The document provides an overview of Aichi Prefecture's fiscal conditions and efforts toward fiscal health. It discusses Aichi's initial budget revenue and expenditure structures from FY00 to FY08, showing a transition toward more independent revenue sources and reduced investment expenses. It also summarizes trends in prefectural bond issuance and outstanding debt, noting that bond issuance and debt peaked in FY04 and have since declined as Aichi manages issuance carefully.

1. Aichi Prefecture Financial Standing Budget Management Division Department of General Affairs September 2008

3. Aichi Prefecture Overview Economic size on par with some nations’ Tokyo Osaka Nagoya 2.22mn Ichinomiya 370,000 Kasugai 300,000 Okazaki 370,000 Toyohashi 370,000 Toyota 420,000 Several cities with populations of 300,000+, including Nagoya GDP rank, 07 *From IMF DATA GDP rank, 05 （ Bn USD ） （ Bn USD ） １ Aichi Prefecture is in Central Japan, midway between Tokyo and Osaka ・・・・ ・・・・・ ・・ 374 Austria 25 3,322 Germany 3 3,251 China 4 2,773 England 5 4,384 Japan 2 13,844 USA 1 54,312 World Total 312 Denmark 27 315 Greece 26 GDP 国名 Kanagawa Aichi Osaka Tokyo Prefecture 283 325 350 837 GDP 3 4 2 1 .5 mil 2 nd （ 05 ） Income per a resident 15.6% 2 nd （ 00-05 ） Real economic growth rate 1.36 Nationwide avg 1.32 ％ (06 ） Total fertility rate 7.0 ％ 2 nd （ Oct 07 ） Population growth 7,366,717 4 th （ Mar 08 ） Population

4. Industrial vitality Mitsubishi heavy Industries Fuji heavy Industries New Industry （ Aircraft ） Chubu International Airport Key Industry （ Automobile ） Mikawa bay Toyota Headquarters Nagoya station high-rise buildings Lucent Tower Mid-land Square JRTowers Spiral Tower Brilliant Tower Prime Central Made-in-Japan jet plane under development, ”MRJ” Automobile shipping bay （ Mikawa bay ） Three companies produce 35% of the Boeing 787 Kawasaki heavy Industries Satellite “Kaguya” Air transportation of Boeing 787’s parts ２ Mitsubishi heavy Industries Total unemployment rate 2.8% Nationwide avg 4.1% (3 rd 06 avg ) - 1 st in areas with 2mn+ labor force population Job offers to applicants 1.99x - Nationwide 1.06x - ( 1 st in Japan for 43 straight months, Aug 07) Per capita income 3.441mn yen - ( 2 nd in Japan, 06) Total unemployment rate 2.7% Nationwide avg 3.9% ( 2007 avg ) - 2 nd in areas with 2mn+ labor force population Job offers to applicants 1.84x - Nationwide 0.95x - ( 1 st in Japan for 50 straight months, Mar 08) Manufacturing Employees 841,662 - ( 1 st in Japan, 06) Manufactured goods shipments 43.6661 trn - ( 1st , 1976 - 2006) Agricultural production 327.5 bn - ( 5 th , 04 - 05) Plant area 193 ha - ( 1st , 04 - 05) Trade tax revenue 10.1028 trn (06) *Exceeds Japan ’ s total trade surplus (7.9019 trn yen) Manufactured goods shipments 4 trillion - ( 1st , 1976 - 2006) Agricultural production $2.9 bn 6 , - - ( th 05 06) Plant area 198 ha - 1st - Trade tax revenue 1.5. trillion (07) *Exceeds Japan ’ s total trade surplus (0.7 trillion) Plant location 98 -( 2st ,07) ( , 06 07)

5. Extensive transportation infrastructure Extensive road network under development Linear Chuo Express Base for commuter, business aircraft Nagoya Airport Nagoya Port ・ Trade value 6.7 trillion 1st in Japan, 2000-2007 2nd Tokyo port, 10.4% of nationwide total ・ Total cargo handled 215 mn tons 1st in Japan, 2001-2007 Chubu International Airport (Central) Both domestic and international flight service – 24-hour distribution operations possible Kinuunra Bay Core of Kinuura reclaimed industrial land ３ Mikawa Bay Automobile shipping port #1 in auto volume in Japan Trunk road Regional trunk route (planned) Regional trunk route (proposed) Regional road (promoting circulation) Local roads, etc. * Roads in use incl temporary use

6. 1 . Fiscal Standing ４

7. ①FY08 Initial Budget Revenue Structure （ FY 08 initial budget revenue structure ） ※ Osaka’s budget is after correction in July. Highest prefectural tax revenue after Tokyo and Osaka Aichi Prefecture Prefectures with FY08 initial budgets of 1.5 trn Yen or more Breakdown of Prefectural tax ５ Independent Revenue sources 80.9% Dependent Revenue sources 19.1% Other independent revenue sources 3.5% Other dependent revenue sources 1.2% Local consumption tax settlement 6.2% Prefectural Tax 60.3% National treasury disbursement 8.3% Prefectural bond 9.6% Misc revenue 10.9% Total Revenue .2 trillion 0 Citizen resident tax 25.3% Corp business tax 34.2% Others 9.1% Corporate residence tax 6.9% Local consumption tax 11.0% Automobile tax 9.0% Light oil transaction tax 4.5% Total revenue .3 trillion 1,718,153 1,683,288 2,254,250 2,922,615 1,534,900 1,976,236 2,908,964 607,959 820,600 1,282,208 1,360,000 1,398,504 734,000 630,863 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Hokkaido Saitama Kanagawa Aichi Osaka Hyogo Fukuoka Budget Local tax （ Mil Yen ）

8. ② Transition of Revenue Budget (Initial Budget) Independent revenue sources 59.1 ％ （ Note ） Excluding refinancing bond. （ Transition of revenue budget （ initial budget ）） Only 3 bodies with independent revenue ratio over 80%: Tokyo, Kanagawa, Aichi FY08 initial budget （ excl Outlines, Tentative ） for 45bodies Allocation tax, a dependent revenue source, gains large share. Dependent revenue sources Independent revenue sources 80.9 ％ ６ Indepenedent fiscal resources IDepenedent fiscal resources 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 Nationwide avg. （ 10 bn Yen ） （ 100 mil Yen ） FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Prefectural tax 10,575 10,976 10,025 9,520 9,935 10,525 11,046 13,116 13,600 Misc revenue 2,663 2,627 2,493 2,525 2,543 2,444 2,528 2,521 2,460 Local consumption tax settlement 1,422 1,399 1,237 1,301 1,526 1,390 1,476 1,506 1,392 Others 983 1,004 1,074 1,097 1,044 810 949 927 787 Total 15,643 16,006 14,829 14,443 15,048 15,169 15,999 18,070 18,239 Local allocation tax 1,400 1,150 1,300 1,000 700 700 350 0 0 National treasury disbursement 2,907 2,998 2,922 2,692 2,593 2,272 1,885 1,879 1,868 Prefectural bond 2,233 2,449 3,281 3,870 3,507 2,492 2,470 2,294 2,175 Others 108 96 123 195 385 845 1,427 207 260 Total 6,648 6,693 7,626 7,757 7,185 6,309 6,132 4,380 4,303 0 5,000 10,000 15,000 20,000 25,000 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Others Prefectural bond National treasury disbusrsement Local allocation tax Others Local consumption tax settlement Misc revenue Prefectural tax Total of independent revenue （ 100 mil Yen ）

10. ④ Transition of Prefectural Bond Issuance Aichi Expo, Chubu International Airport under construction Note: 1) Figures through FY05 based on results. FY06 figures are expected results. FY07 figures based on initial budget. 2) Bars indicate amount of new issuances, line is total including refinancing bonds. (Aichi Prefecture bond issuance (general account)) New bond issuances reduced after 2 big projects, with careful issuance management ８ (100 mil Yen) ( 年度 ) 2,826 2,570 2,788 3,558 3,686 3,377 2,408 2,404 2,482 2,304 3,192 2,827 3,117 4,703 5,149 5,101 3,481 4,187 4,243 4,394 0 1,000 2,000 3,000 4,000 5,000 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

11. ⑤ Transition of Prefectural Bond Outstanding Note: 1) FY06 figures based on results. FY07 figures based on expected results. FY08 figures based on initial budget. 2) are temporary fiscal measures bonds, tax reduction compensation bonds, temporary tax revenue compensation bonds 3) is outstanding amount of debt service fund. （ Outstanding prefectural bonds (general account) ） Issuance under central govt system grows Prefectural bonds outstanding peaked in FY04, and now declining. ９ 22,767 25,318 26,854 27,946 28,852 30,219 30,827 31,224 30,893 29,812 29,641 29,325 750 820 1,662 2,180 2,276 1,116 1,332 1,366 1,474 1,812 2,353 3,767 4,894 5,719 6,593 7,047 7,502 138 37 197 319 474 588 675 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 (100mil Yen) 31,138 37,432 36,868 35,269 33,160 38,067 39,103 28,417 29,739 38,868 26,687 24,021 Debt service fund increased steadily.

12. ⑥ Transition of Debt Service Fund Outstanding ・ Change in reserve rule helps real debt servicing ratio ・ Bringing forward FY07 portion balances debt service ratio Advances reserve of FY07 The reserve provides for future redemption Note: 1) FY06 figures based on results. FY07 figures based on expected results. FY08 figures based on initial budget. （ Transition of Debt Service Fund Outstanding ） １０ Change in reserve rule 319 474 588 675 750 820 1121 1416 1767 134 509 407 259 197 505 0 500 1,000 1,500 2,000 2,500 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 (100mil Yen) 2,276 1,662 2,180

13. ⑦ Real Debt Service Ratio 18 ％ 25 ％ Restricted body Limited issuance for individual projects * No groups Approval body ・ Must receive permission to issue bonds ・ Must detail plan for appropriate debt service costs level * 4 bodies Agreement body ・ May issue with agreement ・ Issuance still possible even without agreement * 43 bodies, led by Aichi Aichi 12.4 ％ （ Real Debt Service Ratio ） Classification of issuers by real debt servicing ratio Aichi Prefecture real debt service ratio is 11.3% (avg, FY05-FY07) Central government permission not necessary to issue local bonds The real debt servicing ratio is a new index introduce in FY06 upon the shift to the local bond issuance consultative system. Compared to the previous issuance limit ratio, the new system consolidates sinking fund reserve building rules and reflects public corporation disbursements. １１ Regarding 4 indices provided by Fiscal Soundness Law （① Real Deficit Ratio②Consolidated Real Deficit Ratio③Real Debt Service Ratio④Future Burden Ratio ） , those were announced from FY07 results, and it’s from FY08 results to obligate detail plan for Fiscal Soundness due to the effects of 4 indices. 【 Based on FY07results, ①②No deficit 、③１１．３％④２３３．０％ , are expected. 】

14. 2. Efforts toward Fiscal Health 12

15. （１） Aichi Reform Framework 2005 【 Numerical target 】 Cutting 1,500+ staff between FY05-FY10 【 Numerical target 】 Cutting approx 3.0bn yen/FY Fiscal reform -> Establishing measures to ensure fiscal flexibility and reduce expenditures and capture revenues from all angles Aichi Reform Framework 2005 Restraining Expenditures and Securing Revenues (Setting of Target Figures ) １７ FY-04 -160.0 ｂｎ yen FY07 reducing by 90% (-16.2 bn yen) Accelerating achieving surplus FY08 from FY 10 Surplus Approx. -16.2 bn yen Primary balance 270.0 bn yen 90.0 bn yen Total Using prefectural assets efficiently Increasing tax collection rate Capturing independent revenue sources 30.0 bn yen 10.0 bn yen 3) Maintaining independent revenue sources Cutting public works costs Reviewing projects with administrative evaluation system 120.0 bn yen 40.0 bn yen 2) Reviewing measures Reviewing allowances, bonuses Reviewing salary system Controlling total personnel costs Maintaining appropriate education system staffing levels Cutting staff in governor’s office and education system Reducing fiscal expenditures to prefecture-related bodies 120.0 bn yen 40.0 bn yen 1) Internal efforts FY05-FY10 total FY05-07 total Main efforts Goals

16. ② Recent Administrative Reforms Aichi Reform Framework results FY05 – FY07 reforms (Aichi Reform Framework 2005) Impact: 352.4bn yen Staff reduction (net reduction):2,540 persons 836staff cut (net reduction) FY99-FY04 efforts (Prefectural Govt Reform Program) 14 Already 400bn yen and 3,000staffs reduced 118.5bn yen saved/cut Internal Efforts 3.7bn Selecting, Consolidating Measures 7.1bn Collecting Independent Resources 7.7bn Total 18.5bn FY99 FY00 FY01 FY02 FY03 FY04 Total 6.9 bn yen 7.7 bn yen 3.6bn yen 4.7 bn yen 1.9 bn yen 800 mil yen 25.6 bn yen （ 681persons ） （ 759 persons ） （ 360 persons ） （ 468 persons ） （ 188 persons ） （ 84 persons ） （ 2,540 persons ） 33.0 bn yen 23.0 bn yen 10.4 bn yen 600 mil yen 600 mil yen 3.5 bn yen 71.1 bn yen 123.7 bn yen 59.9 bn yen 15.8 bn yen 13.3 bn yen 15.3 bn yen 27.7 bn yen 255.7 bn yen 19.9 bn yen 6.3 bn yen 900 mil yen 2.0 bn yen 1.4 bn yen 1.1 bn yen 163.6 bn yen 90.6 bn yen 29.8 bn yen 18.6 bn yen 17.8 bn yen 32.0 bn yen 352.4 bn yen Total Impact Other Salary caps Overhauling public facilities Overhauling public facilities Overhauling prefecture- related bodies Overhauling prefecture- related bodies of this main efforts Rationalizing subsidies Rationalizing subsidies （ Admin, education ） Net staff reduction

17. 3. Guidelines of New Policies 15

19. Basic targets for Aichi regional development -Basic Issues and Main Policies Basic Issues① Building an urban international exchange giant that radiates industry and culture to the world Aichi’s vision （ Guidelines for New Policies 2 ） Industrial and exchange contributions to the world. Socially-productive population Healthy and safe residents Regional self-reliance Vitalizing the region upon the fruits of the Aichi Expo and completion of the Chubu International Airport. Addressing public safety, disaster management, declining childbirth, education, public health, the environment, and other issues. Realizing our slogan, Aichi: Leaping into the Future and Sparking in the World . Aichi: Leaping into the Future and Sparkling in the World ・ Economic Partnership, Exchange Strategy with Asia. Building up special economic partnership mainly with Asia. To enhance international exchange as a hub, it holds various exhibitions periodically made a presentation by Asian companies. ・ Building up Multi-culture Coexistence and Matured Society. Drastic improvements of educational environment for foreign children and students, for example, Moderation of installation standards of International schools’ corporate body. ・ Building up Aichi, where Culture and Art are created. Holding high-quality Operas continuously, Develop international, cultural and artistic events, Assistance for emerging artists. ・ Building up Stage for Attractive and World-wide Exchange Attracting and holding events and conventions continuously for world’s attention. Promoting industrial Tourism, Developing wide-area Tourist’s route. ・ Improvement of Aichi EXPO Memorial Park It contributes for learning nature’s wisdom and being the place to exchange among citizens. Basic Issues② Developing industry to support a stronger core of global industrial technology and a mature society ・ Forming Ise bay-rim Industrial and Creative Cluster Forming the cluster, which creates next-generation industries, such as automobile, health and longevity, new energy, aerospace, interaction with agriculture and industry. ・ Building up “Hub of Wisdom” where Manufacture’s Technologies are created and transmitted. Science and Technology Exchange Center will be improved, as the core facility of hypsometric analysis, R&D, and utilizing and transmitting achievements ・ Enforcement of Agriculture, Forestry and Fisheries for future Aichi’s Development Development of new technologies utilized IT, which is the results of collaborative research with Agricultural Experiment Station and the different field’s research institutes. Nurturing corporate management body as the core of the region, etc. 1 ７