system for capital enhancement to support proactivity (subordinated capital loans) Providing subordinated capital loans treated as capital in financial inspection

4 26 FILP REPORT 2016ⅡRecent FILP Initiatives Support for regional revitalization Given the Overall Strategy on Vitalizing Local Economics (revised in 2015) (Cabinet Decision, December 24, 2015) and other policies, the will proactively provide funds through -affiliated financial institutions to allow local enterprises to switch to aggressive business operations for further growth. <Japan Finance Corporation> Special system for capital enhancement to support proactivity (subordinated capital loans) Providing subordinated capital loans treated as capital in financial inspection on condition of bullet maturity repayment, no security or guarantee, interest rates indexed to business results to induce fund provision by private sector financial institutions [ scale] Micro Unit 5 billion yen SME: 55 billion yen Investment Fiscal Japan Finance Corporation sector financial institutions Subordinated capital loans (Pump-priming effect) SMEs and micro enterprises <Development Bank of Japan Inc. (DBJ)> Special investment service Earmarking funds required for the special investment service to provide capital funds for growth to enterprises that explore new businesses or collaborate with those in other industries Investment ( ) 50 billion yen Other financial institutions, etc. (Megabanks, regional banks, private sector funds, etc.) Interest Interest rates indexed to business results ( investment loan: 23 billion yen) Long-term loan for bullet repayment (Term: 10 years) Funds on hand Injection 50 billion yen DBJ Special investment service 100 billion yen <The Shoko Chukin Bank, Ltd.> Regional cooperation supply loan system Providing long-term risk money required for initiatives of associations and consortiums to exploit regional resources (regional cooperation supply loan system) (Created in FY2016) In continuation from FY2015, Shoko Chukin will provide long-term risk money required for the overseas expansion of SMEs aiming to become global niche top companies that feature excellence in some areas and global presence, as well as for new business development and business improvement efforts of regional core enterprises. (Global niche top supply loan system, regional core enterprise supply loan system) Development Bank of Japan Inc./Investment and to Green Energy Tsu (Support for Woody Biomass Generation Project)/Woody Biomass Generation Facility/Tsu City, Mie ( Investment) s, etc. The Shoko Chukin Bank, Ltd. Global niche top supply loan system Regional core enterprise supply loan system (Pump-priming effect) Capital funds, etc. (Preferred shares, subordinated loans, etc.) Regional cooperation supply loan system Interest, dividend, etc. Interest Interest payment depending of success <Expected effects> Development of growth potential, etc. Initiatives of supported enterprises Competitiveness and profitability enhancement initiatives - Exploring new businesses - Cooperating with enterprises in different industries - Exploiting idled technologies Regional revitalization initiatives - Promoting regional industrial clusters - Promoting inter-regional M&As - Business reorganization and succession Etc. Support target enterprise Long-term loan for bullet repayment (Term: 10 years) The Shoko Chukin Bank, Ltd./Global Niche Top supply loan system/gear Manufacturing Plants/Ashikaga City, Tochigi

COLUMN Addition to FY2015 FILP Plan Based on the Urgent Policies to Realize a Society in Which All Citizens are Dynamically Engaged (adopted by Council for Promoting the Dynamic Engagement of All

1 billion (all in Fiscal ) for the Promotion and Mutual Aid Corporation for Schools of Japan to accelerate earthquake resistance enhancement of private school facilities was added to the FY2015 FILP

5 COLUMN Addition to FY2015 FILP Plan Based on the Urgent Policies to Realize a Society in Which All Citizens are Dynamically Engaged (adopted by Council for Promoting the Dynamic Engagement of All Citizens on November 26, 2015), 36.1 billion (all in Fiscal ) for the Promotion and Mutual Aid Corporation for Schools of Japan to accelerate earthquake resistance enhancement of private school facilities was added to the FY2015 FILP Plan. Earthquake resistance enhancement is important for school facilities that must secure the safety of students and serve as local evacuation centers upon disasters such as earthquakes. At present, earthquake resistance enhancement has made less progress for private schools than for public schools. Progress in earthquake resistance enhancement at private and public schools (Estimate) (Estimate) The Promotion and Mutual Aid Corporation for Schools of Japan/General Facility Expenses/INOKASHIRA Campus, Kyorin University/Mitaka City, Tokyo Public The Promotion and Mutual Aid Corporation for Schools of Japan/General Facility Expenses/New No.1 Building, Takachiho University/Suginami-ku, Tokyo FILP REPORT ⅡRecent FILP Initiatives

There are three methods for supplying funds under FILP: Fiscal Loan, Industrial Investment and Government Guarantee.

Outline of Fiscal Investment 4 FILP REPORT 2016Ⅰ2. Mechanism of FILP 3 FILP Methods There are three methods for supplying funds under FILP: Fiscal Loan, Industrial Investment and Government Guarantee.