1. Compensation System for Directors and Executive Officers

With regard to compensation of the Directors and Executive Officers of Japan Post Holdings Co., Ltd., the Compensation Committee has set a "Policy to Determine Content of Compensation for Individual Directors and Executive Officers," and the amount of compensation is determined in accordance with this policy.

Compensation System

1. 1.
   When serving concurrently as a Director and Executive Officer, compensation shall be paid as an executive officer.
2. 2.
   Directors of Japan Post Holdings shall be paid a fixed amount of compensation according to their duty, based on the scope and size of their responsibility for management.
3. 3.
   Executive Officers of Japan Post Holdings shall be paid basic compensation according to their duty (fixed amount compensation), bonuses as short-term incentives, and stock compensation as medium- to long-term incentives (non-performance-linked and performance-linked), as a mechanism that functions as a sound incentive to promote sustainable growth.

In addition, Directors or Executive Officers of Japan Post Holdings who simultaneously serve as a Director, Auditor, Executive, or Executive Officer of a Japan Post Group company shall be paid compensation by the company where that Director or Executive Officer mainly executes business.

Indicators of Performance-based Compensation, the Reason for Selecting Those Indicators, and the Method for Deciding the Amount of Performance-based Compensation

1. 1.
   Performance-linked monetary compensation (annual bonus)
   With regard to short-term performance-linked monetary compensation (annual bonus) paid to Executive Officers, it is calculated by multiplying a standard amount for their position and their corresponding responsibilities by a coefficient based on individual performance evaluation and a variable payout rate based on the achievement status of management plans, etc.
   Individual evaluations are made by individually evaluating the results and status of initiatives in the business that the Executive Officer is responsible for.
   With regard to indicators related to Company performance, in order to enable comprehensive judgment of the degree of achievement of management,
   indicators are set from multiple different categories. These indicators have been selected as appropriate for the Company's business format and content.
   The financial indicators include consolidated net income attributable to Japan Post Holdings, consolidated ordinary income ratio. The non-financial indicators include sustainability indicators (employee engagement score, ratio of female managers in the head office, status of implementation of initiatives to reduce GHG emissions, and status of improvement in the ratings by ESG assessment organizations), progress of the medium-term management plan,and occurrence of serious clerical accidents and misconduct in the Group and operation of compliance systems.
   In addition, the Company has a system that allows for recovery of all or part of the bonus amount paid to Executive Officers (claw back) in the event of a serious misconduct or violation by an Executive Officer eligible for payment of a bonus.
2. 2.
   Performance-linked stock compensation
   With regard to performance-linked stock compensation paid to Executive Officers, after the end of the last fiscal year of the medium-term management plan, Executive Officers will be awarded points based on the standard number of points for their position and corresponding responsibilities, multiplied by a variable payout rate arrived at based on the degree to which they have met the performance targets in the medium-term management plan.
   The performance targets, which are the basis for determining the payout rate, are based on the medium- to long-term targets and indicators set forth in the medium-term management plan such that stock compensation functions as a sound incentive to enhance corporate value and achieve sustainable growth over the medium to long term. Currently, ROE (based on shareholders' equity), which is one of the key indicators in the current medium-term management plan, has been adopted as the performance target.
   Additionally, the Company has a system that allows for a reduction or cancellation (malus) of the number of points used as the basis for calculating the number of shares granted to relevant Executive Officers in the event of a serious misconduct or violation by an Executive Officer eligible for payment.
   It should be noted that we have not established a policy for determining the payment ratio of performance-based compensation non-monetary compensation, or other forms of compensation.