Mitsubishi UFJ Financial : MUFG Report 2023 (JGAAP) (for viewing)

MUFG Report 2023

Integrated Report

Issued August 2023

What's

MUFG

Way

MUFG Way serves as the basic policy in conducting our business activities, and provides guidelines for all group activities.

MUFG Way also is the foundation for management decisions, including the formulation of management strategies and management plans, and serves as the core value for all employees.

つ
			MUFG's Pursuit of		Management Strategies	Leadership and	Financial Data /
	Management Message		Value Creation		and Performance	Governance	Corporate Data
					Financing for supporting industrial
					development & innovation
					To empower industrial development & innovation,
					we provide inance brokerage which connects
					businesses in need of inancing with depositors
ぐ		and investors.
な			Fund settlement functions
		that enable developing
		social infrastructure in
		remote regions

To empower social infrastructure development, we provide fund settlement including cross-border settlement, and connect parties in distant locations.

Values Purpose Vision

Code of Conduct

Purpose

Committed to empowering a brighter future.

Today, all of our stakeholders are striving to overcome challenges and

ind a way to the next stage toward sustainable growth.

We at MUFG will make every effort to help realize these goals. This will be our unchanging purpose now, and into the future.

Values

In addition to our unchanging primary value of "Integrity and Responsibility,"

we also value "Professionalism and Teamwork" and will "Challenge Ourselves to Grow."

Vision

By empowering our stakeholders to ind a way to the next stage toward sustainable growth, we will make every effort to become an indispensable partner for them and to be the world's most trusted inancial group.

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Committed to empowering a brighter future.

We are helping to resolve social issued by connecting diverse stakeholders.

Asset management and succession planning to ensure response to aging population & low birthrate

To empower response to aging population and low birthrate, we provide asset management and succession planning to connect customers with future generations, and connect their career savings to retirement life.

Rulemaking for environmental protection in Asia and around the world

To empower climate力change measures and environmental protection initiatives, we take part in international rulemaking and connect Asia with other regions worldwide.

Transforming our corporate culture to enable employees to fully live up to their aspirations and serve as

the driving force behind MUFG

To empower a brighter future, we connect issues the world is now confronting with the aspirations of employees.

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CONTENTS

		MUFG's Pursuit of		Management Strategies		Leadership and		Financial Data /
Management Message		Value Creation		and Performance		Governance		Corporate Data

MUFG Way ...................................................................................................... 1

Contents ......................................................................................................... 3

Management Message

CEO Message ....................................................................................................... 5

CFO Message ................................................................................................... 1 7

Management Strategies and Performance
Review of the Medium-Term Business Plan (MTBP)	5 1
Progress under the Medium-Term Business Plan (MTBP)	5 3
Track Record in Value Creation	5 5
(Financial and Non-Financial Highlights)
Digital Transformation
CDTO Message	5 7

Contribution to Addressing Environmental and

Social Issues

CSuO Message ....................................................................................... 6 1

Business Group Performance	9 1
Digital Service Business Group (DS)	9 3
Retail & Commercial Banking Business Group (R&C)	9 5
Japanese Corporate & Investment Banking	9 7
Business Group (JCIB)
Global Commercial Banking Business Group (GCB)	99
Asset Management & Investor Services Business	1 0 1
Group (AM/IS)
Global Corporate & Investment Banking Business	1 03
Group (GCIB)
Global Markets Business Group (Global Markets)	1 05
Leadership and Governance
Dialogue between Outside Directors and	1 09
Institutional Investors

We would like to extend our gratitude to readers of the MUFG Report 2023 integrated report.

In this edition, we focus on reporting on our progress thus far under the Medium-Term Business Plan (MTBP), the second year of which we have just completed, while including descriptions of what we believe MUFG ideally should look like in the long term, initiatives we are taking on to enhance shareholder value and messages from key management members. Also, based on feedback gleaned from stakeholder dialogue, this edition incorporates enriched descriptions regarding MUFG's unique strengths including Group companies' comprehensive capabilities as well as global network in order to facilitate understanding.

As the officer in charge of IR and responsible for the preparation of this report, I hereby declare that the MUFG Report 2023 has been sincerely prepared with the involvement of top management and the collaboration of various departments and that its content is accurate.

MUFG's Pursuit of Value Creation
Value Creation Process	2 9
Value Delivered to Stakeholders	3 1
Trajectory of MUFG's Operations Aligned	3 3
with Changes in Society
Message from Kevin Cronin CEO and Regional	3 5
Executive for the Americas

Sustainability Management Focused on	6 3
Addressing 10 Priority Issues
FOCUS Promoting Sustainable Businesses	6 8
Climate Change Measures & Environmental Protection	69
(Disclosure Based on TCFD Recommendations)
Transforming Our Corporate Culture /
Human Capital Strategy

Global Advisory Board	1 1 2
Corporate Governance	1 1 3
Risk Management	1 2 3
Cyber Security	1 2 7
Compliance	1 2 9
Internal Audit	1 3 1
Initiatives for Practicing a Customer-Oriented Approach	1 3 2

Going forward, we will value any insights and takeaways acquired through stakeholder dialogue to further enhance the content and transparency of information disclosure. We welcome frank opinions from our readers about this publication.

Tetsuya Yonehana

Representative Corporate Executive,

Senior Managing Corporate Executive, Group CFO

MUFG's Unique Strengths	3 7
Group Companies' Comprehensive Capabilities	3 8
Strategies in Asia	4 1
Alliance with Morgan Stanley	4 5
Global AM Business	4 7

CHRO Message .............................................................................. 7 9

Four Key Initiatives Supporting Human Capital	8 1
Management
Fostering a culture of taking on challenges and	8 5
transformation

Financial Data / Corporate Data
Eleven-Year Summary of Major Financial Data	1 3 3
Financial Review for Fiscal 2022	1 3 5
Consolidated Financial Statements	1 3 9
Performance Comparisons with Competitors	1 4 3
Company Overview	1 4 4

Main Disclosure Outlets

			Corporate Website
Detailed
		Annual Report	Sustainability Report
		Basel III Information
		Databook	Corporate
		Governance Report
			Integrated Report
			Investor Meeting
			Presentation
General			Business Report
		Financial	Non-Financial

Editorial Overview

To best explain our efforts to create sustained value to our investors and other stakeholders, we, Mitsubishi UFJ Financial Group, or MUFG, have compiled this integrated report, MUFG Report 2023, with reference to such guidelines as the framework provided by the Value Reporting Foundation (VRF) as well as the Guidance for

Collaborative Value Creation issued by the Ministry of Economy, Trade and Industry. Further details on our financial status and sustainability initiatives are available on our website. In addition, our plans call for issuing the MUFG Sustainability Report 2023, a publication detailing our response to sustainability issues, in September 2023 or later.

Reporting Period

April 1, 2022 to March 31, 2023

(The report includes some information pertaining to activities undertaken up to July 2023.)

Disclaimer

This report contains forward-looking statements with regard to the expectations, forecasts, targets and plans of Mitsubishi UFJ Financial Group, Inc. and its subsidiaries and affiliates. These forward-looking statements are based on information currently available to the Group and are stated in this document on the basis of the outlook at the time that this document was produced. In producing these forward-looking statements, certain assumptions (premises) have been utilized that are subjective and may prove to be incorrect. Should any underlying assumption prove to be incorrect, actual results in the future may vary materially from some of the forward-looking statements in this document. The Group has no obligation or intent to update any forward-looking statements contained in this document. In addition, information on companies and other entities outside the Group that is included in this document has been obtained from publicly available information and other sources. The accuracy and appropriateness of that information has not been verified by the Group and cannot be guaranteed. All figures contained in this report are calculated according to generally accepted accounting principles in Japan, unless otherwise noted.

Definitions of Specific Terms Used in This Report

MUFG/The Group: Mitsubishi UFJ Financial Group, Inc. and its subsidiaries and affiliates

The Bank: MUFG Bank, Ltd.

The Trust Bank: Mitsubishi UFJ Trust and Banking Corporation

The Securities: Mitsubishi UFJ Securities Holdings Co., Ltd. and its subsidiaries

MUMSS: Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

NICOS: Mitsubishi UFJ NICOS Co., Ltd.

MUAH: MUFG Americas Holdings Corporation

Krungsri (KS): Bank of Ayudhya Public Company Limited

Bank Danamon (BDI): PT Bank Danamon Indonesia, Tbk.

FSI: First Sentier Investors Holdings Pty Ltd

AM: Asset Management

IS: Investor Services

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Management Message

CEO Message

Beyond Finance;

Beyond Our Comfort Zone

Hironori

Kamezawa

President &

Group CEO

		MUFG's Pursuit of		Management Strategies		Leadership and		Financial Data /
Management Message		Value Creation		and Performance		Governance		Corporate Data

Reflections on Fiscal 2022

As the world began to stir from its pandemic dormancy in 2022 and overseas business travel became possible again, I set out in April to reestablish face-to-face connections with clients and colleagues, domestically and abroad, for a total of 63 days on the road. The onrush of exposure to diverse points of view after so long in lockdown was invigorating and informative. I returned alert to the immense public expectations of Japan as the world's third largest economy and the only Asian nation in the G7. I heard similar expectations of MUFG as a Global Systemically Important Financial Institution (G-SIFI) and representative of Asia in general. Above all, I was reminded how energizing and reviving-andhumanizing-it is to exchange ideas in person.

I also emerged from the pandemic cocoon with a quiet resolution to take on the challenge of conducting much more of my daily interactions in English. I have spoken it in certain settings for years-meeting with global CEOs, attending meetings and dinners, delivering speeches with English as lingua franca-but I now resolved to consciously expand its use outside my comfort zone.

Through travel and language, I set out to build rapport and deepen relationships with my peers by reinforcing personal connections. I had been cultivating these connections virtually during the pandemic, but now was able to enrich them in person. These experiences taught me how a combination of digital and physical meetings can be powerful, positive, and productive.

Engaging with peers in impromptu pockets of time can be especially beneficial. When walking to a venue for the next meeting, or taking a coffee break, or enjoying a shared lunch or dinner, peers can engage in much more frank conversations than formal settings allow. I've gained valuable insights for developing MUFG's business strategies from these casual exchanges. I've also seen informal conversations among leaders result in consensus on vital issues.

Common topics discussed with peers during these travels were digital, green, and changes in workstyles and social values, with the precept that finding solutions to global issues requires global collaboration among all parties, including Japan. During these travels, leaders asked me about MUFG's position on addressing climate change, or my observations on relevant public discourse in Asia and Japan. When I asked for reciprocal insights, CEOs often volunteered to collaborate with MUFG on solutions to shared concerns. This engagement extended into the digital tech community with startup representatives at home and abroad who also have considerable interest in -and expectations of-MUFG.

I believe our company, with its exceptionally strong global network, has a unique role to play in creating consensus on vital matters like climate change and digital transformation. We also have a corresponding duty to address the trajectory of issues affecting the global economy and society at large.

With this in mind, some thoughts on these issues.

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Management Message

CEO Message

Assessing the Business Environment & Challenges Ahead

This past year brought a rolling tide of profound, world-changing events. With repercussions of the pandemic still in effect, the international community was stunned by Russia's invasion of Ukraine in the spring. Fallout from U.S.-China confrontation and pandemic disruptions had already destabilized free trade, and the invasion widened economic rifts and disrupted supply chains even more dramatically. Meanwhile, monetary policies in Europe and the United States were upended to counter the accelerating pace of inflation. This caused market interest rates to surge radically, and the yen to experience record-breaking depreciation on the foreign-exchange market. Now well into 2023, credit uncertainties among U.S. and European banks have surfaced, as a number of banks have collapsed or entered reorganization. I cannot personally recall experiencing a single year of more radical changes in our business environment.

Meanwhile today, the world is contending with at least two major societal trends.

First is normalization. After three grueling years of battling Covid, the pandemic is subsiding,

bringing eagerly awaited normalization of social and economic activities. We don't know when

inflation will ease, or how long financial authorities will counter it with monetary tightening. But it is

fair to say that interest rates in mature economies including Europe and the United States finally

seem to be on a path toward more familiar activity, and Japan is closely examining the side effects

of its overly low interest-rate policy. Rapid interest-rate hikes and the collapse of some U.S. and

European banks may actually be traceable to efforts to resolve problems arising from prolonged

monetary easing, but in a broader sense they can also be seen as part of a dynamic normalization

cycle bringing us full circle to a more normal status.

Second is a countervailing response to changes driven by the forces we identify as digital and

green-changes in workstyles and social values sweeping us toward a very different world. Some

corporations have begun reevaluating their existing businesses and returning to conventional

operations-a trend toward normalization. But given how forcefully the green-and-digital tides are

rising, slowing the pace of reforms they are driving seems ill-advised.

One example is digital transformation, or DX. Evolution of digital technologies has been a major

driver of radical change in social behavior and lifestyles via the DX of process and analysis. Now,

the emergence of ChatGPT and other generative artificial intelligence (AI) platforms is

transforming the space into what we might call the DX of thinking-specifically, the digitalization of

human thought and language. Such technology means revisiting roles traditionally assigned either

		MUFG's Pursuit of		Management Strategies		Leadership and		Financial Data /
Management Message		Value Creation		and Performance		Governance		Corporate Data

Thoughts on Generative Artificial Intelligence

When hearing the news that ChatGPT passed a law bar exam in the U.S., with a score approaching the 90th percentile, I was actually more perplexed than impressed. Yes, AI has access to massive amounts of data, can recognize patterns, and even in a sense, learn. But however clever, is this latest AI capable of genuinely understanding the foundational concepts posed by these tests? I rather doubt it, if for no other reason than ChatGPT, as it now stands, lacks the ability to truly experience anything.

However, ChatGPT does have the ability to raise unique questions in the human mind. Do its rote answers with "correct" language mean AI understands the fundamental constructs of thought that actually lead to language? For that matter, what constitutes language? What constitutes understanding? What does it take to truly think?

Fascinating-and sure to become even more so. We are witnessing the dawn of a new DX dimension-the DX of cogitation. We already see the concept of "prompt engineering" that provides AI with a baseline of well-thought-out precepts to direct it down a path to useful results (an approach that seems to have much in common with working with humans). The next step would be outsourcing a part of one's cogitation processes to machines, which might lead in turn to even deeper human cogitation. Such collaboration will no doubt materialize, perhaps quite soon, and usher in a new era of cogitation DX, in which people think with, and work alongside, artificial intelligence.

But here's another question: Can humans retain our autonomy in cogitation and judgment? As AI grows more sophisticated and incorporates new models of structural understanding-not just the current Large Language Models*1-we need substantive discussions on a wide range of relevant topics, including rulemaking. AI will keep advancing and insinuating itself into the mainstream-and nooks and crannies-of the human experience. Wherever it leads, inevitably we must all keep pace with AI development.

At MUFG, this means creating an in-house environment, building an external community of partners, and developing a base of

colleagues adept at working productively with this genuinely transformative technology.

*1 A computerized language model developed using massive data sets and deep learning technologies.

to humans or to computers. As humanity explores how to coexist with digital technologies, our
behavior may-in fact surely will-transform profoundly.
Various initiatives aimed at global issues related to green and other ESG concerns are also gaining
momentum. The Inflation Reduction Act and the Green Deal Industrial Plan have been introduced
in the United States and the EU, respectively, and the Japanese government has announced a
basic policy for green transformation, or GX. Similar new national industrial policies are being
announced one after another around the globe. Robust investment from diverse stakeholders in
public and private sectors will surely materialize.
To my mind, any business strategy at MUFG that does not give due consideration to issues of
digital technologies and ESG will be pointless.
The changing landscape presents major opportunities for our company. We have developed an
unparalleled customer base around the globe via the Bank, the Trust Bank, Securities, and other
Group companies-and through our long history of relationship banking. As a matter of course,
we help our customers address a broad spectrum of management issues. With a growing number
of customers who see the need to transform-and are poised to do so-we are confident that our
long-standing reputation as a trustworthy and reliable financial institution will lead them to choose
MUFG as their "go-to" partner. Just as people visit family physicians for health-related issues, we
aim to be our customers' "family doctor"-their first choice-for help with finance and
management issues. The comprehensive capabilities our Group and global network can marshal	MUFG's Unique Strengths
on behalf of our customers can power their growth-and ours.	Pages 37-47

The Past is Prologue: Fiscal 2022 and 2023

Throughout the fiscal year ended March 31, 2023 (fiscal 2022)-the second year of our current three-yearMedium-Term Business Plan (MTBP)-we successfully promoted three transformative pillars: Corporate Transformation, Strategies for Growth, and Structural Reforms. As in the previous fiscal year, we made major progress by focusing on the latter two, which led to tangible financial achievements.

Leveraging the Group's deep capabilities, we made considerable progress in the wealth management business while stepping up risk-taking endeavors in our businesses for large Japanese corporate clients and overseas institutional investors. We improved margins for corporate lending, both at home and abroad, through disciplined profitability management. This led to significant year-on-year growth of net operating profits in customer segments. Meanwhile, expenses-excluding the impact of foreign exchange fluctuations and other extraordinary factors-declined from the previous fiscal year, while risk-weighted assets (RWAs) remained well under control. Profits attributable to owners of parent amounted to ¥1,116.4 billion. For two years in a row, we have been ahead of schedule in meeting our MTBP target of profits attributable to owners of parent of ¥1 trillion or more. Although ROE, a top-priority commitment under our current MTBP, did edge downward to 7.03% from the previous year, we are making steady progress toward our target of 7.5%.

Progress under the MTBP Pages 53-54

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