Filed pursuant to Rule 424(b)(5)
Registration Number 333-250107

 

The information in this preliminary prospectus supplement and the SEC Base Prospectus is not complete and may be changed. This preliminary prospectus supplement and the SEC Base Prospectus are not an offer to sell these securities and are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. A final form prospectus will be prepared and made available. Investors should not subscribe for any securities referred to in this document except on the basis of information contained in the final form prospectus.

 

Subject to Completion Dated September 22, 2022

PROSPECTUS SUPPLEMENT TO SEC BASE PROSPECTUS DATED January 5, 2021

 

		Japan Bank for International Cooperation (Incorporated under the Japan Bank for International Cooperation Act)   U.S.$● ●% Guaranteed Bonds Due ● Unconditionally and Irrevocably Guaranteed as to Payment of Principal and Interest by Japan

 

 

We will pay interest on the $● ●% guaranteed bonds due ● (the “bonds”) semi-annually in arrears in equal payments on ● and ● of each year, commencing ●, 2023. The bonds will mature on ●. We may redeem all, but not less than all, of the bonds in the event of certain tax law changes. The redemption terms are described in this prospectus supplement dated ●, 2022 (this “Supplement”) under “Description of the Bonds and Guarantee—Redemption”. The bonds will be issued only in registered form in denominations of $200,000 and integral multiples of $2,000 in excess thereof. See “Description of the Bonds and Guarantee”.

We intend to use the net proceeds from the issuance of the bonds for existing or future Eligible Projects as defined under our green bond framework (the “Framework”). See “Use of Proceeds.”

As provided under the heading “Luxembourg Stock Exchange Approved Prospectus” on page S-5 of this Supplement, subject to approval by the Luxembourg Stock Exchange, certain parts (but not all) of this Supplement and the accompanying prospectus dated January 5, 2021, starting after page S-56 (the “SEC Base Prospectus”), as well as the documents incorporated by reference into this Supplement or the SEC Base Prospectus, constitute a prospectus for the purposes of the Luxembourg act dated July 16, 2019 (the “Luxembourg Act”). The parts of this Supplement and the SEC Base Prospectus and those documents incorporated by reference into this Supplement that together constitute a “prospectus” for the purposes of the Luxembourg Act are referred to herein as the “LSE Approved Prospectus” and are identified under the heading “Luxembourg Stock Exchange Approved Prospectus” on page S-5 of this Supplement.

Application has been made to admit the bonds to the official list of the Luxembourg Stock Exchange and application has been made to admit the bonds to trading on the Luxembourg Stock Exchange’s Euro MTF Market (the “Euro MTF Market”). The Euro MTF Market is not a regulated market for the purposes of the Markets in Financial Instruments Directive 2014/65/EU (as amended or superseded, “MiFID II”). References in this prospectus to the bonds being “listed” (and all related references) shall mean that the bonds have been admitted to the official list of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF Market.

 

 

Neither the United States Securities and Exchange Commission (the “Commission”) nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this Supplement or the SEC Base Prospectus. Any representation to the contrary is a criminal offense.

 

 

Prospective investors should consider carefully the factors described under the section headed “Risk Factors” in this Supplement.

 

 

 

		Per Bond				Total
Price to Public(1)		●	%				$●
Underwriting Discount		●	%				$●
Proceeds, before expenses, to JBIC(1)(2)		●	%				$●

 

(1)	Plus accrued interest, if any, from ●, 2022, if settlement occurs after that date.

(2)	See “Underwriting”.

 

 

The underwriters are offering the bonds subject to various conditions. The underwriters expect to deliver the bonds through the book-entry facilities of The Depository Trust Company (“DTC”), Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”), against payment on or about ●, 2022.

 

 

 

Daiwa Capital Markets Europe		Barclays		Crédit Agricole CIB		Morgan Stanley

 

 

Prospectus Supplement dated ●, 2022.

TABLE OF CONTENTS

Supplement

 

Foreign Exchange Considerations			S-7
Forward-Looking Statements			S-7
Incorporation by Reference			S-8
Introduction			S-9
Risk Factors			S-11
Recent Developments			S-16
Summary Financial Information			S-25
Use of Proceeds			S-30
Description of the Bonds and Guarantee			S-33
Global Clearance and Settlement			S-40
Taxation			S-43
Underwriting			S-50
Validity of Securities			S-53
Authorized Agents in the United States			S-53
General Information			S-54

SEC Base Prospectus

 

About This Prospectus			ii
Where You Can Find More Information			1
Japan Bank for International Cooperation			2
Japan			18
Financial System			43
Government Finance			47
Use of Proceeds			63
Description of the Debt Securities and Guarantee			64
Plan of Distribution			74
Authorized Agents in the United States			75
Validity of Securities			75
Further Information			75
Annex I: Summary Financial Information			77

 

S-2

The bonds have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended) and the bonds are subject to the Act on Special Measures Concerning Taxation of Japan (Act No. 26 of 1957, as amended). The bonds may not be offered or sold in Japan to any other person resident in Japan, or to others for reoffering or resale directly or indirectly in Japan or to a person resident in Japan, for Japanese securities law purposes (including any corporation or other entity organized under the laws of Japan), except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act of Japan and any other applicable laws, regulations and governmental guidelines of Japan (see “Underwriting” below). The bonds are not, as part of the distribution under the underwriting agreement at any time, to be directly or indirectly offered or sold to, or for the benefit of, any person other than a beneficial owner that is, (i) for Japanese tax purposes, neither (x) an individual resident of Japan or a Japanese corporation, nor (y) an individual non-resident of Japan or a non-Japanese corporation that in either case is a person having a special relationship with JBIC (that is, in general terms, a person who directly or indirectly controls or is directly or indirectly controlled by, or is under direct or indirect common control with, JBIC) as described in Article 6, Paragraph (4) of the Act on Special Measures Concerning Taxation of Japan (a “Specially-Related Party of JBIC”) or (ii) a Japanese financial institution, designated in Article 6, Paragraph (11) of the Act on Special Measures Concerning Taxation of Japan. BY SUBSCRIBING FOR THE BONDS, AN INVESTOR WILL BE DEEMED TO HAVE REPRESENTED IT IS A PERSON WHO FALLS INTO THE CATEGORY OF (i) OR (ii) ABOVE.

In addition, interest payments on the bonds will generally be subject to Japanese withholding tax unless it is established that such bonds are held by or for the account of a beneficial owner that is (i) for Japanese tax purposes, neither (x) an individual resident of Japan or a Japanese corporation, nor (y) an individual non-resident of Japan or a non-Japanese corporation that in either case is a Specially-Related Party of JBIC, (ii) a Japanese financial institution designated in Article 6, Paragraph (11) of the Act on Special Measures Concerning Taxation of Japan which complies with the requirement for tax exemption under that paragraph, or (iii) a Japanese public corporation, a Japanese financial institution or a Japanese financial instruments business operator, etc. described in Article 3-3, Paragraph (6) of the Act on Special Measures Concerning Taxation of Japan which complies with the requirement for tax exemption under that paragraph.

You should rely only on the information contained or incorporated by reference in this Supplement and the SEC Base Prospectus and, for the purposes of the LSE Approved Prospectus, the documents incorporated by reference therein. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in or incorporated by reference in the LSE Approved Prospectus or otherwise in this Supplement or the SEC Base Prospectus is accurate as of any date other than the date on the front page of this Supplement or, with respect to information incorporated by reference, as of the date of such information.

In this Supplement, “we”, “our”, “us” and “JBIC” refer to Japan Bank for International Cooperation.

 

 

The spot buying rate for U.S. dollars quoted on the Tokyo foreign exchange market on ●, 2022, as reported by the Bank of Japan (the “BOJ”) at 5:00 p.m., Tokyo time, was ¥● = $1.00 and the noon buying rate on ●, 2022 for cable transfers in New York City payable in yen, as reported by the Federal Reserve Bank of New York, was $1.00 = ¥●.

References in this Supplement 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. References to “¥”or “yen” are to Japanese yen and references to “U.S.$”, “$” or “dollars” are to U.S. dollars.

 

 

 

S-3

The distribution of this Supplement and the SEC Base Prospectus and the offering of the bonds in certain jurisdictions may be restricted by law.

The bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (the “EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended or superseded, the “IDD”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (as amended or superseded, the “Prospectus Regulation”). Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended or superseded, the “PRIIPs Regulation”) for offering or selling the bonds or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the bonds or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

The bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (the “EUWA”); (ii) a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (as amended, the “FSMA”) and any rules or regulations made under the FSMA to implement the IDD, where that customer would not qualify as a professional client as defined in point (8) of Article 2(1) of Regulation (EU) 600/2014 as it forms part of domestic law by virtue of the EUWA; or (iii) not a qualified investor as defined in Article 2 of Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the EUWA (the “UK Prospectus Regulation”). Consequently, no key information document required by the PRIIPs Regulation as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”) for offering or selling the bonds or otherwise making them available to retail investors in the United Kingdom has been prepared and therefore offering or selling the bonds or otherwise making them available to any retail investor in the United Kingdom may be unlawful under the UK PRIIPs Regulation.

This Supplement and the SEC Base Prospectus do not constitute, and may not be used in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. See “Underwriting”.

This Supplement and the SEC Base Prospectus have been prepared on the basis that all offers of bonds in (i) any Member State of the EEA will be made pursuant to an exemption under the Prospectus Regulation or (ii) the United Kingdom will be made pursuant to an exemption under the FSMA, in each case from the requirement to produce and publish a prospectus for offers of the bonds. Accordingly, any person making or intending to make any offer in a Member State or in the United Kingdom of the bonds which are the subject of the placement referred to in this Supplement and the SEC Base Prospectus may only do so in circumstances in which no obligation arises for JBIC, Japan or the underwriters to produce and publish a prospectus (i) in relation to a Member State of the EEA, pursuant to Article 3 of the Prospectus Regulation, or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation, or (ii) in relation to the United Kingdom, pursuant to section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation, in each case in relation to such offer. Neither JBIC, Japan nor the underwriters have authorized, nor do they authorize, the making of any offer of the bonds in circumstances in which an obligation arises for JBIC, Japan or the underwriters to publish or supplement a prospectus for such offer. Neither JBIC, Japan nor the underwriters have authorized, nor do they authorize, the making of any offer of the bonds through any financial intermediary, other than offers made by the underwriters resulting in sales constituting the final placement of the bonds contemplated in this Supplement and the SEC Base Prospectus.

 

S-4

Solely for the purposes of the manufacturer’s product approval process, the target market assessment in respect of the bonds has led to the conclusion that: (i) the target market for the bonds is eligible counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for distribution of the bonds to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the bonds (a “distributor”) should take into consideration the manufacturer’s target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the bonds (by either adopting or refining the manufacturer’s target market assessment) and determining appropriate distribution channels.

Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the bonds has led to the conclusion that: (i) the target market for the bonds is only eligible counterparties, as defined in the FCA Handbook Conduct of Business Sourcebook, and professional clients, as defined in Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA (“UK MiFIR”); and (ii) all channels for distribution of the bonds to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the bonds (a “distributor”) should take into consideration the manufacturers’ target market assessment; however, a distributor subject to the FCA Handbook Product Intervention and Product Governance Sourcebook (the “UK MiFIR Product Governance Rules”) is responsible for undertaking its own target market assessment in respect of the bonds (by either adopting or refining the manufacturers’ target market assessment) and determining appropriate distribution channels.

In the United Kingdom, this Supplement and the SEC Base Prospectus are only being distributed to and are only directed at persons who (i) have professional experience in matters relating to investments who fall within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended or superseded, the “Order”); (ii) are persons who fall within Article 49(2)(a) to (d) of the Order; or (iii) are persons to whom an invitation or inducement to engage in an investment activity (within the meaning of section 21 of the FSMA) in connection with the issue or sale of any bonds may otherwise be lawfully communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). In the United Kingdom this Supplement and the SEC Base Prospectus and any of their contents are directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this Supplement and the SEC Base Prospectus relate is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

In connection with the issue of the bonds, Daiwa Capital Markets Europe Limited (the “Stabilizing Manager”) (or any persons acting on behalf of the Stabilizing Manager) may overallot the bonds or effect transactions with a view to supporting the market price of the bonds at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilizing Manager (or persons acting on behalf of the Stabilizing Manager) will undertake stabilization action. Any stabilization action may begin on or after the date on which adequate public disclosure of the terms of the offer of the bonds is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the bonds and 60 days after the date of the allotment of the bonds. Any stabilization action or over-allotment must be conducted by the Stabilizing Manager (or persons acting on behalf of the Stabilizing Manager) in accordance with all applicable laws and rules.

Luxembourg Stock Exchange Approved Prospectus

Subject to approval by the Luxembourg Stock Exchange, this Supplement and the SEC Base Prospectus starting after page S-56 including the following documents incorporated by reference:

 

•

the Annual Report on Form 18-K of Japan for the year ended March 31, 2022 (the “Japan 18-K 2022”);

 

•

JBIC’s Annual Report on Form 18-K for the year ended March 31, 2022 (the “JBIC 18-K 2022”) which is otherwise incorporated into this Supplement and the SEC Base Prospectus; and

 

•

Amendment No. 1 to the JBIC 18-K 2022 which is otherwise incorporated into this Supplement and the SEC Base Prospectus;

 

S-5

but excluding the following:

 

•

the section “Where You Can Find More Information” in the SEC Base Prospectus,

together comprise the LSE Approved Prospectus and for the purpose of giving information with regard to us, Japan and our bonds which, according to the particular nature of us, Japan and our bonds, is necessary to enable investors to make an informed assessment of our and Japan’s assets and liabilities, financial position, profit and losses and prospects, and of the rights attaching to our bonds and the guarantee. This LSE Approved Prospectus may only be used for this foregoing purpose.

Responsibility for Statements

We accept responsibility for the information contained in the LSE Approved Prospectus. To the best of our knowledge (having taken all reasonable care to ensure that such is the case) the information contained in the LSE Approved Prospectus is in accordance with the facts and contains no omission likely to affect its import.

Japan accepts responsibility for the information contained in the LSE Approved Prospectus relating to Japan and the guarantee. To the best of Japan’s knowledge (having taken all reasonable care to ensure that such is the case) the information contained in the LSE Approved Prospectus relating to Japan and the guarantee is in accordance with the facts and contains no omission likely to affect its import.

 

S-6

FOREIGN EXCHANGE CONSIDERATIONS

For an investor that is not resident in the United States or does not conduct business or activities in the United States, an investment in the bonds, which are denominated in, and all payments in respect of which are to be made in, U.S. dollars entails significant risks not associated with a similar investment in a security denominated in the investor’s home currency (i.e., the currency of the country in which the investor is resident or the currency in which the investor conducts its business or activities). These include the possibility of:

 

•

significant changes in rates of exchange between the home currency and the U.S. dollar; and

 

•

the imposition or modification of foreign exchange controls with respect to the U.S. dollar.

We have no control over a number of factors affecting this type of bond, including economic, financial and political events that are important in determining the existence, magnitude and longevity of these risks and their results. In recent years, rates of exchange for certain currencies, including the U.S. dollar, have been volatile and this volatility may be expected to continue in the future. Fluctuations in any particular exchange rate that have occurred in the past are not necessarily indicative of fluctuations in the rate that may occur during the term of the bonds. Depreciations of the U.S. dollar against the investor’s home currency could result in a decrease in the investor’s effective yield of the bonds below the coupon rate, and in certain circumstances, could result in a loss to such purchaser on a home currency basis.

The description of foreign currency risks does not describe all the risks of an investment in securities denominated in a currency other than your home currency. Prospective investors should consult their own financial and legal advisors as to the risks involved in an investment in such bonds.

FORWARD-LOOKING STATEMENTS

This Supplement and the SEC Base Prospectus (including the documents incorporated by reference herein and therein) include forward-looking statements. Forward-looking statements are statements that are not historical facts, including statements about beliefs and expectations, and generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “believe”, “continue”, “could”, “should”, “would” or similar terminology. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any of such statements in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties, including but not limited to those discussed under “Risk Factors” and elsewhere in this Supplement and the SEC Base Prospectus (including the documents incorporated by reference herein and therein), and actual results may differ materially from those expressed or implied in any forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements.

 

S-7

INCORPORATION BY REFERENCE

The Japan 18-K 2022, JBIC 18-K 2022 and Amendment No. 1 to the JBIC 18-K 2022 are hereby incorporated by reference and form part of this Supplement.

Any statement contained in a document which is incorporated by reference in the LSE Approved Prospectus or otherwise in this Supplement or the SEC Base Prospectus shall be deemed to be modified or superseded for the purpose of the LSE Approved Prospectus or this Supplement to the extent that a statement contained herein or another document incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the LSE Approved Prospectus or this Supplement. Copies of the documents incorporated by reference in the LSE Approved Prospectus or otherwise in this Supplement or the SEC Base Prospectus are available free of charge at the office of the fiscal agent in London, and will also be available at the website of the Luxembourg Stock Exchange (www.bourse.lu).

The following audited financial statements of JBIC for the fiscal year ended March 31, 2022, prepared in accordance with accounting principles generally accepted in Japan (“Japanese GAAP”), appear on the pages of the JBIC 18-K 2022 as set forth below:

 

(a) Consolidated statements of operations		Set forth on page 7 of Exhibit 2 of the JBIC 18-K 2022
(b) Consolidated balance sheets		Set forth on page 6 of Exhibit 2 of the JBIC 18-K 2022
(c) Consolidated statements of cash flows		Set forth on page 11 of Exhibit 2 of the JBIC 18-K 2022

For the purposes of the LSE Approved Prospectus, the information incorporated by reference from the Japan 18-K 2022 includes the following items in relation to Japan (the page numbers below are those of Exhibit 1 to such Annual Report):

 

Items		Japan 18-K 2022 - Exhibit 1 (Description of Japan)
Geographical location and legal form		“General—Area and Population”, “General—Government” and “General—Political Parties” on pages 4-5
Description of the economy		“The Economy” on pages 8-20
Description of the political system and government		“General—Government”, “General—Political Parties” and “General—Leadership” on pages 4-5
Tax and budgetary systems		“Government Finance” on pages 32-38
Gross public debt and debt record		“Debt Record”, “Japan’s Public Debt”, “Internal Debt” and “External Debt” on pages 38-44
Foreign trade and balance of payments		“Foreign Trade and Balance of Payments—Foreign Trade” and “Foreign Trade and Balance of Payments—Balance of Payments” on pages 21-24
Foreign exchange reserves		“Foreign Trade and Balance of Payments—Balance of Payments—Official Reserve Assets” on page 24
Financial position and resources		“Government Finance” on pages 32-38
Income and expenditure figures		“Government Finance” on pages 32-38
Auditing Procedures		“Government Finance—Revenues, Expenditures and Budgets” on pages 32-36

 

S-8

 

S-9

 

S-10

RISK FACTORS

We believe that the following factors may affect our ability to fulfil our obligations under our bonds. All of these factors are contingencies which may or may not occur and we are not in a position to express a view on the likelihood of any such contingency occurring.

Factors which we believe may be material for the purpose of assessing the market risks associated with our bonds are also described below.

We believe that the factors described below represent the principal risks inherent in investing in our bonds. Prospective investors should carefully consider these factors in conjunction with the detailed information set out elsewhere in this Supplement and the SEC Base Prospectus (including any documents or information incorporated by reference herein) or, for the purposes of the LSE Approved Prospectus, the detailed information set out elsewhere in the LSE Approved Prospectus (including any documents incorporated therein), and reach their own views prior to making any investment decision.

Risks Relating to the Japanese Economy in General

Prospective investors in our bonds should be aware of the challenges faced by the Japanese economy. The Japanese economy continues to face challenges due to uncertainty about the economic prospects of the world economy. In particular, global economic conditions have been significantly impacted due to extensive disruptions in economic activity and volatility in financial markets caused by the global COVID-19 pandemic since December 2019, and the measures implemented in many countries to help contain the spread of the disease. In Japan, the central and local governments have imposed a number of such measures, including the declaration of multiple states of emergency and other restrictive measures aimed at preventing the spread of infections. While the number of infections in Japan had subsequently shown a decreasing trend resulting in the easing of a number of preventative measures, the number of infections subsequently increased and have remained high due to the spread of new COVID-19 variants. Although many preventative measures such as restrictions on international travel have been relaxed, the number of infections continues to be high. Accordingly, additional restrictive measures may be imposed in the future, including the declaration of a state of emergency for all or parts of Japan, based on certain factors such as an increase in infection rates. See “Recent Developments—Japan—The Economy—General” below.

As a result of the COVID-19 outbreak and the measures implemented to contain its spread, Japan and many other major economies reported economic contractions in the first and second quarters of 2020. Although Japan and some other economics have shown signs of recovery since the second half of 2020, many countries continue to report high numbers of infections due to the new COVID-19 variants. In response to the increase in infections, some countries continue to impose restrictive measures, which could have an impact on global economic conditions. Accordingly, the magnitude and duration of the economic impact of COVID-19 remains highly uncertain, and it is possible that another surge in COVID-19 cases could result in a prolonged economic slowdown in Japan and globally, which could differ significantly in terms of severity and duration depending on the country.

The global economy has recently been impacted by Russia’s large-scale military activity against Ukraine that was initiated in February 2022 and the related economic sanctions imposed on certain Russian entities and persons by many major countries. In particular, financial and commodity markets have experienced significant volatility and energy prices have sharply increased mainly due to concerns regarding disruptions in oil and natural gas supply. Driven in part by increases in energy prices as well as increases in raw materials prices, there has been a significant inflationary trend in consumer prices in many major economies including Japan, and monetary authorities in some major economies have been tightening monetary policy in response to this trend. Depending on how the conflict develops and any additional economic sanctions imposed on Russia, as well as the impact of inflation and monetary policy developments and economic conditions in Japan and globally may continue to worsen, and the duration and extent of any economic slowdown is highly uncertain.

 

S-11

Although the Japanese government and the BOJ are pursuing expansive economic measures in an effort to mitigate the impact of the COVID-19 outbreak, including emergency measures aimed at supporting businesses and individuals impacted by the outbreak and monetary easing measures implemented by the BOJ, such as the continuation of the BOJ’s negative interest rate policy and framework for quantitative and qualitative monetary easing first introduced in 2016, the effect of such measures remains unclear. In addition, increased spending for economic stimulus measures could negatively impact Japan’s fiscal condition due to higher levels of public debt. Partially in response to the planned increase in public spending in Japan, in June 2020, S&P Global Ratings lowered its outlook on Japan’s sovereign credit rating from positive to stable. In addition, in July 2020, Fitch Ratings lowered its outlook on Japan’s sovereign credit rating from stable to negative. Further challenges for the Japanese economy include volatile exchange rates, supply chain constraints and, over the long term, demographic challenges, such as an aging workforce and population decrease, and high levels of public debt and associated debt servicing payments. Further slowdowns in overseas economies and sharp fluctuations in the financial and capital markets also pose downside risks to the Japanese economy. In addition, the Japanese economy is also exposed to challenges due to long-term deflation as well as the potential impact of ongoing political disputes, technology and trade tensions between the United States and China and other major trading partners as well as the potential escalation of geopolitical risks associated the Middle East or North Korea.

Risks Relating to Us

General risks relating to our business

The Japan Bank for International Cooperation Act, as amended (the “JBIC Act”), requires the Japanese government, at all times, to hold the total number of outstanding shares of JBIC. JBIC’s operations, including appointment of directors, business plans and issuance of new debt securities, are subject to the supervision of the Japanese government. JBIC’s business operations are conducted in accordance with the Japanese government’s economic and other policies, including the provision of financial support in areas in which it is difficult for private financial institutions to provide on a commercial basis. Accordingly, JBIC’s business operations, results of operations and financial condition have been, and will continue to be, influenced by the Japanese government’s economic and other policies.

In particular, JBIC is subject to governmental regulation pursuant to the JBIC Act in addition to the Companies Act of Japan (Act No. 86 of 2005, as amended). In the future, if these laws are amended in a material way, the operations and other aspects of JBIC may be materially affected.

In addition, our business, financial condition and results of operations may be negatively affected by the spread of COVID-19 and the resulting impact on our borrowers and general economic conditions and financial markets.

Risks relating to transactions with Russian counterparties and compliance with economic sanctions

In light of the ongoing Russian invasion of Ukraine, our business activities with Russian counterparties or involving certain project financing in Russia could subject us to various risks and uncertainties. Due to the broad economic sanctions imposed on Russian entities and persons by the United States, EU, UK, Japan, and other countries worldwide, including, but not limited to, sanctions or other restriction imposed on certain Russian financial institutions and the removal of certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) system (the “Sanctions”), we may experience increased credit risk and defaults on our loans to counterparties in Russia. We currently engage in business involving certain counterparties that are subject to the Sanctions, including, but not limited to, Russian financial institutions such as Sberbank of Russia and Vnesheconombank. We participate in the financing for certain project companies or projects involving entities subject to the Sanctions, including, but not limited to, the Russian Direct Investment Fund. Although we have established policies to ensure that we conduct these activities in compliance with applicable laws and regulations, including applicable sanctions, any actual or perceived failure to comply with

 

S-12

applicable laws and regulations could result in regulatory actions against us, damage to our reputation, or other negative consequences. In addition, our participation in transactions with sanctioned entities may lead some potential counterparties and investors to avoid doing business with us or investing in our securities. We may be required to, or otherwise decide to, terminate our relationships with, or activities involving, Russian counterparties or other entities, which may result in termination fees or other related costs. As a result of the foregoing, our results of operations and financial condition may be negatively impacted.

Risks Relating to the Market Risk of Bonds Generally

Exchange rate risk

Prospective investors in our bonds should be aware that an investment in our bonds may involve exchange rate risks. Our bonds may be denominated in a currency other than the currency of the investor’s home jurisdiction and/or in a currency other than the currency in which an investor wishes to receive funds. Exchange rates between currencies are determined by factors of supply and demand in the international currency markets which are influenced by macro economic factors, speculation and central bank and government intervention (including the imposition of currency controls and restrictions). Fluctuations in exchange rates may affect the value of our bonds. See “Foreign Exchange Considerations”.

The secondary market generally

Our bonds may have no established trading market when issued, and one may never develop. If a market does develop, it may not be sufficiently liquid. Therefore, investors may not be able to sell their bonds easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. Illiquidity may have a severely adverse effect on the market value of our bonds.

Risks Relating to our Bonds

Limited liquidity

The fact that our bonds may be listed does not necessarily assure liquidity. No assurance can be given that there will be a market for our bonds. If our bonds are not traded on any stock exchange, pricing information for such bonds may be more difficult to obtain, and the liquidity and market prices of such bonds may be adversely affected. The liquidity of our bonds may also be affected by restrictions on offers and sales of our bonds in some jurisdictions. The underwriters may from time to time make a market in our bonds but are under no obligation to do so and, if a market does develop, it may not continue until the maturity of all our bonds. The listing application will be subject to approval by the Luxembourg Stock Exchange. If such an approval and listing is obtained, we have no obligation to maintain such listing, and we may delist the bonds at any time.

Bonds subject to optional redemption by us

Redemption of our bonds in circumstances of changes in applicable laws or treaties may limit their market value. During any period when we may elect to redeem our bonds, the market value of our bonds generally will not rise substantially above the price at which they can be redeemed.

The use of proceeds of the bonds may not be suitable for the specific investment criteria of an investor, and we may inadvertently allocate the net proceeds of the bonds to projects other than Eligible Projects.

We intend to allocate the amount equivalent to the net proceeds from the issuance of the bonds towards new or existing Eligible Projects as defined under the green bond framework (the “Framework”), which are projects that we believe contribute to solving environmental issues. See “Use of Proceeds.” Prospective investors should

 

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consider the information set out in this prospectus supplement regarding such use of proceeds and must determine for themselves the relevance of such information for the purpose of any investment in the bonds together with any other investigation such investor deems necessary. We have significant flexibility in allocating the net proceeds from the issuance of the bonds, including re-allocating the net proceeds in the event we determine, in our discretion, that projects receiving allocation no longer meet the eligibility criteria for Eligible Projects, and may also be unable to allocate the net proceeds as intended. Similarly, while we intend not to allocate the net proceeds from the issuance of the bonds to projects that meet certain exclusionary criteria set forth in the Framework, our determination of the projects to which we are able to allocate the net proceeds is based on our own interpretation of the Framework criteria, and there is no assurance that investors will agree with our interpretation.

Prior to the offering of the bonds, we have entered into certain credit facility agreements that provide financing to projects that would fall within the exclusionary criteria set forth in the Framework, including projects relating to the development of fossil fuels including coal, oil and gas as well as fossil fuel power generation. We currently have outstanding amounts under these credit facility agreements, and have future obligations to disburse additional funds under such agreements. For example, we have outstanding amounts under agreements providing financing to coal-fired power plants, and our recent financing activities relating to coal projects include an agreement entered into in December 2020 to provide $636 million in financing for the construction of a coal-fired power plant in Vietnam as well as providing financing for other coal-fired power generation facilities primarily in Vietnam and Indonesia. The funds provided under such agreements relating to projects that are not Eligible Projects are disbursed from our Account for Ordinary Operations as defined under the Japan Bank for International Corporation Act, or the JBIC Act. Because the net proceeds of the bonds will be deposited to the Account for Ordinary Operations in accordance with the JBIC Act and will not be managed in a separate account, we will actively monitor the Account for Ordinary Operations to ensure that an amount equal to such net proceeds is allocated from the Account for Ordinary Operations only to new or existing Eligible Projects in accordance with the Framework. Despite our efforts to prevent misallocation of the net proceeds of the bonds, we may inadvertently allocate such net proceeds, directly or indirectly, to projects that do not qualify as Eligible Projects including those meeting the exclusionary criteria under the Framework. In addition, even if the net proceeds of the bonds are allocated to Eligible Projects, our participation in financing of projects that are not Eligible Projects such as fossil fuel-related projects may be seen negatively by investors given the increased focus of some investors on environmental matters. Moreover, although we have publicly stated the aim of reducing the balance of our loans to coal power generation projects to zero by around fiscal year 2040, there is no assurance that we can achieve this target on the timeline we currently expect or at all. In addition, certain organizations have made claims criticizing us and other agencies of the Japanese government for supporting coal and other fossil fuel-related projects, and any such future claims may adversely impact our reputation.

We may also in our discretion update or amend the Framework from time to time, which gives us further flexibility with respect to both the allocation of the net proceeds from the issuance of the bonds as well as the reporting about such allocation or the environmental impact of the Eligible Projects to which such net proceeds may be allocated. There can be no assurance that such use of proceeds for any Eligible Projects will satisfy, whether in whole or in part, any present or future investor expectations or requirements, taxonomies or standards or other investment criteria or guidelines with which such investor or its investments are required to comply, whether by any present or future applicable law or regulations or by its own bylaws or other governing rules or investment portfolio mandates, ratings criteria, taxonomies or standards or other independent expectations, in particular with regard to any direct or indirect environmental impact of any Eligible Projects. Furthermore, there is currently no clear definition (legal, regulatory or otherwise) of, nor market consensus as to which precise attributes are required for a particular project to be defined as “green,” and therefore no assurance can be provided to potential investors that the use of proceeds specified in this prospectus supplement will meet an investor’s expectations regarding environmental performance or continue to meet the relevant eligibility criteria.

A second party opinion from Sustainalytics Japan Inc. (“Sustainalytics”), an outside consultant specializing in ESG research and ratings, regarding the Framework has been made publicly available. No assurance or

 

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representation is given as to the suitability or reliability for any purpose whatsoever of any opinion or certification of, or any report concerning any review by, any third party (whether or not solicited by us) that will be made available in connection with the issuance of the bonds, in particular as it relates to the ability of an Eligible Project to fulfill any environmental or other criteria. No such opinion, certification or report is, nor should it be deemed to be, a recommendation by us, any underwriter with respect to the bonds or any other person to buy, sell or hold the bonds. Any such opinion, certification or report is only current as of the date it was initially issued. Prospective investors must determine for themselves the relevance of any such opinion, certification or report, the information contained therein and the provider thereof for the purpose of any investment in the bonds. For the avoidance of doubt, no such opinion, certification or report is, nor shall it be deemed to be, incorporated into this prospectus supplement, the accompanying prospectus or any other filing with the SEC.

In the event that the bonds are listed or admitted to trading on any dedicated “green,” or other similarly labelled segment of any stock exchange or securities market (whether or not regulated), or are included in any dedicated “green,” or other similarly labelled index or indices, no representation or assurance is given by us, the underwriters or any other person that such listing or admission, or inclusion in such index or indices, satisfies, whether in whole or in part, any present or future investor expectations or requirements as regards any investment criteria or guidelines with which such investor or its investments are required to comply, whether by any present or future applicable law or regulations or by its own by-laws or other governing rules or investment portfolio mandates, in particular with regard to any direct or indirect environmental impact of any projects or uses that are the subject of or related to, any Eligible Projects. Furthermore, it should be noted that the criteria for any such listings or admission to trading may vary from one stock exchange or securities market to another and also the criteria for inclusion in such index or indices may vary from one index to another. Nor is any representation or assurance given or made by us, the underwriters or any other person that any such listing or admission to trading, or inclusion in any such index or indices, will be obtained in respect of the bonds or, if obtained, that any such listing or admission to trading, or inclusion in such index or indices, will be maintained during the life of the bonds.

Any failure to apply the net proceeds from the issuance of the bonds in the manner set out in “Use of Proceeds” or the withdrawal of any opinion, certification or review of Sustainalytics or other third party, or any attestation that we are not complying in whole or in part with any matters subject to such opinion, certification or review, may have a material adverse effect on the value of the bonds or result in adverse consequences for certain investors with portfolio mandates to invest in securities to be used for a particular purpose. However, neither any such failure, nor any failure to comply with our commitment to certain reporting obligations as described under “Use of Proceeds—Reporting,” will constitute a default or an event of default under the terms of the bonds.

 

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RECENT DEVELOPMENTS

JBIC

Operations

Outstanding Credit in the JBIC Operations

For the three months ended June 30, 2022, JBIC’s total additional disbursed amounts under loans and guarantees on a non-consolidated basis amounted to ¥224 billion and collections of loans and guarantees on a non-consolidated basis amounted to ¥520 billion. As of June 30, 2022, JBIC’s outstanding balance of credit commitments on a non-consolidated basis was ¥16,136 billion and JBIC’s outstanding balance of guarantees on a non-consolidated basis was ¥1,754 billion.

Green Bond Framework Allocation and Impact Reporting

In September 2022, we reported the allocation of the net proceeds and estimated impact for our U.S.$500,000,000 1.625% Guaranteed Bonds Due January 20, 2027 issued on January 20, 2022 under the Framework. We reported that 100% of the net proceeds from such bonds were allocated to refinancing of Eligible Projects under the Framework, including 41.6% of the net proceeds allocated to the Renewable Energy category (11.2% to Solar and Solar Thermal, 18.7% to Wind (offshore and onshore) and 11.7% to Geothermal, respectively) and 58.4% of the net proceeds allocated to the Clean Transportation (Trains and Railways) category.

We estimated that the impact of our portion of the financing for Renewable Energy projects was 510 MW in terms of power generation capacity (including 62 MW from Solar and Solar Thermal, 394 MW from Wind (offshore and onshore) and 54 MW from Geothermal) and 909,390.8 tCO₂ in terms of annual estimated reduction in CO₂ emissions (including 45,041.5 tCO₂ from Solar and Solar Thermal, 547,076.1 tCO₂ from Wind (offshore and onshore) and 317,273.2 tCO₂ from Geothermal). The annual estimated reduction in CO₂ emissions was calculated by multiplying the annual estimated power generation (ex-ante) by the relevant CO₂ emissions factors published by the International Energy Agency. CO₂ emissions from renewable energy were assumed to be zero. The impact of certain manufacturing projects included in the Solar and Solar Thermal projects were excluded from the estimates. The relevant products were expected to be installed into solar power plants, which were expected to contribute to reductions in CO₂ emissions. We estimated that the impact of our portion of the financing for Clean Transportation (Train and Railways) projects was 6 million miles in annual operating distance. Projects in this category include projects for leasing high-speed trains that were expected to be operated as low-carbon railway services, which were expected to contribute to reductions in CO₂ emissions. The relevant project was expected to procure and lease an estimated 369 rolling stock (for the project as a whole and not based on our portion of the financing).

The estimated impact described above is calculated based on our portion of the financing for the relevant projects only unless otherwise noted. The percentage of our portion of the financing varies for each project.

Japan

General

Area and Population

Japan has a total population of approximately 125 million (estimated as of August 1, 2022). It has one of the highest population densities in the world and approximately 24.2% of its people (estimated as of October 1, 2021) are concentrated in three metropolitan areas (Tokyo, Osaka and Nagoya). Japan’s rate of population decrease during the years 2017-2021 was 1.1%. Japan’s population decreased 0.5% during the 12 months ended October 1, 2021 (estimated as of October 1, 2021).

 

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Political Parties

The following tables set forth the membership by political party of the House of Representatives as of September 1, 2022 and the House of Councillors as of September 13, 2022.

 

		House of     Representatives
Liberal Democratic Party			261
The Constitutional Democratic Party of Japan and the Independent			97
Nippon Ishin (Japan Innovation Party)			41
Komeito			32
Democratic Party For the People			10
Japanese Communist Party			10
Yushi no Kai			5
REIWA SHINSENGUMI			3
Independents			4
Vacancies			2
Total			465

 

Source: House of Representatives.

 

		House of     Councillors
Liberal Democratic Party			118
The Constitutional Democratic Party of Japan and Social Democratic Party			39
Komeito			27
Nippon Ishin (Japan Innovation Party)			21
Democratic Party For the People and The Shin-Ryokufukai			13
Japanese Communist Party			11
REIWA SHINSENGUMI			5
NHK Party			2
Okinawa Whirlwind			2
Independents			10
Vacancies			0
Total			248

 

Source: House of Councillors.

 

International Trade Agreements

Japan has also entered into Economic Partnership Agreements, or EPAs, with various countries, including Singapore, Mexico, Malaysia, Chile and Thailand. As of June 2022, Japan had entered into a total of 21 EPAs (including the TPP) with 24 countries as well as the EU. 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.

THE ECONOMY

General

According to the Monthly Economic Report published by the Cabinet Office of Japan for August 2022 published on August 25, 2022, economic activity is recovering moderately as the impact of COVID-19 eases.

 

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Although many of the preventative measures such as restrictions on international travel have been recently relaxed, the number of infections continues to be high, and the duration and extent of the economic impact of COVID-19 still remain highly uncertain. Accordingly, additional restrictive measures may be imposed in the future, including the declaration of a state of emergency for all or parts of Japan, based on certain factors such as an increase in infection rates.

In addition, the global economy has recently been impacted by Russia’s large-scale military activity against Ukraine that was initiated in February 2022 and the related economic sanctions imposed on certain Russian entities and persons by many major countries. In particular, financial and commodity markets have experienced significant volatility and energy prices have sharply increased mainly due to concerns regarding disruptions in oil and natural gas supply. Driven in part by increases in energy prices as well as increases in raw materials prices, there has been a significant inflationary trend in consumer prices in many major economies including Japan, and monetary authorities in some major economies have been tightening monetary policy in response to this trend. Depending on how the conflict develops and any additional economic sanctions imposed on Russia, as well as the impact of inflation and monetary policy developments and economic conditions in Japan and globally may be negatively impacted for an uncertain period of time.

Summary of Key Economic Indicators

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

 

		JFY 2017				JFY 2018				JFY 2019				JFY 2020				JFY 2021
		(yen amounts in billions, except percentages and index)
Percentage Changes of GDP from Previous Year
At Nominal Prices			2.0	%			0.2	%			-0.0	%			-3.9	%			1.3	%
At Real Prices(a)			1.8				0.3				-0.9				-4.6				2.3
Total Revenues of Consolidated General and Special Accounts(b)		¥	244,729			¥	243,868			¥	251,292			¥	353,277			¥	335,202
Total Expenditures of Consolidated General and Special Accounts(b)			229,389				226,661				232,905				305,846				327,800
Surplus of Consolidated Revenues over Consolidated Expenditures(b)			15,340				17,206				18,387				47,431				7,401
Public Debt			934,321				954,863				965,926				993,542				1,037,735

 

(a)	Real prices are based on calendar year 2015.

(b)	The data for JFY 2021 is the provisional results as of December 31, 2021.

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

 

		2017				2018				2019				2020				2021
		(yen or dollar amounts in billions, except percentages and index)
Unemployment Rate			2.8	%			2.4	%			2.4	%			2.8	%			2.8	%
Consumer Price Index(a)			98.6				99.5				100.0				100.0				99.8
Annual Change			0.5	%			1.0	%			0.5	%			0.0	%			-0.2	%
Corporate Goods Price Index(b)			98.4				101.0				101.2				100.0				104.6
Annual Change			2.3	%			2.6	%			0.2	%			-1.2	%			4.6	%
Current Account regarding Balance of Payments		¥	22,778			¥	19,505			¥	19,251			¥	15,674			¥	15,488
Official Foreign Exchange Reserves		$	1,264			$	1,271			$	1,324			$	1,395			$	1,406

 

(a)	Calendar year 2020=100.

(b)	Calendar year 2020=100. Indices are calculated using the monthly averages.

 

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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

The following table sets forth information pertaining to Japan’s gross domestic product for JFY 2017 through JFY 2021. Nominal GDP increased by 1.3% during JFY 2021, and the annual growth rate of real GDP was 2.3%. While the duration and extent of the economic impact of COVID-19 remain highly uncertain, it is likely that the continued spread of COVID-19 will have a significant negative impact on the Japanese economy, including with respect to nominal and real GDP.

Gross Domestic Product^(a)

 

		JFY 2017				JFY 2018				JFY 2019				JFY 2020				JFY 2021				Percentage of JFY 2021 GDP
		(yen amounts in billions)
Total Consumption
Private sectors		¥	303,005			¥	304,854			¥	303,614			¥	286,964			¥	293,817				54.3	%
Public sectors			107,707				109,093				111,837				113,703				117,185				21.6
			410,712				413,946				415,451				400,667				411,002				75.9
Total Gross Capital Formation
Private sectors
Producers’ Durable Equipment			90,183				92,375				91,180				83,746				86,327				15.9
Residential Construction			21,248				20,538				21,386				19,813				20,921				3.9
Public sectors			27,687				28,391				29,300				30,909				29,594				5.5
			139,118				141,305				141,866				134,467				136,842				25.3
Additions to Business Inventories
Private sectors			1,748				2,220				1,304				56				581				0.1
Public sectors			89				(71	)			(5	)			(27	)			(21	)			(0.0	)
			1,838				2,149				1,300				29				560				0.1
Net Exports of Goods and Services			4,044				(749	)			(2,060	)			(433	)			(6,823	)			(1.3	)
Nominal Gross Domestic Expenditures		¥	555,712			¥	556,650			¥	556,558			¥	534,730			¥	541,581				100.0	%
Real Gross Domestic Expenditures(b)		¥	553,192			¥	554,609			¥	549,885			¥	524,860			¥	536,862
Surplus of the Nation on Current Account
Exports of Goods and Services and Other Receipts from Abroad			31,346				33,864				34,329				29,402				32,757
Less: Imports of Goods and Services and Other Payments Abroad			11,026				12,153				12,483				10,241				11,024
			20,320				21,712				21,847				19,161				21,733
Gross National Income		¥	576,032			¥	578,362			¥	578,404			¥	553,891			¥	563,314
Percentage Changes of GDP from Previous Year
At Nominal Prices			2.0	%			0.2	%			(0.0	)%			(3.9	)%			1.3	%
At Real Prices(b)			1.8				0.3				(0.9	)			(4.6	)			2.3
Deflator(c)			0.2				(0.1	)			0.8				0.7				(1.0	)

 

(a)	GDP financial data are subject to change.

 

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(b)	Real prices are based on calendar year 2015.

(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 June 30, 2022.

 

		Quarterly Gross Domestic Product(a)
		2020								2021																2022
		Third Quarter				Fourth Quarter				First Quarter				Second Quarter				Third Quarter				Fourth Quarter				First Quarter				Second Quarter
		(yen amounts in billions)
Nominal Gross Domestic Expenditures(b)		¥	538,685			¥	546,188			¥	543,025			¥	541,515			¥	539,496			¥	541,857			¥	544,114			¥	547,472
Real Gross Domestic Expenditures(b)(c)		¥	527,660			¥	536,246			¥	534,470			¥	536,428			¥	534,015			¥	539,095			¥	539,376			¥	544,022
Percentage Changes of GDP from the Previous Quarter At Nominal Prices(d)			5.5	%			1.4	%			(0.6	)%			(0.3	)%			(0.4	)%			0.4	%			0.4	%			0.6	%
At Real Prices(c)(d)			5.5				1.6				(0.3	)			0.4				(0.4	)			1.0				0.1				0.9
Deflator(e)			0.0				(0.2	)			(0.2	)			(0.6	)			0.1				(0.5	)			0.4				(0.2	)

 

(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 2015.

(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.

Energy

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 per kilo-liter in January 2014, then dropping below ¥37,000 per kilo-liter in February 2015, and increasing again to approximately ¥50,000 per kilo-liter in June 2015. In the first quarter of 2016, oil price dropped below ¥30,000 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. Although the oil price significantly declined soon after the outbreak of COVID-19 in 2020, below ¥20,000 per kilo-liter in May 2020, it has steadily increased since then, as the world economy has gradually recovered from the impact of COVID-19. Recently, the oil price has increased sharply to ¥99,663 per kilo-liter in July 2022, in part due to the conflict between Russia and Ukraine and the resulting disruption in the oil supply.

 

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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
2017			98.4				2.3				98.6				0.5
2018			101.0				2.6				99.5				1.0
2019			101.2				0.2				100.0				0.5
2020			100.0				-1.2				100.0				0.0
2021			104.6				4.6				99.8				-0.2

 

(a)	All commodities. Calendar year 2020=100. Source: Domestic Corporate Goods Price Index, Bank of Japan.

(b)	General index. Calendar year 2020=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 increased from 2004 to 2007 and decreased from 2008 to 2012. After recovering in 2013, the number of employees increased from 2014 to 2019, followed by a decrease in 2020, the first in eight years. In 2020, average employment was estimated at 67.1 million, of which 23.1% were employed in mining, manufacturing and construction, 3.2% were employed in agriculture, forestry and fisheries, and 73.8% were employed in services and other sectors. In 2021, the average employment was estimated at 67.1 million, of which 22.8% were employed in mining, manufacturing and construction, 3.1% were employed in agriculture, forestry and fisheries, and 74.1% 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. In 2020, the unemployment rate increased for the first time in eleven years. It ranged between 2.7% and 3.0% during 2021. The seasonally adjusted unemployment rate was 2.6% for March, 2.5% for April, 2.6% for May, 2.6% for June and 2.6% for July in 2022, the most recent five months for which statistics are available. Concerning short-term prospects, employment conditions in Japan are expected to continue to pick up while affected by the COVID-19 pandemic and the resulting disruption of business activities. However, both the duration and extent of the impact on employment in Japan remain highly uncertain.

 

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FINANCIAL SYSTEM

The Bank of Japan and Monetary Policy

The following table sets forth the principal economic indicators relating to monetary policy from 2017 through 2021.

 

		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)
2017			352,883				458,104				17.2				973,993				4.0				475,148				3.2
2018			382,178				491,499				7.3				1,002,456				2.9				488,331				2.8
2019			396,404				509,008				3.6				1,026,199				2.4				500,517				2.5
2020			438,051				555,229				9.0				1,092,626				6.5				524,164				4.7
2021			521,752				643,496				16.2				1,162,693				6.5				536,911				2.4

 

(a)	Average amounts outstanding.

Source: Bank of Japan Statistics, Bank of Japan.

 

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GOVERNMENT FINANCE

Revenues, Expenditures and Budgets

Special Accounts

 

		JFY 2016								JFY 2017								JFY 2018								JFY 2019								JFY 2020								JFY 2021 Revised Budget(a)								JFY 2022 Revised Budget(b)
		Rev.				Exp.				Rev.				Exp.				Rev.				Exp.				Rev.				Exp.				Rev.				Exp.				Rev.				Exp.				Rev.				Exp.
		(in billions of yen)
Fiscal Investment and Loan Program		¥	42,124			¥	41,166			¥	28,207			¥	27,409			¥	26,070			¥	25,175			¥	28,484			¥	27,873			¥	52,366			¥	51,967			¥	40,595			¥	40,545			¥	48,832			¥	48,594
Government Bonds Consolidation Fund			198,994				195,911				191,227				188,134				186,158				183,082				186,970				183,878				188,973				185,921				242,212				242,212				245,798				245,798
Foreign Exchange Fund			2,948				70				2,808				70				3,101				85				3,599				160				3,133				234				2,465				1,079				2,491				1,147
Local Allocation and Local Transfer Tax			53,577				52,590				52,517				51,780				52,483				51,596				51,985				51,488				51,978				50,829				55,890				55,695				51,419				49,955
Measure for Energy			9,608				9,082				10,191				9,742				10,613				10,158				10,887				10,377				11,155				10,618				14,431				14,431				13,776				13,776
Pensions			90,142				85,786				90,158				87,413				91,700				89,464				93,209				90,919				94,591				91,804				96,610				96,610				96,912				96,912
Stable Supply of Foodstuff			940				820				979				842				970				814				968				851				926				821				1,225				1,216				1,342				1,341
Debt Management of National Forest and Field Service			329				329				342				342				349				349				356				356				363				363				360				360				355				355
Trade Reinsurance(c)			37				12				—				—				—				—				—				—				—				—				—				—				—				—
Automobile Safety			606				426				625				431				672				451				684				500				651				434				530				454				519				448
Labor Insurance			6,296				5,941				6,040				5,656				6,073				5,735				6,371				5,928				10,589				9,519				9,897				8,861				7,955				7,858
Reconstruction from the Great East Japan Earthquake			4,105				2,961				2,924				2,188				2,532				1,868				2,587				1,677				2,498				1,854				994				994				841				841
Others			456				267				469				143				456				158				452				164				338				153				291				264				300				264
Total Revenues and Expenditures(d)		¥	410,162			¥	395,361			¥	386,487			¥	374,150			¥	381,177			¥	368,936			¥	386,552			¥	374,170			¥	417,561			¥	404,519			¥	465,500			¥	462,721			¥	470,540			¥	467,289

 

(a)	As of the date of the Japan 18-K 2022 details for the provisional results for JFY 2021 Special Accounts are not available. Reflect the revised budget for JFY 2021 approved by the Diet on December 20, 2021.

(b)	As revised to reflect the revised budget for JFY 2022 approved by the Diet on May 31, 2022.

(c)	The account was abolished effective JFY 2017.

(d)	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.

 

S-23

FOREIGN TRADE AND BALANCE OF PAYMENTS

Foreign Exchange Rates

In recent months, the exchange rate for the U.S. dollar against the yen has sharply increased. As of September 21, 2022, the daily interbank rate for the U.S. dollar against the yen was ¥143.74.

FINANCIAL SYSTEM

The Bank of Japan and Monetary Policy

In statements released on June 17, 2022 and July 21, 2022, the BOJ recognized that the consumer price index (for all items less fresh food) will likely increase at a year-on-year rate of 2% due to rises in energy and food prices for the time being, but it is expected to decelerate thereafter because the positive contribution of the rise in energy prices to the consumer price index is likely to wane. The BOJ also confirmed that it will maintain its monetary easing policy until the year-on-year rate of increase in the consumer price index (for all items less fresh food) exceeds 2% in a stable manner.

 

S-24

SUMMARY FINANCIAL INFORMATION

JAPAN BANK FOR INTERNATIONAL COOPERATION

SUMMARY JAPANESE GAAP FINANCIAL INFORMATION AS OF AND FOR THE FISCAL YEAR ENDED MARCH 31, 2022

The tables below set forth the summary financial information of JBIC on a consolidated basis as of and for the fiscal year ended March 31, 2022, prepared in accordance with Japanese GAAP derived from the audited financial statements of JBIC for the fiscal year ended March 31, 2022 contained in Exhibit 2 to the JBIC 18-K 2022. The following summary does not purport to be complete, and for more information, you should refer to such audited financial statements and other explanatory information.

 

S-25

CONSOLIDATED BALANCE SHEET

 

		As of March 31, 2022				As of March 31, 2022
		(In millions of yen)				(In millions of U.S. dollars)
Assets:
Cash and due from banks		¥	1,451,153			$	11,857
Securities			328,053				2,680
Loans and bills discounted			14,759,174				120,591
Other assets			602,264				4,922
Property, plant and equipment			29,229				239
Buildings			3,714				30
Land			24,311				199
Construction in progress			221				2
Other			981				8
Intangible assets			9,170				75
Software			9,170				75
Customers’ liabilities for acceptances and guarantees			1,721,217				14,063
Allowance for loan losses			(470,834	)			(3,847	)
Total assets		¥	18,429,429			$	150,580
Liabilities:
Borrowed money		¥	7,554,208			$	61,722
Bonds payable			5,634,984				46,041
Other liabilities			609,336				4,981
Provision for bonuses			597				5
Provision for directors’ bonuses			9				0
Net defined benefit liability			6,056				49
Provision for directors’ retirement benefits			51				0
Acceptances and guarantees			1,721,217				14,063
Total liabilities		¥	15,526,462			$	126,861
Net assets:
Capital stock		¥	2,023,800			$	16,536
Retained earnings			976,953				7,982
Total shareholder’s equity			3,000,753				24,518
Valuation difference on available-for-sale securities			16,084				131
Deferred gains or losses on hedges			(116,730	)			(954	)
Foreign currency translation adjustment			2,508				21
Total accumulated other comprehensive income			(98,136	)			(802	)
Non-controlling interests			350				3
Total net assets		¥	2,902,967			$	23,719
Total liabilities and net assets		¥	18,429,429			$	150,580

 

S-26

CONSOLIDATED STATEMENT OF OPERATIONS

 

		For the year ended March 31, 2022				For the year ended March 31, 2022
		(In millions of yen)				(In millions of U.S. dollars)
Ordinary income		¥	313,480			$	2,561
Interest income			227,973				1,863
Interest on loans and discounts			173,933				1,421
Interest and dividends on securities			963				8
Interest on deposits with banks			1,920				16
Interest on interest swaps			51,128				418
Other interest income			27				0
Fees and commissions			26,100				213
Other ordinary income			31,416				257
Other income			27,989				228
Recoveries of written-off claims			6,673				55
Other			21,315				173
Ordinary expenses			296,089				2,419
Interest expense			135,363				1,106
Interest on borrowed money and rediscounts			21,107				172
Interest on bonds			114,152				933
Other interest expense			102				1
Fees and commissions payments			3,492				29
Other ordinary expenses			1,988				16
General and administrative expenses			21,713				177
Other expenses			133,531				1,091
Provision of allowance for loan losses			130,992				1,070
Other			2,538				21
Ordinary profit			17,391				142
Extraordinary income			4				0
Gain on disposal of noncurrent assets			4				0
Extraordinary loss			0				0
Loss on disposal of noncurrent assets			0				0
Net income before income taxes			17,394				142
Income taxes – current			48				0
Total income taxes			48				0
Net income			17,345				142
Net income attributable to non-controlling interests			46				1
Net income attributable to owner of parent		¥	17,299			$	141

 

S-27

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

		For the year ended March 31, 2022				For the year ended March 31, 2022
		(In millions of yen)				(In millions of U.S. dollars)
Net income		¥	17,345			$	142
Other comprehensive income (loss)			(193,007	)			(1,577	)
Valuation difference on available-for-sale securities			13,996				114
Deferred gains or losses on hedges			(211,584	)			(1,729	)
Foreign currency translation adjustment			1,896				16
Share of other comprehensive income (loss) of equity method investments			2,684				22
Comprehensive income (loss)		¥	(175,661	)		$	(1,435	)
(Comprehensive income (loss) attributable to)
Owner of parent			(175,708	)			(1,436	)
Non-controlling interests			46				1

 

S-28

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		For the year ended March 31, 2022				For the year ended March 31, 2022
		(In millions of yen)				(In millions of U.S. dollars)
Cash flows from operating activities
Net income before income taxes		¥	17,394			$	142
Depreciation and amortization			3,067				25
Losses (profits) of equity method investments			(1,483	)			(12	)
Increase (decrease) in allowance for loan losses			130,992				1,070
Increase (decrease) in provision for bonuses			11				0
Increase (decrease) in provision for directors’ bonuses			(0	)			(0	)
Increase (decrease) in net defined benefit liability			(281	)			(2	)
Increase (decrease) in provision for directors’ retirement benefits			4				0
Interest income			(227,973	)			(1,863	)
Interest expense			135,363				1,106
Losses (gains) related to securities			(17,089	)			(140	)
Foreign exchange losses (gains)			(1,442	)			(12	)
Losses (gains) on disposal of noncurrent assets			(3	)			(0	)
Net decrease (increase) in loans and bills discounted			(1,202,359	)			(9,824	)
Net increase (decrease) in borrowed money			902,887				7,377
Net decrease (increase) in deposits (excluding deposits paid to Bank of Japan)			(270,593	)			(2,211	)
Increase (decrease) in straight bonds-issuance and redemption			667,555				5,454
Interest received			223,946				1,830
Interest paid			(127,193	)			(1,039	)
Other			(298,866	)			(2,441	)
Subtotal			(66,064	)			(540	)
Income taxes paid			(45	)			(0	)
Net cash provided by (used in) operating activities			(66,110	)			(540	)
Cash flows from investing activities
Purchase of securities			(43,434	)			(355	)
Proceeds from sales of securities			26,169				214
Proceeds from redemption of securities			—				—
Purchase of property, plant and equipment			(786	)			(7	)
Proceeds from sales of property, plant and equipment			3				0
Purchase of intangible assets			(7,363	)			(60	)
Net cash provided by (used in) investing activities			(25,412	)			(208	)
Cash flows from financing activities
Proceeds from issuance of new shares			60,000				490
Dividends paid to non-controlling interests			(14	)			(0	)
Payment to National Treasury			(21,868	)			(179	)
Net cash provided by (used in) financing activities			38,116				311
Effect of exchange rate change on cash and cash equivalents			—				—
Net increase (decrease) in cash and cash equivalents			(53,405	)			(437	)
Cash and cash equivalents at beginning of period			781,277				6,384
Cash and cash equivalents at end of period		¥	727,871			$	5,947

 

S-29

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the bonds will be approximately $●.

We have created the Framework based on the Green Bond Principles 2021 (the “GBP”), established by the International Capital Markets Association. We intend to use the net proceeds from the issuance of the bonds which will be managed under the Account for Ordinary Operations for existing or future Eligible Projects (as defined below) in accordance with the Framework.

Eligible Projects

We will allocate the amount equivalent to the net proceeds of the bonds to finance eligible projects (“Eligible Projects”) that (i) have been financed by us within the 36 months prior to the date of the issuance of the bonds, or will be financed within 36 months on or after the date of the issuance of the bonds; and (ii) meet at least one the following “Eligibility Criteria”:

 

•

Renewable Energy—Funds to finance or refinance development, construction, management, operation and/or maintenance of renewable energy projects (including production, power generation, transmission, and parts manufacturing) specified below (limited to projects with less than 100g-CO2 / kWh, and less than 15% usage of non-renewable energies as backup power):

 

•

Solar and Solar Thermal

 

•

Wind (offshore and onshore)

 

•

Geothermal

 

•

Hydro (power generation of 25 MW or less)

 

•

Biomass (waste-derived or wood/ wood pellet-derived products certified by the Forest Stewardship Council (FSC) or Programme for the Endorsement of Forest Certification (PEFC))

 

•

Hydrogen (Hydrogen production: limited to green hydrogen, which has zero CO2 emission during production and combustion. Hydrogen power generation: limited to power plants fueled by 100% green hydrogen)

 

•

Clean Transportation (Trains and Railways)—Funds to finance or refinance clean transportation projects (excluding freight vehicles for transporting fossil fuels) such as:

 

•

Manufacturing, operation and/or maintenance of electric trains and/or energy efficient trains (CO2 emissions of less than 50g-CO2 / p-km for passenger trains and 25g-CO2 / t-km for freight trains)

 

•

Construction, extension, upgrade, maintenance and/or operation of railways and/or railway systems

 

•

Clean Transportation (Zero-emission vehicles (“ZEV”))—Funds to finance or refinance clean transportation projects (Zero-emission vehicles: Battery electric vehicle (“BEV”), Fuel cell vehicle (“FCV”), etc.) such as:

 

•

Investment in property plant and equipment (PP&E) for manufacturing of BEV and components; development of charging infrastructure

 

•

Investment in property plant and equipment (PP&E) for manufacturing of FCV and components; development of charging hydrogen infrastructure

 

•

Green Buildings—Funds to finance or refinance real estate properties which have obtained or is expected to obtain one of the following:

 

•

Gold or Platinum rating under Leadership in Energy and Environmental Design (“LEED”)

 

S-30