Notes on Media Briefing by Akira Kiyota, Director and Representative Executive Officer, Group CEO, Exchange Group, Inc., on December 17, 2018

Today, I would like to brief you on one agenda item, that is, revisions to the calculation methodologies for "JPX-Nikkei Index 400" and "JPX-Nikkei Mid and Small Cap Index". Calculation of JPX-Nikkei Index 400, in collaboration with Nikkei Inc., started nearly five years ago in January 2014. The index was designed to include companies with high investment appeal and focuses on factors such as "three-year average ROE" as indicators for efficient capital utilization. From the perspective of global investment, appointments of independent outside directors and disclosures of financial information in English are also taken into account when selecting constituents. As such, many investors and other market users are using the index. The same concepts were applied when calculation of JPX-Nikkei Mid and Small Cap Index began in March 2017. Though we have reviewed the calculation methodologies of the indices over time, TSE and Nikkei Inc. have together decided that with five years having passed, the time is right to make revisions to such methodologies in consideration of comments received from index users. There are two revisions that will now be applied to both indices at the time of periodic review in August every year. 1. Additional points in the qualitative score category will be granted to companies who disclose corporate governance reports in English in addition to financial information; and 2. When choosing new constituents, it will be more likely that companies with higher ROE will be selected. Moreover, with respect to JPX-Nikkei Mid and Small Cap Index, a revision will be made to the "appointment of independent outside directors" category in qualitative scoring to align with the JPX-Nikkei 400. Instead of "at least two independent outside directors", the new criterion will be "at least one third of the total number of directors or a minimum of three". In the future, we will engage in various initiatives in cooperation with Nikkei Inc. so that the indices can be utilized by many market users as better stock price indices.

1 [Q&A] Q: Could you sum up the market conditions and JPX’s initiatives in 2018? Also, what are the prospects for 2019 and matters or initiatives on which JPX will put special emphasis?

A: This year, we saw the summit between North and South Korean leaders in April and the summit between the U.S. and North Korean leaders in June, which eased tensions surrounding North Korea. Meanwhile, the trade conflict between the U.S. and China intensified, the U.S. consistently started pulling away from its monetary easing policy, and long-term interest rates gradually rose. All of these factors contributed to a turbulent stock market with stock prices experiencing sudden ups and downs. Now, as we come closer to the end of the year, I feel that stock prices have stayed within a relatively narrow range. With respect to the Japanese economy, concerns over the trade conflict between the U.S. and China has recently cast a shadow in some respects. Nevertheless, we can continue to expect solid figures for earnings of Japanese enterprises. Especially after earnings reporting for the first half of the year, concerns over the U.S.-China trade conflict made corporate managers relatively cautious on future results, but I don't believe they are expecting negative figures to a huge extent, even though the current foreign exchange rate has somewhat deviated from the estimated foreign exchange rate for export-driven companies. We should still be able to continue seeing strong conditions in the economy. As for the stock market, 225 reached JPY 24,000 levels in January and October. Prices, however, are on levels that do not allow for further upward movement, and interest rate hikes originating from the U.S. have prevented stock price rises. Due to these factors, market-related parties, including me, have an impression that the Nikkei 225 did not necessarily rise as much as we had expected. As the Nikkei 225 was expected to rise to JPY 25,000 or JPY 26,000 at the beginning of the year, there has not been a significant rise in prices. Under such circumstances, as this year is the last one that caps the 2nd Medium-Term Management Plan, we have done what was necessary in a straightforward manner. For example, we shortened the settlement cycle of JGB transactions to T+1 and introduced a market maker

2 scheme to revitalize the ETF market. With respect to our new management task, that is sustainability matters such as ESG and SDGs, we established the Sustainability Committee in July with myself at the head, and have announced that we will aggressively promote this initiative. In September, S&P/JPX Carbon Efficient Index was selected by GPIF as one of the Global Environmental Stock Indices. As such, I think our endeavors on sustainability initiatives took shape in a sense. Moreover, in October we expressed our support for TCFD. Meanwhile, one of the matters that we must continue addressing next year and onwards is the comprehensive exchange. There has been forward movement since autumn this year toward the creation of such an exchange. In October, we concluded an NDA with Tokyo Commodity Exchange (TOCOM) and have started discussions over initiatives toward said end. The government's Council for Promotion of Regulatory Reform has issued a strong request for creating such an exchange and proposed in its report that a comprehensive exchange should be created as early as possible around FY2020. It also proposed that a certain basic direction should be presented by the end of March 2019. As such, we would like to continue holding active discussions with TOCOM without wasting time. With respect to the cash equity market structure about which various market users have raised issues, we established the Advisory Group to Review TSE Cash Equity Market Structure to discuss said issues. Currently, the Advisory Group is summarizing the roles and issues of the 1st Section, the 2nd Section, Mothers, and JASDAQ and sorting out issues for future discussions. We would like to seek public comments as early as possible. Based on the opinions we receive from a wide range of market users, we will work on reviewing the market structure. These are the matters we will work on for the next year. Moving back to data on this year, cash equity trading value and derivatives trading volume for the year are likely to set record highs. Though it is slightly uncertain whether the cash equity trading value will set a record high, if the current market condition keeps up, the trading value is likely to set a new record by slightly surpassing the

3 record high in the past. That past record high was the total of trading values at TSE and OSE in 2007, when TSE and OSE were yet to be merged, so it means that the trading value at the merged TSE will exceed that from before the merger. The trading volume of derivatives for this year already surpassed the previous record high from 2013 on December 12. We will be very pleased if both of them break their records. Lastly, on behalf of JPX, I would like to say that we are very much concerned about the distress and inconvenience to market users caused by the system glitch of arrowhead in October. Learning from this experience, we will focus on maintaining stable operations of the system and make every effort to prevent the recurrence of any similar problem.

Q: SoftBank, a subsidiary of SoftBank Group, is to be listed the day after tomorrow. How did you approach the examination and determine to approve the listing application considering that it would result in having both parent and subsidiary companies listed on TSE? Also, how was the approval determined in terms of the Corporate Governance Code, which was partially revised this summer?

A: Regarding the listing of SoftBank, cancellation of orders to buy its shares has been reported in some media outlets because of a large scale communication failure that occurred right as they were in the midst of the book building process. Some investors might have concerns. Still, the company seems to be preparing to list its shares on the 19th as scheduled. JPX-R has thoroughly conducted a listing examination on SoftBank, which is the mobile unit of the SoftBank Group. To avoid risk of conflicts of interest between shareholders of the parent company and minority shareholders of a subsidiary, I understand JPX-R has checked whether the company has a concrete system to protect such minority shareholders. The size of SoftBank's IPO is expected to be the largest in history with many shareholders involved. As a market operator, we have high hopes for many people to take this opportunity to start investing.

4 As I said at the previous media briefing, the national number of IPOs this year is expected to reach 99 companies, including one on the Sapporo Securities Exchange. This will be the highest in recent years.

Q: The BOJ's ETF buying reached a record JPY 6 trillion this year. Some critics say that the market has been propped up by the BOJ's large purchase of ETFs, which could distort the stock market. Please share your views on this.

A: I have talked about this matter in previous briefings from time to time. The BOJ says that it keeps buying ETFs to reduce the risk premium in the market to prevent economic activities, including investment, from shrinking and that it believes the approach has been doing more good than harm so far. I remember that the BOJ expanded its annual ETF purchases to JPY 6 trillion in July 2016. The purchases exceeded JPY 6 trillion for the first time but had been JPY 3.3 trillion until mid-2016. When the BOJ made changes to the policy framework at the previous meeting, Governor Kuroda said that it is possible that the bank's ETF purchases may swing a little to above or below JPY 6 trillion. The amount swung up this time. There are eight more business days this year. Even if the BOJ purchases ETFs (excluding those linked to capex & human capital indices) worth up to JPY 6.06 to 6.07 trillion in those eight days, when the difference is around several hundred billions of yen compared to annual purchases of JPY 6 trillion, it should be within the scope of "swinging a little". I don't think the BOJ is expecting the value to reach over JPY 6 trillion on a permanent basis. In that sense, we are not in a position to comment on the monetary policy, but I don't think the approach is sustainable. If the BOJ continues the purchase, and the larger the amount of ETFs it holds, the more likely the policy may have a negative impact on share prices in a way which may distort price formation. Although I think the approach should be temporary, the BOJ says that the purchases have not distorted the market, but rather that the benefits of reducing the risk premium are larger. We share the same view on the

5 current situation at this stage.

Q: Concerning false statements in securities reports made by Motor, not only Mr. Carlos Ghosn but Nissan Motor as a company was charged. Does TSE deem Nissan Motor to have problems in its internal management system? When a company is also charged, the case seems to be more serious in general. How is TSE going to check the internal management system of the company? Could you also give us your comments on this issue as of now?

A: Securities and Exchange Surveillance Commission brought a charge against Nissan Motor, and Tokyo District Public Prosecutors indicted the auto company besides the indictments of Mr. Carlos Ghosn and Mr. Greg Kelly, its former executives. We want to know what is wrong with Nissan's internal management system. Investigation has been underway with circumstances changing every day. As such, it is more important than ever to disclose information in a timely and appropriate manner. As I said in the previous briefing, we have requested Nissan Motor to continue appropriately disclosing company information to shareholders and investors.

Q: Are you considering implementing any measure on Nissan Motor, such as imposing a penalty?

A: If there are false statements in the securities reports, we will examine whether we need to take any measure based on the circumstances of the false statements and the necessary level of improvement in the internal management system. Thus, we do not always implement measures when there are false statements without knowing the details. We may need to take some measures after examining the details of the false statements. At the moment, we have requested the company to disclose company information to shareholders and investors in a timely and appropriate manner and provide the information to us at the same time.

6 Q: There will be ten consecutive non-business days from the end of April through to the beginning of May next year, which fall on the publication period for companies whose fiscal years end in March. As such, the number of days that those companies can publish their financial results will decrease. TSE requests companies to announce their financial results within 45 days after the end of their fiscal years. Are you likely to take any measures concerning this?

A: An amendment to the law regarding ten consecutive non-business days was passed, officially instating that new holiday period. However, we will consult with the relevant parties on whether or not to open the markets during said period before announcing our decision. Since the government has determined to hold new national holidays, leading to a period of 10 consecutive non-business days, there are important matters to be considered such as whether banks, etc. transfer money, or settlement organizations operate as normal. Thus, it is not up to us alone to determine whether or not to keep the markets open. As you said, ten consecutive non-business days will reduce the days on which companies can announce their financial results. That means the number of companies that announce them on the same day may increase. We will consult with parties involved and determine whether we need to take any measures.

Q: When you answered a question about SoftBank listing of parent and subsidiary companies, you said that an issue of conflicts of interest between shareholders of the parent company and minority shareholders of a subsidiary can be prevented with a certain system. Based on what system specifically have you concluded that such an issue can be prevented?

A: As JPX-R conducts the examinations, it is difficult for me to provide detailed information. However, I understand that JPX-R concluded that there would be no problem in approving SoftBank’s listing after thorough verification on the company’s system.

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