EX-1 Description of Japan, August 8, 2018

EX-1 2 d806101dex1.htm EX-1 DESCRIPTION OF JAPAN, AUGUST 8, 2018 EX-1 Description of Japan, August 8, 2018

Exhibit 1

Japan

This description of Japan is dated August 8, 2018, and appears as Exhibit 1 to Japan’s Annual Report on Form 18-K to the U.S. Securities and Exchange Commission for the fiscal year ended March 31, 2018.

THE DELIVERY OF THIS DOCUMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS DOCUMENT (OTHERWISE THAN AS PART OF A PROSPECTUS CONTAINED IN A REGISTRATION STATEMENT FILED UNDER THE U.S. SECURITIES ACT OF 1933) DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OF OR GUARANTEED BY JAPAN.

TABLE OF CONTENTS


GENERAL			4
Area and Population			4
Government			4
Political Parties			4
Leadership			5
International Organizations			5
THE ECONOMY			8
General			8
Gross Domestic Product and National Income			11
Industry			13
Energy			13
Price Indices			15
Labor			15
Aging Workforce and Population Decrease			18
FOREIGN TRADE AND BALANCE OF PAYMENTS			20
Foreign Trade			20
Balance of Payments			23
Foreign Exchange Rates			24
FINANCIAL SYSTEM			27
The Bank of Japan and Monetary Policy			27
Government Financial Institutions			28
Private Financial Institutions			29
GOVERNMENT FINANCE			30
Revenues, Expenditures and Budgets			30
Tax Structure			35
Fiscal Investment and Loan Program			35
DEBT RECORD			36
JAPAN’S PUBLIC DEBT			36
INTERNAL DEBT			38
Direct Debt of the Japanese Government			38
EXTERNAL DEBT			42
Debt Guaranteed by the Japanese Government			42
SUBSCRIPTIONS TO INTERNATIONAL FINANCIAL ORGANIZATIONS			43

FURTHER INFORMATION

This document appears as an exhibit to Japan’s Annual Report filed with the U.S. Securities and Exchange Commission (the “Commission”) on Form 18-K for the fiscal year ended March 31, 2018. Additional information with respect to Japan is available in such Annual Report, in the other exhibits to such Annual Report and in amendments thereto. Such Annual Report, exhibits and amendments may be inspected and copied at the public reference room maintained by the Commission at: 100 F Street, N.E., Washington, D.C. 20549. Information regarding the operations of the public reference room can be obtained by calling the Commission at 1-800-SEC-0330. The Annual Report and its exhibits and amendments are also available through the Commission’s Internet website at http://www.sec.gov.

In this document all amounts are expressed in Japanese Yen (“¥” or “yen”), except as otherwise specified. The spot buying rate quoted on the Tokyo Foreign Exchange Market on July 31, 2018 as reported by The Bank of Japan at 5:00 p.m., Tokyo time, was ¥111.40=$1.00, and the noon buying rate on July 27, 2018 for cable transfers in New York City payable in yen, as reported by the Federal Reserve Bank of New York, was ¥110.94=$1.00. See “Foreign Trade and Balance of Payments — Foreign Exchange Rates”.

References herein to Japanese fiscal years (“JFYs”) are to 12-month periods commencing in each case on April 1 of the year indicated and ending on March 31 of the following year. References to years not specified as being JFYs are to calendar years.

Japan

GENERAL

Area and Population

Japan, an archipelago in the western Pacific, consists of four main islands (Hokkaido, Honshu, Kyushu and Shikoku) which are mostly mountainous located in the same approximate range of latitude as the east coast of the United States north of Florida. The total area of Japan is approximately 146,000 square miles, which is slightly less than that of California and about 4% of the United States. It is bordered by the Sea of Japan to the west and north, and by the Pacific Ocean to the east and south.

Japan has a total population of approximately 127 million (estimated as of July 1, 2018). It has one of the highest population densities in the world and approximately 23.7% of its people (estimated as of October 1, 2017) are concentrated in three metropolitan areas (Tokyo, Osaka and Nagoya). Japan’s rate of population decrease during the years 2013-2017 showed a decline rate of 0.6%. Japan’s population decreased 0.18% during the 12 months ended October 1, 2017.

Government

The legislative power in Japan is vested in the Diet, which currently consists of a House of Representatives having 465 members and a House of Councillors having 242 members. Members of both houses are elected by direct universal suffrage, except that some members of each house are elected by proportional representation. The power of the House of Representatives is superior to that of the House of Councillors in respect of approving certain matters including the national budget and electing the Prime Minister.

The executive power is vested in the Cabinet consisting of a Prime Minister, elected by the Diet from among its members, and other Ministers appointed by the Prime Minister, a majority of whom must be members of the Diet. The judicial power is vested in the Supreme Court and such lower courts as are established by law.

Japan’s 47 prefectures, and its cities, towns and villages, have a certain degree of local autonomy through popularly elected legislative bodies and chief executives. The central government exercises its influence on local governments indirectly through financial aid and prescribing standards of local administration.

Political Parties

Members of the House of Representatives are elected for four-year terms unless the House of Representatives is dissolved prior to expiration of their terms. The House of Representatives was dissolved on September 28, 2017 and an election was held on October 22, 2017. 289 members were elected from single-member districts and 176 members were elected through a proportional representation process from 11 regional districts. The House of Councillors currently consists of 242 members who are elected for six-year terms with one-half of the membership being elected every three years. In an election in July 2016, 121 members were elected, of which 48 members were elected through a proportional representation system and 73 members were elected from 45 districts that correspond to the 47 prefectures of Japan. Currently, the House of Councillors consists of 121 members whose term expires in July 2019 and 121 members whose term expires in July 2022.

The following tables set forth the membership by political party of the House of Representatives as of May 9, 2018 and the House of Councillors as of July 31, 2018.


	House of Representatives
Liberal Democratic Party		283
The Constitutional Democratic Party of Japan		55
Democratic Party For the People		39
Komeito		29
The Group of Independents		13
Japanese Communist Party		12
Nippon Ishin (Japan Innovation Party)		11
Liberal Party		2
Social Democratic Party		2
The Party of Hope		2
Independents		17
Vacancies		0

Total		465

Source: House of Representatives.


	House of Councillors
Liberal Democratic Party and The Party for Japanese Kokoro		125
Komeito		25
Democratic Party For the People and The Shin-Ryokufukai		24
The Constitutional Democratic Party of Japan and Minyukai		23
Japanese Communist Party		14
Nippon Ishin (Japan Innovation Party)		11
Hope Coalition (Kibou)		6
The Party of Hope		3
Independents Club		2
Okinawa Whirlwind		2
Voice of The People		2
Independents		5
Vacancies		0

Total		242

Source: House of Councillors.

Leadership

Japan’s current Prime Minister is Shinzo Abe, a member of the Liberal Democratic Party of Japan and member of the House of Representatives in the Diet. As the Liberal Democratic Party of Japan took its position as the ruling party as a result of the House of Representatives election, Mr. Abe was formally appointed as Japan’s 96th Prime Minister by the Emperor on December 26, 2012 and succeeded the former Prime Minister Yoshihiko Noda, who is a member of the Democratic Party of Japan. After the Democratic Party of Japan became the ruling party in September 2009, Mr. Noda served as the last Prime Minister of the Democratic Party of Japan from September 2, 2011. Mr. Abe was re-elected as 97th and 98th Prime Minister after general elections after breakup of the House of Representatives in 2014 and 2017.

International Organizations

Japan is a member of the United Nations and other international organizations, including the International Monetary Fund, International Bank for Reconstruction and Development, International Development Association, International Finance Corporation, International Fund for Agricultural Development, Multilateral Investment Fund, Multilateral Investment Guarantee Agency, Asian Development Bank, African Development Bank, African Development Fund, European Bank for Reconstruction and Development, Inter-American Development Bank and Inter-American Investment Corporation. See “Subscriptions to International Financial Organizations”.

International Trade Agreements

Japan announced its intent to join the Trans-Pacific Partnership, or TPP, in March 2013, and following negotiations with 11 other countries, signed the TPP Agreement on February 4, 2016. Upon the ratification of the TPP, Japan and the other participating countries planned to aim to not only eliminate tariffs on products but also liberalize services and investment, and establish rules in a wide range of fields, including intellectual property, e-commerce and the environment. Although Japan ratified the TPP on January 20, 2017, the United States announced its formal withdrawal from the TPP on January 23, 2017. On March 8, 2018, Japan and ten other countries excluding the United States signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, pursuant to which each signatory country agreed to start the necessary preparations for the implementation of the TPP.

Japan has also entered into Economic Partnership Agreements, or EPAs, with various countries, including Singapore, Mexico, Malaysia, Chile and Thailand. As of May 2017, Japan had entered into a total of 16 EPAs with 20 countries. Pursuant to the EPAs, Japan will collaborate comprehensively with the counterparties to, among other things, reduce or eliminate tariffs, grant most-favored-nation status in the fields of investment, services and government procurement and expedite patent review and enhance patent protection in the field of intellectual property.

Japan is also a member of international organizations which are based on international trade treaties and other agreements which seek to promote free trade in the international market, including the following: the World Trade Organization, the Organization for Economic Co-operation and Development, the World Customs Organization and the International Trade Centre.

The following is a map of Japan, illustrating its location with respect to neighboring countries:

LOGO

THE ECONOMY

General

Japan has a highly advanced and diversified economy, which has developed in response to changing conditions in Japan and the world. During the era of high economic growth in the 1960s and the early 1970s, the expansion was based on the development of heavy industries consuming large quantities of resources. During the 1980s, there was rapid growth in high value-added industries, such as electronics and precision instruments, which employ high level technology and consume relatively low quantities of resources. The service sector of the economy grew significantly during the 1980s and 1990s.

While the Japanese economy expanded during the period from 2002 to 2007, amidst that expansion, and prior to the global economic crisis of 2008, Japan continued to face several domestic economic difficulties. Among other things, domestic consumption contributed to the economic recovery to a lesser degree than was the case in prior economic growth periods. Also, despite the improving employment environment at the time, the average wage failed to grow appreciably. While those Japanese manufacturing companies with a global competitive edge achieved growth on the back of the favorable world economy, small-to-medium enterprises and non-manufacturing sectors realized only limited productivity growth and profitability. This in turn caused imbalance in the level of economic recovery among the different regions in Japan. In the longer term, Japan faced a declining population, mass retirement of the baby boomer generation, environmental/energy conservation agenda, and fiscal deficit problem. Against this backdrop, the subprime loan crisis in the United States and increases in the prices of energy and raw materials precipitated weakness in the global economy, caused the Japanese economy to deteriorate. Throughout JFY 2008, the global economy continued to worsen, as the collapse of several major financial institutions in the United States and other factors contributed to a credit tightening, volatility in stock, currency and other markets, loss of consumer confidence and decrease in business and industrial activities on a global basis. The Japanese economy was also adversely affected by these factors, especially as Japan’s export sector was hit by the decline in global demand and appreciation of the yen against other major currencies. After February 2008, Japan had entered a recession. The Japanese economy in JFY 2010 picked up, despite a difficult situation where the unemployment rate remained at a high level.

On March 11, 2011, just as the Japanese economy was in a transition from the state of stagnation to recovery, the Great East Japan Earthquake (“Earthquake”) struck Japan. As a result, the Japanese economy posted negative growth for the first and second quarter in 2011. Unlike the cases of the Great Hanshin-Awaji Earthquake in 1995 or Hurricane Katrina in 2005, personal consumption declined on a nationwide basis, with consumer sentiment deteriorating sharply after the Earthquake. The Earthquake had a severe impact on production in Japan through the shutdown of damaged factories, disruptions of the supply chains and power supply constraints. In particular, the Earthquake affected Japan’s auto industry which depends on the Tohoku region for the supply of key parts including semiconductors and other electronic components. The supply constraints and the slower growth in corporate earnings in the aftermath of the Earthquake also put downward pressure on capital investment activities. The Earthquake was accompanied by a nuclear power plant accident, which not only caused power supply constraints but also had a chilling effect on certain business activities, such as in the tourism and leisure sectors. Following the Earthquake, the number of visitors to Japan from foreign countries dropped by approximately half from the monthly averages in the prior year. The Earthquake and its aftermath prompted the Government of Japan to compile a series of supplementary budgets to support reconstruction efforts. On May 2, 2011, a first supplementary budget of approximately ¥4 trillion was approved by the Diet to finance reconstruction relating to damages from the Earthquake and tsunami. The budget was aimed at disaster relief, including providing temporary housing, rebuilding of facilities and disaster assistance loans. On July 25, 2011, the Japanese government approved a second supplementary budget of approximately ¥2 trillion aimed at further disaster relief, including increasing the Contingency Reserve for Recovery from the Great East Japan Earthquake. On November 21, 2011, the Japanese government approved the third supplementary budget of approximately ¥12 trillion aimed at disaster relief, including provision of emergency support to people affected by the disaster and reconstruction of public utilities and facilities. On February 8, 2012, the Japanese government approved the fourth supplementary budget including the establishment of a government guaranteed ¥500 billion credit facility in response to the so-called “Overlapping Debt Problem”, whereby the burden of existing debt makes it difficult to raise funds for victims of the Earthquake. Thereafter, the Japanese government approved budgets of approximately ¥4 trillion for JFY 2012, ¥5 trillion for JFY 2013 and ¥4 trillion for JFY 2014 to finance reconstruction efforts.

The Earthquake and the nuclear disaster in Fukushima were followed by severe flooding that occurred at the end of July 2012 in Thailand, one of Japan’s largest trading partners for both exports and imports. The suspended operations of the local factories in Thailand suppressed Japan’s Thailand bound exports of goods including intermediary materials for cars and electronics and thereby adversely affected the Japanese economy.

Thus, JFY 2011 started in a very challenging environment, with the Earthquake seriously crippling the economy, which posted negative growth for the first quarter. Over time, the government and the people joined forces in an all-out effort to rebuild the social and economic infrastructure, facilitating a rapid recovery of the supply chains and helping the economy on a track to a gradual recovery. Since the summer of 2011, however, the rapid appreciation of the yen, the reduced external demand due to the Thai flooding (as described above) and deceleration in the world economy stemming from the European sovereign debt crisis kept such recovery to a modest level.

In December 2012, the Cabinet Office of the Government of Japan announced “Abenomics” (named after the incumbent Prime Minister Shinzo Abe), an economic strategy of pursuing an expansionary monetary policy, a flexible fiscal policy and an economic growth agenda that promotes private investment, with the goal of achieving GDP growth and job creation. Pursuant to this strategy, specific measures to be implemented include accelerating reconstruction efforts in areas damaged by the Great East Japan Earthquake, increasing stimulus spending and subsidies aimed at strategically important sectors and utilizing a more flexible approach to economic and fiscal management. Other more recent Abenomics measures include the liberalization of electricity retail sales in April 2016 and the liberalization of gas retail sales in April 2017.

Additionally, in January 2013, the Government of Japan and the Bank of Japan issued a joint statement announcing measures to overcome deflation and achieve sustainable economic growth with price stability in order to establish a sustainable fiscal structure and sound fiscal management. In March 2013, Mr. Haruhiko Kuroda, former President of the Asian Development Bank, was appointed as governor of the Bank of Japan. In April 2013, the Bank of Japan announced its new quantitative and qualitative monetary easing policy, under which the Bank of Japan is aiming to achieve a price stability target of 2% in terms of the year-on-year rate of change in the consumer price index at the earliest possible time, with a time horizon of about two years. The real GDP marked an increase of 1.6% during JFY 2017, with the nominal GDP posting a positive growth by 1.7%. As of July 6, 2018, the Cabinet Office of the Government of Japan expected the Japanese economy to recover moderately during JFY 2018, posting real GDP growth of 1.5% and the nominal GDP growth of 1.7%. The Japanese Diet has passed comprehensive social security and tax reform, including an increase in the consumption tax rate from 5% to 8% in 2014, and from 8% to 10% in 2015, subject to certain conditions. Accordingly, the consumption tax rate was increased to 8% in April 2014. However, the planned increase in the consumption tax rate from 8% to 10% has been postponed to October 2019. In addition, the effective corporate tax rate was reduced from 34.62% to 32.11% for JFY 2015 and it was further reduced to 29.97% for JFY 2016 and to 29.74% for JFY 2018.

The Japanese economy faces certain challenges. Challenges for the Japanese economy include, as further described herein, an increased dependence on LNG and other energy imports as a result of the nuclear accident at the Fukushima Daiichi Nuclear Plant and suspension of operations at other nuclear power plants and, over the long term, demographic challenges, such as an aging workforce and population decrease, and the high levels of public debt and associated debt servicing payments.

In addition, Japan’s economy continues to face challenges due to uncertainty about the economic prospects of China and other emerging countries, as well as the impact of the presidential administration in the United States since January 2017. The Japanese economy is also exposed to uncertainty in geopolitical conditions, including concerns over North Korea’s nuclear weapons program and continued instability in the Middle East.

Summary of Key Economic Indicators

The following table sets forth information regarding certain of Japan’s key economic indicators for the periods indicated:


	JFY 2012			JFY 2013			JFY 2014			JFY 2015			JFY 2016			JFY 2017
	(yen amounts in billions, except percentages and index)
Percentage Changes of GDP from Previous Year
At Nominal Prices		0.1	%		2.6	%		2.2	%		3.0	%		1.0	%		1.7	%
At Real Prices^(a)		0.8			2.6			-0.3			1.4			1.2			1.6
Total Revenues of Consolidated General and Special Accounts^(b)	¥	266,025		¥	271,710		¥	247,464		¥	247,917		¥	259,413			—
Total Expenditures of Consolidated General and Special Accounts^(b)		221,853			227,684			226,756			228,749			241,061			—
Surplus of Consolidated Revenues over Consolidated Expenditures^(b)		44,173			44,026			20,708			19,167			18,353			—
Public Debt^(b)		785,723			823,367			851,097			880,335			908,093			—

(a)	Real prices are based on calendar year 2011.

(b)	As of the date of this this Annual Report on Form 18-K, the data for JFY 2017 are not available.

Source: Economic and Social Research Institute; Cabinet Office; and Ministry of Finance.


	2013			2014			2015			2016			2017
	(yen amounts in billions, except percentages and index)
Unemployment Rate		4.0	%		3.6	%		3.4	%		3.1	%		2.8	%
Consumer Price Index^(a)		96.6			99.2			100.0			99.9			100.4
Annual Change		0.4	%		2.7	%		0.8	%		-0.1	%		0.5	%
Corporate Goods Price Index^(b)		99.2			102.3			100.0			96.5			98.7
Annual Change		1.3	%		3.1	%		-2.3	%		-3.5	%		2.3	%
Current Account regarding Balance of Payments	¥	4,457		¥	3,922		¥	16,519		¥	21,062		¥	21,951
Official Reserve Assets	$	1,267		$	1,261		$	1,233		$	1,217		$	1,264

(a)	Calendar year 2015=100.

(b)	Calendar year 2015=100. Indices are calculated using the monthly averages.

Source: Ministry of Internal Affairs and Communications “Labor Force Survey”; Consumer Price Index, Statistics Bureau, Ministry of Internal Affairs and Communications; Domestic Corporate Goods Price Index, Bank of Japan; and Ministry of Finance.

Gross Domestic Product and National Income

In December 2016, the methodology of calculating Japan’s GDP was revised to implement the System of National Accounts 2008 (2008 SNA), the latest version of the international statistics standard for the national accounts adopted by the United Nations Statistical Commission, as well as other changes including revising the benchmark year for real prices from 2005 to 2011. Revised GDP figures based on this methodology were published for prior years starting from JFY 1994. The GDP figures set forth in the tables below reflect this revised methodology.

The following table sets forth information pertaining to Japan’s gross domestic product for JFY 2013 through JFY 2017. As a general matter, with respect to the private sector, companies were shipping their existing inventories pursuant to conservative production plans until the beginning of calendar year 2014. However, after the increase in the consumption tax rate in April 2014, recovery in demand has been delayed, causing increases in inventory and inhibiting production. As a result, there were fluctuations in “Additions to Business Inventories — Private Sectors” during the relevant period.

Gross Domestic Product^(a)


	JFY 2013			JFY 2014			JFY 2015			JFY 2016			JFY 2017			Percentage of JFY 2017 GDP
	(yen amounts in billions)
Total Consumption
Private sectors	¥	299,809		¥	298,739		¥	300,949		¥	300,453		¥	304,034			55.4	%
Public sectors		101,847			104,253			105,970			106,206			107,572			19.6

		401,656			402,993			406,919			406,659			411,606			75.0
Total Gross Capital Formation
Private sectors
Producers’ Durable Equipment		77,464			81,052			83,250			83,653			86,970			15.9
Residential Construction		16,627			15,518			16,066			17,017			17,285			3.2
Public sectors		26,897			27,141			26,833			26,990			27,848			5.1

		120,987			123,710			126,148			127,661			132,103			24.1
Additions to Business Inventories
Private sectors		-1,598			391			1,201			-314			140			0.0
Public sectors		39			89			21			-31			17			0.0

		-1,559			480			1,222			-345			157			0.0
Net Exports of Goods and Services		-13,838			-8,714			-393			5,376			4,831			0.9

Nominal Gross Domestic Expenditures	¥	507,246		¥	518,469		¥	533,897		¥	539,351		¥	548,696			100.0	%

Real Gross Domestic Expenditures^(a)	¥	512,523		¥	510,962		¥	518,321		¥	524,443		¥	533,013

Surplus of the Nation on Current Account
Exports of Goods and Services and Other Receipts from Abroad		24,710			28,201			30,448			29,478			31,928
Less: Imports of Goods and Services and Other Payments Abroad		-7,260			-9,013			-10,035			-11,410			-12,542

		17,450			19,188			20,413			18,067			19,386

Gross National Income	¥	524,696		¥	537,657		¥	554,310		¥	557,418		¥	568,082
Percentage Changes of GDP from Previous Year
At Nominal Prices		2.6	%		2.2	%		3.0	%		1.0	%		1.7	%
At Real Prices^(b)		2.6			-0.3			1.4			1.2			1.6
Deflator		-0.0			2.5			1.5			-0.2			0.1

(a)	GDP financial data are subject to change.

(b)	Real prices are based on calendar year 2011.

(c)	Deflator is a price index used to convert nominal prices into real prices. Deflator is derived by dividing nominal GDP by real GDP.

Source: Economic and Social Research Institute, Cabinet Office

The following table sets forth information pertaining to Japan’s gross domestic product, as seasonally adjusted, for each of the eight quarters ended March 31, 2018.


	Quarterly Gross Domestic Product^(a)
	2016						2017								2018
	Second Quarter		Third Quarter		Fourth Quarter		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		First Quarter
	(yen amounts in billions)
Nominal Gross Domestic Expenditures^(b)	¥	538,585	¥	538,343	¥	539,746	¥	540,451	¥	545,531	¥	549,637	¥	550,869	¥	548,661

Real Gross Domestic Expenditures^(b)(c)	¥	522,117	¥	523,102	¥	524,402	¥	527,938	¥	530,723	¥	533,355	¥	534,715	¥	533,911

Percentage Changes of GDP from the Previous Quarter At Nominal Prices^(d)		0.2%		-0.0%		0.3%		0.1%		0.9%		0.8%		0.2%		-0.4%
At Real Prices^(c)(d)		0.2		0.2		0.2		0.7		0.5		0.5		0.3		-0.2
Deflator^(d)		-0.0		-0.2		0.0		-0.5		0.4		0.3		-0.0		-0.3

(a)	Quarterly GDP financial data are subject to change.

(b)	Numbers are based on seasonally-adjusted GDP figures.

(c)	Real prices are based on calendar year 2011.

(d)	Percentage changes are based on seasonally-adjusted GDP figures.

(e)	Deflator is a price index used to convert nominal prices into real prices. Deflator is derived by dividing nominal GDP by real GDP.

Source: Economic and Social Research Institute, Cabinet Office.

Per Capita Gross Domestic Product

The following table indicates per capita gross domestic product for the last five years.


	Per Capita GDP
JFY	Amount (in thousands of yen)	Year-on-year change (%)
2012	¥3,876	0.3
2013	3,982	2.7
2014	4,075	2.3
2015	4,201	3.1
2016	4,249	1.1

National Income

The following table sets forth national income for calendar year 2012 through calendar year 2016.


	National Income
	2012			2013			2014			2015			2016
	(yen amounts in billions)

Domestic Factor Income	¥	346,958		¥	354,283		¥	357,468		¥	368,896		¥	374,306
Net Income from Abroad		13,258			16,892			18,494			20,296			17,213

National Income at Factor Cost	¥	360,216		¥	371,175		¥	375,962		¥	389,192		¥	391,520

Percentage Changes of Income at Factor Cost from Previous Year		1.1	%		3.0	%		1.3	%		3.5	%		0.6	%

Source: Economic and Social Research Institute, Cabinet Office.

Industry

The following table sets forth the proportion of gross domestic product contributed by major industrial sectors of the economy for calendar year 2012 through calendar year 2016.

GDP by Industrial Sectors (at nominal prices)


	2012		2013		2014		2015		2016
Industry
Agriculture, forestry and fishing		1.1%		1.1%		1.1%		1.1%		1.2%
Mining		0.1		0.1		0.1		0.1		0.1
Manufacturing		19.7		19.4		19.7		20.7		21.0
Electricity, gas and water supply and waste management service		2.0		2.1		2.4		2.6		2.7
Construction		4.9		5.3		5.5		5.5		5.5
Wholesale and retail trade		14.7		14.8		14.2		13.9		13.7
Transport and postal services		5.1		5.0		5.2		5.1		5.0
Accommodation and food service activities		2.4		2.5		2.5		2.3		2.4
Information and communications		5.1		5.1		5.1		5.0		5.0
Finance and insurance		4.5		4.6		4.4		4.4		4.2
Real estate		12.0		11.9		11.7		11.4		11.4
Professional, scientific and technical activities		7.2		7.3		7.2		7.2		7.3
Public administration		5.3		5.1		5.1		5.0		5.0
Education		3.7		3.7		3.7		3.6		3.6
Human health and social work activities		6.9		6.9		6.8		6.8		7.0
Other service activities		4.7		4.5		4.5		4.4		4.3

Total		99.5%		99.4%		99.2%		99.2%		99.2%

Source: Economic and Social Research Institute, Cabinet Office, Annual Report on National Accounts.

Energy

The following table sets forth the total amounts of primary energy supplied and the percentages supplied by different sources for JFY 2012 through JFY 2016.


	Total Primary Energy Supplied (peta-joules)	Sources of Primary Energy Supplied^(a)
JFY		Oil		Coal		Nuclear		Natural Gas		Other
2012	20,715		44.5%		23.6%		0.7%		23.5%		7.8%
2013^(b)	21,030		42.8		25.2		0.4		23.3		8.3
2014^(b)	20,258		41.2		25.2		0.0		24.5		9.2
2015^(b)	20,016		40.7		25.8		0.4		23.3		9.9
2016^(b)	19,836		39.7		25.4		0.8		23.8		10.3

(a)	Figures represent the proportion of each source as a share of the domestic primary energy supplied. Domestic primary energy supplied is total primary energy supplied less exports and inventory adjustments.

(b)	Standard heating value by energy source, which is used to create total primary energy supplied statistics, is revised every five years. Figures for 2013 through 2016 represent the revised standard heating value by energy source.

Source: Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry, Report on Energy Supply and Demand.

Since JFY 2011, largely due to the effects of the Earthquake, the import of oil and natural gas as alternatives to nuclear energy increased significantly as the demand increased for power generation at thermal power stations. In JFY 2014, nuclear power facilities were not in operation and did not contribute to electric power generation during the fiscal year. See “Foreign Trade and Balance of Payments — Foreign Trade”.

The table below sets forth information regarding crude oil imports for JFY 2013 through JFY 2017.


	JFY 2013		JFY 2014		JFY 2015		JFY 2016		JFY 2017
Volume of imports (thousand kilo-liters per day)		587		530		545		521		501
Cost of imports (c.i.f. in billions of yen)	¥	14,826	¥	11,860	¥	7,368	¥	6,181	¥	7,282
Average price (c.i.f. in yen kilo-liters)	¥	69,224	¥	61,279	¥	37,026	¥	32,523	¥	39,825

Source: Customs and Tariff Bureau, Ministry of Finance.

Japan has historically depended on oil for most of its energy requirements and almost all its oil is imported, mostly from the Middle East. Oil price movements thus have a major impact on the domestic economy. Oil price has fluctuated significantly in recent years, reaching approximately ¥75,000 yen per kilo-liter in January 2014, then dropping below ¥37,000 yen per kilo-liter in February 2015, and increasing again to approximately ¥50,000 yen per kilo-liter in June 2015. In the first quarter of 2016, oil price dropped below ¥30,000 yen per kilo-liter due to oversupply and uncertainties regarding the Chinese economy. After the first quarter, oil price began increasing due to the mild recovery of the world economy and the OPEC agreement to reduce production. In May 2018, U.S. President Donald Trump announced that the United States would withdraw from the Iran nuclear deal, contributing to increased volatility in the oil price.

Japan has worked to reduce its dependence on oil by encouraging energy conservation and the use of alternative fuels. In addition, a restructuring of industry, with emphasis shifting from primary industries to processing and assembly type industries and from manufacturing industry to service industry, has also contributed to the reduction of oil consumption.

The following table sets forth information relating to total electric power generating capacity and electric power generation for JFY 2012 through JFY 2016.


	JFY 2012		JFY 2013		JFY 2014		JFY 2015		JFY 2016
Electric power generating capacity^(a):		(megawatts)
Fossil Fuel		188,904		191,258		193,356		190,805		193,910
Hydro-electric		48,934		48,932		49,597		50,035		50,058
Nuclear		46,148		44,264		44,264		42,048		41,482
Other		3,341		4,717		7,343		8,949		12,903

Total		287,327		289,171		294,560		291,836		298,352

Electric power generation:		(gigawatt-hours)
Fossil Fuel		986,758		987,345		955,352		908,779		877,203
Nuclear		15,939		9,303		— ^(b)		9,437		17,300
Hydro-electric		83,645		84,885		86,942		91,383		84,540
Other		7,607		8,949		11,423		14,580		19,012

Total		1,093,950		1,090,482		1,053,717		1,024,179		998,055

(a)	At the end of fiscal year — March 31

(b)	No nuclear plants in Japan were in operation during JFY 2014, therefore the amount was zero.

Source: Handbook of Electric Power Industry, Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry.

Price Indices

The table below sets forth information concerning changes in Japan’s Corporate Goods and consumer price indices for the periods indicated.


	Corporate Goods Price Index^(a)				Consumer Price Index^(b)
	Index^(c)		Annual % Change		Index		Annual % Change
2013		99.2		1.3		96.6		0.4
2014		102.3		3.1		99.2		2.7
2015		100.0		-2.3		100.0		0.8
2016		96.5		-3.5		99.9		-0.1
2017		98.7		2.3		100.4		0.5

(a)	All commodities. Calendar year 2015=100. Source: Domestic Corporate Goods Price Index, Bank of Japan.

(b)	General index. Calendar year 2015=100. Source: Consumer Price Index, Statistics Bureau, Ministry of Internal Affairs and Communications.

(c)	Indices are calculated using the monthly averages.

Labor

The number of employees was on an upward trend from 2004 to 2007, decreased from 2008 to 2012, recovered in 2013 and increased from 2014 to 2017. In 2016, the average employment was estimated at 64.7 million, of which 23.9% were employed in mining, manufacturing and construction, 3.5% were employed in agriculture, forestry and fisheries, and 72.7% in services and other sectors. In 2017, the average employment was estimated at 65.3 million, of which 23.8% were employed in mining, manufacturing and construction, 3.4% were employed in agriculture, forestry and fisheries, and 72.8% were employed in services and other sectors. The unemployment rate (seasonally adjusted) in Japan gradually increased from 2008 to the middle of 2009, but has gradually decreased since the end of 2009. It ranged between 3.0% and 3.2% during 2016 and between 2.7% and 3.0% during 2017. (Note: Due to the impact of the Great East Japan Earthquake, it has become difficult to conduct a labor search in the following prefectures: Iwate, Miyagi and Fukushima. For this reason, the nationwide unemployment rate for the period between March 2011 and August 2011 does not account for these three prefectures.) The seasonally adjusted unemployment rate was 2.5% for February, 2.5% for March, 2.5% for April, 2.2% for May and 2.4% for June in 2018, the most recent five months for which statistics are available.

The following table indicates unemployment statistics for Japan for each of the last five years:


Calendar Year		Unemployment Rate (%)
2013		4.0
2014		3.6
2015		3.4
2016		3.1
2017		2.8

Source: Ministry of Internal Affairs and Communications “Labor Force Survey”.

The table below sets forth information regarding wage index (total cash earnings (nominal)) and industrial production index (manufacturing and mining) for the periods indicated.


	Wage Index^(a)				Industrial Production Index^(b)
Calendar Year	Index^(c)		Annual % Change		Index		Annual % Change
2013		99.6		-0.4		97.0		-0.8
2014		100.0		0.4		99.0		2.1
2015		100.0		0.1		97.8		-1.2
2016		100.6		0.5		97.7		-0.1
2017		101.0		0.4		102.0		4.4

(a)	Calendar year 2015=100. Source: Monthly Labor Survey, Ministry of Health, Labor and Welfare.

(b)	Calendar year 2010=100. Source: Ministry of Economy, Trade and Industry.

(c)	Indices are calculated using the monthly averages.

The following table shows selected employment information by industry.


	2013			2014			2015			2016			2017
	(all figures in percentages, except as indicated)
Employed persons (in thousands of persons)		63,260			63,710			64,010			64,650			65,300
Employment by Industry:
Agriculture, forestry and fisheries		3.70	%		3.63	%		3.58	%		3.45	%		3.38	%
Mining, manufacturing and construction		24.41			24.38			24.12			23.87			23.78
Services and other sectors		71.89			72.00			72.30			72.68			72.83

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Source: Ministry of Internal Affairs and Communications “Labor Force Survey”.

The following table shows employment rate by age and gender.


	2013			2014			2015			2016			2017
	(all figures in percentages, except as indicated)
Total		56.9	%		57.3	%		57.6	%		58.1	%		58.5	%
Employment rate by age:
15 – 64 years old		71.7			72.7			73.3			74.3			75.3
15 – 24 years old		39.7			40.3			40.7			42.4			42.5
25 – 34 years old		80.2			81.0			81.2			82.5			83.6
35 – 44 years old		80.9			81.8			82.4			82.7			83.6
45 – 54 years old		82.9			83.3			83.8			84.6			85.1
55 – 64 years old		66.8			68.7			70.0			71.4			73.4
55 – 59 years old		76.8			78.1			78.7			79.9			81.0
60 – 64 years old		58.9			60.7			62.2			63.6			66.2
65 and over		20.1			20.8			21.7			22.3			23.0
65 – 69 years old		38.7			40.1			41.5			42.8			44.3
70 – 74 years old		23.3			24.0			24.9			25.0			27.2
75 and over		8.2			8.1			8.3			8.7			9.0
25 – 44 years old		80.6			81.5			81.9			82.6			83.6
Employment rate by gender:
Male		67.5			67.7			67.8			68.1			68.4
Female		47.1			47.6			48.0			48.9			49.8

Source: Ministry of Internal Affairs and Communications “Labor Force Survey”.

The following table shows employment data by type of employment.


	2013		2014		2015		2016		2017
	(in thousands of persons)
Employee (except for executive of company or corporation)		52,220		52,660		53,140		54,000		54,690
Regular employee		33,110		32,980		33,270		33,760		34,320
Non-regular employee		19,110		19,680		19,870		20,230		20,360

Source: Ministry of Internal Affairs and Communications “Labor Force Survey”.

Aging Workforce and Population Decrease

One of the risks that the Japanese economy bears is the issue of the aging of the population accompanied with an overall population decrease. Aging and population decrease placed downward pressure on economic growth. The negative impact can be reduced by enhancing productivity and competitiveness through the further opening of the Japanese economy to the world. Aging and population decrease have an impact not only on the macro growth rate but also on spending patterns (such as the older generations spending more than younger generations on service consumption) and, consequently, the country’s economic structure.

The impact of the aging and shrinking population on Japan’s fiscal structure looms as a long-term risk. Social security benefit payments under the current system will increase. The ratio of pensions to national income are expected to remain at the same level, but that of welfare including medical benefits and nursing-care benefits is expected to increase. Aging and population decrease will thus modify the Japanese revenue structure. Furthermore, amid increasing capital mobility, it is imperative for Japan to foster an environment attractive to business enterprises. Under these circumstances, it has become more and more difficult to impose additional tax burdens on the income of individuals and corporations. The effects of the aging and shrinkage of the population would also be prominent in Japan’s regional economies.

The following table indicates the age distribution of Japan’s population:

Population and Percentage distribution by Age (5-Year Age Group)


	Both sex
Age groups	2005*		2014		2015*		2016		2017
	Population (in thousands of persons)
Total		127,768		127,083		127,095		126,933		126,706
0 – 4 years old		5,599		5,213		5,006		4,963		4,909
5 – 9		5,950		5,307		5,319		5,303		5,251
10 – 14		6,036		5,713		5,620		5,514		5,432
15 – 19		6,593		6,005		6,054		6,040		5,995
20 – 24		7,381		6,203		6,091		6,150		6,228
25 – 29		8,314		6,678		6,532		6,393		6,291
30 – 34		9,795		7,466		7,396		7,257		7,112
35 – 39		8,772		8,670		8,417		8,117		7,884
40 – 44		8,113		9,793		9,847		9,713		9,443
45 – 49		7,755		8,608		8,766		9,282		9,457
50 – 54		8,828		7,791		8,024		7,904		8,156
55 – 59		10,294		7,654		7,601		7,546		7,592
60 – 64		8,577		8,980		8,552		8,160		7,804
65 – 69		7,460		9,154		9,759		10,275		9,921
70 – 74		6,661		7,928		7,787		7,408		7,749
75 – 79		5,280		6,269		6,354		6,526		6,738
80 – 84		3,423		4,869		5,026		5,181		5,293
85 – 89		1,855		3,063		3,156		3,275		3,396
90 – 94		843		1,305		1,363		1,479		1,582
95 – 99		212		352		362		383		405
100 and over		25		60		62		66		67
Regrouped
0 – 14 years old		17,585		16,233		15,945		15,780		15,592
15 – 64		84,422		77,850		77,282		76,562		75,962
65 and over		25,761		33,000		33,868		34,591		35,152
65 – 74 years old		14,122		17,082		17,546		17,683		17,670
75 and over		11,639		15,917		16,322		16,908		17,482


	Both sex
Age groups	2005*		2014		2015*		2016		2017
	Percentage Distribution (%)
Total		100.00		100.00		100.00		100.00		100.00
0 – 4 years old		4.38		4.10		3.94		3.91		3.87
5 – 9		4.66		4.18		4.19		4.18		4.14
10 – 14		4.72		4.50		4.42		4.34		4.29
15 – 19		5.16		4.73		4.76		4.76		4.73
20 – 24		5.78		4.88		4.79		4.85		4.92
25 – 29		6.51		5.25		5.14		5.04		4.97
30 – 34		7.67		5.88		5.82		5.72		5.61
35 – 39		6.87		6.82		6.62		6.39		6.22
40 – 44		6.35		7.71		7.75		7.65		7.45
45 – 49		6.07		6.77		6.90		7.31		7.46
50 – 54		6.91		6.13		6.31		6.23		6.44
55 – 59		8.06		6.02		5.98		5.94		5.99
60 – 64		6.71		7.07		6.73		6.43		6.16
65 – 69		5.84		7.20		7.68		8.09		7.83
70 – 74		5.21		6.24		6.13		5.84		6.12
75 – 79		4.13		4.93		5.00		5.14		5.32
80 – 84		2.68		3.83		3.95		4.08		4.18
85 – 89		1.45		2.41		2.48		2.58		2.68
90 – 94		0.66		1.03		1.07		1.17		1.25
95 – 99		0.17		0.28		0.28		0.30		0.32
100 and over		0.02		0.05		0.05		0.05		0.05
Regrouped
0 – 14 years old		13.76		12.77		12.55		12.43		12.31
15 – 64		66.07		61.26		60.81		60.32		59.95
65 and over		20.16		25.97		26.65		27.25		27.74
65 – 74 years old		11.05		13.44		13.81		13.93		13.95
75 and over		9.11		12.53		12.84		13.32		13.80


(Note) *		Statistics Bureau, Ministry of Internal Affairs and Communications, “Population Census”. (Unknown age population is included after being prorated to each age population.)

If the population of Japan continues to decrease, it may have a material adverse impact on Japan’s overall socioeconomics in the future, including with respect to economic scale, standard of living and sustainability of the social security system.

FOREIGN TRADE AND BALANCE OF PAYMENTS

Foreign Trade

Japan is one of the leading trading nations of the world, ranking fourth to China, United States and Germany in merchandise exports and ranking fourth to the United States, China and Germany in merchandise imports among the IMF member countries in 2017.

The trade deficit slightly increased from ¥2,565 billion in 2011 to ¥2,792 billion in 2015 despite an increase in exports for three consecutive years, meaning that Japan had a trade deficit for five consecutive years. The primary reasons for the trade deficit include increased imports of oil and natural gas as alternatives to nuclear energy. Imports of fossil fuels increased as the demand increased for power generation at thermal power stations after the nuclear accident at the Fukushima Daiichi Nuclear Plant caused suspension of operations at other nuclear plants, resulting in reduced energy supply. Due to increased imports of fossil fuels, Japan’s trade balance in 2011 turned to a deficit for the first time in 31 years. In 2012, the trade deficit expanded and it hit a record high in 2014. In 2015, it decreased substantially again and back to the level of 2011. In 2016, the drop in total amount of imports was larger than the drop in total amount of exports, and as a result, Japan had a trade surplus of ¥3,994 billion, reversing a trend of five consecutive years of trade deficits since 2011. In 2017, although the increase in total amount of imports was larger than the increase in total amount of exports, Japan still had a trade surplus of ¥2,907 billion as an overall result. In 2018, total amount of exports is expected to increase 7.0% compared to 2017 in connection with mild recovery of the world economy and stabilized exchange rates, and total amount of imports is expected to increase 8.2% compared to 2017 due to recovery of internal demand and prices of resources.

The following tables set forth information relating to foreign trade for the years indicated. In these tables exports are stated on an f.o.b. basis and imports on a c.i.f. basis. Monetary figures are based on actual movements of goods as calculated by the Ministry of Finance. (This method of computation differs from that used in calculating balance of payments, in which both exports and imports are stated on an f.o.b. basis.)

Foreign Trade of Japan


	Value Index^(a)				Quantum Index^(a)				Unit Value Index^(a)				Terms of Trade^(b)
	Exports		Imports		Exports		Imports		Exports		Imports		Index
2013		103.5		133.7		90.2		105.3		114.8		127.0		90.4
2014		108.4		141.4		90.7		106.0		119.6		133.4		89.7
2015		112.2		129.0		89.8		103.0		125.0		125.3		99.8
2016		103.9		108.7		90.0		102.6		115.5		105.9		109.1
2017		116.2		124.1		94.7		105.9		122.7		117.2		104.7

(a)	Calendar year 2010=100.

(b)	Unit value index of exports divided by unit value index of imports, multiplied by 100.

Source: Japan Tariff Association, Ministry of Finance.

Composition of Japan’s Exports and Imports


	2013				2014				2015				2016				2017
	(yen amounts in billions)
JAPAN’S EXPORTS
Textile Products	¥	869	1.2	%	¥	928	1.3	%	¥	985	1.3	%	¥	863	1.2	%	¥	886	1.1	%
Metals and Metal Products		6,352	9.1			6,598	9.0			6,315	8.4			5,219	7.5			5,907	7.5
Machinery and Equipment:
Ships		1,452	2.1			1,299	1.8			1,334	1.8			1,325	1.9			1,322	1.7
Motor Vehicles		10,413	14.9			10,919	14.9			12,046	15.9			11,333	16.2			11,825	15.1
TV and Radio Receivers		111	0.2			128	0.2			142	0.2			120	0.2			107	0.1
Motorcycles		277	0.4			316	0.4			294	0.4			261	0.4			320	0.4
Scientific and Optical Instruments		2,223	3.2			2,436	3.3			2,376	3.1			2,046	2.9			2,416	3.1
Other^(a)		29,594	42.4			31,227	42.7			32,155	42.5			30,336	43.3			34,143	43.6

Total Machinery and Equipment		44,069	63.2			46,327	63.4			48,347	63.9			45,421	64.9			50,133	64.0
Chemicals		7,507	10.8			7,818	10.7			7,759	10.3			7,123	10.2			8,192	10.5
Foods and Beverages		436	0.6			482	0.7			599	0.8			607	0.9			645	0.8
Other Exports^(b)		10,540	15.1			10,941	15.0			11,609	15.4			10,802	15.4			12,524	16.0

Grand Total	¥	69,774	100.0	%	¥	73,093	100.0	%	¥	75,614	100.0	%	¥	70,036	100.0	%	¥	78,286	100.0	%

JAPAN’S IMPORTS
Foods and Beverages		6,473	8.0	%		6,732	7.8	%		7,002	8.9	%		6,363	9.6	%		7,018	9.3	%
Raw Materials		5,358	6.6			5,590	6.5			4,853	6.2			4,012	6.1			4,725	6.3
Chemicals		6,464	8.0			6,864	8.0			7,748	9.9			7,111	10.8			7,567	10.0
Mineral Fuels:
Petroleum		14,245	17.5			13,873	16.1			8,185	10.4			5,532	8.4			7,155	9.5
Coal		2,307	2.8			2,086	2.4			1,974	2.5			1,665	2.5			2,570	3.4
Other^(c)		10,892	13.4			11,734	13.7			8,059	10.3			4,855	7.4			6,115	8.1

Total Mineral Fuel		27,444	33.8			27,692	32.2			18,218	23.2			12,052	18.2			15,840	21.0
Machinery and Equipment		20,817	25.6			23,249	27.1			24,274	31.0			22,131	33.5			24,490	32.5
Other Imports^(d)		14,687	18.1			15,782	18.4			16,310	20.8			14,373	21.8			15,740	20.9

Grand Total	¥	81,243	100.0	%	¥	85,909	100.0	%	¥	78,406	100.0	%	¥	66,042	100.0	%	¥	75,379	100.0	%

(a)	This category includes general machinery, electronic components including semiconductors and electronic equipment including electronic circuit.

(b)	This category includes raw materials, mineral fuels and vehicle parts.

(c)	This category includes liquid natural gas and petroleum products.

(d)	This category includes clothing and accessories thereof, non-ferrous metal and scientific and optical instruments.

Source: The Summary Report on Trade of Japan, Japan Tariff Association, Ministry of Finance.

Geographic Distribution of Japan’s Exports and Imports


	2013				2014				2015				2016				2017
	(yen amounts in billions)
JAPAN’S EXPORTS
Asia		37,867	54.3	%		39,518	54.1	%		40,329	53.3	%		37,107	53.0	%		42,920	54.8	%
China		12,625	18.1			13,381	18.3			13,223	17.5			12,361	17.7			14,890	19.0
(Asia NIES)		15,271	21.9			15,952	21.8			16,438	21.7			15,094	21.6			17,048	21.8
(ASEAN)		10,828	15.5			11,080	15.2			11,495	15.2			10,378	14.8			11,872	15.2
Oceania		2,029	2.9			1,958	2.7			2,099	2.8			2,010	2.9			2,301	2.9
Australia		1,656	2.4			1,501	2.1			1,555	2.1			1,532	2.2			1,796	2.3
North America		13,776	19.7			14,495	19.8			16,161	21.4			15,029	21.5			16,189	20.7
U.S.A.		12,928	18.5			13,649	18.7			15,225	20.1			14,143	20.2			15,113	19.3
Canada		848	1.2			846	1.2			936	1.2			886	1.3			1,076	1.4
Central and South America		3,560	5.1			3,563	4.9			3,375	4.5			3,002	4.3			3,154	4.0
Western Europe		7,140	10.2			7,745	10.6			8,102	10.7			8,179	11.7			9,053	11.6
EU		7,000	10.0			7,585	10.4			7,985	10.6			7,982	11.4			8,657	11.1
Central and Eastern Europe, Russia etc.		1,810	2.6			1,720	2.4			1,346	1.8			1,286	1.8			1,475	1.9
Russia		1,069	1.5			972	1.3			618	0.8			555	0.8			674	0.9
Middle East		2,478	3.6			2,988	4.1			3,167	4.2			2,585	3.7			2,350	3.0
Africa		1,115	1.6			1,107	1.5			1,036	1.4			839	1.2			843	1.1

Grand Total	¥	69,774	100.0	%	¥	73,093	100.0	%	¥	75,614	100.0	%	¥	70,036	100.0	%	¥	78,286	100.0	%

JAPAN’S IMPORTS
Asia		35,972	44.3	%		38,618	45.0	%		38,358	48.9	%		33,199	50.3	%		37,026	49.1	%
China		17,660	21.7			19,176	22.3			19,429	24.8			17,019	25.8			18,459	24.5
(Asia NIES)		6,692	8.2			7,109	8.3			7,245	9.2			6,241	9.4			7,162	9.5
(ASEAN)		11,486	14.1			12,252	14.3			11,843	15.1			10,047	15.2			11,545	15.3
Oceania		5,376	6.6			5,706	6.6			4,887	6.2			3,843	5.8			4,969	6.6
Australia		4,977	6.1			5,090	5.9			4,210	5.4			3,321	5.0			4,365	5.8
North America		7,993	9.8			8,741	10.2			9,178	11.7			8,331	12.6			9,325	12.4
U.S.A.		6,815	8.4			7,543	8.8			8,060	10.3			7,322	11.1			8,090	10.7
Canada		1,170	1.4			1,190	1.4			1,109	1.4			1,003	1.5			1,226	1.6
Central and South America		3,293	4.1			3,196	3.7			3,075	3.9			2,726	4.1			3,156	4.2
Western Europe		8,266	10.2			8,855	10.3			9,347	11.9			8,777	13.3			9,421	12.5
EU		7,649	9.4			8,169	9.5			8,625	11.0			8,152	12.3			8,757	11.6
Central and Eastern Europe, Russia etc.		2,811	3.5			3,183	3.7			2,593	3.3			1,868	2.8			2,308	3.1
Russia		2,308	2.8			2,619	3.0			1,905	2.4			1,227	1.9			1,551	2.1
Middle East		15,667	19.3			15,826	18.4			9,571	12.2			6,501	9.8			8,243	10.9
Africa		1,864	2.3			1,783	2.1			1,395	1.8			798	1.2			931	1.2

Grand Total	¥	81,243	100.0	%	¥	85,909	100.0	%	¥	78,406	100.0	%	¥	66,042	100.0	%	¥	75,379	100.0	%

Source: Press Release dated March 13, 2018, Ministry of Finance.

Balance of Payments

In 2013, Current Account surplus continued to significantly decrease to ¥4,457 billion due to a substantial decrease in the Trade Balance. In 2014, trade deficit hit a record high and Current Account surplus continued to decrease to ¥3,922 billion. In 2015, trade deficit significantly improved, and Current Account surplus increased to ¥16,519 billion. In 2016, trade deficit turned into trade surplus, and Current Account surplus increased to ¥21,062 billion. In 2017, Current Account surplus continued and increased to ¥21,951 billion with trade surplus.

In October 2013, Ministry of Finance and Bank of Japan announced that they will revise balance of payments statistics, to be based on IMF Balance of Payments Manual, 6^th Edition, starting with transactions in January 2014. The information below reflects the updated statistics.

Balance of Payments of Japan


	2013		2014		2015		2016		2017
	(in billions)
Current Account	¥	4,457	¥	3,922	¥	16,519	¥	21,062	¥	21,951
Balance on Goods and Services		-12,252		-13,499		-2,817		4,389		4,230
Trade Balance		-8,773		-10,465		-886		5,518		4,955
Exports (f.o.b.)		67,829		74,075		75,274		69,093		77,286
Imports (f.o.b.)		76,602		84,540		76,160		63,575		72,330
Services		-3,479		-3,034		-1,931		-1,129		-726
Primary Income		17,698		19,415		21,303		18,818		19,837
Secondary Income		-989		-1,995		-1,967		-2,146		-2,116
Capital Account		-744		-209		-271		-743		-287
Financial Account		-409		6,278		21,876		28,276		17,664
Assets		8,526		2,393		33,669		10,638		11,808
Liabilities		8,935		-3,885		11,793		-17,639		-29,472
Net Errors and Omissions		-4,122		2,566		5,628		7,958		-4,000

(a)	Positive figures (+) show increases in net assets, negative figures (-) show decreases in net assets in “Financial Account”.

(b)

Primary Income mainly shows balance of payments of interests and dividends from external financial credits and debts and includes such items as receipt and payment of dividends and interests between parent companies and their subsidiaries, receipt and payment of stock dividends and bond interests, and receipt and payment of interests related to loans, borrowings, and deposits.

(c)	Secondary Income shows balance of payments of provision of assets unaccompanied by consideration between residents and non-residents and includes such items as receipt and payment of financial support, donations, and gifts by the government or by the people.

Source: Balance of Payments, Ministry of Finance.

Official Reserve Assets


As of December 31,	Gold^(a)		Foreign Currency Reserves		IMF Reserve Position		SDRs (Special Drawing Rights)		Other Reserve Assets		Total
	(in millions of dollars)
2013		29,560		1,202,443		14,202		20,129		481		1,266,815
2014		29,504		1,199,651		11,993		18,895		505		1,260,548
2015		26,134		1,179,004		9,531		18,048		497		1,233,214
2016		28,516		1,157,790		12,019		18,087		491		1,216,903
2017		31,897		1,202,071		10,582		19,195		538		1,264,283

(a)	The valuation of gold reflects marked-to-market values.

Source: International Reserves/Foreign Currency Liquidity, Ministry of Finance.

Foreign Exchange Rates

The following table sets forth the high, low and average daily interbank rate for the U.S. dollar against the yen in the Tokyo foreign exchange market for the years indicated.


	2013		2014		2015		2016		2017
Average (Central Rate)	¥	97.71	¥	105.79	¥	121.09	¥	108.77	¥	112.13
High		105.41		121.86		125.66		121.49		118.18
Low		86.83		100.76		115.85		99.00		107.59

Source: Status of Transactions on Tokyo Foreign Exchange Market, Bank of Japan.

Foreign Direct Investment

The following table sets forth information regarding annual foreign direct investment in Japan and annual foreign direct investment abroad for the periods indicated.

Foreign direct investment in Japan (by industry)^(a)


	2013		2014		2015		2016		2017
	(in billions of yen)
Manufacturing (total)^(b)	¥	237.7	¥	446.0	¥	303.1	¥	1,220.7	¥	1,264.9
Food		-21.5		126.0		21.8		47.7		31.3
Textile		0.6		3.4		12.2		2.0		0.9
Lumber and pulp		0.9		2.0		2.2		1.9		1.7
Chemicals and pharmaceuticals		-32.8		-32.1		141.8		41.9		-57.2
Petroleum		-4.7		-73.9		-0.5		-162.5		-1.7
Rubber and leather		1.0		-10.6		0.0		0.1		0.2
Glass and ceramics		87.5		10.7		18.3		-1.1		10.7
Iron, non-ferrous, and metals		5.1		11.0		-8.7		6.0		-1.6
General machinery		12.8		65.5		54.2		129.7		250.8
Electric machinery		143.5		125.9		32.4		683.9		614.2
Transportation equipment		21.0		138.0		-125.7		408.0		433.1
Precision machinery		-21.3		46.1		-2.4		-10.9		-35.6
Non-manufacturing (total)^(c)		-12.9		828.4		57.0		710.5		-95.1
Farming and forestry		0.4		-0.3		0.9		0.1		0.5
Fishery and marine products		—		0.2		0.4		—		—
Mining		0.6		1.1		1.8		1.7		18.5
Construction		-0.5		-1.6		7.6		14.8		20.7
Transportation		21.0		-90.4		71.0		165.5		81.2
Communications		-8.6		183.4		122.9		105.4		-112.3
Wholesale and retail		14.5		-259.0		-476.8		-262.4		-586.6
Finance and insurance		62.6		795.6		183.5		360.6		175.0
Real estate		24.3		23.8		-16.3		33.6		53.3
Services		-164.9		36.8		32.9		159.8		165.2

Total	¥	224.8	¥	1,274.5	¥	360.2	¥	1,931.2	¥	1,169.9

(a)

Starting with transactions recognized in January 2014, Bank of Japan began using the Sixth Edition of “Balance of Payments and International Investment Position Manual” (BPM6) released by International Monetary Fund in 2008 to calculate the data provided in this table. With respect to transactions recognized before January 2014, Bank of Japan used the Fifth Edition of “Balance of Payments Manual” (BPM5) released by International Monetary Fund in 1993 to calculate the data provided in this table.

(b)	The total amounts for Manufacturing include other types of manufacturing not separately listed in the table and therefore are different from the sum of listed subcategories of manufacturing.

(c)	The total amounts for Non-manufacturing include other industries not separately listed in the table and therefore are different from the sum of listed subcategories of Non-manufacturing industries.

Source: Outward / Inward Direct Investment, Ministry of Finance.

Foreign direct investment in Japan (by region)^(a)


	2013		2014		2015		2016		2017
	(in billions of yen)
North America	¥	135.8	¥	722.2	¥	380.9	¥	425.0	¥	403.9
Asia		86.1		556.8		531.0		758.0		354.2
Europe		96.6		-178.9		-638.6		590.0		27.8
Other regions		-93.7		174.4		86.8		158.3		384.0

Total	¥	224.8	¥	1,274.5	¥	360.2	¥	1,931.2	¥	1,169.9

(a)

Source: Outward / Inward Direct Investment, Ministry of Finance.

Foreign direct investment abroad (by industry)^(a)


	2013		2014		2015		2016		2017
	(in billions of yen)
Manufacturing (total)^(b)	¥	4,148.4	¥	6,933.7	¥	6,175.8	¥	5,755.6	¥	6,165.1
Food		361.1		1,992.2		431.4		323.9		986.8
Textile		46.4		130.3		48.8		171.3		77.4
Lumber and pulp		50.4		167.1		122.8		128.8		18.5
Chemicals and pharmaceuticals		564.6		692.1		1,068.7		766.8		1,182.3
Petroleum		79.5		53.9		-11.9		6.1		14.1
Rubber and leather		312.8		336.8		238.3		371.4		156.7
Glass and ceramics		201.1		196.5		189.8		114.0		176.4
Iron, non-ferrous, and metals		277.5		713.8		300.6		401.1		328.3
General machinery		378.3		771.1		963.7		737.7		1,034.1
Electric machinery		441.2		639.5		1,028.3		1,104.3		676.4
Transportation equipment		1,140.8		1,029.0		1,560.6		1,360.9		1,066.9
Precision machinery		157.3		73.5		105.9		136.7		327.9
Non-manufacturing (total)^(c)		9,100.1		6,928.4		10,316.3		10,704.8		11,831.9
Farming and forestry		12.4		23.3		23.1		-12.8		-10.2
Fishery and marine products		0.7		153.1		11.0		18.6		0.4
Mining		1,273.4		572.3		582.4		440.2		-398.6
Construction		58.3		43.3		46.9		177.4		181.3
Transportation		148.2		166.8		980.1		249.3		205.7
Communications		2,316.7		820.6		1,428.9		1,839.0		2,306.4
Wholesale and retail		1,263.2		1,970.9		1,645.7		2,042.0		3,180.2
Finance and insurance		2,638.8		2,035.1		4,189.2		925.0		4,024.6
Real estate		305.9		161.9		449.7		557.0		694.1
Services		729.2		695.6		656.6		4,088.0		939.8

Total	¥	13,248.5	¥	13,862.2	¥	16,492.1	¥	16,460.4	¥	17,997.0

(a)

(b)	The total amounts for Manufacturing include other types of manufacturing not separately listed in the table and therefore are different from the sum of listed subcategories of manufacturing.

(c)	The total amounts for Non-manufacturing include other industries not separately listed in the table and therefore are different from the sum of listed subcategories of Non-manufacturing industries.

Source: Outward / Inward Direct Investment, Ministry of Finance.

Foreign direct investment abroad (by region)^(a)


	2013		2014		2015		2016		2017
	(in billions of yen)
North America	¥	4,573.0	¥	5,415.4	¥	6,076.6	¥	5,619.0	¥	5,690.4
Asia		3,977.5		4,492.5		4,098.0		1,472.8		4,013.2
Europe		3,159.6		2,410.2		4,021.2		5,849.9		6,215.7
Other regions		1,538.4		1,544.1		2,296.3		3,518.8		2,077.6

Total	¥	13,248.5	¥	13,862.2	¥	16,492.1	¥	16,460.4	¥	17,997.0

(a)

Source: Outward / Inward Direct Investment, Ministry of Finance.

FINANCIAL SYSTEM

The Bank of Japan and Monetary Policy

The Bank of Japan (“BOJ”), with 55% of its capital owned by the government, is the central bank and sole issuing bank, as well as the depository and fiscal agent for the government. As of the end of March, 2018, the BOJ had total assets of ¥528,286 billion.

One of the missions of the BOJ is to contribute to the sound development of the national economy, through the pursuit of price stability. In order to fulfill this mission, the BOJ controls the overall volume of money in the economy and through market operations, along with monetary policy decided at the Monetary Policy Meeting of the BOJ Policy Board. From March 2001 to March 2006, in order to fight deflation and revive the Japanese economy, the BOJ implemented a quantitative easing policy by conducting money market operations to adjust the outstanding balance of the current accounts at the BOJ. And in March 2006, the BOJ announced an exit from the quantitative easing policy and a return to monetary policy that targeted policy interest rate (uncollateralized overnight call rate). At the same time, the BOJ decided to encourage the rate to remain at effectively zero percent. Then, the BOJ increased the policy interest rate to 0.25% in July 2006, and to 0.5% in February 2007. From the fall of 2008, however, when the turmoil in global financial markets intensified, the BOJ implemented various monetary policy measures including reductions in the policy interest rate. It decreased the policy interest rate to 0.3% in October 2008, and further to 0.1% in December 2008. Furthermore, in October 2010, in order to further enhance monetary easing, the BOJ implemented a comprehensive monetary easing policy, which included the establishment of an Asset Purchase Program (APP) to purchase financial assets, including risk assets, as well as to provide loans. Since the APP’s introduction, the BOJ repeatedly and significantly increased the maximum amount outstanding of the APP, from about 35 trillion yen to about 101 trillion yen at the end of 2013. Moreover, in February 2012, the BOJ decided to pursue powerful monetary easing by conducting its virtually zero interest rate policy and by implementing the APP, with the aim of achieving the goal of 1% in terms of the year-on-year rate of change in the consumer price index (CPI). In order to state clearly the shared understanding concerning the roles of the government and the BOJ, the government and the BOJ decided to release “Measures Aimed at Overcoming Deflation” in October 2012. In January 2013, the BOJ introduced the “price stability target” of 2% in terms of the year-on-year rate of change in the CPI. The BOJ also introduced the “open-ended asset purchasing method”, aimed at achieving this target. The government and the BOJ released a joint statement to announce that in order to overcome deflation early and achieve sustainable economic growth with price stability, the government and the BOJ would strengthen their policy coordination and work together. Furthermore, in April 2013, the BOJ introduced a policy of “quantitative and qualitative monetary easing”, aimed at achieving this target at the earliest possible time. In order to do so, under this policy, the BOJ would enter a new phase of monetary easing both in terms of quantity and quality. The BOJ would double the monetary base in two years by conducting money market operations so that the monetary base would increase at an annual pace of about 60-70 trillion yen. The BOJ would also purchase Japanese government bonds (“JGBs”) so that their amount outstanding would increase at an annual pace of about 50 trillion yen, and the average remaining maturity of the BOJ’s JGB purchases would be extended from slightly less than three years at the time to about seven years, which was equivalent to the average maturity of the amount outstanding of JGBs issued. Additionally, the BOJ would purchase exchange-traded funds (“ETFs”) and Japan real estate investment trusts (“J-REITs”) so that their amounts outstanding would increase at an annual pace of about 1 trillion yen and about 30 billion yen, respectively. In October 2014, the BOJ expanded its quantitative and qualitative monetary easing measures to further increase its purchases of JGBs, ETFs and J-REITs to achieve an increase in its purchases of JGBs, ETFs and J-REITs at an annual pace of about 80 trillion yen, 3 trillion yen and 90 billion yen, respectively. In order to maintain momentum towards 2% “price stability target,” in January 2016, the BOJ adopted “quantitative and qualitative monetary easing with a negative interest rate,” under which (i) a negative interest rate of minus 0.1% is applied to a part of BOJ accounts held by financial institutions¹ (if judged necessary by the BOJ, the rate will be lowered even further), (ii) the BOJ will conduct money market operations so that the monetary base will increase at an annual pace of about 80 trillion yen, and (iii) the BOJ will purchase assets as follows: (1) purchase JGBs so that their amount outstanding will increase at an annual pace of about 80 trillion yen, (2) purchase ETFs and J-REITs so that their amounts outstanding will increase at an annual pace of about 3 trillion yen (decided further expansion to about 3.3 trillion yen and to about 6 trillion yen in December 2015 and July 2016, respectively) and about 90 billion yen, respectively, and (3) maintain the amounts outstanding of commercial paper and corporate bonds at about 2.2 trillion yen and about 3.2 trillion yen, respectively. In September 2016, the BOJ announced a new framework for strengthening monetary easing by adopting a program of “quantitative and qualitative monetary easing with yield curve control”, or QQE with yield curve control, under which the BOJ (i) set guidelines for market operations that specify (1) a short-term policy interest rate (set at the minus 0.1% level adopted in January 2016) and (2) a target level of a long-term interest rate (target yield of the 10-year JGB set at around 0%, to be facilitated through continued BOJ purchases of JGBs) and (ii) introduced new tools of market operations so as to control the yield curve smoothly, consisting of (1) outright purchases of JGBs with yields designated by the BOJ and (2) fixed-rate funds-supplying operations for a period of up to ten years. With regard to asset purchase except for JGB purchases, the BOJ also set the following guidelines: (i) purchase ETFs and J-REITs so that their amounts outstanding will increase at an annual pace of about 6 trillion yen and about 90 billion yen, respectively, and (ii) maintain the amounts outstanding of commercial paper and corporate bonds at about 2.2 trillion yen and about 3.2 trillion yen, respectively. Finally, the BOJ announced its “inflation-overshooting commitment”. Under this policy, the BOJ will aim to realize the price stability target of 2%, and for as long as it is necessary to maintain the target in a stable manner, the BOJ will continue QQE with yield curve control. Also, until the year-on-year rate of increase in the observed CPI (excluding fresh food) consistently exceeds 2%, the BOJ will continue the expansion policy.

More specifically, accounts held by financial institutions are divided into three levels referred to as “basic balance” (a positive interest rate of 0.1% is applied), “macro add-on balance” (a zero interest rate is applied), and “policy-rate balance” (a negative interest rate of minus 0.1% is applied). “Policy-rate balance” is the balance in excess of “basic balance” and “macro add-on balance.”

The following table sets forth the principal economic indicators relating to monetary policy from 2013 through 2017.


	Current Account Balances^(a)		Monetary Base			Money Stock			Loans and Bills Discounts Domestically Licensed Banks
			Total^(a)		Annual % Change	Total^(a)		Annual % Change	Total^(a)		Annual % Change
			(yen amounts in billions)
2013		74,992		163,153	34.4		845,884	3.6		421,739	2.6
2014		142,429		233,648	43.2		874,597	3.4		433,710	2.8
2015		217,631		313,121	34.0		906,439	3.6		448,341	3.4
2016		290,611		391,421	25.0		936,885	3.4		460,483	2.7
2017		352,883		458,104	17.0		974,017	4.0		475,456	3.3

(a)	Average amounts outstanding.

Source: Bank of Japan Statistics, Bank of Japan.

Government Financial Institutions

The activities of private institutions are supplemented by a number of financial institutions under government supervision, the appointment of whose senior officials is subject to approval by the government and whose funds are supplied principally or partially by the government. Among these are Japan Finance Corporation (“JFC”), the successor to National Life Finance Corporation (“NLFC”), Japan Finance Corporation for Small and Medium Enterprise (“JASME”), and Agriculture, Forestry and Fisheries Finance Corporation (“AFC”), whose main purposes are to contribute to the improvement of the quality of the national life. They also include Japan Bank for International Cooperation (“JBIC”) and The Okinawa Development Finance Corporation (“ODFC”), whose purposes are to supplement private financing in their respective fields of activity, and Development Bank of Japan Inc. (“DBJ”) and The Shoko Chukin Bank (“SCB”), which will be privatized.

The central government has been steadily promoting reform of governmental financial institutions. The “Outline of Administrative Reforms” decided by the Cabinet on December 1, 2000, requires that the businesses and organizational forms of all special public institutions, which include governmental financial institutions, undergo a thorough review. Pursuant to the Act on Promotion of Administrative Reform for Realization of Small and Efficient Government (the “Administrative Reform Promotion Act”), which was enacted on May 26, 2006, (1) the former Development Bank of Japan was succeeded to by DBJ as of October 1, 2008, which is currently wholly owned by the Japanese government and will be privatized, (2) the international financial operations of JBIC, together with the functions of NLFC, JASME, AFC were transferred to JFC as of October 1, 2008, and the overseas economic cooperation operations of JBIC were transferred to the Japan International Cooperation Agency, and (3) as of October 1, 2008, Japan Finance Corporation for Municipal Enterprises was succeeded by Japan Finance Organization for Municipalities, which is funded by local governments. Each of these measures was implemented through individual laws that were enacted in 2007, pursuant to which these successor institutions were formed on October 1, 2008.

With regard to (1) above, as originally enacted, the Development Bank of Japan Inc. Act (Act No. 85 of 2007), as amended (the “DBJ Act”), contemplated full privatization of DBJ over a period of five to seven years from its establishment on October 1, 2008. During that time period, the DBJ Act (as originally enacted) provided that the Japanese government would dispose of all of the common stock of DBJ that it currently owns (the “full privatization”), and that steps would be taken to abolish the DBJ Act promptly after the full privatization. On June 26, 2009, the Japanese Diet approved the Act for Partial Amendment of the Development Bank of Japan Inc. Act (Act No. 67 of 2009) (the “2009 Amendment Act”), which, as part of the Japanese government’s response to economic and financial crises, enables the Japanese government to strengthen DBJ’s financial base through capital injections up to the end of March 2012. In addition, under the Amendment Act, the targeted timing for the full privatization of DBJ has been extended to approximately five to seven years from April 1, 2012. Further, the Amendment Act provides that the Japanese government is to review the organization of DBJ, including the way of the Japanese government’s holding of the DBJ shares, by the end of fiscal year 2011, and until such time, the Japanese government shall not be disposing of the DBJ’s shares held by it. Additionally, on May 2, 2011, in order to address the Great East Japan Earthquake of March 11, 2011, the Japanese Diet approved the Act for Extraordinary Expenditure and Assistance to Cope with the Great East Earthquake (Act No. 40 of 2011) (the “Extraordinary Expenditure Act”). The Extraordinary Expenditure Act enables to the Japanese government to strengthen DBJ’s financial base through capital injection through March 2015 so that DBJ can smoothly implement its crisis response operations. In addition, under Extraordinary Expenditure Act, the targeted timing for the full privatization of DBJ has been extended to approximately five to seven years from April 1, 2015. Further, the Extraordinary Expenditure Act provides that the Japanese government is to review the organization of DBJ, including the way of the Japanese government’s holding of the DBJ’s shares by the end of fiscal year 2014, and until such time, the Japanese government shall not dispose of the DBJ’s shares held by it. Furthermore, on May 13, 2015, the Japanese Diet approved the Act for Partial Amendment of the Development Bank of Japan Inc. Act (Act No. 23 of 2015) (the “2015 Amendment Act”), under which, in conjunction with DBJ’s full privatization, and taking into consideration the current business environment in the private financial sector, DBJ, utilizing its investment and loan functions, is to take measures necessary for implementing the its crisis response operations and supply of growth capital — that is, DBJ is to take all possible measures to supply funds to deal with large-scale disasters, economic crises and so forth, and to promote the supply of growth capital to revitalize regional economies and to reinforce the competitiveness of enterprises. In order to assure the sufficient implementation of the necessary operations, under the 2015 Amendment Act, the Japanese government shall maintain its stake in excess of one-third for DBJ’s crisis response operations, and one half or more for DBJ’s special investment operations, for as long as the government shall take such measures.

With regard to (2) above, The Japan Bank for International Cooperation Act (the “JBIC Act”) was passed into law on April 28, 2011 to spin off the Japan Bank for International Cooperation Operations from the domestic financial operations of the Japan Finance Corporation. Pursuant to the JBIC Act, Japan Bank for International Cooperation was newly established on April 1, 2012.

Private Financial Institutions

According to the Financial Services Agency, as of June 1, 2018, the private banking system included four city banks, 15 trust banks, and 13 other banks, as well as 105 local banks as of May 1, 2018 (including the Saitama Resona Bank). In addition, 56 foreign banks had branches in Japan as of April 1, 2018.

There are also credit associations, credit cooperative associations, labor credit associations and the national federations of each of such associations, which are engaged mainly in making small business loans. Agricultural cooperatives, prefectural credit federations of such cooperatives and The Norinchukin Bank operate in the field of agricultural credit.

GOVERNMENT FINANCE

Revenues, Expenditures and Budgets

The responsibility for the preparation of the budget and the administration of government finances rests with the Ministry of Finance. The fiscal year commences on April 1, and the Cabinet usually submits the budget to the Diet for its decision in the preceding January. Supplementary budgets revising the original budget may be submitted to the Diet from time to time during the fiscal year.

For advancing fiscal consolidation, the Cabinet approved the “Basic Framework for Fiscal Consolidation: Medium-term Fiscal Plan” on August 8, 2013. This plan provided the following targets for achieving fiscal consolidation.

•

Halving the primary deficit of the national and local governments to GDP ratio by JFY 2015 from the ratio in JFY 2010 (This target is achieved.);

•

Achieving a primary surplus of the national and local governments to GDP ratio by JFY 2020; and

•

Steadily reducing the public debt to GDP ratio.

These targets are firmly maintained in the “Basic Policies for the Economic and Fiscal Management and Reform 2015” decided by the Cabinet on June 30, 2015, including “The Plan to Advance Economic and Fiscal Consolidation” (hereafter, the fiscal consolidation plan) which is an effective and concrete plan for achieving primary surplus target by JFY2020, covering five year period (JFY2016-JFY2020). In the fiscal consolidation plan, the government will assess the progress of reforming expenditure and revenue measures by using several benchmarks.

In order to achieve the primary surplus target, the government will implement steadily the expenditure reforms on all fronts in parallel with economic revitalization.

The fiscal and financial operations of the government and its agencies are budgeted and recorded in the following three sets of accounts:

•

General Account. The general account is used primarily to record operations in basic areas of governmental activity.

•

Special Accounts. The accounts of the central government consist of the general account and special accounts. Special accounts can be set up to carry out specific projects, to manage specific funds, and for other purposes. Special accounts can be set up when the government (i) implements a specific program such as insurance and public works, (ii) possesses and manages special funds such as Fiscal Loan Program Funds and Foreign Exchange Funds, and (iii) uses a certain revenue to secure a special expenditure and thus needs to deal with such revenue and expenditure on a separate basis from the general revenue and expenditure such as Local Allocation and Local Transfer Tax and Government Bonds Consolidation Funds. As of October 13, 2017, the government had 13 special accounts.

•

Government-Affiliated Agencies. The government-affiliated agencies are government-owned corporations which consist of three financial corporations.

The settlement of accounts for revenues and expenditures is made by the Ministry of Finance, based on reports submitted by the respective Ministers. The settlement of accounts is required by law to be audited annually in detail by the Board of Audit, an organ independent of the Cabinet, and submitted by the Cabinet to the Diet in the following fiscal year.

The following tables set forth information with respect to the General Account, the Special Accounts and the Government Affiliated Agencies for JFY 2012 through JFY 2017, and the budget for JFY 2018.

Summary of Consolidated General and Special Accounts^(a)


	JFY 2012		JFY 2013		JFY 2014		JFY 2015		JFY 2016		JFY 2017 (Provisional results as of December 31, 2016)		JFY 2018 Initial Budget
	(in billions)
REVENUES
Total Revenues, General Account	¥	107,762	¥	106,045	¥	104,679	¥	102,175	¥	102,774	¥	103,970	¥	97,713
Total Revenues, Special Accounts		412,533		422,851		406,736		402,884		410,161		399,381		391,079
Less: Inter-Account Transactions^(b)		254,270		257,185		263,951		257,143		253,522		252,723		249,043

Total Consolidated Revenues	¥	266,025	¥	271,710	¥	247,464	¥	247,917	¥	259,413	¥	250,628	¥	239,749

EXPENDITURES
Total Expenditures, General Account	¥	97,087	¥	100,189	¥	98,813	¥	98,230	¥	97,541	¥	103,426	¥	97,712
Total Expenditures, Special Accounts		377,012		382,717		390,202		386,214		395,361		391,445		388,496
Less: Inter-Account Transactions^(b)		252,246		255,221		262,259		255,695		251,842		250,198		247,288

Total Consolidated Expenditures	¥	221,853	¥	227,684	¥	226,756	¥	228,749	¥	241,061	¥	244,673	¥	238,920

Surplus of Consolidated Revenues over Consolidated Expenditures	¥	44,173	¥	44,026	¥	20,708	¥	19,167	¥	18,353	¥	5,955	¥	828

(a)	Because of the manner in which the government accounts are kept, it is not practicable to show a consolidation of the Government Affiliated Agencies with the General and Special Accounts.

(b)	Inter-Account Transactions include transfers between the General Account and the Special Accounts, transfers between the Special Accounts, and transfers between sub- accounts of the Special Accounts.

Source: Budget, Ministry of Finance.

General Account


	JFY 2012		JFY 2013		JFY 2014		JFY 2015		JFY 2016		JFY 2017 Revised Budget^(a)		JFY 2018 Initial Budget
	(in billions)
REVENUES
Tax and Stamp Revenues	¥	43,931	¥	46,953	¥	53,971	¥	56,285	¥	55,469	¥	57,712	¥	59,079
Carried-over Surplus		9,264		10,675		5,836		5,866		3,945		430		63
Government Bond Issues		50,049		43,455		38,493		34,918		38,035		35,555		33,692
Income from Operations		16		44		45		45		47		44		46
Gains from Deposition of Assets		227		328		1,479		349		384		254		277
Miscellaneous Receipts		4,274		4,591		4,856		4,712		4,895		5,115		4,556

Total Revenues	¥	107,762	¥	106,045	¥	104,679	¥	102,175	¥	102,774	¥	99,109	¥	97,713

EXPENDITURES
Local Allocation Tax Grants, etc.	¥	16,885	¥	17,553	¥	17,096	¥	16,801	¥	15,339	¥	15,567	¥	15,515
National Debt Service		21,011		21,294		22,186		22,464		22,086		22,708		23,302
Social Security		29,214		29,249		30,190		31,401		32,208		32,536		32,973
Public Works		5,776		7,975		7,321		6,378		6,710		6,972		5,979
Education and Science		5,963		6,145		5,846		5,571		5,598		5,658		5,365
National Defense		4,762		4,792		5,063		5,130		5,150		5,352		5,191
Former Military Personnel Pensions		570		504		444		387		335		294		250
Economic Assistance		624		651		655		661		743		638		509
Food Supply		1,353		1,172		1,074		1,276		1,140		1,214		992
Energy		828		963		1,303		968		973		973		919
Promotion of SMEs		825		504		417		340		430		385		177
Miscellaneous		9,277		9,387		7,218		6,854		6,830		6,510		6,190
Contingencies		—		—		—		—		—		300		350
Carryback of settlement deficit compensation for JFY 2008		—		—		—		—		—		—		—

Total Expenditures	¥	97,087	¥	100,189	¥	98,813	¥	98,230	¥	97,542	¥	99,109	¥	97,713

Surplus of Revenues over Expenditures	¥	10,675	¥	5,856	¥	5,866	¥	3,945	¥	5,232	¥	—	¥	—

(a)	As of the date of this Annual Report on Form 18-K, details for the provisional results for JFY 2017 General Accounts are not available.

Special Accounts


	JFY 2012				JFY 2013				JFY 2014				JFY 2015				JFY 2016				JFY 2017 Revised Budget^(a)				JFY 2018 Initial Budget
	Rev.		Exp.		Rev.		Exp.		Rev.		Exp.		Rev.		Exp.		Rev.		Exp.		Rev.		Exp.		Rev.		Exp.
	(in billions)
Fiscal Investment and Loan Program	¥	34,888	¥	33,935	¥	30,813	¥	30,043	¥	36,114	¥	35,052	¥	33,360	¥	32,503	¥	42,124	¥	41,166	¥	27,958	¥	27,825	¥	27,083	¥	26,939
Government Bonds Consolidation Fund		214,608		192,159		225,010		198,623		207,469		204,398		201,927		198,309		198,994		195,911		196,085		196,085		191,221		191,221
Foreign Exchange Fund		2,991		138		3,327		118		3,492		78		3,163		46		2,948		70		2,528		915		2,903		971
Local Allocation and Local Transfer Tax		55,720		54,328		56,131		53,815		55,959		53,903		55,638		53,398		53,577		52,590		52,222		52,082		51,922		51,711
Measure for Energy		5,243		4,451		7,437		6,343		8,542		7,650		8,993		8,363		9,608		9,082		15,362		15,362		14,871		14,871
Seamen’s Insurances^(b)		—		—		—		—		—		—		—		—		—		—		—		—		—		—
National Advanced Medical Center^(c)		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Pensions		80,127		76,579		78,204		76,873		80,362		77,311		85,293		81,705		90,142		85,786		89,448		89,488		91,836		91,836
Stable Supply of Foodstuff^(d)		1,895		1,675		1,650		1,434		1,187		978		1,095		975		940		820		1,266		1,255		1,285		1,274
Agricultural Mutual Aid Reinsurance^(d)		95		44		95		42		—		—		—		—		—		—		—		—		—		—
National Forest Service^(e)		533		470		—		—		—		—		—		—		—		—		—		—		—		—
Debt Management of National Forest and Field Service^(e)		—		—		301		301		312		312		321		321		329		329		342		342		350		350
Trade Reinsurance^(f)		78		9		48		15		81		3		59		21		37		12		—		—		—		—
Automobile Safety		118		47		121		47		544		394		567		403		606		426		515		448		556		484
Infrastructure Development^(g)		4,173		3,690		5,729		4,380		—		—		—		—		—		—		—		—		—		—
Labor Insurance		6,561		6,183		6,714		6,145		6,863		6,209		6,880		6,330		6,296		5,941		6,246		6,095		6,233		6,138
Reconstruction from the Great East Japan Earthquake		5,022		3,152		6,770		4,407		5,357		3,792		5,134		3,710		4,105		2,961		2,166		2,166		2,359		2,359
Others		481		151		499		132		455		123		452		131		456		267		464		327		460		342

Total Revenues and Expenditures^(h)	¥	412,533	¥	377,012	¥	422,851	¥	382,717	¥	406,736	¥	390,202	¥	402,884	¥	386,214	¥	410,162	¥	395,361	¥	394,643	¥	392,388	¥	391,079	¥	388,496

(a)	As of the date of this Annual Report on Form 18-K, details for the provisional results for JFY 2017 Special Accounts are not available.

(b)	Account abolished as of January 1, 2010

(c)	Account abolished as of March 31, 2010.

(d)	The account of “Agricultural Mutual Aid Reinsurance” was integrated into the account of “Stable Supply of Foodstuff” effective JFY 2014.

(e)	The account of “National Forest Service” was abolished and a new account “Debt Management of National Forest and Field Service” was established effective JFY 2013.

(f)	Account abolished as of March 31, 2016.

(g)	Account abolished as of March 31, 2014.

(h)	Without adjustment for inter-account transactions. Total Revenues and Expenditures may differ from the actual totals of the listed accounts due to rounding.

Source: Budget, Ministry of Finance.

Government Affiliated Agencies


	JFY 2012				JFY 2013				JFY 2014				JFY 2015				JFY 2016				JFY 2017 Revised Budget				JFY 2018 Budget
	Rev.		Exp.		Rev.		Exp.		Rev.		Exp.		Rev.		Exp.		Rev.		Exp.		Rev.		Exp.		Rev.		Exp.
	(in billions)
Total	¥	1,183	¥	1,216	¥	1,147	¥	1,133	¥	1,129	¥	1,000	¥	1,092	¥	920	¥	1,065	¥	906	¥	1,604	¥	1,845	¥	1,652	¥	1,727

(a)	As of the date of this Annual Report on Form 18-K, details for the provisional results for JFY 2016 Government Affiliated Agencies are not available.

Source: Budget, Ministry of Finance.

Tax Structure

The central government derives tax revenues (including stamp revenues) through taxes on income, consumption and property, etc. The taxes on income, consumption and property (including stamp revenues, etc.) account for 54.5%, 40.2% and 5.2%, respectively, of the total central government taxes and stamp revenues in the JFY 2018 budget.

The individual national income tax is progressive, with rates currently ranging from 5% to 45% of taxable income, and the local taxes are a 10% single rate. Interest income is generally taxed at the rate of 20.315%, including both national and local taxes, separately from other types of income, and subject to certain exemptions. The corporate tax rate has been reduced from 23.4% in JFY 2016 to 23.2% for JFY 2018 (the effective corporate tax rate (national and local) was reduced from 29.97% in JFY 2016 to 29.74% in JFY 2018), except that, for small and medium corporations, the first ¥8 million of income is taxed at 15%. In addition, corporations are subject to local income taxation.

Comprehensive Reform of Social Security and Tax. Japan’s fiscal conditions face challenges, with its tax revenues covering about 60% of its expenditures, and with the ratio of long-term debt outstanding of central and local governments to gross domestic product expected to have reached 198% at the end of JFY 2017. The ratio is expected to be reduced to 196% at the end of JFY 2018. See also “Japan’s Public Debt” below. The Government of Japan seeks to tackle these fiscal challenges through the “comprehensive reform of social security and tax”, which was approved by the Diet in August 2012, and thereby maintain the market’s and the international community’s confidence in Japan and build the foundation for stable economic growth. In the reform, the government planned to set aside consumption tax revenues for social security payments, and, on the condition that the economic situation improves, gradually increase the consumption tax rate to 8% in April 2014 and to 10% in October 2015. In accordance with the plan, consumption tax rate was increased to 8% in April 2014. However, the government decided to postpone the implementation date of further consumption tax hike to 10% from October 1, 2015 to April 1, 2017, as a result of taking comprehensive account of the economic condition and other factors, and on June 1, 2016, Japan Prime Minister Shinzo Abe announced a plan to further postpone the consumption tax hike to 10% from April 1, 2017, to October 1, 2019. The Diet enacted a bill on this postponement of the consumption tax hike to 10% on November 18, 2016.

Fiscal Investment and Loan Program

The Fiscal Investment and Loan Program (the “FILP”) plan is formulated at the same pace as the General Account budget. The FILP plan details the allocation of public funds to various special accounts, government affiliated agencies, local governments, public corporations and other public institutions.

Under the FILP plan, funds are supplied to government-related entities such as public corporations, government affiliated agencies, special accounts and local governments. The total amount of the initial plan for JFY 2018 is ¥14,463 billion. The sources of funds for the plan in JFY 2018 are Fiscal Loan* (¥10,854 billion), Industrial Investment (¥365 billion), Government-Guaranteed domestic bonds (¥2,154 billion) and Government-Guaranteed foreign bonds (¥1,066 billion) and Government-Guaranteed long-term borrowings in foreign currencies (¥25 billion).

* Fiscal Loan utilizes the Fiscal Loan Fund consisting of funds procured through the issuance of FILP bonds and reserves or surplus funds deposited from government special accounts to provide long-term, fixed and low-interest loans to such entities as special government accounts, local governments, government-affiliated agencies, incorporated administrative agencies, etc.

The following table (the “FILP Classification Table by Purpose”) shows the uses of funds allocated under the initial plan for the periods indicated.

(Note)

The FILP Classification Table by Purpose has been published to specify fields where FILP contributes to the national economy or livelihood. Classification of the table had been almost the same from JFY 1961 to JFY 2014. However, the classification became to be inappropriate for reflecting realities of recent FILP-target projects, it was revised in JFY 2015 by sorting out the classification or putting some classifications together.


Old classification	JFY 2011		JFY 2012		JFY 2013		JFY 2014
	(in billions)
Housing	¥	578	¥	923	¥	929	¥	942
Living environment		2,725		2,713		2,805		2,306
Social welfare		550		743		703		920
Education		1,176		1,232		1,522		1,278
Small and medium enterprises		3,627		4,323		4,197		3,861
Agriculture, forestry and fisheries		345		373		407		476
National land conservation/disaster recovery		180		645		348		477
Road construction		2,248		2,813		2,939		2,270
Transportation/communications		408		384		519		629
Regional development		467		447		372		259
Industry/technology		625		2,015		2,005		1,448
Trade/economic cooperation		1,978		1,039		1,644		1,313

Total	¥	14,906	¥	17,648	¥	18,390	¥	16,180


New classification	JFY 2014		JFY 2015		JFY 2016		JFY 2017		JFY 2018
	(in billions)
SMEs and micro enterprises	¥	3,750	¥	3,448	¥	3,182	¥	2,969	¥	2,912
Agriculture, forestry and fisheries		318		280		322		339		573
Education		1,134		1,038		1,055		932		943
Welfare/medical care		772		773		811		670		627
Environment		50		61		61		64		61
Industry/innovation		834		939		864		822		919
Housing		849		742		621		541		461
Social capital^(a)		4,467		3,999		3,087		5,093		4,761
Overseas investment and loans		1,547		1,378		2,000		2,455		2,003
Others		2,460		1,964		1,477		1,243		1,204

Total	¥	16,180	¥	14,622	¥	13,481	¥	15,128	¥	14,463

DEBT RECORD

There has been no default in the payment of interest or principal of any internal Japanese government obligation since the establishment of the modern Japanese state in 1868 or of any external Japanese government obligation within a period of 20 years prior hereto.

JAPAN’S PUBLIC DEBT

The following table summarizes, as of the dates indicated, the outstanding direct internal and external funded and floating debt of Japan. The term “floating debt” is used herein to mean all debt with maturities of one year or less from the date of issue. All other debt is classified as “funded debt.” Detailed debt tables are presented below.

The outstanding government bonds are expected to reach 883 trillion yen at the end of JFY 2018. The amount of public bonds issued by the Japanese government as a percentage of its general account total revenues was 35.3% under the initial budget for JFY 2017 and 34.5% under the initial budget for JFY 2018. The amount of the government bond issuances in the JFY 2018 initial budget is ¥33,692 billion and falls below the JFY 2017 revised budget level of ¥35,555 billion.

In order to reduce the outstanding government bonds, the Government approved the “Basic Framework for Fiscal Consolidation: Medium-term Fiscal Plan” on August 8, 2013. In this plan, the Government has established the following targets: halving the primary deficit of the national and local governments to GDP ratio by JFY 2015 from the ratio in JFY 2010 (-6.3%); achieving a primary surplus by JFY 2020; and steadily reducing the public debt to GDP ratio. In the fiscal consolidation plan, the government will firmly maintain these fiscal consolidation targets. According to the Cabinet Office’s projections, (i) the primary balance of national and local governments in JFY 2017 is projected to increase in deficit to -3.4 percentage points of GDP compared to -3.0 percentage points of GDP in JFY 2016, and (ii) the public debt-to-GDP ratio in JFY 2017 is projected to increase to 189.4% compared to 187.6% in JFY 2016. Debt-to-GDP ratio in JFY 2018 is projected to be 187.8%.

Summary of Japan’s Public Debt


	Funded				Floating Internal
At the end of JFY	Internal		External		Floating Internal
	(in billions)		(in thousands)		(in billions)
2013		823,367		—		201,590
2014		851,097		—		202,261
2015		880,335		—		169,031
2016		908,093		—		163,467
2017		934,321		—		153,492

As of March 31, 2018 Japan had guaranteed payment of principal and interest of various internal yen obligations in the aggregate principal amount of ¥33,970 billion and of various external obligations aggregating the equivalent of ¥5,926 billion.

The following table sets forth the aggregate annual payments of principal in respect of the direct internal funded debt of Japan outstanding as of March 31, 2018 for the periods indicated.

Principal Payments on Direct Funded Debt of Japan


JFY	Internal
	(in billions)
2018	¥	101,331
2019		104,270
2020		79,599
2021		72,999
2022 to 2056		576,081

Total	¥	934,280

INTERNAL DEBT

Direct Debt of the Japanese Government

Funded Debt


Title and Interest Rate	Year of Issue		Year of Maturity		Principal Amounts Outstanding as of March 31, 2018 (in millions)
1. Bonds
Interest-Bearing Treasury Bond — 40 years, 10 Series (0.4-2.4%)		2007-2018		2048-2057	¥	20,283,700
Interest-Bearing Treasury Bond — 30 years, 58 Series (0.3-2.9%)		1999-2018		2029-2048		104,613,474
Interest-Bearing Treasury Bond — 20 years, 125 Series (0.2-2.9%)		1998-2018		2018-2038		230,546,960
Interest-Bearing Treasury Bond — 15 years, 27 Series (variable rate)		2003-2008		2018-2023		22,390,900
Interest-Bearing Treasury Bond — 10 years, 58 Series (0.1-1.8%)		2008-2018		2018-2028		308,203,795
Interest-Bearing Treasury Bond for Individual Investors — 10 years, 78 Series (variable rate)		2008-2018		2018-2028		8,520,562
Inflation-Indexed Bonds —10 years, 7 Series (0.1-1.4%)		2008-2018		2018-2027		8,473,565
Interest-Bearing Treasury Bond — 5 years, 24 Series (0.1-0.4%)		2013-2018		2018-2023		156,681,304
Interest-Bearing Treasury Bond for Individual Investors — 5 years, 54 Series (0.05-0.3%)		2013-2018		2018-2023		1,944,812
Interest-Bearing Treasury Bond for Individual Investors — 3 years, 36 Series (0.05%)		2015-2018		2018-2021		1,274,190
Interest-Bearing Treasury Bond — 2 years, 24 Series (0.1%)		2016-2018		2018-2020		57,975,364
6% Bereaved Family Treasury Bond, 8 Series		2009-2016		2018-2025		2
6% Repatriation Treasury Bond, 3 Series		2008-2014		2018-2024		0
Non-interest Special Benefit Treasury Bond, 1 Series		2013		2023		3
Non-interest Repatriation Special Benefit Treasury Bond, 1 Series		2009		2019		0
Non-interest Special Benefit Treasury Bond IV, 2 Series		2013-2016		2023-2026		12
Non-interest Special Benefit Treasury Bond X, 2 Series		2013-2016		2023-2026		53
Non-interest Special Benefit Treasury Bond XIII, 1 Series		2016		2021		210
Non-interest Special Benefit Treasury Bond XVII, 4 Series		2010-2016		2020-2026		259
Non-interest Special Benefit Treasury Bond XXII, 9 Series^(a)		2009-2017		2019-2027		1,549


Title and Interest Rate	Year of Issue		Year of Maturity		Principal Amounts Outstanding as of March 31, 2018 (in millions)
Non-interest Special Benefit Treasury Bond XXVI, 1 Series		2013		2017		—
Non-interest Special Benefit Treasury Bond XXVII, 4 Series^(a)		2013-2017		2023-2027		56,112
Non-interest Treasury Bond for Special Condolence X, 1 Series		2015		2020		135,223
Non-interest Special Benefit Treasury Bond XXVIII, 1 Series		2016		2021		699

Total Bonds					¥	921,102,747

2. Borrowings
Former Temporary Military Expenditure^(b)		1943-1945			¥	41,422
Allotment of Local Allocation and Local Transfer Tax		2007		2037		11,093,748
Former Government-Operated Land Improvement Project		2008		2019-2026		18,714
Japan Expressway Holding and Debt Repayment Agency		2009		2017		—
Former National Centers for Advanced and Specialized Medical Care		2010		2018-2035		45,916
Special Account for Fiscal Investment and Loan Program (0.1%)		2015		2018		9,000
Special Account for Energy Policy (0.04-1.9%)		2005-2018		2018-2030		171,413
Special Account for Stable Food Supply (0.06-1.3%)		2009-2018		2022-2031		43,490
Special Account for National Forest Debt Management (0.001-1.8%)		1996-2018		2018-2033		1,222,611
Special Account for Motor Vehicle Safety (0.0-1.5%)		1999-2011		2019-2041		572,235

Total Borrowings					¥	13,218,549

Total Direct Internal Funded Debt					¥	934,321,297

(a)

The amounts outstanding for Non-interest Special Benefit Treasury Bond XXII, 9 Series and for Non-interest Special Benefit Treasury Bond XXVII, 4 Series are higher than the amounts outstanding for the other Non-interest Special Benefit Treasury Bond series listed in this table because these bonds relate to “special benefit for the wives of the war dead, etc.”, for which benefit payments are high compared to other special benefits.

(b)	Represents borrowings by the government from special corporations of currencies of areas under Japanese control during World War II. The maturity of such borrowings and other matters relating to such borrowings remain undetermined.

Floating Debt


Title	Interest			Year of Maturity		Principal Amounts Outstanding as of March 31, 2018 (in millions)
1. Bonds
Treasury Discount Bills
Food Financing Bills		Non-interest bearing			2018		100,000
Foreign Exchange Fund Financing Bills		Non-interest bearing			2018-2019		73,363,230
Petroleum Financing Bills		Non-interest bearing			2018		1,185,700
Treasury Bills, 12 Series		Non-interest bearing			2018-2019		26,796,180
Note in Substitution for Currency of the International Monetary Fund		Non-interest bearing			Payable on demand		4,160,245
Note in Substitution for Currency of the International Development Association		Non-interest bearing			Payable on demand		25,737
Note in Substitution for Currency of the Asian Development Bank		Non-interest bearing			Payable on demand		12,934
Note for Contribution to the Special Funds of the Asian Development Bank		Non-interest bearing			Payable on demand		80,590
Note in Substitution for Currency of the African Development Fund		Non-interest bearing			Payable on demand		50,654
Note in Substitution for Currency of the Multilateral Investment Fund of the Inter-American Development Bank		Non-interest bearing			Payable on demand		—
Note in Substitution for Currency of the International Fund for Agricultural Development		Non-interest bearing			Payable on demand		2,952
Note in Substitution for Currency of the Global Environment Facility Trust Fund of the International Bank for Reconstruction and Development		Non-interest bearing			Payable on demand		47,080
Note in Substitution for Currency of the Multilateral Investment Guarantee Agency		Non-interest bearing			Payable on demand		721
Note in Substitution for Currency of the Green Climate Fund		Non-interest bearing			Payable on demand		63,152
Government Bonds issued to Development Bank of Japan		Non-interest bearing			Payable on demand		1,324,665
Government Bonds issued to Nuclear Damage Liability Facilitation Fund		Non-interest bearing			Payable on demand		5,473,600

Total Bonds						¥	112,687,439
2. Borrowings
Special Account for Local Allocation Tax		0.000-0.01	%		2018	¥	32,190,291
Special Account of Pension		0.01	%		2018		1,464,008
Special Account for Energy Policy		0.000	%		2018-2019		7,149,956

Total Borrowings						¥	40,804,255
Total Direct Internal Floating Debt						¥	153,491,694

Total Direct Internal Debt						¥	1,087,812,991

Debt Guaranteed by the Japanese Government


Title	Interest			Year of Issue		Year of Maturity		Principal Amounts Outstanding as of March 31, 2018 (in millions)
1. Bonds Issued by Government-Affiliated Corporations

Japan Finance Corporation		0.001-1.500	%		2008-2018		2018-2028	¥	805,000
Japan Expressway Holding and Debt Repayment Agency		0.005-2.700	%		2005-2018		2018-2058		18,309,700
New Kansai International Airport Co., Ltd.		0.145-2.400	%		2007-2017		2019-2028		335,140
Hanshin Expressway Co., Ltd.		1.300	%		2010		2020		3,500
Development Bank of Japan		0.001-2.200	%		2006-2018		2018-2028		1,750,000
Deposit Insurance Corporation of Japan		0.100	%		2014-2018		2018-2022		1,780,000
Banks’ Shareholdings Purchase Corporation		0.100	%		2016-2018		2018-2020		850,000
Nuclear Damage Compensation and Decommissioning Facilitation Corporation		0.001-0.117	%		2014-2017		2018-2021		800,000
The Corporation for Revitalizing Earthquake-Affected Business		0.001	%		2017		2021		20,000
Private Finance Initiative Promotion Corporation of Japan		0.145	%		2017		2027		5,000
Organization for Promoting Urban Development		0.020-0.699	%		2013-2018		2023-2028		36,800
Central Japan International Airport Co., Ltd.		0.001-1.300	%		2009-2018		2019-2028		149,600
Japan Finance Organization for Municipalities		0.001-2.200	%		2005-2018		2018-2028		7,512,820

Total								¥	32,357,560


2. Borrowings of Government-Affiliated Corporations

Incorporated Administrative Agency — Farmers Pension Fund		0.038-0.241	%		2013-2018		2018-2022	¥	352,900
Incorporated Administrative Agency — Agriculture, Forestry and Fisheries Credit Foundations		0.100	%		2015		2019		2,000
Japan Railway Construction, Transport and Technology Agency		0	%		2017		2018		16,510
Japan Oil, Gas and Metals National Corporation		0	%		2017-2018		2018-2019		424,233
Deposit Insurance Corporation of Japan		0	%		2017-2018		2018-2019		281,000
Banks’ Shareholdings Purchase Corporation		0	%		2018		2019		100,000
Innovation Network Corporation of Japan		0	%		2017		2018		197,800
Nuclear Damage Compensation and Decommissioning Facilitation Corporation		0	%		2017		2018		200,000
The Corporation for Revitalizing Earthquake-Affected Business		0	%		2017		2018		17,500
Private Finance Initiative Promotion Corporation of Japan		0.066	%		2016		2020		15,000
Organization for Promoting Urban Development		0.081	%		2017		2021		5,800

Total								¥	1,612,743
Total Internal Debt Guaranteed by the Japanese Government								¥	33,970,303

EXTERNAL DEBT

Debt Guaranteed by the Japanese Government


	Interest			Year of Loan		Year of Maturity		Principal Amounts Outstanding as of March 31, 2018 (in thousands)
Japan Bank for International Cooperation		1.500-3.375	%		2012-2017		2018-2027	$	39,050,000
		2.625	%		2014		2020	£	425,000
		2.300	%		2013		2018	CAD	—
Japan International Cooperation Agency		1.875-2.750	%		2014-2017		2019-2027	$	1,500,000
Development Bank of Japan		1.625-2.875	%		2012-2017		2018-2027	$	7,505,000
		4.750	%		2007		2027	€	700,000
		1.050-2.300	%		1998-2006		2022-2028	¥	280,000,000
Japan Finance Organization for Municipalities		4.000	%		2011		2021	$	1,000,000
		5.750	%		1999		2019	£	150,000
		1.900	%		2008		2018	¥	75,000,000


Totals by currency								$	49,055,000
								£	575,000
								€	700,000
								CAD	—
								¥	355,000,000

SUBSCRIPTIONS TO INTERNATIONAL FINANCIAL ORGANIZATIONS

The following table sets forth information relating to Japan’s obligations to contribute to the capital and financing requirements of international financing organizations in which it participates as of March 30, 2017.


Organization	Subscription Amount
	(in USD millions)
International Monetary Fund	$	45,633^(a)
International Bank for Reconstruction and Development		19,958^(b)
International Development Association		43,620^(c)
International Finance Corporation		163^(d)
Multilateral Investment Guarantee Agency		97^(e)
International Fund for Agricultural Development		540^(f)
Asian Development Bank		23,593^(g)
African Development Bank		5,091^(h)
African Development Fund		4,281⁽ⁱ⁾
European Bank for Reconstruction and Development		3,068^(j)
Inter-American Development Bank		8,878^(k)
Inter-American Investment Corporation		50^(l)
Multilateral Investment Fund		570^(m)

(a)	Equivalent of SDR 30,820.5 million as of April 30, 2017.

(b)	As stated in IBRD Financial Statements as of June 30, 2017.

(c)	As stated in IDA Financial Statements as of June 30, 2017.

(d)	As stated in IFC Financial Statements as of June 30, 2017.

(e)	As stated in MIGA Financial Statements as of June 30, 2017.

(f)	As stated in IFAD Financial Statements as of December 31, 2017.

(g)	As stated in ADB Financial Statements as of December 31, 2017.

(h)	As stated in AfDB Financial Statements as of December 31, 2017. Equivalent of UA 3,557 million.

(i)	As stated in AfDF Financial Statements as of December 31, 2017. Equivalent of UA 2,767 million.

(j)	As stated in EBRD Financial Statements as of December 31, 2017. Equivalent of € 2,557 million.

(k)	As stated in IDB Financial Statements as of December 31, 2017.

(l)	As stated in IIC Financial Statements as of December 31, 2017.

(m)	As stated in MIF Financial Statements as of December 31, 2017.