Custody Newsflash

The Bank of Tokyo-Mitsubishi UFJ, Ltd. Transaction Services Division

Custody Newsflash June 21, 2016 Fitch Revised Outlook for Japanese Financial Institutions to Negative ======Category Japanese Government Bond Issues Summary On June 16, 2016, Fitch Ratings revised the rating Outlooks for Japanese financial institutions to Negative from Stable. The IDRs have been affirmed. The Outlook revision for the financial institutions' IDRs follows the affirmation of Japan's sovereign rating at 'A' and revision of the Outlook to Negative from Stable on 13 June 2016. Impact This Newsflash is sent as general information. Action No immediate action is required. ======The following article is compiled from Fitch Ratings and BTMU’s own sources.

On June 16, 2016, Fitch Ratings revised the rating Outlooks for Mitsubishi UFJ Financial Group, Inc. (MUFG) and its subsidiaries, Sumitomo Mitsui Financial Group, Inc. (SMFG) and its subsidiaries, Mizuho Financial Group, Inc. (MHFG) and its subsidiaries, The Shizuoka Bank, Ltd. (Shizuoka), Nomura Holdings, Inc. (Nomura) and its subsidiaries and Daiwa Securities Group Inc. (Daiwa) and its subsidiaries to Negative from Stable. The IDRs have been affirmed. The Outlook revision for the financial institutions' IDRs follows the affirmation of Japan's sovereign rating at 'A' and revision of the Outlook to Negative from Stable on 13 June 2016.

The revision of the Outlooks on Japanese financial institutions to Negative from Stable reflects the following factors:-

MUFG and its listed subsidiary banks/SMFG and its subsidiary banks/Shizuoka

Fitch views these entities' Viability Ratings (VRs) are now effectively constrained by the sovereign rating. Their still high exposure to Japanese government bonds (JGBs), despite reductions in the past few years, makes them unlikely to avoid failure in the event of a sovereign default even though their intrinsic profiles otherwise remain broadly stable. (These entities will be referred to as "VR-driven entities affected by sovereign rating" hereafter.)

MHFG, Nomura, Daiwa and their listed subsidiary banks

Fitch views these entities’ IDRs are driven by its expectations of support from the Japanese authorities, which is reflected in their Support Ratings (SRs) and Support Rating Floors (SRFs). The negative rating action on the sovereign reflects weakening ability - rather than propensity - of the government to support the financial institutions. (These entities will be referred to as "support-driven entities" hereinafter.)

======The information contained herein has been derived from several sources believed to be reliable at the time of publication. Although having made every effort to ensure the accuracy of the contents, The Bank of Tokyo-Mitsubishi UFJ, Ltd. does not assume any liability for losses either direct or consequential caused by the use of this information. Copyright 2016 The Bank of Tokyo-Mitsubishi UFJ, Ltd. Designated institution for Alternative Dispute Resolution (ADR): Japanese Bankers Association (Contact No.: +81 (0)570 017109 or +81 (0)3 5252 3772) Page 1 of 2

The Bank of Tokyo-Mitsubishi UFJ, Ltd. Transaction Services Division

Rating The Gov. of Japan BTMU Mizuho SMBC Rating Category Agency before after before after before after before after Outlook S N S N S N S N Issuer Rating A NC A NC A- NC A- NC Fitch Long Term A NC A NC A- NC A- NC Short Term F1 NC F1 NC F1 NC F1 NC Outlook SSSS Issuer Rating A1 A1 A1 A1 Moody's Long Term A1 A1 A1 A1 Short Term P-1 P-1 P-1 P-1 Outlook SSSS LT Foreign Issuer Credit S&P A+ A+ A A ST Foreign Issuer Credit A-1 A-1 A-1 A-1 NC: no change N: Negative S: Stable P: Positive

The VRs for the VR-driven entities affected by sovereign rating could be downgraded were the sovereign to be downgraded, in light of the ratings' proximity to the Japanese sovereign's IDRs (A/Negative). The banks' VRs are unlikely to be rated above the sovereign rating given their significant sovereign exposure and high dependence/reliance on the domestic economy for their business operation and revenue generation.

The SR of '1' and SRF of 'A-' for all entities except for Shizuoka (SR '2' and SRF 'BBB-') are sensitive to changes in Japan's sovereign rating, which underline the government's ability to support the financial institutions. The ratings are also sensitive to any changes to Fitch's perception of the sovereign's willingness to support the financial institutions.

A downgrade in Japan's sovereign ratings to 'A-' or below would likely lead to a downgrade in the financial institutions' SRs and SRFs.

Please refer to https://www.fitchratings.com/site/definitions/bankratings for details of VRs, SRs and SRF

For your reference, please see our previous Newsflash; 20160615_Fitch Affirms Japan at ‘A’; Outlook Revised to Negative 20160212_Fitch Publishes MUFG Rating

Should you have any inquires, please feel free to contact us. Best regards, Transaction Services Division / The Bank of Tokyo-Mitsubishi UFJ, Ltd. Past Newsflash issues are available on the BTMU Yen Custody Website; http://www.bk.mufg.jp/custody/. This site is dedicated to our clients, and accessible only with “ID” and “Password”. Should you require them, please contact us Yusuke Kawabe, Manager Tel: (+81) 3 3245 9085 e-mail: [email protected]