The Japanese Government Balance Sheet (Preliminary trial)

Transcription

1 Unofficial and Provisional Translation Readers are advised to refer to the original Japanese text before quoting from this document. The Japanese Government Balance Sheet (Preliminary trial) Study Group on Explanatory Methods of Fiscal Position September 2001

2 Introduction The Japanese Government Balance Sheet (Preliminary Trial) for Fiscal Year 1999 (hereinafter 99 ) was prepared by the Study Group on Methods to Explain Fiscal Position based on Provisional Concepts and Standards for the Japanese Government Balance Sheet (hereinafter Provisional Concepts and Standards ), authored by AIDA Kazuo, Professor of Accounting, Faculty of Policy Management, Keio University; KONISHI Sachio, Professor, Institute for Industrial Research, Kwansei Gakuin University; TAKAGI Yuzo, Executive Director, The Japanese Institute of Certified Public Accountants; HYODO Hiroji, Counselor, Surety Association for Construction Companies; MURAYAMA Tokugoro, Representative Partner, ChuoAoyama Audit Corporation; YOKOYAMA Kazuo, CEO, Yokoyama Accounting Firm. In preparing 99, we aimed to explain the reasons behind increases or decreases in assets and liabilities and also to improve The Japanese Government Balance Sheet (Preliminary Trial) by enhancing its accountability and providing more precise information. As stipulated in Provisional Concepts and Standards, the Japanese Government Balance Sheet gives an overview of the entire fiscal position of the Government on a stock basis. The Japanese Government Balance Sheet aims to help the Japanese people to understand the national fiscal position and thus contributes to better accountability of the Government for its fiscal policy. Due to differences in purpose and significance between the Government and private corporations, the roles of their balance sheets differ. Taking this into account, the Government balance sheet should be interpreted with reference to Provisional Concepts and Standards. We hope that this preliminary trial of the Government balance sheet and Provisional Concepts and Standards will serve as useful tools for future constructive discussions over the methods to explain the Government s fiscal position. We would like to express our gratitude to all organizations concerned for their dedicated cooperation.

3 Table of contents 1.Balance sheet 1 2.Increases and decreases in assets and liabilities 3 3. Summery of significant accounting policies 5 4. Note to line items 7 5. Other notes 25 Reference material 31 Examinations in preparing 99 49

4 1.Balance sheet Japanese Government Balance Sheet (trillion yen) Line items FY1998 FY1999 ((as of March (as of March 31,1999) 31,2000) Differe nces Line items FY1998 (as of March 31,1999) FY1999 (as of March 31,2000) Differe nces [Assets] [Liabilities] Cash and deposits Accounts payable Securities Short-term Government Accounts receivable securities held by the Loans receivable public Money in trust Government bonds held Allowance for doubtful by the public accounts Postal savings Tangible assets Deposits received of Buildings and structures public pensions Advance received Machinery and equipment Reserves Unfilled timbers Land Construction in progress Reserves for retirement benefit Reserve for bonus payment Others Insurance reserves Intangible assets Others Investments Total liabilities Others [Difference between assets and liabilities] (Sub-table) Difference between assets and liabilities Total liabilities and Total assets difference between assets and liabilities Line items Method 1 Method 2 Method 3 FY1998 FY1999 FY1998 FY1999 FY1998 FY1999 Deposits received of public pensions Public pension liabilities Total liabilities , , , (Difference between assets and liabilities) Note 1: The balance sheet is prepared based on method 1, and differences between methods 1, 2 and 3 are explained in the sub-table (differences in methods 1, 2 and 3 originate from the differences in methods to record liabilities for future public pensions benefits corresponding to the past period (see note 3 (p.2).). 1

5 Note 2:Figures are expressed to 2 decimal points with no rounding Note 3: In preparing 99, we made some improvement on the Japanese Government Balance Sheet (`Preliminary trial). More concretely, we reexamined arrangement of line items to enhance its accountability and increased kinds of assets included in the balance sheet. And also we reexamined figures for FY Note 4: We showed 99 in a format of 98. As a result, the amount of the total assets at the end of FY 1999 is different by about 20 trillion yen from that of 98. 2

6 2. Increases and decreases in assets and liabilities during FY 1999 (1) Budget and settlement of accounts Budget, settlement of accounts, etc The budget and settlement of accounts for/at the end of FY 1999 were the followings. a hundred million Initial growth from previous After Settlement of growth from previous budget fiscal year revision accounts fiscal year The general account Revenue 818, , , Inside Construction bond 93, , , Deficit-covering bond 217, , , Expenditure 818, , , A special account Revenue 3,115, ,149,636 3,101, Expenditure 2,897, ,931,382 2,793, Initial plan growth from previous fiscal year Revised plan Result growth from previous fiscal year Fiscal Investment and Loan Program 528, , , Changes in bond outstanding during FY1999 Among revenue, the amount of newly issued bonds was about 38,330.5 hundreds million yen (construction bond: 13,132.8 billion yen, deficit-covering bond: 25,197.7 billion yen). Moreover, the government issued refunding bonds of 49,511.0 billion yen to refund. On the other hand, the government refunded 54,948.7 billion yen. Thus the total amount of construction bonds and deficit-covering bonds outstanding at the end of FY 1999 increased about 32,892.8 hundreds million yen compared with that at the end of FY Including other bonds, the amount of bonds outstanding purely increased by 31,505.3 billion yen. Note: The amount of Government bond held by the public) at the end of FY 1999 increased by about 24 trillion yen compared with that at the end of FY

7 (2) Breakdown of increases and decreases in national assets and liabilities Main items that increased during FY 1999 Comparing the FY 1999 balance sheet to that of FY 1998, assets increased by about trillion yen from about trillion yen at the end of FY 1998 to about trillion yen at the end of This is mainly due to the following. (a) Cash and deposits increased by about 7.44 trillion yen, partly because of increases in deposits from national treasury surplus to the Bank of Japan (with interests) (See the reference below). (b) Securities increased by about 5.10 trillion yen, partly because of increases in foreign securities that the Foreign Exchange Reserve Special Account holds. (c) Buildings and structures increased by about 4.45 trillion yen, partly because of increases in facilities for public use, such as roads and river improvement, due to the high level of public work expenditures in FY 1999, etc.. On the other hand in FY 1999, liabilities increased by about trillion yen from about trillion yen in FY 1998 to about trillion yen in FY This is mainly due to the following. (a) Short-term government securities held by the public increased by about trillion yen, partly because of increases in foreign exchange reserve securities within the Foreign Exchange Reserve Special Account. (b) Government bonds held by the public increased by about trillion yen, partly because of increases in government bonds outstanding (construction bonds : 10 trillion yen, special deficit-financing bonds : 23 trillion yen, etc.) due to a large increase in the amount of newly issued bonds in FY (c) Postal savings increased by about 7.38 trillion yen, partly because of increases in fixed deposits (about 5.94 trillion yen) and ordinary deposits (about 2.64 trillion yen) As a result, the negative net position increased by about trillion yen from about trillion yen at the end of FY 1998 to about yen at the end of FY Note: In April 1999, a public auction system for FB (Financing Bills) was introduced to improve the short-term finance market. In conjunction, the Bank of Japan opened an interest-bearing deposit account designated for the government, while on the other hand, FB trading between the government and the Bank of Japan gradually decreased, in general. Therefore, a part of the treasury surplus that would have been used for FB transaction between the government and the Bank of Japan in the old system, was deposited into the deposit account within the Bank of Japan designated for the government to increase the amount of money accumulated within this account. Cash flows related to main items In general, among the above items which increased the amount of liabilities, the amount of increase in Short-term government securities held by the public and Postal savings were loaned to third parties or invested in securities etc. As a result, it can be said that those assets corresponding to the increased liabilities were counted as assets items ( Cash and deposits, Securities, Loans receivable, Money in trust, etc). Concerning the increase of Government bonds held by the public, part of the increases in government bonds outstanding were expensed to finance government activities and does not directly link to the increase in the amount of assets. However, part of the increases can be said to have contributed to the increases in assets through public infrastructure construction for which construction bonds were issued (Note 1). In FY 1999 it is estimated that among the 32 trillion yen net increase of government bonds outstanding, approximately 6 trillion yen contributed to the formation of national assets through public works, etc. (Note 2). Note 1: Since there are items within those items causing an increase in assets such as public infrastructures, which become possessions of the local government ( the national government issues construction bonds and issues grants to local governments, and the local government consequently obtains assets), only a part of these items become national assets. Like this, only a part of the increases in government bonds outstanding contributed to increases in assets to hence increase the negative net position. Note 2: The estimated accumulated amount of those items that contributed to the formation of national assets, within those items subject to expenses from construction bonds issuance (government investments, loans, expenses for public facilities, and expenses for public works). 4

8 (Reference) Basic policy stance on economic and fiscal management for FY 1999 (1) Basic policy stance on economic and fiscal management and actual performance for FY1999 Basic policy stance on economic management The cabinet decided Economic outlook and basic policy stance on economic management for FY 1999 in January 1999, considering the very severe domestic economic conditions under which the final consumption expenditures were decreasing because of waning confidence in the management of financial institutions and uncertainties over employment and also the very severe international economic conditions caused by the Asian financial and currency crises. (a) To consolidate the foundation for economic recovery, take full steps to deal with the instability in the financial system and credit contraction and generate sufficient demand stimulating measures in the short term. (b)proceed with structural reforms for strengthening the supply side. (c)through loans to Asian countries, support these countries recover their economies and structural reforms. Actual economic performance Under the basic policy stance above, the government tried to overcome financial crises and recessions with all possible measures, including finance, tax systems, legislation and so on. In November 1999, the government adopted the rebirth plan to propel recover from recession and economic structure reforms. As a result, although the economic condition in FY 1999 was still severe because of slow recovery of demands, it was getting better gradually. The nominal GDP was about 514 trillion yen based on 93 SNA, and the nominal and real growth rates were respectively 0.2% and 1.4%. and the whole sale price index decreased by 1.0% and the consumer price decreased by 0.5%. (2) Basic policy stance on fiscal management Policy on forming budget for FY 1999 Based on the basic policy stance on economic management, the budget was formed as follows. (a) General account was formed under a concept of 15 months budget linked to the third supplementary budget for FY 1999 to promote economic recovery. (b)income taxes and corporate taxes were cut to stimulate the economy (c)the fiscal investment and loan program was formed to distribute funds efficiently Characteristics of the FY1999 Initial Budget The following are the characteristics of the FY1999 initial budget, approved in March 1999, which was formed along the above principles. (a) The FY1999 budget was formed from a perspective to place priority on promoting economic recovery. For example, public works expenditures including public works contingencies, increased by 10% compared to the initial budget of the previous year, in order to materialize a spending structure prioritizing economic recovery. Consequently, the scale of general expenditures became to be 46,887.8 billion yen, an increase of 5.3% from the previous year s initial budget. (b) In view of the financial situation of that time, revenue sources of 2.5 trillion yen to cash government bonds granted to the Deposit Insurance Corporation, were transferred to the Special Account for the National Account Consolidation Fund. Consequently, the scale of the general account budget was 81,860.1 billion yen, a 5.4% increase from the previous year s initial budget. (c) Within the taxation system, being the nucleus of revenues, measures were made to permanently cut down income taxes and corporate taxes. (d) Due to the above measures, the scheduled amount of government bond issues in the initial budget was 31,050 billion yen, and increase of 15,493 billion yen from the previous year s initial budget. Formation of the First and Second Supplementary Budget In addition, two supplementary budgets were formed in FY1999. In June 1999, the government decided on an emergency employment measure in an increasingly severe employment situation, and additionally required expenditures for this purpose were included in the first supplementary budget, which 5

9 was approved in July. Furthermore in November, a set of policy measures for economic rebirth was newly decided upon, and a secondary supplementary budget to fund for this measure was approved in December. Consequently, the general account budget after supplementation was 89,018.9 billion yen, and the amount of government bond issuance was 38,616.0 billion yen, an increase of 1.2% and 13.6% compared to the previous year s supplemented budget, respectively. 6

10 3. Summery of significant accounting policies (1) Scope of the entities included The Japanese Government Balance Sheet for FY 1999 includes the financial status of the nation. In other words, it includes the General Account and all Special Accounts (38 accounts). Rights and obligations among accounts are all canceled out, and those assets and liabilities that the nation holds externally are accounted. Note 1: The nation here, stands for the central government. Note 2: For example, the government bond outstanding was trillion yen. But since the amount held by the government has been canceled out, the accounted amount on the balance sheet as Government bonds held by the public is trillion yen. (trillion yen) Government bonds outstanding Outstanding at the end of the fiscal year Amount held by the Government(not included in carried amount on the balance sheet) Amount held by the public(included in carried amount on the balance sheet) Amount of bonds issued during the settlement period (included in carried amount on the balance sheet) Carried amount on the balance sheet trillion yen Un-amortized premiums and discounts on Government securities 0.55 Note 1: See.Liabilities(3)Government bond held by the public Note 2: Figures are expressed to 2 decimal points with no rounding. (2) Date of the Balance Sheet The Japanese Government Balance Sheet generally sets forth information for the fiscal years ended, as of March 31, 1998 and But some accounts have settlement periods, and hence the amount of these accounts includes cash receipts and payments during settlement periods. In calculating Public Pension Liabilities for FY 1998, the actuarial revaluation amount at the end of FY 1999 is used after arrangements of the amount at the end of FY (3) Currency Translations Exchange rates as of March 31, 1999 and 2000 were used. (reference) Key exchange rates FY 1998 (as of March 31, 1999) FY 1999 (as of March 31, 2000) US dollar Euro (Note) Each rate is expressed as Yen s per currency. 7

11 4. Notes to line items I. Assets (1) Cash and deposits This line item consists of the deposit to the Bank of Japan and in other banks, and cash in hand. (2) Securities This line item consists of stocks and bonds, except securities recognized as investment. In principal, the securities are evaluated at acquisition cost, but securities corresponding to the trading securities or other securities with market value, are evaluated at the closing market value as of the end of FY1998. The accrual interests are included. Note: See the Opinion Concerning the Establishment of Accounting Standard for Financial Instruments (Business Accounting Deliberation Council on of January 22, 1999) to obtain information about trading securities and other securities. (Reference) Current market value of marketable securities Carried amount on the Categoly balance sheet(a) (trillion yen) Current Difference market value between of marketable (A)and(B) securities(b) Securities Stocks,local authority bonds, Government related institution bonds,bonds of special corporations, bank bonds,corporate bonds,and FY FY foreign currency securities etc. Note 1: Figures are expressed to 2 decimal points with no rounding. Note 2: Evaluation of current market value Listed securities: Current market value is evaluated primarily with the final price of the Tokyo Stock Exchange. Unlisted securities: Current market value is evaluated when it is possible to recognize current market price such as the over-the-counter-standards quote, which the Japan Securities Dealers Association provides. (3) Accounts receivable and accrued income This line item consists of following accounts receivable and accrued incomes namely, uncollected amount of credits in National Tax Receipts Fund, handling charge, burden charge, payment, insurance premium, profit on sale of assets, loan receivable, use fee, redemption amount, compensation for damages and interest, etc. (4) Loans receivable This line item consists of loans receivable. 8

12 (trillion yen) FY1998 (as of March 31,1999) FY1999 (as of March 31,2000) Local authorities Government Housing loan Corporation Pension Welfare Service Public Corporation Development Bank of Japan Japan Bank for International Cooperation National Life Finance Corporation Urban Development Corporation Japan finance Corporation for Small Business Agriculture,Forestry and Fisheries Finance Corporation Postal Life Insurance Welfare Corporastion Corporation for Advanced Transport&Technology Social Welfare and Medical service Corporastion Japan Scholarship Foundation The Okinawa Development Finance Corporation Japan Highway Public Corporation Others Carried amount on the balance sheet Note 1: Figures are expressed to 2 decimal points with no rounding. (5) Money in trust This line item consists of moneys in trust. (trillion yen) FY1998 (as of March 31,1999) FY1999 (as of March 31,2000) Designated money in trust(postal Life Insurance Special Account) Money in trust(postal Savings Special Account) Carried amount on the balance sheet Note: Figures are expressed to 2 decimal points with no rounding. (6) Allowance for doubtful accounts This line item is the amount calculated resulting from the failure to collect over the past three years. If special account balance sheets record allowance for uncollected amounts, recording larger amount between two amounts is appropriate. 9

13 (7) Tangible assets The tangible assets that the Government owns shall be recognized as much as possible and this item consists of land, un-felled timbers and bamboos, buildings, structures, machinery and equipment, ships, aircrafts, property for public use -lands(except for public parks, etc.), property for public use facilities (except for public parks), construction in progress and incomplete facilities. Note: Valuation of tangible assets With regard to the assets to which the National Property Law applies (buildings and structures), the depreciated amount is calculated using the fixed rate method, based on the acquisition costs multiplied by current value inflator at the time of revision of the National Property Register (As for the assets belonging to the special accounts for enterprises, the depreciation method in accordance with concerning law is applied.) Concerning public property facilities (other than parks), the depreciated amount is calculated based on the acquisition costs using a straight -line method. As for important goods under the regulations of the Commodities Management Law, the estimated values after the depreciation are settled to be a half of acquisition costs. (Concerning the goods belonging to special accounts for enterprises, the depreciation method in accordance with concerning law is applied.) (trillion yen) Items FY1998 (as of March 31,1999) FY1999 (as of March 31,2000) Quantity Amount Quantity Amount Building area(square 44,428,738 44,746,330 Building and structure Buildings meter) Total area (Square meter) 98,087, ,213, Structures Property for public use facilities(except parks,etc) Machinery and Equipment Unfelled timbers Timbers(Pieces) 6,732,408 7,122,683 Stumpages(Cublic meter) 919,471, ,358,191 Bamboos(Bundle) 189, , Lands(Square meter) 89,292,804, ,286,933, Land Property for public use lands(except parks,etc) Construction in progress Others Ships(Ship) 4, , Aircrafts(Aircraft) 1, , Note 1: Figures are expressed to 2 decimal points with no rounding. Note 2:The amounts of assets to which the national property law were applied were the figures in the General 10

14 Statement of the Fluctuation, Current Amount and Value of National Property. Note 3:the method above shows the amount of depreciation of Building and structure during FY 1999 was about 3.18 trillion yen and the amortized amount was about trillion yen. The amount of depreciation of Others during FY 1999 was about 0.44 trillion yen and the amortized amount was about 2.19 trillion yen. (8) Intangible assets This line item consists of the surface rights, easements, mining rights, patent rights, copyrights, and trademarks, which have been evaluated based on the General Statement of the Fluctuation, Current Amount and Value of National Property (Concerning special accounts for enterprises, values after depreciation are recorded.). Also, software and telephone subscription right is included. (reference) Breakdown of Intangible assets (a hundred million yen) FY1998 (as of March 31,1999) FY1999 (as of March 31,2000) Surface rights,easements and mining rights Patent rights,copyrights and trademarks Software 2,966 3,141 Other intangible assets (tenant rights,telephone subscription rights) Carried amount on the balance sheet 3,386 3,563 (9) Investments The acquisition cost of Government investments is recorded. To be specific, the amount of Government investments, etc. in The General Statement on the Fluctuation, Current Amount and Value of National Property, which is held by the Government for political ends, is recorded. (Reference) List of investments by the government(as of March 31, 2000) (million yen) Classification(Note 1) Corporate names Carried amounts on balance sheets Assets (A) Liabilities(B) Net assets (C)=(A)-(B) Paid in capital (D) Capital invested by the Government(E) % of capital invested by the Government (F)=(E)/(D)% Amount worked out (G) = (C) X (F) (Note 2, 3) A. Financial institutions a) Finance corporations A The Okinawa Development Finance Corporation 58,604 1,869,548 1,809,402 60,146 58,604 58, ,146 A National Life Finance Corporation 290,771 11,074,609 10,783, , , , ,771 A Agriculture, Forestry and Fisheries Finance Corporation 307,237 4,270,179 3,962, , , , ,237 of Japan A Japan Finance Corporation for Small Business 371,115 7,737,207 7,366, , , , ,115 11

15 Classification(Note 1) Corporate names Carried amounts on balance sheets Assets (A) Liabilities(B) Net assets (C)=(A)-(B) Paid in capital (D) Capital invested by the Government(E) % of capital invested by the Government (F)=(E)/(D)% Amount worked out (G) = (C) X (F) (Note 2, 3) A The Government Housing Loan Corporation 166,200 76,619,300 76,168, , , , ,857 A Japan Finance Corporation for Municipal Enterprises 16,600 24,066,234 24,049,634 16,600 16,600 16, ,600 b) Banks B Bank of Japan ,000stocks 90,000 yen (Note 2) 49,500 A The Shoko Chukin Bank 377,967 13,910,238 13,305, , , , ,562 A Development Bank of Japan 976,286 19,581,221 17,653,040 1,928, , , ,928,180 A The Rxport-Import Bank of Japan 6,679,944 22,838,567 15,484,372 7,354,194 6,679,944 6,679, ,354,194 B Public Corporations A Water Resources Development Public 2,392 4,625,433 4,582,197 43,235 2,392 2, ,235 Corporation A Japan Regional Development Corporation 125, , , , , , ,682 A Japan Green Resources Corporation 633,104 1,505, , , , , ,477 A Japan National Oil Corporation 1,623,749 3,709,300 2,437,431 1,271,869 1,623,749 1,623, ,271,869 A Japan Railway Construction Public Corporation 64,180 8,836,156 5,572,094 3,264,062 64,180 64, ,264,062 A New Tokyo International Airport Authority 276, , , , , , ,167 A Japan Highway Public Corporation 1,772,725 37,422,307 35,618,838 1,803,468 1,772,725 1,772, ,803,468 A Metropolitan Expressway Public Corporation 273,347 6,597,428 6,050, , , , ,686 A Hanshin Expressway Public Corporation 219,500 4,713,625 4,274, , , , ,500 A Honshu-Shikoku Bridge Authority 463,576 4,009,207 4,246, , , , ,706 A Urban Development Corporation 646,425 16,999,938 16,385, , , , ,893 C. Associations A The public Foundation for Peace and Consolation 40,000 40, ,007 40,000 40, ,007 A Japan Safe Driving Center 6,245 20,710 4,094 16,616 6,245 6, ,616 A Japan Consumer Information Center 9,396 6, ,181 9,396 9, ,181 A National Institute for Research Advancement 15,550 32, ,083 20,700 15, ,097 B Japan Atomic Energy Research Institute 1,798, ,684 34, ,970 1,802,047 1,798, ,252 B The Institute of Physical and Chemical Research 439, ,635 18, , , , ,364 B Japan Nuclear Cycle Development Institute 2,729, ,187 74, ,957 2,823,249 2,729, ,988 B National Space Development Agency of Japan 2,819, ,850 21, ,915 2,819,563 2,819, ,864 B Japan Science and Technology Corporation 463, ,930 10, , , , ,486 A Japan Marine Science and Technology Center 277,228 86,666 6,327 80, , , ,322 A Japan Environment Corporation 10, , ,064 14,299 10,100 10, ,299 A The Pollution-Related Health Damage Compensation and 6,071 70,775 17,291 53,483 6,071 6, ,483 Prevention Association A Fund for the Promotion and Development of the Amami 6,901 39,305 28,726 10,578 10,917 6, ,686 Islands 12

16 Classification(Note 1) Corporate names Carried amounts on balance sheets Assets (A) Liabilities(B) Net assets (C)=(A)-(B) Paid in capital (D) Capital invested by the Government(E) % of capital invested by the Government (F)=(E)/(D)% Amount worked out (G) = (C) X (F) (Note 2, 3) A The Japan Foundation 106, ,224 8, , , , ,200 A Japan International Cooperation Agency 130, ,062 39, , , , ,973 A Deposit Insurance Corporation of Japan 5,150 21,443,529 23,810,304-2,366,774 5,455 5, ,234,235 A Commemorative Association for the Japan World 25,380 98,551 4,338 94,212 47,854 25, ,960 Exposition (1970) A Nippon Automated Cargo Clearance System Operations 60 9,604 8, Organization A The Japan Scholarship Foundation 3,700 2,214,638 2,206,269 8,369 3,701 3, ,369 A National Education Center 18,894 16, ,151 18,894 18, ,151 A Japan Arts Council 388, ,673 7, , , , ,867 A Japan Society for the Promotion of Science 75,367 2,267 1, ,367 75, A The University of The Air Foundation 23,000 31,692 16,428 15,264 23,000 23, ,264 A National Stadium and School Health Center of Japan 45,325 79,859 27,113 52,746 45,325 45, ,746 A The Promotion and Mutual Aid Corporation for Private 48,419 4,467,989 5,952,365-1,484,376 48,419 48, ,484,376 Schools of Japan A Social Insurance Medical Fee Payment Fund 0 1,588,102 2,384, , ,717 A The pension Welfare Service Public Corporation 1,067,519 35,587,749 36,078, ,917 1,067,519 1,067, ,917 A Association for the Welfare of the Mentally and Physically 10,018 6, ,399 10,018 10, ,399 Handicapped A Social Welfare and Medical Service Corporation 252,550 2,963,117 2,708, , , , ,087 A The Organization for Pharmaceutical Safety and 38,936 48,643 11,066 37,577 41,414 38, ,326 Research A Japan Racing Association 4,924 1,260, ,158 1,148,620 4,924 4, ,148,620 B Agriculture & Livestock Industries Corporation 15, , , ,956 16,732 15, ,550 A National Agricultural Insurance Fund 3,800 8, ,194 5,600 3, ,559 A Japan Marine Fishery Resources Research Center 100 4,394 1,507 2, A Agricultural and Fishery Co-Operative Savings , , Insurance Corporation A Bio-oriented Technology Research Advancement 61,725 54,233 8,299 45,933 67,138 61, ,226 Institution A Agriculture, Forestry and Fisheries Credit Foundations 207, ,268 83, , , , ,208 A Japan External Trade Organization 102, ,212 10, , , , ,677 A Metal Mining Agency of Japan 23,737 76,030 49,220 26,809 23,737 23, ,809 A Japan Small and Medium Enterprise Corporation 3,138,590 11,451,961 8,602,672 2,849,289 3,138,590 3,138, ,849,289 B New Energy and Industrial Technology Development 429, , , , , , ,947 Organization A Information-Technology Promotion Agency, Japan 314, ,598 32, , , , ,358 A Japan Key Technology Center 285, ,911 31, , , , ,857 A Industrial Structure 57, ,304 33, , ,672 57, ,593 Improvement Fund 13

17 Classification(Note 1) Corporate names Carried amounts on balance sheets Assets (A) Liabilities(B) Net assets (C)=(A)-(B) Paid in capital (D) Capital invested by the Government(E) % of capital invested by the Government (F)=(E)/(D)% Amount worked out (G) = (C) X (F) (Note 2, 3) Improvement Fund B Teito Rapid Transit Authority 976,460 1,353,783 1,249, ,090 58,100 31, ,594 A Japan National Tourist Organization 1,098 2, ,559 1,098 1, ,559 A Corporation for Advanced Transport & Technology 18,011 8,104,942 7,120, ,311 18,011 18, ,311 A National Organization for Automotive Safety & Victim s 23,610 37,403 21,619 15,783 23,770 23, ,676 Aid A Maritime Disaster Prevention Center ,367 9,715 4, ,104 A Association for Structural Improvement of the 1,000 12,151 2,093 10,058 7,350 1, ,367 Shipbuilding Industry A Organization for Environment Improvement around Airport 1,050 15,528 13,217 2,310 1,400 1, ,733 A Postal Life Insurance Welfare Corporation 425,542 26,300,179 26,071, , , , ,847 A Telecommunications Advancement Organization of 317, ,414 36, , , , ,180 Japan A Labor Welfare Corporation 697, ,654 94, , , , ,987 A The Japan Institute of Labour 6,075 6,717 1,239 5,477 6,075 6, ,477 A Employment & Human Resources Development 2,082,414 2,309, ,195 1,599,851 2,083,332 2,082, ,599,051 Organization of Japan A Japan Association for Employment of the Disabled 24,659 43,747 2,468 41,278 24,659 24, ,278 A Japan Sewage Works Agency 1, , ,708-14,585 2,727 1, ,093 D. Special Corporations C Japan Tobacco Inc. (IISA, note 4) 50,000 1,000,000stocks 735,000yen(Note 2) 735,000 C Electric Power Development Co., Ltd. 47,083 2,282,881 2,162, ,185 70,600 47, ,139 C Kansai International Airport Co., Ltd. 365,200 1,531,367 1,140, , , , ,401 C Nippon Telegraph and Telephone Corporation (IISA, 265,200 5,304,000stocks 1,630,000 yen (Note 2) 8,645,520 note 4) C Central Japan International Airport Co., Ltd. 6,442 84,818 68,805 16,012 16,106 6, ,403 E. International Organizations A International Monetary Fund 1,898,006 34,526, ,193 34,425,494 33,535,514 2,146, ,203,545 C International Bank for Reconstruction and 161,783 27,897,762 24,510,864 3,386,898 1,377, , ,693 Development C International Finance Corporation 15,811 4,043,846 3,397, , ,961 17, ,692 A International Development Association 3,046,164 12,583, ,583,171 11,553,238 2,487, ,709,156 C Asian Development Bank 85,973 4,769,074 3,656,871 1,112, ,474 56, ,173 A African Development Fund 283,321 1,260, ,260,931 1,306, , ,439 C Inter-American Development Bank 26,988 6,775,956 5,536,306 1,239, ,723 22, ,196 C African Development Bank 22,020 1,325, , , ,184 10, ,146 C Inter-American Investment Corporation ,025 16,117 21,908 21, C Multilateral Investment Guarantee Agency 1,753 76,391 45,021 31,369 23,486 1, ,393 C Common Fund for 3,071 17, ,014 12,869 1, ,531 Commodities 14

18 Classification(Note 1) Corporate names Carried amounts on balance sheets Assets (A) Liabilities(B) Net assets (C)=(A)-(B) Paid in capital (D) Capital invested by the Government(E) % of capital invested by the Government (F)=(E)/(D)% Amount worked out (G) = (C) X (F) (Note 2, 3) Commodities C European Bank for Reconstruction and Development 52,935 2,012,760 1,491, , ,593 44, ,699 F. Liquidated corporations (a) Liquidated corporations C Nippon Steel Corporation C Teikoku Fuel Industrial Corporation (b) Closed organizations A South Development Treasury ,574 20,500 3, ,074 A Foreign Investment Treasury 50 71,954 66,811 5, ,143 G. Other corporations C Shibetsu Kido Corporation Note 1: In the column of Classification, A designates Right obtained by equity contribution, B designates Subscription certificate and C designates Stock certificate. Note 2: The amounts worked out are based on net assets (amount of assets deducted by liabilities) multiplied by the percentage of capital invested by the Government (rounded below two decimals), except for the listed stocks, etc. (Nippon Telegraph and Telephone Corporation, Japan Tobacco Inc., Bank of Japan). Note 3: As for listed stocks, etc., the amounts are evaluated based on the closing market prices of over-the counter or market transaction on March 31, 1999, multiplied by the number of stocks. Note 4: IISA refers to the shares held in the Industrial Investment Special Account. Note 5: As for book-closing period, the year-end of each corporation is on March 31, However, as for some corporations, the year-end is determined as follow: April 30, 1999 International Monetary Fund June 30, 1999 The International Bank for Reconstruction and Development, International Finance Corporation, International Development Association and Multilateral Investment Guarantee Agency December 31, 1999 Japan Racing Association, Asian Development Bank, African Development Fund, Inter-American Development Bank, African Development Bank, Inter-American Investment Corporation, Common Fund for Commodities and European Bank for Reconstruction and Development In cases when the Japanese Government has made additional investment after the book-closing period, the incremental amount is added to the calculated amount. With regard to the amounts related to international organizations, they are, in principle, valued based on the exchange rate at book-closing period. Note 6: Regarding the amounts on balance sheets, the carried amount under International Monetary Fund is taken from the General Statement of the Fluctuation, Current Amount and Value of National Property and adjusted, in order to meet the fiscal period of the Japanese Government. Note 7: With regard to the recorded balance sheet amounts of the Nippon Steel Corporation, they are evaluated based on the total amount paid to the Government, deducted by the distributed amount of residual properties in the mid-term. Note that the Nippon Steel Corporation suspended its liquidation procedure in November Note 8: Figures are expressed to 2 decimal points with no rounding. (10) Others Inventories This line item consists of stocked items from working assets, commodities, products/half-finished 15

19 products, goods in process, basic materials and supplies. They are principally valued at acquisition cost, but inventories such as rice and wheat which came under the special account for food control, are valued at the predetermined selling prices less the future costs (warehousing costs and interest rates, etc.). Advance payments and prepaid expenses This line item consists of advance payments and prepaid expenses such as the amount of payment for services that are not provided for yet in the closing date, such as part related to later periods of the insurance premium and rent among amounts already paid, the amount paid in advance or paid using a rough estimate for the services not completed and unclear if completed. Other rights (reference) (trillion yen) FY1998 (as of March 31,1999) FY1999 (as of March 31,2000) Inventories Advance payments and prepaid expenses Other credits Carried amount on the balance sheet

20 II. Liabilities (1) Accounts payable and accrued expenses This line item consists of accounts payable and accrued expenses such as reserves for outstanding claims in Insurance Special Accounts, interest subsidies for loans at fixed interest rates, and current payments to be carried over to the next term. (2) Short-term securities held by the public This line item consists of short-term securities held by the public (Treasury Financing Bills, Foreign Exchange Fund Bills and Food Financing Bills). (reference) Breakdown of short-term government securities held by the public FY1998 (trillion yen) FY1999 (as of March 31,1999) (as of March 31,2000) Outstanding of short-term securities Amount held by the Government Trust fund Bureau Special Account 1.00 Special Account for the National Debt Consolidation Fund Short-term government bond held by the public Unamortized premiums and discounts on Government securities Carried amount on the balance sheet Note: Figures are expressed to 2 decimal points with no rounding. (3) Government bonds held by the public This line item consists of Government bonds held by the public (straight bonds, subsidy bonds, etc.). (reference 1) Breakdown of government bonds held by the public FY1998 (trillion yen) FY1999 (as of March 31,1999) (as of March 31,2000) Government bonds outstanding Outstanding at the end of the fiscal year Outstanding of Government internal bonds (Except for redemption amounts payable) Straight bonds Construction bonds Special deficit- financing bonds Special bonds for temporary tax cut

21 Refunding bonds for the debt transfer from Japanese National Railways Settlement Corporation Refunding bonds for the debt transfer from the National Forest Service Subsidy bonds Subscription bonds Contribution bonds Government bonds issued to Deposit Insurance Corporation Government bonds converted from Japanese National Railways Settlement Corporation bonds Amount of bonds issued during the settlement period Amount held by the Government (Outstanding at the end of the fiscal year) Trust Fund Bureau Special Account Special Account for the National Debt Consolidation Fund Postal Savings Special Account Postal Life Insurance Special Account Carried amount on the balance sheet Outstanding at the end of the fiscal year Amount of bonds issued during the settlement period Un-amortized premiums and discounts on Government securities Note: Recorded amounts are at face value. Figures are expressed to 2 decimal points with no rounding. 18

22 (reference 2) Redemption plan of Government bonds for each fiscal year FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY Total Note 1: In this table, the outstanding at the end of FY 1998 (including the amount issued during the settlement period) which are to be redeemed for internal bonds for each fiscal year are recorded. Accordingly, the total amount is not equal to the outstanding amount of the internal bonds indicated in the table (reference 1) added to the amounts issued during the settlement period. Note 2: Figures are expressed to 2 decimal points with no rounding. (4) Postal savings This line item consists of postal savings. (trillion yen) FY1998 (as of March 31,1999) FY1999 (as of March 31,2000) Ordinary Savings Collection Savings Housing Savings Education Savings Time savings Zaikei Savings Teigaku Savings Carried amount on the balance sheet (5) Deposits received of public pensions cognition of the future public pension benefits corresponding to the past period as liabilities With regard to recognition of the future public pension benefits corresponding to the past period as liabilities, the amount are recognized by the present value of benefits in actuarial revaluation of pensions. The present value of benefits shows the total amount of the future pension benefit at present value, and the pension benefit can be considered from three different financial sources as follows; (1) Insurance premium income in the future; (2) Reserves (reserves from the past insurance premium income or from its benefits of investment); and (3) Government subsidies (which is paid from the Government budget at the time of pension benefits payment). 19

23 Details for recording ways for the methods 1 to 3 indicated in the annex and explanations of these methods will be mentioned in the following passages in accordance with the classifications mentioned above. See reference (page 23) about the present value of benefits and financial sources of public pensions as well as its financing method. Method 1: Future pension benefits corresponding to the past period are not recognized as liabilities, but solely reserves which the Government holds at present are recognized as the deposits received of public pensions, which is a part corresponding to their assets, among liabilities on balance sheets. ( ) Each reserve for Federation of National Public Service Personnel Mutual Aid Association Pension, Employees of Agriculture, Forestry, and Fisheries Institutions Mutual Aid Association Pension, Private Schools Teachers and Employees mutual Aid Association Pension is set aside respectively in the Federation of National Public Service Personnel Mutual Aid Association, Mutual Aid Association of Agriculture, Forestry and Fishery Corporation Personnel, and the Promotion and Mutual Aid Corporation for Private Schools of Japan, thereby this accumulated fund is excluded from the calculation. (trillion yen) Reserve for national pension 12 Reserve for employees pension 141 Carried amount on the balance sheet 153 (Explanation for method 1) Since most of the future public pension benefit is to be financed by the future insurance premium income, the public pension in Japan is similar to pay-as you-go system while some of the future public pension benefits is to be considered to be paid from the interests acquired from holding and investing the reserves. The Japanese Government should perform actuarial revaluation every five years in accordance with law in force (Article 87 of the National Pension Law, Article 81 of the Employees Pension Insurance Law etc.) under certain reasonable assumptions. It also has the obligation to raise the premium properly corresponding to the expected amount (the present value of benefits) for the future pension benefit, under the principal of balancing between revenues and expenses. In fulfilling this obligation, each future pension benefit corresponding to the past period will be financed from each years investing interests of reserves, insurance premium income, and tax income etc. (One third of the basic pension benefits are paid from the Government subsidies in accordance with the law). Therefore, the future public pension benefits corresponding to the past period are not recognized as liabilities. Note : The present value of benefits used in actuarial revaluation is estimated under certain assumptions for fundamentals based on the current system, and there will be considerable changes in the present value of benefits, when there is a change in the system, in the average life span or in the interest rate, etc. Method 2: As judging by each finance source to recognize as liabilities or not, only reserves and Government subsidies are to be recognized as liabilities, since the future insurance premium income is expected to be paid by employers and insured persons who are outside to the Government in the current system. ( ) The Government subsidies to Federation of National Public Service Personnel Mutual Aid Association Pension, Employees of Agriculture, Forestry, and Fisheries Institutions Mutual Aid Association Pension, Private Schools Teachers and Employees mutual Aid Association Pension are considered as liabilities as in the case of the Employees Pension and National Pension. (trillion yen) Reserve in and Government subsidies to the National Pension 46 Reserve in and Government subsidies to the Employees Pension 238 Government subsidies to the National Public Service Personnel Mutual Aid Pension 3.5 Government subsidies to the Mutual Aid Pension for Agriculture and Forestry 1.6 Government subsidies to the Mutual Aid Pension for Private Schools 1.2 Carried amount on the balance sheet

24 (Explanation for method 2) The public pension is managed by the social insurance system with which the benefits are subject to insurance premium payment. Therefore, insured persons to the pension fund may have a expected right with conditions that after the premium payment they can receive a pension when they fulfill certain conditions for pension benefits such as aging in the future. Furthermore, beneficiaries who already receive a pension benefit has a vested right for demanding a future pension benefit. Note: The concrete contents of these rights mentioned above are not decided as the right for money claim, since the future pension benefits may be changed by the future price trends, etc. or by the future reform in pension system. In this case, the reserves and Government subsidies at present value of benefits calculated in actuarial revaluation is recognized as liabilities on the balance sheet, because some of the corresponding Government debts are financed from the future insurance premium income. Method 3: Other than Government subsidies, the Government has an obligation to raise the future premium according to the present value of benefits and to provide a public pension so that the total amount of the present value of benefits corresponding to the past period is to be recognized as liabilities on the balance sheet. ( ) The Government pays for the future pension premium for National Public Service Personnel Mutual Aid Pension as an employer (half of the future insurance premium payment that is recognized as liabilities) (trillion yen) Present value of benefits corresponding to the past period of premium payments for the 85 National Pension Present value of benefits corresponding to the past period of premium payments for the 693 Employees Pension Government subsidies to the National Public Service Personnel Mutual Aid Pension, 16.1 and half of future insurance premium payment, which will cover a part of pension benefit Government subsidies to the Mutual Aid Pension for Agriculture and Forestry 1.6 Government subsidies to the Mutual Aid Pension for Private Schools 1.2 Carried amount on the balance sheet (Explanation for Method 3) The explanation for method 2 is applied for method 3. Furthermore, when we consider that the Government provides the pension including the amount to be covered by the insurance premium payment in the future, the total amount of the present value of benefits corresponding to the past period for premium payment is recognized as liabilities on the balance sheet. Calculation method for Deposits received from public pensions This balance sheet recognized the reserve for public pensions calculated on a present value basis, of future pension benefits in the actuarial revaluation as Deposits received of public pensions. But there are some limitations, since the actuarial revaluation is revised only once every 5 years. Thus in acquiring the present value of benefits at the end of each year, the newest set of figures available were the estimated amount of present value for FY 1999 in the newest actuarial revaluation was available. Since the liability for public pensions changes according to changes in invested assets managed by public pensions reserves, Deposits received from public pensions for FY 1998 includes the estimated present value of future pension benefits as of March 31, 1999 (about 153 trillion yen) subtracted by the increased amount of assets (the amount of increase of pension reserves during FY 1999 was, about 4.1 trillion yen). (6) Advance received and differed revenues This line item consists of advance receipts and advance revenues such as prepaid insurance premiums. 21