#1JP JAPAN POST HOLDINGS HOLDINGS Initiatives for the "Action to Implement Management that is Conscious of Cost of Capital and Stock Price" November 13, 2023#2Analysis and Evaluation of Current Situation Japan Post Holdings' PBR While the Tokyo Stock Exchange has indicated that approximately half of the listed companies on the Prime Market have a PBR below 1, the Company needs to improve its PBR as it has a PBR of less than 1 in the past 5 fiscal years. PBR can theoretically be expressed as PBR = ROE / (cost of equity - expected growth rate). Improving PBR requires three things: (1) increasing ROE, (2) reducing cost of equity, and (3) increasing expected growth rate. Assuming an expected growth rate of zero, "ROE ≥ cost of equity" needs to be achieved for PBR to be more than 1. PBR of the Company* Decomposition of PBR (Times) 0.45 0.40 0.35 0.39 0.30 0.37 PBR (Price-to-Book Ratio) = ROE (Return on Equity) PER (Price Earnings Ratio) ROE Cost of equity - Expected growth rate ROA Net Income 0.31 0.29 3 things to improve PBR 0.25 0.27 1 ROE ↑ 0.20 2 Cost of equity Д Х 0.15 0.10 FY18 FY19 FY20 FY21 FY22 *Figures as of the end of each fiscal year are calculated JP JAPAN POST GROUP Expected growth rate Total Assets Financial leverage Total Assets ( = Net Assets + Liabilities ) Net Assets Copyright © JAPAN POST GROUP. All Rights Reserved. 1#3Analysis and Evaluation of Current Situation/Initiatives for Improvement Japan Post Holdings' ROE and Cost of Equity ➤ Using CAPM based on the most recent data, the cost of equity is estimated to be approx. 5%. The Company's ROE is below the cost of equity. We aim for a level of ROE that exceeds the cost of equity. Trends of the Company's ROE (* 1,2) and the cost of equity (%) 6.0 5.5 Cost of equity: Approx. 5% 5.0 4.5 4.5 4.5 4.7 4.4 4.0 3.9 3.5 3.0 2.5 In FY2023, ROE declined due to a decline in consolidated net income from the previous fiscal year resulting from a decrease in the shareholding ratio of Japan Post Bank shares, a group company (from approx. 89% to approx. 60%). 2.7 2.0 FY18 FY19 FY20 FY21 FY22 FY23 (Forecast) Increasing ROE Specific ROE and other targets, timing for achieving them, details of initiatives, etc. will be discussed while reviewing the Medium- term Management Plan during the current fiscal year, and will be disclosed in FY2024. FY24... 1 ROE on a shareholders' equity basis not affected by net unrealized gains (losses) on available-for-sale securities, taking into consideration our banking business characteristics X2 Calculated by dividing net income attributable to Japan Post Holdings by the average shareholders' equity during the period (excluding non-controlling interests and net unrealized gains (losses) on available-for-sale securities from net assets) and rounding to the first decimal place JP JAPAN POST GROUP Copyright © JAPAN POST GROUP. All Rights Reserved. 2#4Initiatives for Improvement Policy for Initiatives to Improve PBR (Overall Picture) ➤ Improve PBR by increasing ROE, reducing cost of equity and increasing expected growth rate. Details of specific initiatives, etc. will be discussed while reviewing the Medium-term Management Plan during the current fiscal year, and will be disclosed in FY2024. 【Profit generation] Japan Post Co. Increasing ROA (profit) Increasing ROE Japan Post Bank Japan Post Insurance Controlling financial leverage Reducing cost of equity Increasing expected growth rate Postal and domestic logistics business: Reinforcing sales capabilities and systems, and increasing the number of parcels, etc. by collaborating with other companies Post office business: Increasing usage by improving sales skills, etc., and improving customer convenience by expanding online and remote services Real estate business: Promoting development of Group-owned real estate, etc. in accordance with their location characteristics Market business: Expansion of risk assets, restructuring of yen interest rate portfolio Retail business: Improving earnings of existing businesses, and seizing new revenue opportunities by using apps, etc. Σ business: Developing GP services unique to Japan Post Bank Sales: Strengthening of sales network cooperation, development of sales personnel, enhancement of product lineup Asset management: Expanding asset management earnings by achieving greater depth and sophistication of asset management Securing new revenue: Creating new measures to secure revenue through alliances with other companies [Financial strategy and capital policy] - Utilization of debt in growth investments to control funding costs - Improve capital efficiency through flexible share repurchases [Stable share price formation】 - Stable dividend - Reduce business risk and conduct appropriate control [Investor relations activities and information disclosure) - Strengthening the transmission of equity stories [Growth strategy】 - Develop growth strategies to realize the "Co-creation Platform" set forth in the Medium-term Management Plan, and identify seeds in new business fields that will contribute to these strategies JP JAPAN POST GROUP Copyright JAPAN POST GROUP. 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