Annual Report2017

CENTRAL JAPAN RAILWAY COMPANY ANNUAL REPORT 2017

CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 For the Year Ended March 31, 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017

Management Philosophy Contribute to the development of Japan’s main artery and social infrastructure

Central Japan Railway Company (JR Central) marked the 30th anniversary of its founding on April 1, 2017. JR Central took this opportunity to revise its management philosophy with a view to continue carrying out its mission and responding to new challenges, such as operating “three generations of railways” , which are conventional lines, the Tokaido Shinkansen, and the Chuo Shinkansen.

Japan’s Main Artery Social Infrastructure

JR Central’s mission is to undertake high-speed, large- On a broader perspective, JR Central also undertakes capacity passenger transport between Tokyo, Nagoya, the mission of supporting the social infrastructure. and Osaka. “Japan’s main artery” refers to this passenger That is, along with the management of Japan’s transport. Since the artery runs through this area of main artery, we take a locally oriented approach Japan, which plays an important role as the center of in operating a network of conventional lines in the the country’s economy and culture, it is possible that Tokai Region, centered on the Nagoya and Shizuoka stagnancy in the main transportation artery will cause areas, and manage affiliated business focused on the Japan’s economic and societal movements in general to local communities, thereby supporting the people in also stagnate. JR Central must continue to carry out its these areas. We will remain committed to operating mission of managing Japan’s main transportation artery conventional lines while managing and further today and in the future through operation of the Tokaido enhancing affiliated businesses. Shinkansen and the Chuo Shinkansen.

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CENTRAL JAPAN Messages from Key Measures and Operating Revenues Composition RAILWAY COMPANY Management Management Strategies The transportation business accounts for approximately 80% of consolidated operating revenues and 1 Management Philosophy 8 Greetings 14 Key Measures and Capital Investment earnings from the Tokaido Shinkansen account for roughly 90% of non-consolidated operating revenues. 2 Contents 10 Interview with the President 18 Ensuring Safe and Reliable Transportation 3 Operating Revenues 12 Topics 1 Long-Term Loan Using the 22 Enhancing Transportation Services Transportation Tokaido Shinkansen 4 Market Area Characteristics and Fiscal Investment and Loan Transportation Capacity Program (FILP) 26 Promoting the Chuo Shinkansen 1,368.6 1,211.9 Project Using the Superconducting billion yen billion yen 6 Enhancing Our Competitive 13 Topics 2 Maglev System Strength Outlook on Key Measures 28 Refining the Superconducting Maglev Technology and Reducing Costs 78% 88 % Other Other 30 Enhancing Sales and Marketing 119.9billion yen 64.8billion yen 32 Technological Development and 7% 5% Enhancement of Technical Capability Real Estate Conventional Lines 33 Overseas Deployment of High- 41.2billion yen 103.9billion yen Speed Railway Systems Consolidated Non-consolidated 8% 2% 34 Developing Affiliated Businesses Merchandise and Other 1,756.9 1,380.7 227.2billion yen billion yen billion yen 13% FY2016 FY2016

Corporate Data and ESG* Information Appendices Financial Section Note 1: Consolidated operating revenues 36 Engagement in Global 51 Profile / Organization Chart 90 Financial and Transportation composition is based on revenues from external customers Environment Preservation Data Note 2: The total of items in the breakdown 52 Operating Area may not be 100% due to rounding. 40 Human Resources Development 92 Financial Data Comparison 53 History of Three JR Companies 42 Cooperation with Local (Consolidated) Communities / International 54 Summary of Performance Exchanges / Promotion of 93 Stock Information Culture & Art and Lifelong 56 Financial Highlights (Consolidated / Learning Non-consolidated)

44 Corporate Governance 57 Other Related Materials

50 Board of Directors, Audit and 58 Financial Section Supervisory Board Members, and Corporate Officers

* Environmental, Social, and Governance. [Remarks regarding forecasts, etc.] Companies appropriately considering/responding to ESG Future plans, forecast figures, etc. in this report are an outlook based on the information that is currently available issues and the existence of shareholders who make for JR Central and may contain risks and uncertainty. Examples of potential risks and uncertainty include investments in response to such efforts by the companies economic trends, business environment developments, consumption trends, competition situation for JR Central are thought to lead to the solution/improvement of global and subsidiaries, and changes in relevant laws and legal provisions. This report is compiled based on information environmental issues and social issues and even to the available as of the end of May 2017 in principle. sound development/expansion of capital markets, thus •In this report, figures of financial information are truncated, while statistical data and all percentages are rounded. contributing to the establishment of a sustainable society. •FY2016 signifies the fiscal year ended March 31, 2017. Source: Japan Exchange Group, Inc.

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Japan’s population and economic activity are Representing a powerful presence in the inter-city concentrated in the area covering the Tokyo Metropolitan area, the Nagoya region, and the transportation market, one that is unrivaled all over the world. Osaka region Percentages of our market area in Japan as a whole

JR Central’s Market Area Others

Tokaido Shinkansen 23.7% Area [As of October 2016]

An overwhelming capacity for transporting 60.3% passengers along its main route, from Tokyo to Population Osaka [As of January 1, 2016]

Changes in daily transportation capacity (comparison 64.6% between the Tokaido Shinkansen and airline transportation Prefectural GDP Nagoya Tokyo Hiroshima Okayama services operating between the Tokyo Metropolitan area (Nominal GDP) Osaka [FY2014] and the Osaka region) Fukuoka 0 50 100 (%) Tokaido Shinkansen Airlines (Ten Thousand seats/day) [Source] 40 JR Central’s market area is calculated taking the following prefectures into Approximately account Tokyo, Kanagawa, Chiba, Saitama, Ibaraki, Shizuoka, Yamanashi, Nagano, Operating area *1 Aichi, Mie, Gifu, Shiga, Osaka, Kyoto, Hyogo, Nara 360,000 seats Population: Ministry of Internal Affairs and Communications “Population, Demographics and Number of Households Derived from Basic Resident Registration” Total production by prefecture: Cabinet Office “Report on Prefectural Accounts”

30 JR Central boasts an overwhelming market share within its operating areas

About An inter-city transportation capacity that is unrivaled all over the world 12times that of airlines Market Share*1 (against Airlines) Railway Airlines (Example) Comparison with overseas transportation services

JR Central JR West Shinkansen 20 (Thousand passengers/day) Operating (Reference*3) Tokyo Nagoya Osaka Okayama Hiroshima Hakata 100% Kilometers Tokaido Tokyo area*2 - 452 Nagoya area*2 New York ~ Shinkansen (76 thousand passengers/day) Tokyo ~ Nagoya Washington D.C. [Tokyo ~ Shin-Osaka] (LGA-IAD) 86% 14% 366.0km 369km Eurostar *1 Tokyo area - [London ~ 27 *2 Osaka area Los Angeles ~ San 10 Paris/Brussels] Tokyo ~ Shin-Osaka (142 thousand passengers/day) Francisco (LAX-SFO)

Acela Express *2 69% 31% 552.6km 542km [Boston ~ 10 Tokyo area - Okayama Washington D.C.] (9 thousand passengers/day) New York ~ Chicago Tokyo ~ Hakata 70% 30% (LGA-ORD) (Reference) Tokyo area - Hiroshima *3 (15 thousand passengers/day) Approximately Airlines 1,174.9km 1,180km *2 11 % 90% 30,000seats [New York ~ Chicago] 10 0 Tokyo area - Fukuoka ’07.3 ’08.3 ’09.3 ’10.3 ’11.3 ’12.3 ’13.3 ’14.3 ‘15.3 ’16.3 ’17.3 (29 thousand passengers/day) [Source] *1 Tokaido Shinkansen: The number of passenger seating provided (including extra *1 Calculated by JR Central based on figures provided on the Eurotunnel train services) on through-service “Nozomi” and “Hikari” lines operating between website (2016.1-2016.12) *1 Market share is calculated by JR Central based on the Inter-prefectural data of the inter-Regional Passenger Mobility Survey, Tokyo Station and Shin-Osaka Station in each respective fiscal year. *2 Calculated by JR Central based on figures provided by the National Fact published by the Ministry of Land, infrastructure, Transport and Tourism for FY2015. *2 Airlines: Calculated by JR Central based on information pertaining to specified Sheet: FY2016 (Amtrak) *2 Tokyo area: Tokyo, Kanagawa, Chiba, Saitama, Ibaraki / Nagoya area: Aichi, gifu, Mie / Osaka area: Osaka, Kyoto, Hyogo, Nara Japanese air carriers (Ministry of Land, Infrastructure, Transport and Tourism) for *3 Calculated by JR Central based on figures provided on the U.S. *3 Based on the U.S. Department of Transportation website FY2006 to FY2016. Department of Transportation website (2014.12-2015.11)

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FY2019 •All rolling stock to be N700A type rolling stock capable of traveling at a maximum speed of 285km/h (plan) FY2017 •Completion of N700S Thoroughgoing preparations against future aging degradation validation test vehicles (plan) of the Tokaido Shinkansen and large-scale disasters

Japan’s main transportation artery needs to be duplicated

FY2014 FY2013 The area covering the three major cities (Tokyo, Nagoya, and Osaka) will •Increase maximum •Revise the timetable effectively form one massive mega-city with a drastic reduction in travel speed to 285km/h Transportation Service to have a maximum of times brought on by the introduction of the Superconducting Maglev System 10 “Nozomi” services We succeeded in lifting the maximum speed of our services With this expansion of the sphere of activity, our lifestyle will undergo a running per hour for massive change in terms of the way business is conducted and how we from 220 km/h, to 270 km/h, and then to 285 km/h. We nearly all operating hours use our spare time, opening the door for a wide range of possibilities successively increased the number of services for our fastest FY2012 speed train, the “Nozomi”, through increased investment •Put the N700A into •Operating speed •Time required (fastest) in rolling stock and ground facilities. We established an commercial service Tokyo ~ Nagoya City Tokyo ~ Osaka City operational system running up to 10 up and down “Nozomi” •Extend platforms at 500km/h 40minutes 67minutes services each hour. We continued to introduce new rolling Shin-Osaka Station stock incorporating the latest technology. •First stage (Shinagawa Station ~ Nagoya Station)

Tokaido Shinkansen 1hr 26min* FY2007 FY 2017 •Put the Series N700 into •The “smartEX” service starts Chuo Shinkansen commercial service for the Tokaido Shinkansen and (Superconducting minutes Maglev System) 40 the Sanyo Shinkansen *As of the March 2017 timetable revision (travel time based on the fastest trains in service) 1. Register 2. Book 3. Board

Credit Tap! Chuo Shinkansen Project outline card The project has been proceeding at JR Central’s own expense, using the Superconducting FY2003 Maglev System developed by the Company. We will first establish a connection between FY2012 Tokyo and Nagoya City, before expanding this service to Osaka City under the premise of •Shinagawa Station on the ensuring sound management and providing stable dividends. Once launched, JR Central •The “PLUS EX” service starts Commuting type Tokaido Shinkansen is opened IC card will manage this service in an integrated manner together with the Tokaido Shinkansen. •Maximum speed of all Tokaido Shinkansen trains increased to 270km/h FY2009 Dividend per share Net income (non-consolidated) (Yen / Year) •Shift to train scheduled •The “EX-IC” service expands to 140 Providing stable 140 135 centered on “Nozomi” the Sanyo Shinkansen 125 dividends 120 115 120 •Corporate member service starts 105 Our policy on dividends has 100 95 (100s of 90 90 90 million yen) FY2007 85 Passenger Service always been to decide the specific 80 75 4,000 •The “EX-IC” service starts for dividend amount in accordance 65 60 3,000 the Tokaido Shinkansen We expanded the lineup and sections covered by with the management environment/ 50 50 50 50 50 50 55 the “Express Reservation” online reservation service, performance in each FY based 40 2,000 establishing it as a core Tokaido Shinkansen service. And on the principle of continuously 20 1,000 providing stable dividends. we improved convenience through our ticketless boarding 0 0 service EX-IC. We aim to improve convenience for light ’99.3 ’02.3 ’05.3 ’08.3 ’11.3 ’14.3 ’16.3 ’17.3 ’18.3 plan

FY2006 users and overseas visitors to Japan with our new online *1: The planned figures for FY2017 are as of the publication of the financial report for FY2016. reservation and ticketless boarding service, the “smartEX”, *2: With respect to the amount of dividend per share for FY2012, given the adoption of the unit share system of splitting 1 share of common stock into 100 shares and setting •“Express Reservation” service expands to the total one (1) unit of shares as 100 shares effective October 1, 2012, the amount was calculated on assumption that the stock split was conducted at the beginning of the period. length of Tokaido and Sanyo Shinkansen lines scheduled for implementation at the end of September 2017. *3: The amount of dividend per share for FY2011 and prior is shown by dividing the amount by 100 for the ease of comparison with the amount for FY2012 and thereafter.

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Ensuring Safe and Reliable Transportation and encourage customers to use the service. We will continue to Consulting Corporation) while continuing to bolster promotional actively market “EX Family Hayatoku” and other tourist products activities for the use of the Superconducting Maglev system Messages from Management Greetings In the railway business, JR Central will place top priority for Express Reservation and PLUS EX along with “50+” in order in the Northeast Corridor Project in the U.S. and proceeding on ensuring safe and reliable transportation and promote to spur demand for tourism. Further, we will look to enhance with the technical consulting services for Taiwan High Speed earthquake countermeasures, such as the implementation of tourism campaigns and products that convey the attractiveness Rail. We will also promote initiatives to establish the Japanese derailment/deviation countermeasures expanded to cover the of Kyoto, Nara, Tokyo, Hida, Ise-Shima and other locations, and high-speed rail system, which is based on the core principle of To all persons reading the Central Japan entire Tokaido Shinkansen, enhancement of the earthquake will actively engage in sales and marketing activities such as “Crash Avoidance”, as a global standard. safety of elevated track columns, etc. along the conventional promoting products using events held along railway lines and Railway Company Annual Report 2017 lines, renovation and anti-quake reinforcement of the Nagoya providing further information to overseas customers. Technological Development and Enhancement of Workshop and station buildings, and anti-falling measures Technical Capability on suspended ceilings of stations on the Tokaido Shinkansen Promoting the Chuo Shinkansen Project Using the and conventional lines. We will also continue to move ahead Superconducting Maglev System In an effort to enhance technological development and with our efforts to refurbish and enhance structures and other capabilities, JR Central will newly produce N700S validation facilities, which include the large-scale renovation work of The Chuo Shinkansen that employs the Superconducting test vehicles and prepare to perform running tests for the final the Tokaido Shinkansen as well as measures against falling Maglev System will enable us to continue our mission of checking of the new technology to be reflected in the next rocks and improvement of safety devices on grade crossings operating a high-speed railway linking the Tokyo Metropolitan set of commercial trainsets. In addition, we will further move for conventional lines. In addition, we will work to repeatedly areas, Chukyo regions, and Kinki regions, which is also the forward in implementing efficient and advanced inspection and conduct practical training in order to more appropriately lifeline of our business. It is being planned in order to ensure maintenance that utilize the condition monitoring technology, as respond to natural disasters and other situations. the future foundation of the company. well as make further progress with technological development As for the Chuo Shinkansen Project, we will maintain sound that can lead to cost reductions for large-scale renovation, Enhancing Transportation Services management and stable dividends and will take steady steps earthquake countermeasures, upgrading equipment, and toward completing the project while demonstrating flexibility. other uses, while we pursue technological development that In terms of the Tokaido Shinkansen, we will continue JR Central will continue promoting close coordination with local would enable us to accurately respond to landslides and other scheduling trains flexibly by utilizing the “10 Nozomi Timetable” communities and carry out measurement, design, acquisition disasters. (operating up to 10 “Nozomi” services in both directions) of land, etc. according to plan. At the same time, we will to meet demands with a focus on time frames or seasons steadily move forward with construction work, including tunnel Developing Affiliated Businesses with increased customer use. JR Central will also continue excavation and diaphragm wall work of the Southern Alps introducing the N700A (3rd edition) as well as begin upgrading tunnel, Shinagawa Station, and Nagoya Station, where work is Looking at businesses other than the railway business, we will the series to reflect the features of the 3rd-edition model, such challenging and construction periods will be long. We will also smoothly bring up to speed the businesses in JR Gate Tower, as the enhancement to shorten the stopping distance of the carry out this work on sections where the necessary preparation which fully opened in April 2017, operate them with JR Central Earthquake Brake on existing rolling stock. Furthermore, we has been completed, while giving serious consideration to Towers in a uniform manner, and provide attractive services, will complete the installation work of more security cameras in construction safety and environmental protection. Meanwhile, including existing businesses, to boost earnings. We will also cabins of the N700A, etc. to enhance security. we will also promote efforts to establish sophisticated and make efforts to further strengthen the earning capability of the Chairman and Representative President and Representative Director Director In terms of conventional line, we will flexibly increase the efficient operation and maintenance systems for the Chuo JR Central Group by revitalizing station building commercial Yoshiomi Yamada Koei Tsuge frequency or the number of cars of train to meet demands for Shinkansen. Furthermore, in terms of financing, with a view to facilities and merchandise businesses, promoting businesses “Shinano,” “Hida” and other limited express trains. Meanwhile, promoting construction of the Chuo Shinkansen, we arranged by making effective use of land owned by the Company, to further enhance the convenience of customers using the for a long-term loan using the Fiscal Investment and Loan and striving to further increase earnings and enhance In the railway business, JR Central sets the highest Tokaido Line (between Okazaki Station and Toyohashi Station) Program (FILP) and borrowed a total of 3 trillion yen before July competitiveness. priority on ensuring safe and reliable transportation and to establish an efficient structure in line with customer use, 2017 as scheduled. under its management philosophy of “Contribute to we will introduce the centralized passenger service system in the development of Japan’s main artery and social Engagement in Global Environment Preservation October 2017. infrastructure. ” JR Central’s fundamental policy is to Refining Superconducting Maglev Technology and In regard to passenger-related facilities, we will begin operation In regard to global environmental issues, JR Central will not continue executing the long-term mission to integrally Reducing Costs of movable platform fences to be installed at Shinagawa and only make the public aware of the superiority of railways to maintain and develop the Tokaido Shinkansen, which Shin-Yokohama stations on the Tokaido Shinkansen. At the same In regard to the Yamanashi Maglev Line, we will proceed the global environment, but also continue promoting various serves as Japan’s main transportation artery, and the time, we will proceed with the development of movable platform with verification testing, etc. to establish a maintenance policies that contribute to engagement in global environment conventional line network in the Tokai region through fences to accommodate conventional lines, which have varying system that responds to commercial services by alternately preservation, such as introduction of the N700A, which enables continuous efforts, such as providing services that are models and numbers of train cars, and conduct verification operating 2 trainsets and continuing to conduct long distance significant energy conservation, as well as working toward preferred by customers and streamlining of work, as testing at Kanayama Station. We will complete installing braille running tests by using rolling stock and facilities in commercial resource and energy conservation in our daily operations. well as to operate the “three generations of railways” by blocks that indicate where platform edges are located on the line specifications. We will also strive to further refine the constructing the Chuo Shinkansen to make Japan’s main platforms of conventional lines in stations servicing 5,000 or Superconducting Maglev technology and reduce the costs for transportation artery a dual system. more passengers by moving up the installation plan by three the construction, operation, and maintenance of commercial In FY2017, as we celebrate the 30th anniversary of the The railway business, which is the core business of years. We will continue to move forward with the installation lines. We will also continue promoting the “Superconducting Company’s founding, JR Central is thankful to its customers the JR Central Group, requires long-term massive of barrier-free facilities, such as elevators and multi-functional Maglev Ride” in a well-planned manner and, as an initiative and all related persons who have supported the Company, capital investment and technological development with toilets, at stations on conventional lines. commemorating the Company’s 30th anniversary of its and is committed to making efforts to reinforce earning considerable lead times. Due to such a business structure, founding, will host classes for children along with the Ride. power and enhance technical capabilities based on renewed it is vital that we manage our railway business based Enhancing Sales and Marketing determination to continue contributing to the development of on a long-term outlook rather than pursuing short-term Overseas deployment of high-speed railway systems Japan’s main artery and social infrastructure. At the same time, profitability. Therefore, we are promoting mid-to-long term As part of our efforts to strengthen sales and marketing, we we will strive to promote efficiency and reduce costs throughout projects in a well-planned manner while simultaneously will launch “smartEX”, a new online reservation and ticketless In our overseas projects, we will promote technical assistance our business execution activities, including capital investments, providing high quality services in our daily railway boarding service for customers other than EX service members to the main development entity of the Texas Project in the U.S. with a view to enhancing our management strength. through the local subsidiary (High-Speed-Railway Technology operations and aiming to enhance our management base. and customers from overseas, at the end of September 2017

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Messages from Management Interview with the President become an EX service member, by the end of September 2017. Over 50 years have passed since the inauguration of the Tokaido This service will make it more convenient for light users, including Shinkansen, which currently fulfills this role, and the time has overseas tourists visiting Japan, to travel on the Shinkansen. come where we must consider drastic measures to respond to Contribute to the development of Japan’s aging in the future and large-scale disasters. In the wake of the Great East Japan Earthquake, the need for a new line which What will N700S, the next series of rolling stock for the enables us to offer multiple routes in our main transportation main artery and social infrastructure Tokaido Shinkansen, be like? Can you provide us with details artery has become even more important to prepare for the risk on the schedule for adding this next set of rolling stock? from natural disasters. This is the very reason why we decided The N700S - a new series to be introduced following the N700 full model to complete the Chuo Shinkansen as quickly as possible, as it changeover - comes equipped with the latest technology designed to can be used as an alternate to the role of the Tokaido Shinkansen improve safety and reliability, while better conserving energy. by utilizing the Superconducting Maglev System, which we President and Representative Director With the N700S we have developed a “standard rolling stock” have developed, under the condition that we bear the cost of its Koei Tsuge that is adaptable to rolling stock of varying trainset lengths construction. JR Central will operate the Chuo Shinkansen in an through the optimal placement of underfloor equipment, made integrated manner along with the Tokaido Shinkansen. possible by painstaking efforts to reduce the size and weight of the equipment used. What risk factors do you foresee for the Chuo Shinkansen Management arteries, and will also carry out the mission of contributing to The first trainsets are scheduled for around March 2018, which the development of social infrastructure in a broad sense by are to be used as validation test vehicles to perform the final Project, and how do you feel they can be overcome? What is most important in management? supporting communities and people through the operation of confirmation tests of new technologies that will be incorporated With construction on the Chuo Shinkansen taking place over the long- In the railway business, which is the core business of the JR conventional lines, mainly in Nagoya and Shizuoka, and by the in the next series of commercial rolling stock (mass produced term, naturally this brings with it inherent risks in terms of fluctuations Central Group, requires long-term massive capital investment and expansion of affiliated businesses in these areas. JR Central vehicles). Following this, they will be used as testing vehicles to in the economic climate, namely fluctuations in business conditions, technological development. Due to such a business structure, is committed to continue contributing to the development of promote technological development in an aim to further brush up interest rates, prices, labor costs, and land value. However, we aim to it is vital that we manage our railway business based on a long- Japanese society overall by pursuing these activities. Shinkansen technologies. We plan to introduce the next series of deal with this by strengthening our management base by improving term outlook rather than a short-term profitability-based view. commercial rolling stock (mass produced vehicles) in FY2020. profitability, streamlining business operations, reducing costs, and by What’s also important is improving our three strengths - safety, further curtailing construction costs for the Chuo Shinkansen specifically. technology, and human resources - to sustain and grow the Tokaido Shinkansen We aim to gradually complete this project in a flexible manner while Company. Conventional Lines ensuring sound management and stable dividends, assuming that the Passenger volume for the Tokaido Shinkansen is improving The most important is our safety capabilities. If we were to cause Company is provided with freedom in management while maintaining steadily, marking another record high in FY2016. How do Can you tell us of what initiatives you have in place to a major accident, all of the trust placed in our Company built up autonomy over investments as a private enterprise. you feel about these circumstances? expand the use of conventional lines? over the years would be lost in an instant, and not only the Chuo From the perspective of mitigating management risk, we secured Shinkansen Project, but the Company’s very existence would be While the Japanese economy has largely continued to show In regards to conventional lines, we have steadily improved services financing through long-term loans using the Fiscal Investment put in danger. signs of growth, we also feel that many of the measures we put in such as introducing new rolling stock, and increasing the frequency and Loan Program (FILP) in FY2016 and FY2017. place to enhance our competitiveness over the mid to long-term The Tokaido Shinkansen boasts an incredible safety record, with of trains. In terms of “Shinano”, “Hida”, and other limited express Reference P. 12 have borne fruit. trains, we will strive to increase the use of our train services by no fatal accidents involving passengers on board in the period Topics: Long-Term Loan Using the Fiscal Investment and Loan Program (FILP) of over 50 years since the launch of the service. How we can Since the foundation of our company, we have continued to flexibly increasing the frequency and the number of train cars to maintain this service record, and improve it further, lies at the consistently work towards strengthening our transportation meet demand at busy times and for nearby events, while also very core of JR Central’s management philosophy. To achieve capacity. For example, the “10 Nozomi Timetable”, which strengthening ties with local communities to achieve this. Affiliated Businesses this, along with our other goals, we will endeavor to operate made the current high transportation capacity possible, was In anticipation of the replacement of diesel railcars currently used for the The JR Gate Tower was fully opened in April 2017. What is our daily railway services in a disciplined manner, increase achieved after spending a period of over five years installing “Hida” limited express and other trains, the Company will newly develop the status since the full-scale opening? customer satisfaction by improving our technological capabilities, additional platforms, increasing station loopback equipment, and a test vehicle for the next-generation limited express rolling stock that and enhance our human resource capabilities, which are so implementing other measures at Shin-Osaka Station to bring it to uses the hybrid system, the first of its kind for JR Central, by the end of Opened in 2000, JR Central Towers have already established fundamental to the operation of our railway services. fruition. The continual introduction of new rolling stock, and the 2019 and conduct test runs to establish relevant technologies. We are itself as a Nagoya landmark, and has greatly contributed to the enrichment of our “EX service*” lineup and other such sales and aiming to commercially operate the country’s first hybrid-type railway economic development of the Chubu region. marketing activities also help support the current high level of rolling stock that runs at speeds of up to 120 km/h, while enhancing JR Gate Tower, which stands adjacent to the Towers, started JR Central celebrated the 30th anniversary of its founding. service of our Shinkansen trains. safety and comfort of such trains, and are taking steps toward a target of ahead office-leasing in November 2016. Subsequently in April * Our “EX service” lineup refers to the “Express Reservation” service offered by JR The Company began operating with a sense of crisis, facing the launching mass-produced vehicles in FY2022. 2017, “Takashimaya Gate Tower Mall” and “Nagoya JR Gate Central and JR West, and the “PLUS EX” service offered by JR Central. risk of bankruptcy as a private company immediately after the From the perspective of strengthening ties with local communities, Tower Hotel” opened, resulting in the full-opening of the complex, division and privatization of Japanese National Railways in 1987. we are also rolling out “Shupo” campaigns intended to introduce and we have been receiving a great number of visitors to date. What kind of service enhancement measures do you have in We will continue to operate Towers and Gate Tower in a uniform manner Over the past 30 years since then, we have managed to expand place for the Tokaido Shinkansen over the mid to long-term? the many tourist attractions situated around our railway lines in our earnings base through a concerted effort to enhance safety an attempt to further promote the use of limited express trains on and take initiatives to maximize earnings by demonstrating synergistic and convenience on the Tokaido Shinkansen and conventional We will continue to improve customer convenience by boosting conventional lines, and “Sawayaka Walking” events, which are effects through clearly segregating the business concepts of both lines, while actively pursuing affiliated businesses. I sincerely the advantages provided by the Tokaido Shinkansen in order to free walking courses covering sightseeing spots near our railway facilities while expanding earnings based on business cooperation and thank the numerous customers and related persons who have continue fulfilling its mission. lines that start from our stations. pursuing efficient management. supported us over the years. From a transportation perspective, we will offer more flexible Looking ahead to the coming 30 years, JR Central will be facing train services to meet consumer demand, as well as continue to new management challenges, including the operation of the “three add rolling stock and pursue upgrading work to reflect features Chuo Shinkansen Dividends generations of railways” - the Tokaido Shinkansen, conventional of the latest rolling stock, such as enhancements to shorten the What is Company policy on dividends? lines, and the Chuo Shinkansen - as well as the deployment of a stopping distance of the Earthquake Brake, on existing rolling In FY2016, the Company began full-scale construction work, high-speed rail system abroad. stock. We plan to change all rolling stock to the N700A type, including work on the Southern Alps tunnel and Shinagawa and Our policy on dividends has always been to decide the Nagoya stations right below the commercial lines, where work Therefore, we redefined the value of pursuing corporate activities which can travel at speeds of up to 285 km/h, by the end of specific dividend amount in accordance with the management is challenging and construction periods will be long. Can you and set forth a new management philosophy for the next 30 FY2019. This will advance our preparations to step up the service environment and performance in each fiscal year based on please reiterate the significance of the Chuo Shinkansen Project? years: “Contribute to the development of Japan’s main artery and level offered to our customers. the principle of continuously providing stable dividends in a social infrastructure.” From a marketing perspective, we are moving forward with The Chuo Shinkansen Project is designed to continue to fulfill the manner characteristic to the railway business, which emphasizes Going forward, JR Central will undertake the mission of our preparations to launch smartEX - a convenient ticketless Company’s founding mission into the future through the operation management based on a long-term perspective. operating the two railways - the Tokaido Shinkansen and the reservation service - that allows customers to use the Tokaido of a high speed train service that links the Tokyo Metropolitan This stance will not change during construction or after the Chuo Shinkansen - that serve as Japan’s main transportation Shinkansen and the Sanyo Shinkansen by simply entering the area with the Chukyo and Kinki areas (Tokyo ~ Nagoya ~ Osaka). launch of the Chuo Shinkansen. necessary information via their smartphones without the need to

10 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 11 Messages from Management Topics 1 Topics 2 Long-Term Loan Using the Fiscal Investment and Loan Program (FILP) Outlook on Key Measures

1 Implementation of Long-Term Loan Using the Fiscal Investment and Loan Program (FILP) Ensuring safe and reliable transportation and enhancing transportation services (Tokaido Shinkansen and conventional lines)

In November 2016, JR Central applied for a long-term loan using the of the section between Shinagawa and Nagoya stations. We will actively FY Prior to 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Fiscal Investment and Loan Program (hereinafter, “FILP Loan”) for 3 trillion promote construction efforts for the Chuo Shinkansen in an aim to moving yen (plan) to Japan Railway Construction, Transport and Technology up live operation of the entire line by up to 8 years. Large-scale renovation Agency (“JRTT”). We proceeded to borrow funds sequentially thereafter The Chuo Shinkansen Project is pursued based on the premise that and secured financing for a planned total of 3 trillion yen in July 2017. JR Central, as a private corporation, covers full cost of construction, Securing long-term, fixed- and low-interest rate financing using FILP, by while securing management autonomy in investment and seeing that taking advantage of the low-interest rate environment at the time of draw- sound management and stable dividends are strictly maintained until the Implementation of derailment and deviation countermeasures down, will enable us to mitigate management risk and start the construction construction work is fully completed. The FILP Loan poses no change to work for the section between Nagoya and Osaka right after the operation this premise. Tokaido Shinkansen

Complete construction work for the entire line by FY2028 New production of N700A 2 Advantage of the FILP Loan

The advantage we gain from the FILP loan lies in mitigating three the amount through the FILP Loan, we have the funds needed until live management risks, which are interest-rate increase risk, financing risk, and operation in Nagoya without being considerably impacted by future redemption risk. Specifically, since we can secure long-term, fixed- and low- economic conditions and interest rate fluctuations, and reduce financing Upgrading of existing Shinkansen rolling stock interest rate funds, we are able to mitigate the risk of interest rates rising in risk. the future and fix interest payments at a low level for a long period of time. Furthermore, since the FILP Loan matures after the construction period Under the original plan, the construction cost for the route between of the Chuo Shinkansen, during which time a large amount of funds is New production of N700S validation test vehicles Shinagawa and Nagoya was approximately 5.5 trillion yen, of which needed, we are able to build up cash from operating activities to provide roughly 3 trillion yen was expected to require new financing. By securing for the redemption of liabilities, thereby also mitigating redemption risk. Launch of next-generation commercial rolling stock (mass-production vehicles)(plan)

3 FILP Loan scheme Earthquake-resistance measures for Nagoya Workshop Conventional Lines Under the FILP Loan scheme, long-term, fixed- and low-interest Diagram 1 FILP Loan scheme rate funds are loaned from the state FILP funds to Japan Railway Long-term, fixed- and Loan under the same terms as FILP Construction, Transport and Technology Agency (JRTT), the FILP low-interest loan (separate payment of expenses) New production of next-generation limited express train rolling stock using the hybrid method agency. Then JR Central borrows the funds from JRTT under the same interest rate and terms. Diagram 1 FILP JRTT JR-CENTRAL New production of testing vehicles

With a plan to secure FILP-based financing for a total of 3 trillion yen, JR redemption redemption Launch of mass-production vehicles (under consideration) Central borrowed 1.5 trillion yen in FY2016 and subsequently borrowed the remaining 1.5 trillion yen in FY2017. Funds procured will be applied only to costs associated with the construction of the Chuo Shinkansen and not for Diagram 2 Illustrated plan of moving up live operation any other use or investment. 2027 Earthquake-resistance measures for ceilings of stations In the material submitted to the Transport Policy Council of the Ministry Management strength Common Existing Construction between Construction between Live operation restoration period of Land, Infrastructure, Transport and Tourism in 2010, we indicated in Shinagawa and Nagoya Nagoya and Osaka plan (8 years) in Osaka our outlook that a period of 8 years after live operation in Nagoya will be set to recover management strength. After reducing long-term debt by a certain amount, construction on the route between Nagoya and Osaka will conventional lines) (Tokaido Shinkansen and Enhancement of train service information provided to customers Move up Construction between Construction between be initiated while seeing that sound management and stable dividends are operation Shinagawa and Nagoya Nagoya and Osaka Live operation in Osaka strictly maintained, and ensuring that the balance of long-term debt does not Equal principal Completion of website renewal in March 2019 (plan) redemption over exceed 5 trillion yen throughout the project period until live operation of the Moving up live operation by up to 8 years a period of about entire line. By utilizing this FILP Loan, we are able to reduce this period for 10 years Renewal of electric sign boards at ticket gates in Shinkansen stations sequentially from restoring management strength and promote construction efforts in an aim to FILP Loan Deferred fixed/low-interest for about 30 years March 2019 (plan) (plan to complete work on “Nozomi” stations by the end of FY2019) moving up live operation of the entire line by up to 8 years. Diagram 2

As for the terms of the FILP Loan, the interest rate is the FILP loan Diagram 3 Primary terms of financing interest rate of the borrowing date, which is fixed throughout the entire 1st 2nd 3rd 4th 5th period. The repayment method is equal principal payment over a Amount 500 billion yen 500 billion yen 500 billion yen 750 billion yen 750 billion yen borrowed Chuo Shinkansen Project Using the Superconducting Maglev System period of roughly 10 years after deferring the payment of principal for about 30 years, and we will repay the loan over a period of roughly Interest 0.6% 0.8% 0.9% 0.9% 1.0% Rate Fixed throughout entire period 10 years after the live operation in Osaka when management is FY Prior to 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Borrowing November 29, January 16, March 10, May 17, July 12, stabilized. The funds procured from the FILP Loan will be applied Date 2016 2017 2017 2017 2017

only for the cost of construction of the Chuo Shinkansen. We ensure Maturity November 29, January 16, March 10, November 17, January 12, the transparency of funds by setting a trust aimed at segment-based Date 2055 2056 2056 2055 2056 Construction between Shinagawa and Nagoya for the Chuo Shinkansen Deferred until Deferred until Deferred until Deferred until Deferred until management. September Repayment May 2046 July 2046 May 2046 July 2046 Method 2046 Since the FILP Loan amounts to a large sum of 3 trillion yen in two Thereafter, equal principal repayment Diagram 3 years, we borrowed the funds in five lots. Security Unsecured

12 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 13 Key Measures

Key Measures and Capital Investment FY2017

Capital investment amount: 143.0 billion yen Capital investment amount: 47.0 billion yen Capital investment amount: 159.0 billion yen Capital investment amount: 5.0 billion yen 1 2 3Promoting the Chuo Shinkansen Project 4 Ensuring Safe and Enhancing Transportation Using the Superconducting Refining Superconductive Maglev Technology Reliable Transportation P.18 Services P.22 Maglev System P.26 and Reducing Costs P.28

JR Central will work to further reinforce JR Central will proceed with initiatives to enhance With regard to the Chuo Shinkansen Project JR Central will continue brushing up earthquake countermeasures. the convenience and comfort of railways. involving the Superconducting Maglev System, Superconducting Maglev Technology and Advance construction work for the installation of derailment-prevention < Shinkansen > < Conventional lines > proceed steadily with the construction work at pursuing cost reduction. guards for the Tokaido Shinkansen based on the new policy of expanded Continue to work on setting more Flexibly increase the frequency and full speed in respective areas of the line. At the With the Yamanashi Maglev Line, alternately operate two trainsets by using implementation to cover the entire line. flexible train services in accordance number of cars of train services to same time, give serious consideration to safety, rolling stock and facilities having commercial line specifications and continue For conventional lines, continue to proceed with the implementation of with demand during seasons and time meet demand for limited express conducting long-distance running tests. quake-resistant measures for elevated track columns, etc. and rebuilding frames with increased customer use by trains, such as “Shinano” and “Hida”. the environment, and coordination with towns Proceed with verification, etc. toward establishing a maintenance system or reinforcing the quake resistance of the Nagoya Workshop, stations, etc. applying the “10 Nozomi Timetable”. Work to further enhance the and cities along the planned route. that can handle commercial services. Also, work to further refine the In order to prevent suspended ceilings from falling in an earthquake, take Continue to proceed with the launch convenience of customers using the As for the Chuo Shinkansen Project, maintain sound management and steps to put in place fall-prevention measures for ceilings at stations of the of N700A (3rd edition), while initiating Superconducting Maglev Technology and reduce costs for construction, Tokaido Line (between Okazaki Station stable dividends and take steady steps toward completing the project while Shinkansen and conventional lines. enhancement work to reflect the operation and maintenance. and Toyohashi Station). Also, in order demonstrating flexibility. features of the third-edition trainsets, Continue promoting “Superconducting Maglev Ride” in a well-planned to build an efficient structure in line Continue promoting close coordination with local communities and carry out such as reducing the stopping manner and, as an initiative commemorating the Company’s 30th with customer use, introduce the measurement, design, acquisition of land, etc. according to plan. JR Central will move forward with the renovation distance of the Earthquake Brake, on anniversary, host classes for children along with the Ride. centralized passenger service system Steadily move ahead with construction work, including tunnel excavation and upgrade of structures and other facilities. existing trains. in October 2017. and diaphragm wall work, of the Southern Alps tunnel, Shinagawa Station, Steadily proceed with large-scale renovation of the Tokaido Shinkansen and Nagoya Station, where work is challenging and construction period will while making efforts to achieve cost reductions by introducing the results be long. Also do this work on sections where the necessary preparation of technological development and improving construction methods. has been completed, while also giving serious consideration to safety and For conventional lines, continue to proceed with the implementation of environmental protection. measures against falling rocks and improving safety devices on railway Promote efforts to establish sophisticated and efficient operation/ crossings. Also, complete replacing operation management systems for maintenance systems for the Chuo Shinkansen. the Tokaido Line in the Shizuoka area in the fall of 2017. In order to promote construction of the Chuo Shinkansen, procure long-term debt using the Fiscal Investment and Loan Program. N700A Wide-View Shinano JR Central will advance its initiatives to more appropriately cope with natural disasters, etc. Feature of N700A (3rd edition) Reduction of To be able to respond to various conditions expected in an extraordinary stopping distance of situation, repeatedly perform practical training. Earthquake Brake by In cases where train operations will likely be significantly impacted by a Series L0 Conventional N700A 3rd edition typhoon etc., take initiatives for curtailing scheduled services, avoiding any about 5% impact at an early stage, and promptly resuming operation while providing Improve the form of brake lining passengers with information in a prompt, precise manner. JR Central will advance initiatives so that customers can use railways with a greater sense of security Complete installing additional security cameras in passenger cars of N700A, etc. and promote further enhancement of security. Begin operation of movable platform fences to be additionally installed in Shinagawa and Shin-Yokohama stations of the Tokaido Shinkansen. At the same Construction of the Southern Alps tunnel (Yamanashi section) time, proceed with the development of movable platform fences to accommodate conventional lines that come in varying models and the number of cars of a train with a view to conducting verification testing at Kanayama Station. Derailment-prevention guards Large-scale renovation Complete installing braille blocks that indicate where platform edges are located on the platforms of conventional lines in stations servicing 5,000 or Superconducting Maglev Ride more passengers by moving up the installation plan by three years. Continue to move forward with the installation of barrier-free facilities at stations of conventional lines, such as elevators and multifunction toilets.

Ground-breaking ceremony (Nagano Prefecture) Platform Training for recovering disconnected overhead catenary edge line Movable platform fences (Nagoya Station) Braille blocks that indicate where platform edges are located Reference Reference Launch of 20 trainsets of N700A FY2016 Conducted ceremony to pray Long-term debt using the Fiscal Reference N700A (3rd edition) (3rd edition) from FY2016 to FY2019 for safety/ground-breaking ceremony Investment and Loan Program (7 trainsets in FY2017) Southern Alps tunnel November 29, 2016, January 16, 2017, Laying derailment- FY2017 approximately 75 km Verification testing of movable fences November 1 Scheduled to start in early 2018 (Nagano section) prevention guards (including additional length of about 3 km) at Kanayama Station March 10, 2017: Borrowing of 500.0 Reference billion yen on each date Braille blocks that indicate whereplatform edges are located Hiyoshi tunnel, Gifu FY2017 37.0 billion yen December 13 Prefecture Large-scale renovation Stations servicing 10,000 or more passengers Installation completed Plan to borrow 1.5 trillion yen also in Long-distance running tests for Cumulative running distance of 1.86 million km (FY2016 to FY2019 145.0 billion yen) (Minamigaito section) FY2017 the Yamanashi Maglev Line (as of February 28, 2017) Stations servicing 5,000 to 10,000 passengers To complete installation in FY2017 (three years ahead of plan) Nagoya Station Fall-prevention for All 17 Shinkansen stations, 30 conventional line stations December 19 (Central east section, First offering in March and April 2017 ceilings in stations (FY2016 to FY2026 approximately 13.0 billion yen) Stations servicing 3,000 to 5,000 passengers To complete installation in FY2018 Superconducting Maglev Ride (two years ahead of plan) Central west section) (total of 11 days)

14 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 15 Key Measures Key Measures and Capital Investment FY2017

Capital investment amount: 19.0 billion yen Capital investment amount: 1.0 billion yen Capital investment amount: 28.0 billion yen 5 6Strengthening Technological Capability, 7 (including capital investment of 23.0 billion yen by consolidated subsidiaries) 8 Enhancing Sales and Marketing Engagement in Global Environment Preservation, Developing Affiliated Initiatives for P.30 Pursuing Overseas Projects P.32 Businesses P.34 the 30th Anniversary P.1

JR Central will work to further enhance JR Central will continuously strive to enhance With the new addition of JR Gate Tower, JR JR Central will continue to be thankful to its convenience for the Tokaido Shinkansen, its technological capabilities and promote Central will promote affiliated businesses to customers and all related persons and do its including the launch of the “smartEX” service. global environment preservation. further enhance customer satisfaction. best to carry out the mission of the Company with a determination to continue contributing to Introduce “smartEX”, a new online reservation and ticketless boarding Newly produce N700S validation test vehicles and prepare to perform Smoothly start businesses in JR Gate Tower, which will fully open in April service for customers other than Express members and customers from running tests for the final checking of the new technology to be reflected in 2017, operate the facility with JR Central Towers in a uniform manner, and the future of Japan. overseas, at the end of September 2017 and encourage them to use the the next set of commercial trainsets. provide attractive services, including existing businesses, to boost earnings. In order to respond to new issues, such as the operation of “three service. Implement more advanced and power-saving inspection and maintenance Revitalize commercial facilities of station buildings and stimulate generations of railways”, including the Chuo Shinkansen, and to continue Continue to market “EX that utilize condition monitoring technologies. Also, move further ahead merchandise businesses, promote businesses by making effective use of carrying out the mission of the Company, revise the management philosophy, Family Hayatoku” and other with technical development that can lead to cost reductions for large-scale land owned by the Company, and strive to further increase earnings and which was formulated at the time of the Company’s founding. tourist products for “Express renovation, earthquake countermeasures, upgrading equipment and other enhance competitiveness. Renew the service staff uniform to one that is more functional while Reservation” and “PLUS EX” uses. Revitalize local communities by boosting the use of “IIMONOTANBO” maintaining the concept of safety, reliability, and refinement. along with “50+” in order to spur Pursue technological website that sells attractive locally produced products found along the train “smartEX” logo Hold events, such as train depot tours and experiencing work at stations, demand for tourism. development to more routes. mainly during the summer vacation period to have people enjoy the world of accurately respond to Make efforts to develop our agriculture business to provide even safer and railways even more. disasters, e.g., landslides. more reliable food products. Sell commemorative products, including “IC Hayatoku Type 21” tickets with Promote various policies greater discounts for Express Reservation members and newly set family JR Central will make use of the tourist that contribute to global JR Central Towers JR Gate Tower tour packages during the Golden Week Holidays. attractions along railway lines to actively environment preservation, deploy sales and marketing measures. such as shifting to N700A and other energy-saving Enhance tourism campaigns and products that convey the attractiveness of rolling stock. N700S (sample illustration) Kyoto, Nara, Tokyo, Hida, Ise-Shima, etc. Actively engage in sales and marketing activities such as promoting products using events held along railway lines. Promote merchandise sales activities and provide further information to Overseas we will advance our initiatives in overseas customers. high-speed railway and Superconducting Enhance coordination with local communities through the “Sawayaka Maglev projects. Walking” event, “Shupo” publication and “Japan Highlights Travel” website, etc. while making efforts to promote the use of conventional train services, Promote technical assistance to the main development entity of the Texas such as “Shinano” and “Hida”. Project in the U.S. through the local subsidiary (HTeC) while bolstering promotional activities for the use of the Superconducting Maglev system in the Northeast Corridor Project in the U.S. Continue to proceed with the technical consulting services for Taiwan High Speed Rail. JR Central Towers and JR Gate Tower Advance initiatives to make the Japanese high-speed rail system, which is based on the principle of “Crash Avoidance”, a global standard.

30th anniversary logo mark

Sakura (cherry blossoms) version of Kyoto Campaign (Nijo Castle)

Takashimaya Gate Tower Mall on the opening day President of HTeC presenting the company profile New Summer uniform for the Shinkansen staff

Reference Reference Reference Reference New management Scheduled to perform running tests starting in FY2018 and Enforce on April 1, 2017 N700S philosophy considering to launch commercial rolling stock in FY2020. JR Gate Tower Number of members of “Express 3.11 million (as of February 28, 2017) Reservation” and “PLUS EX” Concept of eliminating the possibility of a collision by Gate Tower Plaza Restaurant Area, BIC CAMERA, New uniform Introduce on June 1, 2017 Opening on April 7, 2017 using a combination of two mechanisms: (i) dedicated UNIQLO, GU, fitness club Principle of tracks for high-speed passenger rail service with no “Crash Avoidance” railway crossings, and (ii) an Automatic Train Control (ATC) Sell at a price commemorating the 30th anniversary Takashimaya Gate Tower Mall, Number of members of “50+” 870,000 (as of February 28, 2017) system, which controls the speed of trains and definitely Opening on April 17, 2017 IC Hayatoku Type 21 (30% off the prescribed fare/charge) prevents any collision from happening. Nagoya JR Gate Tower Hotel Period of use April 1, 2017 to April 30, 2017

16 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 17 Management Strategy — Safe and Reliable Transportation Ensuring Safe and Reliable Transportation Further reinforcement of earthquake countermeasures

Tokaido Shinkansen

Implementation of derailment and deviation countermeasures We are promoting derailment and deviation countermeasures to prevent expansion of damage from derailment caused by an earthquake, etc. These measures come in a dual system where the highest priority is set on preventing rolling stock from derailment at the time of an earthquake and, when derailment cannot be avoided, it prevents the rolling Ensuring safe and reliable transportation marks stock from deviation. the foundation of the railway business. If we In regard to measures for ground facilities, we are installing “derailment prevention were to cause a major accident, the trust placed guards” to prevent derailment itself to the extent possible, as well as adopting measures in the Company would be lost in an instant, and Number of accidents resulting in fatalities or Derailment prevention guards injuries of passengers on board since the Tokaido for civil engineering structures to have the derailment prevention guards function the Company’s very existence would be put in Shinkansen started service in 1964 effectively. While we expect to complete implementing these measures to the entire line by FY2028, considering the nature of these danger. With this frame of mind, the Company measures, we will continue to study the possibility of completing the work as early as possible. has worked to ensure safety across all its As for measures adopted for rolling stock, in order to prevent large rolling stock deviations from the track in case of a derailment, operations since its founding. “deviation prevention stoppers” were installed on all of our Shinkansen rolling stock. Total safety-related investments have now exceeded 3.3 trillion yen in total, accounting Reinforcement of structures for approximately 70% of all annual capital accidents JR Central has been implementing earthquake-resistance measures for various Measures taken and progress investment when excluding investments made 0 civil engineering structures and buildings related to transportation by the Measures taken Progress (as of the end of FY2016) towards the Chuo Shinkansen. We will also Shinkansen so as to prevent the Shinkansen from going out of service for a long Elevated track Completed* Except for some areas under continue with steadfast initiatives aimed at period of time in the event of a major earthquake. columns, discussion(Elevated track columns: Total cumulative safety-related investments bridges, and Approximately 19,600; Bridges: Approximately further improving the technical skills and safety since the Company’s founding Since 2010, we have been carrying out large-scale renovation work for the embankments 900 units; Embankments: Approximately 9.4 km) consciousness of employees, such as by Hamamatsu Workshop, which conducts general overhauls* of Shinkansen rolling Bridge railing Under way (Completed about 2,070 beams implementing practical training and large-scale stock. This includes rebuilding and reinforcement so that the general overhaul (Fall prevention) out of about 2,215 beams concerned) recovery training in preparation for emergency Completed* Except for some areas under function can be maintained even in the event of a major earthquake. Renovation Station buildings situations, etc. work has already been completed, and we have been conducting general discussion overhauls using the new inspection and repair lines since January 2017. Rolling stock depot buildings: Completed trillion yen General Principles of Safety Rolling stock Hamamatsu Workshop: Rebuilding and Refer to P. 57 for further related information (Column 1 “Learning safety from accidents”) 3.3 Reviewing the inspection and repair lines in conjunction with this renovation work workshops, etc. reinforcement of buildings under way resulted in improving operating efficiency. As a result, the number of days required Plan to complete by the end of FY2018

for the general overhauls of the Series N700 has been reduced from 15 days to 14 *General overhauls (Shinkansen): Overhauls required for Shinkansen rolling days, enabling us to use rolling stock for operating trains more promptly. stock within 36 months or under the distance of 1,200,000 km. Renovation and upgrade of structures and other facilities Initiatives to stop trains quickly In order to prevent expansion of damage caused by earthquakes, it is important Tokaido Shinkansen Earthquake Rapid Alarm System Tokaido Shinkansen Large-scale renovation 1 (TERRA-S) to stop trains quickly. JR Central adopts an earthquake prevention system* which Suspension of power transmission Emergency stop of train detects tremors, automatically stops power transmission, and issues an order to Earthquake early warning Large-scale renovation (Japan Meteorological Agency) moving trains to make an emergency stop. We also made improvements to the Our civil engineering structures are sufficiently maintained years. We will begin with Seismometer alongside “Earthquake Brake” on rolling stock in an effort to reduce the stopping distance railway lines Distant through daily and thorough inspections and repair. However, the implementation of at the time of an earthquake. For the next-generation Shinkansen rolling stock seismometer in future, it will be inevitable to replace many of the facilities “measures to inhibit aging N700S, which we are looking to launch in FY2020, we will make improvements to Relay Station 2 due to aging. We received the approval of the Minister of Land, damage”* and, while ATC and the brake system to further reduce the stopping distance at the time of Substation Infrastructure, Transport and Tourism for our allowance reserve checking the effect of those an earthquake by roughly 5% compared to the stopping distance of N700A (3rd 3 Vertical earthquakes plan for the large-scale renovation of Shinkansen infrastructure measures, perform “overall renovations”* as necessary. edition) (refer to P. 24). Trench-type earthquakes *1 We continued enhancing the “Urgent Earthquake Detection and Alarm System (UrEDAS)” even after introducing it to the Detects P-wave (primary tremors) and S-wave (secondary based on the Nationwide Shinkansen Railway Development Act, Construction is estimated to total approximately 730 billion yen, Shinkansen prior to other companies in 1992, and introduced the “Tokaido Shinkansen Earthquake Rapid Alarm System tremors), and once a certain level of tremors is detected, (TERRA-S)” in 2005, accelerating the speed of the alarm and improving accuracy, etc. Furthermore, in 2013, we increased issues an order for trains to stop and began building the reserve from 2002. Along with this, we and the reserve of 350 billion yen accumulated by FY2012 is responsiveness to vertical earthquakes and interlocking-type earthquakes. have advanced our research on a new construction method, appropriated at a rate of 35 billion each year from FY2013. led by our Komaki Research Center. As a result of our R&D We will continue to actively incorporate the results of our R&D efforts, we developed a new construction method that allows efforts and make improvements, etc. to construction methods, Conventional Lines us to significantly reduce the impact on train operations during thereby bringing down related costs in making sure steps construction work, and to considerably cut construction costs. forward with our construction work. Reinforcement of structures Initiatives to stop trains quickly In order to minimize the impact of earthquakes also on conventional lines, we are Information from the aforementioned earthquake With this method in place, JR Central began the renovation *1 Received the approval of the Minister of Land, Infrastructure, Transport and Tourism for the change 1 of our allowance reserve plan for the large-scale renovation of Shinkansen infrastructure in FY2012 implementing earthquake-resistance measures on various civil engineering structures. prevention system will be used for conventional work in FY2013, ahead of the original schedule* .We are and began the renovation work in FY2013. *2 “Measures to inhibit aging damage”: Measures to extend the life of structures by inhibiting the lines to detect the initial weak tremors in case of expecting to engage in renovations for a period of about 10 occurrence of cracking and other damage from aging. *3 “Overall renovation”: Replacement of components, etc. . Measures taken and progress an earthquake, and give a warning to the driver’s Measures taken Progress (as of the end of FY2016) cabin of trains traveling in segments that are likely Earthquake-resistance reinforcements under way in sections where there are at to be impacted significantly by the earthquake. Conventional Lines Elevated track least 10 departures per peak hour, and in sections where a long, strong earthquake Every driver who received the warning would columns and vibration is expected, as in the case of the Tokai Earthquake bridges * Elevated track columns: Completed approximately 5,020 out of the 5,075 columns concerned immediately hit the brake and stop the train. Counter-disaster measures and other efforts * Bridges: Completed two out of the four bridges concerned Furthermore, we have been strengthening the JR Central’s conventional lines operate not only in urban areas as reinforcing slope protection and newly installing drainage Completed earthquake-resistance reinforcements in sections including those where functions of seismometers since FY2016. We will but also along steep natural slopes and other varied terrain. As facilities. Bridge railing there are at least 10 departures per peak hour and where a long, strong earthquake be able to issue warnings to trains more quickly (Fall prevention) vibration is expected, as in the case of the Tokai Earthquake such, we have been making efforts to adopt measures against We will also continue to advance our efforts to improve safety * Completed for all approximately 1,975 beams than before. falling rocks, heavy rainfall, and other disaster situations. In devices on grade crossings together with making replacements Implementation of earthquake-resistance measures under way for station buildings Station buildings servicing at least 5,000 passengers per day FY2017, we will continue to take measures against falling due to aging in order to improve efficiency of maintenance while * Completed for 72 stations out of 76 stations concerned rocks, such as newly installing falling rock detection nets stepping up safety. Rolling stock Nagoya Workshop: Rebuilding and reinforcement of buildings under way and protective equipment, and against heavy rainfall, such workshops, etc. * Plan to complete by the end of FY2021

18 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 19 Management Strategy — Safe and Reliable Transportation

Common Initiatives for the Tokaido Shinkansen and Tokai General Control Center (Nagoya) / Multiple Inspection Train and Track Inspection Train Conventional lines Hanging bolts Shizuoka General Control Center (Dr. Tokai) Earthquake-resistance measures for ceilings of stations JR Central’s 12 conventional lines are operated and managed by two We efficiently monitor facility status with regard to the maintenance control centers; the Tokai General Control Center in Nagoya and the of railway tracks and electrical facilities on conventional lines, using In order to heighten safety at stations in case of an earthquake, Shizuoka General Control Center. Each center monitors the operational the “Multiple Inspection Train” and “Track Inspection Train (Dr. we install anti-falling measures on suspended ceilings*1 at Earthquake-resistance measure: Joining the building frame and the ceiling with wires status of trains and the utilization status of facilities 24 hours a day. Tokai)”. In an effort to further improve our inspection capabilities, we stations that service a large number of customers. *2 Station concourse, etc. installed the latest sensors, high performance cameras, and other We prevent suspended ceilings from falling by firmly joining Illustration of anti- falling measure Introduction of tablet devices for drivers devices in line with the building frame and the ceiling with wires and taking other *1 A type of ceiling with a structure that hangs from the building frame We will look to further improving safety and promoting speedy the upgrade timing of measures. *2 Applicable for all 17 stations of the Shinkansen and 30 stations of conventional lines that service at least10,000 customers per day response to any interference in transportation by introducing tablet inspection equipment, devices for drivers on conventional lines. The device is able to completed the Operation Management and Safety Measures provide steering control support through notification of slowdown installation work for sections, etc. by using screen diagrams, text, and voice narration, two-trainset trains by Tokaido Shinkansen as well as communicating information by electronic data. This is December 2016 and scheduled to be introduced at the end of FY2017. began using them. Features of Japanese high-speed rail system Shinkansen General Control Center Dr. Tokai The Japanese high-speed rail system led by the Tokaido At the Shinkansen General Control Center in Tokyo, various directives, Shinkansen is based on a principle of Crash Avoidance, which such as transportation, operations, facilities, electrical power, and Education and training is the biggest feature for ensuring safety. This principle has signals, utilize the above-mentioned systems and work in close been derived to prevent the possibility of a collision by using cooperation to support the safety and reliability of the Shinkansen. Technical skills training Employee training in preparation for contingencies (1) dedicated tracks for high speed passenger rail service, Also, the Shinkansen Second General Control Center, with the To ensure safe and reliable transportation, we implement safety From FY2016 we started training all employees to go beyond which completely exclude freight and commuter rail and have same functions as the General Control Center in Tokyo, has been education and training for staff engaging in train operations and the call of duty in working together with staff, etc., to respond no grade crossings, and (2) an Automatic Train Control (ATC) established in Osaka with the cooperation of JR West. This Center is facility maintenance. We conduct education and training especially appropriately in ensuring our customers’ safety should

system, which automatically controls the speed limit of high- to be used in the event that the Shinkansen General Control Center for staff engaging in train operations (such as drivers, conductors, employees happen to be Employee training in preparation for speed trains and prevents collisions from happening. becomes inoperable due to a disaster, thereby strengthening our directors, and those who handle signals or operate switch stands) present when unforeseen contingencies

How ATC works crisis management in emergency situations. Equipment at the Second according to the content and time stipulated for each duty. circumstances occur while

(3) Creates ATC signals (train speed comparing patterns) from General Control Center is on stand-by at all times with the power on. We introduce simulators, which can perform operations simulation traveling to and from work, (4) Compares positional information for the train ahead and one’s own train training, etc. for emergencies, for drivers and conductors. We also or while on a business trip. the speed They are usually utilized for education and training of directors and with the signal (5) When the train’s speed exceeds maintenance staff. The Tokaido Shinkansen has been doubling various conduct various training sessions using ground facilities, such as We will continue to train the signal the brakes are applied facilities for ensuring safe and reliable transportation. We also reinforce actual rolling stock, catenary, and signaling equipment, so that employees every year in the our crisis management ability by doubling control centers. employees on each system can swiftly and accurately respond to specific measures to take in (2) Own train positional information Speed of the own train Preceding train emergencies. an emergency, including the The Shinkansen Multiple Inspection Train (Dr. Yellow) (1) Preceding train positional information (rail) mental readiness needed to Ground facilities (for positional adjustments) Receive the information We have also introduced the “Shinkansen Multiple Inspection Train Emergency conditions response training respond in such a manner. (Dr. Yellow)” to test ground facilities, such as electrical facilities and “General Training Session Simulating Actual Accidents” is Operational control systems tracks. This rolling conducted every year as an opportunity for us to enhance the Other training The safe and punctual operation of the Tokaido Shinkansen is stock, which is based fast-response restoration structure in case of accidents and The General Education Center offers education on specialized supported by a number of systems, mainly the Computer Aided on the Series 700, to learn the work of other systems. We conducted practical knowledge and skills for each function, and provides sessions Traffic Control (COMTRAC*). These systems accurately process aids safe and reliable training in FY2016, such as passenger evacuation guide for various qualifications and trains conductors and drivers. a massive amount of information, such as the operational transportation by training sessions, information communication training sessions, It also hosts effective Simulators for station staff and conductors status of trains and utilization status of facilities, control overall efficiently conducting training sessions simulating repair of derailed rolling stock, and training beyond the transportation services, and thoroughly manage the safety. high precision line facility restoration training, based on the assumption of borders of professions, *COMTRAC (COMputer-aided TRAffic Control): COMTRAC is the system that controls train routes, manages train operations, and operates and manages the allocation of staff (drivers and conductors) inspections at speeds natural disasters, such as earthquakes, and train fires. holds lectures for and rolling stock. Based on input data prescribing the operational conditions for each train (such as station departure and arrival time, platform, and order) in the computer, the system can monitor the of 270km/h. both Shinkansen and status of all trains in operation at all times. Dr. Yellow Relief and connection training Tsunami evacuation guidance training conventional lines and enhancing lectures Conventional Lines involving borders of systems, etc. ATS-PT (Automatic Train Stop) Operation management systems ATS-PT continuously checks the speed for conventional lines Our Company currently incorporates operation management according to the distance between the train and the signal, systems into most lines run on conventional lines. The operation the curve, and the points. It ensures safety by automatically management system includes CTC (Centralized Traffic applying emergency brakes in situations where the train risks Control)*1 and the PRC (Programmed Route Control)*2. These overrunning. We completed the introduction of ATS-PT to all of manage train schedules, signal control, train tracing, and our conventional lines* in 2012. operation performance data, etc. These systems enable us to Other initiatives *Introduced on the Meisho Line (Ieki ~ Ise-Okitsu section), which had been put out of service from manage train and station information in a centralized manner October 2009 due to natural calamities, in conjunction with the recommencement of services in March Safety audits 2016. at control centers. Such centralization not only enables normal Internal audits are performed on the Company’s business state of accident prevention measure implementation. We strive train management but also allows orders and directives to be ATS-PT function organizations and affiliated companies from three main to prevent violations of laws and regulations, the fading out of Speed issued more rapidly even in emergency situations. We plan to Travel curve of train ATS-PT overview standpoints. The confirmation of the level of compliance with past countermeasures, and rules from losing their substance Brake patterns •A brake pattern is generated in the complete the replacement of the operation management system Consecutively comparing train based on the distance to the speeds. The emergency signal derived from information laws and regulations, etc., the confirmation of systems in place before an incident occurs by having a third party inspect our brakes are applied when from the ground for the Tokaido Line (Shizuoka district) in FY2017. excessive speed is detected, •The emergency brakes are *1 CTC: The CTC system not only remotely and integrally controls station signaling equipment, etc. in to prevent train and labor accidents, and the confirmation of the business operations and share these results. regardless of the speed automatically applied to stop trains order to efficiently manage train operations, but also has the function of conducting real-time running at speeds in excess of this monitoring of the operational status of trains. signal pattern by the time they get to the *2 PRC: Equipment that automatically controls the route for each train via CTC, using daily operation signal plan information and the position of each train. •Continuous control is performed Ground unit (pattern occurrence) using brake patterns

20 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 21 ManagementManagement Strategy Strategy— Safe and — TransportationReliable Transportation Services Enhancing Transportation Services Diagram 1 Number of train services and usage status of the Tokaido Shinkansen (per day) Nozomi Hikari Kodama Usage status

148 159 (Index) 157 150 143 141 142 152 137 138 134 130 133 128 129 127 130 126 124 126 125 126 JR Central strives to improve its 121 123 122 120 122 123 transportation service to fulfill its mission (Trains / day) 118 of integrally maintaining and developing 400 111 120 the Tokaido Shinkansen, which serves as 358 365 100 350 Japan’s main transportation artery, and 342 334 341 336 333 336 the conventional line network in the Tokai 319 region. With continual long-term capital 311 314 investments, we have improved the Tokaido Tokaido Shinkansen 300 290 90 271 276 273 270 271 274 274 271 269 269 271 272 275 Shinkansen service not only by bolstering Since its inauguration in 1964, approximately 6 billion people have 260 safety and accuracy, but also by the high 252 used the Tokaido Shinkansen, the transportation artery linking Japan’s 239 speed, frequency, and capacity, such as by 231 0 5 34 34 35 37 41 45 50 51 61 70 101 145 166 170 175 187 193 188 185 188 194 201 209 217 three largest metropolitan areas, Tokyo, Nagoya, and Osaka. The boosting speeds to 285 km/h, or introducing Tokaido Shinkansen has literally supported Japan’s economic growth. 10 10 the “10 Nozomi timetable” (operating up to 200 60 10 “Nozomi” services in both directions). We will continue operating Japan’s main transportation artery while 9 We will look to further maintain and ensuring safe and reliable transportation as the first priority. 8 enhance the competitive advantages 143 150 165 176 187 189 158 157 158 158 155 148 139 138 130 122 offered by the Tokaido Shinkansen as the 7 earnings received from this service are 100 93 65 65 64 64 66 66 66 66 66 65 65 65 65 30 vitally important in proceeding with the Chuo Shinkansen Project. 89 88 87 84 84 82 81 80 79 78 78 78 80 80 3 80 80 80 80 80 81 82 82 82 82 83 83 83 83 2 80 79 1 0 0 ’88.3 ’89.3 ’90.3 ’91.3 ’92.3 ’93.3 ’94.3 ’95.3 ’96.3 ’97.3 ’98.3 ’99.3 ’00.3 ’01.3 ’02.3 ’03.3 ’04.3 ’05.3 ’06.3 ’07.3 ’08.3 ’09.3 ’10.3 ’11.3 ’12.3 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3

Note 1. Departures shown include extra trains. Note 2. Usage status is shown by means of an index with the sectional transportation volume for FY1987 as 100. Maximum number of the fastest Note 3. Station stops Nozomi: Shinagawa, Shin-Yokohama, Nagoya, and Kyoto Hikari: Same as “Nozomi”, plus a few additional stations Kodama: Stops at each station train, “Nozomi” one way per hour Note 4. The sum of figures for “Nozomi”, “Hikari”, and “Kodama” may not agree with the total due to rounding. Characteristics of the Tokaido Shinkansen

Diagram 2 The Tokaido Shinkansen Service (Comparison with airline transportation service) (As of April 2017) Safety Punctuality 0accidents 0.4 minutes Tokyo - (Operating Kilomaeters) Osaka (552.6km) Okayama (732.9km) Hiroshima (894.2km) Fukuoka (1,174.9km) 3 4 •No accidents resulting in fatalities or injuries of passengers on •Average delay time: 0.4 minutes / 1 train in service Shinkansen 2hr 22min* 3hr 09min 3hr 44min 4hr 46min* board since operations commenced Note: Results for FY2016. Including delays caused by natural disasters, etc. Travel Time*1 •Improvement of safety awareness and skills through human Airlines*2 1hr 05min 1hr 10min 1hr 20min 1hr 35min resources education and training (approx. 2 hr 40 min) (approx. 3 hr) (approx. 3 hr 10 min) (approx. 2 hr 50 min) •Continual investment in safety-related facilities Number of services Shinkansen*5 250 128 99 67 and High Frequency departures/arrivals 365services, High Speeds and per day Airlines 108 20 34 110 km/h High Capacity 285 *1 Travel times are in the case of the fastest service *2 Travel times in parentheses include transfer and access times between city centers and airports *3 Travel time between Tokyo and Shin-Osaka stations 452,000passengers *4 Travel time between Tokyo and Hakata stations *5 Number of services excludes extra services •Maximum speed: 285 km/h •Number of train services per day: 365 •Tokyo ~ Shin-Osaka: 2 hours 22 minutes Note: Results for FY2016 (including extra trains)

Note: Accurate as of the March 2017 timetable revision (travel time based on the fastest trains in service) •Number of passengers per day: 452,000 Note: Results for FY2016 “10 Nozomi Timetable” and offering extra trains flexibly Refer to P. 57 for further related information (Column 2 “Shortening of travel •Number of seating available: 1,323 seats/train time by speed increase”) Since the introduction of “Nozomi” in 1992, JR Central has capital investment over a mid to long-term span is needed to increased the number of services for “Nozomi”, which is the increase the number of services available. We currently operate fastest train of Tokaido Shinkansen, with the aim of improving up to 15 Shinkansen per hour one way with up to 10 “Nozomi” - our transportation service. In 2014, we created the “10 Nozomi the fastest train - mainly during the time frames with increased Environmental Approx. timetable”, which enabled a maximum of 10 “Nozomi” services customer use. We offer flexible services to meet the demands. 1/8 Comfort feasibility operated each hour, for almost all time frames. This was made We were able to increase the number of daily services offered Approx.1/12 possible due to the fact that the renovation construction to add by 2% over the previous year to 365 in FY2016 by scheduling a new track, a new platform, and two more draw-out tracks trains in this manner. We also recorded the highest number •The energy consumption amount per seat when traveling between •Wide open, quiet space from 2 to 4, for which back-to-back maintenance is possible, of services offered in one day, 432, on August 10, 2016 at the Tokyo and Osaka is approximately 1/8th of that of an aircraft in Shin-Osaka Station was completed, and that we now have height of the Summer holiday season. •The CO2 emission rate for the same is around 1/12th a certain number of trainsets for the N700A type*. This kind of *General term for rolling stock both for the Series N700 which reflects the key remodeled functions Note: Comparison between the “Nozomi” Series N700 Tokaido Shinkansen and a B777-200 jet adopted for N700A, and for N700A and thereon.

22 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 23 ManagementManagement Strategy Strategy— Safe and — TransportationReliable Transportation Services

Increasing the speed of the Tokaido Shinkansen Conventional Lines Shifts in the number of passengers on conventional lines Commuter Passes Ordinary Tickets We operate a network of 12 conventional lines, which form (Million passengers) Thanks to the revised timetable in 2015, we were able to With the timetable revision in March 2017, approximately 90% an integrated network with the Tokaido Shinkansen. These 400 387 395 391 401 405 increase the speed for the first time in 23 years. The maximum of all regular trains are operated with the N700A type rolling lines have contributed to the development of communities 300 133 135 134 138 140 speed of the Tokaido Shinkansen increased to 285 km/h. Due stock that can travel at speeds up to 285 km/h. We plan to and the regional economy in the Tokai region, mainly around to this, the travel time required between Tokyo and Shin-Osaka continue sequentially increasing the number of trains running at Nagoya and Shizuoka. 200 was shortened by 3 minutes, which is as short as 2 hours 285km/h in line with the progress of upgrading rolling stock and 253 260 257 262 265 and 22 minutes. The new timetable has improved not only modification work. 100 convenience but also the timetable recovery capability in cases 0 of emergency and other such situations. ’13.3 ’14.3 ’15.3 ’16.3 ’17.3

Improvement of service on conventional lines Introduction of the latest N700A and upgrading of rolling stock In regards to conventional lines, we have steadily improved system, and adjust services so that they are offered in certain We have continued to introduce the N700A, which employs Shifts in the number of trainsets by series for the Tokaido Shinkansen services by increasing speeds, introducing new rolling stock, intervals. Through initiatives such as the above, we will strive to (From March 2007 to March 2020 (plan)) the results of our unique technological developments, as the and improving the frequency of trains. With regard to the limited offer timetables that are easier for customers to use. rolling stock to replace Series 700. We have begun introducing Series 300 Series 700 Series N700 N700A express trains, we have introduced “Wide-View” rolling stock (Trainsets) Limited Express Train “Wide-View Shinano” the N700A (3rd edition) from FY2016. With a view to further 150 and established the “Wide-View” limited express network, which enhancing the safety and stability of the N700A (3rd edition), we forms an integrated network with the Shinkansen, by ensuring have been undertaking enhancement work on the trainsets, such connections with the Shinkansen. In terms of the popular “Wide- 6 as heightening functions to prevent equipment malfunction on 13 View Shinano”, “Wide- View Hida” and other limited express 120 16 32 rolling stock by reinforcing the monitoring function, in addition to 32 19 25 trains, we are flexibly increasing the frequency and the number 48 further reducing the stopping distance of the Earthquake Brake 64 51 of train cars in service to meet demand at busy times and for 80 by 5% compared to the brake used in the already launched 90 80 nearby events. N700A. These functions will be made available not only on newly 80 60 80 80 In terms of local trains, we are striving to increase the produced rolling stock, but also on Series N700 and the existing frequency and number of cars per train in service during peak- 60 80 N700A rolling stock by remodeling and adding similar features. 60 demand morning and evening periods, establish a rapid train These measures are due to be completed by the end of 60 80 FY2019, resulting in all of our Shinkansen rolling stock being the 60 N700A type capable of running at a maximum speed of 285km/h. 30 New production of next-generation limited express train rolling stock using the hybrid method 61 60 This will advance our preparations to step up the service level 52 41 51 47 40 32 28 21 In anticipation of the replacement of electric cars currently adopting this method, we do not need the rotary components offered to our customers. 25 Meanwhile, in order to further enhance security, we are 0 9 used for the “Hida” and “Nanki” limited express trains, we will unique to diesel railcars and can achieve increased safety and ’07.3 ’08.3 ’09.3 ’10.3 ’11.3 ’12.3 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 ’20.3 newly develop a testing vehicle for the next-generation limited reliability. In terms of comfort, we can improve quietness and adding more security cameras in the passenger cars and deck (plan) passageways of our N700A type rolling stock and, by the end Note: The trainset figures are as of the end of each fiscal year (excluding retained trains, etc.) express rolling stock that uses the hybrid system, the first of comfort by not having to make the gear changes unique to of 2017, we will have security cameras in roughly 90% of all its kind for us, by the end of 2019 and conduct test runs to diesel railcars, reducing the number of engines, etc. Tokaido Shinkansen rolling stock. establish relevant technologies. We are aiming to commercially Exterior illustration operate the country’s first hybrid-type railway rolling stock that runs at speeds up to 120 km/h, while enhancing the safety Development of the next-generation rolling stock, N700S and comfort of such trains. We are currently reviewing plans to commercially introduce mass-produced vehicles by FY2022. By the end of March 2018, we will develop the validation test We have developed a standard rolling stock that is adaptable The hybrid method utilizes a combination of power generated vehicles for the next-generation rolling stock, reflecting a full- to rolling stock of varying trainset lengths by painstaking efforts by the engine and the power stored in a storage battery during scale model changeover for the first time since Series N700. We to reduce the size and weight. Since it will be possible to braking, etc., to rotate the motor for running the train. By *Design is illustration only. will use these validation test vehicles to conduct final checks of provide rolling stock that meet the needs of various lengths of new technologies reflected in the next-generation commercial trainsets without making a major modification, we can expect rolling stock. Following this, they will be used as testing vehicles cost reduction and quality improvement due to the expansion of Introduction of centralized passenger service system for the Tokaido Line to promote technological development in an aim to further brush manufacturer production size. In order to further enhance the convenience of customers and the staff will go to the site and respond to the customer’s needs. up the Tokaido Shinkansen and the Sanyo Shinkansen. We are to establish an efficient structure in line with customer use, we currently reviewing plans to commercially introduce the next will introduce the centralized passenger service system, which Centralized passenger service system series of commercial rolling stock around FY2020. Illustration of the front car of the N700S is currently adopted on the Taketoyo Line, at 8 stations on the Service Stations with the system We will improve the ATC and brake system for N700S to center Tokaido Line (between Okazaki and Toyohashi stations) from further reduce the stopping distance of the Earthquake Brake ITV camera Speaker October 2017. by 5% compared to that used in N700A (3rd edition) in order to Due to the centralized passenger service system, such further enhance safety. In addition, we will heighten functions service functions as purchase of tickets, fare adjustment, and Intercom to prevent accidents in advance by improving the monitoring Intercom (inside the recharging of IC cards, that are currently suspended during ticket gate) of equipment on running rolling stock. At the same time, we early morning hours and late night hours when the station staff will aim at further enhancing the precision and efficiency of are not on duty, will be available at all hours while trains are in inspections by transmitting a greater volume of data recorded Ticket machine Ticket confirming service. In addition, a full-time operator at the service center Operator stand by rolling stock to the ground, and conducting more detailed will monitor the status of the station via surveillance cameras Ticket purchase, IC card IC processing analyses of rolling stock conditions at the “rolling stock analysis recharge, fare adjustment (remote control) Simplified ticket gate as well as handle fare adjustments, respond to inquiries receipt (remote control) (accommodates IC, and center”. In terms of service, we will make efforts to further magnetic tickets) from customers, provide necessary assistance, and make improve comfort, placing electric outlets for mobile devices at *If a ticket requires a fare adjustment or cannot be used through the automatic ticketing gates, the announcements. If a customer requires guidance, etc., on site, operator will provide guidance via the intercom. all seats, and taking other steps. *If trouble arises, such as a ticket becoming jammed, station staff will go to the site to troubleshoot.

24 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 25 ManagementManagement Strategy Strategy — Safe and— Chuo Reliable Shinkansen Transportation Project Promoting the Chuo Shinkansen Project Using the Superconducting Maglev System Progress of the Project

Route of the Chuo Shinkansen (Between Tokyo and the City of Nagoya)

Yamanashi Prefecture Tokyo Time required (fastest) Metropolis Nagano Tokyo Metropolis ~ Gifu Prefecture Nagoya City Prefecture

Kanagawa Prefecture minutes Operating speed 40 Tokyo Metropolis ~ Osaka City Legends :Planning Route Shizuoka :Yamanashi Maglev Line Prefecture Aichi N Prefecture :Station Location km/h minutes 500 67 0 25 50km This map is copied from a Japanese map (with a scale of 1 to 1,000,000) published by the Geographical Survey Institute with their authorization. (Authorization number: H25 Jo Fuku, 310) We are promoting the Chuo Shinkansen Project using the Superconducting Maglev According to the Act, JR Central follows the procedures for the Chuo scale in places where the required preparations have been completed, System based on the Nationwide Shinkansen Railway Development Act (hereinafter Shinkansen (between the Tokyo Metropolis and the City of Osaka) as such as the Southern Alps tunnel (Yamanashi section, Nagano section), referred to as “the Act”) to continually carry out our mission of operating a high- shown in Diagram 1 . Since receiving the order for construction in May Shinagawa Station (north section, south section), and Nagoya Station speed railway linking the Tokyo Metropolitan area, Chukyo, and Kinki regions, which is the lifeline of our business, and to ensure the future foundation of the company. 2011, we have taken the procedures of environmental assessment (central east section, central west section). between Tokyo and the City of Nagoya, which is promoted as the first We will continue to go forward with our plan based on the major stage. In August 2014, we submitted the final Environment Impact premise of strictly ensuring sound management, and by focusing on Statement to the Minister of Land, Infrastructure, Transport and Tourism construction safety, environmental protection, and coordination with Significance of the Chuo Shinkansen Project using the Superconducting Maglev System (the Minister) and made a public announcement. In addition, we local communities. - Promoting the Project while ensuring sound management and providing stable dividends simultaneously made necessary preparations to apply for the approval The Act on the Japan Railway Construction, Transport and Technology 50 years have passed since the inauguration of the Tokaido fundamental clauses regarding application of the Act to the Ministry of the construction implementation plan along with the environmental Agency, Independent Administrative Agency was revised in November Shinkansen, which serves as Japan’s main transportation artery. of Land, Infrastructure, Transport and Tourism and received a reply in assessment procedures. We submitted the application for the 2016, and a system in which the Agency provides JR Central with the Therefore, we must consider drastic measures to respond to aging in January 2008 indicating that those principles would not be hindered. approval of the Construction Implementation Plan (Part 1) for the Chuo loans for part of the funds required for the construction of the Chuo the future and large-scale disasters based on the fact that it takes a Shinkansen section between Shinagawa and Nagoya to the Minister Shinkansen was put in place. Diagram 1 Flow of work based on the Nationwide Shinkansen on the same day as the submission of the final Environment Impact We will see that sound management and stable dividends are strictly long time to construct and build a new railway line. In the wake of the Railway Development Act Statement, and received approval in October of the same year. maintained by securing freedom of management and autonomy of Great East Japan Earthquake, the need for a new line that enables us Article 4 Basic Plan Decided in November 1973 to offer multiple routes in our main transportation artery has become We have continued to hold briefings introducing our project for investment, and effectively make use of long-term, fixed- and low- individual municipalities and self-government associations along interest rate financing to reduce management risk as we actively even more important to prepare for the risk from natural disasters. This Topological and geological surveys Article 5 Researches and Reports Ordered in February 1990 the planned route to explain the ways in which we work with local move ahead with the is the reason we decided to complete the Chuo Shinkansen as quickly Reported in October 2008 “Research on the residual 4 items” * as possible, as it can be used as an alternate to the role of the Tokaido Ordered in December 2008 communities in as detailed a manner as possible, and introduce region- construction efforts. After Reported in December 2009 oriented information etc. Further, we have proceeded carefully with launching the service to Shinkansen by utilizing the Superconducting Maglev System, which Consulted on February 24, 2010 Article 14-2 The Transport Policy Council Replied on May 12, 2011 we have developed, under the condition that we bear the cost of its preparations toward initiating construction work, including conducting Nagoya Station, we will center line surveys, implementing designs and holding discussions, continue on to promptly construction. We will operate the Chuo Shinkansen in an integrated Consented on May 18, 2011 Article 6 Designation of Operator and Constructor manner along with the Tokaido Shinkansen. Designated on May 20, 2011 acquiring land, concluding construction contracts, and conducting initiate the construction While steadily working towards the successful completion of this briefings. of the route to Osaka with Consented on May 23, 2011 Development Plan project and maintaining our ability to react in a flexible manner, we will Article 7 Decided on May 26, 2011 Construction contracts were concluded mainly for sections where a view to exerting full make necessary investments to ensure safe and reliable transportation, construction is difficult and requires a long period of time, such as the efforts to move up live and to enhance competitiveness in the railway business, as well as Article 8 Instruction to Construct Instructed on May 27, 2011 Southern Alps tunnel and the Shinagawa and Nagoya terminal stations, operation of the entire Environmental Impact and for emergency exits that serve as the starting point of the shield line by up to 8 years. ensure sound management and provide stable dividends. We will first Assessment Submission on August 26, 2014 Article 9 Construction Implementation Plan machine when excavating tunnels for the main line in urban areas. realize the project between Tokyo and the City of Nagoya, where we Approved on October 17, 2014 Construction of Southern Alps tunnel have received approval for the construction implementation plan, and Among such locations, we have begun civil engineering work on a full (Yamanashi section) strive to further extend to the City of Osaka. Start of Construction Reducing costs thoroughly while ensuring safety In order to confirm that the principles of a privately owned company, *“Research on the residual 4 items” •Items related to transportation capacity in response to the transportation demand such as freedom of management and autonomy of capital investment, •Items related to the development of facility and rolling stock technologies •Items related to construction costs We are responsible for the entire construction cost of the Chuo reduce costs while ensuring safety. At the same time, we will would not be hindered by application of the Act, we referred •Other necessary items Shinkansen, therefore all construction expenses and costs will flexibly distribute resources in an optimal fashion in accordance Outline of the Construction Implementation Plan (Part1) of the Chuo be examined by the internally established “Chuo Shinkansen with the managerial environment. Contents of Development Plan (Note)The estimated amount of expenditures for construction Shinkansen section between Shinagawa and Nagoya does not include interest. Construction Cost Reduction Committee”, which will thoroughly Construction line Chuo Shinkansen Section Between Shinagawa and Nagoya

Section Tokyo - Osaka City Shinagawa Station, Kanagawa Prefecture Station (provisional name), Station Location Yamanashi Prefecture Station (provisional name), Nagano Prefecture Station Technology used for running Superconducting magnetic levitation technology Superconducting Maglev System and engagement in global environment preservation (provisional name), Gifu Prefecture Station (provisional name), Nagoya Station Maximum design speed 505 km / h Line extension 285.6km Tokyo and Osaka will be connected in as fast as 67 minutes emissions that Superconducting Maglev System produces per Estimated amount of costs required for construction 9,030 billion yen 4,015.8 billion yen by the Chuo Shinkansen using the Superconducting Maglev seat between Tokyo and Osaka is approximately one-third of [Total construction costs of 5,523.5 billion yen (Includes rolling stock (including rolling stock costs) Construction costs costs. Excludes the construction costs for the existing Yamanashi System, and the actual travel time required to move between airplanes. As this shows, Superconducting Maglev is a transport Kofu City area, south-central Akaishi Maglev Line)] Main areas Other necessary items Mountains (Southern Alps), Nagoya the centers of Tokyo and Osaka City can be shortened to system suitable for the 21st century in which global environment passed through City area, Nara City area Expected completion year 2027 approximately half of airplanes. In addition, the amount of CO2 preservation is becoming more and more important.

26 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 27 Management Strategy — Superconducting Maglev Technology Refining Superconducting Maglev Technology and Reducing Costs Progress on the Superconducting Maglev System What is superconductivity? Technology Superconductivity is the phenomenon that the electrical resistance of certain materials approaches zero at very low temperatures. When an electrical current is applied to a JR Central applies to the Minister of Transport for the approval of coil in a superconductive state (superconducting coil), this current continues to flow June 1990 the construction plan of the Yamanashi Maglev Line and gains almost indefinitely, resulting in the creation of a very large magnetic field. approval. Niobium-titanium alloy has been used for the Superconducting Maglev and superconductive state is achieved when cooling it with liquid helium to a temperature April 1997 Running tests start on the Yamanashi Maglev Line. of minus 269°C. Higher Accumulated traveling distance(Yamanashi Maglev Line) Accumulated investment amount (includes consumption tax in part) The Superconducting Magnetic Levitation Technological Practicality Evaluation Committee of the Ministry of Transport Temperature of March 2000 (hereafter, the “Evaluation Committee”) acknowledges that “there is liquid helium potential from a technological standpoint that the technology could have practical applications” Electrical December 2003 JR Central records the world speed record for a manned rail Approx. million km billion yen vehicle at 581 km/h resistance 2.01 November 2004 JR Central performs exercises of trains passing each other at 1,026 (As of the end of June 2017) 669.6 km/h relative to one another 0 Higher The Evaluation Committee of the Ministry of Land, Infrastructure, Temperature March 2005 Transport and Tourism acknowledges that “the core technologies -273 for practical application have been established” -269 September 2006 A facility investment plan is established to extend the Yamanashi JR Central has promoted technological development based on our Maglev Line and upgrade facilities long-term belief that the Superconducting Maglev System is the most Application for changes of “Yamanashi Maglev Line Construction January 2007 Plan” is approved by the Minister of Land, Infrastructure and suitable for use on the Chuo Shinkansen due to its speed and advanced Transport (hereafter, the “Minister”)

technology. The Evaluation Committee of the Ministry of Land, Infrastructure, The Principles of the Superconducting Maglev System The Superconducting Maglev System Technology has been completed Transport and Tourism acknowledges that “the technologies required for commercial services have been established from as a practical technology. We will continue to make efforts in further July 2009 a comprehensive and systematic standpoint, and it is possible Propulsion System N S N S N S N S N brushing up the Superconducting Maglev System Technology, including to move forward with detailing the specifications for commercial By passing current through the services and the technical standards” improving comfort and enhancing efficiency of maintenance, toward the Propulsion Coils on the ground, a S N S N The Minister of Land, Infrastructure, Transport and Tourism magnetic field (north and south opening of the Shinagawa-Nagoya route of the Chuo Shinkansen, as well poles) is produced, thus the vehicle May 2011 determines development plans for the Chuo Shinkansen as work to reduce costs for the construction, operation, and maintenance (between Tokyo and the City of Osaka), which is based on a is propelled forward by the attractive Superconducting Magnetic Levitation System force of opposite poles and the N S N S of commercial lines. repulsive force of same poles acting December The Minister establishes the technical standards for Superconducting Maglev between the ground coils and the S N S N S N S N S Superconducting Magnets built into Work extending the Yamanashi Maglev Line to 42.8km and the vehicles. August 2013 renewing the facilities is completed, and running tests starts with the Series L0

JR Central records a travel distance of 4,064 km in one day April 2015 JR Central records the world speed record for a manned rail Levitation System vehicle at 603 km/h Initiatives with the Yamanashi Maglev Line The Levitation and Guidance Coils The Evaluation Committee of the Ministry of Land, Infrastructure, are installed on both sides of the February 2017 Transport and Tourism evaluates that “the technology development guideway (track). When the We started running tests on the initial 18.4 km section of the tests were started with the Series L0 (el zero) rolling stock based on required for commercial lines was completed” on-board Superconducting Magnets Yamanashi Maglev Line in April 1997. The level of the Superconducting commercial line specifications. In April 2015 we recorded the maximum pass through at high speed, an electric current is induced in the N S N S Maglev Technology was evaluated in multiple stages, resulting in daily running distance of 4,064 km, and beat our own world record for Diagram 1 Superconducting Maglev Ride Levitation and Guidance Coils, S N causing them to become the Superconducting Magnetic Levitation Technological Practicality the fastest running train with a record of 603 km/h. In February 2017, electromagnets. This generates a Evaluation Committee of the Ministry (hereinafter, the Evaluation the Evaluation Committee confirmed its evaluation that the technology force that both pushes and pulls up the vehicle. Committee) acknowledging that the Superconducting Maglev development required for commercial lines was completed. Technology had already achieved levels sufficient for commercial We will continue to make efforts in further brushing up service in July 2009. The Minister established the technological Superconducting Maglev System Technology, including improving Guidance System standards of the Superconducting Maglev in December 2011. comfort and enhancing efficiency of maintenance for the practical The Levitation and Guidance Coils Work extending the Yamanashi Maglev Line to 42.8 km and fully technologies already established, as well as work to reduce costs for on both sides of the guideway keep renewing the facilities was completed in August 2013, and running the construction, operation, and maintenance of commercial lines. the vehicle in the center of the guideway at all times by exerting an attractive force on the far side of the N S N N vehicle and a repulsive force on the Superconducting Maglev Ride near side when the vehicle moves off center to either side. We have been conducting “Superconducting Maglev Ride” with many giving their positive impressions, such as “traveled in since FY2014, and approximately 60,000 people to date have extreme comfort” and “wishing for early launch of the service.” experienced the high-speed travel at 500 km/h, and the high Diagram 1 We will also continue promoting “Superconducting level of performance of Superconducting Maglev Technology, Maglev Ride” in a well-planned manner. Overview of the Yamanashi Maglev Line

Yamanashi Maglev Initial section Initial section Yamanashi Maglev Investment in the Yamanashi Maglev Line and Superconducting Maglev technological development Line starting point start point end point Line end point 0km000m 16km610m 35km010m 42km800m We have invested heavily in developing the practical Investment in the Yamanashi Maglev Line and technologies required to establish Superconducting Superconducting Maglev technological development Maglev commercial lines. We will proceed with Accumulated investment amount *1 initiatives to realize Superconducting Maglev Project Special investments for the Yamanashi Maglev Line billion yen Elevation 170.6 800ｍ in the Northeast Corridor of the United States while Extension of the Yamanashi Maglev Line and *2 billion yen constructing Superconducting Maglev-based Chuo upgrading of facilities 338.1 600ｍ Investment in proprietary Superconducting Maglev Shinkansen ourselves. The construction, operation *3 technological development 160.9billion yen 400ｍ and maintenance for these projects all rely on Total ｍ technologies we have developed. 669.6billion yen 200 [Extended section] Initial section [facility upgraded] [Extended section] *1 Special investment of 196.5 billion yen (including consumption tax) planned for test infrastructure (above-ground facilities for general purpose use), etc., such as civil engineering structures along initial sections Incline (‰) 18 40 17 40 6 40 28 3 40 9 3 40 of track. The above amount is the amount paid from FY1990 to FY2016. *2 355 billion yen (including tax) in construction costs planned as a new investment framework for work extending the Yamanashi Maglev Line to 42.8 km and renewing the facilities. The above amount is the amount paid from FY2006 to FY2016. Kilometers (km) *3 The above amount is the amount paid separate to the amounts listed for *1 and *2 from FY1987 when the company was founded to FY2016. 0 5 10 15 20 25 30 35 40

28 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 29 Management Strategy — Sales and Marketing Enhancing Sales and Marketing Stimulating Tourist Demand

Deployment of tourism campaigns

“Express Reservation” and “PLUS EX” are We have continuously implemented travel campaigns, such as Kyoto Campaign membership reservation services that enable the “Kyoto Campaign”, for Kyoto and Nara, which are the largest members to reserve seats and change reservations Number of “EX service*1” members *2 and most sustainable tourist resources in our market area, and easily online, while eliminating the need to pick up we are promoting the use of the Shinkansen mainly from the tickets, thereby making the most use of the high Tokyo Metropolitan area to the Kansai region. In particular, volume Tokaido Shinkansen. And they are used we run promotional advertisements for the “Kyoto Campaign” in approximately 30% of all seat bookings for the based on a concept of enabling customers to re-acknowledge Tokaido Shinkansen. At the end of September million 2017 we will introduce “smartEX”, a new online 3.15 Japanese beauty and profundity. reservation and ticketless boarding service that can In our “Tokyo Bookmark” Campaign to promote the use of the be used by following a simple registration procedure. Shinkansen to visit Tokyo from the Kansai and Chukyo areas, we The service will also offer greater convenience for Record of “EX service*1” use (Daily average on weekdays)*2 also introduce tourism information on Tokyo, travel items, etc., non-members of the abovementioned services and on the website. In addition, we are working on coming up with for foreign tourists visiting Japan, etc. in using the attractive products associated with Hida, Ise-Shima and other Tokaido Shinkansen. locations. In terms of tourism, we will roll out measures to 171,000 stimulate demand, such as the Kyoto campaign, uses and continue to strengthen our relationship with local residents and travel agencies at tourist spots in *1 Our “EX service” lineup refers to the “Express Reservation service” offered by JR Central and JR our operating areas. We will also strive to increase West, and the “PLUS EX” service offered by JR Central. Shinkansen ridership by providing attractive travel *2 As of March 2017 Enhancement of tourist products for “Express Reservation” and “PLUS EX” members products and bolstering initiatives aimed at various members. While the number of members of both services has been rising Family Hayatoku” and other services that offer a discount for year after year, we are expanding tourist products to increase using the Shinkansen, although the travel dates and hours of Shinkansen use for travel on weekends and holidays for these boarding may be limited, we are stimulating demand for the use members that typically only ride the Shinkansen for business. of Shinkansen for purposes other than business. Improving Convenience for the Tokaido Shinkansen For example, by launching various products, such as “EX

“Express Reservation Service” and “PLUS EX Service” “50+ (Fifty Plus)” travel plan

Shifts in usage of “Express Reservation”, etc. Members of either service can smoothly ride the Shinkansen Membership Number of uses Given the aging population in Japan, the senior age group, of FY2016 totaled approximately 870,000, and approximately (Daily average on weekdays) by simply touching their member IC card at the automatic Membership (10,000 persons) (Thousand) which is said to have more leisure time and disposable income 210,000 members enjoyed “50+” brand products. ticketing gates after reserving their seats with a smartphone or 350 210 315 than other age groups, is growing. We expanded the target We not only inform the members of seasonal tourism other device beforehand. There is no need to stop at the ticket 300 289 180 group to include persons aged 50 and above, and has been information through the magazine and the website but also offer counter of a station, which allows customers to significantly 266 171 operating a travel club “50+”, which anyone over 50 years affordable travel products that use the Tokaido Shinkansen. reduce the total transit time, plus enjoy the benefit of using the 250 236 155 150 old can participate in. The number of members as of the end 217 Shinkansen at a discounted price. Additionally, as members can 200 134 138 120 change their reservation as many times as they want without 119 150 90 any additional charges, they can always select the train that best suits their need from a vast selection of trains including the 100 60 “Nozomi”, which has a maximum of 10 departures every hour. Efforts toward foreign tourists 50 30 As of the end of March 2017, the number of members of both services totaled 3,150,000 (up 260,000 (9%) year on year) and 0 0 In our new online reservation and ticketless boarding cooperation with local municipalities and tourist associations ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 the number of uses per weekday totaled approximately 170,000 *1 The membership numbers are as of the end of each month and include the total of JR Central and service “smartEX” for the Tokaido Shinkansen and the Sanyo along the line. The website may be viewed also in English and JR West. (up 16,000 (10%) year on year). *2 Includes “PLUS EX” members from March 2013 Shinkansen, foreigners visiting Japan will be able to reserve Chinese (traditional Chinese) in addition to Japanese. seats for the Tokaido and Sanyo Shinkansen overseas prior to Japan Highlights Travel New Tokaido and Sanyo Shinkansen online reservation and ticketless boarding service, “smartEX” their departure. We also offer travel products, etc., using the “FLEX JAPAN” We have been offering the “Express Reservation service” smartphone, etc. This service will offer greater convenience for brand to stimulate tourism along our lines, with a focus on and “PLUS EX” service only to members, largely targeting even more customers, including people traveling to visit their the Tokaido Shinkansen. Specifically, we offer a product, for passengers who frequently ride the Shinkansen for business or hometowns, tourists, and foreigners visiting Japan, in addition example, that offers a round-trip non-reserved seat ticket other reasons. These services require members to apply for a to customers on business trips, to use the Shinkansen. between Tokyo and Kyoto or Osaka plus a one-day tourist relevant credit card prior to using the service. Illustration of using “smartEX” ticket at the destination as a set. We also collaborate with We aim to start a new online reservation and ticketless municipalities located along the lines and other transportation 1. Register 2. Book 3. Board boarding service, “smartEX” for the Tokaido Shinkansen and the companies to promote the sales of excursion packages

Sanyo Shinkansen by the end of September 2017, in an attempt Credit Tap! for foreign tourists visiting Japan, targeting areas such to improve convenience for even more customers by eliminating card as “Takayama and Hokuriku”, and “the Ise, Kumano, and the aforementioned advance requirements. This ticketless Wakayama” areas. service enables customers to board the Tokaido Shinkansen We have been operating “Japan Highlights Travel”, a portal and the Sanyo Shinkansen simply by registering a credit site that has a collection of tourism information on areas card and the widely-used commuting type IC card from their Commuting type IC card along the Tokaido Shinkansen to stimulate travel demand in

30 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 31 Management Strategy — Technological Development, Enhancement of Technical Capability, Overseas Deployment Technological Development and Enhancement of Technical Capability Overseas Deployment of High-Speed Railway Systems

The railway business is supported by employees who We currently offer consultation to overseas high-speed railway Basic railway R&D cycle Target lines for overseas expansion thoroughly execute their tasks using various skills and projects by utilizing our comprehensive technologies in the highest cooperation with each other, and supported by various level high-speed railway system in the world. We believe that the Acquisition of large amounts of types of equipment, such as rolling stock, civil engineering field data Field-based verification overseas deployment of our high-speed railway system will be a (From rolling stocks in commercial (From testing on main lines, etc.) Target lines for the SCMAGLEV: structures, tracks, and electric and signal communications services, above-ground facilities, test meaningful project that enables Japanese manufacturers to maintain Northeast Corridor. (Washington D.C. - New York) equipment, functioning seamlessly. In order to further ensure rolling stock, etc.) and strengthen their technology and skills through the expansion of safety and strengthen the future managerial foundation, it is Understanding phenomena the international high-speed railway market, and it also leads to the New York vital to continue developing core technologies which serve occurring in the field stable provision of equipment, and to technological innovation and cost Baltimore as the base of the foundation. reductions in railway-related equipment. Target lines for the N700-I Bullet: Looking ahead, we will continue to proceed with We target countries and regions where it can be expected to introduce Dallas - Houston (State of Texas) Washington D.C. development using the latest technology in relation to rolling Theoretical Examination total systems involving new high-speed passenger railway lines in analysis using testing stock and other equipment towards further improving safety and simulation equipment which our superior high-speed railway systems can be used to their and enriching our transportation service, and have this lead full potential. Furthermore, we realize the need for target countries and Dallas

back to the building of an efficient management structure regions to have a complete legal system where intellectual property Houston Computer-based theoretical Verification using full scale large that emphasizes reducing unnecessary costs. analysis testing equipment rights and the sanctity of agreements are established as socially- accepted ideas, a stable political situation, and the economic strength to invest in large-scale infrastructure investments. Therefore, the U.S. is currently the main target for promotional activities.

Promoting Technological Development at the Komaki Research Center Consulting & Coordination business We opened Komaki R&D center in Komaki, Aichi Prefecture, in July 2002 in order to strengthen technological development efforts that would Our policy regarding the overseas expansion of high-speed railway systems is that we do not lead the implementing body of development support our future with the aim of enhancing our technical capabilities and developing human resources. The main distinctive feature of the projects but contribute to projects primarily through consulting. Specifically, we propose the deployment of high-speed railway as a total system, Komaki R&D Center is its technological development capability using actual-size testing equipment. Through the 15 years since the Center’s which includes civil engineering structures, tracks, electrical equipment, signaling equipment, rolling stock, operation management systems, founding, we have worked to improve our testing equipment. At the same time, we have made accomplishments in proprietary technology maintenance and repair, etc., to overseas markets. We not only formulate technical specifications and provide support and consultation to ensure development, including the development of new rolling stock (refer to P. 24 for features of N700S; refer to P. 25 for features of the next- safe and reliable operation of the high-speed railway by supplying various manuals regarding operations and maintenance, and conducting generation limited express rolling stock using the hybrid method), the development of countermeasures against derailment and deviation for the education and training for staff, etc., but also coordinate with relevant Japanese companies when projects become concrete. Tokaido Shinkansen, the development of large-scale renovation methods for civil engineering structures in relation to our Shinkansen trains, and the development of high-speed heavy simple catenary for our Shinkansen trains. The N700-I Bullet and SCMAGLEV In FY2017, we will newly produce validation test vehicles for the next-generation rolling stock N700S for the Tokaido Shinkansen, and prepare to perform running tests for the final checking of the new technology to be reflected in the next set of commercial trainsets. In addition, we We are proposing high-speed railway systems called the “N700-I Bullet” of which the Series N700 rolling stock is the main component. The will implement efficient and advanced inspection and maintenance that utilizes condition monitoring technology, as well as move ahead with and “SCMAGLEV” to overseas markets. The N700-I Bullet is a Tokaido SCMAGLEV is a Superconducting Maglev System completed by us that technical development that can lead to cost reductions for large-scale renovation, earthquake countermeasures, upgrading of equipment, and Shinkansen total system based on the principle of “Crash Avoidance”, can realize commercial services at a high speed of 500 km/h. other uses. We will also pursue technology development in order to respond more accurately to landslides and other disasters.

The Texas Project to ensure that the initial segment from Washington D.C. to Baltimore goes ahead as a Development of equipment to continuously measure stress on steel bridges The Texas Project, which is set to use the N700-I Bullet, is a business venture which project based on cooperation of both the Japanese and U.S. governments. In 2015, the aims at linking two major city centers, Dallas and Houston, with high-speed rail. U.S. government approved a federal grant of 27.8 million USD for the State of Maryland to cover the cost of research for the aforementioned segment, and the procedure for JR Central has been conducting detailed inspections of steel bridges identify the possibility of irregular conditions arising and have achieved The main development body, Texas Central Partners (TCP), is pursuing business development activities on a full scale through the procurement of construction funds environmental impact assessment by the Federal Railroad Association, etc. began in for the Tokaido Shinkansen every 8 years in order to properly make increased safety in performing tasks. and the formulation of preliminary designs. late 2016. The Japanese government also posted research expenses for this project Distortion gauge under the FY2017 budget as done in FY2016. There has been a rise in awareness and repairs before cracks or other irregular conditions occur. We also check, Installation on bridge beams In order to provide technical assistance for TCP, we established a local subsidiary, whenever necessary, the soundness of steel bridges by measuring the High-Speed-Railway Technology Consulting Corporation (HTeC) in May 2016. In support toward this project in the governments of both Japan and the U.S. The U.S. October of the same year, HTeC entered into a technical assistance agreement Secretary of Transportation, the stress applied on the bridges in connection with the passing of trains. This with TCP and began providing technical consulting for the business development Governor of Maryland, and other checking process placed a great deal of labor on the staff performing activities performed by TCP, such as formulation of design standards and VIPs, have experienced riding on-site work, including installation of equipment on the steel bridges and specifications, preparation of management and maintenance plans, creation of on the Yamanashi Maglev Line and expressed high recognition measuring and acquiring data as trains passed. preliminary designs for stations and maintenance facilities, development of personnel training and educational programs, and formulation of pre-launch testing plan. of the quality of the technology. With the development of this device, it has become easier to check the Equipment body We will provide full support from trends of stress placed on steel bridges in a continuous manner without (LED version) The Northeast Corridor Project the technological perspective when the project moves to a more having to go to the site. Consequently, we have come to more effectively An SCMAGLEV line is supposed to be adopted for Northeast Corridor that connects specific phase. Installation spots Installation status Washington D.C. and New York, and we are currently initiating promotional activities Meeting between HTeC and TCP

Development of new electronic railroad crossing device Technical consulting for Taiwan High Speed Rail We developed a new electronic railroad crossing device that offers roughly 30%) for the device. enhanced stability and reliability. This device will be our standard railroad Furthermore, we adopted a highly functional all-purpose integrated We received a request for technical assistance from Taiwan High Speed from FY2014 through FY2016. Since May 2017, we have been providing crossing control device. circuit to put in place a common control device for use inside stations Rail Corporation, which operates Taiwan’s high-speed rail system based technical consulting for construction related to upgrading of the operation We revised the design of the railroad crossing device, added flexibility to and between stations, rather than having separate ones as we did on the Japanese high-speed rail system, and provided technical consulting management system conducted by Taiwan High Speed Rail Corporation. wiring and installation of the device, improved features to prevent aging before. As a result, we were able to reduce parts and establish a uniform of metal parts of the control circuit, and enhanced the heat-resistance maintenance method, which led to increased efficiency in construction and heat-exhaust function. As a result, durability against lightning strikes and maintenance, and reduced production costs (by roughly 25%). Making efforts to promote Japanese high-speed rail systems as a global standard and temperature increased. We consequently secured high safety by We will proceed with the installation of the device in approximately 1,800 We will continue to promote initiatives to establish the Japanese high-speed rail system, which is based on the core principle of “Crash mitigating the risk of malfunctions occurring, and achieved longer life (by spots in FY2017 and thereafter. Avoidance”, as a global standard, through the International High-Speed Rail Association (IHRA).

32 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 33 Management Strategy — Affiliated Businesses Developing Affiliated Businesses Development of Nagoya Station boasting the highest number of passengers among our stations

The development of Nagoya Station, which boasts an average in April 2017. We will continue to operate Towers and Gate Tower 210,000 passengers per day, the highest number of passengers of in a uniform manner and take initiatives to maximize earnings by any our stations, forms a pillar of our affiliated businesses. demonstrating synergistic effects through clearly segregating At Nagoya Station, we opened JR Central Towers (hereinafter, the concepts of businesses of both facilities, while maximizing “Towers”) right above the station in 2000 and then fully opened profits based on business cooperation and by pursuing efficient Operating Revenues of Consolidated Subsidiaries (simply aggregated) JR Gate Tower (hereinafter, “Gate Tower”) adjacent to the Towers management.

FY1989 JR Central Towers (3 companies) Towers, the skyscraper complex with a height of 245 meters and a total floor work for the first time since the opening, in anticipation of the opening of 52.6 billion yen area of approximately 417,000 m², built right above Nagoya Station at a total “Takashimaya Gate Tower Mall” at Gate Tower, and reopened in March 2017. cost of roughly 200 billion yen, is the core of our affiliated businesses. Our Net sales for the year ending February 2017 totaled 128.6 billion yen, which three consolidated subsidiaries run a department store, a hotel, and offices. was more than double that of 2000 when the store commenced its operation. After the full opening in 2000, earnings of our affiliated businesses increased With regard to the hotel business, Nagoya Marriott Associa Hotel is run by JR FY2016 significantly. Diagram 1 Tokai Hotels Co., Ltd. (wholly-owned subsidiary of JR Central, belonging to the The office business is run by JR CENTRAL BUILDING CO., LTD. (wholly-owned Other segment). The location directly above the station allows for a spectacular subsidiary of JR Central, belonging to the Real Estate segment), which owns high-rise view and the high-grade facilities have gained wide acclaim. This has the Towers property. Since its opening, the offices have continually recorded a led to the hotel maintaining a high occupancy rate of more than 82% in FY2016 (29 companies) high occupancy level, which remained at near full occupancy during FY2016. (annual average), and we are working to increase earnings by performing As for the department store business, JR Tokai Takashimaya Co., Ltd., flexible yield control. billion yen belonging to the Merchandise and Other segment, operates JR Nagoya The combined operating revenues of these three companies were 173.9 582.9 Takashimaya, which attracts many visitors by leveraging the store’s location billion yen in FY2016 (simply aggregated). directly above the station. In February 2017, we completed large-scale renewal

As seen in JR Central Towers and the JR Gate JR Gate Tower Tower in Nagoya Station, we have improved our Gate Tower, standing adjacent to Towers, is a high-rise complex comprising signed for almost all offices. The “Takashimaya Gate Tower Mall” is operated revenue base by engaging in businesses that are offices, commercial facilities, a hotel, a bus terminal, and parking lots, along by JR Tokai Takashimaya Co., Ltd., which undertakes the department store expected to generate synergistic effects with the with other facilities. The height is approximately 220 meters, and the total floor business at Towers. The mall has over 150 fashion and goods stores in area is approximately 260,000 m². It is roughly 60% of the scale of Towers. categories and price ranges that are not covered by the current JR Nagoya railway business, such as in areas that make full The total business cost is approximately 120 billion yen. In November 2016, Takashimaya. use of the good location of railway stations. We occupancy of offices began, followed by the opening of “Takashimaya Gate “Nagoya JR Gate Tower Hotel” is run by JR Tokai Hotels Co., Ltd., which will continue to expand our revenues and profits Tower Mall” and “Nagoya JR Gate Tower Hotel” along with other facilities in undertakes the hotel business at Towers. With a total of 350 rooms, the hotel in cooperation with group companies. April 2017. Gate Tower, along with Towers, has created a highly convenient focuses on lodging that provides a sense of high quality and great functions, and attractive urban space, further invigorating the area around the Nagoya while offering the convenience of being directly connected to the station, as Station. well as providing a comfortable sleeping environment. Given the convenient location of offices above the Nagoya Station where the Furthermore, in addition to a restaurant floor that boasts one of the largest Chuo Shinkansen will be in service in the future, tenant contracts have been number of restaurants offered in Japan (in conjunction with Towers), an electronics retail store, clothing stores, a fitness club, a childcare facility, medical care facilities, and other facilities are also tenants. From the standpoint of pursuing efficient management by the JR Central Group, JR CENTRAL BUILDING CO., LTD. undertakes the management and operation of the overall building in the same manner as done for Towers.

Projected sales of JR Gate Tower and major businesses (In 100s of million yen)

JR Central Towers (center/right) and JR Gate Tower (left) Takashimaya Gate Building business Nagoya JR Gate Tower Mall (JR (JR CENTRAL Tower Hotel (JR Tokai Takashimaya BUILDING CO., Tokai Hotels, Co., Co., Ltd.) LTD.) Ltd.) Takashimaya Gate Tower Mall on the opening day Projected sales 337* 114 15 Line-ups of JR Central Group affiliated business (full year basis) JR Gate Tower *Amount handled by tenants

The JR Central Group undertakes businesses in Diagram 1 Transportation Merchandise and Other Real Estate Other the areas of Transportation, Merchandise and Other, Shifts in the Operating Revenues of Consolidated Subsidiaries (simply aggregated) 5,829 Real Estate, and Other. The Transportation segment 5,696 (29) 5,561 5,577 (28) 131 5,286 (29) (29) involves railway and bus businesses. The Merchandise 5,181 5,259 5,073 (31) 5,112 ( ) Other initiatives (100s of million yen) (29) 29 (31) (29) 5,000 and Other segment manages department stores and 4,624 provides sales services for goods and food in stations 4,362 (30) Further, as JR Central only holds Tokaido Shinkansen stations and food court under the elevated bridge of Shizuoka Station by leveraging 4,105 (30) , and trains, utilizing the merit of having good railway (30) 2 410 4,000 3,820 3,850 related facilities in the Tokyo Metropolitan area and the Kansai region, we our new in-house developed construction method. This method has 3,693 (29) (30) station locations to attract customers. The Real Estate 3,556 (29) to date have engaged in developing a business which effectively uses the enabled us to significantly keep construction costs down and shorten 3,350 (30) segment develops commercial facilities in stations (30) limited space available, such as the area inside Shinkansen stations and the construction period compared to when performing development and and areas under elevated track columns, and also 3,000 665 under elevated tracks. In FY2016, we opened “Nippon Gourmet Road”, construction work under railway viaducts using the conventional method. leases real estate such as station buildings. In the 2,101 a new zone of selected well-established stores that offer local gourmet We will continue to take initiatives (19) Other segment, we manage hotels, travel agencies, 2,000 items from all over the country, in “First Avenue Tokyo Station” in Tokyo in FY2017 to further strengthen our and advertising agencies, etc. We also manufacture Station. Meanwhile, in Kyoto Station, we opened “Hachijo Komachi” in earnings capability and reinforce rolling stock and maintain, inspect, and repair our 2,623 1,000 front of the ticketing gates, aiming to establish a commercial zone for competitiveness by invigorating railway facilities in this segment. customers to get a better feel of the atmosphere unique to Kyoto. our real estate business and Operating revenues of consolidated subsidiaries, In addition, we are proceeding with our development efforts in places merchandise business, making 0 excluding JR Central, totaled 582.9 billion yen (simply ’00.3 ’01.3 ’02.3 ’03.3 ’04.3 ’05.3 ’06.3 ’07.3 ’08.3 ’09.3 ’10.3 ’11.3 ’12.3 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 other than Nagoya Station in the Tokai region where we operate effective use of land we own, and aggregated) in FY2016. Note: Each figure in parentheses indicates the number of consolidated subsidiaries at the end of FY conventional lines. In FY2016, we opened “Shizuoka Golden Yokocho” pursuing other efforts. Shizuoka Golden Yokocho food court

34 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 35 ESG Information — Engagement in Global Environment Preservation Engagement in Global Environment Preservation Initiatives with the Shinkansen

Introducing Energy-Conserving Rolling Stock We are proactively developing and introducing energy- h. It means that the N700A has significantly improved energy

Energy Consumption Unit* for the conserving rolling stock in our effort to further reduce the consumption while increasing the speed. The result is that our Tokaido Shinkansen in FY2016 Shinkansen’s energy consumption. We have introduced 80 Energy Consumption Unit at the end of FY2016 improved by mainline Series N700 trainsets in an intensive manner for five approximately 33% compared with that of FY1990. We will aim to Compared to FY1990 years since FY2007. 32 trainsets of the latest N700A rolling stock further achieve energy efficiency by promoting the introduction of have been introduced as of FY2016, with a further 19 trainsets the N700A. scheduled to be introduced from FY2017 to FY2019. With the adoption of a drive system using silicon carbide (SiC), Energy consumption volume for the N700A to travel between lighter rolling stock, reduced travel resistance and, other features % improvement Tokyo and Shin-Osaka at the maximum speed of 285 km/h is on the next-generation Shinkansen rolling stock N700S, which we 33 23% less than that for Series 300, and 16% less than that for plan to launch commercially in FY2020, we expect to be able to Less than1% Less than1% 3% Railway Series 700, which travel at the maximum speed of 270 km/ cut energy consumption even further. Bus Railways have the outstanding characteristic of being highly 57% Airplane 81% energy efficient compared to other transportation modes and 84% Car Comparison of Electricity Consumption by Shifts in the Ratio of the Tokaido Shinkansen Tokaido Shinkansen Rolling Stock Type Energy-Conserving Rolling Stock and Energy Consumption Unit having minimal adverse impact on the global environment. In 6% Other

270km/h 23% (%) (%) Energy Consumption Unit (Ratio using an FY1990 basis) addition to directly reducing the load on the environment by 6% 9% 7% 100 100 270km/h 16% Approximately 33% further improving energy efficiency in its railway operations, such 3% Ratio of energy-conserving rolling stock improvement over FY1990 31% 3% 285km/h as by lowering power consumption in rolling stock, JR Central 4% 7% 80 80 also considers suppression of the load placed on the environment Transportation volume Energy CO2 (passenger-kilometer) consumption emission rate across its entire Transportation section, brought about by having Source: For transportation volume/energy consumption, created based on data from Handbook of Energy & 60 Series 0/ Series 100 60 Economic Statistics, and for CO2 emissions, based on the National Institute for Environmental Studies, Greenhouse 100% 92% 77% as many passengers as possible opt to use railway services that Gas Inventory Office of Japan. reduce the burden on the global environment, as linked to efforts * The total of items in the breakdown may not be 100% due to rounding. Energy-conserving rolling 40 stock Series 300/ Series 700 40 related to the engagement in global environment preservation. Diagram 1 Distribution of Passenger Transportation Share, in terms of Transportation Volume, Energy Consumption and CO2 Emissions 20 Even more energy-conserving 20 rolling stock * JR Central defines Energy Consumption Unit as the “Amount of energy consumed when running 1 car for 1 kilometer”, due to total rolling stock kilometers being the value which is the most relevant to our business activities. Series 300 Series 700 N700A Series N700/ N700A (1992) (1999) (2013) 0 0 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 * Note: Simulated run from Tokyo to Shin-Osaka at the maximum speed above (FY) Environmental Superiority of Railway

The problem of global warming is an issue that Diagram 2 Comparison of the Tokaido Shinkansen and Airplanes (between Tokyo and Osaka) Great environmental performance of Series N700 and N700A should be dealt with on a global scale. While Series N700 and N700A trains have been highly improved in environmental performance in terms of both speed and comfort due to Energy Consumption per Seat CO2 Emission per Seat it is regarded that CO², among greenhouse the introduction of the following technologies. gasses, in particular has the largest impact on Shinkansen Approximately Shinkansen Approximately Reduction in running global warming, railways account for only 7% of 1/8 1/12 We reduce the running resistance by introducing a nose shape with great aerodynamic attributes, using flush windowpanes, which have *1 *1 1 resistance CO² emissions despite undertaking 31% of the 90MJ of an airplane 4.2kg-CO² of an airplane no unevenness between the outside panel and windowpane, and installing coverall hoods between all cars, etc. Series N700 Series N700 Diagram 3 country’s overall passenger transport volume. “Nozomi” “Nozomi” Diagram 1 Compared with an airplane (B777- Airplane Airplane Reducing rolling stock A light and simple-structured bolsterless bogie is used, with light aluminum alloy used for the body frame. Furthermore, we employed a 200), the Tokaido Shinkansen (Series N700 2 weight high performance and small alternating-current traction motor. Through these changes, we have reduced the rolling stock weight. *2 *2 746MJ 50kg-CO² “Nozomi”) consumes approximately 1/8th of B777-200 B777-200 The Body Inclining System is introduced to Series N700 and N700A for the first time in the Shinkansen in order to increase the speed Introducing the Body the amount of energy per seat when traveling at curves currently subject to speed restriction. This system makes it possible to increase speed while securing comfort and shortening 3 Inclining System between Tokyo and Osaka, and discharges about *1 Calculation based on running performance of Series N700 Nozomi (Tokyo - Shin-Osaka) conducted by JR Central. travel time, and to simultaneously cut power consumption by reducing the frequency of speed acceleration and deceleration. *2 Calculated by JR Central using ANA's "Annual Report 2011” B777-200 (Haneda - Itami/Kansai Airport) for reference. 1/12th of the CO emissions. The data shows ² Expansion of Electric Power We adopt the Electric Power Regenerative Braking System, in which the motor is used as a generator during braking to produce that the Tokaido Shinkansen has overwhelming electricity and return it to the catenary. While 12 of the 16 cars in one trainset of Series 700 were regenerative, 14 of the 16 cars in one 4 Regenerative Braking System trainset of Series N700 and N700A are regenerative. The Electric Power Regenerative Braking System provides all of the braking power environmental superiority. Diagram 2 Diagram 4 needed for one trainset during normal braking.

The power converter (CI) converts electricity from the catenary and sends it to the motor at the time of acceleration, and returns the Guidelines and Objectives Lighter, smaller blower- electricity generated by the motor back to the catenary at the time of deceleration. JR Central was the first to put the blower-less power 5 less CI in all motor cars converter, which uses airflow from running for air cooling, into practical use in the Shinkansen and uses the system in part of the rolling stock of Series N700. For N700A, these CI were made 17% smaller and lighter and are installed on all motor cars. Environmental Action Guidelines Environmental goal In the cabins of regular cars on the N700A, lighting has been optimized in accordance with the bright seat colors. LED lights with a Optimization of cabin lighting dimmer function have also been installed in the toilets and powder rooms. These measures have contributed to achieving a reduction in JR Central has established a set of Environmental Action Guidelines JR Central has formulated the Implementation Plan of Low Carbon 6 and introduction of LED lighting lighting energy consumption by approximately 20% compared to Series N700. We have been installing LED lights in passenger cabins of rolling stock introduced in FY2016 and thereafter to reduce power consumed for lighting. consisting of the following seven items as part of its engagement in Society Phase II, in which our Energy Consumption Unit(*) as of global environment preservation. FY2030 will be improved by 25% compared with that of FY1995 (refer Using eco-friendly Approximately 90% (weight ratio) of the waste generated after scrapping the Shinkansen rolling stock is recyclable. With the N700A, 7 100% recyclable polyester has been used for seat cushions, and conventional fiber-reinforced plastic (FRP) bogie skirts, which cover to the Japan Business Federation (Keidanren) website for further materials bogies to lower air resistance, have been replaced with stainless steel ones to utilize highly recyclable materials. 1 Provide comfortable transportation services to promote further use details), and is striving to make sure that the plan is executed. Up to of railways, which offer superior global environment preservation now we established a Voluntary Plan in which we achieved our target Diagram 3 Reduction in Running Resistance (Coverall Hoods) Diagram 4 Electric Power Regenerative Braking System 2 Promote technological development that contributes to global of a 15% reduction in energy consumption as of the end of FY2010, environment preservation and we have proactively developed and introduced energy-conserving 3 Use fuel and energy efficiently rolling stock. We will continue promoting proactive initiatives, such as 4 Promote waste control and recycling the continuous development and introduction of energy-conserving 5 Appropriately manage chemical substances rolling stock, while setting train services flexibly through the 10 Nozomi 6 Procure environmentally friendly goods and materials Timetable (operating up to 10 Nozomi services in both directions), etc. Brakes (Power generation) Power running (Power consumption) 7 Contribute to society and raise awareness for global environment to meet the needs of passengers. The motor is used as a generator during The regenerated power returned to preservation * JR Central defines Energy Consumption Unit as the “Amount of energy consumed when running 1 car for 1 braking to produce electricity and return catenary is reused when accelerating kilometer”, due to total rolling stock kilometers being the value which is the most relevant to our business activities. it to catenary other trains Series 300 (Not Equipped N700A (Equipped with Coverall Hoods) with Coverall Hoods) 36 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 37 ESG Information — Engagement in Global Environment Preservation

Enhancement of electricity supply efficiency by replacing ground facilities Effective Use of Resources/Use of Natural Energies and Introduction of Energy-Efficient Facilities By replacing the electricity compensation devices from FY2011 Also, by replacing part of the frequency converters from FY2014 to FY2020, which inhibit voltage reduction as rolling stock travels to FY2021, which convert 50 Hz electricity to 60 Hz electricity JR Central promotes effective utilization of resources through the 3R (Reduce, Reuse, and Recycle) initiative, etc. Specifically, we aim to reduce emissions away from a substation, with a facility with less electricity loss, we required to operate the Shinkansen, with a stationary type with from waste materials during construction, utilize rain water, recycle tickets and uniforms, recycle rolling stock, etc. expect to be able to reduce the electricity use on the Shinkansen less loss, we expect to be able to reduce Shinkansen electricity In addition, we strive to leverage natural energies and introduce energy-efficient facilities when constructing new buildings and renovating existing buildings. by approximately 3%. consumption by approximately 2%. Green Procurement Guidelines

JR Central implements a green procurement policy, prioritizing the procurement of eco-friendly materials. To this end, we established the JR Central Green Procurement Guidelines to enhance coordination with our business partners and work with them to contribute Initiatives with Conventional Lines towards global environment preservation. URL http://english.jr-central.co.jp/company/company/material_procurement/_pdf/green_guide_line.pdf Introducing Energy-Conserving Rolling Stock

JR Central has also been striving to conserve the energy In anticipation of the replacement of the 85 Series diesel rail of rolling stock on conventional lines. We will promote the cars currently used for the “Hida” limited express and other Facility and workshop status introduction of rolling stock with better energy efficiency by trains, the Company will newly develop testing vehicles for the JR Gate Tower Hamamatsu Workshop introducing the Electric Power Regenerative Braking System, next-generation limited express rolling stock that uses the hybrid With the JR Gate Tower, the construction of which was completed in February 2017, we worked on creating The Hamamatsu Workshop, which conducts general higher efficiency power control conversion methods, lighter rolling system, and conduct test runs to establish relevant technologies an energy-efficient environment within the entire building and reduce the environmental burden by introducing overhauls of Shinkansen rolling stock, has been stock, etc. to electric cars, and will do the same for diesel railcars from the end of 2019. The next-generation limited express regional air-conditioning systems, adopting LED lighting, installing solar power generation panels, creating conducting renovation construction since July 2010. green areas in the 15th-floor rooftop garden and on roofs of low-rise buildings, etc. We not only achieved “Rank S” In FY2015 the rooftop of the workshop was used by introducing lighter rolling stock and high mileage diesel train rolling stock (testing vehicles) is expected to achieve an in environmental performance, which is the highest rank on the “CASBEE (Comprehensive Assessment System to install a solar power generation system with the engines, etc. As a result of these initiatives, all of the conventional approximately 15% improvement in fuel efficiency and reduction for Built Environment Efficiency)” scale, but also reduced approximately 25% of CO2 emissions from the building capacity to generate approximately 300 kW or about line rolling stock is energy-conserving rolling stock. For our new in exhaust fumes, such as CO and NOx, by making use of compared to standard model buildings, according to the CASBEE Nagoya 2010 standard. 300,000 kWh annually. In addition, we introduced a ² highly efficient substation facility, boilers, and other rolling stock (Series 313 5th edition; Series Ki-Ha 25 2nd edition), power stored in batteries when accelerating and stopping. We equipment in FY2016. General Education Center General Education Center (rooftop gardening) we will look to further reducing the load on the environment by are currently reviewing plans to commercially introduce mass- Meanwhile, in regard to painting for the body At the General Education Center, which was newly built in using LED lights. produced vehicles by FY2022. (Refer to P. 25 for further details.) of trains, although we had been using oil-based September 2011, we aim to conserve energy by introducing a paint containing volatile organic compounds, we ventilation system which uses ice thermal storage achieved by Comparison of electricity consumption and adopted a new painting facility which now allows Shift in the introduction of energy-conserving rolling stock the utilization of nighttime electricity service as its heat source diesel fuel consumption of cars on conventional us to use water-based paint that is harmless to on conventional lines (electric cars and diesel railcars) and LED lighting, etc. Furthermore, we designed the building to lines (electric cars and diesel railcars) the environment, thereby reducing environmental use natural energy effectively by improving external insulation burden. Furthermore, we introduced the country’s Electric cars (Cars) Energy-conserving rolling stock Conventional type rolling stock efficiency through arranging a rooftop garden and taking first water-based paint coating robot to improve the Conventional type 100 (Base) 1,600 advantage of natural wind and light as much as possible. As (Series 117, 110 km/h) 440 775 working environment for our employees. 465 469 481 490 542 626 881 a result, we were able to obtain “Rank S”, which is the highest 639 887 885 885 885 885 888 1,091 1,210 1,242 Energy-efficient type 1,112 1,112 1,112 1,166 1,242 1,265 1,222 1,222 assessment level under the “CASBEE” (Series 313, 120 km/h) 69 1,200 SCMAGLEV and Railway Park Nagoya Workshop Note: Based on simulated test runs between Toyohashi and Ogaki (solar power generation system) (rapid operation) SCMAGLEV and Railway Park JR Central has been taking anti-earthquake 800 988 936 918 919 877 850 measures and upgrading facilities in February 2014 Diesel railcars 748 733 At the SCMAGLEV and Railway Park, which opened in March in the Nagoya Workshop where general overhauls, 100 (Base) 698 Conventional type 2011, we introduced a solar energy generation system on etc. of conventional line rolling stock are conducted. (rolling stock with conventional engine) 400 517 480 432 426 426 425 the expansive roof. The system has a generation capacity of We aim to reduce approximately 20% of electricity Energy-efficient type 408 153 (cars with new model 71 272 127 127 107 107 approximately 500 kW, or roughly 630,000 kWh annually, which consumption for the entire workshop by introducing energy-efficient type engines) 50 0 0 0 0 0 can cover approximately 30% of the SCMAGLEV and Railway high ceiling LED lighting and highly efficient * Result from running Series Ki-Ha 40 with new/conventional engines ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 Park’s energy needs. transforming equipment as energy saving measures. (Conventional engine: DMF15HS, new model engine: C-DMF14HZ) *Values denote the number of rolling stock as of the end of each fiscal year (they include some event trains, retained trains, and test trains). (FY)

Common Initiatives for the Shinkansen and Conventional Lines

Energy-saving by replacing high-pressure mercury lamps with LED Activity status for FY2016 JR Central has conventionally used high-pressure mercury of railway facilities by approximately 70% (down 20 million kWh) Environmental accounting Environmental load in business activities lamps for lighting in stations, railroad crossings, and other railway compared to the level prior to the replacement work. At the same The investments, costs, and their principal effect involved in environment The main resources and energy utilized as facilities. However, we are proceeding to replace high-pressure time, we expect to also reduce the annual CO² emission volume mercury lamps with LED lamps. We plan to complete the by approximately 70% (down 10,000 t) compared to the prior preservation activities during FY2016 are estimated as listed below. well as waste generated during JR Central’s replacement process by the end of 2020, as a result of which we level, thereby decreasing environmental burden. business activities during the year FY2016 are will cut our annual power consumption associated with lighting Environmental accounting as shown below. Environment preservation cost INPUT/OUTPUT Classification Main Initiatives (100 million yen) *1 Principal Effects of Environment preservation Investment Expenditures Global Introduction of energy-conserving rolling stock Energy-conserving rolling stock ratios: 100% (Shinkansen electric cars), environment Improved energy-efficiency at stations and office buildings 100% (conventional line (electric cars and diesel railcars))Non-CFC INPUT Legal Compliance preservation cost 437.1 8.2 rectifiers: 54 in operation Installation of non-CFC type equipment, etc. Electricity Fuel Water Development of energy-conserving rolling stock (Amount of converted crude oil) Research and Energy efficiency of Series N700A 23% (more efficient than Series 300) Development related to environment preservation along * Comparison between the Series 300 (traveling at 270 km/h) development cost 0.3 94.9 3 JR Central has established a system to comply with relevant environmental laws. railway lines, etc. and the N700A (traveling at 285 km/h) 2.85billion kWh 30,000kL 3.325million m Proper disposal and recycling of station and train refuse, etc. (2.12 billion kWh) (14,000 kL) Resource Recycle rate of Shinkansen rolling stock: Approximately 90% recycling cost Proper disposal and recycling of items generated by 0.7 40.0 Management of chemical substances Measures against soil contamination workshops and construction work Recycle rate of uniforms: Basically 100% * Figures in parentheses are for operations (reprinted) Environment Countermeasures for noise and vibration Protection of the surrounding environment by modifying conservation cost noise-blocking walls and increasing their height, shaving rail Proper management of environmental load substances, etc. 109.3 43.5 Based on the PRTR Law (Pollutant Release and Transfer In FY2016, specific hazardous substances were detected exceeding the along railway lines surfaces, etc. OUTPUT Management Environmental advertising Acquisition of ISO14001 certification in Technology CO2 emission Refuse and waste Register Law), we report the amount of emissions and transfer standard value from part of the soil when we conducted soil surveys in the activity cost Environmental management education etc. 0.0 0.0 Research and Development Department 253,000 t million t (Station, train, and office refuse 18,000 t) of relevant substances to local municipalities and manage those Hiyoshi Tunnel (Minamigaito section) in conjunction with the construction Social activity Support and cooperation for organizations and Participation in environmental partnership organizing club 1.48 cost other groups undertaking environment preservation 0.0 0.0 (EPOC) (Construction waste 226,000 t)(Rolling stock waste 9,000 t) substances appropriately. of the Chuo Shinkansen, at the material storage yard in Inazawa City, and Total *2 * The electricity and fuel CO2 emission the former Daikoku corporate housing site in Gifu. We reported the matter 547.5 186.9 coefficients are based on a report of the [Approach to environment preservation cost] *1. Fractions below 10 million yen are omitted.*2. Totals do not add up due to rounding. law (Energy Saving Act) concerning the to relevant administrative agencies and took appropriate measures. We will streamlining of energy use. Recycled Compilation is applicable only to JR Central. The applicable period is April 1, 2016 to March 31, 2017. 147,000 t submit a report should any substances exceeding the standard value be * Recycled amount reprinted. Items (Including internal reuse) “Environmental Accounting Guidelines 2005”, a publication of the Ministry of the Environment, was consulted with regard to aspects of style. confirmed to have been reused by Depreciation is not included in the calculations for expenditures. manifest or vendor have been recorded. detected in such surveys, and will take appropriate measures as instructed In the event of multiple-purpose expenditures, the full amount with greater environment preservation effect is included in the calculation. by laws and regulations and the administrative authorities. 38 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 39 ESG Information — Human Resources Development Human Resources Development Promoting female employees in active roles

At JR Central, there is no gender bias in terms of the content of in principle, excluding some job types. Due to this situation, the work performed, and a number of female workers are undertaking ratio of female employees as of the end of FY1996 was only 1.3%. active roles in the Company. Subsequently, in response to the revision of the Labor Standards Due to the characteristics of the work involved, the railway Act in 1997, we have actively employed female employees. As business requires so-called late-night work (work between 10 p.m. of the end of FY2016, the number of female employees was and 5 a.m.). However, the Labor Standards Act at the time of the approximately 2,000 (approximately 11% of all employees), Company's establishment prohibited late-night work by women reflecting a significant increase.

Support for maintaining balance between child care/nursing care and work

JR Central has been actively making efforts to enhance various for employees to achieve a good balance between work and Female employees at work General Education Center (Mishima City, Shizuoka Prefecture) Sufficient childcare support system programs so that employees, regardless of gender, can maintain private life in various perspectives by establishing different a good home-work balance and be motivated to work with types of social welfare benefit programs*4, offering a wide range Turnover rate JR Central views its employees as its greatest management resource. It is the people who operate railways enthusiasm in active roles over many years. In 2006, JR Central of leave periods, and introducing other measures. A number of that protect the safety of railways. The railway business is also referred to as experience engineering, became the first company in the transport and railway industry to employees actually make use of these support programs. and employee skills development does not happen short term. Therefore, we focus on human resources development and skills development from a long-term perspective based on long-term employment in order to receive the “Minister of Health, Labour and Welfare Effort Award” Effective FY2017, we will introduce a system to rehire former *1 develop employees with the awareness to thoroughly execute their duties and great skills. as a Family Friendly Corporation . We have continued to make employees who resigned for reasons including childcare and We also provide various welfare benefits beyond that called for by law, including programs for health further efforts even after receiving the award and many of our nursing care as long as a certain set of conditions are satisfied. management and nursing care and childcare support. By making efforts to secure favorable work-life balance programs greatly exceed the level required by law. We continue to move forward with our efforts to foster an Around % for employees, we encourage employees to continue working and demonstrate their strengths at JR Central. For example, pregnant workers may take pre-birth leave of 9 environment in which employees can demonstrate their skills in 1 As a result of these initiatives, we have an extremely high employee retention rate despite the fact that we *2 weeks (6 weeks under law) and may take childcare leave until a active roles by making use of the welfare programs we offer. employ many new employees every year, as the labor turnover rate of approximately 1% indicates. *2 child reaches the age of three (until a child reaches the age of *1 A system introduced by the Ministry of Health, Labour and Welfare in which companies are *2 rewarded for taking initiatives to establish various programs to support employees in achieving a one under law), or for six months after a child enters elementary good balance between work and child care/nursing care, and for putting in place a mechanism in *3 which employees have the option of selecting diverse, flexible working styles. school. We establish and carry out an action plan for maintaining *2 Treatment differs in part depending on the type of employee. *3 Based on the Act on Advancement of Measures to Support Raising Next-Generation Children and Basic Policy of Human Resources Development and improving the ratio of employees taking childcare leave. In the Act to Advance Women’s Success in their Working Life, JR Central formulated an action plan for the fifth period from FY2016 to FY2020. Under this action plan, we set targets on childcare leave, FY2016, the ratio of females taking childcare leave was 100% including 100% of female employees to take childcare leave, and 3% or more of male employees to take childcare leave. Given that we achieved the targets set in our action plan for the period JR Central’s basic policy of human resources development is based on to attain in order to be regarded as being qualified and the attained level, and that of males was 8.2%. from FY2005 to FY2014, which was formulated based on the Act on Advancement of Measures to Support Raising Next-Generation Children, and fulfilled certain requirements, we were certified by three fundamental principles: Discipline, technical capability, and sense and the “Chart” for recording each individual’s development plan, details Meanwhile, if the need to take care of a family member arises, the Minister of Health, Labour and Welfare as a Childcare Support Company. *2 *4 We offer various benefits, including a monetary gift of 200,000 yen when an employee gives birth, a of unity. Given these three fundamental principles, we develop human of guidance, and results of guidance. Meanwhile, approximately 250 group employees may take nursing care leave of up to one year (93 subsidy of up to 5,000 yen per month per child for day-care, a childcare support benefit of offering *2 50% (up to 4,000 yen) of the cost required when using a babysitter, etc., nursing care relief money resources that undertake the businesses of the Company. The basic training sessions were held in FY2016 and about 9,500 employees attended days under law). of 3,000 yen per day during the period of nursing care leave, and a nursing care subsidy of up to 2,000 yen per month per person when using the nursing-care service, etc. set forth under the Long- education system mainly involves on-the-job training (OJT), in which these sessions. Taking this number multiplied by the number of days of JR Central puts in place an adequately supportive environment Term Care Insurance Act. (Treatment differs in part based on the type of employee.) employees learn the knowledge and skills required for work through daily training sessions held came to roughly 83,000 man days. This means that operations in each workplace. They also acquire additional knowledge and we provided approximately 4 days of training per employee in a year. To Initiatives for supporting childcare, etc. Initiatives beyond that called for by law, or voluntary initiatives *1 skills through group training, which is held in the General Education Center , promote self-betterment, we offered 30 internal correspondence training Enrollment in 1st grade & 6 months Pregnancy Childbirth 1 year old 3 years old elementary school in elementary school 9 years old etc., and various self-betterment opportunities, such as internal and external courses to employees of JR Central, its group companies, etc. Approximately correspondence training systems, etc., that help employees learn knowledge 7,100 employees in total voluntarily participated in these courses. Check-up/maternity leave (unpaid) Related to the Equal Employment Opportunity Act and skills on their own. We will remain committed to enhancing educational opportunities by Working restrictions on pregnant women In OJT, we have in place the “N-OJT” program particularly for employees continuously working to brush up various training programs and measures Childbirth leave Related to the Labor Standards Act in younger generations to attain specialized knowledge and technical skills. aimed at human resources development. Childcare leave (paid) Under the N-OJT program, we take a fine-tuned approach in developing *1 With focus on safety and service, the General Education Center conducts training for employees, including personnel from affiliated companies that are engaged in railway operations. employees by using the so-called the “List”, which indicates the requirements *2 Simple aggregation of the number of persons participating in each training program or course. Childcare leave

Related to the Reduction of scheduled working hours Initiatives for Promoting Health Management of Employees and Eliminating Labor Accidents Childcare and Nursing Care Restriction on overtime/late-night work Leave Act It is the duty of JR Central to maintain and promote healthy minds and improve the workplace environment and other relevant matters. Furthermore, Exemption from overtime work bodies of employees and to secure an environment in which employees we conduct stress checks for all employees at the annual checkup, following Nursing leave (unpaid) can be motivated to work. To date, we have taken a number of initiatives a change in assignment, etc. Child dependency allowance (up to 22 years old) in addition to providing health check-ups, etc. required under law. Such In regard to measures against lifestyle-related diseases, we have been Wage Provision of at least 30% of the The Company bears the social insurance premium deducted from initiatives include measures to promote sound mental health, measures providing specific health checkups and specific health guidance for year-end bonus even during childcare leave the year-end bonus in line with the period of childbirth/childcare leave against life-style related diseases and sleep apnea syndrome, subsidies for employees aged 40 and above since FY2008. In FY2015, we expanded the Home help usage subsidy: Up to 5,000 yen/day (up to 20 days per year) (no age limit) fees for complete physical check-ups and influenza vaccinations, and efforts target of guidance to also include employees below the age of 40 and have Welfare Childcare support subsidy: Up to 4,000 yen/day (up to 60 days per year) to maintain reasonable working hours. since been offering guidance on various matters as necessary from the association Day-care center usage subsidy: 5,000 yen/month As for measures to maintain sound mental health, we take a three-tier perspective of taking measures early. approach based on the “Plan for Promoting Healthy Mind” formulated in We have also been actively taking initiatives to eliminate labor accidents 2009. The approach comprises measures for primary prevention (prevention and have been able to significantly reduce the number of accidents of mental disorder and promoting good health), secondary prevention (early compared to the level at the time of founding of the Company. We set “priority Healthy labor-management relations detection and early treatment), and tertiary prevention (returning to work execution items” each fiscal year and promote elimination of labor accidents and recurrence prevention). We also provide education concerning roles on a corporate-wide basis. Specifically, we continue to provide education JR Central currently complies with the various laws and We hold joint management council meetings and engage in and coordination among relevant departments by holding training sessions on safety at our General Education Center and at each of our workplaces, regulations, including the Labor Union Act, and has signed labor collective bargaining based on these labor agreements, and will based on employee level at our General Education Center. Since 2013, as well as conduct research activities led by employees of field offices to agreements with all four labor unions currently in place. [Total continue to strive to build healthy and stable labor-management we have been holding training sessions also for managerial staff on how to prevent labor accidents in the group. union membership of 19,328 employees as of March 31, 2017]. relations.

40 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 41 ESG Information — Local Communities, International Exchanges, Culture & Art, etc. Cooperation with Local Communities / International Exchanges / Promotion of Culture & Art and Lifelong Learning Participating in programs to vitalize local communities

SCMAGLEV and Railway Park - A museum of memories and dreams - We opened the “SCMAGLEV and Railway Park” in March 2011 in Kinjo Futo, Minatoku, Nagoya, as part of our participation in the “Monozukuri (manufacturing) Culture Exchange Area Project”, hosted by the City of Nagoya. At the “SCMAGLEV and Railway Park”, we introduce the progress of the high-speed railway technology through displays of rolling stock mainly of the Tokaido Shinkansen, as well as conventional lines and Superconducting Maglev. In May 2017, the number of visitors exceeded 4 million.

SCMAGLEV and Railway Park Roll out of initiatives in coordination with Shupo Japan Highlights Travel IIMONOTANBOU website Railways, which are a mode of public transportation, are extremely closely connected to communities located along our lines local communities. We are enhancing the convenience of stations, which are the gateway As part of sales and marketing, we are deepening ties with to local communities, as well as contributing to local communities, through operating communities located along our lines while rolling out initiatives medical facilities and museums, etc. in the Nagoya region, where our head office is located, in addition to rolling out sales and marketing efforts and operating websites that such as the “Shupo” campaign, “Sawayaka Walking”, and “Japan spread the attractive features of communities located along our railway lines by selling Highlights Travel”. locally produced goods, etc. Furthermore, we interact with experts on railways from other Further, as an initiative aimed at revitalizing local communities countries and engage in activities toward promoting culture, art, and lifelong learning. along the railway lines we operate, in October 2016 we began selling locally produced goods on our “IIMONOTANBOU” website that introduces attractive features of local communities through Contribution to Local Communities local delicacies in cooperation with producers in communities. Initiatives to improve the level of convenience and accessibility of stations, etc.

JR Central cooperates with the requests from local municipalities persons and braille blocks that prevent such persons from falling International Exchanges to establish new stations, improve station buildings, develop from platforms. Furthermore, in regard to braille blocks, we are JR Central proactively undertakes a wide range of international plazas in front of stations, and promote railway elevation projects, sequentially replacing them with the type of braille blocks that operations, such as gathering mainly railway information from etc., thereby contributing to community development. indicate where platform edges are located. In addition, to further around the world via the company's network of overseas Based on relevant laws, such as the so-called Barrier-Free Act, increase the safety of platforms, since FY2011 we have been offices (Washington D.C. , London, and Sydney), exchanging JR Central cooperates with governments and municipalities to moving ahead with the installation of movable platform fences at technological and management information with specialists in jointly establish and improve facilities to enable all passengers, Nozomi stations that service a high number of passengers. As for various countries, and issuing press releases overseas as part of including persons with disabilities and elderly passengers, to use conventional lines, we are engaged in the development of movable our PR activities, etc. our services safely and with a sense of security. platform fences compatible to the platforms of lines we operate. We also offer technical cooperation in the field of railways in As part of our initiatives taken in stations, we are proceeding Further, nearly all of JR Central’s trains include support facilities response to government requests, and promote human resources with our plan to eliminate uneven ground by installing elevators, for passengers using a wheelchair. development by hosting interns from overseas universities and etc. and to install multi-functional toilets sequentially in stations Our station staff members offer assistance and guidance, international organizations, etc. used by 3,000 or more passengers per day. Basically in all of the whenever necessary, to customers with disabilities using our stations, installations have been completed or are under way. We facilities. Accepting interns from foreign universities have completed installation of guiding blocks for visually impaired

Setting general hospitals for local communities (Nagoya Central Hospital) Promotion of culture, art, and lifelong learning (JR Tokai Lifelong Learning Foundation) JR Tokai Lifelong Learning Foundation is a public interest As an acute care hospital, Nagoya Central Hospital, located in incorporated foundation established in 1990 with the purpose Nakamura-ku, Nagoya, performs over 1,500 surgeries year round, of contributing to society through promotion of culture, art, and providing some of the most advanced medical care services lifelong learning. The Foundation’s main activities include holding available using the latest medical equipment. The hospital is also exhibits of artwork of Hoshun Yamaguchi, known as an authority a committed emergency health care provider, coordinating with on Japanese art, at Hoshun Yamaguchi Memorial Hall which local ambulance services to take in over 4,000 ambulance calls opened in Hayama-machi, Kanagawa in 1991, and disclosing per year. Looking ahead, the Nagoya Central Hospital will look to the ateliers and gardens for public viewing. Further, in an effort leverage its distinctive features and expertise to further contribute to support lifelong learning, the Foundation engages in a wide to the local community. range of cultural activities, including holding classes for painting, photography, etc. and organizing classes to learn about history and culture. Nagoya Central Hospital Hoshun Yamaguchi “Moruru Hi” 1961

42 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 43 ESG Information — Corporate Governance Corporate Governance Outside Directors and Outside Audit and Supervisory Board Members

As for the election of Outside Directors and Outside Audit and Supervisory Board Members who provide advice based on Supervisory Board Members, JR Central appoints three Outside their various experience and great insight gained outside of the Directors and three Outside Audit and Supervisory Board Members company from their independent standpoints, both in and outside JR Central strives to enhance our corporate governance to ensure soundness, efficiency, and transparency of management, to based on our policy to make the most appropriate execution of the Board of Directors and Audit and Supervisory Board. We implement long-term development of the company, and to enhance sustainable corporate value. system. The Company determines the level of independence utilize the advice given by Outside Directors and Outside Audit of Outside Directors and Outside Audit and Supervisory Board and Supervisory Board Members to execute audits by Audit JR Central's Corporate Governance System Members based on the criteria for independence established and Supervisory Board Members, internal audits, safety audits, by the Japan Exchange Group, Inc. in order to ensure that the accounting audits, as well as items stipulated in the Fundamental opinions provided by Outside Directors and Outside Audit and Corporate Governance Policies. General Meeting of Shareholders Supervisory Board Members on matters raised are formed from Each Outside Director and Outside Audit and Supervisory Board Selection Selection Selection an independent standpoint, and are based on the high degree of Member is submitted to the Tokyo Stock Exchange and the Audit Cooperate Board of Directors Audit and Supervisory Board experience and insight accumulated outside the Company. Nagoya Stock Exchange as an independent officer who does not JR Central receives beneficial opinions about the execution have any conflicts of interest with general shareholders.

President and Representative Director of our business from Outside Directors and Outside Audit and Cooperate Investigate Management Meeting Accounting Audit Auditors Election of Outside Directors and Outside State of main posts held concurrently for Outside Activity status of Outside Directors and Outside Audit and Supervisory Board Members Directors and Outside Audit and Supervisory Board Audit and Supervisory Board Members Audit Cooperate Members [As of March 31, 2017] [FY2016] Head Office, Regional offices, Field offices Internal Audit Department (Audit Department/Transportation Safety Department) Name Reasons for election Name Name of other company, etc. Titles Name Principal activity

Management / Guidance Audit Report Mr. Cho was appointed Attended 10 out of 12 meetings of the Board Outside as an Outside Director of Directors held in FY2016. In the Board of Fujio Kenji Furukawa Electric Audit and Fujio because of his corporate Directors meetings, he has stated his opinions Audit Supervisory Cho management experience Koroyasu Co., Ltd. Cho based on his experience in corporate Affiliated Companies Board Member and his great insight. management, etc.

Directors Mr. Koroyasu was Directors Directors Attended all 12 meetings of the Board of appointed as an Outside Directors held in FY2016. In the Board Kenji Director because of his FamilyMart UNY Outside Kenji of Directors meetings, he has stated his experience as a public Director Koroyasu Holdings Co., Ltd. Koroyasu opinions based on his experience as a public prosecutor and lawyer, and prosecutor and lawyer, etc. his great insight. Takashi Saeki Mr. Saeki was appointed Attended all 12 meetings of the Board of Outside as an Outside Director Directors held in FY2016. In the Board of Takashi The Ogaki Kyoritsu Audit and Takashi because of his corporate Directors meetings, he has stated his opinions Supervisory Saeki management experience Bank, Ltd. Saeki based on his experience in corporate Board Member Overview of Corporate Governance System and his great insight. management, etc.

Audit and Supervisory BoardAudit and Supervisory Members Attended all 12 meetings of the Board of Mr. Ishizu was appointed The Board of Directors of JR Central is composed of 16 members Audit and Supervisory Board Members not only attend important Directors, and attended all 14 meetings of the as an Outside Audit and Audit and Supervisory Board held in FY2016.

Audit and Supervisory Board Audit and Supervisory Members Supervisory Board Member Outside Board Audit and Supervisory Memb ers (three of whom are outside directors). JR Central also employs an meetings such as the Board of Directors and the Management Hajime ISHII IRON WORKS Hajime In the Board of Directors meetings and because of his experience Director meetings of the Audit and Supervisory Board, Ishizu in transportation CO., LTD. (Audit Member) Ishizu auditor system, and its Audit and Supervisory Board consists of Meetings, but also inspect the state of execution carried out at he has stated his opinions based on his administration and his great experience in transportation administration, five members (three of whom are outside auditors). (The figures head offices, railway operations divisions, branch offices, field insight. Shigeo etc. are as of June 23, 2017.) offices, and affiliated companies based on plans enacted by Kifuji Attended all 12 meetings of the Board of Mr. Ota was appointed Directors, and attended all 14 meetings of The Board of Directors meets at least once a month, and makes the Audit and Supervisory Board to strictly promote their audit as an Outside Audit and Outside the Audit and Supervisory Board held in Hiroyuki Supervisory Board Member Mori Building CO., Audit and Hiroyuki legal and appropriate decisions upon fully discussing issues work. To ensure effective audits by the members of the Audit FY2016. In the Board of Directors meetings because of his experience Supervisory Ota Ltd. Ota and meetings of the Audit and Supervisory in police administration and Board Member stipulated by the law and issues of importance to management, and Supervisory Board, JR Central also provides an assistant Board, he has stated his opinions based on his great insight. following conscientious briefings that are given to bring all system in which our employees are assigned as full-time staff to his experience in police administration, etc.

(Note 1) Takashi Saeki resigned from the position of Chairman and Representative Attended all 12 meetings of the Board of concerned up to speed on the background of issues discussed support auditors work. Internal audits are performed by the Audit Mr. Kifuji was appointed Director of TOHO GAS Co., Ltd. as of June 27, 2016. Directors, and attended all 14 meetings of as an Outside Audit and Also as of June 24, 2016, Mr. Saeki resigned from the position of Outside Audit and the Audit and Supervisory Board held in and the progress status for such, as well as monitors the work Department on the work of JR Central, its affiliated companies, Supervisory Board Member Shigeo Supervisory Board Member of Aichi Tokei Denki Co., Ltd. Shigeo FY2016. In the Board of Directors meetings because of his experience (Note 2) Shigeo Kifuji, Outside Audit and Supervisory Board Member, retired from and meetings of the Audit and Supervisory of directors. To broaden deliberations, we have also established and related companies to confirm that execution is legally and Kifuji as a public prosecutor Kifuji the position of Outside Audit and Supervisory Board Member of ISHII IRON WORKS Board, he has stated his opinions based on and lawyer and his great a Management Meeting in which important issues related to appropriately made based on laws, articles of incorporation, and CO., LTD. at the ordinary general meeting of shareholders on June 28, 2016 and his experience as a public prosecutor and insight. assumed the position of Outside Director (Audit Member) of the aforementioned lawyer, etc. management are discussed in advance of the meetings of the internal regulations. The results of internal audits are reported company. Board of Directors. We request Audit and Supervisory Board to management. In addition, to prevent operational and labor Members to attend meetings of the Board of Directors, the accidents, safety audits are performed by the Transportation Safety Content of Compensation for Officers Management Meeting and other important meetings, as we Department, and the results are also reported to management. endeavor to ensure the legality of management measures during Based on generally accepted accounting standards, JR Central Compensation for directors is comprised of certain basic Board Members within the range of compensation, etc., which was the deliberation process. Further, JR Central strives to ensure the has appropriate accounting audits made by an audit corporation, compensation and a bonus. Basic compensation is based on decided in the 20th Ordinary General Meeting of Shareholders appropriate execution of business by managing and providing Deloitte Touche Tohmatsu LLC, which has been selected to be our comprehensive consideration of the title, length of service, etc., held on June 22, 2007. guidance to affiliated companies where necessary. accounting auditor. and the bonus is based on the performance and commissioned Total amount of compensation, etc. by officer classification, total amount of Although we introduced the corporate officer system in May 2003, Audit and Supervisory Board Members, internal audit work, etc. of each FY. Each amount is appropriately decided in compensation, etc. by type, and number of target officers [FY2016] we introduced an executive system in June 2012 with the aim of departments, and accounting auditors cooperate with each other Board of Directors meetings within the range of compensation, Basic Compensation Bonus Total amount Number Number for the further accelerating decision-making, enhancing discussions, and by exchanging information periodically or as necessary and etc., which was decided in the 25th Ordinary General Meeting of Classification of target Total of target Total compensation/ amount amount bonus, etc. officers (Million yen) officers (Million yen) further clarifying roles for directors and corporate officers, who receive necessary information from each department involved in Shareholders held on June 22, 2012. Furthermore, compensation (People) (People) (Million yen) are responsible for operation, in order to appropriately respond to internal control to confirm the status of implementation of each item for Outside Directors comprises the fixed basic compensation Directors (Excluding Outside Directors) 14 578 13 237 815 changes in the business environment influencing our management stipulated in the Fundamental Corporate Governance Policies. only. Audit and decisions in a timely manner. Compensation for Audit and Supervisory Board Members is Supervisory Board 2 94 - - 94 Members comprised solely of certain basic compensation. The appropriate (Excluding Outside Auditors) amount is decided through discussions of Audit and Supervisory Outside Officers 6 126 - - 126

44 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 45 ESG Information — Corporate Governance

Respond to the Corporate Governance Code The Board of Directors is involved in decision making processes concerning matters stipulated in relevant laws and regulations and the articles of incorporation, matters put in their charge at a general shareholders’ meeting, Supplementary Principle 4-1 and important matters related to the execution of business. A specific outline of such matters is established in the JR Central has announced its stance, and the initiatives it has plans and establish numerical targets in this manner, the principle rules governing the Board of Directors. Roles and responsibilities of the put in place, in relation to the Corporate Governance Code Company does promote its railway business from a long-term Further, the Board of Directors clearly defines the division of duties and job functions for each department Board of Directors 4-1 1 (hereafter, “the Code”) found within Corporate Governance perspective. Specifically, in addition to the construction of the based on internal regulations and clarifies the scope of authority for Directors and corporate officers, while also defining the division of roles of Directors and areas in which corporate officers are put in charge. Report*. Chuo Shinkansen, which is now underway, other measures that Of the principles set forth in the Code, those that are not require a long-term capital investment, such as large-scale Principle implemented are principles that assume the formulation of renovation for the Tokaido Shinkansen, the implementation of 4-9 The Company determines the level of independence of Outside Directors and Outside Audit and Supervisory Board Members based on the criteria for independence established by the Japan Exchange midterm management plans and the presentation of numerical earthquake countermeasures, and plans to upgrade rolling stock Independence standards and Group, Inc. in order to ensure that the opinions provided by Outside Directors and Outside Audit and targets (supplementary principle 4-1 2 and principle 5-2). The in service, are established with a long-term perspective in mind, qualification for Independent Supervisory Board Members on matters raised are formed from an independent standpoint, and are based on the high degree of experience and insight accumulated outside the Company. reason for this as provided in the report is as follows. and we are steadily proceeding forward these projects. Plans Directors

“In the railway business, the core pillar of JR Central’s business, and results of other major measures are announced publicly The appointment of Directors is conferred to General Shareholders Meetings following a resolution of the ensuring safe and reliable transportation is an issue of utmost as appropriate, and steady progress continues to be made in Board of Directors concerning the appropriate election of candidates deemed to be the most fitting for Supplementary the role as selected based upon a general consideration of their abilities, knowledge, and work history, importance, and all aspects of our business, from our daily these areas. We will continue to announce annual income and principle etc. The number of Directors elected, and the division of Director roles, etc. is determined based on a business operations to employee training and capital investment, expenditure plans, key measures, and capital investment plans 4-11 1 comprehensive consideration of the level of progress of each project at the time based on a policy of are implemented with the highest priority given to increasing the each year in light of our immediate management environment, establishing the most appropriate management structure for the execution of the Company’s business activities. level of reliability of the services we provide and, as such, we and will continue to steadily enhance our management foundation do not implement a system of management whereby company- in order to firmly maintain a sound management outlook based on Supplementary The status of Directors and Audit and Supervisory Board Members holding important concurrent wide mid-term business plans are formulated and managerial efficient operational management stemming from the securing of principle positions is as described in business reports and General Shareholders Meeting Reference Materials. All targets are pursued in a manner that can neatly serve as a cross- safe and reliable transportation.” concurrently held positions bear no hindrance on the Director or Audit and Supervisory Board Member’s Principle 4-11 4-11 2 ability to fulfill the roles and responsibilities of such a position for the Company. sectional look at the state of the business at set moments. Further, matters disclosed based on each principle of the code Premises for ensuring the While JR Central does not formulate mid-term management are as follows. effectiveness of the Board of Directors and the Audit and * Corporate Governance Report can be found on the Japan Exchange Group, Inc. website. The Board of Directors of the Company meets once or more a month to make legal and appropriate Supervisory Board decisions upon fully discussing issues stipulated by law, following conscientious briefings that are given Disclosure based on Corporate Governance Code principles to bring all concerned up to speed on the background of issues discussed, and the progress status for such. Further, the status of the execution of duties by Directors is monitored by having Directors report Supplementary back on business functions under their charge when needed. JR Central receives valuable broad-view General principle Supplementary Disclosed contents principle principle advice on management from Outside Directors, which is brought into consideration in regulating the management of the Company. [1] Policy concerning cross-shareholdings 4-11 3 Additionally, round-table conferences for opinion exchanges between Outside Directors, Outside Audit JR Central holds cross-shareholdings based on a general consideration of the necessity of such from the and Supervisory Board Members and members of management are set up ahead of meetings of the Board perspective that maintaining and strengthening long-term, stable business relations through the holding of of Directors in order to further improve the effectiveness of the Board of Directors. shares will lead to the smoother execution of business operations and increases in corporate value over the Principle Through the above-mentioned initiatives, we find at meetings of the Board of Directors that the 1-4 mid- to long-term. effectiveness of the entire Board of Directors is ensured to a satisfactory degree. Cross-shareholdings [2] Criteria for the exercising of voting rights In terms of the exercising of cross-shareholding voting rights, JR Central closely examines the content of each resolution and decides how to vote in consideration of improving the corporate value of the Company over the mid- to long-term and the sustainable growth of business partners, etc. All Directors and Audit and Supervisory Board Members of the Company have the sufficient ability and All transactions involving Directors which may pose a conflict of interest, and transactions between Directors insight to fulfill their roles and responsibilities, and perform their duties with an appropriate sense of and the Company, require the approval of, and reporting to, the Board of Directors as stipulated in relevant laws responsibility as entrusted by all shareholders, while continuing to refine their skills and knowledge by Principle Supplementary 1-7 and regulations and rules governing the Board of Directors. Every year confirmations are made on a regular Principle 4-14 actively participating in external training programs, etc. principle Related party transactions basis with officers as to whether related party transactions have been made between officers or relatives and the JR Central takes necessary measures to ensure that all Directors and Audit and Supervisory Board Director and Audit and Company. Members perform the duties required of them, such as in instances where relevant laws and regulations Supervisory training 4-14 2 are revised, for example, by making the content of such revisions commonly known through meetings, [1] • JR Central was founded in 1987 as part of the reform of the national railway system with a mission of etc., and by holding training events to share management issues faced by the Company so that the integrally maintaining and developing the Tokaido Shinkansen, which serves as Japan's main transportation Company can make decisions concerning such issues in an appropriate manner. artery linking Tokyo, Nagoya and Osaka, and the conventional line network in the Tokai region with a central focus around Nagoya and Shizuoka. Furthermore, JR Central revised its management philosophy to “Contribute to the development of Japan’s main artery and social infrastructure” in April 2017 to reflect the direction the Company should aim at in line with the expanding scope of business activities going forward, including the operation, etc. of the three JR Central has established a Policy for Promoting Constructive Dialog with Shareholders as follows. generations of railways, i.e. conventional lines, the Tokaido Shinkansen, and the Chuo Shinkansen. • In the railway business, JR Central sets the highest priority on ensuring safe and reliable transportation. JR • JR Central positions the General Meeting of Shareholders as an important opportunity for dialog with shareholders Central's fundamental policy is to stably and fully execute the long-term social mission described in detail and strives to improve the quality of questions and answers sessions in the meeting as a means of contributing to above through the continuous efforts of providing services that are preferred by customers as well as the sustainable growth and enhancing corporate value over the mid- to long-term. All dialog with shareholders is overseen streamlining of work, etc. This fundamental policy is included in the Messages from Management section of by the General Manager of the Administration Department, and questions, opinions and requests from shareholders are the Annual Report, and can be found at the following URL. fielded and responded to in the form of an individual meeting or over the telephone, etc. where it is reasonable to do so. Annual Report • Of this, dialog with institutional investors is overseen by the Director General of the Corporate Planning Division, and the URL http://english.jr-central.co.jp/company/ir/annualreport/index.html IR team is placed in the Business Administration Department, Corporate Planning Division in order to further improve Principle 3-1 • Specific measures to be implemented in the current business year based on this fundamental policy are shareholder dialog by organically coordinating with the Administration, Finance, Legal Departments, etc. Dialog described in Key Measures and Capital Investment, and can be found at the URL below. response is the purview of the IR team, and a response is made together with members of management and Directors, Full disclosure Principle Key Measures and Capital Investment 5-1 where reasonable, based on a general consideration of the requests and interests, etc. put forth by the institutional investor. Specifically, we strive to improve upon dialog measures by not only holding individual meetings but also URL http://english.jr-central.co.jp/company/company/achievement/capital-investment/key-measures.html Policy for constructive dialog with holding conference calls and facility tours, etc., where necessary, in addition to holding financial results briefings twice a shareholders [2] The basic outlook on corporate governance is described in 1.1. Basic Outlook in the Corporate Governance year. Report. • We also strive to enrich the broader provision of information to shareholders by sending reports on information presented at financial results briefings twice a year, on top of posting this information on our website. Moreover, we work to [3] Details on the policy and procedures concerning the setting of Director compensation are described in 2.1. ensure that a sufficient degree of information concerning decisions made on important measures and important capital [Director Compensation-related] Disclosure of Policy for Determining the Amount of Compensation and the investments reaches as large a number of stakeholders as possible by using the mass media services to deliver detailed Calculation Method for Such in the Corporate Governance Report. information at press conferences held by the President, and by presenting such information to the press. [4] The election of Directors and Audit and Supervisory Board Members is conferred to General Shareholders • The content of discussions with shareholders is reported to members of management and, if necessary, feedback is Meetings following a resolution of the Board of Directors concerning the appropriate election of candidates given to the Board of Directors. deemed to be the most fit for the role as selected based upon a general consideration of their abilities, • Under no circumstances is insider information communicated during discussions with shareholders. Furthermore, the knowledge, and work history, etc. 14-day period in the lead up to the day in which financial results are announced each quarter is designated as a silent period, in which the Company refrains from discussing financial results. [5] The candidates of Directors and Audit and Supervisory Board Members are elected in an appropriate manner in consideration of the work history, etc. written in the General Shareholders Meeting Reference Materials.

46 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 47 ESG Information — Corporate Governance

Fundamental Corporate Governance Policies Summary of the 30th Ordinary General Meeting of Shareholders (Held June 23, 2017)

JR Central resolved the Fundamental Corporate Governance *The Fundamental Corporate Governance Policies can be found at the URL below. The following resolutions were passed at the 30th Ordinary General Meeting of Shareholders held June 23, 2017. Policies* in the Board of Directors meetings. URL http://english.jr-central.co.jp/company/company/about/governance.html (1) Content of the resolved matters: Proposal Appropriation of retained (i) Matters concerning year-end dividends earnings Seventy (70) yen per common share of the Company Compliance/Whistle-blowing system (ii) Other matters concerning the appropriation of retained earnings: JR Central not only stipulates internal regulations based on order to establish a system in which employees, etc. can report • Line item relating to retained earnings showing an increase and the amount thereof the law, etc. but also conducts employee education on various any violation of the law, etc. at work. We also post fliers describing General reserve: 350,000,000,000 yen occasions with the aim of thoroughly complying with the law, etc. the whistle-blowing system and contact information for the contact • Line item relating to retained earnings showing a decrease and the amount thereof when executing work. In addition, we also have established a points in all workplaces with the aim of widely disseminating the whistle-blowing system. We have whistle-blowing contact points system. Retained earnings carried forward: 350,000,000,000 yen not only within the Company but also in an external law firm in

(2) Number of votes, indicating approval, disapproval, and abstention regarding the resolved matters, Risk-management system requirements for the resolved matters to be adopted, and results of voting:

Resolved matter Approval Disapproval Abstention Approval Rate Result of Voting JR Central has established the Railway Safety Promotion railway operation division to respond to emergencies, such as (number of votes) (number of votes) (number of votes) (%)

Committees, etc. at the head office, railway operation divisions, accidents and disasters, and has also established a fast-response Proposal 1,693,771 21,160 1,057 97.94 Approved branch offices, and in each area from the perspective of preventing restoration structure in which employees can be gathered anytime according to the scale or impact of an accident or disaster. (Note) The requirements for the proposal to be resolved were as follows: train and labor accidents, and formulating and promoting safety A majority of votes indicating the approval of the shareholders who attended the meeting was required. measures through an integrated organization that stretches from Additionally, in preparation for emergencies such as large-scale the head office to each field office. natural disasters, we have established the second Shinkansen JR Central also manages a control center, which plays a key General Control Center that can substitute for the Shinkansen role in information communication, on call 24 hours a day at each General Control Center for the Tokaido Shinkansen. (3) Reason for not adding some of the votes of shareholders who attended the ordinary general meeting of shareholders to the final number of votes:

The votes of shareholders who attended the general meeting of shareholders on the meeting date, but have not been confirmed as to Response to internal control related to financial reporting whether they indicated approval, disapproval or abstention, were not added to the final count because the requirements for the proposals to be resolved were already met by adding the votes from the exercise of voting rights as of the day before the general meeting of We periodically investigate the system and execution situation, functioning. JR Central also engages in efforts to maintain the shareholders was held to the votes of shareholders who attended the general meeting of shareholders, which were confirmed as approvals etc. within JR Central and JR Central Group companies in level of internal control related to financial reporting by providing or disapprovals, and the proposals were duly adopted in accordance with the Companies Act. accordance with a basic framework offered by the Business feedback from these investigations to duties. Accounting Council in order to confirm that they are effectively

Concept of capital policy and shareholder return

Our policy on dividends has always been to decide the specific We will finance our projects by issuing corporate bonds and dividend amount in accordance with the management environment borrowing, in addition to the long-term loan totaling 3 trillion yen and performance in each FY based on the principle of continuously acquired using the Fiscal Investment and Loan Program (FILP) to providing stable dividends. JR Central considers that shareholder promote the construction of the Chuo Shinkansen, and we do not returns through dividends are appropriate in principle, and we do plan to use treasury shares or pursue capital increase at this point. not plan to purchase additional treasury stock at this point.

48 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 49 Corporate Data

Board of Directors, Audit and Supervisory Board Members, and Corporate Officers [as of June 23, 2017] Corporate Data

Profile

Name Head Office and Other Main Offices (As of July 2017)

Central Japan Railway Company (JR Central) Head Office Meieki 1-1-4, Nakamura-ku, Nagoya-shi, Aichi 450-6101, Japan JR Central Towers Established

April 1, 1987 Head Office (Tokyo) Chairman Emeritus and Chairman and President and Executive Vice President Executive Vice President Executive Vice President JR Central Shinagawa Building -A Wing 2-1-85, Konan, Minato- Representative Director Representative Director Representative Director and Representative Director and Representative Director and Representative Director ku, Tokyo 108-8204, Japan Business activities Yoshiomi Yamada Yoshiyuki Kasai Koei Tsuge Shin Kaneko Yutaka Osada Katsumi Miyazawa Railways business, Affiliated businesses Conventional Lines JR Central Taiko Building, Meieki 1-3-4, Nakamura-ku, Nagoya- Operations Division shi, Aichi 453-8520, Japan Board of Directors and Key data Audit and Supervisory Board Members Corporate Officers (As of the end of March 2017) Shizuoka Branch Office 4, Kurogane-cho, Aoi-ku, Shizuoka-shi, Shizuoka 420-0851, Japan Chairman Emeritus and Representative Director Senior Corporate Executive Officers Capital 112.0 billion yen Noriyuki Shirakuni Director General of the Maglev Systems Development Division of the Operating Revenues 1,380.7 billion yen Mie Regional Office Yoshiyuki Kasai Chuo Shinkansen Promotion Division and in charge of controlling the Ust-Tsu 12F, 700, Hadokoro-cho, Tsu-shi, Mie 514-0009, Japan (Ph.D.) Rolling Stock Section Number of Shares Outstanding 206 million Yoshito Tsubouchi In charge of the Secretarial Department, the Audit Department, the Public Relations Chairman and Representative Director Department, the Administration Department, the Legal Affairs Department, the Share Listings Nagoya/Tokyo Stock Exchange Iida Regional Office Personnel Department, and the Property Management Department 5356, Kami-Iida, Iida-shi, Nagano 395-0000, Japan Number of Shareholders 95,652 Yoshiomi Yamada Yoshiki Suyama Director General of the Corporate Planning Division and in charge of the Finance Department Number of Employees 18,054 Shinkansen Operations Marunouchi Chuo Building, 1-9-1, Marunouchi, Chiyoda-ku, Director General of the General Technology Division, in charge of the Shun-ichi Kosuge Operating Kilometers Division Tokyo 100-0005, Japan President and Representative Director Overseas High Speed Railway Project, and in charge of controlling the 1,970.8 km Tracks and Structures Section Koei Tsuge Number of Stations 405 Kansai Branch Office Shin-Osaka Hankyu Building 10F, 1-1-1, Miyahara, Yodogawa- Mamoru Uno (Ph.D.) Director General of the Chuo Shinkansen Promotion Division and in ku, Osaka-shi, Osaka 532-0003, Japan charge of controlling the Construction Section Number of Rolling Stock 4,850

Director General of the Marketing Division Executive Vice President and Representative Director Sumio Atsuchi Double-and Multi-Tracked Section 55.1% (1,086.8km) Washington D.C. Office 900 17th Street, N.W., Suite 520, Washington, Director General of the Business Promotion Division DC 20006, U.S.A. Shin Kaneko In charge of the Administrative Kimiaki Tanaka Electrified Section 76.7% (1,511.0km) Departments and in charge of the Chuo Director General of the Shinkansen Operations Division Hideyuki Shoji CTC System Adoption Rate 97.5% (1,922.3km) London Office Shinkansen Promotion Division 6th Floor, 4 Eastcheap, London, EC3M 1AE, U.K. Automatic Signaling System Adoption Rate 97.8% (1,927.3km) Yutaka Osada In charge of the Shinkansen and Corporate Executive Officers Conventional Lines Operations Division, Tokuji Matsuno General Manager of the Construction Department and General Manager Sydney Office Suite 5.01A, Level5, 20 Hunter Street, Sydney, in charge of controlling the Transportation of the Nagoya Construction Subdivision of the Chuo Shinkansen NSW 2000, Australia Safety Section, and in charge of controlling Construction Department of the Chuo Shinkansen Promotion Division the Electrical Engineering Section Takanori Mizuno Deputy Director General of the Chuo Shinkansen Promotion Division Katsumi Miyazawa In charge of the Technology Section Motoaki Terai Deputy Director General of the Maglev Systems Development Division of and in charge of controlling the the Chuo Shinkansen Promotion Division Transportation Section Corpotrate Officers Takao Yamaguchi Deputy Director General of the Corporate Planning Division and General Manager Directors of the Information Systems Department of the Corporate Planning Division Organization Chart Yoshiki Suyama Toshio Otake (Ph.D.) Deputy Director General of the General Technology Division and General Manager of the Technology Research and Development Department of Shun-ichi Kosuge the General Technology Division Mamoru Uno (Ph.D.) Mamoru Tanaka Deputy Director General of the General Technology Division and General Manager of the Technology Planning Department of the General Technology Division Secretarial Department Kimiaki Tanaka Board of Directors Shin Iwata Deputy Director General of the Chuo Shinkansen Promotion Division and Corporate Planning Division Hideyuki Shoji General Manager of the Chuo Shinkansen Construction Department of Chairman Supervision Department General Technology Division the Chuo Shinkansen Promotion Division Transportation and Marketing Department Conventional Lines Atsuhito Mori President Chuo Shinkansen Promotion Division Akihiko Ito General Manager of the Administration Department Operations Division Rolling Stock Department Torkel Patterson Ryo Ejiri (Ph.D.) General Manager of the Property Management Department Audit Department Engineering Department (Outside) Fujio Cho Director General of the Conventional Lines Operations Division Public Relations Department Atsuhito Mori Shizuoka Branch Office ( ) Kenji Koroyasu Outside Eiji Sugizaki Deputy Director General of the Corporate Planning Division, General Manager of the Administration Department Project Development Department of the Corporate Planning Division, and General Mie Regional Office (Outside) Legal Affairs Department Takashi Saeki Manager of the Tokyo Project Development Department of the Corporate Planning Division Iida Regional Office Hajime Ikuta Deputy Director General of the Corporate Planning Division and General Manager of the Investment Planning Department of the Corporate Personnel Department Planning Division Full-time Audit and Supervisory Board Members Audit and Supervisory Finance Department Atsushi Honda (Ph.D.) Deputy Director General of the Chuo Shinkansen Promotion Division and Board Members Planning Department Hidenori Fujii General Manager of the Planning and Promotion Department of the Chuo Property Management Department Shinkansen Promotion Division Supervision Department Hiromu Emi Deputy Director General of the Maglev Systems Development Division of the Chuo Audit and Marketing Division Yutaka Hatano Supervisory Board Shinkansen Transportation and Marketing Department (Outside) Shinkansen Promotion Division and General Manager of Yamanashi Maglev Center of the Business Promotion Division Hajime Ishizu Maglev Systems Development Division of the Chuo Shinkansen Promotion Division Operations Division Rolling Stock Department Construction Department Hiroyuki Ota (Outside) Shunsuke Niwa General Manager of the Public Relations Department Tracks and Structures Department Transportation Safety Department Tatsuhiko Yamada General Manager of the Finance Department Electrical Engineering Department (Ph.D.) Deputy General Manager of the Construction Department Overseas Offices: Washington D.C., London, Sydney Audit and Supervisory Board Member Hiroto Takeuchi Kansai Branch Office Shigeo Kifuji (Outside) Tomohisa Furuhashi General Manager of the Transportation Safety Department General Education Center Nobuhiro Hayakawa General Manager of the General Education Center Nagoya Central Hospital Masayuki Ueno Deputy Director General of the Shinkansen Operations Division and General Health Care Center Manager of the Rolling Stock Department of the Shinkansen Operations Division Administration Management Center Hiroshi Suzuki Director General of the Shizuoka Branch Office SCMAGLEV and Railway Park Takayuki Oyama Director General of the Kansai Branch Office

50 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 51 Corporate Data

Corporate Data Corporate Data

Operating Area History

JR Central operates the Tokaido Shinkansen, the main transportation artery linking Tokyo, 1987 April • Central Japan Railway Company (JR Central) is established. Nagoya, and Osaka, and a network of 12 conventional lines centered on the Nagoya and March • Three stations are established on the Tokaido Shinkansen (Shin-Fuji, Kakegawa, Mikawa-Anjo). 1988 • JR Tokai Bus Company is established (now a consolidated subsidiary). Shizuoka City areas. In April of the same year, automobile transport business is transferred to the company. 0 500km

Area of Japan: Approx. 380,000 km2 1989 March • A new model diesel railcar is introduced to the Hida Express on the Takayama Line. Population: 128 million (As of January 1, 2016) 1990 February • JR Central starts topographical and geological surveys along the Chuo Shinkansen following orders from the Minister of Transport. June • JR Central applies to the Minister of Transport for approval of the construction plan of the Yamanashi Maglev Line and gains approval. Kyoto Nagoya Tok yo JR Central Shinkansen Conventional Lines October • JR Central takes over the Tokaido Shinkansen facilities. Shin-Osaka 1991 Shizuoka JR Central 1992 March • The first Nozomi begins commercial service on the Tokaido Shinkansen using Series 300 rolling stock. Inotani July • JR Tokai Hotels Co., Ltd. is established (now a consolidated subsidiary). December • JR Central Department Store Co., Ltd. is established. Company name changed to JR Tokai Takashimaya Co., Ltd. in September 1997 (now a consolidated subsidiary). 1994 June • JR CENTRAL BUILDING CO., LTD. is established (now a consolidated subsidiary). Shiojiri 1997 April • Running tests start on the Yamanashi Maglev Line. October • JR Central lists on the first section of the Nagoya, Tokyo, and Osaka stock exchanges (integrated with the Tokyo Stock Exchange in July 2013) and also on the Kyoto Stock Exchange (merged with the Osaka Stock Exchange in March 2001). Takayama Line Tatsuno 1999 March • Series 700 rolling stock is introduced on the Tokaido Shinkansen Nozomi. Tokyo December • Construction of JR Central Towers is completed. Kofu March • JR Nagoya Takashimaya opens (operated by JR Tokai Takashimaya Co., Ltd.). Chuo Line 2000 Taita Line Shinagawa May • Nagoya Marriott Associa Hotel opens (operated by JR Tokai Hotels Co., Ltd.).

Mino-Akasaka Mino-Ota Shin-Yokohama 2001 March • JR Tokai Real Estate Co., Ltd. is established (now a consolidated subsidiary). Iida Line Minobu Line Gotemba Line December • JR Central is excluded from the jurisdiction of the JR Law through the enactment of amendment to the JR Law. Gifu July • A new research center is constructed in Komaki City in Aichi Prefecture. Ogaki Tajimi 2002 Maibara Fuji Kozu October • Shinagawa Station on the Tokaido Shinkansen opens. The timetable is drastically revised by the increase of the maximum speed on all Tokaido 2003 Shinkansen trains to 270km/h. Nagoya Atami July • The Japan National Railways (JNR) Settlement Headquarters, an independent division within the Japan Railway Construction, Transport and Kansai Line Numazu 2005 Technology Agency (JRTT), sells 600,000 shares of JR Central.

Obu March • New Automatic Train Control (ATC) system is introduced to the Tokaido Shinkansen. Kyoto Kameyama Shizuoka 2006 Tokaido Line April • JR Central repurchases 268,686 shares of its treasury stock based on a decision made by the Board of Directors, authorized by the articles of Taketoyo incorporation. • The JNR Settlement Headquarters within the JRTT completes the sale of all of its shares of JR Central by selling 286,071 shares of common stock Meisho Line Toyohashi of the company. Shin-Osaka Matsusaka Tokaido Shinkansen January • Application for changes to the Yamanashi Maglev Line Construction Plan is approved by the Minister of Land, Infrastructure and Transport (hereafter, Taketoyo Line 2007 the “Minister”). Ise-Okitsu Toba July • JR Central introduces the new Series N700 rolling stock for the Tokaido Shinkansen Nozomi services. Taki Sangu Line October • JR Central makes NIPPON SHARYO, LTD. a consolidated subsidiary. Kisei Line 2008 • JR Central submits a report to the Minister of Land, Infrastructure, Transport and Tourism (the “Minister”) concerning topographical and geological Operating Kilometers by line surveys of the Chuo Shinkansen in response to the order received in 1990. December • JR Central starts conducting the remaining four surveys under Article 5 of the Nationwide Shinkansen Railway Development Act (hereinafter referred to as "the Act") related to the Chuo Shinkansen in response to the order by the Minister. Tokaido Shinkansen 552.6km Conventional Lines 2009 May • JR Central cancels 90,000 shares of treasury stock. Tokaido Line 360.1km December • JR Central submits a report regarding the remaining four surveys under Article 5 of the Act related to the Chuo Shinkansen in response to the order Gotemba Line 60.2km by the Minister received in 2008. Minobu Line 88.4km Shingu 2011 May • The Minister designates JR Central as the operator and constructor of the Chuo Shinkansen between Tokyo and Osaka City. Iida Line 195.7km • The Minister approves the development plan and instructs JR Central to construct the Chuo Shinkansen. Taketoyo Line 19.3km 2012 May • JR Central cancels 90,000 shares of treasury stock. Takayama Line 189.2km February • JR Central introduces the new Series N700A rolling stock for the Tokaido Shinkansen Nozomi services. Chuo Line 174.8km 2013 Taita Line 17.8km August • Extension of the Yamanashi Maglev Line to 42.8km and upgrading of facilities are completed, and running operation is restarted. Kansai Line 59.9km 2014 October • The Minister approves the Construction Implementation Plan (Part 1) between Shinagawa and Nagoya along the Chuo Shinkansen. Kisei Line 180.2km March • The Taketoyo Line (between Obu and Taketoyo stations) is electrified. Meisho Line 43.5km 2015 • Increase in the maximum speed of the Tokaido Shinkansen to 285km/h. Sangu Line 29.1km 2016 November • Applies for long-term loan totaling 3 trillion yen (plan) using the Fiscal Investment and Loan Program (FILP) for the construction of the Chuo Conventional Line Total 1,418.2km Shinkansen to the Japan Railway Construction, Transport and Technology Agency. Total 1,970.8km 2017 February • Construction of JR Gate Tower is completed.

52 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 53 Corporate Data

Corporate Data Corporate Data

Summary of Performance

Segment-by-Segment Performance for FY2016 which opened at Takayama Station, etc. and took other initiatives. “First Avenue Tokyo Station” and the opening of “Nippon Gourmet Road”. JR Central Group has prioritized safe and reliable transportation in Common initiatives for the Shinkansen and conventional lines included Additionally, we advanced the sale of apartments in “Central Garden our core railway business, and enhanced our services at the same adopting earthquake countermeasures for station ceilings and conducting Residence Okazaki”, a condominium apartment building developed on a Shifts in Operating Revenues time. We have continually endeavored to improve the competency practical training for promoting preparedness to respond to different site used to be used for company housing in Okazaki City, Aichi. of our employees, enhance facilities, and increase efficiency and situations expected in the event of a natural disaster or other irregular As a result of the aforementioned, operating revenues for the term 1) Transportation reduce costs throughout our business, including capital investments, situation. We also introduced tablet devices with interpreting and increased by 3.9% YoY to 68.6 billion yen, and operating income increased in an effort to enhance profitability. As a result, the overall railway translating functions to provide guidance to customers at stations, etc. in by 16.0% YoY to 18.1 billion yen. 1,358.1 1,380.4 performance for the term (passenger-kilometers) rose favorably in an effort to enhance our services. (Billion yen) 1,243.0 1,276.1 1,305.6 terms of both business and tourism use, increasing by 1.3% YoY to In regard to sales and marketing, we expanded our tourist products, 4) Other 1,200

62.269 billion passenger-kilometers. Operating revenue also increased such as “IC Hayatoku Type 21”, “EX Family Hayatoku”, and “Isshoni With our hotel business, we have worked on creating attractive products 900 by 1.1% YoY to 1,756.9 billion yen, ordinary income increased by Kodama Hayatoku” for members of Express Reservation and PLUS and on enhancing our sales capabilities. We have also worked to offer 10.3% YoY to 563.9 billion yen, and net income attributable to owners EX in order to stimulate demand for use of our services by families and higher quality services to respond to the needs of foreign customers. 600 of the parent increased by 16.4% YoY to 392.9 billion yen. groups. In addition, we began providing a smartphone application for Further, we moved ahead with preparations, including marketing and 300 Long-term debt amounted to 3,395.4 billion yen mainly due to the Express Reservation with a view to increasing convenience. We rolled promotional activities, in the lead up to the opening of the Nagoya JR Gate 0 long-term debt for the Chuo Shinkansen of 1,500 billion yen. The out tourism campaigns covering the Ise-Shima region, which was in the Tower Hotel on April 17, 2017. ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 amount of long-term debt excluding the long-term debt for the Chuo spotlight as the venue of the Ise-Shima Summit, in addition to Kyoto, Nara, With our travel business, we have proactively marketed attractive travel Shinkansen was 1,895.4 billion yen, down 49.5 billion yen from the end and Tokyo by highlighting local tourist resources and expanding travel products and promoted sales of such products in collaboration with travel of the previous fiscal year. products associated with the campaigns. JR Central also promoted sales campaigns for Ise-Shima in addition to locations such as Kyoto, Nara, and The year-end dividend was set at 70 yen, an increase of 5 yen to the in cooperation with communities, such as the “Japan Highlights Travel” Tokyo. 2) Merchandise and Other expected dividend per share of 65 yen announced in January 2017 campaign in coordination with Hamamatsu-shi, Shizuoka Prefecture, In our rolling stock manufacturing business, we have endeavored to due to increases in passenger volumes for business and leisure. As a which has been attracting attention in relation to Naotora Ii, and the increase orders for and the manufacture of rolling stock, construction 233.8 239.6 237.0 (Billion yen) 209.5 220.7 result, the annual dividend came to 135 yen per share. “Shupo” Campaign. At the same time, we worked to expand usage of machinery, and other items. 200 Business performance in each segment was as follows. our services by widening our excursion tickets for foreign tourists visiting As a result of the aforementioned, operating revenues for the term Japan. In addition, we worked to expand the network of stores accepting increased by 4.5% YoY to 253.9 billion yen, and operating income was 1.6 150 1) Transportation electronic money with TOICA. Meanwhile, we steadily moved ahead billion yen. 100 We steadily proceeded with large-scale renovations to maintain and with preparations to begin the new Shinkansen online reservation and 50 improve the soundness of civil engineering structures along the Tokaido ticketless boarding service “smartEX” for customers other than Express Efforts for FY2017 Shinkansen in constant pursuit of cost reduction. In terms of earthquake- Reservation members at the end of September 2017. We will continue to ensure that our railway business provides safe and 0 resistant measures, we expanded the implementation of derailment and Due to the successive use of the railway for business and tourism, reliable transportation as the top priority for FY2017. Moreover, we will ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 deviation countermeasures to also cover the sections where construction performance for the Tokaido Shinkansen increased by 1.4% YoY to steadily move ahead with the implementation of earthquake-resistant work became possible as a result of developing an effective installation 52.909 billion passenger-kilometers for FY2016. For conventional lines, it measures, including derailment and deviation countermeasures, which have method. We also generally completed our renovation work primarily aimed increased by 0.6% YoY to 9.359 billion passenger-kilometers. been expanded to cover the entire Tokaido Shinkansen line, the large-scale at enhancing the earthquake-resistance of the Hamamatsu Workshop, In our bus business, we have worked to create products tailored to renovation of the civil engineering structures, and the introduction of the 3) Real Estate which conducts the Shinkansen rolling stock general overhauls, and customers' needs and ensure profitability with safety as the first priority. N700A (3rd edition), as well as will newly develop the N700S validation test 67.4 68.6 began conducting general overhauls in the new line. Meanwhile, we As a result of the aforementioned, operating revenues for the term vehicles. We will also work to promote usage of “smartEX” - a new online (Billion yen) 64.9 66.5 66.0 worked to schedule trains flexibly by utilizing the “10 Nozomi Timetable increased by 1.6% YoY to 1,380.4 billion yen, and operating income reservation and ticketless boarding service for the Shinkansen - which will 60

(operating up to 10 Nozomi services in both directions)” to meet demands increased by 6.5% YoY to 593.1 billion yen. be introduced in late September 2017. With regard to our Chuo Shinkansen 45 with a focus on time frames or seasons with increased customer Project, which uses the Superconducting Maglev Technology, we will steadily use, and welcomed a large number of customers using our services. 2) Merchandise and Other move ahead with our plan while giving serious consideration to safety, the 30

Furthermore, with a view to further increasing security, we proceeded In our merchandise and other businesses, we worked to bolster environment, and coordination with towns and cities along the planned 15 with the installation of additional security cameras in passenger cabins, earning power by offering an attractive product lineup and providing route. In terms of financing, we will proceed to borrow the remaining 1,500 etc. We also completed the introduction of the N700A (2nd edition) and services that accommodate the needs of customers at JR Nagoya billion yen by means of the long-term loan using the Fiscal Investment and 0 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 subsequently began launching the N700A (3rd edition). In addition, we Takashimaya, among other efforts made. Meanwhile, we completed Loan Program (FILP) to promote the construction of the Chuo Shinkansen. completed the replacement to new automatic ticketing gates, which we large-scale renovations in February, in consideration of the opening of In addition, we will steadily pursue overseas projects using the high-speed had been working on since FY2014, and continued to ensure safe and the “Takashimaya Gate Tower Mall”, as well as advanced preparations, rail and Superconducting Maglev systems. Furthermore, we will operate JR reliable transportation and further enhance our transportation services including conducting marketing and promotional activities, toward the Gate Tower, which fully opened in April 2017, along with JR Central Towers 4) Other by moving ahead with the additional implementation of movable platform opening of the “Takashimaya Gate Tower Mall” on April 17, 2017. in a uniform manner, and provide attractive services to boost earnings. fences at Shinagawa and Shin-Yokohama stations, and completing the As a result of the aforementioned, operating revenues for the term At the same time, we will make every effort to reduce costs and increase (Billion yen) 250.6 238.9 243.0 253.9 installation at the No. 4 platform of Shin-Yokohama Station. decreased by 1.1% YoY to 237.0 billion yen, and operating income efficiency across all operations including capital investment and will strive to 250 233.1 In terms of conventional lines, we have continued proceeding with reduced by 14.2% YoY to 7.5 billion yen. improve our business strength. 200 earthquake countermeasures, such as anti-earthquake constructions in the Nagoya Workshop, which conducts general overhauls for conventional line 3) Real Estate 150 100 rolling stock, etc., in addition to anti-earthquake reinforcement for elevated In our real estate business, we began having tenants move into the Performance forecast for FY2017 (consolidated) track columns, etc. We have also systematically promoted measures offices in the JR Gate Tower on November 7, 2016. We also moved ahead (Billion yen) (YoY) 50 against rainfall, measures against falling rocks, and the improvement of with preparations, including marketing and advertising activities, toward 0 Operating Revenues 1,760.0 100.2% safety devices on grade crossings. We flexibly increased the frequency or the opening of the “Gate Tower Plaza Restaurant Mall”, BIC CAMERA, ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 the number of train cars to meet demands for the “Shinano”, “Hida”, and UNIQLO, GU and other stores on April 7, 2017 and the opening of the Operating Income 583.0 94.1%

other limited express trains. To ensure safe and reliable transportation and “Takashimaya Gate Tower Mall” and “Nagoya JR Gate Tower Hotel” Ordinary income 499.0 88.5% further enhance our transportation services, we also moved forward with on April 17. Furthermore, we strengthened competitiveness and sales Note:Operating revenues by segment include sales to other segments in addition to Net income attributable to owners of the parent 348.0 88.6% our plans for over-track stations and for installation of free passageways, power in commercial facilities at stations, including the renovation of sales to external customers Note: As of the release of the financial report for FY2016

54 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 55 Corporate Data

Corporate Data Corporate Data

Financial Highlights Other Related Materials

Consolidated • List of consolidated subsidiaries (Table 1)

Capital Capital Ratio Capital Capital Ratio Segment Company Name Main Business Segment Company Name Main Business FY2012 FY2013 FY2014 FY2015 FY2016 (Million yen) (%) (Million yen) (%) JR Tokai Bus Company 1,747 100.0 Bus services (Billion yen) (Billion yen) (Billion yen) (Billion yen) (Billion yen) JR Tokai Hotels Co., Ltd. 14,000 100.0 Hotel business Transportation JR TOKAI LOGISTICS COMPANY 300 90.0 Logistics business Operating Revenues ¥1,585.3 ¥1,652.5 ¥1,672.2 ¥1,738.4 ¥1,756.9 Railway business, JR Tokai Tours 490 70.0 Travel agency services Tokai Transport Service Company 295 100.0 entrusted business Operating expenses 1,159.1 1,157.9 1,165.6 1,159.7 1,137.4 JR Tokai Takashimaya Co., Ltd. 10,000 59.2 Department store operations JR TOKAI AGENCY CO., LTD. 61 90.0 Advertising Operating income 426.1 494.6 506.5 578.6 619.5 Wholesale and retail sales, JR-CENTRAL PASSENGERS Co., Ltd. 998 100.0 food and beverage service Merchandise Income before income taxes 326.1 402.7 404.6 508.1 560.0 Manufacturing of railway and Tokai Kiosk Company 700 100.0 Wholesale and retail sales NIPPON SHARYO, LTD. 11,810 51.2 rolling stock Other Net income attributable to owners of the parent 199.9 255.6 264.1 337.4 392.9 Tokai Food Service co., Ltd. 295 51.6 Food and beverage service JR TOKAI CONSTRUCTION Co., Ltd. 300 100.0 Construction Depreciation and amortization 240.1 276.2 271.5 242.3 225.3 JR Tokai Corporation 100 70.0 Wholesale and retail sales

JR CENTRAL BUILDING CO., LTD. 45,000 100.0 Real estate leasing Other CHUOH LINEN SUPPLY Co., Ltd. 150 87.6 Linen supply services Capital expenditure*1 281.1 200.1 214.5 238.3 329.9 JR Tokai Real Estate Co., Ltd. 16,500 100.0 Real estate leasing and sales JR TOKAI Information Systems Total assets , Development, improvement 5,231.1 5,178.1 5,217.9 5 268.5 7,052.6 Company 100 100.0 and maintenance of systems Shin-Yokohama Station Development Co., Ltd. 9,304 100.0 Real estate leasing Total equity 1,557.9 1,802.2 2,063.9 2,352.5 2,726.7 Real estate leasing Track maintenance and Toyohashi Station Building Co., Ltd. 1,880 52.5 Nihonkikaihosen Co., Ltd. 100 92.1 inspection

Equity 1,513.3 1,753.7 2,020.1 2,316.3 2,692.4 Tokyo Station Development Co., Ltd. 1,750 100.0 Real estate leasing Real Contracted accounting JR Tokai Financial Management Co., Ltd. 80 100.0 operations and financial Estate business Equity Ratio 28.9% 33.9% 38.7% 44.0% 38.2% Shizuoka Terminal Development Company Limited 624 67.0 Real estate leasing

HAMAMATSU TERMINAL DEVELOPMENT CO., Ltd. 600 76.8 Real estate leasing Rolling stock and machinery Operating income/Total assets 8.2% 9.5% 9.7% 11.0% 10.1% Tokai Rolling Stock & Machinery Co., Ltd. 80 88.4 inspections and repair Nagoya Station Area Development Corporation 480 100.0 Real estate leasing Return on Equity 14.1% 15.7% 14.0% 15.6% 15.7% Construction consulting JR DEVELOPMENT AND MANAGEMENT JR Central Consultants Company 50 100.0 business (Yen) (Yen) (Yen) (Yen) (Yen) Real estate leasing CORPORATION OF SHIZUOKA 363 100.0

2 JR Development and Management Earnings per Share * 30 100.0 Real estate leasing Note: Two affiliated companies, SHINSEI TECHNOS CO., LTD. and RAILWAY INFORMATION ¥1,016 ¥1,299 ¥1,342 ¥1,714 ¥1,996 Corporation of Kansai SYSTEMS CO., LTD., are accounted for by the equity method.

Annual dividends per share 105*2 115 120 125 135 • Learning safety from accidents (Column 1) • Shortening of travel time by speed increase (Column 2) *1: Increase in tangible fixed assets and intangible fixed assets Learning Safety from Accidents is a booklet that has been With the inauguration of the Tokaido Shinkansen in 1964, *2: On October 1, 2012, the Company implemented a 100-for-1 stock split and employed a share unit system by which one share unit equals 100 shares. Along with this, net income per share and annual dividends per share were calculated based on the assumption that the said stock split was made in the beginning of the period. published seven times since FY2007 that introduces, in the time required to travel between Tokyo and Osaka was illustrations, past accidents and disasters in an easy to shortened to 3 hours and 10 minutes from 6 hours and 30 Non-consolidated understand format. The booklet is distributed to the General minutes (4 hours at the time of inauguration). Furthermore, Education Center and field offices for use in training and with the introduction of the “Nozomi” in 1992, that time was FY2012 FY2013 FY2014 FY2015 FY2016 workplace OJT. shortened to 2 hours and 30 minutes. This booklet is prepared based on a theme of how past events In October 2003, the investment in rolling stock and (Billion yen) (Billion yen) (Billion yen) (Billion yen) (Billion yen) have been used as lessons, and serves as an educational tool ground facilities that we had continuously engaged in for Operating Revenues ¥1,245.0 ¥1,277.2 ¥1,306.6 ¥1,357.9 ¥1,380.7 used to aid readers in gaining an accurate understanding why approximately 15 years culminated with the upgrading of the current rules and equipment are established in the manner the maximum speed of all trains to 270 km/h and the drastic Railways Business 1,235.9 1,268.5 1,297.8 1,349.7 1,371.9 they are. timetable revision that resulted in a maximum of seven Nozomi Affiliated Businesses 9.0 8.6 8.7 8.2 8.8 services operating each hour. With the introduction of the “10 Nozomi Timetable (operating Operating expenses 845.9 816.3 831.1 800.3 784.9 up to 10 Nozomi services in both directions)” in 2014 and the increase in maximum speed to 285 km/h in 2015, the shortest Railways Business 840.1 808.9 826.5 794.1 779.9 travel time between Tokyo and Osaka has now been reduced Affiliated Businesses 5.7 7.4 4.6 6.1 4.9 to 2 hours and 22 minutes. Acceleration by increasing the speed of the Tokaido Shinkansen Operating Income 399.1 460.8 475.4 557.6 595.8 Tokyo - Osaka Shortest travel time Income before income taxes 301.8 370.7 397.8 491.7 541.1 Series 0 4 hr October 1, 1964 (3 hr 10 min in the Net income 187.8 240.3 260.2 328.6 381.8 210km/h following fiscal year)

Depreciation and amortization 223.7 260.3 255.8 227.0 210.9 Series 100 November 1, 1986 2 hr 52 min 220km/h Total capital investments 301.6 229.0 257.2 259.1 330.8 Series 300 March 14, 1992 2 hr 30 min Total assets 5,042.9 4,986.0 5,013.4 5,059.4 6,814.3 270km/h

Total equity 1,436.3 1,661.3 1,931.0 2,219.9 2,582.8 N700A March 14, 2015 2 hr 22 min 285km/h

56 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 57 Financial Section

Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations (MD&A)

1) Overview of FY2016 income at 619.5 billion yen, and net income attributable to 3) Cash Flow When JR Central purchased the Tokaido Shinkansen In FY2016, amid the continuing satisfactory level of railway owners of the parent at 392.9 billion yen. Cash and cash equivalents (hereinafter, “capital”) as of the facilities in October 1991, we were burdened with total long- use, JR Central strived to enhance services placing the top end of FY2016 increased by 96.2 billion yen YoY to 414.5 term debt and payables of more than five times our annual priority on ensuring safe and reliable transportation in the billion yen. transportation revenues, including the liabilities inherited railway business, which is the core of our operations. 2) Operating Performance Capital gained from operating activities decreased by 20.9 from Japanese National Railways at the time of its break-up In our railway business, in terms of the Tokaido Shinkansen, a) Operating Revenue billion yen YoY to 580.5 billion yen due to an increase in and privatization. We regarded reducing long-term debt and we have steadily proceeded a large-scale renovation and Operating revenue increased by 18.5billion yen (1.1%) YoY income tax paid, although non-consolidated transportation payables as our most important financial task, and we have earthquake countermeasures, such as countermeasures to to 1,756.9 billion yen. revenues of JR Central increased as the use of JR Central’s endeavored to trim debt and payables as rapidly as possible. derailment and deviation. Also, we utilized the “10 Nozomi In terms of our transportation business, JR Central’s services for business as well as tourism maintained high Consequently, the 5,456.2 billion yen in total long-term debt Timetable” to schedule trains flexibly. Furthermore, we have transportation revenues increased by 21.1billion yen (1.6%) levels. and payables at the end of March 1992, immediately after we worked to enhance passenger service and ensure safe and YoY to 1,315.8 billion yen. Passenger volume on the Tokaido Capital expended through investing activities increased acquired the Tokaido Shinkansen assets, has been lowered by reliable transportation by introducing the N700A(3rd edition), Shinkansen increased by 1.4% YoY, pushing up transportation by 1,739.2 billion yen YoY to 1,909.5 billion yen due to an 3,587.2 billion yen. and by upgrading existing rolling stock of N700A type. revenues 1.7% YoY to 1,211.9 billion yen. Passenger expenditure of 1,500.0 billion yen by entrusting the proceeds JR Central will continue working to enhance the earning In terms of the conventional lines, we have systematically volume on conventional lines increased by 0.6% YoY with from long-term debt for the Chuo Shinkansen construction, capability and make every effort to pursue efficiency and cost promoted earthquake countermeasures, such as anti-earthquake transportation revenues increasing 1.3% YoY to 103.9 billion proceeds of 27.2 billion yen from cancellation of money held reduction across all operations including capital investment reinforcement for elevated columns, etc., measures against yen. in trust (trust for the Chuo Shinkansen construction), and while steadily promoting efforts to strengthen our managerial rainfall and falling rocks, and improvement of safety devices In our non-transportation businesses, operating revenues expenditure of 330.1 billion yen for purchase of tangible assets foundation for various businesses, such as the Tokaido on grade crossings. Also, we flexibly increased the frequency for the merchandise and other segment decreased by 1.1% and intangible assets, etc. Shinkansen, and to construct the Chuo Shinkansen. At the and the number of train cars to meet demand for the “Shinano”, YoY and real estate segment and other segment increased Capital expended through financing activities increased by same time, we will strive to improve our financial strength as “Hida”, and other limited express trains. respectively by 3.9% and by 4.5% YoY. 1,668.0 billion yen YoY to 1,425.1 billion yen mainly due to the entire group by, among others, procuring capital effectively In terms of sales and marketing, we have promoted 1,500.0 billion yen in proceeds from long-term debt for the as well as efficiently. proactive initiatives, such as measures to expand our tourist b) Operating Expenses Chuo Shinkansen construction. products in order to stimulate demand for use of our services. Operating expenses decreased by 22.3 billion yen (1.9%) (Reference) In non-railway business, we have continued to prepare for YoY to 1,137.4 billion yen because of decrease in depreciation Substantial free cash flow (amount obtained by subtracting 5) Net Asset Balance the grand opening of the “JR Gate Tower” at Nagoya Station and amortization associated with the Yamanashi Maglev Line an expenditure for purchase of tangible assets and intangible Net asset balance at the end of FY2016 increased by 374.1 in April 2017. as well as in costs of sales of group companies, etc. assets, etc. (330.1 billion yen) within net cash used in billion yen over the end of FY2015 to 2,726.7 billion yen, and Our commitment to the aforementioned series of measures investing activities from net cash provided by operating our equity ratio decreased from 44.0% at the end of FY2015 to led to continuing favorable railway transportation volume for c) Operating Income activities (580.5 billion yen)) decreased by 98.7 billion yen 38.2% at the end of FY2016. both business and tourism. Therefore, transportation revenues Operating income increased by 40.8 billion yen (7.1%) YoY YoY to 250.4 billion yen. for JR Central increased, thanks to which overall consolidated to 619.5 billion yen. operating revenues also increased despite decrease in revenues 6) Capital Procurement of some parts of group companies such as NIPPON SHARYO, d) Non-Operating Income/Loss 4) Long-Term Debt and Payables In order to procure capital from various sources and LTD. On the other hand, overall consolidated operating Non-operating income/loss improved 11.6 billion yen over During FY2016, the balance of long-term debt and payables facilitate smooth fundraising, we have acquired issuer expenses decreased because of decrease in depreciation and the FY2015 due to a decrease in interest expenses as well as as of March 31, 2017, increased to 3,395.4 billion yen credit ratings from Moody’s Japan, Rating and Investment amortization associated with the Yamanashi Maglev Line as the absence of the loss arising from the early redemption of on a consolidated basis and 3,369.0 billion yen on a non- Information, Inc., Standard and Poor’s Ratings Japan K.K. and well as in costs of sales of group companies, etc. Moreover, bonds in the previous fiscal year. consolidated basis, mainly due to borrowing of 1,500.0 billion Japan Credit Rating Agency, Ltd. The rating is respectively non-operating income/loss improved due to a decrease in yen in long-term debt for the Chuo Shinkansen construction. Aa3, AA, AA-, and AAA. interest expenses as well as the absence of the loss arising e) Net Income Attributable to Owners of the Parent The balance of long-term debt and payables other than long- Furthermore, in order to secure short-term liquidity, we have from the early redemption of bonds in the previous fiscal year. As a result, net income attributable to owners of the parent term debt for the Chuo Shinkansen construction decreased by established a commitment of 100 billion yen as of the end of As a result, both revenue and income increased for FY2016 increased by 55.4 billion yen (16.4%) YoY to 392.9 billion 46.5 billion yen to 1.869.0 billion yen on a non-consolidated FY2016. with operating revenue ending at 1,756.9 billion yen, operating yen. basis.

58 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 59 Financial Section

Consolidated Balance Sheet

Central Japan Railway Company and Consolidated Subsidiaries March 31, 2017 March 31, 2017 Thousands of Millions of Yen Thousands of Millions of Yen U.S. Dollars (Note 2) U.S. Dollars ASSETS (Note 2) (Note 2) LIABILITIES AND EQUITY (Note 2)

2017 2016 2017 2017 2016 2017

CURRENT ASSETS: CURRENT LIABILITIES: Cash and cash equivalents (Note 11) ¥ 414,559 ¥ 318,352 $ 3,701,419 Short-term loans payable (Notes 5 and 11) ¥ 25,563 ¥ 24,800 $ 228,241 Current portion of long-term debt (Notes 5 and 11) 100,574 112,236 897,982 Time deposits (Note 11) 32,000 Current portion of long-term accounts payable—railway facilities (Notes 7 and 11) 4,824 77,665 43,071 Money held in trust for the Chuo Shinkansen construction (Notes 3.d and 11) 1,472,741 13,149,473 Trade payables (Note 11) 200,298 179,047 1,788,375 Marketable securities (Notes 4 and 11) 138,700 1,238,392 Provision for bonuses 28,074 27,991 250,660 Trade receivables (Note 11) 94,776 85,524 846,214 Income taxes payable (Note 11) 86,788 105,953 774,892 Allowance for doubtful accounts (16) (37) (142) Advances received 43,215 42,781 385,848 Inventories 36,706 38,214 327,732 Other (Note 10) 66,011 68,792 589,383 Deferred tax assets (Note 10) 18,787 24,222 167,741 Total current liabilities 555,352 639,269 4,958,500 Prepaid expenses and other 34,087 32,440 304,348 NONCURRENT LIABILITIES: Total current assets 2,210,342 530,716 19,735,196 Long-term debt (Notes 5 and 11) 1,241,031 1,201,290 11,080,633

NONCURRENT ASSETS: Long-term debt for the Chuo Shinkansen construction (Notes 3.d, 6 and 11) 1,500,000 13,392,857 Investments and other assets: Long-term accounts payable—railway facilities (Notes 7 and 11) 549,028 553,856 4,902,035 Provision for large-scale renovation of the Shinkansen infrastructure (Note 3.k) 210,000 245,000 1,875,000 Investment securities (Notes 4 and 11) 137,711 109,730 1,229,562 Liability for retirement benefits (Note 8) 205,423 207,625 1,834,133 Investments in and advances to unconsolidated subsidiaries and affiliates (Note 4) 17,076 16,593 152,464 Other (Note 10) 65,110 68,936 581,339 Asset for retirement benefits (Note 8) 4,123 4,015 36,812 Total noncurrent liabilities 3,770,594 2,276,709 33,666,017 Deferred tax assets (Note 10) 144,580 148,760 1,290,892 CONTINGENCIES (Note 14): Prepaid expenses and other 50,395 43,995 449,955 EQUITY (Notes 9 and 17): Total investments and other assets 353,887 323,096 3,159,705 Common stock—authorized, 824,000,000 shares;

Property, plant and equipment (Note 3.g): issued, 206,000,000 shares in 2017 and 2016 112,000 112,000 1,000,000 Buildings and structures 4,791,770 4,677,518 42,783,660 Capital surplus 53,498 53,499 477,660 Machinery, rolling stock and vehicles 1,409,173 1,380,116 12,581,901 Retained earnings 2,608,511 2,241,207 23,290,276

Land 2,355,373 2,356,273 21,030,116 Treasury stock—at cost, 9,200,886 shares in 2017 and 9,200,776 shares in 2016 (103,159) (103,157) (921,062)

Construction in progress 273,653 225,268 2,443,330 Accumulated other comprehensive income: Unrealized gain on available-for-sale securities 28,832 22,227 257,428 Other 176,531 176,848 1,576,169 Deferred loss on hedges (1) (2) (8) Total 9,006,502 8,816,025 80,415,196 Remeasurements of defined benefit plans (Note 8) (7,229) (9,375) (64,544) Accumulated depreciation (4,518,056) (4,401,293) (40,339,785) Total 2,692,451 2,316,397 24,039,741 Net property, plant and equipment 4,488,445 4,414,731 40,075,401

Noncontrolling interests 34,277 36,168 306,044 Total noncurrent assets 4,842,333 4,737,827 43,235,116

Total equity 2,726,729 2,352,566 24,345,794 TOTAL ASSETS (Note 5.) ¥ 7,052,675 ¥ 5,268,544 $ 62,970,312 See notes to consolidated financial statements. TOTAL LIABILITIES AND EQUITY ¥ 7,052,675 ¥ 5,268,544 $ 62,970,312 See notes to consolidated financial statements. 60 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 61 Financial Section

Consolidated Statement of Income Consolidated Statement of Changes in Equity

Central Japan Railway Company and Consolidated Subsidiaries Year Ended March 31, 2017 Thousands of Central Japan Railway Company and Consolidated Subsidiaries Year Ended March 31, 2017 Millions of Yen U.S. Dollars (Note 2) (Note 2) Thousands Millions of Yen (Note 2) 2017 2016 2015 2017 Accumulated Other Comprehensive Income OPERATING REVENUES ¥ 1,756,980 ¥ 1,738,409 ¥ 1,672,295 $ 15,687,321 Outstanding Unrealized Deferred OPERATING EXPENSES (Note 3.m): Number of Gain on (Loss) Gain Remeasurements Transportation, other services and cost of sales (Note 3.k) 954,512 982,295 983,074 8,522,428 Shares of Common Capital Retained Treasury Available-for- on of Defined Noncontrolling Total Selling, general and administrative expenses 182,903 177,436 182,622 1,633,062 Common Stock Stock Surplus Earnings Stock Sale Securities Hedges Benefit Plans Total Interests Equity BALANCE, MARCH 31, 2014 Total operating expenses 1,137,415 1,159,732 1,165,696 10,155,491 (APRIL 1, 2014, as previously reported) 196,799 ¥ 112,000 ¥ 53,500 ¥1,669,462 ¥ (103,155) ¥ 21,493 ¥ 5 ¥ 465 ¥1,753,771 ¥ 48,481 ¥1,802,252 Operating income 619,564 578,677 506,598 5,531,821 Cumulative effect of accounting change (Note 3.l) 17,450 17,450 (580) 16,869 OTHER INCOME (EXPENSES): BALANCE, APRIL 1, 2014 (as restated) 112,000 53,500 1,686,913 (103,155) 21,493 5 465 1,771,221 47,900 1,819,122 Interest and dividend income 2,030 2,790 2,287 18,125 Interest expense (Note 7) (60,285) (65,533) (72,272) (538,258) Net income attributable to owners of the parent 264,134 264,134 264,134 Other—net (Note 3.t) (1,279) (7,832) (31,915) (11,419) Dividends from surplus, ¥120 per share (23,640) (23,640) (23,640) Other expenses—net (59,534) (70,575) (101,900) (531,553) Purchase of treasury stock (0) (1) (1) (1) Net change in the year 17,169 (30) (8,657) 8,482 (4,130) 4,351 INCOME BEFORE INCOME TAXES 560,029 508,101 404,698 5,000,258

INCOME TAXES (Note 10): BALANCE, MARCH 31, 2015 196,799 112,000 53,500 1,927,407 (103,156) 38,663 (24) (8,192) 2,020,196 43,770 2,063,967 Current 160,669 165,344 135,387 1,434,544 Deferred 8,098 11,754 12,547 72,303 Net income attributable to owners of the parent 337,440 337,440 337,440 Total income taxes 168,768 177,098 147,934 1,506,857 Dividends from surplus, ¥120 per share (23,640) (23,640) (23,640) Purchase of treasury stock (0) (0) (0) (0) NET INCOME 391,261 331,003 256,763 3,493,401 Change in the parent's ownership interest due to NET (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS (1,652) (6,437) (7,370) (14,750) transactions with noncontrolling interests (1) (1) (1) NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT ¥ 392,913 ¥ 337,440 ¥ 264,134 $ 3,508,151 Net change in the year (16,436) 21 (1,183) (17,597) (7,601) (25,199)

Yen U.S. Dollars BALANCE, MARCH 31, 2016 196,799 112,000 53,499 2,241,207 (103,157) 22,227 (2) (9,375) 2,316,397 36,168 2,352,566 2017 2016 2015 2017 PER SHARE OF COMMON STOCK (Note 3.s): Basic net income ¥ 1,996.52 ¥ 1,714.64 ¥ 1,342.15 $ 17.83 Net income attributable to owners of the parent 392,913 392,913 392,913 Cash dividends applicable to the year 135.00 125.00 120.00 1.21 Dividends from surplus, ¥130 per share (25,610) (25,610) (25,610) See notes to consolidated financial statements. Purchase of treasury stock (0) (2) (2) (2) Change in the parent's ownership interest due to transactions with noncontrolling interests (0) (0) (0) Net change in the year 6,605 1 2,146 8,753 (1,891) 6,861

Consolidated Statement of Comprehensive Income BALANCE, MARCH 31, 2017 196,799 ¥ 112,000 ¥ 53,498 ¥ 2,608,511 ¥ (103,159) ¥ 28,832 ¥ (1) ¥ (7,229) ¥ 2,692,451 ¥ 34,277 ¥ 2,726,729

Thousands of U.S.Dollars (Note 2) Central Japan Railway Company and Consolidated Subsidiaries Year Ended March 31, 2017 Accumulated Other Thousands of Millions of Yen Comprehensive Income (Note 2) U.S. Dollars (Note 2) Unrealized 2017 2016 2015 2017 Gain on Deferred Remeasurements NET INCOME ¥ 391,261 ¥ 331,003 ¥ 256,763 $ 3,493,401 Common Capital Retained Treasury Available-for- Loss of Defined Noncontrolling Total Stock Surplus Earnings Stock Sale Securities on Hedges Benefit Plans Total Interests Equity OTHER COMPREHENSIVE INCOME (LOSS) (Note 15): BALANCE, MARCH 31, 2016 $1,000,000 $477,669 $20,010,776 $ (921,044) $198,455 $ (17) $(83,705) $20,682,116 $322,928 $21,005,053 Unrealized gain (loss) on available-for-sale securities 6,507 (16,719) 18,741 58,098 Deferred gain (loss) on hedges 2 42 (59) 17 Remeasurements of defined benefit plans 2,020 (1,898) (6,725) 18,035 Net income attributable to owners of the parent 3,508,151 3,508,151 3,508,151 Share of other comprehensive income in affiliates 63 (105) 201 562 Dividends from surplus, $1.16 per share (228,660) (228,660) (228,660) Purchase of treasury stock (17) (17) (17) Total other comprehensive income (loss) 8,595 (18,681) 12,157 76,741 Change in the parent's ownership interest due to COMPREHENSIVE INCOME ¥ 399,856 ¥ 312,322 ¥ 268,921 $ 3,570,142 transactions with noncontrolling interests (0) (0) (0) TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Net change in the year 58,973 8 19,160 78,151 (16,883) 61,258 Owners of the parent ¥ 401,667 ¥ 319,842 ¥ 272,616 $ 3,586,312 Noncontrolling interests (1,810) (7,520) (3,694) (16,160) BALANCE, MARCH 31, 2017 $1,000,000 $477,660 $23,290,276 $ (921,062) $ 257,428 $ (8) $(64,544) $24,039,741 $306,044 $24,345,794 See notes to consolidated financial statements. See notes to consolidated financial statements.

62 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 63 Financial Section

Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements

Central Japan Railway Company and Consolidated Subsidiaries Year Ended March 31, 2017 Central Japan Railway Company and Consolidated Subsidiaries Thousands of Millions of Yen U.S. Dollars (Note 2) (Note 2) 1.INCORPORATION OF CENTRAL JAPAN RAILWAY accepted in Japan, which are different in certain respects as to the 2017 2016 2015 2017 COMPANY application and disclosure requirements of International Financial OPERATING ACTIVITIES: Central Japan Railway Company (Tokai Ryokaku Tetsudo Reporting Standards. Income before income taxes ¥ 560,029 ¥ 508,101 ¥ 404,698 $ 5,000,258 Kabushiki Gaisha, the "Company") was incorporated on April In preparing these consolidated financial statements, certain Adjustments for: 1, 1987, as a private business company, pursuant to the Law reclassifications and rearrangements have been made to the Income taxes—paid (183,562) (133,119) (148,296) (1,638,946) for Japanese National Railways Restructuring enacted upon the consolidated financial statements issued domestically in order to Depreciation and amortization 225,386 242,369 271,568 2,012,375 resolution of the Japanese Diet. present them in a form which is more familiar to readers outside Equity in earnings of affiliates (363) (560) (339) (3,241) The business of the Japanese National Railways (the "JNR") Japan. In addition, certain reclassifications have been made in Proceeds from contribution for construction (2,641) (3,944) (2,221) (23,580) was succeeded by the following newly established organizations: the 2015 consolidated financial statements to conform to the Reduction of noncurrent assets related to contribution for construction 2,566 4,244 3,545 22,910 seven railway companies including the Company, the former classifications used in 2017 and 2016. Loss on retirement of noncurrent assets 13,433 8,769 10,001 119,937 Shinkansen Holding Corporation (a predecessor entity to the Railway Gain on sales of noncurrent assets—net (341) (1,322) (1,395) (3,044) Development Fund (1991–1997), which was subsequently succeeded The consolidated financial statements are stated in Japanese yen, Changes in assets and liabilities: by the Corporation for Advanced Transport and Technology the currency of the country in which the Company is incorporated Decrease in provision for large-scale (the "CATT") (1997–2003) and in turn by the Japan Railway and operates. The translations of Japanese yen amounts into renovation of the Shinkansen infrastructure (35,000) (35,000) (35,000) (312,500) U.S. dollar amounts are included solely for the convenience of (Increase) decrease in trade receivables (9,278) 5,743 8,052 (82,839) Construction, Transport and Technology Agency (the "JRTT")), the readers outside Japan and have been made at the rate of ¥112 to Decrease (increase) in inventories 1,946 1,421 (518) 17,375 former Railway Telecommunication Co., Ltd., Railway Information Increase in trade payables 10,409 1,324 6,654 92,937 Systems Co., Ltd., and the Railway Technical Research Institute $1, the approximate rate of exchange as of March 31, 2017. Such Increase (decrease) in advances received 434 1,644 (11,752) 3,875 (the "RTRI") which reorganized as a public interest corporation translations should not be construed as representations that the Increase in liability for retirement benefits 764 1,657 4,561 6,821 as of April 1, 2011. The JNR itself became the JNR Settlement Japanese yen amounts could be converted into U.S. dollars at that Other—net (3,216) 165 61,249 (28,714) Corporation (the "JNRSC"). All of the assets and liabilities of the or any other rate. Japanese yen figures of less than one million JNR were transferred to such organizations, including the JNRSC. yen are rounded down to the nearest million of yen, except for per Net cash provided by operating activities 580,565 601,495 570,806 5,183,616 Prior to December 1, 2001, the Law Concerning Passenger share information, and U.S. dollar figures of less than one thousand U.S. dollars are also rounded down to the nearest thousand of U.S. INVESTING ACTIVITIES: Railway Companies and the Japan Freight Railway Company (the Placement of time deposits (78,700) (162,900) (279,000) (702,678) "Law") required that authorization be obtained from the Minister dollars, except for per share information. Withdrawal of time deposits 110,700 244,900 215,010 988,392 of Land, Infrastructure, Transport and Tourism (the "Minister of Payments for money held in trust for the Chuo Shinkansen construction (1,500,000) (13,392,857) Transport") regarding fundamentals such as: (1) commencement 3.SUMMARY OF SIGNIFICANT ACCOUNTING Proceeds from cancellation of money held in trust of business other than railway and its related business, (2) the POLICIES for the Chuo Shinkansen construction 27,259 243,383 appointment or dismissal of representative directors and corporate a.Principles of Consolidation Purchases of marketable securities (555,100) (120,000) (50,000) (4,956,250) auditors, (3) the issuance of new shares and bonds, (4) long-term —The accompanying consolidated financial statements as of Proceeds from redemption of marketable securities 416,400 120,000 50,000 3,717,857 loans payable, (5) amendments to the Articles of Incorporation, March 31, 2017, include the accounts of the Company and its 29 Purchases of property, plant and equipment (305,151) (236,164) (197,469) (2,724,562) (6) operating plans, (7) sales of material assets, (8) appropriations (28 in 2016 and 29 in 2015) significant subsidiaries (together, the Proceeds from contribution for construction 6,022 4,909 4,929 53,767 of earnings and (9) merger or dissolution. As of December 1, "Companies"). Purchases of investment securities (19,600) (2,013) (203) (175,000) 2001, since the Law was revised and the Company was no longer On May 10, 2016, the Company established JR Central Financial Proceeds from sales of investment securities 33 5,262 434 294 in scope of the Law, the Company was not required to obtain the Management Co., Ltd., which became a consolidated subsidiary Other—net (11,410) (24,300) (7,670) (101,875) aforementioned authorizations. from the fiscal year ended March 31, 2017. SHIZUOKA TERMINAL Net cash used in investing activities (1,909,547) (170,305) (263,970) (17,049,526) On October 8, 1997, the Company's shares were listed on the HOTEL CO., LTD., a consolidated subsidiary, was excluded from Nagoya and Tokyo stock exchanges in Japan. The JNRSC, which the scope of consolidation due to a merger with JR Tokai Hotels Co., FINANCING ACTIVITIES: held all 2,240,000 of the Company's outstanding shares prior to Ltd., another consolidated subsidiary, on April 1, 2015. Net increase (decrease) in short-term loans payable 877 (5,712) 6,581 7,830 the listing, sold 1,353,929 shares in the initial public offerings. Under the control and influence concepts, those companies in Proceeds from long-term debt 140,288 215,141 259,600 1,252,571 Pursuant to the Law for Disposal of Debts and Liabilities of the which the Company, directly or indirectly, is able to exercise control Repayments of long-term debt (112,236) (322,464) (353,699) (1,002,107) JNRSC enacted in October of 1998, the Company's shares held by Proceeds from long-term debt for the Chuo Shinkansen construction 1,500,000 13,392,857 over operations are consolidated, and those companies over which Payments for long-term accounts payable—railway facilities (77,668) (98,163) (126,202) (693,464) the JNRSC were transferred to Japan Railway Construction Public the Company has the ability to exercise significant influence are Cash dividends paid (25,610) (23,640) (23,640) (228,660) Corporation (the "JRCPC"). On October 1, 2003, the CATT and the accounted for using the equity method. Cash dividends paid to noncontrolling interests (79) (79) (434) (705) JRCPC were fully integrated, pursuant to the Law of Japan Railway Investments in two affiliates are accounted for using the equity Other—net (381) (7,928) (14,483) (3,401) Construction, Transport and Technology enacted on October 1, 2003, method. Investments in the remaining unconsolidated subsidiaries and designated as the JRTT. In July 2005, the JRTT sold 600,000 and affiliates are stated at cost. If the equity method of accounting Net cash provided by (used in) financing activities 1,425,188 (242,847) (252,279) 12,724,892 shares of the Company. On April 5, 2006, the JRTT also sold its had been applied to the investments in these companies, the effect NET INCREASE IN CASH AND CASH EQUIVALENTS 96,207 188,343 54,556 858,991 remaining 286,071 shares of the Company. As a result of this sale, on the accompanying consolidated financial statements would not be all of the Company's shares held by the JRTT were sold. material. CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 318,352 130,002 75,445 2,842,428 The shares above do not reflect the effect of the hundred-for-one The difference between the cost of acquisition and the fair value CASH AND CASH EQUIVALENTS INCREASED stock split effective as of October 1, 2012. of the equity of an acquired subsidiary at the date of acquisition is BY MERGER WITH AN UNCONSOLIDATED SUBSIDIARY 0 7 0 fully amortized when incurred. 2.BASIS OF PRESENTATION OF CONSOLIDATED All significant intercompany balances and transactions have been CASH AND CASH EQUIVALENTS, END OF YEAR ¥ 414,559 ¥ 318,352 ¥ 130,002 $ 3,701,419 FINANCIAL STATEMENTS eliminated in consolidation. All material unrealized profit included The accompanying consolidated financial statements have been in assets resulting from transactions within the Companies is also ADDITIONAL CASH FLOW INFORMATION: prepared in accordance with the provisions set forth in the Japanese eliminated. Interest paid ¥ 58,812 ¥ 65,636 ¥ 72,683 $ 525,107 Financial Instruments and Exchange Act and its related accounting A certain consolidated subsidiary has adopted a fiscal year ending See notes to consolidated financial statements. regulations, and in accordance with accounting principles generally on February 28, which is different from that of the Company. The

64 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 65 Financial Section

necessary adjustments for preparing consolidated financial statements g.Property, Plant and Equipment remaining service period. differences between the carrying amounts and the tax bases of assets as of the Company's year-end were appropriately made, such as —Property, plant and equipment are stated at cost. Certain The Accounting Standards Board of Japan (the "ASBJ") issued ASBJ and liabilities. Deferred taxes are measured by applying currently adjustments for significant intercompany accounts and transactions contributions in aid for construction of railways and other property Statement No. 26, "Accounting Standard for Retirement Benefits" enacted tax laws to the temporary differences. which occur between the fiscal year-end of the subsidiary and that of are deducted directly from the cost of the related assets. The in May 2012 and ASBJ Guidance No. 25, "Guidance on Accounting The Companies applied ASBJ Guidance No. 26, "Guidance on the Company. accumulated contributions deducted from the cost of property, plant Standard for Retirement Benefits” in March 2015, which replaced the Recoverability of Deferred Tax Assets," effective April 1, 2016. There and equipment as of March 31, 2017 and 2016 amounted to ¥279,789 accounting standard for retirement benefits that had been issued by the was no impact from this for the year ended March 31, 2017. b.Business Combinations million ($2,498,116 thousand), and ¥277,750 million, respectively. Business Accounting Council in 1998 with an effective date of April 1, —Business combinations are accounted for using the purchase Depreciation is computed substantially by the declining-balance 2000, and the other related practical guidance, and were followed by p.Appropriations of Retained Earnings method. Acquisition-related costs, such as advisory fees or method over the estimated useful lives of the assets. Additional partial amendments from time to time through 2009. —Appropriations of retained earnings are reflected in the professional fees, are accounted for as expenses in the periods in depreciation is provided for the Shinkansen rolling stock based on (1) Under the revised accounting standard, actuarial gains and consolidated financial statements for the following year upon which the costs are incurred. If the initial accounting for a business kilometers traveled. losses and past service costs that are yet to be recognized in shareholders' approval. combination is incomplete by the end of the reporting period in The range of useful lives is principally from 2 to 60 years for profit or loss are recognized within equity (accumulated other which the business combination occurs, an acquirer shall report in buildings and structures, and from 2 to 20 years for machinery, comprehensive income), after adjusting for tax effects, and any q.Consumption Tax its financial statements provisional amounts for the items for which rolling stock and vehicles. resulting deficit or surplus is recognized as a liability (liability for —Unless otherwise stated, all figures are presented net of tax. the accounting is incomplete. During the measurement period, which Depreciation of certain railway structures, except for the retirement benefits) or asset (asset for retirement benefits). shall not exceed one year from the acquisition, the acquirer shall Shinkansen railway facilities, is computed by the replacement- (2) The revised accounting standard does not change how to r.Derivatives and Hedging Activities retrospectively adjust the provisional amounts recognized at the accounting method. recognize actuarial gains and losses and past service costs in —The Companies use derivative financial instruments mainly to acquisition date to reflect new information obtained about facts and profit or loss. Those amounts are recognized in profit or loss over manage exposure to market risks of changes in foreign currency circumstances that existed as of the acquisition date and that would h.Long-Lived Assets a certain period no longer than the expected average remaining exchange rates and in interest rates. Foreign currency swaps are utilized have affected the measurement of the amounts recognized as of that —The Companies review their long-lived assets for impairment service period of the employees. However, actuarial gains and by the Companies to reduce foreign currency exchange rate risks. date. Such adjustments shall be recognized as if the accounting for whenever events or changes in circumstances indicate the carrying losses and past service costs that arose in the current period and Interest rate swaps are utilized by the Companies to reduce interest the business combination had been completed at the acquisition date. amount of an asset or asset group may not be recoverable. An have not yet been recognized in profit or loss are included in other rate risks. Interest rate and currency swap contracts are utilized by A parent's ownership interest in a subsidiary might change if the impairment loss is recognized if the carrying amount of an asset or comprehensive income, and actuarial gains and losses and past the Company to reduce interest rate and foreign exchange risks. The parent purchases or sells ownership interests in its subsidiary. The asset group exceeds the sum of the undiscounted future cash flows service costs that were recognized in other comprehensive income Companies do not enter into derivatives for trading or speculative carrying amount of noncontrolling interest is adjusted to reflect the expected to result from the continued use and eventual disposition in prior periods and then recognized in profit or loss in the current purposes. change in the parent's ownership interest in its subsidiary while the of the asset or asset group. The impairment loss would be measured period, are treated as reclassification adjustments (see Note 15). Foreign currency swaps, which qualify for hedge accounting and parent retains its controlling interest in its subsidiary. Any difference as the amount by which the carrying amount of the asset exceeds its (3) The revised accounting standard also made certain amendments specific matching criteria, are not remeasured at market value, but the between the fair value of the consideration received or paid and the recoverable amount, which is the higher of the discounted cash flows relating to the method of attributing expected benefit to periods, hedged debt is translated at the contracted rates of the foreign currency amount by which the noncontrolling interest is adjusted is accounted from the continued use and eventual disposition of the asset or the the discount rate, and expected future salary increases. swaps. Interest rate swaps, which qualify for hedge accounting and for as capital surplus as long as the parent retains control over its net selling price at disposition. This accounting standard and the guidance for (1) and (2) above meet specific matching criteria, are not remeasured at market value, subsidiary. are effective for the end of annual periods beginning on or after April but the differential paid or received under the swap agreements is i.Software Costs 1, 2013, and for (3) above are effective for the beginning of annual recognized and included in interest expense. When interest and currency c.Cash Equivalents —Software costs are amortized by the straight-line method mainly periods beginning on or after April 1, 2014, or for the beginning of swap contracts meet the above criteria, hedged debt is translated at the —Cash equivalents are short-term investments that are readily over five years. annual periods beginning on or after April 1, 2015, subject to certain contracted rates, and the differential paid or received under the swap convertible into cash and that are exposed to insignificant risk of disclosure in March 2015, all with earlier application being permitted agreement is recognized and included in interest expense. changes in value. Cash equivalents include time deposits, certificates j.Deferred Charges from the beginning of annual periods beginning on or after April 1, of deposit, commercial paper and others, all of which mature or —Bond issuance costs are fully charged to income as incurred. 2013. However, no retrospective application of this accounting standard s.Per Share Information become due within three months of the date of acquisition. to the consolidated financial statements in prior periods is required. —Basic net income per share is computed by dividing net income k.Provision for Large-Scale Renovation of the Shinkansen The Companies applied the revised accounting standard and guidance attributable to owners of the parent available to common shareholders d.Money Held in Trust for the Chuo Shinkansen Construction and Infrastructure for retirement benefits for (1) and (2) above, effective March 31, 2014, by the weighted-average number of common shares outstanding for the Long-Term Debt for the Chuo Shiknkansen Construction —Provision for large-scale renovation of the Shinkansen and for (3) above, effective April 1, 2014. period. —The Company has received loans from the JRTT for promoting infrastructure is provided based on the Nationwide Shinkansen With respect to (3) above, the Companies changed the method of The net income attributable to owners of the parent available to the construction of the Chuo Shinkansen, and the money is placed in Railway Development Law. In accordance with the Nationwide attributing the expected benefit to periods from a straight-line basis to a common shareholders used in the computation for 2017, 2016 and 2015 the trust fund to segregate it from other money. Shinkansen Railway Development Law and Regulations, the benefit formula basis, and the method of determining the discount rate, was ¥392,913 million ($3,508,151 thousand), ¥337,440 million and Company reversed the provision in the amount of ¥35,000 million and recorded the effect above as of April 1, 2014, in retained earnings. ¥264,134 million, respectively. The average number of common shares e.Inventories ($312,500 thousand) for the year ended March 31, 2017 and ¥35,000 As a result, retained earnings as of April 1, 2014, increased by ¥17,450 used in the computation for 2017, 2016 and 2015 was 196,799,182 —Inventories are stated at the lower of cost, principally million for the years ended March 31, 2016 and 2015. million. The effect of this change on the consolidated statement of shares, 196,799,236 shares and 196,799,298 shares, respectively. determined by the retail method for merchandise, by the specific income for the year ended March 31, 2015, was immaterial. Diluted net income per share is not presented in the accompanying identification method for land and buildings held for sale in lots, l.Retirement and Pension Plans consolidated financial statements as the Companies do not have any by the specific identification method for work in process and by —The Company and 27 consolidated subsidiaries have unfunded m.Research and Development Costs dilutive securities. the moving-average cost method for materials and supplies, or net retirement plans covering substantially all of their employees. Six —Research and development costs are charged to income as incurred. Cash dividends per share presented in the accompanying consolidated selling value. consolidated subsidiaries have noncontributory defined benefit Research and development costs charged to income were ¥66,609 statement of income are dividends applicable to the respective years, pension plans and one consolidated subsidiary has a defined million ($594,723 thousand), ¥75,199 million and ¥107,370 million for including dividends to be paid after the end of the year. f.Marketable and Investment Securities contribution pension plan, some of those subsidiaries also have the years ended March 31, 2017, 2016 and 2015, respectively. —All marketable and investment securities are classified and unfunded retirement plans. Some of the subsidiaries adopt the accounted for, depending on management's intent, as available- simplified accounting method for calculation of liability for n.Leases t.Change in Presentation (Consolidated Statement of Income) for-sale securities, which are principally comprised of investment retirement benefits and retirement benefit expenses. —Lease assets of finance leases that were not deemed to transfer —Prior to April 1, 2015, the loss on redemption of bonds was securities, and are reported at fair value, with unrealized gain and ownership of the leased property are depreciated and amortized by the disclosed separately in the other income (expenses) section of the loss, net of applicable taxes, reported in a separate component of Liability for retirement benefits is mainly calculated based on the straight-line method over the lease period. consolidated statement of income. Since the year ended March 31, equity. projected benefit obligations and plan assets at the balance sheet 2016, the materiality of the amount decreased, and such amount is Nonmarketable available-for-sale securities are stated at cost date. The projected benefit obligations are attributed to periods on a o.Income Taxes included in the other-net in the other income (expenses) section. The determined by the moving-average cost method. For other-than- benefit formula basis. Actuarial gains and losses are amortized on a —The provision for income taxes is computed based on the pretax amounts of loss on redemption of bonds separately disclosed for the temporary declines in fair value, investment securities are reduced to straight-line basis mainly over five years, which is within the average income included in the consolidated statement of income. The asset years ended March 31, 2015 were ¥13,676 million. net realizable value by a charge to income. remaining service period. Prior service costs are amortized on a and liability approach is used to recognize deferred tax assets and straight-line basis mainly over five years, which is within the average liabilities for the expected future tax consequences of temporary

66 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 67 Financial Section

u.Accounting Changes and Error Corrections specific transitional provisions. (2) Changes in Presentation—When the 5.SHORT‍TERM LOANS PAYABLE AND LONG‍TERM DEBT —In December 2009, the ASBJ issued ASBJ Statement No. 24, presentation of financial statements is changed, prior-period financial The interest rates applicable to short‍term loans payable were 0.12% as of March 31, 2017, 0.16% as of March 31, 2016, and 0.36% as of March 31, 2015. Long-term debt as of March 31, 2017 and 2016, consisted of the following: "Accounting Standard for Accounting Changes and Error Corrections" statements are reclassified in accordance with the new presentation. (3) and ASBJ Guidance No. 24, "Guidance on Accounting Standard for Changes in Accounting Estimates—A change in an accounting estimate Thousands of Millions of Yen U.S. Dollars Accounting Changes and Error Corrections." Accounting treatments is accounted for in the period of the change if the change affects that 2017 2016 2017 under this standard and guidance are as follows: (1) Changes in period only, and is accounted for prospectively if the change affects The Company Accounting Policies—When a new accounting policy is applied both the period of the change and future periods. (4) Corrections of Unsecured 2.39% bonds due 2026 ¥ 29,789 ¥ 29,788 $ 265,793 following revision of an accounting standard, the new policy is applied Prior-Period Errors—When an error in prior-period financial statements Unsecured 2.31% bonds due 2027 19,984 19,982 178,428 retrospectively unless the revised accounting standard includes specific is discovered, those statements are restated. Unsecured 2.3% bonds due 2027 14,994 14,993 133,875 Unsecured 2.39% bonds due 2028 19,986 19,985 178,446 transitional provisions, in which case the entity shall comply with the Unsecured 2.391% bonds due 2028 30,000 30,000 267,857 Unsecured 2.646% bonds due 2038 10,000 10,000 89,285 Unsecured 2.166% bonds due 2029 30,000 30,000 267,857 Unsecured 2.312% bonds due 2029 30,000 30,000 267,857 Unsecured 2.556% bonds due 2039 10,000 10,000 89,285 4.MAKETABLE AND INVESTMENT SECURITIES Unsecured 2.321% bonds due 2029 30,000 30,000 267,857 Marketable securities as of March 31, 2017 consisted of certificates of deposit. Information regarding investment securities with readily determinable fair values Unsecured 2.157% bonds due 2029 40,000 40,000 357,142 classified as available-for-sale as of March 31, 2017 and 2016, was as follows: Unsecured 2.375% bonds due 2039 10,000 10,000 89,285 Millions of Yen Unsecured 2.212% bonds due 2030 30,000 30,000 267,857 Unsecured 2.111% bonds due 2030 20,000 20,000 178,571 2017 Unsecured 1.797% bonds due 2030 10,000 10,000 89,285 Unrealized Unrealized Fair Unsecured 2.083% bonds due 2031 20,000 20,000 178,571 Cost Gain Loss Value Unsecured 1.895% bonds due 2031 10,000 10,000 89,285 Equity securities ¥ 81,778 ¥ 43,271 ¥ 2,128 ¥ 122,921 Unsecured 1.824% bonds due 2032 10,000 10,000 89,285 Unsecured 1.725% bonds due 2033 10,000 10,000 89,285 Trust fund investment and other 276 61 337 Unsecured 1.807% bonds due 2033 15,000 15,000 133,928 Total ¥ 82,054 ¥ 43,333 ¥ 2,128 ¥ 123,258 Unsecured 1.786% bonds due 2033 15,000 15,000 133,928 Unsecured 1.629% bonds due 2033 10,000 10,000 89,285 Millions of Yen Unsecured 1.623% bonds due 2034 15,000 15,000 133,928 Unsecured 1.584% bonds due 2034 15,000 15,000 133,928 2016 Unsecured 1.502% bonds due 2034 20,000 20,000 178,571 Unrealized Unrealized Fair Unsecured 1.309% bonds due 2032 15,000 15,000 133,928 Cost Gain Loss Value Unsecured 1.917% bonds due 2044 10,000 10,000 89,285 Unsecured 1.362% bonds due 2034 20,000 20,000 178,571 Equity securities ¥ 62,188 ¥ 35,842 ¥ 3,151 ¥ 94,879 Unsecured 1.014% bonds due 2035 20,000 20,000 178,571 Trust fund investment and other 276 45 321 Unsecured 1.685% bonds due 2045 10,000 10,000 89,285 Total ¥ 62,464 ¥ 35,887 ¥ 3,151 ¥ 95,200 Unsecured 1.196% bonds due 2035 15,000 15,000 133,928 Unsecured 1.297% bonds due 2035 15,000 15,000 133,928 Unsecured 1.21% bonds due 2035 15,000 15,000 133,928 Thousands of U.S. Dollars Unsecured 1.018% bonds due 2036 15,000 15,000 133,928 2017 Unsecured 0.421% bonds due 2036 10,000 89,285 U.S. dollar 4.25% bonds due 2045 issued abroad 36,397 36,375 324,973 Unrealized Unrealized Fair U.S. dollar 2.8% bonds due 2022 issued abroad 68,097 608,008 Cost Gain Loss Value Unsecured loans from Japanese banks and others, with interest rates ranging from Equity securities $ 730,160 $ 386,348 $ 19,000 $ 1,097,508 0.61% to 4.8% (2017), from 0.71% to 5.6% (2016), due 2016 to 2045 590,982 637,962 5,276,625 Subsidiaries Trust fund investment and other 2,464 544 3,008 Unsecured and secured loans from Japanese banks and others, with interest rates Total $ 732,625 $ 386,901 $ 19,000 $ 1,100,517 ranging from 0.53% to 2.8% (2017), from 0.53% to 3.15% (2016), due 2016 to 2022 26,373 29,438 235,473 Total 1,341,606 1,313,527 11,978,625 The information for available-for-sale securities whose fair value is not readily determinable as of March 31, 2017 and 2016, is disclosed in Note 11. Less current portion (100,574) (112,236) (897,982) The impairment losses on investments in an unconsolidated subsidiary for the years ended March 31, 2016 and 2015, were ¥19,061 million and ¥5,648 million, respectively. The impairment loss on investment securities for the year ended March 31, 2017 was not presented as the effect was immaterial. Long-term debt, less current portion ¥ 1,241,031 ¥ 1,201,290 $ 11,080,633

Annual maturities of long‍term debt outstanding at the principal amounts as of March 31, 2017, were as follows: Millions of Yen Thousands of Year Ending March 31 U.S. Dollars 2018 ¥ 100,574 $ 897,982 2019 82,047 732,562 2020 110,493 986,544 2021 58,369 521,151 2022 130,359 1,163,919 Thereafter 860,489 7,682,937 Total ¥ 1,342,331 $ 11,985,098

68 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 69 Financial Section

The Company has entrusted cash for the repayment of a portion of its outstanding bonds based on debt assumption agreements with financial institutions; 6.LONG‍TERM DEBT FOR THE CHUO SHINKANSEN CONSTRUCTION however, the Company is not released from the primary responsibility for the liability by these agreements. The outstanding bonds covered by these Long-term debt for the Chuo Shinkansen construction is borrowing from the JRTT based on the application form for borrowing funds in total of planned agreements as of March 31, 2017 and 2016, were as follows: ¥3,000,000 million ($26,785,000 thousand) which the Company submitted to the JRTT in accordance with the JRTT Act for promoting the construction of Thousands of the Chuo Shinkansen. Millions of Yen U.S. Dollars Annual maturities of long-term debt for the Chuo Shinkansen construction as of March 31, 2017, were as follows: 2017 2016 2017 Millions of Yen Thousands of Year Ending March 31 U.S. Dollars Secured 3.95% bonds due 2016 ¥ 29,000 2018 Secured 2.825% bonds due 2017 ¥ 49,800 49,800 $ 444,642 2019 Secured 2.18% bonds due 2018 29,900 29,900 266,964 2020 Secured 2.6% bonds due 2020 49,800 49,800 444,642 2021 Unsecured 2.39% bonds due 2022 18,995 18,995 169,598 2022 Unsecured 2.2% bonds due 2022 18,200 18,200 162,500 Thereafter ¥ 1,500,000 $ 13,392,857 Unsecured 1.74% bonds due 2022 20,000 20,000 178,571 Total ¥ 1,500,000 $ 13,392,857 Unsecured 1.42% bonds due 2017 10,000 10,000 89,285 Unsecured 1.15% bonds due 2022 25,000 25,000 223,214 Unsecured 1.31% bonds due 2033 10,000 10,000 89,285 7.LONG-TERM ACCOUNTS PAYABLE—RAILWAY FACILITIES Long-term accounts payable—railway facilities were incurred in the amount of ¥5,095,661 million in 1991 for the purchase of the Shinkansen railway Unsecured 2.015% bonds due 2023 9,000 9,000 80,357 ground facilities and serially repaid to the JRTT. Payment terms are 25.5 years for ¥4,494,466 million and 60 years for ¥601,195 million. Payment terms and Unsecured 2.2% bonds due 2024 9,900 9,900 88,392 interest rates of the payables were determined based on the agreements on the purchase of the Shinkansen railway ground facilities. Unsecured 2.19% bonds due 2019 9,900 9,900 88,392 Based on legal defeasance agreements with special purpose entities, the Company had transferred the debt repayment obligations for certain long-term Unsecured 1.875% bonds due 2019 20,000 20,000 178,571 accounts payable—railway facilities to the special purpose entities, and had provided the special purpose entities with Japanese national government bonds Unsecured 2.21% bonds due 2024 9,650 9,650 86,160 or cash for the payments of principal and interest on the long-term accounts payable—railway facilities. As a result of these transactions, the balance of long- term accounts payable—railway facilities was reduced by ¥79,632 million as of March 31, 2016. Unsecured 1.775% bonds due 2020 20,000 20,000 178,571 Unsecured 1.77% bonds due 2017 20,000 20,000 178,571 Annual maturities of long-term accounts payable—railway facilities as of March 31, 2017, were as follows: Unsecured 2.14% bonds due 2018 18,400 18,400 164,285 Millions of Yen Thousands of Unsecured 2.405% bonds due 2026 9,900 9,900 88,392 Year Ending March 31 U.S. Dollars Unsecured 2% bonds due 2016 30,000 2018 ¥ 4,824 $ 43,071 Unsecured 2.04% bonds due 2018 18,800 18,800 167,857 2019 5,122 45,732 Unsecured 1.88% bonds due 2016 20,000 2020 5,440 48,571 Unsecured 1.78% bonds due 2017 20,000 20,000 178,571 2021 5,779 51,598 Unsecured 1.78% bonds due 2017 20,000 20,000 178,571 2022 6,140 54,821 Unsecured 1.75% bonds due 2017 20,000 20,000 178,571 Thereafter 526,545 4,701,294 Unsecured 1.69% bonds due 2018 10,000 10,000 89,285 Total ¥ 553,853 $ 4,945,116 Unsecured 1.79% bonds due 2020 19,900 19,900 177,678 Interest expense on the aforementioned long-term accounts payable—railway facilities amounted to ¥37,523 million ($335,026 thousand), ¥41,718 million Unsecured 1.83% bonds due 2018 10,000 10,000 89,285 and ¥46,784 million for the years ended March 31, 2017, 2016 and 2015, respectively. Unsecured 1.557% bonds due 2019 19,800 19,800 176,785 Unsecured 1.667% bonds due 2019 10,000 10,000 89,285 8.RETIREMENT AND PENSION PLANS Unsecured 1.472% bonds due 2020 14,100 14,100 125,892 Employees whose service with the Company and consolidated subsidiaries is terminated are entitled to retirement and pension benefits determined by Total ¥ 521,045 ¥ 600,045 $ 4,652,187 reference to accumulated points during their employment calculated by their position or basic rates of pay at the time of termination, length of service and other conditions under which the termination occurs. Some of the subsidiaries adopt the simplified accounting method for calculation of liability of The aforementioned bonds for which the Company entered into debt assumption agreements have been derecognized in the consolidated balance sheet and retirement benefits and retirement benefit expenses. disclosed as contingent liabilities (see Note 14). The Company has credit commitments from banks. Total unused credit available to the Company as of March 31, 2017, was ¥100,000 million a.The changes in defined benefit obligation for the years ended March 31, 2017, 2016 and 2015, were as follows: ($892,857 thousand). Thousands of All assets of the Company were pledged for the above secured bonds of ¥129,500 million ($1,156,250 thousand), as an enterprise mortgage, which gives Millions of Yen U.S. Dollars the holder thereof a security interest in all assets junior to that of other present or future secured creditors, but senior to that of general creditors. 2017 2016 2015 2017 The carrying amounts of assets pledged as collateral for secured long-term debt of a consolidated subsidiary of ¥24,173 million ($215,830 thousand),

including current portion of ¥5,000 million ($44,642 thousand), as of March 31, 2017, were as follows: Balance at beginning of year (as previously reported) ¥ 228,531 ¥ 226,219 ¥ 230,925 $ 2,040,455 Cumulative effect of accounting change (25,696) Millions of Yen Thousands of Balance at beginning of year (as restated) 228,531 226,219 205,228 2,040,455 U.S. Dollars Current service cost 15,510 15,065 13,227 138,482 Buildings and structures—net of accumulated depreciation ¥ 3,913 $ 34,937 Interest cost 934 1,099 2,900 8,339 Land 11,975 106,919 Actuarial losses 1,451 4,323 19,841 12,955 Benefits paid (20,009) (18,232) (15,068) (178,651) 11,740 104,821 Investment securities Prior service cost (66) Total ¥ 27,629 $ 246,687 Others 121 90 Balance at end of year ¥ 226,417 ¥ 228,531 ¥ 226,219 $ 2,021,580 The retirement benefit expenses recognized by the consolidated subsidiaries, which adopt the simplified accounting method, are included in the current service cost. b.The changes in plan assets for the years ended March 31, 2017, 2016 and 2015, were as follows: Thousands of Millions of Yen U.S. Dollars 2017 2016 2015 2017 Balance at beginning of year ¥ 24,920 ¥ 26,647 ¥ 20,231 $ 222,500 Expected return on plan assets 322 321 290 2,875 Actuarial (losses) gains (411) (2,124) 5,763 (3,669) Contributions from the employer 1,100 997 1,124 9,821 Benefits paid (815) (921) (854) (7,276) Others 90 Balance at end of year ¥ 25,117 ¥ 24,920 ¥ 26,647 $ 224,258

70 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 71 Financial Section

c.Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan assets as of March 31, 9.EQUITY b.Increases/Decreases and Transfer of Common Stock, Reserve and 2017 and 2016, was as follows: Japanese companies are subject to the Companies Act of Japan (the Surplus Thousands of "Companies Act"). The significant provisions in the Companies Act that The Companies Act requires that an amount equal to 10% of dividends Millions of Yen affect financial and accounting matters are summarized below: must be appropriated as a legal reserve (a component of retained earnings) U.S. Dollars or as additional paid-in capital (a component of capital surplus), depending 2017 2016 2017 a.Dividends on the equity account charged upon the payment of such dividends, until Under the Companies Act, companies can pay dividends at any time the aggregate amount of legal reserve and additional paid-in capital equals Funded defined benefit obligation ¥ 23,204 ¥ 23,067 $ 207,178 to 25% of the common stock. The Company has already appropriated Plan assets (25,117) (24,920) (224,258) during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. Additionally, for companies that meet certain defined amount as a legal reserve or additional paid-in capital. Under the Total (1,912) (1,853) (17,071) criteria including (1) having a Board of Directors, (2) having independent Companies Act, the total amount of additional paid-in capital and legal Unfunded defined benefit obligation 203,213 205,463 1,814,401 auditors, (3) having an Audit & Supervisory Board, and (4) the term of reserve may be reversed without limitation. The Companies Act also Net liability arising from defined benefit obligation 201,300 203,610 1,797,321 service of the directors being prescribed as one year rather than the normal provides that common stock, legal reserve, additional paid-in capital, other Liability for retirement benefits 205,423 207,625 1,834,133 two-year term by its articles of incorporation, the Board of Directors may capital surplus and retained earnings-unappropriated can be transferred Asset for retirement benefits (4,123) (4,015) (36,812) declare dividends (except for dividends-in-kind) at any time during the among the accounts within equity under certain conditions upon resolution Net liability arising from defined benefit obligation ¥ 201,300 ¥ 203,610 $ 1,797,321 fiscal year if the Company has prescribed so in its articles of incorporation. of the shareholders. However, the Company does not meet all the above criteria. c.Treasury Stock and Treasury Stock Acquisition Rights The Companies Act permits companies to distribute dividends-in-kind The Companies Act also provides for companies to purchase treasury d.The components of net periodic benefit costs for the years ended March 31, 2017, 2016 and 2015, were as follows: (noncash assets) to shareholders subject to a certain limitation and additional stock and dispose of such treasury stock by resolution of the Board of Thousands of requirements. Directors. The amount of treasury stock purchased cannot exceed the Millions of Yen Semiannual interim dividends may also be paid once a year upon amount available for distribution to the shareholders which is determined by U.S. Dollars resolution by the Board of Directors if the articles of incorporation of the a specific formula. 2017 2016 2015 2017 company so stipulate. The Companies Act provides certain limitations Under the Companies Act, stock acquisition rights are presented as a Service cost ¥ 15,510 ¥ 15,065 ¥ 13,227 $ 138,482 on the amounts available for dividends or the purchase of treasury stock. separate component of equity. The limitation is defined as the amount available for distribution to the The Companies Act also provides that companies can purchase both Interest cost 934 1,099 2,900 8,339 treasury stock acquisition rights and treasury stock. Such treasury stock Expected return on plan assets (322) (321) (290) (2,875) shareholders, but the amount of equity after dividends must be maintained at no less than ¥3 million. acquisition rights are presented as a separate component of equity or Recognized actuarial losses 4,695 3,840 3,742 41,919 deducted directly from stock acquisition rights. Amortization of prior service cost 33 36 79 294 Amortization of transitional obligation 199 10.INCOME TAXES

Net periodic benefit costs ¥ 20,851 ¥ 19,721 ¥ 19,859 $ 186,169 The Companies are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate The retirement benefit expenses recognized by the consolidated subsidiaries, which adopt the simplified accounting method, are included in service cost. of approximately 30.6% for the year ended March 31, 2017, 32.7% for the year ended March 31, 2016, and 35.2% for the year ended March 31, 2015. e.Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans for the years ended March 31, 2017, 2016 and 2015, were as follows: The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities as of March 31, 2017 and 2016, were as follows: Thousands of Millions of Yen U.S. Dollars Thousands of Millions of Yen U.S. Dollars 2017 2016 2015 2017 2017 2016 2017 Actuarial losses (gains) ¥ 2,832 ¥ (2,607) ¥ (10.334) $ 25,285 Prior service cost 33 102 79 294 Deferred tax assets:

Transitional obligation 199 Depreciation and amortization ¥ 70,090 ¥ 68,936 $ 625,803 Total ¥ 2,866 ¥ (2,504) ¥ (10,055) $ 25,589 Liability for retirement benefits 64,762 64,403 578,232 Software 9,812 9,688 87,607 Loss on write down of investment securities 9,715 9,782 86,741 f.Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of March 31, 2017 and 2016, were as follows: Provision for bonuses 8,619 8,604 76,955 Unrealized profit on property, plant and equipment 7,600 7,420 67,857 Thousands of Millions of Yen Accrued railway usage charges 3,257 3,491 29,080 U.S. Dollars Other 37,481 43,264 334,651 2017 2016 2017 Total 211,339 215,590 1,886,955 Unrecognized actuarial losse ¥ (8,006) ¥ (10,839) $ (71,482) Less valuation allowance (32,515) (29,337) (290,312) Unrecognized prior service cost 19 (13) 169 Deferred tax assets 178,823 186,252 1,596,633 Total ¥ (7,987) ¥ (10,853) $ (71,312) Deferred tax liabilities: g.Plan assets Unrealized gain on available-for-sale securities 12,104 10,144 108,071 (1) Components of plan assets Deferred gain on transfer of certain fixed assets 4,911 4,923 43,848 Plan assets as of March 31, 2017 and 2016, consisted of the following: Other 6,764 5,237 60,392 Deferred tax liabilities 23,780 20,306 212,321 2017 2016 Equities 54% 59% Net deferred tax assets ¥ 155,043 ¥ 165,946 $ 1,384,312 General security account 28 26 Bonds 12 11 Net deferred tax assets as of March 31, 2017 and 2016, were reflected in the accompanying consolidated balance sheets under the following captions: Others 6 4 Total 100% 100% Thousands of Millions of Yen U.S. Dollars The employee retirement benefit trust for the Companies’ contributory pension plans accounted for 46% and 47% of total plan assets for the years ended March 31, 2017 and 2016, respectively. 2017 2016 2017 Current assets ¥ 18,787 ¥ 24,222 $ 167,741 (2) Method of determining the expected rate of return on plan assets Investments and other assets 144,580 148,760 1,290,892 The expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the future from the various components of the plan assets. Current liabilities—other (11) Noncurrent liabilities—other (8,324) (7,024) (74,321) h.Assumptions used for the years ended March 31, 2017, 2016 and 2015, were set forth as follows: Net deferred tax assets ¥ 155,043 ¥ 165,946 $ 1,384,312 2017 2016 2015 Reconciliations between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statements of Discount rate Mainly 0.4% Mainly 0.4% Mainly 0.4% income for the years ended March 31, 2016, were as follows: Expected rate of return on plan assets 1.2% to 2.0% 1.2% to 2.0% 1.2% to 2.0% 2016 i.Defined Contribution Plan Total contribution by the Companies for the defined contribution plan was ¥121 million ($1,080 thousand) for the year ended March 31, 2017, ¥117 Normal effective statutory tax rate 32.7% million for the year ended March 31, 2016, and ¥113 million for the year ended March 31, 2015. Increase in valuation allowance 1.6 Effect of tax rate reduction 1.6 Deduction of R&D promotion tax system (1.4) Other—net 0.3 Actual effective tax rate 34.9%

72 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 73 Financial Section

Since the difference between the normal effective statutory tax rate and the actual effective tax rate was not significant, reconciliations were not presented Millions of Yen for the years ended March 31, 2017 and 2015. Carrying Amount Fair Value Unrealized Gain/(Loss) New tax reform laws enacted in 2016 in Japan changed the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2016 and March 31, 2016 2017, from approximately 31.9% to 30.6% and the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2018, to approximately Cash and cash equivalents ¥ 318,352 ¥ 318,352 30.3%. The effect of these changes was to decrease deferred tax assets, net of deferred tax liabilities, in the consolidated balance sheet as of March 31, 2016, Time deposits 32,000 32,000 by ¥7,794 million and to increase income taxes - deferred in the consolidated statement of income for the year then ended by ¥8,162 million. Trade receivables 85,524 85,524 New tax reform laws enacted in 2015 in Japan changed the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2015, from approximately 35.2% to 32.7% and the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2016, to approximately 31.9%. The Investment securities 95,200 95,200 effect of these changes was to decrease deferred tax assets, net of deferred tax liabilities, in the consolidated balance sheet as of March 31, 2015, by ¥15,736 Total ¥ 531,077 ¥ 531,077 million and to increase income taxes - deferred in the consolidated statement of income for the year then ended by ¥17,296 million. Short-term loans payable ¥ (24,800) ¥ (24,800) 11.FINANCIAL INSTRUMENTS AND RELATED amount of ¥5,095,661 million in 1991 for the purchase of the Shinkansen Trade payables (179,047) (179,047) DISCLOSURES railway ground facilities and serially repaid to the JRTT. Payment terms Income taxes payable (105,953) (105,953) are 25.5 years for ¥4,494,466 million and 60 years for ¥601,195 million. a.Policy for Financial Instruments Long-term debt (1,313,527) (1,482,643) ¥ (169,115) The Companies use financial instruments, mainly debt including bank Payment terms and interest rates of the payables were determined based on ( loans, bonds and others, based on their capital financing plan. Cash the agreements on the purchase of the Shinkansen railway ground facilities. Long-term accounts payable—railway facilities (631,521) (1,327,184) 695,662) surpluses, if any, are invested in low risk financial assets, such as bank Derivatives include foreign currency swaps, which are used to manage Total ¥ (2,254,851) ¥ (3,119,629) ¥ (864,778) deposits. exposure to market risks of changes in foreign exchange rates of foreign Derivatives are used, not for speculative purposes, but to manage currency denominated long-term debt, and interest rate swaps, which are Thousands of U.S. Dollars used to manage exposure to market risks of changes in interest rates of long- exposure to financial risks as described in Note 12. March 31, 2017 Carrying Amount Fair Value Unrealized Gain/(Loss) term debt. Please see Note 12 for details on derivatives.

b.Nature and Extent of Risks Arising from Financial Instruments Cash and cash equivalents $ 3,701,419 $ 3,701,419 Money held in trust for the Chuo Shinkansen construction is set to c.Risk Management for Financial Instruments Money held in trust for the Chuo Shinkansen construction 13,149,473 13,149,473 segregate loans from the JRTT from other money for promoting the Credit Risk Management Marketable securities 1,238,392 1,238,392 Credit risk is the risk of economic loss arising from a counterparty's construction of the Chuo Shinkansen, and the trust property is composed of Trade receivables 846,214 846,214 a deposit. failure to repay or service debt according to the contractual terms. The Trade receivables are exposed to customer credit risk. Investment Companies manage their credit risk from trade receivables by monitoring Investment securities 1,100,517 1,100,517 securities, mainly equity instruments of customers and suppliers of the of payment terms and balances of major customers by each business Total $ 20,036,026 $ 20,036,026 Companies, are exposed to the risk of market price fluctuations. administration department to identify the default risk of customers in the early stage. Payment terms of trade payables and income taxes payable are within one Short-term loans payable $ (228,241) $ (228,241) year. Market Risk Management Short-term bank loans are used to fund the Companies’ ongoing Investment securities are managed by monitoring market values and Trade payables (1,788,375) (1,788,375) operations. Bonds and long-term loans are used for renewal of long-term financial position of issuers on a regular basis. Income taxes payable (774,892) (774,892) debt and capital spending. Please see Note 5 for a maturity analysis for Foreign currency swaps are used to manage exposure to market risks of Long-term debt (11,978,625) (13,307,580) $ (1,328,946) changes in exchange rates of foreign currency long-term debt. Interest rate bank loans and bonds payable. Long-term debt for the Chuo Shinkansen construction (13,392,857) (12,680,919) 711,928 Long-term debt for the Chuo Shinkansen construction is borrowing from swaps are used to manage exposure to market risks of changes in interest the JRTT based on the application form for borrowing funds in total of rates of long-term debt. Long-term accounts payable—railway facilities (4,945,116) (10,579,169) (5,634,044) planned ¥3,000,000 million ($26,785,000 thousand) which the Company Total $ (33,108,125) $ (39,359,205) $ (6,251,071) submitted to the JRTT in accordance with the Order for Enforcement of the d.Fair Values of Financial Instruments Act on the Japan Railway Construction, Transport and Technology Agency Fair values of financial instruments are based on quoted prices in Cash and Cash Equivalents and Time Deposits and Marketable Domestic bonds are measured at the quoted market prices. Fair values of active markets. If a quoted price is not available, other rational valuation Securities foreign currency bonds are measured in combination with foreign currency (the "JRTT Act") for promoting the construction of the Chuo Shinkansen. The carrying values of cash and cash equivalents, time deposits and swaps, which qualify for hedge accounting and meet specific matching Long-term accounts payable—railway facilities were incurred in the techniques are used instead. Also, please see Note 12 for the details of fair marketable securities approximate fair value because of their short criteria and are accounted for by the method stated in the Note 3.r, by value for derivatives. maturities. discounting the aggregated values of the bonds in combination with foreign Money Held in Trust for the Chuo Shinkansen Construction currency swaps at the Companies' assumed bond issuing rate. (1) Fair Value of Financial Instruments The fair value of money held in trust for the Chuo Shinkansen Fair values of long-term debt with floating interest rates are measured in construction is determined based on financial assets which compose the combination with interest rate swaps or interest rate and currency swaps, Millions of Yen trust property. Their carrying values approximate fair value because the trust which qualify for hedge accounting and are accounted for by the method Carrying Amount Fair Value Unrealized Gain/(Loss) property consists of a deposit. stated in the Note 3.r, by discounting the aggregated values of the principals March 31, 2017 Investment Securities and interests at the Companies' assumed borrowing rate. Cash and cash equivalents ¥ 414,559 ¥ 414,559 The fair values of investment securities are measured at the quoted The fair values of other debt and long-term debt for the Chuo Shinkansen market price of the stock exchange. Fair value information for investment construction are determined by discounting the cash flows related to the debt Money held in trust for the Chuo Shinkansen construction 1,472,741 1,472,741 securities by classification is included in Note 4. at the Companies assumed bond issuing rate or corporate borrowing rate. Marketable securities 138,700 138,700 Trade Receivables and Payables, Short-Term Loans Payable and Long-Term Accounts Payable—Railway Facilities Including Current Income Taxes Payable Portion Trade receivables 94,776 94,776 The carrying values of trade receivables and payables, short-term loans Considering the legal characteristics, all terms and conditions of accounts Investment securities 123,258 123,258 payable and income taxes payable approximate fair value because of their payable-railway facilities are stipulated in the special law, and as no active Total short maturities. market exists for this type of obligation, the fair values of these payables are ¥ 2,244,035 ¥ 2,244,035 Long-Term Debt Including Current Portion and Long-Term Debt for determined by discounting the cash flow estimated for each due date at the the Chuo Shinkansen Construction Company’s assumed bond issuing rate. Short-term loans payable ¥ (25,563) ¥ (25,563) Trade payables (200,298) (200,298) (2) Financial Instruments Whose Fair Value Cannot be Reliably Determined Income taxes payable (86,788) (86,788) Carrying Amount Long-term debt (1,341,606) (1,490,449) ¥ (148,842) March 31, 2017 Millions of Yen Thousands of U.S. Dollars Long-term debt for the Chuo Shinkansen construction (1,500,000) (1,420,263) 79,736 Investments in equity instruments that do not have a quoted market price in an active market: Long-term accounts payable—railway facilities (553,853) (1,184,867) (631,013) Investment securities ¥ 14,452 $ 129,035 Total ¥ (3,708,110) ¥ (4,408,231) ¥ (700,120) Investments in unconsolidated subsidiaries and affiliates 12,757 113,901 Total ¥ 27,210 $ 242,946

Carrying Amount March 31, 2016 Millions of Yen Investments in equity instruments that do not have a quoted market price in an active market: Investment securities ¥ 14,529 Investments in unconsolidated subsidiaries and affiliates 12,275 Total ¥ 26,805

74 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 75 Financial Section

e.Maturity Analysis for Financial Assets and Securities with Contractual Maturities 13.LEASES As a lessee, the minimum rental commitments under noncancelable operating lease as of March 31, 2017 and 2016 were due as follows. Millions of Yen Thousands of Due after One Year Due after Five Millions of Yen U.S. Dollars March 31, 2017 Due within One Year through Five Years Years 2017 2016 2017 Cash and cash equivalents ¥ 414,559 Due within one year ¥ 474 ¥ 468 $ 4,232 Money held in trust for the Chuo Shinkansen construction 1,472,741 Due after one year 3,165 3,293 28,258 Total ¥ 3,640 ¥ 3,762 $ 32,500 Marketable securities 138,700 As a lessor, the minimum rental commitments under noncancelable operating leases as of March 31, 2017 and 2016, were due as follows: Trade receivables 94,775 ¥ 1 Thousands of Total ¥ 2,120,776 ¥ 1 Millions of Yen U.S. Dollars Thousands of U.S. Dollars 2017 2016 2017 Due within one year ¥ 4,471 ¥ 2,008 $ 39,919 Due after One Year Due after Five Due after one year 15,064 7,035 134,500 March 31, 2017 Due within One Year through Five Years Years Total ¥ 19,535 ¥ 9,043 $ 174,419 Cash and cash equivalents $ 3,701,419 Money held in trust for the Chuo Shinkansen construction 13,149,473 14.CONTINGENCIES Marketable securities 1,238,392 As of March 31, 2017, the Company has joint and several obligations with the RTRI to make payments on long-term debt of ¥7,716 million Trade receivables 846,205 $ 8 ($68,892 thousand) issued by the RTRI. The proceeds are being used for the enhancement of technology development for the Maglev system. As discussed in Notes 5, based on debt assumption agreements with financial institutions, the Company has transferred the debt repayment obligations for Total $ 18,935,500 $ 8 certain bonds to such financial institutions. As of March 31, 2017, the Company had contingent obligations of ¥521,045 million ($4,652,187 thousand) for f. Annual Maturities of long-term debt, long-term debt for the Chuo Shinkansen construction and long-term accounts payable—railway facilities the bonds. Please see Note 5 for annual maturities of long-term debt, Note 6 for long-term debt for the Chuo Shinkansen construction and Note 7 for long-term accounts payable—railway facilities. 15.OTHER COMPREHENSIVE INCOME (LOSS) The components of other comprehensive income (loss) for the years ended March 31, 2017, 2016 and 2015, were as follows: 12.DERIVATIVES Thousands of The Companies enter into foreign currency swap agreements to manage exposure to market risks of changes in foreign exchange of foreign currency bonds, and interest rate swap agreements to manage exposure to market risks of changes in interest rates of certain liabilities. Millions of Yen U.S. Dollars Derivative transactions are mainly entered into to hedge foreign exchange exposures and interest rate exposures incorporated within their business. 2017 2016 2015 2017 Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged liabilities. Unrealized gain (loss) on available-for-sale securities: Because the counterparties to these derivatives are limited to major international financial institutions, the Companies do not anticipate any losses arising Gain (loss) arising during the year ¥ 8,490 ¥ (24,160) ¥ 25,964 $ 75,803 from credit default. Reclassification adjustments to profit or loss (23) 0 (158) (205) Derivative transactions entered into by the Companies have been made in accordance with internal policies and have been subject to due internal formalities. Amount before income tax effect 8,466 (24,160) 25,806 75,589 Income tax effect (1,959) 7,440 (7,065) (17,491) Derivative Transactions to Which Hedge Accounting Is Applied Total ¥ 6,507 ¥ (16,719) ¥ 18,741 $ 58,098 Deferred gain (loss) on hedges: Millions of Yen Gain (loss) arising during the year ¥ 2 ¥ 65 ¥ (88) $ 17 Contract Amount Amount before income tax effect 2 65 (88) 17 March 31, 2017 Hedged Item Contract Amount Due after One Year Fair Value Income tax effect (22) 29

Foreign currency swaps:(fixed amount payment in yen, fixed amount receipt in U.S. dollars) Foreign currency bonds ¥ 105,175 ¥ 105,175 * Total ¥ 2 ¥ 42 ¥ (59) $ 17 Remeasurements of defined benefit plans: Interest rate swaps:(fixed rate payment, floating rate receipt) Bank loans ¥ 140,401 ¥ 115,601 * Adjustments arising during the year ¥ (1,862) ¥ (6,381) ¥ (14,077) $ (16,625) Interest rate and currency swaps: (fixed rate / amount payment in yen, floating Reclassification adjustments to profit 4,729 3,876 4,021 42,223 rate receipt and fixed amount receipt in U.S. dollars ) Foreign currency bank loans ¥ 46,563 ¥ 44,063 * Amount before income tax effect (2,866) (2,504) (10,055) 25,589 Income tax effect 845 605 3,329 (7,544) Total ¥ 2,020 ¥ (1,898) (6,725) $ (18,035) Millions of Yen Share of other comprehensive income in affiliates Contract Amount Gain (loss) arising during the year ¥ 27 ¥ (122) ¥ 167 $ 241 March 31, 2016 Hedged Item Contract Amount Due after One Year Fair Value Reclassification adjustments to profit 36 17 33 321 Total ¥ 63 ¥ (105) ¥ 201 $ 562 Foreign currency swaps:(fixed amount payment in yen, fixed amount receipt in U.S. dollars) Foreign currency bonds ¥ 37,015 ¥ 37,015 * Interest rate swaps:(fixed rate payment, floating rate receipt) Bank loans ¥ 193,473 ¥ 156,473 * Total other comprehensive income (loss) ¥ 8,595 ¥ (18,681) ¥ 12,157 $ (76,741)

Thousands of U.S. Dollars 16.SEGMENT INFORMATION Contract Amount Under ASBJ Statement No. 17, "Accounting Standard for Segment The Companies are composed of three reportable segments by nature March 31, 2017 Hedged Item Contract Amount Due after One Year Fair Value Information Disclosures" and ASBJ Guidance No. 20, "Guidance on of products and services: Transportation, Merchandise and Other and Real Accounting Standard for Segment Information Disclosures," an entity is Estate are disclosed. Foreign currency swaps:(fixed amount payment in yen, fixed amount receipt in U.S. dollars) Foreign currency bonds $ 939,062 $ 939,062 * required to report financial and descriptive information about its reportable The Transportation segment manages the Companies' railway operations, Interest rate swaps:(fixed rate payment, floating rate receipt) Bank loans $ 1,253,580 $ 1,032,151 * segments. Reportable segments are operating segments or aggregations such as the Tokaido Shinkansen and conventional railway operations in the of operating segments that meet specified criteria. Operating segments Tokai area, bus operations and others. The Merchandise and Other segment Interest rate and currency swaps: (fixed rate / amount payment in yen, floating are components of an entity for which separate financial information is includes a department store in JR Central Towers, retail sales in trains and rate receipt and fixed amount receipt in U.S. dollars ) Foreign currency bank loans $ 415,741 $ 393,419 * available and such information is evaluated regularly by the chief operating stations and others. The Real Estate segment includes real estate leasing decisionmaker in deciding how to allocate resources and in assessing business, such as station building leasing, and real estate sales in lots. performance. Generally, segment information is required to be reported *Foreign currency swaps, interest rate swaps, or interest rate and currency swaps which qualify for hedge accounting are accounted for in combination with b.Methods of Measurement for the Amounts of Operating Revenues, hedged items such as the foreign currency bonds, long-term debt, or foreign currency bank loans and the fair values of these swaps are included in those of on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. Profit (Loss), Assets, Liabilities and Other Items for Each Reportable hedged items in Note 11. Segment a.Description of Reportable Segments The accounting policies of each reportable segment are consistent The Companies' reportable segments are those for which separate with those disclosed in Note 3, "Summary of Significant Accounting financial information is available and regular evaluation by the Companies' Policies." Reportable segment profit represents operating income. Prices management is being performed in order to decide how resources are of intersegment transactions or transfers are determined based upon arm's allocated among the Companies. length transactions.

76 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 77 Financial Section

c.Information about Operating Revenues, Profit (Loss), Assets, Liabilities and Other Items 17.SUBSEQUENT EVENTS Millions of Yen a.Appropriations of Retained Earnings The following appropriation of retained earnings as of March 31, 2017, was approved at the Company's shareholders’ meeting held on June 23, 2017: 2017 Reportable Segment Millions of Yen Thousands of U.S. Dollars Transportation Merchandise and Other Real Estate Total Other Total Reconciliations Consolidated Year-end cash dividends, ¥70 ($0.63) per share ¥ 13,790 $ 123,125 Operating revenues: External customers ¥ 1,368,604 ¥ 227,201 ¥ 41,244 ¥ 1,637,050 ¥ 119,929 ¥ 1,756,980 ¥ 1,756,980 b.Substantial Amount of Borrowing Intersegment transactions or transfers 11,798 9,888 27,400 49,087 134,036 183,124 ¥ (183,124) The Company submitted the application form for borrowing funds in total of planned ¥3,000 billion ($26,785 million) to the JRTT based on the JRTT Act for promoting the construction of the Chuo Shinkansen on November 18, 2016. Based on the application form, the Company made the following agreement Total ¥ 1,380,403 ¥ 237,089 ¥ 68,645 ¥ 1,686,138 ¥ 253,966 ¥ 1,940,104 ¥ (183,124) ¥ 1,756,980 with the JRTT on May 1, 2017 and executed the borrowing. Segment profit ¥ 593,192 ¥ 7,501 ¥ 18,144 ¥ 618,838 ¥ 1,684 ¥ 620,522 ¥ (958) ¥ 619,564 (1) Lenders Segment assets 6,295,736 111,093 376,295 6,783,124 369,461 7,152,585 (99,910) 7,052,675 The JRTT Other: (2) Amount of borrowing Depreciation and amortization 205,970 3,463 12,147 221,581 3,804 225,386 225,386 ¥750 billion ($6,696 million) Amounts of investments in equity in affiliates 9,048 9,048 9,048 9,048 (3) Execution date of borrowing Increase in property, plant and equipment May 17, 2017 (4) Maturity date and intangible assets 270,710 12,786 39,720 323,217 6,706 329,924 329,924 November 17, 2055 Millions of Yen (5) Interest rate 2016 0.9% (6) Repayment schedule Reportable Segment Fixed principal payment beginning in May, 2046 Transportation Merchandise and Other Real Estate Total Other Total Reconciliations Consolidated (7) Pledged Asset Operating revenues: None External customers ¥ 1,346,347 ¥ 230,670 ¥ 38,618 ¥ 1,615,635 ¥ 122,774 ¥ 1,738,409 ¥ 1,738,409 (8) Special clause Intersegment transactions or transfers 11,815 9,025 27,471 48,312 120,252 168,564 ¥ (168,564) The borrowed money is to be used only for expenditures of the construction of the Chuo Shinkansen. Total ¥ 1,358,162 ¥ 239,695 ¥ 66,089 ¥ 1,663,947 ¥ 243,026 ¥ 1,906,974 ¥ (168,564) ¥ 1,738,409

Segment profit (loss) ¥ 556,892 ¥ 8,747 ¥ 15,637 ¥ 581,276 ¥ (1,722) ¥ 579,554 ¥ (876) ¥ 578,677 Segment assets 4,648,963 105,259 342,344 5,096,567 212,356 5,308,923 (40,378) 5,268,544 Other: Depreciation and amortization 222,474 3,481 12,477 238,433 3,936 242,369 242,369 Amounts of investments in equity in affiliates 8,705 8,705 8,705 8,705 Increase in property, plant and equipment and intangible assets 202,549 7,855 24,338 234,743 3,635 238,379 238,379 Millions of Yen 2015 Reportable Segment Transportation Merchandise and Other Real Estate Total Other Total Reconciliations Consolidated Operating revenues: External customers ¥ 1,294,050 ¥ 225,038 ¥ 39,349 ¥ 1,558,437 ¥ 113,857 ¥ 1,672,295 ¥ 1,672,295 Intersegment transactions or transfers 11,641 8,818 27,237 47,697 125,114 172,812 ¥ (172,812) Total ¥ 1,305,691 ¥ 233,856 ¥ 66,587 ¥ 1,606,135 ¥ 238,971 ¥ 1,845,107 ¥ (172,812) ¥ 1,672,295

Segment profit ¥ 472,017 ¥ 8,935 ¥ 16,616 ¥ 497,570 ¥ 8,281 ¥ 505,851 ¥ 746 ¥ 506,598 Segment assets 4,631,213 99,620 332,606 5,063,440 219,910 5,283,351 (65,369) 5,217,982 Other: Depreciation and amortization 251,092 3,383 13,148 267,624 3,944 271,568 271,568 Amounts of investments in equity in affiliates 8,332 8,332 8,332 8,332 Increase in property,plant and equipment and intangible assets 191,252 6,143 14,051 211,446 3,084 214,531 214,531 Thousands of U.S. Dollars 2017 Reportable Segment Transportation Merchandise and Other Real Estate Total Other Total Reconciliations Consolidated Operating revenues: External customers $ 12,219,678 $ 2,028,580 $ 368,250 $ 14,616,517 $ 1,070,794 $ 15,687,321 $ 15,687,321 Intersegment transactions or transfers 105,339 88,285 244,642 438,276 1,196,750 1,635,035 $(1,635,035) Total $ 12,325,026 $ 2,116,866 $ 612,901 $ 15,054,803 $ 2,267,553 $ 17,322,357 $(1,635,035) $ 15,687,321

Segment profit $ 5,296,357 $ 66,973 $ 162,000 $ 5,525,339 $ 15,035 $ 5,540,375 $ (8,553) $ 5,531,821 Segment assets 56,211,928 991,901 3,359,776 60,563,607 3,298,758 63,862,366 (892,053) 62,970,312 Other: Depreciation and amortization 1,839,017 30,919 108,455 1,978,401 33,964 2,012,375 2,012,375 Amounts of investments in equity in affiliates 80,785 80,785 80,785 80,785 Increase in property,plant and equipment and intangible assets 2,417,053 114,160 354,642 2,885,866 59,875 2,945,750 2,945,750 Notes:1. Other includes business in hotel, travel, advertising, rolling stock production and construction which are not included in a reportable segment. 2. Reconciliations are as follows: a. The amount of the elimination of intersegment transactions included in the reconciliations was ¥(958) million ($(8,553) thousand), ¥(876) million and ¥746 million for the years ended March 31, 2017, 2016 and 2015, respectively. b. The reconciliations for segment assets include corporate assets, which are not allocated to a reportable segment, and the elimination of intersegment transactions. Corporate assets principally consist of investment securities and certificates of deposit. The amounts of corporate assets were ¥426,429 million ($3,807,401 thousand), ¥320,737 million and ¥303,610 million for the years ended March 31, 2017, 2016 and 2015, respectively. The elimination of intersegment transactions consists of intersegment receivables and others. The amounts of the elimination were ¥526,340 million ($4,699,464 thousand), ¥361,116 million and ¥368,979 million for the years ended March 31, 2017, 2016 and 2015, respectively. 3. Segment profit (loss) is reconciled to operating income in the consolidated statement of income. 4. Information about products and services was omitted since equivalent information was disclosed above. Information about geographical areas was not presented since the Companies have no significant overseas operations.

78 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 79 Financial Section

Nonconsolidated Balance Sheet Nonconsolidated Statement of Income

Central Japan Railway Company March 31, 2017 Central Japan Railway Company Year Ended March 31, 2017 Millions of Yen Thousands of U.S. Dollars Millions of Yen Thousands of ASSETS (Note 2) (Note 2) U.S. Dollars (Note 2) (Note 2) 2017 2016 2017 CURRENT ASSETS: 2017 2016 2015 2017 Cash and cash equivalents ¥ 398,157 ¥ 308,951 $ 3,554,973 OPERATING REVENUES: Time deposits 32,000 Railway business ¥ 1,371,906 ¥ 1,349,713 ¥ 1,297,852 $ 12,249,160 Money held in trust for the Chuo Shinkansen construction (Note 3.c) 1,472,741 13,149,473 Other Marketable securities 138,700 1,238,392 8,863 8,278 8,749 79,133 Trade receivables 42,385 39,604 378,437 Total operating revenues 1,380,770 1,357,991 1,306,602 12,328,303 Supplies 11,377 11,176 101,580 17,167 22,716 153,276 Deferred tax assets (Note 8) OPERATING EXPENSES: Prepaid expenses and other 35,273 34,149 314,937 Total current assets 2,115,801 448,598 18,891,080 Railway business (Note 3.j) 779,970 794,126 826,585 6,964,017 4,978 6,175 4,614 44,446 NONCURRENT ASSETS: Other Investments and other assets: Total operating expenses 784,949 800,301 831,199 7,008,473 Investment securities 120,622 92,417 1,076,982 Investments in and advances to subsidiaries and affiliates (Note 5) 189,615 182,075 1,692,991 Operating income 595,821 557,689 475,403 5,319,830 Deferred tax assets (Note 8) 130,389 134,382 1,164,187 Prepaid expenses and other 31,721 36,378 283,223 Total investments and other assets 472,348 445,253 4,217,392 OTHER INCOME (EXPENSES): Property, plant and equipment (Notes 3.f and 4): Interest and dividend income 2,233 2,899 3,151 19,937 8,025,536 7,968,043 71,656,571 Railway business property Interest expense (60,177) (65,379) (72,148) (537,294) Construction in progress 268,681 207,814 2,398,937 Other 214,626 164,899 1,916,303 Other—net (Note 3.r) 3,273 (3,426) (8,584) 29,223 Total 8,508,843 8,340,757 75,971,812 Other expenses—net (54,670) (65,907) (77,581) (488,125) Accumulated depreciation (4,282,636) (4,175,182) (38,237,821) 4,226,206 4,165,574 37,733,982 Net property, plant and equipment INCOME BEFORE INCOME TAXES 541,150 491,782 397,821 4,831,696 Total noncurrent assets 4,698,555 4,610,827 41,951,383 INCOME TAXES (Note 8): TOTAL ASSETS (Note 6) ¥ 6,814,357 ¥ 5,059,426 $ 60,842,473 Current 151,746 155,787 125,607 1,354,875 Thousands of Deferred Millions of Yen U.S. Dollars 7,505 7,335 11,935 67,008 LIABILITIES AND EQUITY (Note 2) (Note 2) Total income taxes 159,252 163,123 137,542 1,421,892 2017 2016 2017 CURRENT LIABILITIES: NET INCOME ¥ 381,898 ¥ 328,658 ¥ 260,278 $ 3,409,803 Short-term loans payable ¥ 108,421 ¥ 129,677 $ 968,044 93,374 109,171 833,696 Current portion of long-term debt Yen U.S. Dollars Current portion of long-term accounts payable—railway facilities 4,824 77,665 43,071 Trade payables 164,866 133,584 1,472,017 2017 2016 2015 2017 Provision for bonuses 21,360 21,431 190,714 PER SHARE OF COMMON STOCK (Note 3.q): Income taxes payable 81,263 100,071 725,562 Basic net income ¥ 1,938.56 ¥ 1,668.31 ¥ 1,321.21 $ 17.31 Prepaid fares received 30,243 30,138 270,026 Cash dividends applicable to the year 135.00 125.00 120.00 1.21 Inter-line fares received 185 260 1,651 Other 38,051 48,080 339,741 See notes to nonconsolidated financial statements. Total current liabilities 542,590 650,081 4,844,553 NONCURRENT LIABILITIES: Long-term debt 1,221,858 1,174,917 10,909,446 Long-term debt for the Chuo Shinkansen construction (Note 3.c) 1,500,000 13,392,857 Long-term accounts payable—railway facilities 549,028 553,856 4,902,035 Provision for large-scale renovation of the Shinkansen infrastructure (Note 3.j) 210,000 245,000 1,875,000 Provision for retirement benefits 179,160 179,399 1,599,642 Other 28,879 36,262 257,848 Total noncurrent liabilities 3,688,926 2,189,435 32,936,839 CONTINGENCIES (Note 9) EQUITY (Notes 7 and 10): Common stock—authorized, 824,000,000 shares; issued, 206,000,000 shares in 2017 and 2016 112,000 112,000 1,000,000 Capital surplus 53,500 53,500 477,678 Retained earnings: Legal reserve 12,504 12,504 111,642 Unappropriated 2,480,566 2,124,277 22,147,910 Treasury stock-at cost, 8,999,266 shares in 2017 and 8,999,156 shares in 2016 (102,205) (102,203) (912,544) Unrealized gain on available-for-sale securities 26,474 19,831 236,375 Total equity 2,582,839 2,219,910 23,061,062

TOTAL LIABILITIES AND EQUITY ¥ 6,814,357 ¥ 5,059,426 $ 60,842,473 See notes to nonconsolidated financial statements.

80 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 81 Financial Section

Nonconsolidated Statement of Changes in Equity Notes to Nonconsolidated Financial Statements

Central Japan Railway Company Year Ended March 31, 2017 Central Japan Railway Company Thousands Millions of Yen (Note 2) Outstanding Unrealized 1.INCORPORATION OF CENTRAL JAPAN RAILWAY 2.BASIS OF PRESENTATION OF NONCONSOLIDATED Number of Retained Earnings Gain on COMPANY FINANCIAL STATEMENTS Shares of Common Capital Legal Treasury Available-for-Sale Total Central Japan Railway Company (Tokai Ryokaku Tetsudo The accompanying nonconsolidated financial statements have Common Stock Stock Surplus Reserve Unappropriated Stock Securities Equity Kabushiki Gaisha, the "Company") was incorporated on April been prepared in accordance with the provisions set forth in the BALANCE, APRIL 1, 2014 1, 1987, as a private company, pursuant to the Law for Japanese Companies Act of Japan (the "Companies Act"), the Japanese (as previously reported) 197,000 ¥ 112,000 ¥ 53,500 ¥ 12,504 ¥ 1,565,533 ¥ (102,201) ¥ 19,989 ¥ 1,661,326 National Railways Restructuring enacted upon the resolution of the Financial Instruments and Exchange Act, the Law for Railway Cumulative effect of accounting change (Note 3.k) 17,086 17,086 Japanese Diet. Business Enterprise and their related accounting regulations, and The business of the Japanese National Railways (the "JNR") in accordance with accounting principles generally accepted in BALANCE, APRIL 1, 2014 (as restated) 197,000 112,000 53,500 12,504 1,582,619 (102,201) 19,989 ¥ 1,678,412 was succeeded by the following newly established organizations: Japan, which are different in certain respects as to the application seven railway companies including the Company, the former and disclosure requirements of International Financial Reporting Net income 260,278 260,278 Shinkansen Holding Corporation (a predecessor entity to the Railway Standards. Dividends from surplus, ¥120 per share (23,640) (23,640) Development Fund (1991–1997), which was subsequently succeeded As consolidated statements of cash flows and certain disclosures Purchase of treasury stock (0) (1) (1) by the Corporation for Advanced Transport and Technology are presented in the consolidated financial statements of the Net change in the year 16,047 16,047 (the "CATT") (1997–2003) and in turn by the Japan Railway Companies, nonconsolidated statements of cash flows and certain Construction, Transport and Technology Agency (the "JRTT")), the disclosures are not presented herein in accordance with accounting BALANCE, MARCH 31, 2015 197,000 112,000 53,500 12,504 1,819,258 (102,203) 36,037 1,931,097 former Railway Telecommunication Co., Ltd., Railway Information principles generally accepted in Japan. Systems Co., Ltd. and the Railway Technical Research Institute Effective for the year ended March 31, 2014, the Japanese Net income 328,658 328,658 (the "RTRI") which reorganized as a public interest corporation Financial Instruments and Exchange Act and its related accounting Dividends from surplus, ¥120 per share (23,640) (23,640) as of April 1, 2011. The JNR itself became the JNR Settlement regulations were amended to allow an entity not to disclose certain Purchase of treasury stock (0) (0) (0) Corporation (the "JNRSC"). All of the assets and liabilities of the designated footnote information in its nonconsolidated financial Net change in the year (16,205) (16,205) JNR were transferred to such organizations, including the JNRSC. statements if the entity prepares and discloses consolidated financial BALANCE, MARCH 31, 2016 197,000 112,000 53,500 12,504 2,124,277 (102,203) 19,831 2,219,910 Prior to December 1, 2001, the Law Concerning Passenger statements. Accordingly, the Company has omitted disclosure of Railway Companies and the Japan Freight Railway Company (the certain footnote information in the accompanying nonconsolidated Net income 381,898 381,898 "Law") required that authorization be obtained from the Minister financial statements. Dividends from surplus, ¥130 per share (25,610) (25,610) of Land, Infrastructure, Transport and Tourism (the "Minister of In preparing these nonconsolidated financial statements, certain Purchase of treasury stock (0) (2) (2) Transport") regarding fundamentals such as: (1) commencement reclassifications and rearrangements have been made to the Net change in the year 6,643 6,643 of business other than railway and its related business, (2) the nonconsolidated financial statements issued domestically in order appointment or dismissal of representative directors and corporate to present them in a form which is more familiar to readers outside BALANCE, MARCH 31, 2017 197,000 ¥ 112,000 ¥ 53,500 ¥ 12,504 ¥ 2,480,566 ¥ (102,205) ¥ 26,474 ¥ 2,582,839 auditors, (3) the issuance of new shares and bonds, (4) long-term Japan. In addition, certain reclassifications have been made in loans payable, (5) amendments to the Articles of Incorporation, the 2015 nonconsolidated financial statements to conform to the (6) operating plans, (7) sales of material assets, (8) appropriations classifications used in 2017 and 2016. Thousands of U.S. Dollars (Note 2) of earnings and (9) merger or dissolution. As of December 1, The nonconsolidated financial statements are stated in Japanese Unrealized 2001, since the Law was revised and the Company was no longer yen, the currency of the country in which the Company is Retained Earnings Gain on Common Capital Legal Treasury Available-for-Sale Total in scope of the Law, the Company was not required to obtain the incorporated and operates. The translations of Japanese yen amounts Stock Surplus Reserve Unappropriated Stock Securities Equity aforementioned authorizations. into U.S. dollar amounts are included solely for the convenience of BALANCE, MARCH 31, 2016 $ 1,000,000 $ 477,678 $ 111,642 $ 18,966,758 $(912,526) $ 177,062 $ 19,820,625 On October 8, 1997, the Company's shares were listed on the readers outside Japan and have been made at the rate of ¥112 to $1, Nagoya and Tokyo stock exchanges in Japan. The JNRSC, which the approximate rate of exchange as of March 31, 2017. Such Net income 3,409,803 3,409,803 held all 2,240,000 of the Company's outstanding shares prior to translations should not be construed as representations that the Dividends from surplus, $1.16 per share (228,660) (228,660) the listing, sold 1,353,929 shares in the initial public offerings. Japanese yen amounts could be converted into U.S. dollars at that Purchase of treasury stock (17) (17) Pursuant to the Law for Disposal of Debts and Liabilities of the or any other rate. Japanese yen figures of less than one million Net change in the year 59,312 59,312 JNRSC enacted in October 1998, the Company's shares held by the yen are rounded down to the nearest million of yen, except for per JNRSC were transferred to the Japan Railway Construction Public share information, and U.S. dollar figures of less than one thousand BALANCE, MARCH 31, 2017 $ 1,000,000 $ 477,678 $ 111,642 $ 22,147,910 $ (912,544) $ 236,375 $ 23,061,062 Corporation (the "JRCPC"). On October 1, 2003, the CATT and the U.S. dollars are also rounded down to the nearest thousand of U.S. See notes to nonconsolidated financial statements. JRCPC were fully integrated, pursuant to the Law of Japan Railway dollars, except for per share information. Construction, Transport and Technology enacted on October 1, 2003, and designated as the JRTT. In July 2005, the JRTT sold 600,000 shares of the Company. On April 5, 2006, the JRTT also sold its 3.SUMMARY OF SIGNIFICANT ACCOUNTING remaining 286,071 shares of the Company. As a result of this sale, POLICIES all of the Company's shares held by the JRTT were sold. a.Nonconsolidation The shares above do not reflect the effect of the hundred-for-one —The nonconsolidated financial statements do not include the stock split effective as of October 1, 2012. accounts of subsidiaries. Investments in subsidiaries and affiliates are stated at cost.

82 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 83 Financial Section

b.Cash Equivalents of the asset or asset group. The impairment loss would be measured The Company applied the revised accounting standard and guidance swap contracts meet the above criteria, hedged debt is translated at the —Cash equivalents are short-term investments that are readily as the amount by which the carrying amount of the asset exceeds its above, effective April 1, 2014. contracted rates, and the differential paid or received under the swap convertible into cash and that are exposed to insignificant risk of recoverable amount, which is the higher of the discounted cash flows The Company changed the method of attributing the expected benefit agreement is recognized and included in interest expense. changes in value. Cash equivalents include time deposits, certificates from the continued use and eventual disposition of the asset or the net to periods from a straight-line basis to a benefit formula basis, and of deposit, commercial paper and others, all of which mature or become selling price at disposition. the method of determining the discount rate and recorded the effect of q.Per Share Information due within three months of the date of acquisition. above as of April 1, 2014, in retained earnings. As a result, retained —Basic net income per share is computed by dividing net income h.Software Costs earnings as of April 1, 2014, increased by ¥17,086 million. The effect available to common shareholders by the weighted‍average number of c.Money Held in Trust for the Chuo Shinkansen Construction and —Software costs are amortized by the straight-line method mainly of this change on the nonconsolidated statement of income for the year common shares outstanding for the period. Long – Term Debt for the Chuo Shiknkansen Construction over five years. ended March 31, 2015, was immaterial. Cash dividends per share presented in the accompanying —The Company has received loans from the JRTT for promoting the nonconsolidated statement of income are dividends applicable to the construction of the Chuo Shinkansen, and the money is placed in the i.Deferred Charges l.Leases respective years, including dividends to be paid after the end of the trust fund to segregate it from other money. —Bond issuance costs are fully charged to income as incurred. —Lease assets of finance leases that were not deemed to transfer year. ownership of the leased property are depreciated and amortized by the d.Supplies j.Provision for Large-Scale Renovation of the Shinkansen Infrastructure straight-line method over the lease period. r.Changes in Presentation (Nonconsolidated Statement of Income) —Supplies are stated at the lower of cost, determined by the moving- —Provision for large-scale renovation of the Shinkansen —Prior to April 1, 2015, the loss on redemption of bonds was average cost method, or net selling value. infrastructure is provided based on the Nationwide Shinkansen Railway m.Income Taxes disclosed separately in the other income (expenses) section of the Development Law. In accordance with the Nationwide Shinkansen —The provision for income taxes is computed based on the pretax nonconsolidated statement of income. Since during the year ended e.Marketable and Investment Securities Railway Development Law and Regulations, the Company reversed the income included in the nonconsolidated statement of income. The March 31, 2016, the materiality of the amount decreased, such amount —All marketable and investment securities are classified and provision in the amount of ¥35,000 million ($312,500 thousand) for asset and liability approach is used to recognize deferred tax assets is included in the other-net in the other income (expenses) section. The accounted for, depending on management's intent, as available-for-sale the year ended March 31, 2017 and ¥35,000 million for the years ended and liabilities for the expected future tax consequences of temporary amounts of loss on redemption of bonds separately disclosed for the securities, which are principally comprised of investment securities, March 31, 2016 and 2015. differences between the carrying amounts and the tax bases of assets years ended March 31, 2015 were ¥13,676 million. and are reported at fair value, with unrealized gain and loss, net of and liabilities. Deferred taxes are measured by applying currently applicable taxes,reported in a separate component of equity. k.Retirement and Pension Plans enacted tax laws to the temporary differences. s.Accounting Changes and Error Corrections Nonmarketable available-for-sale securities are stated at cost, —The Company has an unfunded retirement plan covering The Company applied ASBJ Guidance No. 26, "Guidance on —In December 2009, the ASBJ issued ASBJ Statement No. 24, determined by the moving-average cost method. For other-than- substantially all of its employees. The provision for retirement benefits Recoverability of Deferred Tax Assets," effective April 1, 2016. There "Accounting Standard for Accounting Changes and Error Corrections" temporary declines in fair value, investment securities are reduced to is calculated based on the projected benefit obligations at the balance was no impact from this for the year ended March 31, 2017. and ASBJ Guidance No. 24, "Guidance on Accounting Standard for net realizable value by a charge to income. sheet date. The projected benefit obligations are attributed to periods Accounting Changes and Error Corrections." Accounting treatments on a benefit formula basis. Actuarial gains and losses are amortized n.Appropriations of Retained Earnings under this standard and guidance are as follows: (1) Changes in f.Property, Plant and Equipment on a straight-line basis over five years, which is within the average —Appropriations of retained earnings are reflected in the Accounting Policies—When a new accounting policy is applied —Property, plant and equipment are stated at cost. Certain remaining service period. Accounting treatments for unrecognized nonconsolidated financial statements for the following year upon following revision of an accounting standard, the new policy is applied contributions in aid for construction of railways and other property are actuarial gains and losses in the nonconsolidated financial statements shareholders' approval. retrospectively unless the revised accounting standard includes specific deducted directly from the cost of the related assets.The accumulated are different from those in the consolidated financial statements. transitional provisions, in which case the entity shall comply with contributions deducted from the cost of property, plant and equipment The Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ o.Consumption Tax the specific transitional provisions. (2) Changes in Presentation— as of March 31, 2017 and 2016 amounted to ¥274,000 million Statement No. 26, "Accounting Standard for Retirement Benefits" —Unless otherwise stated, all figures are presented net of tax. When the presentation of financial statements is changed, prior-period ($2,446,428 thousand), and ¥271,895 million, respectively. in May 2012 and ASBJ Guidance No. 25, "Guidance on Accounting financial statements are reclassified in accordance with the new Depreciation is computed by the declining-balance method over the Standard for Retirement Benefits” in March 2015, which replaced the p.Derivatives and Hedging Activities presentation. (3) Changes in Accounting Estimates—A change in an estimated useful lives of the assets. Additional depreciation is provided accounting standard for retirement benefits that had been issued by the — The Company uses derivative financial instruments mainly accounting estimate is accounted for in the period of the change if the for the Shinkansen rolling stock based on kilometers traveled. Business Accounting Council in 1998 with an effective date of April 1, to manage exposure to market risks of changes in foreign currency change affects that period only, and is accounted for prospectively if The range of useful lives is principally from 3 to 50 years for 2000, and the other related practical guidance, and were followed by exchange rates and in interest rates. Foreign currency swaps are utilized the change affects both the period of the change and future periods. buildings, from 3 to 60 years for structures, from 10 to 20 years for partial amendments from time to time through 2009. by the Company to reduce foreign currency exchange rate risks. Interest (4) Corrections of Prior-Period Errors—When an error in prior-period rolling stock and from 4 to 17 years for machinery and equipment. The revised accounting standard made certain amendments relating rate swaps are utilized by the Company to reduce interest rate risks. financial statements is discovered, those statements are restated. Depreciation of certain railway structures, except for the Shinkansen to the method of attributing expected benefit to periods, the discount Interest rate and currency swap contract are utilized by the Company to railway facilities, is computed by the replacement-accounting method. rate, and expected future salary increases. reduce interest rate and foreign exchange risks. The Company does not This accounting standard and the guidance above are effective for enter into derivatives for trading or speculative purposes. g.Long-Lived Assets the beginning of annual periods beginning on or after April 1, 2014, or Foreign currency swaps, which qualify for hedge accounting and —The Company reviews its long-lived assets for impairment for the beginning of annual periods beginning on or after April 1, 2015, meet specific matching criteria, are not remeasured at market value, whenever events or changes in circumstances indicate the carrying subject to certain disclosure in March 2015, with earlier application but the hedged debt is translated at the contracted rates of the foreign amount of an asset or asset group may not be recoverable. An being permitted from the beginning of annual periods beginning on currency swaps. Interest rate swaps, which qualify for hedge accounting impairment loss is recognized if the carrying amount of an asset or or after April 1, 2013. However, no retrospective application of this and meet specific matching criteria, are not remeasured at market value, asset group exceeds the sum of the undiscounted future cash flows accounting standard to nonconsolidated financial statements in prior but the differential paid or received under the swap agreements is expected to result from the continued use and eventual disposition periods is required. recognized and included in interest expense. When interest and currency

84 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 85 Financial Section

4.PROPERTY, PLANT AND EQUIPMENT may be reversed without limitation. The Companies Act also exceed the amount available for distribution to the shareholders Property, plant and equipment as of March 31, 2017 and 2016, consisted of the following: provides that common stock, legal reserve, additional paid-in which is determined by a specific formula. capital, other capital surplus and retained earnings—unappropriated Under the Companies Act, stock acquisition rights are presented Thousands of can be transferred among the accounts within equity under certain as a separate component of equity. Millions of Yen U.S. Dollars conditions upon resolution of the shareholders. The Companies Act also provides that companies can purchase c.Treasury Stock and Treasury Stock Acquisition Rights both treasury stock acquisition rights and treasury stock. Such 2017 2016 2017 The Companies Act also provides for companies to purchase treasury stock acquisition rights are presented as a separate Land ¥ 2,327,331 ¥ 2,327,505 $ 20,779,741 treasury stock and dispose of such treasury stock by resolution of the component of equity or deducted directly from stock acquisition Board of Directors. The amount of treasury stock purchased cannot rights. Buildings 604,025 542,517 5,393,080 Structures 3,767,978 3,746,906 33,642,660 Rolling stock 891,142 885,509 7,956,625 8.INCOME TAXES Machinery and equipment 647,563 628,886 5,781,812 The Company is subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of Lease assets approximately 30.6% for the year ended March 31, 2017, 32.7% for the year ended March 31, 2016, and 35.2% for the year ended March 31, 2015. 2,119 1,617 18,919 The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities as of March 31, 2017 and 2016, were as Construction in progress 268,681 207,814 2,398,937 follows: Total 8,508,843 8,340,757 75,971,812 Thousands of Millions of Yen U.S. Dollars Accumulated depreciation (4,282,636) (4,175,182) (38,237,821) Net property, plant and equipment ¥ 4,226,206 ¥ 4,165,574 $ 37,733,982 2017 2016 2017 Deferred tax assets: Depreciation and amortization ¥ 70,049 ¥ 68,891 $ 625,437 5.INVESTMENTS IN SUBSIDIARIES AND AFFILIATES Provision for retirement benefits 54,336 54,457 485,142 The carrying amounts and aggregate fair value of investment securities in subsidiaries whose fair values are available as of March 31, 2017 and 2016, were as follows: Software 9,670 9,586 86,339 Provision for bonuses 6,536 6,557 58,357 Millions of Yen Accrued railway usage charges 3,257 3,491 29,080 2017 2016 Other 30,819 39,008 275,169 Carrying Fair Unrealized Carrying Fair Unrealized Total 174,670 181,992 1,559,553 Amount Value Loss Amount Value Loss Less valuation allowance (14,026) (14,028) (125,232) Subsidiaries ¥ 27,079 ¥ 21,762 ¥ (5,316) ¥ 27,079 ¥ 20,365 ¥ (6,713) Deferred tax assets 160,643 167,963 1,434,312

Thousands of U.S. Dollars Deferred tax liabilities: 2017 Unrealized gain on available-for-sale securities 9,082 7,046 81,089 Carrying Fair Unrealized Amount Value Loss Deferred gain on transfer of certain fixed assets 3,590 3,590 32,053 Subsidiaries $ 241,776 $ 194,303 $ (47,464) Reserve for special depreciation 133 186 1,187 The carrying amounts of investments in subsidiaries and affiliated companies whose fair value cannot be readily determined as of March 31, Other 281 41 2,508 2017 and 2016, were as follows: Deferred tax liabilities 13,087 10,865 116,848 Thousands of Millions of Yen U.S. Dollars Net deferred tax assets ¥ 147,556 ¥ 157,098 $ 1,371,464 2017 2016 2017 Since the difference between the normal effective statutory tax rate and the actual effective tax rate was not significant, reconciliations were not Subsidiaries ¥ 120,202 ¥ 119,962 $ 1,073,232 presented for the years ended March 31, 2017, 2016 and 2015. Affiliates 2,133 2,133 19,044 New tax reform laws enacted in 2016 in Japan changed the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2016 and 2017, from approximately 31.9% to 30.6% and the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2018, to approximately 30.3%. The effect of these changes was to decrease deferred tax assets, net of deferred tax liabilities, in the nonconsolidated balance sheet as of March 31, 2016, by ¥7,772 million and to increase income taxes - deferred in the nonconsolidated statement of income for the year then ended by ¥8,144 million. 6.CREDIT COMMITMENTS AND PLEDGED FOR incorporation, the Board of Directors may declare dividends (except New tax reform laws enacted in 2015 in Japan changed the normal effective statutory tax rate for the fiscal year beginning on or after April 1, THE SECURED BONDS for dividends-in-kind) at any time during the fiscal year if the 2015, from approximately 35.2% to 32.7% and the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2016, to The Company has credit commitments from banks. Total company has prescribed so in its articles of incorporation. However, approximately 31.9%. The effect of these changes was to decrease deferred tax assets, net of deferred tax liabilities, in the nonconsolidated balance unused credit available to the Company as of March 31, 2017, was the Company does not meet all the above criteria. sheet as of March 31, 2015, by ¥15,375 million and to increase income taxes - deferred in the nonconsolidated statement of income for the year ¥100,000 million ($892,857 thousand). The Companies Act permits companies to distribute dividends-in- then ended by ¥16,836 million. All assets of the Company were pledged for secured bonds of kind (noncash assets) to shareholders subject to a certain limitation ¥129,500 million ($1,156,250 thousand), which the Company entered and additional requirements. into as debt assumption agreements and have been derecognized Semiannual interim dividends may also be paid once a year upon in the nonconsolidated balance sheet (see Note 9), as an enterprise resolution by the Board of Directors if the articles of incorporation mortgage, which gives the holder thereof a security interest in all of the company so stipulate. The Companies Act provides certain assets junior to that of other present or future secured creditors, but limitations on the amounts available for dividends or the purchase senior to that of general creditors. of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of equity after 7.EQUITY dividends must be maintained at no less than ¥3 million. Japanese companies are subject to the Companies Act. The b.Increases/Decreases and Transfer of Common Stock, Reserve significant provisions in the Companies Act that affect financial and and Surplus accounting matters are summarized below: The Companies Act requires that an amount equal to 10% of a.Dividends dividends must be appropriated as a legal reserve (a component Under the Companies Act, companies can pay dividends at any of retained earnings) or as additional paid-in capital (a component time during the fiscal year in addition to the year-end dividend upon of capital surplus), depending on the equity account charged upon resolution at the shareholders’ meeting. Additionally, for companies the payment of such dividends, until the aggregate amount of legal that meet certain criteria including (1) having a Board of Directors, reserve and additional paid-in capital equals 25% of the common (2) having independent auditors, (3) having an Audit & Supervisory stock. The Company has already appropriated defined amount as Board, and (4) the term of service of the directors being prescribed a legal reserve or additional paid-in capital. Under the Companies as one year rather than the normal two-year term by its articles of Act, the total amount of additional paid-in capital and legal reserve

86 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 87 Financial Section

9.CONTINGENCIES Deloitte Touche Tohmatsu LLC As of March 31, 2017, the Company has joint and several obligations with the RTRI to make payments on long-term debt of ¥7,716 million JP TOWER NAGOYA ($68,892 thousand) by the RTRI. The proceeds are being used for the enhancement of technology development for the Maglev system. 1-1-1 Meieki, Nakamura-ku The Company also had contingent liabilities for guarantees of the loans of a certain subsidiary amounting to ¥2,200 million ($19,642 thousand) Nagoya, Aichi 450-8530 as of March 31, 2017. Japan The Company has entrusted cash for the repayment of a portion of the certain bonds based on debt assumption agreements with financial institutions; however, the Company is not released from the primary responsibility for the liability by these agreements. The outstanding bonds covered by Tel: +81(52)565 5511 Fax:+81(52)569 1394 these agreements as of March 31, 2017, were as follows: www.deloitte.com/jp/en Millions of Yen Thousands of U.S. Dollars 2017 2017 INDEPENDENT AUDITOR’S REPORT Secured 2.825% bonds due 2017 ¥ 49,800 $ 444,642 Secured 2.18% bonds due 2018 29,900 266,964 Secured 2.6% bonds due 2020 49,800 444,642 To the Board of Directors of in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an Unsecured 2.39% bonds due 2022 18,995 169,598 Central Japan Railway Company: We have audited the accompanying consolidated opinion on the effectiveness of the entity’s internal control. Unsecured 2.2% bonds due 2022 18,200 162,500 balance sheet of Central Japan Railway Company and its An audit also includes evaluating the appropriateness Unsecured 1.74% bonds due 2022 20,000 178,571 consolidated subsidiaries as of March 31, 2017, and the of accounting policies used and the reasonableness of Unsecured 1.42% bonds due 2017 10,000 89,285 related consolidated statements of income, comprehensive accounting estimates made by management, as well as Unsecured 1.15% bonds due 2022 25,000 223,214 income, changes in equity, and cash flows for the year evaluating the overall presentation of the consolidated and Unsecured 1.31% bonds due 2033 10,000 89,285 then ended, and a summary of significant accounting nonconsolidated financial statements. Unsecured 2.015% bonds due 2023 9,000 80,357 policies and other explanatory information, and the We believe that the audit evidence we have obtained is Unsecured 2.2% bonds due 2024 9,900 88,392 accompanying nonconsolidated balance sheet of Central sufficient and appropriate to provide a basis for our audit Unsecured 2.19% bonds due 2019 9,900 88,392 Japan Railway Company as of March 31, 2017, and the opinion. Unsecured 1.875% bonds due 2019 20,000 178,571 related nonconsolidated statements of income, and changes in Unsecured 2.21% bonds due 2024 9,650 86,160 equity for the year then ended, and a summary of significant Opinion Unsecured 1.775% bonds due 2020 20,000 178,571 accounting policies and other explanatory information, all In our opinion: (1)The consolidated financial statements referred to above Unsecured 1.77% bonds due 2017 20,000 178,571 expressed in Japanese yen. present fairly, in all material respects, the consolidated Unsecured 2.14% bonds due 2018 18,400 164,285 Management’s Responsibility for the Consolidated and financial position of Central Japan Railway Company Unsecured 2.405% bonds due 2026 9,900 88,392 Nonconsolidated Financial Statements and its consolidated subsidiaries as of March 31, 2017, Unsecured 2.04% bonds due 2018 18,800 167,857 Management is responsible for the preparation and fair and the consolidated results of their operations and their Unsecured 1.78% bonds due 2017 20,000 178,571 presentation of these consolidated and nonconsolidated cash flows for the year then ended in accordance with Unsecured 1.78% bonds due 2017 20,000 178,571 financial statements in accordance with accounting principles accounting principles generally accepted in Japan. Unsecured 1.75% bonds due 2017 20,000 178,571 generally accepted in Japan, and for such internal control (2)The nonconsolidated financial statements referred to Unsecured 1.69% bonds due 2018 10,000 89,285 as management determines is necessary to enable the above present fairly, in all material respects, the financial Unsecured 1.79% bonds due 2020 19,900 177,678 preparation of consolidated and nonconsolidated financial position of Central Japan Railway Company as of March Unsecured 1.83% bonds due 2018 10,000 89,285 statements that are free from material misstatement, whether 31, 2017, and the results of its operations for the year then Unsecured 1.557% bonds due 2019 19,800 176,785 due to fraud or error. ended in accordance with accounting principles generally Unsecured 1.667% bonds due 2019 10,000 89,285 accepted in Japan. Unsecured 1.472% bonds due 2020 14,100 125,892 Auditor’s Responsibility Our responsibility is to express an opinion on these Emphasis of Matter Total ¥ 521,045 $ 4,652,187 consolidated and nonconsolidated financial statements As discussed in Note 17. b to the consolidated financial based on our audit. We conducted our audit in accordance statements and in Note 10. b to the nonconsolidated financial 10. SUBSEQUENT EVENTS with auditing standards generally accepted in Japan. Those statements, Central Japan Railway Company entered into a a.Appropriations of Retained Earnings The following appropriation of retained earnings as of March 31, 2017, was approved at the Company's shareholders' meeting held on June 23, 2017: standards require that we plan and perform the audit to obtain borrowing agreement on May 1, 2017 with the Japan Railway Millions of Yen Thousands of U.S. Dollars reasonable assurance about whether the consolidated and Construction, Transport and Technology Agency in order to Year-end cash dividends, ¥70 ($0.63) per share ¥ 13,790 $ 123,125 nonconsolidated financial statements are free from material promote the construction of the Chuo Shinkansen on May 17, misstatement. 2017 based on the agreement on May 1, 2017. Our opinion is b.Substantial Amount of Borrowing An audit involves performing procedures to obtain not modified in respect of this matter. The Company submitted the application form for borrowing funds in total of planned ¥3,000 billion ($26,785 million) to the JRTT based on the JRTT Act for promoting the construction of the Chuo Shinkansen on November 18, 2016. Based on the application form, the Company made the audit evidence about the amounts and disclosures in the following agreement with the JRTT on May 1, 2017 and executed the borrowing. consolidated and nonconsolidated financial statements. Convenience Translation The procedures selected depend on the auditor’s judgment, Our audit also comprehended the translation of Japanese (1) Lenders The JRTT including the assessment of the risks of material misstatement yen amounts into U.S. dollar amounts and, in our opinion, (2) Amount of borrowing of the consolidated and nonconsolidated financial such translation has been made in accordance with the basis ¥750 billion ($6,696 million) stated in Note 2 to the consolidated and nonconsolidated (3) Execution date of borrowing statements, whether due to fraud or error. In making those May 17, 2017 risk assessments, the auditor considers internal control financial statements. Such U.S. dollar amounts are presented (4) Maturity date relevant to the entity’s preparation and fair presentation of solely for the convenience of readers outside Japan. November 17, 2055 (5) Interest rate the consolidated and nonconsolidated financial statements 0.9% (6) Repayment schedule Fixed principal payment beginning in May, 2046 (7) Pledged Asset None (8) Special clause Member of The borrowed money is to be used only for expenditures of the construction of the Chuo Shinkansen. June 23, 2017 Deloitte Touche Tohmatsu Limited

88 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 89 Appendices

Appendices

Financial and Transportation Data

Shifts in Revenues/Income (Consolidated) Transportation revenues Top 10 Stations in terms of Number of Average Daily Passengers (FY2016) Shifts in EBITDA (consolidated) (Thousand passengers/day) Net income attributable to 209 (Billion yen) Operating Revenues Operating Income Ordinary income owners of the parent Shinkansen Total Ordinary Tickets Commuter Passes , , 200 900 844.9 (Billion yen) 1,738.4 1 756.9 1 760.0 (Billion yen) 1,192.0 1,211.9 821.0 1,200 1,113.8 1,143.4 800 770.8 778.1 1,700 1,672.2 1,069.6 1,652.5 1,100 1,194.5 1,175.2 700 1,126.5 150 662.9 666.3 1,600 1,000 1,096.7 640.6 629.5 1,585.3 1,053.0 607.9 900 600 561.6 1,500 800 500 20 16.6 17.1 16.9 16.8 17.3 100 98 1,400 10 400 0 79 68 1,300 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 59 300 50 Conventional Lines 200 1,200 38 37 35 34 33 (Billion yen) 120 100 1,100 99.4 100.9 99.7 102.6 103.9 100 0 0 Nagoya Tok yo Shin-Osaka Kanayama Shizuoka Kyoto Hamamatsu Shinagawa Kariya Shin-Yokohama 1,000 80 65.3 66.6 65.7 68.7 69.1 ’08.3 ’09.3 ’10.3 ’11.3 ’12.3 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 60 Note: The figures for Tokyo, Shin-Osaka, Kyoto, Shinagawa, and Shin-Yokohama Stations indicate Note: EBITDA figures are calculated as the sum of operating income and depreciation and amortization 900 Shinkansen passengers only. 40 34.0 34.3 34.0 33.9 34.8

20 800 Shifts in Capital Investment Amounts (Non-consolidated) Capital Investment Amounts (Excluding the Chuo Shinkansen) Chuo Shinkansen 0 434.0 700 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 (Billion yen) 619.5 400 600 578.6 Passenger Ridership 506.5 563.9 583.0 500 494.6 350 426.1 428.1 511.4 499.0 Shinkansen Total Ordinary Tickets Commuter Passes 404.2 330.8 400 (Million passengers) 328.0 337.4 392.9 155 157 163 165 298.4 301.6 348.0 160 149 300 288.8 300 264.1 140 277.4 255.6 148 150 265.2 120 140 143 257.2 259.1 199.9 135 250 200 244.8 100 229.0 80 211.1 209.8 100 197.8 20 14 15 14 15 15 200 10 174.3 0 166.9 164.8 171.3 172.6 169.8 0 159.5 159.2 156.8 157.6 161.5 155.5 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 ’18.3 150 151.5 (plan) ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 128.5 128.3 Note: Net income attributable to owners of the parent in or before FY2014 indicates net income in each FY. Conventional Lines 120.3 The planned figures are as of the publication of the financial report for FY2016. (Million passengers) 100 395 401 405 400 387 391 50 50.1 Shifts in Revenues/Income (Non-Consolidated) 300 253 260 257 262 265

200 Operating Revenues Operating Income Ordinary income Net income 0 133 135 134 138 140 ’88.3 ’89.3 ’90.3 ’91.3 ’92.3 ’93.3 ’94.3 ’95.3 ’96.3 ’97.3 ’98.3 ’99.3 ’00.3 ’01.3 ’02.3 ’03.3 ’04.3 ’05.3 ’06.3 ’07.3 ’08.3 ’09.3 ’10.3 ’11.3 ’12.3 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 ’18.3 (plan) (Billion yen) 100 Note: The planned figures are as of the publication of March 2017. 1,400 1,380.7 1,383.0 1,357.9 0 1,306.6 1,300 1,277.2 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 1,245.0 Shifts in Total Long-Term Debt and Payables Inherited Liabilities Corporate Bonds Long-Term Debt Long-Term Accounts Payable - Railway Facilities (Non-Consolidated) Latent Liabilities Born by the Shinkansen Leasing System Long-term debt for the Chuo Shinkansen Average Interest Rate (Right axis) 1,200 Passenger kilometers (Billion yen) (%) 6,000 8.0 1,100 Shinkansen Total Ordinary Tickets Commuter Passes 5,456.2 5,422.3 5,392.0 (Million passenger-kilometers) 5,346.3 1,000 5,269.3 5,223.0 5,232.7 5,195.6 5,278.5 5,164.3 55,000 52,166 52,909 5,045.2 48,873 50,134 5,000 4,922.2 7.0 50,000 4,801.0 4,859.0 900 46,930 45,000 50,734 51,459 4,560.8 47,429 48,744 40,000 45,540 4,289.3 800 4,125.5 35,000 4,000 6.81 3,943.4 6.0 700 2,000 1,391 1,444 1,390 1,431 1,450 6.53 3,665.8 1,000 6.35 6.39 3,455.7 3,415.6 3,369.0 6.08 6.19 3,260.1 600 557.6 595.8 0 6.01 3,177.6 3,117.0 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 3,000 5.90 5.84 3,001.5 5.0 475.4 490.5 561.0 2,829.1 500 460.8 Conventional Lines 5.43 2,614.9 397.7 399.1 541.2 478.0 (Million passenger-kilometers) 5.21 2,351.7 400 5.16 5.08 2,136.3 371.8 381.8 10,000 9,038 9,229 9,069 9,302 9,359 5.01 4.91 302.4 328.6 2,000 4.75 1,915.6 4.0 4.62 300 260.2 335.0 8,000 4.51 240.3 4.30 6,000 5,463 5,588 5,481 5,568 5,614 200 187.8 4.08 1,000 3.91 3.0 4,000 3.71 100 3,734 3.54 2,000 3,575 3,641 3,587 3,745 3.36 3.24 3.14 3.13 3.10 3.12 0 0 2.00 0 2.0 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 ’18.3 ’13.3 ’14.3 ’15.3 ’16.3 ’17.3 ’88.3 ’89.3 ’90.3 ’91.3 ’92.3 ’93.3 ’94.3 ’95.3 ’96.3 ’97.3 ’98.3 ’99.3 ’00.3 ’01.3 ’02.3 ’03.3 ’04.3 ’05.3 ’06.3 ’07.3 ’08.3 ’09.3 ’10.3 ’11.3 ’12.3 ’13.3 ’14.3 ’15.3 ’16.3 ’18.3 (plan) ’17.3 (plan) Note: The planned figures are as of the publication of the financial report for FY2016. Note: The planned figures are as of the publication of the financial report for FY2016.

90 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 91 Appendices

Appendices

Financial Data Comparison of Three JR Companies (Consolidated)*1 Stock Information

Shifts in JR Central’s Stock Price

(yen) (yen) Return on Equity Operating Income/Total Assets Earnings per Share 2,600,000 26,000

(%) (%) (Yen) 20 12 2,000 1,996 2,400,000 24,000 10.1 15.7 2,200,000 22,000

2,000,000 20,000 10.9 10.0 10 6 5.9 6.0 1,000 713 1,800,000 18,000 471 1,600,000 16,000

1,400,000 14,000 0 0 0 JR Central JR East JR West JR Central JR East JR West JR Central JR East JR West 1,200,000 12,000

Net Income/Operating Revenues Equity Ratio Shareholders’ Equity per Share 1,000,000 10,000 (%) (%) (Yen) 13,681 30 40 38.2 14,000 800,000 8,000 33.5 22.4 31.3 600,000 6,000

400,000 4,000 15 20 7,000 6,825 Jan. Mar. May Jul. Sep. Nov. Jan. Mar. May Jul. Sep. Nov. Jan. Mar. May Jul. Sep. Nov. Jan. Mar. May Jul. Sep. Nov. Jan. Mar. May Jul. Sep. Nov. Jan. Mar. May Jul. Sep. Nov. Jan. Mar. May Jul. Sep. Nov. Jan. Mar. May. Jul. Sep. Nov. Jan. Mar. May. Jul. Sep. Nov. Jan. Mar. May. 2008 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2015 2015 2015 2015 2015 2015 2016 2016 2016 2016 2016 2016 2017 2017 2017 9.6 4,857 Note: On October 1, 2012, the Company implemented a 100-for-1 stock split and employed a share unit system by which one share unit equals 100 shares. 6.3 Please refer to the left axis for stock prices before September 2012 and the right axis for stock prices after October 2012.

0.0 0 0 JR Central JR East JR West JR Central JR East JR West JR Central JR East JR West Major Shareholders Asset Turnover Debt to Equity Ratio Dividend per Share Name Number of shares held Percentage of total issued shares (Times) (%) (Yen) 140 1.0 220 210.0 140 Mizuho Bank, Ltd. 9,783,300 4.75% 135 197.3 130 The Master Trust Bank of Japan, Ltd. (Trust Account) 8,368,600 4.06% The Nomura Trust and Banking Co., Ltd. (Holder in Retirement Benefit Trust for The Bank of Tokyo-Mitsubishi UFJ, Ltd.) 160.7 7,125,000 3.46% Japan Trustee Services Bank, Ltd. (Trust Account) 6,756,000 3.28%

The Bank of Tokyo-Mitsubishi UFJ, Ltd. 6,678,100 3.24% 0.5 0.5 110 70 0.4 Nippon Life Insurance Company 5,000,000 2.43% 0.3 Toyota Motor Corporation 4,000,000 1.94%

The Dai-ichi Life Insurance Company, Ltd 3,423,900 1.66%

Sumitomo Mitsui Banking Corporation 3,230,000 1.57%

0.0 0 0 Japan Trustee Services Bank, Ltd. (Trust Account 5) 3,055,200 1.48% JR Central JR East JR West JR Central JR East JR West JR Central JR East JR West Total 57,420,100 27.87% Note: In addition to the above, JR Central holds 8,999,266 shares of treasury stock. (As of March 31, 2017) Financial Leverage Interest Coverage Ratio*2 Dividend Payout Ratio (Times) (Times) 10.3 (%) 4 10 30 29.7

3.2 7.9 3.0 JR Central has been included in the ECPI Indices, which is a leading index for socially 2.6 6.7 responsible investment (SRI) and is used for investment decisions by investors. 18.2

2 5 15

6.8 URL: http://english.jr-central.co.jp [ECPI Indices] 0 0 0 Tel:( ) ,Fax:( ) ECPI Indices is a socially responsible investment index provided by ECPI, which investigates ESG 052 564-2413 052 587-1300 JR Central JR East JR West JR Central JR East JR West JR Central JR East JR West (Environmental, Social and Governance) in a company and provides its rating information. ECPI's main offices are located in Luxembourg and Italy. E-mail: [email protected]

*1. Figures are calculated by JR Central based on Financial Report of all JR companies for FY2016. *2. (Operating income + Interest and dividend income) / Interest expense

92 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 CENTRAL JAPAN RAILWAY COMPANY Annual Report 2017 93