By reading these materials, you agree to be bound by the following limitations:
No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy,completeness or correctness of the information, or opinions contained herein. Neither the company nor any of the company’s advisorsfrom any use of these materials or their contents or otherwise arising in connection with these materials. The information set out
herein may be subject to updating, completion, revision, verification and amendment and such information may change materially.
These materials are based on the economic, regulatory, market and other conditions as in effect on the date hereof. It should beunderstood that subsequent developments may affect the information contained in these materials, which neither the company nor its
advisors or representatives are under an obligation to update, revise or affirm.
at the time they were prepared and involve potential risks and uncertainties. Actual results, therefore, may differ from those describedin these materials due to changes in a variety of factors, such as market trends, economic conditions and regulations. Accordingly,
investors are advised to use their own discretion and exercise great caution when making investment decisions.
These materials and the information contained herein do not constitute or form part of any offer for sale or subscription of orsolicitation or invitation of any offer to buy or subscribe for any securities of the company.
Securities of the company not registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), may not be
offered, sold or delivered within the United States or to U.S. persons absent registration under or an applicable exemption from the
These materials and the information contained herein are being furnished to you solely for your information and may not be
reproduced or redistributed to any other person, in whole or in part. In particular, neither the information contained in these materials
nor any copy hereof may be, directly or indirectly, taken or transmitted into or distributed in the United States, Canada, Australia,
Japan, Hong Kong or any other jurisdiction which prohibits the same except in compliance with applicable securities laws. Any
failure to comply with this restriction may constitute a violation of U.S. or other national securities laws. No money, securities or otherconsideration is being solicited, and, if sent in response to this presentation or the information contained herein, will not be accepted.
Note to Financial Statements
using the prevailing exchange rate as of 31 March 2020, the final day of the fiscal year, which was JPY 108.70 to USD 1. Thistranslation should not be construed as a representation that all amounts shown could be converted into U.S. dollars at such rate.
ANNUAL REPORT 2020 JFM

04 Message from the President and CEO
06 JFM at a Glance
08 Outline of JFM Operations
09 Capital

Review and Plan
12 Review of Operations for Fiscal 2019
14 2. Funding Operations
16 3. Financial Review
18 Management Plan for Fiscal 2020
18 1. Lending Operations
18 2. Funding Operations
19 3. Scheduled Payment to the National Treasury

Operations

42 1. Corporate Governance
44 2. Internal Control over Financial Reporting
44 3. Internal Audit
45 General Account and Management Account47 Risk Management
54 Compliance
55 Disclosure

JFM’s Role in Local Government Finance
56 1. Japanese Local Government System
57 2. Local Government Finance Programme
58 3. Local Allocation Tax
58 4. Local Government Borrowings
58 5. Security of Local Government Borrowings
59 6. Local Government Borrowing Programme
60 7. JFM Funds in Local Government Borrowing Programme

22 Lending Operations
22 1. Outline
24 2. Loan Interest Rates
26 3. Credit Check System
26 4. Trends in Lending Operations
29 5. Lending Operations by Business

Financial Section
62 Financial Statements
102 Independent Auditor’s Report

Appendix / JFM Data

32 1. Issue Type

105 Appendix

35 4. Trends in Funding Operations
36 Local Government Support Operations
38 JFM and Sustainable Development Goals

Appendix / JFM Data

32 Funding Operations

34 3. Features of JFM Bonds
Traditional Japanese patterns were devised in ancient times and are still widely used in Japanese society today.
Each pattern expresses a certain wish, such as happiness, healthy growth for children, or longevity. Various
patterns continue to be used on daily items, in product designs, and in rituals, as a plea for good luck in allendeavors. JFM has incorporated several of these auspicious patterns in the design of its Annual Report 2020 as
we wish for community growth, successful development, and valuable communications and connections toward
the future.

42 Corporate Governance

12 1. Lending Operations

33 2. Basic Funding Policy

Wishes in Japanese traditional patterns

Management Structure

Financial Section

The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers outside Japan,

03 Management Philosophy

JFM’s Role in Local
Government Financeregistration requirements of the United States securities laws.

02 Profile of JFM

Management Structure

Forward-looking statements, including the company’s plans in these materials, are based on information available to the company

CONTENTS

Operations

or representatives shall have any responsibility or liability whatsoever (for negligence or otherwise) for any loss howsoever arising

Review and PlanDISCLAIMER

117 JFM Data
117 Organization History
118 Organization Chart
119 Directors and Corporate Auditors
119 Contact Information

JFM ANNUAL REPORT 20201

Management
Philosophy

Profile of JFM

Name

Japan Finance Organization for Municipalities (JFM)

Establishment

1 August 2008 (Reorganized on 1 June 2009)

Governing Law

Japan Finance Organization for Municipalities Law(Law No. 64 of 2007, as amended)

Address

Shisei Kaikan, 1-3 Hibiya Koen, Chiyoda-ku, Tokyo

President and CEO

SATO Fumitoshi

CapitalUSD 152.7 million

Number of Employees

88 (As of April 2020)

Outstanding Loans

USD 215.3 billion

as of 31 March 2020
Outstanding Bonds and

USD 186.0 billion

Japan Finance Organization for Municipalities (JFM), as a joint fundingorganization wholly contributed by all Japanese local governments, sets forth
the following three policies as its management philosophy with the purpose ofcontributing to fiscal soundness of local governments through our financing
activities.

1

Bank Loans
as of 31 March 2020
Credit Ratings

S&P: A+as of 31 March 2020

Moody’s: A1
R&I: AA+2
3

2

JFM ANNUAL REPORT 2020

Being Responsive to Local Government Needs

As a reliable provider of long-term and low-interest funds for local
governments, JFM closely supports local government funding basedon their needs as well as the environment.

Strengthening Confidence from the Capital Markets

JFM aims to strengthen its market confidence and secure low-costfunding through appropriate disclosure as required in capital markets,
as well as its sound financial standing maintained through prudent
risk management. Furthermore, JFM, as a leading public-sector bondissuer, is committed to contributing to the sound development of capital
markets.

Ensuring Responsible Corporate Governance as a
Joint Organization of Local Governments

JFM ensures responsible corporate governance through prudent risk
management, monitoring and recommendations by the Supervisory
Committee, as well as audits by external accounting auditors anddeepen communication with local governments as a responsible joint
organization of local governments.

JFM ANNUAL REPORT 20203

Message
2020

SATO Fumitoshi

President and CEO
2020

Message from the President and CEO

I have been appointed as President and CEO of the JFM as of August 1, 2020.
The JFM was established in 2008, amid reforms to governmental policy and finances, as a
jointly-founded regional government organization and with the strong recognition by regional

search index and a financial analysis chart called “Octagon,” enhanced supporting tools andembarked on joint research with universities and specialized organizations.
The JFM has transferred its management account reserve for interest rate volatility with angovernments for the need of a joint regional financing function to accompany decentralization.

amount of 2.7 trillion yen to the Japanese government for the purpose of providing financial

The JFM has continuously maintained stable management by providing long-term and low-

resources for issues to be addressed by the regional governments, including revitalization. Theinterest loans to local governments since its establishment.

JFM is planning to further provide a total of 230 billion yen over 5 years starting from fiscal 2020

The JFM is expanding business based on the following management principles set forth on

for the purpose of promoting forestry management.

our 10th anniversary: “Being Responsive to Local Government Needs,” “Strengthening Capital

Regional governments, amidst a steady decrease in the Japanese population, are facing

Market Confidence,” “Ensuring Responsible Corporate Governance as a Joint Organization ofvarious administrative issues, such as promoting the revitalization of regions, measures against

Local Governments,” and our new motto “Supporting local economies through finance to create

the declining birth rate and an aging population, deteriorating infrastructure, measures against

a future for regions.”

large-scale and intensifying natural disasters. Moreover, the spread of COVID-19 is producing a

In our lending operations, in addition to securing the total funding necessary for the JFM,
we have expanded our lending projects by adding projects, such as measures to counter
depopulation, to support the higher priority policy needs in regions.
Amidst a strong interest in the SDGs in financial markets, as part of our funding operations,
the JFM has begun to issue green bonds in the euro market in February of this year for the firsttime.
With respect to our regional government support operations, we have developed a case study

major impact on the world economy and is changing societal norms as well as the way we live
our daily lives.
The JFM will continue to make every effort to contribute to the sound financial managementof regional governments, which directly relates to the credibility of the JFM itself, by properly
understanding local policy needs and improving upon the confidence the market has in us andthe knowledge we have accumulated. We appreciate your continued cooperation and support inthese endeavors.

Japan Finance Organization for Municipalities
4

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 2020

5

JFM at a Glance
The Joint Funding Organization for
All Japanese Local Governments■ H igh credit quasi-sovereign issuer, wholly owned by

Japanese local governments with the capital contribution
from 1,789*1 local governments*2
 perates as a non-profit organization under the JFM Law■Owith the objective to provide long-term and low-interestrate loans exclusively to Japanese local governments
 FM has never experienced any default on its loans■J apanese local governments include 47 prefectures■Jand a total of 1,741*1 cities and special wards of Tokyo,
government-designated cities, as well as towns andvillages evenue sources for the local governments are secured■Rby the national government
・The national government allocates a part of nationaltax revenue to the local governments, in order to adjust
revenue disparities among the local governments(Local Allocation Tax system)・T he national government also prepares the Local
Government Borrowing Programme (LGBP) each fiscal
year, which specifies the amount of local government
borrowing as well as funding sources
・In the case of each local government funding, consent
or approval must, in principle, be obtained from therelevant authorities■ The national government also establishes a legal framework
to monitor fiscal indices for each local government
and implement early correction measures if the local
governments with the indices exceeding the early warning
limits or reconstruction limits shall restore their financial
soundness hus, none of the local governments has defaulted■T*3
 IS 0% risk weight for Japanese local governments■B

Lending
15%–16% of the

LGBP since fiscal 2013 FM provides loans to almost all local governments■J oans planned to be made in fiscal year (FY) 2020
■Lending 31 March 2021 are amounted to USD 15.3 bn
 aximum term to maturity of JFM loans is 40 years■M

Note: Figures in USD are converted at USD 1 = JPY 108.70 as of 31 March
2020, unless otherwise noted.

6

JFM ANNUAL REPORT 2020

Publicly Offered Bonds
National Government(USD bn)

180

15.9

160

15.8

16.1

Other Private Sectors
JFM
JFM Ratio
16.1

15.6

15.3

15.3

(％)

15.5

18
16

140

14

120

12

100

10

80

8

60

6

40

4

20

Japanese Local Governments

 FM funds have accounted for around■J

LGBP—Funding Sources for Local Governments

0

20.0

18.9

18.1

16.7

16.7

16.4

16.9

16.8

FY 2013 2014 2015 2016 2017 2018 2019 2020

20

Funding■ Leading issuer in the Japanese bond market with anaverage annual funding volume of USD 17–19 bn■ A iming to diversify its funding sources and expand
its investor base—continues to access the international
market through benchmark transactions as well as private
placements, making use of its MTN Programme.
■ In the international market, only non-guaranteed bonds
will be issued( ※)■ I n fiscal 2019, JFM issued a total of USD 1.6 bn
worth of international bonds through two benchmark
transactions and two Uridashi Bonds※ excludes USD 1.0 bn benchmark transaction issued on 12 March 2019

which we have prefunded for fiscal year 2019.

Annual Lending Volume(USD bn)25

Support Structure20■ Under the JFM Law, if JFM is to be dissolved and its

obligations cannot be satisfied in full with its assets,
local governments bear all costs necessary to satisfy
the relevant obligations in full via payment to JFM

15
10
5
0

FY 2013 2014 2015 2016 2017 2018 2019 2020

*Planned amount; subject to change depending on market
conditions and other factors.

Outstanding Loans by BusinessSewerage USD 67.0 bn 31.1%
Temporary Financial Countermeasures
Funding USD 53.6 bn 24.9%

Water Supply USD 29.5 bn 13.7%
Three Special Projects
USD 6.8 bn 3.2%

Total
USD
215.3 bn

Transportation USD 7.4 bn 3.5%
Special Municipal Mergers
USD 10.0 bn 4.6%
Hospitals USD 10.0 bn 4.7%

Disaster Management and
Mitigation USD 7.3 bn 3.4%

Public Works USD 4.6 bn 2.1%
Industrial Water Supply
USD 1.6 bn 0.7%
Local Road Maintenance
USD 4.7 bn 2.2%

Others USD 12.9 bn 5.9%

Outstanding Loans by Borrower Type
Prefectures USD 45.2 bn 21.0%
Government-designated Cities

Total
USD
215.3 bn

Solid Risk Management■ JFM maintained USD 26.0 bn of reserves for interest

rate volatility for the purpose of dealing with interest
rate risk resulting from a duration gap between lending(8.01 years) and funding (7.33 years)*1■ The duration gap of 0.68 years
in the general accountqualifies JFM’s management target of the duration gap
below 2 years

Credit Ratings■ A1 (Moody’s), A+ (S&P)■ The ratings of JFM are the same as those of the Japanesesovereign*3■ BIS risk weight : 10% for JFM bonds (non-guaranteed)
denominated in JPY

Note: A rating is not a recommendation to buy, sell or hold securities andmay be subject to suspension, reduction or withdrawal at any time by
the assigning rating agencies.

USD 32.1 bn 14.9%

Cities, Special Wards of Tokyo,
Towns and Villages
USD 132.2 bn 61.4%
Local Government Corporations
and Associations
USD 5.8 bn 2.7%

*1: As of 31 March 2020.
*2: Local governments comprise all of the prefectures, cities and special
wards of Tokyo, government-designated cities, towns and villages, aswell as some local government associations.
*3: Value for investors in Japan. For overseas bonds, the value is determinedby respective authorities in each country (as of 31 March 2020).

Funding Plan
Type of
Funding Instruments

FY2020(plan)(1)

FY2019(achieved)

USD 16.3 bn

USD 14.7 bn

Domestic Public Offerings

USD 6.8 bn

USD 8.7 bn

Domestic Private Placements

USD 4.9 bn

USD 4.4 bn

Non-Guaranteed Bonds

USD 1.6 bn(2)Overseas Offerings - GMTN
BenchmarkUSD 2.8 bn

Uriadshi Bonds

USD 1.5 bn
USD 94 mm–

Private Placements
Open Issuance (3)Guaranteed Bonds(4)

Long-Term Bank Loans

USD 1.8 bn–

USD 0.6 bn

USD 0.9 bn

USD 0.7 bn

USD 0.8 bn(1) Planned amount; subject to change depending on lending
status, market conditions and other factors.
(2) Includes USD, EUR and AUD denominated bonds, eachconverted at the exchange rate at the time of pricing.
(3) Details of issuance such as tenor, issue size and issue market
will be determined as necessary based on the lending status,
market conditions and other factors.
(4) Denominated in JPY only and issued in the domestic market forrefinancing our predecessor’s government guaranteed bonds.
(5) Excludes USD 1.0 bn benchmark transaction issued on 12
March 2019 which we have prefunded for fiscal year 2019.

Bond Issuance(USD bn)

Bonds without government guarantee
Bonds with government guarantee

16
14
12
10
8
6
4
2
0

FY 2013 2014 2015 2016 2017 2018 2019 2020

* Planned amount; subject to change depending on lending
status, market conditions and other factors.

Outstanding Non-JPY Public Bonds(non-guaranteed)
Issue Date

Currency

Issue
AmountCoupon(%)

Tenor

12-Feb-20

EUR

500 mm0.050

7y5-Sep-19

USD

1,000 mm

1.750

5y

12-Mar-19

USD

1,000 mm

3.000

5y

27-Sep-18

USD

1,000 mm

3.375

5y

24-Apr-18

USD

1,000 mm

3.250

5y

8-Sep-17

USD

1,000 mm

2.000

3y

20-Apr-17

USD

1,000 mm

2.625

5y

25-Oct-16

USD

1,000 mm

2.125

7y

13-Apr-16

USD

1,500 mm

2.125

5y

12-Feb-16

USD

500 mm2.125

5y21-Apr-15

USD

1,000 mm

2.000

7y

13-Feb-15

USD

1,000 mm

2.375

10y

22-Sep-14

EUR1,000 mm

0.875

7y

JFM ANNUAL REPORT 20207

Outline of JFM Operations
In response to this situation, JFM issues bonds in capital markets with a wide variety of maturities ranging
from medium-term to super long-term to provide stable and low-interest funds to local governments.
Under the JFM Law (Article 52, Section 1), local governments have an obligation to bear the cost necessary
to satisfy all JFM obligations in the event JFM is to be dissolved and its obligations remain unpaid.

Outstanding
Bonds
JPY 20.0 tn(USD 184.1 bn)

Outstanding
Long-term BankLoans
JPY 0.2 tn(USD 1.9 bn)

Proceeds from
Public Races*

Japan Finance
Organization for
Municipalities(JFM)

Reserve forInterest Rate
Volatility, etc.
JPY 2.8 tn(USD 26.0 bn)

Lending(Long-term/lowinterest rates)
Outstanding
Loans
JPY 23.3 tn(USD 215.3 bn)

Reduction ofLending Rates

Solid Financial Foundation

Local Governments

Financial Markets

Funding(JFM Bonds)

Fund forLending Rate
Reduction
JPY 0.9 tn(USD 8.5 bn)

JFM primarily issues 10-year bonds to raise funds and extends long-term loans to local governments, which
creates a duration gap between lending and funding. To cope with the interest rate risk associated with bondrefinancing (a potential negative margin caused by the interest payable exceeding the interest receivable), JFM
maintains reserves for interest rate volatility.

Reduction of Lending Rates by Utilizing the Fund for Lending Rate Reduction
JFM receives a portion of the earnings from various racing events (horse, bicycle, motorcycle and boat races)
operated by local governments, which is directed to the Fund for Lending Rate Reduction. The investment gains
from the fund are used for lowering interest rates on JFM loans.

Capital* A portion of the earnings from municipally operated racing(horse, bicycle, motorcycle and boat race).

As of 31 March 2020

Public Institution Wholly Owned by Japanese Local Governments
JFM is a joint funding organization for all local governments, wholly owned by Japanese local governments
under the Japan Finance Organization for Municipalities Law (Act No. 64 of 2007, as amended; the “JFM Law”).
JFM loans are provided exclusively to local governments, and local governments must, in principle,
receive consents or approvals of the Minister for Internal Affairs and Communications or their respective
prefectural governors when they borrow from JFM. Within this structure, JFM has never had a default since its
establishment.

Capital Contribution by
Local Government GroupAs of 31 March 2020, JFM’s capital was USD
Towns, villages andlocal government associations
152.7 million contributed by 1,789 Japanese
USD 9.6 million
Prefectures
local governments, i.e., all of the prefectures,
USD 58.6 million
6.2%
cities, special wards of Tokyo, government38.4%
designated cities, towns and villages, as wellUSD
as some local government associations.
152.7
mm
The amount of capital contribution fromeach local government is decided based on 1)
Governmentoutstanding JFM loans to each local government,
designated cities*2
and 2) the amount of revenue of each local
USD 26.5 million
Cities*1 and special wards of Tokyo
government (mainly comprised of local taxes,
17.3%
USD 58.1 million
Local Allocation Tax and temporary financial
38.1%
countermeasures funding).
(As of 31 March 2020)

Joint Funding Organization for All Local Governments
JFM contributes to the sound financial operation of local governments and improves the welfare of local
residents with the aim of efficiently and effectively complementing local government fund-raising by providing
long-term funding at low-interest rates to local governments.
For social infrastructure improvements to be implemented by local governments, long-term funding is usuallydesirable given that it takes a long time to recoup such capital expenditures, and also the cost burden should beshared across generations. However, local governments generally raise funds in capital markets for terms of 10
years or less.

8

JFM ANNUAL REPORT 2020

Notes: 1. Excludes government-designated cities.
2. Government-designated cities:
Cities with populations of 500,000 or more designated in accordance with Article 252-19, Section 1 of the Local Autonomy Act. Suchgovernment-designated cities are allowed to administer certain matters such as social welfare, food safety, urban planning and so on,
for which prefectures are responsible in principle.

JFM ANNUAL REPORT 20209

Review and Plan

Review and Plan

Operations
Management Structure
JFM’s Role in Local
Government Finance
Financial Section

1. Lending Operations 
2. Funding Operations 
3. Financial Review 

12
14
16

Appendix / JFM Data

Review of Operations for Fiscal 2019

Management Plan for Fiscal 2020

Shirogane Blue Pond, Hokkaido Prefecture

10

JFM ANNUAL REPORT 2020

1. Lending Operations 
2. Funding Operations 
3. Scheduled Payment to the National Treasury 

18
18
19

JFM ANNUAL REPORT 202011

Review and Plan | Review of Operations for Fiscal 2019

1 Lending Operations

Note: Represents local government funding to cover shortfalls in local government revenue sources pursuant to theprovisions of the Local Government Finance Law (Act No. 109 of 1948, as amended).

Business

Number of Loans
Made

Loan Amount (USD in millions)% of total

General Account-related Loans
499

362

2.4

Public Housing

159

129

0.8

Educational Facilities Development

209

98

0.6

Social Welfare Facilities Development

136

68

0.4

General Waste Dispoal

80

64

0.4

General Service Facilities Development

5

15

0.1

General Projects

72

49

0.3

Regional Revitalization

188

94

0.6

Disaster Prevention

437

126

0.8

Transportation(USD 0.2 bn)

Water Supply(USD 1.7 bn)

44%

2,172

1,238

8.1

1

0

0.0

598

703

4.6

7

2

0.0

Anti Depopulation Measure Project

795

229

1.5

Subtotal

6,208

4,281

28.0

9% (USD 1.4 bn)

1,281

1,677

11.0

Cities and Special
Wards of Tokyo

75

0.5

221

1.4

Electricity and Gas Supply

40

81

0.5

Port Facilities

22

27

0.2

Hospitals and Elderly Care Services

488

916

6.0

Markets and Slaughterhouses

35

83

0.5

2,773

3,718

24.3

Sewerage
Tourism and Others
Subtotal
Refinancing Loans for Facilities Affected by Earthquake
Temporary Financial Countermeasures Funding
Total
Note: Totals may not add up due to rounding.

17

3

0.0

4,778

6,801

44.4

-

-

0.0

637

4,232

27.6

11,623

15,315100.0

Temporary Financial
Countermeasures Funding

28%(USD 4.2 bn)

General Account-related
Loans

28%

(USD 4.3 bn)

FY2019 Loans Extended by Borrower Type
Local Government
Corporations and Associations

2% (USD 0.4 bn)

Prefectures

20% (USD 3.0 bn)

Towns and Villages

Government-designated
Cities9% (USD 1.4 bn)

60% (USD 9.2 bn)

Appendix / JFM Data

89

12

Others%(USD 1.8 bn)

15.3 bn
Total

USD

Financial Section

Disaster Management and Mitigation

33

11%

JFM’s Role in Local
Government Finance

1.2
6.0

Transportation

2(USD 6.8 bn)

912

Industrial Water Supply

Public Projects,
etc. %(USD 0.4 bn)

Municipal Enterprise-related
Loans

191

Water Supply

6

24

545

Municipal Enterprise-related Loans

Special Municipal
Mergers %(USD 0.9 bn)

Sewerage%(USD 3.7 bn)

305

National Disaster Prevention

1%

6

Local Road Development

Proper Management of Public Facilities and Infrastructures

8

Hospitals andElderly Care
Services%(USD 0.9 bn)

Special Municipal Mergers
Optimization of the Public Facilities

Disaster Management
and Mitigation %(USD 1.2 bn)

Management Structure

Public Projects, etc.

2

Others %(USD 0.3 bn)

Operations

Lending Operations by Business Type in Fiscal 2019

FY2019 Loans Extended by Business Type

Review and Plan

In fiscal 2019, JFM provided loans totaling USD 15.3 billion.
General account-related loans totaled USD 4.3 billion (28%) of the total lending volume, mainly represented bydisaster management and mitigation and special municipal mergers. Loans for temporary financial countermeasuresfunding* were USD 4.2 billion (28%) and loans for municipal enterprise-related loans were USD 6.8 billion (44%), of
which sewerage and water supply businesses were the main contributors.

Note: Totals may not add up due to rounding.

12

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202013

Review and Plan | Review of Operations for Fiscal 2019

2 Funding Operations
1.Overview*1

2. Government-guaranteed Domestic Bonds
10-year

USD 0.9 bn

USD 0.9 bn

Total

USD 0.9 bn

USD 0.9 bn

Long-term Bank Loans

Plan

Achieved

USD 0.7 bn

USD 0.8 bn

Notes 1 : Details of issuance such as tenor, issue size and issue market will be determined as necessary based on the lending status, market conditions
and other factors.

2. Issue Spreads
In the domestic market, JFM bonds had been priced under the low-interest-rate environment on the back of theintroduction of BOJ’s QQE with yield curve control.
Due to the negative Japanese government’s bond (“JGB”) yield environment from July to September 2019 and March
2020, JFM 10-year domestic bonds were priced with a floored absolute yield. From November 2019 to February 2020,
JFM 10-year domestic bonds were priced over respective JGB yield curve due to the increase in yield, starting from
16.0 bps and gradually tightened by 1.0 bp on November, December and February, resulting in 13.0 bps in February.
During the period from July 2019 to March 2020, bonds were priced with a yield from 0.050% to 0.155%.
There were strong demands from the investor for 5-year, 20-year and 30-year JFM bonds. 5 year bonds attracted
investors as substitutes for JGB, while 20-year and 30-year bonds had been supported by investors looking for higher
yields.
JFM’s international bonds have been issued based on investor demands and market conditions by referring to credit
spreads observed in the international primary and secondary markets at the time of pricing.

Issue Conditions of JFM 10-Year Domestic Bonds
(bps)

20.0

Funding in Fiscal 2019

1. JFM Bonds (non-government-guaranteed)(1) Domestic and overseas offerings
Plan (Initial)

Achieved

Type of Bonds

Plan

Achieved

Domestic Public Offerings

USD 6.9 bn

USD 8.7 bn

10-year

USD 2.2 bn

USD 2.2 bn

10-year

USD 2.4 bn

USD 3.3 bn

20-year

USD 2.2 bn

USD 2.2 bn

20-year

USD 1.0 bn

USD 1.4 bn

Total

USD 4.4 bn

USD 4.4 bn

5-year

USD 0.2 bn

USD 0.2 bn

30-year

USD 0.2 bn

USD 0.3 bn

Opportunistic Issuance

USD 3.1 bn

USD 3.6 bn

Overseas Offerings - MTN

USD 2.3 bn

USD 1.6 bn

Open Issuance *1

USD 1.4 bn-

USD 10.5 bn

USD 10.3 bn

Total

16.0

16.0

16.0

16.0

16.0
15.0

16.0

16.0

16.0

16.0

14.0

14.0

14.0

14.0

14.0

14.0

0.35

0.299

0.200

0.215 0.220

0.30

0.279

0.264 0.269

10.0

0.25
0.200

0.195

0.20

0.166

0.151

0.145

0.155

6.0

0.125

0.155

0.15

0.115

0.115

0.095

4.0

0

14.0
13.0

12.0

2.0

0.40

15.0

15.0

14.0

8.0

0.45

0.065 0.060
0.049
1.0

1.0

1.0

Apr

May Jun

1.0

1.0

1.0

Jul

Aug Sep

1.0

1.0

1.0

Oct

Nov Dec

1.0

1.0

1.0

Jan

Feb Mar

FY20181.0

1.0

Apr May

1.0

Jun

0.050

0.10
0.050

0.050

0.05

0.5

Jul

Aug Sep

Oct

Nov DecJan

Feb Mar

Appendix / JFM Data

Type of Bonds

18.0

Spread over major local government bonds (bps, LHS)
Spread over JGB yield curve (bps, LHS) *ー Yield on JFM bonds (%, RHS)

Financial Section(2) Private Placements with Pension Funds for Local
Government Officials

(%)

0.50

JFM’s Role in Local
Government FinanceFlexible Issuance Programme (“FLIP”)
FLIP is JFM’s unique framework for domestic bond issuance which is similar to the MTN programme in some ways. JFM issues domestic bonds under theFLIP, in order to meet both the needs of investors in the domestic market and the borrowing needs of local governments in a timely and flexible manner.
FLIP permits minimum and maximum issue sizes of JPY 3 billion (USD 27.6 million) and JPY 20 billion (USD 184.0 million), respectively.

Achieved

Management Structure

Notes: 1. Issued amounts are calculated based on issue prices.
2. Includes an offering of USD, AUD and EUR denominated bonds, converted at the exchange rate at the time of pricing. JFM prefunded USD 1.0
billion 5-year tenor benchmark bond in March 2020, which is excluded from the total volume of fiscal 2019.

Plan

Operations

As a result, JFM’s outstanding bonds were USD 184.1 billion, including the Predecessor’s bonds to which JFM
succeeded. Outstanding long-term bank loans totaled USD 1.9 billion as of 31 March 2020.

Type of Bonds

Review and Plan

In fiscal 2019, JFM raised a total of USD 16.4 billion including USD 14.7 billion in JFM bonds (non-government
guaranteed), and USD 0.9 billion in government-guaranteed bonds for the repayment of existing bonds issued by
Japan Finance Corporation for Municipal Enterprises (the “Predecessor”). And, with the aim of diversifying funding
source, JFM raised USD 0.8 billion through long-term bank loans.
With regard to JFM bonds, a total of USD 10.3 billion was raised by the regular issuance of 5-year, 10-year, 20-yearand 30-year domestic bonds, as well as opportunistic issuances through JFM’s Flexible Issuance Programme (“FLIP”)
and the MTN Programme.
As for domestic public offerings, a total of USD 8.7 billion was issued in the fiscal year. In order to cope with highly
volatile market condition through the period, JFM increased 10-year, 20-year, 30-year of the regular issuance and FLIP
from the initial plan by utilizing the budget of Open Issuance scheme.
In overseas offerings, JFM issued USD denominated benchmark bonds in 5-year tenor (USD 1.0 billion) in
September 2019 and also issued inaugural EUR denominated green bond in 7-year tenor (EUR 0.5 billion). In addition
to these successful public offerings, JFM issued a total of USD 94 million equivalent Uridashi bonds in two tranches.
Through these activities, the total volume of international bonds issued for fiscal 2019 amounted to USD 1.6 billion*2.
Private placements with pension funds for local government officials were totaled USD 4.4 billion.

3. Long-term Bank Loans

0.00

FY2019Note: Spreads over the JGB curve are theoretical values calculated by JFM.

14

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202015

Review and Plan | Review of Operations for Fiscal 2019

3 Financial Review
1. Income Statement

1. Income Statement(USD Millions)

FY2017

YoY

3,197

2,933

2,665

-268

Expenses

1,799

1,651

1,478

-173

Ordinary Income

1,398

1,283

1,187

-95

240

213

237

24

(USD mm)
6,000

Operations

4,000

2,000

0

FY201720182019

2. Balance Sheet(USD Millions)

Total Assets

227,745

226,212

223,981-2,231

Loans

218,659

216,220

215,268-952

Others

9,085

9,992

8,713

-1,279Total Liabilities

225,284

223,496

221,001-2,495

Bonds

186,610

187,601

184,116-3,484

113

254

534

280

Fund for lending rate reduction

8,466

8,466

8,466

-

Reserves under special laws

28,56525,93825,96930

Reserve for interest rate volatility

20,23920,23920,239-Management account reserve for interest rate
volatility

8,008

5,493

5,571

78

318

206

158

-48

1,530

1,236

1,915

679

2,460

2,716

2,980

264

Cash collateral received for financial instruments

Reserve for interest rate reduction
OthersTotal Net assets

YoY(USD mm)250,000
240,000
230,000
220,000

Appendix / JFM Data

End of FY2019

Financial Section

End of FY2018

JFM’s Role in Local
Government FinanceEnd of FY2017

Management Structure

As of 31 March 2020, JFM’s total assets amounted to USD 224.0 billion, a decrease of USD 2.2 billion from theprevious year. This mainly resulted from a decrease in loans by USD 1.0 billion.
Total liabilities decreased by USD 2.5 billion resulting in USD 221.0 billion. This decrease primarily reflected adecrease of USD 3.5 billion in bonds.
Total net assets were USD 3.0 billion, up USD 0.3 billion. This mainly reflected net income of USD 0.2 billion in thegeneral account being recorded as the general account surplus reserve.
Financial highlights since fiscal 2017 are on the next page.

2019

IncomeNet Income

2. Balance Sheet

2018

Review and Plan

In fiscal 2019, JFM’s income was USD 2.7 billion, a decrease of USD 0.3 billion from the previous year. This decrease
was mainly due to a decrease in interest income caused by a decrease in the average interest rate on loans as a resultof redemptions of loans made in the past with relatively high interest rates. Expenses also decreased by USD 0.2
billion from the previous fiscal year resulting in USD 1.5 billion. Due to the increase in funds for interest rate volatility,
net income increased by USD 0.02 billion from precious year, resulting in USD 0.2 billion.

Financial Highlights

210,000
200,000

FY201720182019

Note: Totals may not add up due to rounding.

16

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202017

Review and Plan | Management Plan for Fiscal 2020

Funding Plan for FY2020

1 Lending Operations

Lending Plan
FY2019YoY

USD 15.3 bn

USD 15.3 bn

0.0%Type of Bonds

FY2020 (Plan)

FY2019 (Achieved)

USD 6.8 bn

USD 8.7 bn

10-year

USD 2.4 bn

USD 3.3 bn

20-year

USD 1.0 bn

USD 1.4 bn

5-year

USD 0.2 bn

USD 0.2 bn

30-year

USD 0.2 bn

USD 0.3 bn

Opportunistic Issuance

USD 3.0 bn

USD 3.6 bn

Overseas Offerings - MTN

USD 2.8 bn

USD 2.1 bn

Open Issuance

USD 1.8 bn-

USD 11.4 bn

USD 10.8 bn

Domestic Public Offerings

JFM Funds in Local Government Borrowing Programme

Total
FY2019YoY

USD 16.8 bn

USD 16.9 bn-0.9%General Account-related Loans

USD 5.9 bn

USD 5.5 bn

5.8%

Municipal Enterprise-related Loans

USD 7.1 bn

USD 7.4 bn-4.5%

Temporary Financial Countermeasures Funding

USD 3.8 bn

USD 4.0 bn-3.6%

JFM Funds

Notes: 1. The amount of JFM funds in the LGBP does not match JFM’s lending plan due to the timing for consent or approval (booked amount in the LGBP)
being different from JFM’s plan for disbursements during the corresponding period.
2. See page 60 for more information on JFM funds in the LGBP.

Type of Bonds

FY2020 (Plan)

FY2019 (Achieved)

10-year

USD 2.4 bn

USD 2.2 bn

20-year

USD 2.5 bn

USD 2.2 bn

USD 4.9 bn

USD 4.4 bn

FY2020 (Plan)

FY2019 (Achieved)

10-year-

USD 0.9 bn

4-year

USD 0.6 bn-

USD 0.6 bn

USD 0.9 bn

FY2020 (Plan)

FY2019 (Achieved)

USD 0.7 bn

USD 0.8 bn

Total

2. Government-guaranteed Domestic Bonds
Type of Bonds

Total

3. Long-term Bank Loans
Long-term Bank Loans

In accordance with the Supplementary Provisions of the Law, a portion of JFM’s management account reservefor interest rate volatility is being attributed to the Japanese national government over a period of 5 years from fiscal
2020 through fiscal 2024, with the aim of transferring up to USD 2.1 billion over this period for the purpose of forest
environment transfer tax increase.
Furthermore, an amount of up to USD 13.8 million from fiscal 2018 through fiscal 2023 shall be attributed to thegovernment for exemptions of early redemption charges in relation to concessions of water supply and seweragebusinesses and the relevant amount shall be transferred to the government in fiscal 2020.

18

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 2020

Appendix / JFM Data

3 Scheduled Payment to the National Treasury

Financial Section

In order to raise funds for lending operations, JFM primarily issues non-government guaranteed bonds throughdomestic public offerings and overseas offerings. For fiscal 2020, JFM plans to issue USD 11.4 billion of JFM bonds
through these methods.
In addition, private placements with pension funds for local government officials are projected to amount to USD 4.9billion in fiscal 2020. In addition to issuing JFM bonds, JFM plans to raise USD 0.7 bn through long-term bank loans.
As for government-guaranteed bonds, JFM plans to issue USD 0.6 billion during fiscal 2020.

(2) Private Placements with Pension Funds for Local Government Officials

JFM’s Role in Local
Government Finance

2 Funding Operations

Notes: 1. Subject to change depending on lending status, market conditions and other factors.
2. For Open Issuance, details of issuance such as tenor, issue size and issue market will be determined as necessary based on the lending status,
market conditions and other factors.

Management Structure

FY2020Operations

Planned AmountFY2020

1. JFM bonds (non-government guaranteed)(1) Domestic and Overseas Offerings
Review and Plan

JFM’s lending plan is formulated based on the amount of local government borrowing for which the consent orapproval is scheduled to be given by the Minister for Internal Affairs and Communications or the respective prefectural
governors, under the Local Government Borrowing Programme (the “LGBP”).
Based on the LGBP, JFM plans to extend loans in the amount of USD 15.3 billion in fiscal 2020, which is the sameamount as fiscal 2019.

19

Review and Plan

Operations

Operations
Management Structure
JFM’s Role in Local
Government Finance

22
24
26
26
29

Funding Operations

Bishamondo Temple, Kyoto Prefecture

20

JFM ANNUAL REPORT 2020

1. Issue Type 
2. Basic Funding Policy 
3. Features of JFM Bonds 
4. Trends in Funding Operations 

32
33
34
35

Local Government Support Operations 

36

Appendix / JFM Data

1. Outline 
2. Loan Interest Rates 
3. Credit Check System 
4. Trends in Lending Operations 
5. Lending Operations by Business 

Financial Section

Lending Operations

JFM and Sustainable Development Goals  38

JFM ANNUAL REPORT 202021

Operations | Lending Operations

JFM’s primary objective is to contribute to the sound operation of the local government financing andto improve the welfare of local residents by providing long-term funding at low-interest rates to local
governments.

3. Lending Scopes and Maturities of Loans
JFM lends mainly to the following local government businesses with respective loan maturities.

1 Outline

Business Type

Within (Years)
25

Within (Years)
5

25

5

25

5

Educational Facilities Development*2

25

3

25

3

Social Welfare Facilities Development

25

3

25

3

General Waste Disposal

20

3

20

3

General Projects*2

30

5

30

5

Regional Revitalization

30

5

30

5

Disaster Prevention

30

5

30

5

Local Road Development

20

5

20

5

Special Municipal Mergers

30

5

30

5

Disaster Management and Mitigation

30

5

30

5

Public Facilities Optimization

30

5

30

5

Emergency Natural Disaster
Prevention

30

5

30

5

Anti-depopulation Measure Project

30

5

40

5

Water Supply

30

5

40

5

Industrial Water Supply

30

5

40

5

Transportation*2

30

5

40

5

Electricity Supply*2

30

5

30

5

Gas Supply

25

5

25

5

Port Facilities*2

30

5

40

5

Hospitals*2

30

5

30

5

Markets

30

5

40

5

Slaughterhouses

30

5

30

5

Sewerage

30

5

40

5

Prefectures and GovernmentDesignated Cities

–

–

30

3

Cities, Towns and Villages

–

–

20

3

Public Housing

JFM classifies general loans into the following three categories depending on the term.
• Long-Term Loans
Loans provided to local governments that have the consent or approval, and mature in or after the second
fiscal year.
• Short-Term Loans
Loans to be repaid with revenues in the same fiscal year.

General Account-related Loans

2. Types of Loans

Educationaland Social
WelfareFacilities
Projects

Unsubsidized
Projects

Municipal
Enterprise-related
Loans

Temporary Financial
Countermeasures
Funding

Appendix / JFM Data

Within (Years)
5

Financial Section

Within (Years)
25

JFM’s Role in Local
Government Finance

Grace Period
for Principal
Repayment

Management Structure

Maturity

Operations

Grace Period
for Principal
Repayment

Public Projects, etc.*2

JFM provides loans exclusively to local governments.

Adjustable Lending Rate*1

Maturity

As public funds included in the LGBP, JFM loans are offered to local governments which have the consent or approvalof the Minister for Internal Affairs and Communications or the respective prefectural governors.

1. Eligible Borrowers

Fixed Lending Rate

Review and Plan

Loans for Fiscal 2020

Notes: 1. Adjustable lending rates are reviewed depending on the maturity of the loan every 5 years, every 10 years or every 15 years or 20th, or 30th
anniversary of the initial disbursement. Lending rates for Temporary Financial Countermeasures Fundings are reviewed every 5 years or 10 years.
2. Figures represent maximum maturities and grace period for principal payment.

22

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202023

Operations | Lending Operations

2. Lending Rate Reduction

2 Loan Interest Rates

1. Loan Interest Rates

Standard Lending Rate
Special Lending Rate = Fiscal Loan Fund Interest Rate

0.70%
0.60%

0.20%
Standard
Lending Rate(funding costs)

Reduction using JFM’s own funds

0.15%

General Account-related Loans• Public housing
Municipal Enterprise-related Loans• Industrial water supply• Gas supply• Elderly care services • Markets• Slaughterhouses• Parking facilities

General Account-related Loans(excluding public housing)Temporary Financial
Countermeasures Funding
Municipal Enterprise-related Loans• Water supply • Transportation• Hospitals • Sewerage• Electricity supply

Notes: 1. The minimum interest rates for JFM loans are set at the same level as the interest rates of the Fiscal Loan Fund provided by the national
government.
2. The discount rates using the investment gains (0.15% or 0.20%) applicable to each business category are determined by the Minister for Internal
Affairs and Communications, pursuant to the Ministerial Ordinance on Finance and Accounting of Japan Finance Organization for Municipalities(Ordinance No. 87 of the Ministry of Internal Affairs and Communications, 2008).

JFM’s Role in Local
Government Finance

0.50%

0.20%

Management Structure

0.80%

Reduction using investment gains

Reduction
0.35%

SpecialLending Rate

Trends of Lending Rates

0.15%

Operations

JFM offers two types of loan interest rates: the standard lending rate and the special lending rate. The standard
lending rate is calculated in order to balance JFM’s funding cost with interest income from its lending. Specifically, thisrate is determined in a manner that the discounted present value of the cash flows of the funds raised to make theloans equals the discounted present value of the cash flows to be generated by those loans with their respective terms
to maturity, grace period for principal repayment and repayment methods. The special lending rate is set at 0.35% perannum below the standard rate.
The trends of JFM loan interest rates since April 2018 are shown below. The special lending rate has been at thesame level as the national government’s lending rates that are applicable to loans for specific public projects (the Fiscal
Loan Fund). This is due to the floor rates of the special lending rates being set equal to respective lending rates of the
Fiscal Loan Fund which have identical terms on redemptions to those of JFM loans.

The interest rate differentials between the special lending rates and the standard lending rates are covered byinvestment gains in the Fund for Lending Rate Reduction. The fund is comprised of a portion of proceeds that local
governments earn from municipally operated racing in accordance with the Local Government Finance Law, and also
JFM’s own funds.

Review and Plan

JFM sets standard lending rates, which are determined to balance its funding cost, and also offers special lending
rates at a discount to the standard rates by making use of its Fund for Lending Rate Reduction.

0.40%
0.30%
0.20%
0.10%

Apr

Jun

Aug
2018

Oct

Dec

Feb

Apr

Jun

2019

Aug

Oct

Dec

Financial Section

0.00%

Feb Mar2020

Note: The lending rates above represent a 30-year fixed rate loan with a 5-year grace period for semi-annually equal total payment.

Appendix / JFM Data

24

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202025

Operations | Lending Operations

2. Annual Lending Volume by Business and Borrower

3 Credit Check System1) JFM checks the financial and operational status of local governments and municipal enterprises to which it plans
to lend, in light of the fiscal indicators as stipulated in the Law Relating to the Financial Soundness of Local
Governments of Japan (Act No. 94 of 2007). This credit check process may include an interview of the staff ofprefectures, cities, towns and villages.

3) After a loan is disbursed, JFM conducts an onsite review to verify the use of funds and to check the operational
status of the project and the financial and operational status of the borrower.

Water Supply

17.7

18%

7%

2015

17.1

18

2016

15.9

18

9

2017

15.9

18

9

2018

15.2

2019 15.3

General Account-related Loans
2%

8

6

Others
2%

38%

28%

Temporary Financial Countermeasures Funding

Hospitals
2

28

35

2

34

3

Transportation

21

7

2
9

9

24.3

28
1

8
11.0

33

29
1
6.0

2

31

29
1.4
28.0

2

27.6

1.7

Notes: Totals may not add up due to rounding.

• Check the status of loans
and projects• Check financial andoperational status

FY2019 Loans Extended by Borrower

1. Overview

Total

JFM’s annual lending volume has dropped since fiscal 2013 due mainly to decrease in the budget of disastermanagement and mitigation and temporary financial countermeasures funding.
In fiscal 2019, the lending volume amounted to USD 15.3 billion. At fiscal year-end, outstanding loans were USD
215.3 billion.

Outstanding Loans(USD bn)(USD bn)25

240

15.3 bnTowns and villages

9% (USD 0.4 bn)

Cities andSpecial Wards of Tokyo

60% (USD 9.2 bn)

Prefectures

20% (USD 3.0 bn)

Government-designated
Cities9% (USD 1.4 bn)

Financial Section

Annual Lending Volume

USD

2% (USD 1.4 bn)

Note: Totals may not add up due to rounding.

230

19.6
17.7

17.1

220
15.9

15.9

15

15.2

15.3

210

212.4

215.6

218.2

218.7

2015

2016

2017

216.2

215.3

2018

2019

Appendix / JFM Data

217.7

200
10

190
180

5

170
0

26

FY 2013

2014

JFM ANNUAL REPORT 2020

2015

2016

2017

2018

2019

0

JFM’s Role in Local
Government Finance

Local Government Corporations
and Associations

4 Trends in Lending Operations

20

5%

Onsite credit review

Disbursementof loans• Verify the consent or approval
for the loan amount• Check the loan application
documents• Check financial andoperational status• Conduct interviews

Sewerage2014

3 Subsequent review

of lending
Check of the loan
application documents

governments/municipal
enterprises applying
for loans

Total
FY (USD bn)

Management Structure

2 Verification at the time

1 Check of local

Long-Term Loans Extended by Business

Operations2) JFM reviews loan applications submitted by local governments to determine if conditions are met. The conditions
include the consent or approval, any required resolution by the local government assembly and budget
appropriation for loans.

In fiscal 2019, loans for temporary financial countermeasures funding were USD 4.2 billion, accounting for the largest
share of lending, at 27.6% of the total. Ranked next were USD 3.7 billion in the sewerage business, representing
24.3% of the total, and USD 1.7 billion in the water supply, for 11.0% of the total.

Review and Plan

JFM conducts the following credit check process for all loans on the assumption that the details and legality of eachproject as well as assurance of loan repayment have been confirmed during the consultation and checking process to
obtain the consent or approval for loans.

FY 2013

2014

JFM ANNUAL REPORT 202027

Operations | Lending Operations

3. Outstanding Loans by Business and Borrower

JFM provides loans to local government businesses specified in the LGBP that the national government formulates
each fiscal year.
The major JFM-funded businesses are as follows.

Water Supply Business

4.8

31.1%

Others%(USD10.3bn)

Sewerage(USD 67.0bn)

Public Works(USD 4.6bn)

Water Supply(USD 29.5bn)

2.1%

2.2%

(USD bn)

Disaster Management
and Mitigation%(USD 7.3bn)

3.5%

Industrial Water
Supply%(USD 1.6bn)

3.4

1200

1.0

1100

0.5

1000

0.7

Special Municipal Mergers(USD 10.0bn)

4.6%

1.1

Others%(USD 2.3bn)

24.9% (USD 53.6bn)

20.3% (USD 43.7bn)

Toll Road Public
Loans

Municipal Enterprise-related
Loans

0.1% (USD 0.2bn)

54.7% (USD 117.8bn)

0
Kaneda Raw Water Reservoir (Kisarazu City, Chiba Prefecture)

FY2015 16

17

18

19

900

*1 Development projects for local roads, rivers and other waterways, and high school building.

Transportation Business

Outstanding Loans by Borrower (as of 31 March 2020)

2.7

21.0%

Prefectures(USD 45.2bn)(USD bn)

Government-designated
Cities%(USD 32.1bn)

0.4

14.9

61.4

215.3 bn

100

Loan Amount80

Number of Loans

Total

USD

(Number of loans)

0.5

Kumamoto City0800 Type Line (Kumamoto City, Kumamoto Prefecture)

0.3

60

0.2

40

0.1

20

0

FY2015 16

17

18

19

Appendix / JFM Data

Cities, Special Wardsof Tokyo, Towns
and Villages%(USD 132.2bn)

At the end of fiscal 2018, the transportation projects managed by local governments totaled 86 projects and public
transportation is used by approximately 3.5 billion people annually (9.54 million people on an average daily basis).
In fiscal 2019, loans extended to the transportation business amounted to USD 0.2 billion.

Financial Section

Local Government Corporations
and Associations%(USD 5.8bn)

JFM’s Role in Local
Government FinanceTemporary Financial
Countermeasures Funding

General Account-related
LoansManagement Structure

Transportation(USD 7.4bn)

Number of
Loans

1.5

4.7

3.2

1300

Loan Amount

13.7%

Hospitals%(USD 10.0bn)

Three Special
Projects*1%(USD 6.8bn)(Number of Loans)

2.0

Operations

At the end of fiscal 2018, the water supply coverage was 97.3% of the population. The water supply business(including small-scale water supply) operated by local governments totaled 1,882 projects and provided about 13.5
billion cubic meters of water annually for approximately 124.02 million people.
In fiscal 2019, loans extended to the water supply business amounted to USD 1.7 billion.

Outstanding Loans by Business (as of 31 March 2020)

Local Road
Maintenance(USD 4.7bn)

5 Lending Operations by Business
Review and PlanAt the end of fiscal 2019, the outstanding loans were USD 215.3 billion, of which the sewerage business accounted
for the largest share at 31.1%, followed by temporary financial countermeasures funding at 24.9% and water supply at
13.7%.
There was a total of 2,176 local governments, local government associations and corporations with outstanding JFM
loans, including all prefectures. Cities, special wards of Tokyo, towns and villages accounted for the largest portion at
61.4% of the total, followed by prefectures at 21.0% and government-designated cities at 14.9%. Local government
associations and corporations represented the remaining 2.7%.

0Note: Totals may not add up due to rounding.

28

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202029

Operations | Lending Operations

Disaster Management and Mitigation

At the end of fiscal 2018, hospital projects managed by local governments totaled 628 with 776 hospitals, which
included 744 general hospitals and 32 mental hospitals.
In fiscal 2019, loans extended to the hospitals business (including those run by local independent administrative
institutions) totaled USD 0.9 billion.

Disaster management and mitigation represent projects to support
and build strong disaster-resistant cities and towns by extending loans tofacilities that can gather information promptly in case of emergent situations
and other projects that can increase disaster prevention capability.
In fiscal 2019, loans extended for Disaster Management and Mitigation
amounted to USD 1.2 billion.

(USD bn)(Number of loans)

1.4
1.2

Number of
Loans

Loan Amount

600

2,000

1.2
1.0

1,500
1,000
500

FY2015 16

17

18

19

0

200

Operations

0

3,000
2,500

Loan Amount

0.2

300

0.4

100

FY2015 16

17

18

19

0

At the end of fiscal 2018, the sewerage system covered 91.4% of the nation’s total population. There were 3,628
projects involved, with a total annual sewerage processing capacity (combined storm water and sewerage treatment,
excluding river basin sewerage) of around 14.8 billion cubic meters serving areas with a population of nearly 105
million people.
In fiscal 2019, loans extended to the sewerage business totaled USD 3.7 billion.

Temporary financial countermeasures funding represents the funding for
local governments in order to cover general resource shortfalls pursuant to
the provisions of the Local Government Finance Law.
In order to secure the payments of the principal and interest of funds
borrowed by local governments under temporary financial countermeasuresfunding, the national government includes the entire amount of suchpayments in the total amount of Local Allocation Tax grants, which are to beallocated to local governments in subsequent years.
In fiscal 2019, loans extended for temporary financial countermeasuresfunding amounted to USD 4.2 billion.

(USD bn)

4.0(Number of loans)

3,000

Number of
Loans

Loan Amount

3.0(USD bn)

8.0(Number of loans)

800

Number of
Loans

6.0

Loan Amount

600

4.0

400

2.0

200

2,000
0

2.0

FY2015 16

17

18

19

0

Financial Section

Temporary Financial Countermeasures Funding

JFM’s Role in Local
Government Finance

Sewerage Business

Management Structure

0.2
0

1.4

0.4

0.8

Atsugi City Hospital (Atsugi City, Kanagawa Prefecture)

1.6

0.6

400

0.6

(Number of loans)
Number of
Loans

0.8

500

1.0

(USD bn)

1.8

Review and Plan

Hospitals Business

1,000

Sewage Purification Center (Shiojiri City, Nagano Prefecture)

30

JFM ANNUAL REPORT 2020

0

FY2015 16

17

18

19

Appendix / JFM Data

1.00

JFM ANNUAL REPORT 202031

Operations | Funding Operations

As a joint funding organization for local governments, JFM raises funds in a consistent manner to provide
local governments with long-term and low-interest funds, while endeavoring to focus on market fluctuations.

JFM Bonds

To be issued by JFM without government guarantees. Under Article 40,
Paragraph 2 of the JFM Law, all holders of JFM bonds have a preferential rightto be paid prior to other unsecured indebtedness.

•Regular issuance of 5-year, 10-year, 20-year and 30-year bonds

PublicOfferings•Opportunistic bond issuance (maturities except for 5-year, 10-year, 20-year and30-year)Private Placements with Pension Funds for Local
Government Officials

Bonds issued in international markets through the MTN Programme

2. Proactive Disclosure and Investor Relations
JFM proactively discloses information on its operations, financial conditions and risk management status in order tosupport investment decisions by investors. In this context, JFM announces its annual funding plan prior to the start of
the new fiscal year and its second half-year funding plan in August.
In addition, JFM performs investor relations activities, including presentation meetings and/or one-on-one meetings
with investors in both domestic and international markets. JFM thereby helps investors correctly understand JFM’s
management and bonds as well as strengthens market confidence toward JFM.
In fiscal 2019, JFM issued green bond financing sewerage projects managed by local governments.

Government-Guaranteed Bonds

To be issued only in the domestic market denominated in Japanese yen forthe purpose of refinancing outstanding government guaranteed bonds issued

Long-term Bank Loans

3. Contribution to the Sound Development of Capital Markets
While capturing funding opportunities in response to the needs of capital markets, JFM will further strengthen its role
as a leading public-sector bond issuer and be committed to contributing to the sound development of capital markets.

JFM utilizes long-term bank loans as a complementary means of fundraising.

Financial Section

by the Predecessor.

JFM’s Role in Local
Government FinanceInternational
Bonds

From the viewpoint of stable funding, JFM endeavors to issue bonds with various maturities and structures, including
medium-term and super-long-term bonds in response to the market environment and market needs, in order tobroaden its investor base, while also considering funding costs and risk management.
JFM’s basic means of funding is the issuance of bonds. JFM accesses the domestic market through the regularissuance of 5-year, 10-year, 20-year and 30-year bonds, and also continues to take advantage of its Flexible Issuance
Programme (FLIP) for opportunistic funding as well as long-term bank loans. JFM also utilizes the MTN Programme,
being committed to the regular issuance of benchmark bonds to the international investors and Uridashi bonds toJapanese retail investors. In addition to that, JFM is going to issue private placement bonds in a flexible manner.

Management Structure

Domestic
Bonds

1. Diversification of Funding Methods
Operations

JFM primarily issues non-government guaranteed bonds (i.e., JFM bonds) through public offerings in order to raise
funds for its lending operations. Private placements with pension funds for local government officials are also taken asa means of fund-raising.
JFM issues government-guaranteed bonds only for refinancing the existing government-guaranteed bonds of thePredecessor in order to manage the Predecessor’s assets to which JFM has succeeded.
In addition to issuing bonds, JFM raises money from long-term bank loans as a supplemental source for overallfunding operations.

To secure stable funding at fair value, JFM pursues diversified funding options and strives to build confidence incapital markets by proactively disclosing information and thoroughly fulfilling responsibilities. JFM also endeavors toseek more flexible funding operations than ever in response to volatile market conditions and shift in investor demandson the back of the change of monetary policy of major central banks.

Review and Plan

1 Issue Type

2 Basic Funding Policy

Appendix / JFM Data

32

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202033

Operations | Funding Operations

4 Trends in Funding Operations

JFM bonds are generally recognized as having high credit standing with the following features.

JFM issues JFM bonds (non-government guaranteed bonds to be issued through domestic public offerings orunder the MTN Programme, or private placements with pension funds for local government officials) and governmentguaranteed bonds for the purpose of refinancing existing government guaranteed bonds of the Predecessor. And, fromthe perspective of diversifying funding source, long-term bank loans are also important for JFM’s funding operations.

• JFM’s assets can be deemed to be highly stable based on the fact that JFM lends exclusively to local
governments, and no local governments have ever defaulted.
• JFM has a solid financial foundation, backed by its reserve for interest rate volatility and the Fund forLending Rate Reduction prescribed in the JFM Law.

• Under the JFM Law, local governments have an obligation to bear the costs necessary to satisfy all JFM
obligations in the event JFM is to be dissolved and its obligations remain unpaid.

S&P : A+JFM bonds :For reference :10%

Japanese Government Bonds : 0%
Japanese Government-Guaranteed Bonds : 0%be paid prior to other unsecured indebtedness, and such preferential right shall rank immediately after
the general preferential rights as provided for in the Civil Code of Japan (Law No. 89 of 1896, as

JFM ANNUAL REPORT 2020

188.1

188.8

186.0

150
20

18.6

15

6.6

10

0.3
3.5

18.9

19.5

5.5

7.0
0.5

3.9
2.6

0

94.8

18.0
2.4

0.1
4.6

70.9

61.3

117.9

124.7

2018

2019

16.4
0.4

0.9

0.8

4.5

4.4

3.3

1.6

6.4

5.6

FY2015

2016

2017

7.4

2018

100

50

2.1

6.4

79.7

85.6

88.6

99.6

108.4

8.7

2019

0

FY20152016

2017

Government-guaranteed Domestic Bonds

Management AccountLong-term Bank Loans

General AccountPrivate Placements with Pension Funds for Local
Government Officials
JFM Bonds (international bonds)
JFM Bonds (domestic bonds)
Non-government guaranteed bonds

Appendix / JFM Data

Note: The risk weights are values for investors in Japan. For international bonds, the values are determined by respective authorities in each country. (as of
31 March 2020)

185.2

Financial Section

All holders of JFM bonds (as well as JFM’s government-guaranteed bonds) have a preferential right to

183.4

25

5

amended). (Article 40, Paragraph 2 and Paragraph 3 of the JFM Law)

34

200

1.7

Local Government Bonds : 0%

Preferential Rights
for JFM Bonds(USD bn)30

Moody’s : A1
R&I : AA+BIS Risk Weighting(denominated in yen)

(USD bn)

JFM’s Role in Local
Government Finance

Issuer Credit Rating(As of 31 March 2020)

Outstanding Bonds and Bank LoansManagement Structure

JFM has received the highest credit rating among the Japanese public-sector bond issuers from Standard and Poor’s(S&P), Moody’s Investors Service (Moody’s) and Rating and Investment Information, Inc. (R&I). The BIS risk weighting
is 10% for JFM bonds denominated in yen.
In addition to JGBs and local government bonds, interest received by foreign investors (non-residents, foreign
corporations, etc.) on JFM’s domestic bonds in book-entry form as well as JFM’s international bonds (both of which
include government-guaranteed bonds) shall be exempted from Japanese income tax, subject to certain procedural
requirements.

Funding Volume

Operations• JFM is a joint funding organization established with a capital contribution from Japanese local governments
encompassing all prefectures, cities, special wards of Tokyo, government-designated cities, towns andvillages, as well as some local government associations.

In fiscal 2019, JFM raised a total of USD 16.4 billion, slightly decreased from the previous year. This was mainly
the result of a decrease in the amount of guaranteed and non-guaranteed JFM bonds and private placements withpension funds issued during fiscal 2019 while the issuance volume of JFM bank loans increased.
As of 31 March 2020, outstanding bonds were USD 184.1 billion. Outstanding long-term bank loans totaled USD 1.9
billion. The total amount of outstanding bonds and long-term bank loans was USD 186.0 billion, which was comprisedof USD 124.7 billion in the general account and USD 61.3 billion in the management account. Since the end of fiscal
2016 the volume of outstanding debt in the general account exceeds that of the management account as a result of thetrend that the management account has been decreasing while the general account has been increasing.

Review and Plan

3 Features of JFM Bonds

JFM ANNUAL REPORT 202035

Operations | Local Government Support Operations

Support for Local Governments

2. Personnel Training
SupportConduct research on financial
management of local governments,
regional finance, local government
finance in other countries and provide
results and necessary support tolocal governments which can be used
for human resource development,
practical support, and information
dissemination.

Hold seminars for local governments
and provide personnel training support
for local governments in order toacquire necessary financial knowledge
such as funding methods to ensure
sound financial management of local
governments.

Hold JFM local government
finance seminars, JFM municipal
enterprise seminar and more

Conduct research on local government
finance such as research on the futureof local public enterprise system incollaboration with the Ministry of Internal
Affairs and Communications

Hold seminars on timely issues
related to local finance and local public
enterprises that are of great interest
to local governments such as joint
seminars for chiefs and executives of
local public organizations with local
administrative and financial researchcommittee.

フリーワード検索

Research and studies onregional financing

Local government seminar

Introductory seminar on funding andinvestment and joint accommodation
type training with Japan Academyof Municipal Personnel and Japan
Municipal Training and Research
Foundation.

Research and studies on local
government finance in othercountries

Hold on-site lectures

Hold on-site lectures in local governmentsby sending JFM staff and outside experts
as lecturers and lecture on topics which
are of interest to local governments.

B
A
N
K

Expansion of municipal enterpriseaccounting applications and support
for formulating municipal enterprisemanagement strategies

Studies to understand the needs
and issues of local governments

JFM offers support for issues related
to the overall financial managementof local governments, which includes
ensuring financial health and fundraising.

Gathering advanced cases

Collect and accumulate advanced
cases of matters which are of highpractical interest to local governments.

3. Information Dissemination
Strengthen information dissemination by effectively using
the website.

Practical support for financial
management and funding

Operation of advanced case search system

Operation of database search system with keyword researchwhich has more than 800 advanced cases to help in solving
issues in local governments.

Operation of the “Octagon” financial
analysis chart

Operation of local government’s financial
analysis chart “Octagon” which is a tool toanalyze the financial status and changes inlocal governments.

Provide learning materials and relevant
economic and financial data/knowledge

Provide necessary materials and videos
related to local government funding andmanagement.

Provide individual practical support
from local government finance advisors
on financial management and funding
for local governments such as helping
local governments issue publicly offeredlocal bonds.

Appendix / JFM Data

Send experts to workshops heldby local governments and support
local governments apply accounting
applications and formulate management
strategies.

Financial Section

Conduct research by cooperating withspecialized agencies on local government
finance and its operation in other countries
such as the latest funding methods of
local governments-owned joint fundingorganizations.

JFM’s Role in Local
Government FinanceConduct research on borrowing
environment of local governments fromlocal financial institutions.

Management Structure

Research and studies on local
government financeOperations

1. Research andStudies

Review and Plan

JFM, as a joint funding organization owned by local governments, offers support for sound financial
management of local governments by utilizing the expertise and experience as a market participant. As
a close advisor of local governments, JFM offers various support services such as research and studies,personnel training and information dissemination, as per local government needs.

Buildings, facilities and equipment marked prominently are examples of municipal installations funded by JFM.

36

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202037

Operations | JFM and Sustainable Development Goals

Review and Plan

JFM and SDGs related operations
Support sustainable community development through lending operations█ JFM lending operations and SDG mapping

Disaster Management and Mitigation

Operations

Local governments are facing various administrative issues, such as promoting the revitalization of regions,
measures against the declining birth rate and an aging population, deteriorating infrastructure, measures against largescale and intensifying natural disasters.
To address these challenges, JFM provide loans to local governments who develop infrastructure and administrative
services to their residents of the region and contribute to a sustainable development of the region’s community andenvironment.

Building facilities and network for large scale disaster prevention.
Updating public facilities with earthquake-resistant capacity.

SewerageSocial Welfare and Educational Facilities Development
Nagano Prefecture, Iida City Matsuo Purification Center

JFM’s Role in Local
Government FinancePublic sewerage, basin sewerage, agricultural settlement
drainage facilities, wastewater treatment facilities.

Transportation

Kumamoto Prefecture, Kumamoto City 0800 Series Low Floor Tram

Aomori Prefecture, Hirosaki City, Tateno Elementary School

Supporting local governments through local
government support operations

Hospitals and Elderly Care Services

Appendix / JFM Data

JFM offers various support for sound financial management oflocal governments by providing services such as research andstudies, personnel training and information dissemination, as per
local government needs.

Issued first green bond in February 2020
JFM issued its first green bond in February 2020 with an amount of EUR 500 million for the purpose of allocating
the net proceeds to sewerage business. JFM has published impact report summarizing the description of projects andenvironment impacts and is planning to continuously support the SDG activities managed by local governments inJapan. JFM green bond framework obtained the highest level of assurance from Vigeo Eiris, a second party opinion
provider.

Maintaining hospitals, medical facilities, elderly care facilities
managed by local governments.

Hyogo Prefecture, Kobe City, Kobe Proton Center38

JFM ANNUAL REPORT 2020

Financial Section

Maintaining educational facilities such as schools managed by
local governments.

Rail track, automobile transportation, railway/ship operation
maintenance business.

Management Structure

Kochi Prefecture, Tsunami Evacuation Tower(Link to JFM green bond homepage : http://www.jfm.go.jp/en/investors/greenbond.html)

JFM ANNUAL REPORT 2020

39

Review and Plan
Operations

Management
Structure

Management Structure
JFM’s Role in Local
Government Finance
Financial Section

Tadami Line, Fukushima Prefecture

40

JFM ANNUAL REPORT 2020

1. Corporate Governance 
2. Internal Control over Financial Reporting 
3. Internal Audit General Account and Management Account 
Risk Management Compliance Disclosure 

42
44
44
45
47
54
55

JFM ANNUAL REPORT 2020

Appendix / JFM Data

Corporate Governance41

Management Structure | Corporate GovernanceJFM ensures responsible corporate governance through the participation of external experts on the
Representative Board and the Supervisory Committee and audits by external accounting auditors.

Corporate Governance System

Representative Board

Appointmentof members

Members: External experts
Number of Members: 6
Term of Office: 2 years

Decisions on importantmatters, including budgets
and accounts

Consultation andpropositions
Statement of opinion
for important matters
including financial
results and budget

AuditsPresident and CEO,
Deputy President, etc.

Approval of changes to thearticles of association
Demand for correction of illegal
activities

National Government(Certified public
accountants or an
audit corporation)

Corporate Auditors

JFM has focused on establishing highly transparent management that incorporates unbiased opinions of external
parties, and responsible corporate governance. To ensure such a governing structure, JFM has the Supervisory
Committee as a deliberative committee comprising external experts.
The Representative Board appoints the members of the Supervisory Committee from among experts in local
administration, economics, finance, law or accounting, and other experts in the academic world.
The Supervisory Committee has the function of monitoring the operations of JFM and may offer its opinions onimportant matters such as JFM’s operations including budgets, settlement of accounts and business plans. The
Committee may also, if necessary, request that the President and CEO reports on those matters. The President andCEO must respect and report the Committee’s opinions to the Representative Board.

3. Audits by Corporate Auditors
The Corporate Auditors are responsible for auditing the accounts of JFM, and may, at their discretion, submit reports
to the Representative Board, the President and CEO and the Minister for Internal Affairs and Communications.

JFM’s Role in Local
Government FinanceBudgetsubmissions

Audits

Accounting
Auditors

2. Supervisory Committee

Management Structure

Supervisory
Committee

Appointment and dismissal of
the President and CEO
Agreement for appointment anddismissal of the President andCEO / Deputy President

Appointment of
Accounting Auditors
and Corporate
Auditors

Operations

Members: (1) Representatives at local governments*(2) External experts*
Number of Members: 6 (3 from (1) above and 3 from (2) above)
Term of Office: 3 years

As an organization autonomously managed by local governments, JFM has the Representative Board as its supremedecision-making body.
To ensure independence and transparency, the Representative Board consists of one prefectural governor, one city
mayor, one town/village mayor and three members from among experts in local administration, economics, finance,law or accounting.
The Representative Board has the authority to make decisions on important matters related to the overall managementof JFM, including budgets, settlement of accounts and business plans and to appoint and dismiss the President andCEO as well as Corporate Auditors. As its supervisory function, the Board is also authorized to obtain from the President
and CEO information relating to JFM’s operations and financial condition, and to order the President and CEO to takecorrective actions with respect to any illegal or other inappropriate activities.

Review and Plan

1 Corporate Governance

1. Representative Board*Elected by the national associations of prefectural governors, mayors of cities, and mayors of towns and villages.

As JFM raises funds in capital markets, the proper disclosure of information and external checks on accounting
procedures are essential in order to build market confidence toward JFM.
From this viewpoint, JFM has its financial statements audited not only by corporate auditors but also by external
accounting auditors (certified public accountants or an audit corporation) appointed by the Representative Board.

Financial Section

4. Audits by External Accounting Auditors

Appendix / JFM Data

42

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202043

Management Structure | General Account and Management Account

2 Internal Control over Financial Reporting

Japan Finance Organization for Municipal Enterprises was established on 1 August 2008, with capital contributed by
all prefectures, cities, special wards of Tokyo, government-designated cities, towns and villages, as well as some local
government associations, to provide funds to local governments. JFM commenced its operations after succeeding to
the assets and liabilities of the Predecessor on 1 October 2008.
As a result of the reorganization on 1 June 2009, JFM’s lending scope was extended to overall general accountrelated loans.
Under the JFM Law, JFM requires managing loans and bonds issued since JFM began its operations in the generalaccount of JFM, whereas loans and operations carried over from the Predecessor are administered in the separate
account known as the management account of JFM.
With regard to the management account, JFM issues government-guaranteed bonds solely for the purpose ofrefinancing government-guaranteed bonds of the Predecessor.
Established on
1 August 2008

3 Internal Audit

Reorganized on
1 June 2009

Japan Finance
Organization for
Municipal Enterprises

Japan Finance
Organization for
Municipalities (JFM)

Established by capital
contributions only from Japanese local
governments

The lending scope was expanded tooverall general account-related loans

Established on
1 June 1957
Japan Finance Corporation
for Municipal Enterprises(the “Predecessor”)

Management Structure

An internal auditor, who is independent from other departments, divisions and offices, examines and assesses theappropriateness and effectiveness of JFM’s internal control systems, thereby helping ensure reliable financial reporting
and appropriate and efficient operations.
On completing this task, the internal auditor submits a report to the president and CEO.
If the internal auditor identifies deficiencies, related divisions and offices must immediately take the required
corrective actions. The internal auditor will then submit to the president and CEO an internal audit report that includes
the progress of corrective actions.
The internal auditor also performs follow-up audits and reports the results to the president and CEO as necessary.

Began operations on
1 October 2008

Operations

Pursuant to the Ministerial Ordinance on Finance and Accounting of Japan Finance Organization for Municipalities,
JFM has set up a system which is similar to the internal control reporting system under the Financial Instruments andExchange Law in Japan. In accordance with the system, JFM prepares the Internal Control Report to evaluate theeffectiveness of internal control over financial reporting to ensure the reliability of its financial statements, the base dateof which is the end of the fiscal year (31 March), and it is audited by the external auditors and released together withthe financial statements.
As for the Internal Control Report in which JFM viewed its internal controls on financial reporting as effective as ofthe end of fiscal 2020, the accounting auditors gave their opinion (unqualified audit opinion pursuant to Ministerial
Ordinance Article 32, Paragraph 2, Clause 1) that, in all material respects, evaluation results of JFM’s internal controls
over financial reporting were in conformity with the standards of evaluation for internal controls over financial reporting
generally accepted in Japan.

Succeeded to assets
and liabilities
Abolished(and its capital returned to
the national government)

Deputy President

Departments
DivisionsInternal Audits

Internal
Auditors

Predecessor

44

JFM ANNUAL REPORT 2020

Japan Finance Organization for Municipalities (JFM)
General Account

JPY 0.2 tn (USD 1.8 bn)
Management AccountJPY 3.2 tn (USD 29.4 bn)

Ensure a financial foundationthat can withstand therefinancing risk posed by thegovernment-guaranteed bonds, etc.

JPY 2.2 tn
Reserve for(USD 20.2 bn)
Interest Rate Volatility
FY2009-2017
JPY 220 bn (USD 2.0 bn)
transferred each year

Management Account Reservefor Interest Rate Volatility

JPY 0.6 tn(USD 5.5 bn)

JFM ANNUAL REPORT 2020

Appendix / JFM Data

Reserve for Losseson the Refinancingof Bonds
JPY 3.4 tn(USD 31.3 bn)

Ensure a financial
foundation needed tosustain the businesses
into the future

Financial Section

SeniorExecutive
Directors

When JFM was founded, it succeeded to the Reserve for Losses on the Refinancing of Bonds in the amount ofapproximately JPY 3.4 trillion (USD 31.3 billion) to ensure its future stable management from the Predecessor.
Of this amount which was recorded in the management account, the JPY 2.2 trillion (USD 20.2 billion) needed toensure the future continuity of JFM’s operations is being transferred to the general account in equal installments over
10 years, with the remainder which is expected to remain in the management account to ensure a sufficient financial
foundation to appropriately manage the Predecessor’s bonds and loans and prepare for the risk with refinancing bondsof the Predecessor.

JFM’s Role in Local
Government FinanceSpecial governmental institution(wholly owned by the national government)Internal Audit System
President and CEO

Review and Plan

Management Structure | Corporate Governance45

Management Structure | General Account and Management AccountManagement Structure | Risk Management

Under the JFM Law, if any assets remain when the asset management operations of the Predecessor are completed
and the management account is closed, those assets shall be returned to the national treasury.
Even before the management account is closed, in the event that the businesses of JFM are determined to havebeen executed smoothly in light of the condition of the management of JFM, the Minister for Internal Affairs andCommunications and the Minister of Finance shall, if the management account reserve for interest rate volatility andthe management account surplus reserve are determined to exceed the amount necessary for the smooth operationof the asset management operations of the Predecessor in the future, cause the amount that is determined to be inexcess to belong to the national treasury (Article 14 of the Supplementary Provisions of the JFM Law).
In accordance with this provision, JFM has transferred a portion of its reserve for interest rate volatility within the
management account to the Japanese national government and such portion has been allocated to the nationaltreasury to secure financial resources of the Local Allocation Tax for regional revitalization.

1 Overall Risk Management
1. Risk Management System
Review and Plan

JFM adopts an integrated risk management approach to respond to various risks, while pursuing for a higher level ofrisk analysis and management.
Accordingly, JFM has developed a system for appropriate risk management, including the establishment of theIntegrated Risk Management Committee, which supervises JFM’s overall risk management, and the Risk Management
Office to ensure comprehensive risk management. Risk management can then be appropriately reflected inmanagement decisions.

Risk Management System
Operations

Integrated Risk
Management
Committee

President and CEO

Senior Executive
Director in Charge

ALM Committee

Management Structure

Risk Management OfficeFinance
Department

Loan
Department

Administration
Department

Financial Section

JFM lends to local governments with the maximum maturity of 40 years while JFM raises funds primarily by issuing
10-year bonds. Among other risks, JFM considers the interest rate risk associated with bond refinancing as its majorrisk (the risk of the negative margin caused by the interest payable exceeding the interest receivable).
To address such interest rate risk, JFM maintains reserves for interest rate fluctuations (the Reserve for Interest Rate
Volatility) and has set up the ALM Committee to comprehensively analyze and manage JFM’s assets and liabilities in atimely and appropriate manner.
The ALM Committee conducts medium-term and long-term management and risk analysis through scenario analysis,
VaR analysis, duration analysis, and other analyses. JFM reflects the findings in its bond issuance plans and otheraspects of management and endeavors to lower interest rate risk.

JFM’s Role in Local
Government Finance

2. Characteristics of JFM’s Risks

Appendix / JFM Data

46

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202047

Management Structure | Risk Management

2 Management of Specific Risks
1. Credit Risk

1) Credit risk associated with loans
JFM lends exclusively to local governments. Local government bonds and loans have a zero risk weighting under
the regulations of the Bank for International Settlements (as of 31 March 2020). For the reasons outlined below, JFM
believes it is unlikely that any of its borrowers will default those loans. In fact, JFM and its Predecessor have neverexperienced any loan losses.

JFM is, however, exposed to the risk of loss arising from credit events, such as deterioration in the financial conditionof a counterparty, which causes an asset to lose value or become worthless. JFM works to appropriately manage credit
risk of this type by constantly monitoring counterparties’ financial standings and taking measures including suspensionof new deals and cancellation of transactions with counterparties that have come to poor credit standings. Moreover,JFM limits counterparties to financial institutions that meet the credit rating and other criteria, and conducts transactions
within the credit lines for each counterparty in order to diversify risks.
In addition, JFM entered into the ISDA (International Swaps and Derivatives Association) Master Agreements and theCSA (Credit Support Annex) with its derivatives counterparties to reduce the credit risk resulting from fluctuations in thevalue of derivative transactions.

Management Structure
JFM’s Role in Local
Government Finance• Before issuing a loan, JFM checks the financial and operational status of the local government, including
its debt servicing costs, tax revenues and necessary funds. In addition, when reviewing the ability of a local
government to repay the loan, where such local government’s expenditures exceed the revenue generated
by local taxes, JFM takes into account the Local Allocation Tax grants from the national government
described above.

Appendix / JFM Data

JFM ANNUAL REPORT 2020

Financial Section• The Early Correction Measure requires certain local governments, such as those whose debt servicing
costs or financial deficits exceed specified levels, to obtain approval from the Minister for Internal Affairs
and Communications or their respective prefectural governors in cases where they issue additional bonds
or borrow additional loans. In addition, local governments whose fiscal indicators exceed certain early
warning limits must make their own efforts toward achieving fiscal soundness, and local governments
whose fiscal indicators exceed certain “reconstruction limits” must take necessary actions to restore fiscal
soundness under the oversight of the national government with regard to redemption of local government
bonds and loans, and other operations. This system facilitates the maintenance of the credit standing of
local government bonds and loans.

48

Operations• Financial sources for the payment of the principal and interest of local government bonds and loans are
secured through the following mechanisms. First, local governments can obtain local tax revenues pursuant
to their right to impose tax. Second, in addition to such local tax revenues, Local Allocation Tax grants areallocated as follows: (i) the national government includes certain local government debt servicing costs,
i.e., expenditures for the payment of the principal and interest of certain local government bonds and loans
including those issued or borrowed with consents or approvals, in the amount of “expenditures” in the
Local Government Finance Programme formulated by the national government; and (ii) the total amountof Local Allocation Tax grants is calculated so that the total amount of local government expenditures,
including such debt servicing costs, is equivalent to the total amount of the local government revenues, inthe Local Government Finance Programme. Thus, the national government effectively secures revenue
sources for the payment of principal and interest of such local governments bonds and loans in terms of thetotal amount. When calculating the amount of Local Allocation Tax grants to be allocated to an individual
local government, a part of the “expenditures” for the payment of the principal and interest of such local
government bonds and loans are included.

2) Credit risk associated with market transactions

Review and Plan

Credit risk is the risk of loss arising from deterioration in the financial condition of a borrower and other situations,which could cause an asset to lose value or become worthless. Loans and financial transactions involve credit risk.

As of 31 March 2020, JFM’s total outstanding loans stood at USD 215.3 billion. The amount of loans outstanding
made to local governments whose fiscal indicators exceeded the early warning limits or the reconstruction limits
accounted for less than 0.03 %. in aggregate of total loans outstanding as of 31 March 2020.

JFM ANNUAL REPORT 2020

49

Management Structure | Risk Management

2. Market Risk

1) Interest rate risk

• Interest rate risk associated with bond refinancing

J FM is exposed to the interest rate risk resulting from a duration gap between lending and funding. To address
such risk, JFM takes measures described on page 49.

J FM generally raises funds required to finance a loan by issuing bonds prior to the loan disbursements. Proceedsfrom bond issuances may not be earmarked for a particular loan. Thus, fluctuations in interest rates in the period
where lending and funding schedules differ affect the profitability of loans (“pipeline” risk). In order to hedge against
pipeline risk, JFM utilizes interest rate swaps.

• JFM maintains reserves to prepare for interest rate risk associated with bond refinancing. At the end of
fiscal 2019, the total amount of the reserves stood at USD 25.8 billion, which consisted of USD 20.2 billion
in the general account and USD 5.6 billion in the management account.
• As assets and liabilities in the general account are expected to expand as a result of an increase in loans andfund-raising, JFM carries out an ALM analysis of this account in order to further enhance the effectivenessof its interest rate risk management. Furthermore, JFM has established a medium-term management targetof 5 years from fiscal 2018, in which the duration gap is maintained below 2 years. In order to implement the
management target, JFM takes the following measures:(1) Controlling lending duration – Lending rates for loans for temporary financial countermeasures funding,which account for approximately one third of JFM’s outstanding loans in the general account, arerevised every 5 years or 10 years depending on the loans. In addition, JFM will revise its lending rate by
the 30th year at the latest for its loans with maturities longer than 30 years.
(2) Extending funding duration – Utilizing its FLIP and Open Issuance scheme, JFM aims to extend thefunding duration by carefully choosing maturities of bonds to be issued e.g., continuously issuing longdated bonds with maturities over 10 years.

• In the management account, which manages assets transferred from the Predecessor, JFM maintains USD
5.6 billion of the management account reserve for interest rate volatility as described above. As no newlending from the management account has been made since October 2008, JFM expects that the interest
rate risk in the management account will decline overall as the size of the account declines over time.

JFM’s Role in Local
Government Finance
Financial Section• Pursuant to Article 14 of the Supplementary Provisions of the JFM Law, a portion of JFM’s management
account reserve for interest rate volatility is being attributed to the Japanese national government over a
period of 5 years from fiscal 2020 through fiscal 2024, with the aim of transferring up to USD 2.1 billion
over this period. Furthermore, it has been also determined that an additional amount of up to USD 13.8
million from fiscal 2018 through fiscal 2023 shall be attributed to the government. The amount of transfer
is to be within the amount which the Minister for Internal Affairs and Communications and the Minister ofFinance deem as an amount exceeding the requisite amount of reserve necessary for the smooth operationof JFM’s management account at the time of transfer and in the future, in light of JFM’s financial condition.
Even after these transfers, JFM does not expect the transfers to have a material effect on JFM’s business,
results of operations or financial condition, due primarily to sufficient amount of the reserve for this account.

Management Structure• At the end of fiscal 2019, the duration gap in the general account was 0.68 years, staying within the
management target.

Operations• Interest rate risk associated with a gap in lending and funding schedules

Managing interest rate risk associated with bond refinancing
Review and Plan

Market risk is the risk of losses resulting from changes in the value of assets and liabilities due to fluctuations in risk
factors such as interest rates, securities prices and foreign exchange rates, or the risk of loss resulting from changes
in earnings generated from assets and liabilities. Market risk includes interest rate risk, foreign exchange risk, inflation
risk and price fluctuation risk.

Appendix / JFM Data

50

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202051

Management Structure | Risk Management

3. Liquidity Risk

Maturity Ladder (JFM Loans, Bonds and Bank Loans)Interest Receipt (Lending)Principal Redemption (Lending)Principal Redemption (Funding)Interest Payment (Funding)Gap

4. Operational Risk

FY 2020 21 22 23 24

25 26 27 28 29 30

31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49

Lending duration 8.01 years • Funding duration 7.33 years • Duration gap 0.68 years (YoY change: -0.19 years)

FY 2020•(As of 31 March 2020)

Interest Receipt (Lending)Principal Redemption (Lending)Principal Redemption (Funding)Interest Payment (Funding)

Administrative risk is the risk of loss resulting from the neglect or inadequacy of attention by management andemployees to properly conduct administrative work, or from accidents and/or violation of laws caused by them in thecourse of the administrative work process. JFM endeavors to mitigate its exposure to administrative risk by preparing
operational manuals, holding educational seminars and training sessions, and reducing operational workload throughsystematization.

2) Systems risk

Gap

Systems risk is the risk of the confidentiality, integrity and availability of information assets being impaired as a resultof computer system inadequacies or the fraudulent use of computer systems. JFM has established and implemented
the Systems Risk Management Policy and the Systems Risk Management Standard to appropriately manage systems
risk and ensure smooth business operations.

5. Contingency Measures
21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

Lending duration 4.99 years • Funding duration 4.13 years • Duration gap 0.86 years (YoY change: -0.05 years)

JFM as a whole• Lending duration 7.11 years • Funding duration 6.28 years • Duration gap 0.83 years (YoY change: -0.15 years)

JFM has prepared the Contingency Plan to minimize the scope of losses and the impact on operations and restore
normal operations promptly and efficiently in the event that computer systems break down or cannot be used due to
unexpected incidents, disasters or malfunctions. Furthermore, in order to prepare for a contingency, JFM has a backup
server outside JFM so that its business operations can be continued.

Appendix / JFM Data

2) Foreign exchange and other risks
Various risks associated with bond principal and interest payments are generally hedged by swap transactions.
These risks include foreign exchange risk related to foreign currency denominated bonds and interest rate risk related
to floating rate bonds. JFM’s investments of surplus funds are exposed to the risk of losses on the sale of securities
resulting from price declines and the risk of realized losses on foreign currency denominated deposits resulting fromfluctuations in foreign exchange rates. Accordingly, in principle, JFM reduces the price fluctuation risk by holding
investments until maturity and hedges foreign exchange risk by using forward foreign exchange contracts.

52

JFM ANNUAL REPORT 2020

Financial Section

16,00014,00012,00010,000
8,000
6,000
4,000
2,000
0
-2,000-4,000-6,000-8,000-10,000-12,000-14,000-16,000

1) Administrative risk

JFM’s Role in Local
Government Finance

USD mmManagement AccountOperational risk is the risk of loss resulting from inadequate operation processes, inadequate activities by management
and staff, and inadequate computer systems, or from external events.
Management Structure•

Liquidity risk is the risk that JFM would incur losses because of difficulty in funding, or because of funding at far
higher interest rates than under ordinary conditions. It also includes the risk that JFM would incur losses because of theinability to conduct market transactions or because of transactions at prices far more unfavorable than under normal
conditions due to market disruption or other situations. However, JFM’s current exposure to liquidity risk is low becauseloans are made based on a pre-set schedule, and the daily cash and liquidity management is carried out. Moreover,JFM has entered into overdraft agreements with a wide range of financial institutions to prepare for unexpected fundshortfalls, and invests surplus funds only in short-term financial products.
In addition, JFM has implemented a policy to maintain a certain amount of liquid assets so that, in the event ofmarket disruption, JFM may continue to timely make its payments of interest and principal on the bonds and other dent
securities.

Operations

16,00014,00012,00010,000
8,000
6,000
4,000
2,000
0
-2,000-4,000-6,000-8,000-10,000-12,000-14,000-16,000(As of 31 March 2020)

Review and Plan

USD mmGeneral Account

JFM ANNUAL REPORT 202053

Management Structure | Disclosure

1 Basic Policy

1 Basic Stance on Information Disclosure

JFM has prepared the Compliance Rules to ensure that operations are conducted in accordance with laws andregulations and indicate what actions management and staff should take when a breach of laws or regulations is
identified. The rules include the following basic policy on compliance.

From the viewpoint of investor protection, JFM strives to ensure the transparency of JFM’s management bydisclosing information on its financial conditions and other relevant information.

2 Compliance System

The following materials are available on JFM’s website (www.jfm.go.jp/en/).

1. Materials for Disclosure Pursuant to Laws and Regulations• Financial statements• Business reports and statement of accounts (in Japanese only)• Explanatory documents based on Article 36, Paragraph 3 of the JFM Law (Documents corresponding to annual
securities reports specified in the Financial Instruments and Exchange Act and the Internal Control Report) (inJapanese only)

2. Other Documents for DisclosureManagement Structure• Budgets, business plans, funding plans, and medium-term plans on income and expenditures• Management plan
• Funding plan
• Brochure• Annual Report• JFM News magazine• JFM Green Bond

JFM’s Role in Local
Government Finance

Based on the Compliance Rules, JFM has established the Compliance Committee.
JFM’s deputy president serves as the chairman of the committee, with senior executive directors and department
heads serving as committee members. The committee deliberates on important compliance issues, such as theformulation, revision and abolition of compliance-related rules and regulations and the preparation of guidelines andaction plans for compliance.
JFM has also established the compliance division to oversee compliance arrangements. This unit deploys
compliance-based initiatives (providing system guidance and training or producing manuals) in keeping with thecommittee’s guidelines.

2 Materials for Disclosure

Compliance System
President and CEO
Appointment

Financial Section

Compliance Committee
Instruction

ReportCompliance Division (Administration Department)
Website (http://www.jfm.go.jp/en/)

Annual Report

ReportAppendix / JFM Data

Instruction and training
Directors and Employees

54

JFM ANNUAL REPORT 2020

Operations• Management and employees must be aware of JFM’s social responsibility and public mission and realizethat a breach of laws or regulations would cause a great hindrance to JFM’s business operations, such asa loss in credibility of JFM as a whole. Management and staff must also observe laws and regulations andfulfill their duties with integrity and fairness.
• Management and employees must strive to earn the trust of society by appropriately disclosing information
on JFM’s operations.

Review and Plan

Management Structure | Compliance

JFM ANNUAL REPORT 2020

55

JFM’s Role in Local Government Finance

Each local government is unique in terms of its natural andhistoric situations, industrial structures, population sizes, and otherattributes. As a result, each local government handles diverse
administration. The term “local government finance” collectively
refers to funding for individual local governments engaging in suchadministration. Just as with national finance, local government
finance plays a major role in the nation’s economy and the livesof citizens. In fiscal 2020, local government finance will total JPY
91.7 trillion (USD 843.6 billion) (based on the Local Government
Finance Programme (the “LGFP”)).
Because local governments engage in numerous activities thatclosely relate to residents, they need to provide stable public
services regardless of regional differences stemming from varying
populations, industry densities, and/or tax revenue fluctuations
over years. Accordingly, the national government formulates
the LGFP each fiscal year based on assessments of the scalesof local government finance and forecasts of overall revenues
and expenditures. In response to annual national budget plans,
the national government balances the total amount of local
government revenues and expenditures in the LGFP. Under thisProgramme, revenue sources for all local governments, including
Local Allocation Tax grants as well as bonds and loans to beissued or borrowed, are secured so that local governments canensure uniform public service standards.

National Government
Prefectures
Local Government

Cities, Special Wards of Tokyo,
Towns and Villages

Number of Japanese Local Governments
Prefectures

47

Cities, special wards of Tokyo, etc.

1,741
20

Cities772

Special wards of Tokyo

23

Towns

743

Villages

183
Total

Annual Expenditure(USD 843.6 bn)

Annual Revenue(USD 843.6 bn)

Local Tax
USD 401.1 bn- Social Welfare- Education- Fire Defense- Infrastructure, etc.

Local Allocation Tax
USD 158.2 bn
Local Government
Bonds and Loans
USD 85.6 bn
OthersUSD 199.6 bn

Note: The above programme includes Great East Japan
Earthquake related budgets.

JFM’s Role in Local
Government Finance

Government-designated cities

Local Government Finance Programme(Initial Plan for FY2020)

Management Structure

Local governments are responsible for extensive areas of public administration for the welfare of citizens.
While the national government focuses on administrative affairs for the state as a member of the international
community, local governments engage in administration that relates to the daily lives of citizens. Local governments are
responsible for social welfare, education, fire defense, and infrastructure such as road and waterways.
The Japanese local government system adopts a two-tier system with prefectures serving broader geographic areas,and cities, special wards of Tokyo, as well as government-designated cities, towns and villages providing local services.

Operations

2 Local Government Finance Programme
Review and Plan

1 Japanese Local Government System

1,788

Financial Section(As of 1 April 2020)

Appendix / JFM Data56

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 2020

57

JFM’s Role in Local Government Finance2) Issuance restriction

3 Local Allocation Tax

Local Allocation Tax System

3) Supervision of financial soundness
The Law Relating to the Financial Soundness of Local Governments of Japan, which was promulgated in June 2007,
requires local governments to fulfill the following measures in order to securely manage their fiscal soundness:( i ) Specified fiscal indicators to be disclosed

ShortageStandard
Local
Tax revenue*2

Local Allocation Tax
for City A

4 Local Government Borrowings

The LGBP is an annual plan that the national government prepares for local government funding. The LGBP isclosely linked to the national government budget-making. The LGBP plays the following crucial roles in terms of local
government finance.

1) Consent (approval) based on the LGBPThe LGBP specifies the total scheduled amount of local government borrowings including the amount by businesstype. Typically, the consent or approval for local government borrowings is given based on the LGBP.

2) Secured funding sources for local government borrowings
The national government balances the amount of local government funding needs and the amount of funding
sources, and specifies funding sources for each business under the LGBP.

5 Security of Local Government Borrowings

3) Guideline for local government borrowings
The LGBP is published as well as local financial plan which specifies the guideline for each business on local
government borrowings.

1) Secured funds for repayments of local government borrowings
The national government effectively secures revenue sources for repayments of local government borrowings fromboth macro and micro perspectives.

Financial Section

The following framework secures principal and interest payments of local government borrowings. On the back ofthis framework, the BIS risk weighting for local government borrowings is 0%, based on the standardized approach (asof 31 March 2020).

JFM’s Role in Local
Government Finance

Local government borrowings are bonds and loans to be issued by local governments for securing necessary
external funds, and mature no earlier than the first fiscal year. In principle, a local government should cover
expenditures with its revenues other than local government borrowings. However, local governments can financethrough borrowings in the case that it is desirable to share costs with future residents such as for constructions offacilities, or that large temporary expenses are required due to disasters.

6 Local Government Borrowing ProgrammeManagement Structure

Notes: 1. Standard financial requirements are the amount of funds necessary to provide standard public services. The requirements are calculated
for each local government according to the standard specified by the Ministry of Internal Affairs and Communications.
2. Local governments have taxation rights in Japan, but there are regional imbalances in tax revenues.

(iii) L ocal governments with those fiscal indicators exceeding certain reconstruction limits to take necessary actions
under the supervision of the national government or the respective prefectural governments, in order to restore
their fiscal soundness

Operations( ii ) L ocal governments with those fiscal indicators exceeding certain early warning limits to restore fiscal soundness
through their own efforts

Example: City A
Standard
Financial
Requirements*1

Local governments with a real debt payment ratio of 18% or higher, or those with a real deficit ratio exceeding specified
levels, are restricted from additional borrowings under the Local Government Finance Law.
Review and Plan

Local governments would ideally cover the expenditures necessary to provide public services with their local tax
revenues. In reality, however, tax revenues are distributed unevenly. In order to adjust disparities and secure funds
for local governments that have low tax revenues, the national government distributes Local Allocation Tax, which
comprises certain percentages of national taxes, including personal and corporate income taxes and consumption
taxes. Local Allocation Tax is an important source of funds for local governments to maintain an appropriate level of
public services.

Appendix / JFM Data(i)L ocal tax revenues are secured by taxation rights of local governments.
( ii ) The national government includes repayments of local government borrowings (i.e., principal and interest
payments) in the amount of expenditures in the LGFP.
(iii) The total amount of Local Allocation Tax grants is set aside so that the total amount of local government
expenditures, including the principal and interest payments, is equivalent to the total amount of local government
revenues in the LGFP.
(iv) In the calculation of Local Allocation Tax grants to be allocated to an individual local government, a portion of
the principal and interest payments are included in the Standard Financial Requirements of an individual local
government.
Note: In（ⅱ）,（ⅲ）and（ⅳ）above, only the local government borrowings to which the consent or approval has been given are covered.

58

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 2020

59

JFM’s Role in Local Government Finance

7 JFM Funds in Local Government Borrowing Programme
The sources for local government funding are classified into national government funds, JFM funds and private
funds.
Local Government Borrowing Programme

Private Funds

Public Funds

FY2019FY2020Publicly Offered Bonds

USD 36 bn

USD 35 bn

33%

Other Private Sectors

USD 30 bn

USD 29 bn

27%

JFM

USD 17 bn

USD 17 bn

15%

National Government

USD 27 bn

USD 27 bn

25%

Total

USD 110 bn

USD 108 bn

100%

Share

Note: The figures above are the planned numbers originally published by the Ministry of Internal Affairs and Communications and not the actual numbers.

Since fiscal 2016, JFM funds have accounted for around 15 –16% of the LGBP. JFM plays a major role in Japanese
local government finance, making a substantial contribution to project implementation and financial management oflocal governments.

LGBP Volume by Funding Source (Initial Plan)(USD bn)

180
160

16.1

(%)

18

15.6

15.3

15.3

15.5

14

140
120
100
80
60
40
20
0

16

107

107

110

108

35.1

35.1

36.2

35.4

26.7

28.9

29.8

30.1

28.8

26.1

26.4

25.9

27.2

27.0

16.7

16.7

16.4

16.9

16.8

FY2016

2017

2018

2019

2020

103
33.9

12
10
8
6
4
2
0

Source: The Ministry of Internal Affairs and Communications

60

JFM ANNUAL REPORT 2020

Publicly Offered Bonds
Other Private Sectors
National Government
JFM
JFM Ratio

Review and Plan

Financial Section
62 Financial Statements
63Statements of Income

64Statements of Appropriation of Profit [General account]

65

Statements of Appropriation of Profit [Management account]

66

Statements of Changes in Net Assets

68

Statements of Cash Flows69

Notes to Financial Statements

Management Structure

Balance Sheets

Operations

62

102 Independent Auditor’s Report

JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 202061

Financial Section | Financial Statements

Balance Sheets

Statements of Income

Item

Fiscal 2018(31 March
2019)(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2019(31 March 2020)

Item

Fiscal 2018(31 March
2019)

AmountFiscal 2019(31 March 2020)

Item

AmountAssetsLoans (Note 3)

Liabilities¥23,503,092 ¥23,399,615 $215,267,851

Bonds (Notes 7 and 8)

Income¥20,392,179 ¥20,013,462 $184,116,493

3,362,466

Borrowed money (Note 9)

128,000

203,000

1,867,525

Cash and bankdeposits

870,480

557,437

5,128,216

Cash collateral received
for financial instruments

27,63058,073534,250

Cash collateral
paid for financial
instruments

22,847

12,391

113,993

Other liabilities

6,261

5,040

46,36672,508Reserve for bonuses(Note 10)

57

58

535

25,549Reserve for bonuses
for directors andcorporate auditors(Note 10)

10

10

96

Reserve for retirement
benefits(Notes 10 and 13)

52

Reserve for retirement
benefits for directors andcorporate auditors(Note 10)

24

8,859

Tangible fixed
assets (Note 6)

2,884

Intangible fixed
assets (Note 6)

1,035

7,881

2,777

1,097

10,098

32

572

295

Amount¥289,727$2,665,385

313,785

282,6232,600,028

Fees and commissions

93

87

805

Other operating income

21

8

78

4,962

7,008

64,474

4,949

6,996

64,361Others

12

12

113

Expenses

179,428

160,663

1,478,049

172,436

154,271

1,419,241

Fees and commissions

300

299

2,752

Other operating expenses

3,270

2,926

26,923General and administrative expenses

3,397

3,166

29,13323--

Interest income

Other income
Contributions from fund for lending rate reduction(Note 12)

Other expenses
920,2878,466,307

Ordinary income

139,434

129,063

1,187,336

Basic fund for lending
rate reduction (Note 12)920,287920,2878,466,307

Special gains

406,190105,259

968,349

Reserves under special laws

2,819,505

2,822,777

25,968,515

400,064

100,000

919,963

Reserve for interest rate
volatility (Note 11)2,200,000

2,200,000

20,239,190

6,125

5,259

48,386

Management account reservefor interest rate volatility(Note 11)597,076

605,607

5,571,370

522,445

208,555

1,918,633

Reserve for interest rate
reduction

-

23

219

22,42917,169157,955

24,294,008

24,022,803

221,000,954

Provision for management account reserve for interest rate
volatility (Note 11)

122,381108,531

998,451

Payment to national treasury (Notes 4 and 11)

400,064

100,000

919,963¥23,179¥25,767$237,052

Reversal of management account reserve for interest rate
volatility (Note 11)
Reversal of reserve for interest rate reduction
Special losses
Loss on disposal of fixed assets

Net Assets
Capital16,602

16,602

152,733

Retained earnings

212,616

238,383

2,193,044

General account surplus
reserve

212,616

238,383

2,193,044

Valuation, translation
adjustments and others

8,163

11,101102,129

Management accountsurplus reserve

57,80857,808531,821

Total net assets

295,191

323,896

2,979,727

Net income
See notes to financial statements.

Appendix / JFM Data

920,287

Financial Section

Fund for lending rate
reduction

Total liabilities

Total assets

Amount¥318,863

Interest expenses
62

Fiscal 2019
(1 April 2019 to 31 March 2020)

JFM’s Role in Local
Government Finance

365,500

Fiscal 2018
(1 April 2018 to
31 March 2019)

Management Structure

180,000(Millions of yen) (Thousands of U.S. dollars)

Operations

Securities(Note 17)

Other assets(For the years ended 31 March 2019 and 2020)

Review and Plan

As of 31 March 2019 and 2020

¥24,589,199 ¥24,346,700 $223,980,681 Total liabilities and net assets ¥24,589,199 ¥24,346,700 $223,980,681

See notes to financial statements.

62

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202063

Financial Section | Financial Statements

Statements of Appropriation of Profit [General account](Millions of yen)

1 Profit available for appropriation¥23,179¥23,179

Net income
Accumulated deficit brought forward(Millions of yen)

1 Profit available for appropriation¥-

Net income
Accumulated deficit brought forward-¥-

2 Profit appropriated2 Profit appropriated
23,179Surplus reserve

23,179(For the year ended 31 March 2020)¥25,767(For the year ended 31 March 2020)(Millions of yen)

1 Profit available for appropriation¥-

Net income
Accumulated deficit brought forward-¥-

2 Profit appropriated2 Profit appropriated25,767

Surplus reserve

25,767

Surplus reserve-

Accumulated deficit brought forward-$-

2 Profit appropriated2 Profit appropriatedSurplus reserve$-

Net income$237,052

Net income

1 Profit available for appropriation

237,052

237,052

Notes: 1. P rofit was appropriated at the end of the fiscal year in accordance with the provisions of Article 39, Section 1 of the Japan Finance Organization
for Municipalities Law (Law No. 64, 2007; hereinafter the “Law”).
2. Surplus reserve appropriated was posted as general account surplus reserve on the balance sheets.

Surplus reserve--

See notes to financial statements.

Financial Section

See notes to financial statements.

JFM’s Role in Local
Government Finance$237,052

1 Profit available for appropriation-(Thousands of U.S. dollars)(Thousands of U.S. dollars)

Accumulated deficit brought forward-

Management Structure¥25,767

Net income-

Statements of Appropriation of Profit [Management account](Millions of yen)

1 Profit available for appropriation

Surplus reserve

Operations

Statements of Appropriation of Profit [General account]

Accumulated deficit brought forward(For the year ended 31 March 2019)

Review and Plan

(For the year ended 31 March 2019)

Statements of Appropriation of Profit [Management account]

Appendix / JFM Data

64

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202065

Financial Section | Financial Statements

Statements of Changes in Net Assets(Millions of yen)

Stockholders’ equity
Retained earnings
CapitalGeneralaccount
surplusreserve

Total
retainedearnings

Total
stockholders’equityValuation,translation
adjustments
and others Management
account
surplus
Unrealized
reservegain/(loss)

Total
net
assets¥191,890¥208,492¥5,268¥53,666¥267,427

Cumulative effects of error
correction (Note 19)-(2,453)(2,453)(2,453)

-

4,142

1,688

16,602

189,436

189,436

206,038

5,268

57,808269,116

23,17923,17923,179--23,179-Net changes duringaccounting period-

23,17923,17923,1792,895-

26,074¥16,602¥212,616¥212,616¥229,218¥8,163¥57,808¥295,191

Balance as of 31 March 2019

-

-

-

2,895

-

2,895

¥212,616¥229,218¥8,163¥57,808¥295,191

25,76725,76725,767--25,767

-

-

-

-

2,937

-

2,937

-

25,76725,76725,7672,937-

28,704¥16,602¥238,383¥238,383¥254,985¥11,101¥57,808¥323,896

CapitalTotal
retainedearnings¥16,602¥212,616

Net income-

Net changes duringaccounting period in
items other thanstockholders’ equity
Net changes duringaccounting period

Changes duringaccounting period

Balance as of 31 March
2020(For the year ended 31 March 2020)(Thousands of U.S. dollars)

Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Total
net
assets$1,955,992$2,108,725$75,106$531,821$2,715,652

237,052

237,052

237,052--

237,052

-

-

-

-

27,023-27,023-

237,052

237,052

237,052

27,023-

264,075$152,733$2,193,044$2,193,044$2,345,777$102,129$531,821$2,979,727

CapitalTotal
retainedearnings$152,733$1,955,992

Net income-

Net changes duringaccounting period in
items other thanstockholders’ equity
Net changes duringaccounting period

Changes duringaccounting period

Balance as of 31 March
2020

Appendix / JFM Data

Unrealized
gain/(loss)
from hedging
instruments

Financial Section

Totalstockholders’equityGeneralaccount
surplusreserve

Balance as of 1 April
2019

Management
account
surplusreserve

JFM’s Role in Local
Government FinanceNet changes during accounting
period in items other thanstockholders’ equity

Unrealized
gain/(loss)
from hedging
instruments

Management Structure

Changes duringaccounting period

Total
net
assetsTotal
stockholders’equityGeneralaccount
surplusreserve

Balance as of 1 April
2019

Management
account
surplusreserve

Operations¥191,890-

Valuation,translation
adjustments
and others

Retained earnings

from hedging
instruments¥16,602

Net income(Millions of yen)

Stockholders’ equity

Balance as of 1 April 2018

Balance at the beginning ofcurrent period after retrospective
adjustment for error correction(For the year ended 31 March 2020)

Review and Plan

(For the year ended 31 March 2019)

See notes to financial statements.

66

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202067

Financial Section | Financial Statements

Statements of Cash Flows

Notes to Financial Statements

Item(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2018
(1 April 2018 to
31 March 2019)

Fiscal 2019
(1 April 2019 to 31 March 2020)

AmountAmountⅠ Cash flows from operating activities
Net income

5,584Interest income(313,785)(282,623)(2,600,028)

Interest expenses

172,436

154,271

1,419,241

Increase in reserve for bonuses

0

0

4

Increase in reserve for bonuses for directors andcorporate auditors

2

0

1

Increase in reserve for retirement benefits

5

9

87

Increase in reserve for retirement benefits
for directors and corporate auditors

0

7

71

Decrease in fund for lending rate reduction(4,949)(6,996)(64,361)

Increase/(decrease) in management account reserve for interest
rate volatility

122,381108,531

998,451

Decrease in reserve for interest rate reduction(6,125)(5,259)(48,386)

Net (increase)/decrease in loans

265,147

103,477

951,952

Net increase/(decrease) in bonds

105,848(380,219)(3,497,878)

Net increase/(decrease) in borrowed money(31,500)

75,000689,972

Interest received

314,710283,600

2,609,016

Interest paid

(171,555)(153,475)(1,411,921)

51,73443,807403,017528,254(33,493)(308,126)

Proceeds from redemption of securities

578,000

934,200

8,594,296

Purchases of securities(588,000)(1,119,700)(10,300,828)

Purchases of tangible fixed assets

(91)

(411)

(3,785)Purchases of intangible fixed assets

(336)

(634)

(5,840)(10,427)(186,546)(1,716,157)(400,064)(100,000)(919,963)

4,949

6,996

64,360(395,114)(93,003)(855,603)---

Ⅴ Net increase/(decrease) in cash and cash equivalents

122,712(313,043)(2,879,886)

Ⅵ Cash and cash equivalents at beginning of year

747,767

870,480

8,008,102¥870,480¥557,437$5,128,216

OthersNet cash provided by/(used in) operating activities
Ⅱ Cash flows from investing activities

Net cash used in investing activities
Ⅲ Cash flows from financing activities
Payment to national treasury
Revenue from contributions made from municipally operated racing
Net cash used in financing activities
Ⅳ Effect of exchange rate changes on cash and cash equivalents

Ⅶ Cash and cash equivalents at end of year
See notes to financial statements.

68

JFM ANNUAL REPORT 2020

2. Summary of Significant Accounting Policies(1) Securities
Held-to-maturity securities are carried at amortized cost (straight-line method).
(2) Derivative transactions
Derivative transactions are carried at fair value with changes in unrealized gain or loss charged or credited toincome, except for those which meet the criteria for hedge accounting.
(3) Depreciation and amortization(a) Tangible fixed assets
Depreciation of tangible fixed assets is calculated by the straight-line method based on the estimated useful lives
and the residual value determined by management. The estimated useful lives of major items are as follows:
Buildings: 23 to 47 years
Others: 2 to 19 years(b) Intangible fixed assets
Amortization of intangible fixed assets is calculated by the straight-line method based on the estimated useful
lives and the residual value determined by management. Software for internal use owned by the JFM isamortized over 5 years.
(4) Deferred assets
Bond issuance costs are expensed in full when incurred.
(5) Translation of assets and liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies, for which foreign currency swaps or foreignexchange forward contracts are used to hedge the risk of foreign currency fluctuation, are translated at thecontracted rate as these swap contracts or the forward contracts qualify for deferral hedge accounting.
(6) Reserves(a) Reserve for possible loan losses
The JFM has never experienced any loan losses. Accordingly, no reserve for possible loan losses has been maintained.
(b) Reserve for bonuses
The reserve for bonuses is provided for payment of bonuses to employees, in the amount of estimated bonuses,
which are attributable to the fiscal year.
(c) Reserve for bonuses for directors and corporate auditors
The reserve for bonuses for directors and corporate auditors is provided for payment of bonuses to directors andcorporate auditors, in the amount of estimated bonuses, which are attributable to the fiscal year.
(d) Reserve for retirement benefits
The reserve for retirement benefits is provided for payment of retirement benefits to employees, in the amountdeemed accrued at the fiscal year-end, based on the projected retirement benefit obligation and fair value of plan
assets at the fiscal year-end. The reserve for retirement benefits and pension expenses are calculated using thesimplified method, which assumes the JFM’s retirement benefit obligation to be equal to the benefits payable if
all eligible employees voluntarily terminated their employment at the fiscal year-end.
(e) Reserve for retirement benefits for directors and corporate auditors
The reserve for retirement benefits for directors and corporate auditors is provided for payment of retirement

JFM ANNUAL REPORT 2020

Appendix / JFM Data

606

Financial Section

726

Depreciation and amortization

JFM’s Role in Local
Government Finance$237,052

Management Structure¥25,767

Operations¥23,179

1. Basis of Presentation
Japan Finance Organization for Municipalities (hereinafter, the “JFM”) has prepared financial statements inaccordance with the Japan Finance Organization for Municipalities Law (Law No. 64, 2007; hereinafter the “Law”),
the ordinances based on the Law and other regulations applicable to the JFM and accounting principles generally
accepted in Japan, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards.
Since the JFM does not have any subsidiaries or affiliates, it does not prepare consolidated financial statements.
Amounts less than 1 million yen have been omitted. As a result, the totals in Japanese yen shown in the financial
statements do not necessarily agree with the sum of the individual amounts.
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers
outside Japan, using the prevailing exchange rate as of 31 March 2020, the final day of the fiscal year, which was¥108.70 to U.S. $1. This translation should not be construed as a representation that all amounts shown could be
converted into U.S. dollars at such rate.

Review and Plan

(For the years ended 31 March 2019 and 2020)69

Financial Section | Financial Statements

JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data

4. Payment to the National Treasury of a Portion of the JFM’s Management Account Reserve for Interest Rate
Volatility
In accordance with the Supplementary Provisions of the Law, a portion of the JFM’s management account reservefor interest rate volatility is being attributed to the Japanese national government over a period of three years fromfiscal 2017 through fiscal 2019, with the aim of transferring up to 900 billion yen over this period.
The Act on Promotion of Private Finance Initiative (Law No. 60, 2018) was amended on 20 June 2018 and it wasdetermined that an amount of up to 230 billion yen of a portion of the JFM’s Management Account Reserve forInterest Rate Volatility would be transferred to the national treasury over a six-year period ending 31 March 2024 forsecuring funds of the Trust Fund Bureau Fund for exemptions of early redemption charges in relation to concessionsof water supply and sewerage businesses.
In fiscal 2018, 400,064 million yen was reversed from the Management Account Reserve for Interest Rate
Volatility and the same amount was transferred to the national treasury by the JFM, pursuant to Article 14 of
the Supplementary Provision of the Law for fiscal 2018 (Ordinance No. 1 of the Ministry of Internal Affairs andCommunications, and the Ministry of Finance, 2018).
In fiscal 2019, 100,000 million yen (919,963 thousand U.S. dollars) was transferred to the national treasury by
the JFM, pursuant to Article 14 of the Supplementary Provision of the Law for fiscal 2019 (Ordinance No. 4 of the
Ministry of Internal Affairs and Communications, and the Ministry of Finance, 2019).

Management Structure

JFM ANNUAL REPORT 2020

3. Loans
There are no bankrupt loans, non-accrual loans, past due loans (three months or more), or restructured loans. Since
the JFM has never experienced loan losses in the past, it does not record a reserve for possible loan losses.
Bankrupt loans represent loans to borrowers as defined in Article 96, Section 1, Clause 3 (a) through (e) and Clause
4 of the Enforcement Ordinance of the Corporate Income Tax Law (Government Ordinance No. 97, 1965), and on
which accrued interest is not accounted in revenue as there is no expectation of collection of either principal orinterest because they are past due for a considerable period of time or for other reasons (excluding loans on which
bad debts are written off; hereinafter, “Non-accrual loans”).
Non-accrual loans represent loans on which accrued interest is not accounted in revenue, excluding loans tobankrupt borrowers and loans with grace periods for interest payments to assist in corporate reorganization or to
support business.
Past due loans (three months or more) represent loans on which payment of principal or interest is in arrears formore than three months, calculated from the day following the contractual due date, excluding bankrupt loans andnon-accrual loans.
Restructured loans represent loans, given certain favorable terms and conditions, such as reduction or exemptionof interest, grace periods for interest or principal payments, and debt waivers, to assist borrowers in corporate
rehabilitation or to support business, excluding bankrupt loans, non-accrual loans and past due loans (three months
or more).

Operations

70

Ordinance”) and Articles 3 and 5 of the Supplementary Provisions of the above ordinance.
(11) Reserve for interest rate reduction
Reserve for interest rate reduction is set aside to reduce interest rates on the loans made by the Predecessor
to local governments pursuant to the provisions of Article 9, Section 13, and Article 13, Section 8 of the
Supplementary Provisions of the Law, and Article 26, Sections 1, 3 and 4 of the Preparation Ordinance, andis calculated and accounted for based on the provisions of Article 5 of the Management Account Operations
Ordinance.
(12) Management account surplus reserve
Profits generated in the management account are accounted for as the management account surplus reserve
separately from retained earnings in accordance with the provisions of Article 13, Section 8 of the Supplementary
Provisions of the Law and Article 26, Section 2 of the Preparation Ordinance.
(13) Consumption taxes
National and local consumption taxes are accounted for using the tax exclusion method.

Review and Planbenefits to directors and corporate auditors, in the amount deemed accrued at the fiscal year-end based on theinternal policies.
(7) Hedge accounting(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest rate fluctuations that qualify for hedge accounting and meet
specific matching criteria are not measured at fair value, but the differential paid or received under the swap
agreements is recognized and included in interest expense or income. If swap contracts or forward contracts
used to hedge the risk of foreign currency fluctuation qualify for deferral hedge accounting, the foreign currencydenominated assets and liabilities are translated at the contracted rate.
(b) Hedging instruments and hedged items( i ) Hedging instruments・・・Interest rate swaps
Hedged items・・・・・・・Bonds and long-term borrowed money( ii) Hedging instruments・・・Currency swaps
Hedged items・・・・・・・Foreign currency-denominated bonds(iii) Hedging instruments・・・Foreign exchange forward contracts
Hedged items・・・・・・・Foreign currency-denominated bank deposits(c) Hedging policy
The JFM uses hedging instruments as a means of hedging exposure to interest rate risk and foreign exchangerisk. Hedged items are identified by each individual contract.
As a means of hedging foreign exchange fluctuation risks associated with the receipt of interest and principal offoreign currency-denominated bank deposits, a foreign exchange forward contract is entered into at the time ofeach deposit by the JFM.
(d) Assessment of hedge effectiveness
The JFM ensures hedging instruments and hedged items have the same major terms when entering into hedgetransactions to offset market fluctuation risks associated with bonds and long-term borrowed money. Accordingly,
the JFM deems these to be highly effective and thus does not assess effectiveness. Moreover, a periodic
assessment of hedge effectiveness for interest rate swaps and currency swaps and forward contracts that qualify
for deferral hedge accounting is omitted when the exceptional accrual method is applied.
(8) Cash and cash equivalents
Cash and cash equivalents in the statements of cash flows consist of “Cash and bank deposits” on the balance
sheets.
(9) Fund for lending rate reduction
In accordance with the provisions of Article 46, Section 1 of the Law, the JFM has established the fund for lending
rate reduction to reserve contributions as stipulated in Article 32-2 of the Local Government Finance Law(Law No. 109, 1948). Also, pursuant to the provisions of Article 46, Section 5 of the Law, income arising fromthe investment of the fund (hereinafter, “investment income”) is used to reduce interest rates of the loans tomunicipalities, and if there is any surplus in the investment income after this interest rate reduction process,the surplus amount is added to the fund. Further, pursuant to the provisions of Article 46, Section 6 of the Law,
if there is any shortfall after the interest rate reduction process, the shortfall is covered by withdrawal of thefund within the limits of the total of the additional portion to the fund made up to the previous fiscal year and thecontributions made in the most current fiscal year.
(10) Reserve for interest rate volatility and management account reserve for interest rate volatility
The reserve for interest rate volatility is set aside to prepare for interest rate risk associated with refinancing of
the JFM bonds (excluding the bonds issued by the former Japan Finance Corporation for Municipal Enterprises;
hereinafter, the “Predecessor”) pursuant to the provisions of Article 38, Sections 1 and 3 of the Law, and Article 9,Sections 8 and 10 of the Supplementary Provisions of the Law, and is calculated and accounted for based on theprovisions of Article 34 of the Ministerial Ordinance on Finance and Accounting of Japan Finance Organization
for Municipalities (Ordinance No. 87 of the Ministry of Internal Affairs and Communications, 2008; hereinafter,“Ordinance on Finance and Accounting”) and Articles 22 and 23 of the Government Ordinance on preparation of
relevant government ordinances and provisional measures for the abolishment of the Japan Finance Corporation
for Municipal Enterprises Law (Government Ordinance No. 226, 2008; hereinafter, “Preparation Ordinance”).
The management account reserve for interest rate volatility is set aside to manage interest rate risk associatedwith refinancing of bonds issued by the Predecessor pursuant to the provisions of Article 9, Sections 9 and 10,
and Article 13, Sections 5 and 7 of the Supplementary Provisions of the Law, and is calculated and accounted forbased on the provisions of Articles 1 through 3 of the Ministerial Ordinance on the operations of the Management
Account at Japan Finance Organization for Municipal Enterprises (Ordinance No. 2 of the Ministry of Internal
Affairs and Communications, and the Ministry of Finance, 2008; hereinafter, “Management Account Operations

Additional information
In accordance with the Supplementary Provisions of the Law, a portion of the JFM’s management account reservefor interest rate volatility is being attributed to the Japanese national government over a period of five years fromfiscal 2020 through fiscal 2024, with the aim of transferring up to 230 billion yen over this period.
In fiscal 2020, 60 billion yen is scheduled to be transferred to the national treasury by the JFM, pursuant to Article 14of the Supplementary Provision of the Law from fiscal 2020 through fiscal 2024 (Ordinance No. 1 of the Ministry of

JFM ANNUAL REPORT 202071

Financial Section | Financial Statements

Internal Affairs and Communications, and the Ministry of Finance, 2020).

JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data

JFM ANNUAL REPORT 2020

Management Structure

JFM ANNUAL REPORT 2020

Operations

72

Review and Plan

5. Financial Instruments(1) Status of financial instruments(a) Policy for financial instruments
In order to maintain a sound and good financial standing as well as the solid confidence of capital markets,
which are experiencing increasing volatility and face various risks, such as geopolitical risk, the JFM needs toappropriately manage these risks including interest rate risk.
The JFM adopts an integrated risk management approach to appropriately respond to risks while endeavoring tofurther advance its risk analysis and management.
Accordingly, the JFM has developed a system for appropriate risk management, including the establishment of
the Integrated Risk Management Committee, which supervises the JFM’s overall risk management, and the Risk
Management Office, which monitors the risks in each department. The content of risk management can then be
appropriately reflected in management decisions.
(b) Details and risks of financial instruments
The JFM makes loans to local governments. The maximum term to maturity is 40 years, but the majority of thefunds for these loans are raised mainly through issuance of 10-year bonds. Therefore, a large duration gap iscreated between lending and funding, and the JFM is exposed to the interest rate risk associated with bond andlong-term borrowed money refinancing.
The JFM has set aside reserves for interest rate fluctuations (the reserve for interest rate volatility), and has set
up the ALM Committee separately from the Integrated Risk Management Committee to comprehensively analyze
and manage the JFM’s assets and liabilities in a timely and appropriate manner. At the meeting, medium- andlong-term management analysis as well as risk analysis and evaluation are conducted through scenario analysis,
VaR analysis, and duration analysis, among other methods. In addition, the JFM reflects the findings in its bondissuance plans and other aspects of management and endeavors to reduce interest rate risk.
(c) Risk management for financial instruments( i ) Credit risk
Credit risk is the risk of loss arising from a credit event, such as deterioration in the financial condition of aborrower, which causes an asset to lose value or become worthless. In addition to credit risk associated withloans, market transactions also involve credit risk.
A. Credit risk on loans
The JFM extends loans exclusively to local governments. Local governments have a zero Basel Committee on
Banking Supervision risk weighting and the JFM does not expect any default on loans made to local governments
for the reasons outlined below. The JFM and the Predecessor have never experienced any loan losses.
• The Japanese national government includes principal and interest payments of local government bonds andloans in the expenditure of the Local Government Finance Program, and secures the total amount of local
allocation tax which balances local governments’ total expenditures including principal and interest payments,
and total revenue. Thus, the national government effectively secures revenue sources for principal and interest
payments by local governments. The national government also secures revenue sources for principal andinterest payments by individual local governments by including a portion of such principal and interest in theStandard Financial Needs when calculating local allocation tax.
• Under the consultation system for local government bonds and loans, credit reviews must include checks on
the repayment status of local governments, and tax revenue and necessary revenue sources to be secured.
Additionally, under the Early Warning System, the local governments whose principal and interest payments orfinancial deficits exceed a certain level must apply for approval to issue bonds or obtain loans, so that the credit
standing of local government bonds and loans is maintained.
• Under the Law Relating to the Financial Soundness of Local Governments, which was promulgated in June2007 (No. 94), local governments whose fiscal indicators exceed the early warning limits must make theirown efforts toward achieving fiscal soundness, and local governments whose fiscal indicators exceed thereconstruction limits must take necessary actions to restore their finances under the supervision of the national
government or the respective prefectural governments with regard to redemption of local government bonds
and loans, and other operations.
• The JFM is not subject to the “Banking Law” (1981, No. 59) or the “Financial Reconstruction Law” (1998, No.
132) but performs self-assessment of loans in accordance with the JFM's internal rules in order to manage risks
appropriately.

B. Credit risk on transactions
The JFM is exposed to the risk of loss arising from credit events, such as deterioration in the financial conditionof a counterparty, which causes an asset to lose value or become worthless. However, the JFM appropriately
manages credit risk of this type by constantly monitoring counterparties’ financial standing, taking measures
including suspension of new deals and cancellation of transactions in case of a deterioration of their credit
standings. Moreover, the JFM limits counterparties to financial institutions that achieve a certain credit rating andother criteria, and conducts transactions within the credit lines for each counterparty in order to diversify risks. In
addition, the JFM enters into the ISDA (International Swaps and Derivatives Association) Master Agreements andthe CSA (Credit Support Annex) with all derivatives counterparties to reduce credit risk.
(ii) Market risk
Market risk is the risk of loss resulting from changes in the value of assets and liabilities due to fluctuations inrisk factors such as interest rates, securities prices and foreign exchange rates, or the risk of loss resulting fromchanges in earnings generated from assets and liabilities. Market risk includes interest rate risk, foreign exchangerisk, inflation risk and price change risk.
A. Interest rate risk
Interest rate risk is the risk of losses incurred or a decrease in profits due to fluctuations in interest rates when
there is an interest rate or duration gap between assets and liabilities. The interest rate risk at the JFM includes
the interest rate risk associated with bond and borrowed money refinancing and pipeline risk.
-Interest rate risk associated with bond and borrowed money refinancingThe JFM makes loans to local governments. The maximum term to maturity is 40 years, but the majority of
the funds for these loans are raised mainly through issuance of 10-year bonds, which creates interest rate risk
associated with bond refinancing. The JFM takes the following measures to address the interest rate risk resulting
from a duration gap between lending and funding.
• The JFM maintains necessary reserves to cope with the interest rate risk resulting from a duration gap between
lending and funding.
• As assets and liabilities in the JFM’s general account will expand as a result of lending to local governments
and funding, the JFM carries out an ALM analysis of this account in a timely and appropriate manner to further
enhance the effectiveness of its management of interest rate risk. In order to reduce exposure to interest raterisk, the JFM has established a medium-term management target for five years from fiscal 2018, in which theduration gap is to be maintained below approximately two years.
• To achieve its objective, from the viewpoint of controlling the duration on assets (lending), the interest rates for
temporary financial countermeasures funding which accounts for approximately 1/ 3 of the overall outstandingloans in the general account, are revised every 5 or 10 years. In addition, the JFM will revise its lending rate by
the 30th year at the latest for its loans with maturities longer than 30 years. And, in terms of funding, the JFM
has taken measures to manage the duration on liabilities (bonds and loans) by issuing bonds with maturities
longer than 10 years continuously under the ultra-low interest rate circumstances and carefully choosing
maturities of bonds to be issued by utilizing its FLIP and Open Issuance scheme.
• The management account, which manages assets related to loans extended by the Predecessor, is exposed
to interest rate risk. To address such risk, the JFM contributes to the required reserves for interest rate volatility
as described above. In accordance with Article 14 of the Supplementary Provisions of the Law, a portion of
the JFM’s management account reserve for interest rate volatility is to be transferred to the Japanese national
government. The transfer is scheduled to occur over a period of three years from fiscal 2017 through fiscal
2019, with the aim of transferring up to 900 billion yen of which the transfer of 100 billion yen is pursuant to
the January 2015 determination, and over a period of six years from fiscal 2018 through fiscal 2023, with theaim of transferring up to 1.5 billion yen for securing funds of the Trust Fund Bureau Fund for exemptions ofearly redemption charges in relation to concessions of water supply and sewerage businesses. In addition, thetransfer is scheduled to occur over a period of five years from fiscal 2020 through fiscal 2024, with the aim oftransferring up to 230 billion yen due to the increase in concession amount charged for Forest Environment
Concession Tax, which promotes forest maintenance. The amount of transfer is to be within the amount which
the Japanese national government deems as an amount exceeding the requisite amount of reserve necessary
for the smooth operation of the JFM’s management account at the time of transfer and in the future, in light of
the JFM’s financial condition.
-Pipeline riskThe JFM is also exposed to pipeline risk, whereby losses would be incurred or profits decreased as a result ofinterest rate fluctuations during the time from when the JFM raises money until the point at which the money isloaned to local governments. The JFM, in principle, uses swap transactions to hedge against pipeline risk.

73

Financial Section | Financial Statements

Book value
Loans

Fair value

Difference¥23,503,092¥25,369,115¥1,866,022

Securities held-to-maturity securities

180,000

180,000-

Cash and bank deposits

870,480

870,480-

Cash collateral paid for financial instruments

22,847

22,847-

Total assets

24,576,420

26,442,443

1,866,022

Bonds

20,392,179

21,226,384

834,205

Borrowed money

128,000

130,272

2,272

Cash collateral received for financial instruments

27,63027,630-20,547,809

21,384,287

836,478

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

Total liabilities

The book value, fair value and difference between them as of 31 March 2020 are as follows:(Millions of yen)Book value

Difference¥23,399,615¥24,901,200¥1,501,584

Securities held-to-maturity securities

365,500

365,500-

Cash and bank deposits

557,437

557,437-

Cash collateral paid for financial instruments

12,391

12,391-

Total assets

24,334,943

25,836,528

1,501,584

Bonds

20,690,092

676,629

203,000

204,988

1,988

Cash collateral received for financial instruments

58,07358,073

20,274,535

20,953,153

678,617

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

Total liabilities

Financial Section

20,013,462

Borrowed money

JFM’s Role in Local
Government Finance

Loans

Fair value

Management Structure
Appendix / JFM Data

JFM ANNUAL REPORT 2020

(Millions of yen)

Operations

74(2) Items related to fair value of financial instruments
The book value, fair value and difference between them as of 31 March 2019 are as follows:
Review and Plan

B. Foreign exchange and other risks
Various risks associated with bond principal and interest payments are hedged by swap transactions. These risks
include foreign exchange risk related to foreign currency-denominated bonds and interest rate risk related tofloating rate bonds.
The JFM’s investments of surplus funds are exposed to the risk of losses on the sale of securities resulting
from price declines and the risk of realized losses on the cancellation of foreign currency-denominated deposits
resulting from fluctuations in foreign exchange rates. Accordingly, in principle, the JFM minimizes the risk of pricefluctuation by holding investments until maturity, and hedges foreign exchange risk by using foreign exchange
contracts.
C. Quantitative information on market risk
Loans, bonds and long-term borrowed money are primarily affected by interest rate risk, which is a major risk
variable among the market risks.
With respect to loans, bonds and long-term borrowed money in the general account, the JFM establishes amanagement target for the duration gap in order to manage interest rate risk appropriately. With regard to thequantitative analysis of interest rate risk, while the JFM does not have a management target for the quantitative
figures, it reports the results of calculating the quantitative information to the ALM Committee and tracks thestatus of the interest rate risk.
With respect to these financial instruments in the general account, based on an assumption that the risk
variables, except for interest rate risk, hold steady, for an indicative interest rate that is 10 basis points higher
than the actual rate, it is assumed that the fair value of the net amount (assets side), after offsetting such financial
instruments with the financial liabilities, would decline by 38,399 million yen and 36,671 million yen (337,368
thousand U.S. dollars) as of 31 March 2019 and 2020, respectively. On the contrary, for an indicative interest ratethat is 10 basis points lower than the actual rate, it is assumed that the fair value of the net amount (assets side),
after offsetting such financial instruments with the financial liabilities, would increase by 39,013 million yen and
37,215 million yen (342,365 thousand U.S. dollars) as of 31 March 2019 and 2020, respectively.
With respect to loans and bonds in the management account, the JFM raises funds by the issuance of bonds
as necessary in order to manage existing loans until their redemption. For this reason, while the JFM reports
the calculation results of the quantitative information regarding the interest rate risk to the ALM Committee
and confirms the status of interest rate risk as is the case in the general account, the JFM does not establish amanagement target or use the quantitative analysis for the management account.
With respect to these financial instruments in the management account, based on an assumption that the risk
variables, except for interest rate risk, hold steady, for an indicative interest rate that is 10 basis points higher
than the actual rate, it is assumed that the fair value of the net amount (assets side), after offsetting such financial
instruments with the financial liabilities, would decline by 10,560 million yen and 8,642 million yen (79,506
thousand U.S. dollars) as of 31 March 2019 and 2020, respectively. On the contrary, for an indicative interest ratethat is 10 basis points lower than the actual rate, it is assumed that the fair value of the net amount (assets side),
after offsetting such financial instruments with the financial liabilities, would increase by 10,692 million yen and
8,742 million yen (80,428 thousand U.S. dollars) as of 31 March 2019 and 2020, respectively.
(iii) Liquidity risk
Liquidity risk is the risk that the JFM would incur losses due to difficulties in securing the necessary funds or thenecessity of obtaining funds at far higher interest rates than under normal conditions as a result of a mismatch
between the maturities of assets and liabilities or an unexpected outflow of funds (funding liquidity risk). It also
includes the risk that the JFM would incur losses because it is unable to conduct market transactions or is forced
to conduct transactions at far more unfavorable prices than under normal conditions due to market disruption orother difficult situations (market liquidity risk).
The JFM’s exposure to liquidity risk is extremely low because loans are made to local governments according
to a pre-set schedule, and the daily cash and liquidity management is carried out based on a monthly plan forfund management. Moreover, the JFM has entered into overdraft agreements with several financial institutions to
prepare for the unexpected events, and invests surplus funds only in short-term financial products.
In addition, the JFM has implemented a plan to secure liquidity support assets in advance in order to prepare forpotential market disruption which may prevent the JFM from securing the necessary funds for scheduled bondprincipal and interest payments.
(iv) Supplemental remarks on fair value of financial instruments
In addition to the amount based on the market price, the fair value of illiquid financial instruments includes a valuethat has been rationally calculated. Since certain assumptions were made when calculating the fair value, thevalue may differ in the event that the assumptions change.

JFM ANNUAL REPORT 202075

Financial Section | Financial Statements(Thousands of U.S. dollars)Book value
Loans

Fair value

Difference$ 229,081,880$ 13,814,029

Securities held-to-maturity securities

3,362,466

3,362,466-

Cash and bank deposits

5,128,216

5,128,216-

113,993

113,993-

Total assets

223,872,526

237,686,555

13,814,029

Bonds

Cash collateral paid for financial instruments

190,341,234

6,224,741

1,867,525

1,885,820

18,295

Cash collateral received for financial instruments

534,250534,250

186,518,268

192,761,304

6,243,036

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

Total liabilities(3) Cash collateral received for financial instruments
Cash collateral is associated with derivative transactions. The book value is used as the fair value of cash collateral
received for financial instruments since both values are approximately equal as a result of each deposit period
being short term.

JFM’s Role in Local
Government Finance

Assets(1) Loans
The fair value of loans is calculated by discounting future cash flows assuming prepayment at the discount rate
calculated using the Japanese government bond rates as of 31 March 2019 and 2020.

Management Structure

Note 1. Method for calculating fair value of financial instruments and items related to marketable securities andderivative transactions(2) Borrowed money
The fair value of long-term borrowed money is calculated by discounting the future cash flows using the interest ratethat would presumably be applied when issuing bonds with the same total principal and interest and payment term.
On the other hand, the book value is used as the fair value of short-term borrowed money since both values areapproximately equal as a result of each loan period being short term.

Operations

184,116,493

Borrowed money

Review and Plan

$215,267,851

Liabilities(1) Bonds
The fair value of bonds issued by the JFM that have a market price is based on the market price. The fair value ofbonds without a market price is calculated by discounting the future cash flows using the interest rate that would beapplied when issuing similar bonds with the same total principal and interest and payment term.
Deferral hedge accounting is used for currency swaps, and the fair value of foreign currency-denominated bonds isthus calculated using the total of the fair value of that bond and the fair value of the swap transaction.
Hedge accounting is used for interest rate swaps, and the fair value of floating rate bonds is thus calculated bydetermining the present value using the total of the corresponding interest rate swap accounted for together withthe principal and interest and discounting the future cash flows using the interest rate that would be applied whenissuing a similar bond.

(2) Securities
All bonds are held until maturity, and the fair value of treasury discount bills is the market price.
Since all negotiable certificates of deposit are short-term, the fair value approximates the book value. As a result,the book value is deemed to be the fair value.

Financial Section(3) Cash and bank deposits
The book value is used as the fair value for deposits without maturities. Since all deposits with maturities are shortterm, the fair value approximates the book value. As a result, the book value is deemed to be the fair value.
(4) Cash collateral paid for financial instruments
Cash collateral is associated with derivative transactions. The book value is used as the fair value of cash collateral
paid for financial instruments since both values are approximately equal as a result of each deposit period being
short term.

Appendix / JFM Data76

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202077

Financial Section | Financial Statements

Derivative transactions
Transactions for which hedge accounting is applied(Thousands of U.S. dollars)(Millions of yen)

Hedge accounting
methodInterest rate swap
transactions

Primary hedged items

Bonds
Long-term borrowed
money

Interest rate swap
transactions
Receive/floating andpay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Foreign currencydenominated bonds

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts

Foreign currencydenominateddeposits

Total-¥35,000

Fair
value

-

¥20,000-

Based on prices
provided by
the counterparty
financial
institution(*1)

1,474,819

1,436,071

(*2)

3,000

-

(*2)

¥1,512,819¥1,456,071

Principal
accounting
methodInterest rate swap
transactions

Bonds
Long-term borrowedmoney

Hedge accounting
for interest rate
swaps

Interest rate swap
transactions
Receive/floating andpay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Foreign currencydenominated bonds

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts

Foreign currencydenominateddeposits

Total

Contract amount
Of which 1
year or more

Fair
value

Method for
calculating fair
value

-

Based on prices
provided by
the counterparty
financial
institution--$183,993$183,993(*1)

14,833,266

12,282,529

(*2)

-

-

(*2)

$15,017,259$12,466,522-(*1) Since interest rate swaps for which hedge accounting is applied are accounted for together with the bond being hedged, the fair value is presented
together with the fair value of the relevant bond.
(*2) Since currency swaps and foreign exchange contracts for which deferral hedge accounting is applied are accounted for together with the foreign
currency-denominated bond or foreign currency-denominated deposit being hedged, the fair value is presented together with the fair value of therelevant hedged item.

For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent to
the principal in the contract under each hedge accounting method as of 31 March 2020 is as follows:

As of 31 March 2019
(Millions of yen)

(Millions of yen)Primary hedged items

Principal
accounting
methodInterest rate swap
transactions

Bonds
Long-term borrowedmoney

Hedge accounting
for interest rate
swaps

Interest rate swap
transactions
Receive/floating andpay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Foreign currencydenominated bonds

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts

Foreign currencydenominateddeposits

Total

78

JFM ANNUAL REPORT 2020

Of which 1
year or more

Fair
value

-

-

-

¥20,000¥20,000(*1)

1,612,376

1,335,110

(*2)

-

-

(*2)

¥1,632,376¥1,355,110

Based on prices
provided by
the counterparty
financial
institution

Loans

After
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 years¥1,763,913 ¥1,784,040 ¥1,769,220

After
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years

After
30 years
through
40 years¥1,709,516 ¥1,605,880 ¥6,520,793 ¥6,648,578 ¥1,665,063¥36,084

Securities
held-tomaturity
securities

180,000

-

-

-

-

-

-

-

-

Deposits

870,480

-

-

-

-

-

-

-

-

Appendix / JFM Data

Type of derivativetransactions

Within1 yearMethod for
calculating fairvalue

Financial Section

Hedge accounting
methodContract amount

JFM’s Role in Local
Government Finance

Note 2. The repayment schedule for monetary claims and securities with maturities is as follows:

Management Structure

Hedge accounting
for interest rateswaps

Of which 1
year or more

Method for
calculating fairvalue

Primary hedged items

Operations

Principal
accounting
methodType of derivativetransactions

Contract amountType of derivativetransactions

Review and Plan

For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent to
the principal in the contract under each hedge accounting method as of 31 March 2019 is as follows:

Hedge accounting
method-JFM ANNUAL REPORT 202079

Financial Section | Financial Statements

As of 31 March 2020

(Millions of yen)

After 2years
through 3
years

After 3years
through 4
years

After 4years
through 5
years¥1,803,890 ¥1,806,270 ¥1,770,897 ¥1,681,255

Loans
Securities
held-tomaturity
securities
Deposits

365,500-

557,437--

After 10After 20After 30
years
years
years
through 20 through 30 through 40
years
years
years

¥1,567,759 ¥6,503,382 ¥6,555,776 ¥1,663,603--

After 5years
through 10
years

-

-

-

-

-

-

-

-

-

-

-

After 2years
through 3
years

After 3years
through 4
years

After 4years
through 5
years

After 5years
through 10
years

After 10After 20After 30
years
years
years
through 20 through 30 through 40
years
years
years

Securities
held-tomaturity
securities

3,362,466

Deposits

5,128,216

-

-

-

-

-

-

Buildings¥1,185¥-¥-¥1,185

¥476

¥33

¥708

Land

1,659

-

-

1,659

-

-

1,659

439

454

0

893

377

85

515

3,284

454

0

3,738

853

119

2,884

2,930

339

3

3,266

2,353

606

912

31

122

30

123

-

-

123

$430,358¥2,962¥461¥33¥3,389¥2,353¥606¥1,035

Tangible fixed assets

Other tangible fixed assets
Total tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed assets
Total intangible fixed assets-

Tangible and intangible fixed assets as of 31 March 2020 consisted of the following:
-

-

-

-

-

-

-

-

(Millions of yen)

(Millions of yen)

After 1year
through 2
years

Within 1
year

After 2years
through 3
years

After 3years
through 4
years¥2,078,327 ¥2,072,865 ¥2,345,072
10,000-After 5years
through 10
years¥2,124,677 ¥2,332,910 ¥6,272,932

1,000

-

86,20030,800After 10After 20After 30
years
years
years
through 20 through 30 through 40
years
years
years

Buildings¥1,185¥2¥-¥1,187

¥508

¥32

¥679

Land

1,659

-

-

1,659

-

-

1,659

893

45

332

606

168

123

438

¥2,917,863¥183,000¥70,000

3,738

48

332

3,454

677

155

2,777

-

-

-

3,266

658

2,079

1,844

748

451

1,096

123

1

123

1

-

-

1

¥3,389¥660¥2,203¥1,846¥748¥451¥1,097

Other tangible fixed assets
Total tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed assets

As of 31 March 2020

(Millions of yen)

¥2,072,865 ¥2,345,072

Borrowedmoney-

After 2years
through 3
years

After 3years
through 4
years

After 4years
through 5
years

After 5years
through 10
years

After 10After 20After 30
years
years
years
through 20 through 30 through 40
years
years
years

¥2,124,677 ¥2,332,910¥1,827,159¥5,897,181¥3,117,760¥206,000¥94,000

83,40030,800

1,600

-

-

1,000

-

86,200Total intangible fixed assets

Appendix / JFM Data

After 1year
through 2
years

Within 1
year
Bonds

Tangible fixed assets(Thousands of U.S. dollars)

After 1year
through 2
years

Within 1
year
Bonds

After 3years
through 4
years

After 4years
through 5
years

After 5years
through 10
years

After 10After 20After 30
years
years
years
through 20 through 30 through 40
years
years
years

$19,069,596 $21,573,802 $19,546,255 $21,461,914 $16,809,194 $54,251,898 $28,682,245

Borrowedmoney

80

After 2years
through 3
years

JFM ANNUAL REPORT 2020

-

9,200

-

793,008

767,249

283,349

14,719$1,895,124$864,765--

Financial Section

Borrowedmoney

After 4years
through 5
years

Decreaseduringthe year

JFM’s Role in Local
Government Finance

Increaseduringthe yearType of assets

As of 31 March 2019

Accumulated
Balance as
Balance as
Depreciation
depreciationof 31
of 31 March
and
and
March
2020
amortizationamortization
2020(Acquisition
duringas of 31(Net bookcosts)
the yearMarch 2020
value)

Balance asof 1 April
2019(Acquisition
costs)

Note 3. The repayment schedule for bonds and borrowed money is as follows:

Bonds

Decreaseduringthe yearManagement Structure$16,595,125 $16,617,027 $16,291,601 $15,466,928 $14,422,811 $59,828,727 $60,310,734 $15,304,540

Loans

Increaseduringthe yearType of assets

Operations

After 1 year
through 2
years

Accumulated
Balance as
Balance as
Depreciation
depreciationof 31
of 31 March
and
and
March
2019
amortizationamortization
2019(Acquisition
duringas of 31(Net bookcosts)
the yearMarch 2019
value)

Balance asof 1 April
2018(Acquisition
costs)¥46,779(Thousands of U.S. dollars)Within 1
year(Millions of yen)

Review and Plan

After 1 year
through 2
years

Within 1
year

6. Tangible and Intangible Fixed Assets
Tangible and intangible fixed assets as of 31 March 2019 consisted of the following:

JFM ANNUAL REPORT 202081

Financial Section | Financial Statements(Thousands of U.S. dollars)

Increaseduringthe year

Decreaseduringthe yearAccumulated
Balance as
Balance as
Depreciation
depreciationof 31
of 31 March
and
and
March
2020
amortizationamortization
2020(Acquisition
duringas of 31(Net bookcosts)
the yearMarch 2020
value)

Tangible fixed assets
Buildings$10,903$24$-$10,927$4,678$295$6,249Land

15,270--15,270--15,270

5,582

1,552

1,139

4,030

31,779

6,230

1,434

25,549Other tangible fixed assets
Total tangible fixed assets

8,216

423

34,389

447

3,057
3,057

Software
Other intangible fixed assets
Total intangible fixed assets

30,048

6,058

19,135

16,971

6,888

4,150

10,083

1,135

14

1,134

15

-

-

15

$31,183$6,072$20,269$16,986$6,888$4,150$10,098

Balance as of
31 March 2019

Couponrate (%)

Maturity

Government-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 1-118)

6/15/20093/18/2019¥4,792,105¥5,053,012(683,910)

0.005
to 1.500

10Y

Government-guaranteed bonds issued by the JFM(domestic) 8-year bonds (Series 1-7)

9/26/20132/24/2017

420,086

420,0730.001
to 0.576

8Y

Government-guaranteed bonds issued by the JFM(domestic) 6-year bonds (Series 5-20)

4/26/201210/28/2016

1,130,594

810,455(290,000)

0.001
to 0.385

6Y

Government-guaranteed bonds issued by the JFM(domestic) 4-year bonds (Series 7-10)

6/30/20162/26/2018

200,336200,223

0.001

4Y

Government-guaranteed bonds issued by the JFM(international) Global U.S. dollar bonds (Series 1)

1/13/2011

83,17083,170[USD 1,000 million]

4.0

10Y

Non-guaranteed bonds issued by the JFM(domestic) 5-year bonds (Series 12-24)

4/22/201311/19/2018

160,000

135,000(30,000)

0.001
to 0.360

5Y

Non-guaranteed bonds issued by the JFM(domestic) 7-year bonds (Series 1)

8/20/2012

20,00020,000(20,000)

0.446

7Y

Non-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 1-118)

6/18/20093/22/2019

2,970,000

3,250,000(245,000)

0.060
to 1.648

10Y

Non-guaranteed bonds issued by the JFM(domestic) 15-year bonds (Series 1-3)

1/31/20131/22/2014

50,00050,0001.161
to 1.334

15Y

Non-guaranteed bonds issued by the JFM(domestic) 20-year bonds (Series 1-73)

6/25/20093/22/2019

1,295,000

1,425,000

0.180
to 2.266

20Y

Non-guaranteed bonds issued by the JFM(domestic) 30-year bonds (Series 1-7)

6/26/201410/19/2018

55,00075,0000.569
to 1.864

30Y

Non-guaranteed bonds issued by the JFM(domestic) 40-year bonds (Series 1)

2/26/2019-15,0000.882

40Y

Non-guaranteed bonds issued by the JFM(domestic) FLIP bonds (Series F2-F6, F8-F17, F19, F20,
F22-25,F27-29, F31, F34-F37, F39, F41-F52, F54-F153,
F155-F164, F166-F169, F171-F210, F212-F243,
F245-F276, F278-F456)

7/23/20093/26/2019

2,206,530

2,380,659(153,500)

0.001
to 2.334

2Y
to 40Y

Non-guaranteed bonds issued by the JFM (domestic)
FLIP bonds (Floater, Series F53, F211, F244)

2/1/20117/25/2014

35,00035,000(15,000)

Floatingrate

9Y
to 30Y

1,340,300[USD 10,200 million][AUD 604 million]
1,257,266[NZD 58 million][EUR 1,080 million]

0.875
to 5.092

3Y
to 10Y

3/1/20123/12/2019

Non-guaranteed bonds issued by the JFM (international)(Floater, Series 30, 36, 38, 39)

6/6/20127/22/2013

40,376

20,230[USD 230 million](10,367)

Floating
rate

5Y
to 7Y

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series A1-A110)

7/31/20093/26/2019

2,480,000

2,630,000(280,000)

0.069
to 1.53

10Y

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series B1-B41)

11/24/20153/26/2019

159,000

229,500

0.069
to 0.511

10Y

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series C1-C41)

11/24/20153/26/2019

248,500

365,500

0.190
to 1.154

20Y

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series D1-D36)

4/21/20163/26/2019

300,000

450,000

0.190
to 0.778

20Y

JFM ANNUAL REPORT 2020

Appendix / JFM Data

Non-guaranteed bonds issued by the JFM (international)(Series 15, 35, 40-45, 47-68)

Financial Section

JFM ANNUAL REPORT 2020

Balance as of
1 April 2018

JFM’s Role in Local
Government Finance82

Date ofissue

Management Structure

7. Assets Pledged as Collateral
Pursuant to the provisions of Article 40, Section 2 of the Law, the JFM’s total assets are pledged as general collateral
for the JFM bonds in the amount of 20,392,179 million yen and 20,013,462 million yen (184,116,493 thousand U.S.
dollars) as of 31 March 2019 and 2020, respectively.

Type of bondOperations

Intangible fixed assets(Millions of yen)

Review and Plan

Type of assets

Balance asof 1 April
2019(Acquisition
costs)

8. Bonds
Bonds as of 31 March 2019 consisted of the following:83

Financial Section | Financial Statements

18,988,125(1,727,777)--

Government-guaranteed bonds issued by Japan
Finance Organization for MunicipalEnterprises (domestic) 10-year bonds (Series 1-8)

10/16/20085/25/2009

562,285

140,000(140,000)

1.3
to 1.6

10Y

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic) 10-year bonds (Series 1-4)

11/25/20085/28/2009

139,996

60,000(60,000)

1.59
to 1.77

10Y

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic) 20-year bonds (Series 1, 2)

1/26/20094/30/2009

84,967

84,9702.07
to 2.29

20Y

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic)
Private placements with pension funds
for local government officials (Series A1, A2)

4/30/20095/26/2009

907,249

Government-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 884-886)

4/17/20086/19/2008

221,115-

Government-guaranteed bonds issued by
the Predecessor (domestic)
15-year bonds (Series 1-5)

6/22/20057/18/2007

184,815

184,838

1.6
to 2.2

15Y

Government-guaranteed bonds issued by
the Predecessor (international)
Euro-sterling bonds (Series 4), Global-yen bonds(Series 5), etc.

8/9/19996/25/2008

103,366

28,376[GBP 150 million](28,380)

1.9
to 5.75

10Y
to 20Y

Non-guaranteed bonds issued by
the Predecessor (domestic) 10-year bonds (Series 30)

6/16/2008

Non-guaranteed bonds issued by
the Predecessor (domestic) 20-year bonds (Series 1-25)

7/30/20026/16/2008

Non-guaranteed bonds issued by
the Predecessor (domestic) 30-year bonds (Series 1-10)

1/29/20049/20/2006

Non-guaranteed bonds issued by
the Predecessor (domestic)
Bonds with scheduled repayment (Series 1-3)
Non-guaranteed bonds issued by
the Predecessor (domestic)
Private placements with pension funds
for local government officials (Series Special No.29-31)

49,999

10Y

Couponrate (%)

Maturity

Government-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 1-123)

6/15/20091/21/2020¥5,053,012¥4,469,844(652,530)

0.001
to 1.500

10Y

Government-guaranteed bonds issued by the JFM(domestic) 8-year bonds (Series 1-7)

9/26/20132/24/2017

420,073

420,0590.001
to 0.576

8Y

Government-guaranteed bonds issued by the JFM(domestic) 6-year bonds (Series 9-20)

4/25/201310/28/2016

810,455

520,315(200,000)

0.001
to 0.385

6Y

Government-guaranteed bonds issued by the JFM(domestic) 4-year bonds (Series 7-10)

6/30/20162/26/2018

200,223

200,111(40,000)

0.001

4Y

1/13/2011

83,17083,170 [USD 1,000 million](83,170)

4.0

10Y

1.4
to 1.8

10Y

Non-guaranteed bonds issued by the JFM (domestic)
5-year bonds (Series 15-26)

4/17/201411/22/2019

135,000

125,000(20,000)

0.001
to 0.230

5Y

Non-guaranteed bonds issued by the JFM(domestic) 7-year bonds (Series 1)

8/20/2012

20,000

-

0.446

7Y

Non-guaranteed bonds issued by the JFM (domestic)
10-year bonds (Series 1-130)

6/18/20093/23/2020

3,250,000

3,360,000(360,000)

0.049
to 1.648

10Y

Non-guaranteed bonds issued by the JFM (domestic)
15-year bonds (Series 1-3)

1/31/20131/22/2014

50,00050,0001.161
to 1.334

15Y

Non-guaranteed bonds issued by the JFM (domestic)
20-year bonds (Series 1-81)

6/25/20093/23/2020

1,425,000

1,575,000

0.180
to 2.266

20Y

Non-guaranteed bonds issued by the JFM (domestic)
30-year bonds (Series 1-9)

6/26/201410/18/2019

75,000105,000

0.446
to 1.864

30Y

Non-guaranteed bonds issued by the JFM (domestic)
40-year bonds (Series 1-2)

2/26/20191/28/2020

15,00030,0000.646
to 0.882

40Y

Non-guaranteed bonds issued by the JFM (domestic)
FLIP bonds (Series F2-F6, F8-F14, F16-F17,F24-F25,
F27-F29, F31, F35-F37, F41-F43, F45-F52,
F54-F69, F71-F73, F75-F85, F87-F90, F92-F93,
F95-F98, F100-F112, F115-F139, F141-F153,
F155-F164, F166-F169, F171-F210, F212-F243,
F245-F276, F278-F513)

7/23/20092/28/2020

2,380,659

2,600,288(81,000)

0.001
to 2.334

2Y
to 40Y

Non-guaranteed bonds issued by the JFM (domestic)
FLIP bonds (Floater, Series F53, F211, F244)

2/1/20117/25/2014

35,00020,000Floatingrate

9Y
to 30Y

1,517,247[USD 11,260 million][AUD 654 million]
1,340,300[NZD 58 million][EUR 1,580 million](184,232)

0.05
to 5.092

3Y
to 11Y10Y

569,834

1.03
to 2.58

20Y

189,897

189,9032.39
to 2.95

30Y

2/14/20036/9/2004

28,30026,130(2,170)1.39
to 2.0128Y

4/30/20087/31/2008

127,000-

1.59
to 1.91

10Y

Bonds issued by the Predecessor - Sub-total-

1,474,304

999,082(30,550)

-

-

Total

-

¥20,284,520¥20,392,179(2,078,327)--

Non-guaranteed bonds issued by the JFM (international)(Series 43-45, 47-72)

5/1/20142/12/2020

Non-guaranteed bonds issued by the JFM (international)(Floater, Series 30, 39)

6/6/20127/22/2013

20,230

9,863[USD 100 million](9,863)

Floating
rate

7Y

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series A1-A122)

7/31/20093/25/2020

2,630,000

2,510,000(400,000)

0.069
to 1.530

10Y

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series B1-B53)

11/24/20153/25/2020

229,500

311,500

0.069
to 0.511

10Y

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series C1-C53)

11/24/20153/25/2020

365,500

462,500

0.190
to 1.154

20Y

JFM ANNUAL REPORT 2020

Appendix / JFM Data

-

1.97

JFM ANNUAL REPORT 2020

Balance as of
31 March 2020-

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, the JFM’s total assets are pledged as general collateral for the JFM bonds in theamount of 20,392,179 million yen as of 31 March 2019.
2. Amounts in square brackets under “Balance as of 31 March 2019” for “Government-guaranteed bonds issued by the JFM (international)—Global
U.S. dollar bonds (Series 1),” “Non-guaranteed bonds issued by the JFM (international)— (Series 15, 35, 40-45, 47-68),” “Non-guaranteed bonds
issued by the JFM (international)— (Floater, Series 30, 36, 38, 39)” and “Government-guaranteed bonds issued by the Predecessor (international)—
Euro-sterling bonds (Series 4), Global-yen bonds (Series 5), etc.” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2019” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:

84

Balance as of
1 April 2019

Government-guaranteed bonds issued by the JFM(international) Global U.S. dollar bonds (Series 1)-

569,809

Date ofissue

Financial Section-

404,970(320,000)

Bonds issued by Japan Finance Organization for
Municipal Enterprises - Sub-total

1.69
to 1.73

Type of bond

JFM’s Role in Local
Government Finance

120,000(120,000)(Millions of yen)Management Structure

120,000

Bonds as of 31 March 2020 consisted of the following:

Operations

17,902,966

Review and Plan-

Bonds issued by the JFM - Sub-total

85

Financial Section | Financial Statements(Thousands of U.S. dollars)

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series D1-D48)

590,000-

18,988,125

18,959,899(2,030,795)

4/15/20095/25/2009

140,000

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic) 10-year bonds (Series 3-4)

4/28/20095/28/2009

60,000Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic) 20-year bonds (Series 1-2)

1/26/20094/30/2009

84,970120,000-

404,970

Government-guaranteed bonds issued by
the Predecessor (domestic) 15-year bonds (Series 1-5)

6/22/20057/18/2007

Government-guaranteed bonds issued by
the Predecessor (international)
Euro-sterling bonds (Series 4)

20Y

-

-

1.4
to 1.5

10Y

-

1.593
to 1.65

10Y

84,9732.07
to 2.29

20Y-

Date of
issue

Balance as of
1 April 2019

Couponrate (%)

Maturity

Government-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 1-123)

6/15/20091/21/2020$46,485,858$41,120,921(6,003,037)

0.001
to 1.500

10Y

Government-guaranteed bonds issued by the JFM(domestic) 8-year bonds (Series 1-7)

9/26/20132/24/2017

3,864,518

3,864,394

0.001
to 0.576

8Y

Government-guaranteed bonds issued by the JFM(domestic) 6-year bonds (Series 9-20)

4/25/201310/28/2016

7,455,890

4,786,711(1,839,926)

0.001
to 0.385

6Y

Government-guaranteed bonds issued by the JFM(domestic) 4-year bonds (Series 7-10)

6/30/20162/26/2018

1,841,985

1,840,950(367,985)

0.001

4Y

Government-guaranteed bonds issued by the JFM(international) Global U.S. dollar bonds (Series 1)

1/13/2011

765,132
765,132 [USD 1,000 million](765,132)

4.0

10Y

Non-guaranteed bonds issued by the JFM(domestic) 5-year bonds (Series 15-26)

4/17/201411/22/2019

1,241,950

1,149,954(183,993)

0.001
to 0.230

5Y

Non-guaranteed bonds issued by the JFM(domestic) 7-year bonds (Series 1)

8/20/2012

183,993

-

0.446

7Y

Type of bond

Balance as of
31 March 2020

84,973--

Non-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 1-130)

6/18/20093/23/2020

29,898,804

30,910,764(3,311,868)

0.049
to 1.648

10Y

184,838

184,860(39,900)

1.6
to 2.2

15Y

Non-guaranteed bonds issued by the JFM(domestic) 15-year bonds (Series 1-3)

1/31/20131/22/2014

459,982459,982

1.161
to 1.334

15Y

8/9/1999

28,376

-

5.75

20Y

Non-guaranteed bonds issued by the JFM(domestic) 20-year bonds (Series 1-81)

6/25/20093/23/2020

13,109,476

14,489,420

0.180
to 2.266

20Y

Non-guaranteed bonds issued by
the Predecessor (domestic) 20-year bonds (Series 1-25)

7/30/20026/16/2008

569,834

569,858

1.03
to 2.58

20Y

Non-guaranteed bonds issued by the JFM(domestic) 30-year bonds (Series 1-9)

6/26/201410/18/2019

689,972

965,9610.446
to 1.864

30Y

Non-guaranteed bonds issued by
the Predecessor (domestic) 30-year bonds (Series 1-10)

1/29/20049/20/2006

189,903

189,9092.39
to 2.95

30Y

Non-guaranteed bonds issued by the JFM(domestic) 40-year bonds (Series 1-2)

2/26/20191/28/2020

137,994

275,9890.646
to 0.882

40Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Bonds with scheduled repayment (Series 1-3)

2/14/20036/9/2004

26,13023,960(2,170)1.39
to 2.0128Y

7/23/20092/28/2020

21,901,194

23,921,698(745,170)

0.001
to 2.334

2Y
to 40Y

Bonds issued by the Predecessor - Sub-total-

999,082

968,589(42,070)--

Non-guaranteed bonds issued by the JFM (domestic)
FLIP bonds (Series F2-F6, F8-F14, F16-F17, F24-F25,
F27-F29, F31, F35-F37, F41-F43, F45-F52,
F54-F69, F71-F73, F75-F85, F87-F90, F92-F93,
F95-F98, F100-F112, F115-F139, F141-F153,
F155-F164, F166-F169, F171-F210, F212-F243,
F245-F276, F278-F513)

Total

-

¥20,392,179¥20,013,462(2,072,865)--

Non-guaranteed bonds issued by JFM (domestic)
FLIP bonds (Floater, Series F53, F211, F244)

2/1/20117/25/2014

321,987

183,993

Floatingrate

9Y
to 30Y

13,958,123[USD 11,260 million][AUD 654 million]
12,330,273[NZD 58 million][EUR 1,580 million](1,694,868)

0.05
to 5.092

3Y
to 11Y

Bonds issued by Japan Finance Organization for
Municipal Enterprises - Sub-total

5/1/20142/12/2020

Non-guaranteed bonds issued by the JFM (international)(Floater, Series 30, 39)

6/6/20127/22/2013

186,11390,736[USD 100 million](90,736)

Floating
rate

7Y

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series A1-A122)

7/31/20093/25/2020

24,195,032

23,091,076(3,679,853)

0.069
to 1.530

10Y

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series B1-B53)

11/24/20153/25/2020

2,111,316

2,865,685

0.069
to 0.511

10Y

Non-guaranteed bonds issued by the JFM (domestic)
Private placements with pension funds for
local government officials (Series C1-C53)

11/24/20153/25/2020

3,362,466

4,254,830

0.190
to 1.154

20Y

JFM ANNUAL REPORT 2020

Appendix / JFM Data

JFM ANNUAL REPORT 2020

Non-guaranteed bonds issued by the JFM (international)(Series 43-45, 47-72)

Financial Section

10Y-

JFM’s Role in Local
Government Finance1.69
to 1.73

Management Structure

4/30/20095/26/2009

0.190
to 0.778

Operations

Government-guaranteed bonds issued by Japan
Finance Organization for MunicipalEnterprises (domestic) 10-year bonds (Series 7-8)

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic)
Private placements with pension funds
for local government officials (Series A1-A2)

86450,000

Review and Plan

Bonds issued by the JFM - Sub-total

4/21/20163/25/2020

87

Financial Section | Financial Statements

Non-guaranteed bonds issued by the JFM(domestic)
Private placements with pension funds for
local government officials (Series D1-D48)

4,139,834-

Government-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 10-year bonds (Series 7-8)

As of 31 March 2019

5,427,783

0.190
to 0.778

20Y

174,683,769

174,424,102(18,682,568)--

4/15/20095/25/2009

1,287,948-

1.4
to 1.5

10Y

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic) 10-year bonds (Series 3-4)

4/28/20095/28/2009

551,978-

1.593
to 1.65

10Y

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic) 20-year bonds (Series 1-2)

1/26/20094/30/2009

781,700

781,727

2.07
to 2.29

20Y

Bonds issued by the JFM - Sub-total

Bonds¥2,078,327--

3,725,582

Government-guaranteed bonds issued by
the Predecessor (domestic) 15-year bonds (Series 1-5)

6/22/20057/18/2007

Government-guaranteed bonds issued by
the Predecessor (international)
Euro-sterling bonds (Series 4)

After 2 years
through 3 years¥2,072,865

After 3 years
through 4 years¥2,345,072

After 4 years
through 5 years¥2,124,677¥2,332,910(Millions of yen)

Within 1 year
Bonds

¥2,072,865

After 1 year
through 2 years

After 2 years
through 3 years¥2,345,072

After 3 years
through 4 years¥2,124,677

After 4 years
through 5 years¥2,332,910¥1,827,159(Thousands of U.S. dollars)Within 1 year

781,727--

1,700,444

1,700,649(367,066)

1.6
to 2.2

15Y

8/9/1999

261,057

-

5.75

20Y

Non-guaranteed bonds issued by
the Predecessor (domestic) 20-year bonds (Series 1-25)

7/30/20026/16/2008

5,242,265

5,242,493

1.03
to 2.58

20Y

Non-guaranteed bonds issued by
the Predecessor (domestic) 30-year bonds (Series 1-10)

1/29/20049/20/2006

1,747,043

1,747,099

2.39
to 2.95

30Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Bonds with scheduled repayment (Series 1-3)

2/14/20036/9/2004

240,386

220,423(19,963)

1.39
to 2.01

28Y

Bonds issued by the Predecessor - Sub-total-

9,191,195

8,910,664(387,029)

-

-

Total

-

$187,600,546$184,116,493(19,069,597)--$21,573,802

After 3 years
through 4 years$19,546,255

After 4 years
through 5 years$21,461,914

9. Borrowed Money
Borrowed money as of 31 March 2019 consisted of the following:
Classification of borrowed money

Balance as of
1 April 2018$16,809,194(Millions of yen)

Balance as of
31 March 2019

Average interest rate(%)

Repayment date

Short-term borrowed money

-

-

-

-

Long-term borrowed money(repayment within 1 year)¥80,000¥10,000

0.210

3/9/2020

Long-term borrowed money(excluding repayment within 1 year)

79,500118,000

0.445

9/27/20213/15/2029¥159,500¥128,000

-

-

Total

Borrowed money as of 31 March 2020 consisted of the following:Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, the JFM’s total assets are pledged as general collateral for JFM bonds in the amountof 20,013,462 million yen (184,116,493 thousand U.S. dollars) as of 31 March 2020.
2. Amounts in square brackets under “Balance as of 31 March 2020” for “Government-guaranteed bonds issued by the JFM (international)—Global
U.S. dollar bonds (Series 1),” “Non-guaranteed bonds issued by the JFM (international)— (Series 43-45, 47-72),” “Non-guaranteed bonds issued
by the JFM (international)— (Floater, Series 30, 39)” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2020” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:(Millions of yen)Classification of borrowed money

Balance as of
1 April 2019

Balance as of
31 March 2020

Average interest rate(%)

Repayment date

Short-term borrowed money

-

-

-

-

Long-term borrowed money(repayment within 1 year)¥10,000---

Long-term borrowed money(excluding repayment within 1 year)

118,000¥203,000

0.324

9/27/20213/16/2040¥128,000¥203,000

-

-

Total

Classification of borrowed money

Average interest rate(%)

Repayment date

-

-

-

-

Long-term borrowed money(repayment within 1 year)$91,996---

1,085,557$1,867,525

0.324

9/27/20213/16/2040$1,177,553$1,867,525

-

-

Total

JFM ANNUAL REPORT 2020

Balance as of
31 March 2020

Short-term borrowed money

Long-term borrowed money(excluding repayment within 1 year)

88

Balance as of
1 April 2019

JFM ANNUAL REPORT 2020

Appendix / JFM Data

(Thousands of U.S. dollars)

Financial Section

10Y

After 2 years
through 3 years

JFM’s Role in Local
Government Finance1.69
to 1.73$19,069,596

After 1 year
through 2 years

Management Structure

1,103,956

After 1 year
through 2 years

As of 31 March 2020

Bonds
4/30/20095/26/2009

Bonds issued by Japan Finance Organization for
Municipal Enterprises - Sub-total

Within 1 year

Operations

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic)
Private placements with pension funds
for local government officials (Series A1-A2)(Millions of yen)

Review and Plan

4/21/20163/25/2020

89Financial Section | Financial Statements(Thousands of U.S. dollars)

Notes: 1. Average interest rates are calculated by dividing the total amount of interest paid by the total amount ofprincipal multiplied by repayment years.
2. Annual schedule of repayments within five years after the fiscal year-end:(Millions of yen)

Within 1 year
Borrowed money¥ 10,000

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥-¥ 1,000¥-¥86,200

As of 31 March 2020

$531

$535

$531

$-

$535

Reserve for bonuses for directors andcorporate auditors

94

96

94

-

96

Reserve for retirement benefits

485

163

5

71

572

Reserve for retirement benefits for directors
and corporate auditors

224

82

-

11

295

Reserve for bonuses

Other

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥ 1,000¥-¥ 86,200¥83,400

11. Reserve for Interest Rate Volatility
Reserve for interest rate volatility as of 31 March 2019 consisted of the following:(Millions of yen)(Thousands of U.S. dollars)$-

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years$9,200$-$793,008$767,249

10. Reserves
Reserves as of 31 March 2019 consisted of the following:

Decrease during the year

Increaseduring the
year

¥57

¥57

¥57

¥-

¥57

Reserve for bonuses for directors andcorporate auditors

8

10

8

-

10

Reserve for retirement benefits

47

16

4

7

52

Reserve for retirement benefits for directors
and corporate auditors

24

8

6

1

24

Reserve for bonuses

Intended
purposeBalance as of
31 March
2019

Other

Reserves as of 31 March 2020 consisted of the following:

Decrease during theyear

Cumulative
effectsof errorcorrection

AmountprovidedAmountwithdrawn

Reserve for interest rate
volatility¥2,200,000¥-¥2,200,000¥-

Management accountreserve forinterest rate volatility

870,453

4,306

874,759

122,381¥3,070,453¥4,306¥3,074,759¥122,381

¥-

¥-

¥-

Balance
as of 31March
2019
¥2,200,000

400,064¥-

597,076¥400,064¥-¥2,797,076

Reserve for interest rate volatility as of 31 March 2020 consisted of the following:(Millions of yen)

Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn

Classification of reserve

Balance asof
1 April 2019

Reserve for interest rate volatility¥2,200,000¥-

Management account reserve forinterest rate volatility

597,076108,531¥2,797,076¥108,531

Total

¥-

¥-

¥-

Balance asof 31 March
2020¥2,200,000

100,000¥-

605,607¥100,000¥-¥2,805,607(Millions of yen)

90

Balance as of
1 April 2019

Increaseduring theyear

Decrease during the year
Intended
purposeBalance as of
31 March
2020

Other

(Thousands of U.S. dollars)

Classification of reserve

Balance asof
1 April 2019

Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn

Reserve for bonuses

¥57

¥58

¥57

¥-

¥58

Reserve for bonuses for directors andcorporate auditors

10

10

10

-

10

Reserve for interest rate volatility$20,239,190$-

Reserve for retirement benefits

52

17

0

7

62

Reserve for retirement benefits for directors
and corporate auditors

24

8

-

1

32

Management account reserve forinterest rate volatility

5,492,882

998,451$25,732,072$998,451

JFM ANNUAL REPORT 2020

Total

$-

$-

$-

Balance asof 31 March
2020$20,239,190

919,963$-5,571,370$919,963$-$25,810,560

JFM ANNUAL REPORT 2020

Appendix / JFM DataClassification of reserve

Financial Section

Balance as of
1 April 2018

Classification of reserve

Balanceas of
1 April
2018

Total

Increase during theyear

JFM’s Role in Local
Government Finance(Millions of yen)Classificationof reserve

Balance at the
beginning ofcurrent period
after retrospective
adjustment
for error correction

Management Structure

Within 1 year

Operations¥-

Borrowed money

Intended
purposeBalance as of
31 March
2020(Millions of yen)

Within 1 year
Borrowed money

Increaseduring theyear

Review and Plan

As of 31 March 2019

Decrease during the year

Balance as of
1 April 2019

Classificationof reserve

91Financial Section | Financial Statements

12. Fund for Lending Rate Reduction
Fund for lending rate reduction as of 31 March 2019 consisted of the following:(Millions of yen)

Basic fund for lending rate
reduction
Total

Increase during
the year

Decrease during
the year

Balance as of
31 March2019

Amount ofreserveAmounttransferred

Amountwithdrawn¥920,287¥4,949¥-¥4,949¥-¥920,287¥920,287¥4,949¥-¥4,949¥-¥920,287

Others(Millions of yen)Classification of fund

Total

Increase during
the year

Decrease during
the year

Balance as of
31 March
2020

Amount ofreserveAmounttransferred

Amountwithdrawn¥920,287¥6,996¥-¥6,996¥-¥920,287¥920,287¥6,996¥-¥6,996¥-¥920,287

Others(Thousands of U.S. dollars)

Basic fund for lending rate
reduction
Total

Balance as of
1 April 2019

Decrease during
the year

Balance as of
31 March
2020

Amount ofreserveAmounttransferred

Amountwithdrawn$8,466,307$64,361$-$64,361$-$8,466,307$8,466,307$64,361$-$64,361$-$8,466,307

Others

As of and for the year ended 31 March 2020
(1) Outline of retirement benefits system
The JFM has a defined benefit plan that contributes to the Corporate Pension Fund and offers lump-sum
payments upon retirement of employees and a defined contribution plan. The reserve for retirement benefits
and pension expenses are calculated using the simplified method.
(2) Defined benefit plan(a) Reconciliation of outstanding amounts of reserve for retirement benefits:
Reserve for retirement benefits at the beginning of the fiscal year:
52 million yen
Pension expenses:
17 million yen
Employee retirement benefits paid:
0 million yen
Contributions to the defined benefit plan:
7 million yen
Reserve for retirement benefits at the end of the fiscal year:
62 million yen(485 thousand U.S. dollars)(163 thousand U.S. dollars)(5 thousand U.S. dollars)(71 thousand U.S. dollars)(572 thousand U.S. dollars)(b) Retirement benefit obligation, plan assets, and reconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:
184 million yen(1,694 thousand U.S. dollars)
Plan assets:(168) million yen((1,547) thousand U.S. dollars)
Balance:15 million yen(147 thousand U.S. dollars)
Unfunded retirement benefit obligation:
46 million yen(425 thousand U.S. dollars)
Net liability for retirement benefits in the balance sheet:62 million yen(572 thousand U.S. dollars)
Reserve for retirement benefits at the end of the fiscal year:
62 million yen(572 thousand U.S. dollars)
Net liability for retirement benefits in the balance sheet:62 million yen(572 thousand U.S. dollars)

Appendix / JFM Data

Notes: 1. The “amount of reserve” in the “increase during the year” for the “basic fund for lending rate reduction”
represents the payment of the amount stipulated in Article 46, Section 1 of the Law and received inaccordance with Article 46, Section 2 of the Law.
2. The “amount withdrawn” in the “decrease during the year” for the “basic fund for lending rate reduction”
represents the payment of the amount reduced in the fund for interest rate reduction pursuant to theprovisions of Article 46, Section 6 of the Law.

(c) Profit and loss associated with employee retirement benefits
Pension expenses calculated based on the simplified method: 16 million yen

Financial Section

Classification of fund

Increase during
the year(b) Retirement benefit obligation, plan assets, and reconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:
184 million yen
Plan assets:(171) million yen
Balance:13 million yen
Unfunded retirement benefit obligation:
39 million yen
Net liability for retirement benefits in the balance sheet:52 million yen
Reserve for retirement benefits at the end of the fiscal year:
52 million yen
Net liability for retirement benefits in the balance sheet:52 million yen

JFM’s Role in Local
Government Finance

Basic fund for lending rate
reduction

Balance as of
1 April 2019(2) Defined benefit plan(a) Reconciliation of outstanding amounts of reserve for retirement benefits:
Reserve for retirement benefits at the beginning of the fiscal year:
47 million yen
Pension expenses:
16 million yen
Employee retirement benefits paid:
4 million yen
Contributions to the defined benefit plan:
7 million yen
Reserve for retirement benefits at the end of the fiscal year:
52 million yen

Management Structure

Fund for lending rate reduction as of 31 March 2020 consisted of the following:

As of and for the year ended 31 March 2019(1) Outline of retirement benefits system
The JFM has a defined benefit plan that contributes to the Corporate Pension Fund and offers lump-sum
payments upon retirement of employees and a defined contribution plan. The reserve for retirement benefits
and pension expenses are calculated using the simplified method.

Operations

Classification of fund

Balance as of
1 April 2018

13. Reserve for Retirement Benefits

Review and Plan

Note: The “decrease during the year” for the “management account reserve for interest rate volatility” in the amountof 100,000 million yen (919,963 thousand U.S. dollars) consists of the payment to the national treasury inaccordance with an ordinance pursuant to Article 14 of the Supplementary Provisions of the Law for fiscal 2019
(Ordinance No. 4 of the Ministry of Internal Affairs and Communications, and the Ministry of Finance, 2019).

(c) Profit and loss associated with employee retirement benefits
Pension expenses calculated based on the simplified method: 17 million yen (163 thousand U.S. dollars)

14. Net Income by Account(For the year ended 31 March 2019)
Net income of general account was 23,179 million yen, while there was no net income of management account.

92

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202093

Financial Section | Financial Statements(For the year ended 31 March 2020)
Net income of the general account was 25,767 million yen (237,052 thousand U.S. dollars), while there was no
net income of management account.

Generalaccount

Management
account¥15,743,380¥7,759,711

OffsetTotal(Assets)
Loans

Generalaccount

Management
account¥16,640,828¥6,758,787

OffsetTotal¥23,503,092

Loans¥23,399,615

365,500

365,500

Cash and bank deposits

557,437

557,437

Cash collateral paid for financial instruments

12,391

12,391Other assets

3,682

4,199

7,881

180,000

180,000

Cash and bank deposits

870,480

870,480

Tangible fixed assets

2,777

2,777

Cash collateral paid for financial instruments

22,847

22,847

Intangible fixed assets

1,097

1,097

Other assets

3,948

8,859

Due from general accountTangible fixed assets

2,884

2,884

Total assets

Intangible fixed assets

1,035

1,035
622,397¥(622,397)

16,824,577

8,387,019(622,397)

12,686,161

7,706,017

24,589,199(Liabilities)
Bonds

20,392,179

582,840¥(582,840)

17,583,713

7,345,827(582,840)

13,351,373

6,662,089

24,346,700(Liabilities)
Bonds

20,013,462

Borrowed money

203,000

203,000

Cash collateral received for financial instruments

58,07358,073

Other liabilities

1,889

3,150

5,040

128,000

128,000

Cash collateral received for financial instruments

27,63027,630Reserve for bonuses

58

58

Other liabilities

2,573

6,261

Reserve for bonuses for directors and corporate auditors

10

10

3,687

57

57

Reserve for retirement benefits

62

62

Reserve for bonuses for directors and corporate auditors

10

10

Reserve for retirement benefits

52

52

Reserve for retirement benefits for directors andcorporate auditors

32

32

Reserve for retirement benefits for directors andcorporate auditors

24

24

920,287920,287920,287920,287920,287920,287920,287920,287

Fund for lending rate reduction
Basic fund for lending rate reduction
Due to management account622,397

Reserves under special laws

2,200,000

Reserve for interest rate volatility(622,397)
619,505

2,819,505

2,200,000

2,200,000
597,076

597,076

Reserve for interest rate reduction

22,42922,429Total liabilities

16,587,195

8,329,210(622,397)

24,294,008(Net Assets)
Capital16,602

16,602Retained earnings

212,616

212,616

212,616

212,616

8,163

8,163

General account surplus reserve
Valuation, translation adjustments and others
Management account surplus reserve
Total net assets
Total liabilities and net assets

JFM ANNUAL REPORT 2020

57,80857,808237,382

57,808295,191¥16,824,577¥8,387,019¥(622,397)¥24,589,199

Basic fund for lending rate reduction
Due to management account582,840

Reserves under special laws

2,200,000

Reserve for interest rate volatility

622,777

2,822,777

2,200,000

Management account reserve for interest rate volatility
Reserve for interest rate reduction
Total liabilities(582,840)

17,317,625

2,200,000
605,607605,607

17,16917,1697,288,018(582,840)

24,022,803(Net Assets)
Capital16,602

16,602Retained earnings

238,383

238,383

238,383

238,383

11,101

11,101

General account surplus reserve
Valuation, translation adjustments and others
Management account surplus reserve
Total net assets
Total liabilities and net assets

57,80857,808266,087

57,808323,896¥17,583,713¥7,345,827¥(582,840)

Appendix / JFM DataManagement account reserve for interest rate volatility

Fund for lending rate reduction

Financial Section

Reserve for bonuses

JFM’s Role in Local
Government Finance

Borrowed money

Management Structure

Total assets

4,910

Operations

Securities

Securities

Due from general account

94

Item
(Assets)(Millions of yen)

Item

(Millions of yen)

Review and Plan

15. Information by Account (Balance sheets)
Balance sheets of general account and management account as of 31 March 2019 were as follows:

Balance sheets of general account and management account as of 31 March 2020 were as follows:¥24,346,700

JFM ANNUAL REPORT 202095

Financial Section | Financial Statements(Thousands of U.S. dollars)

ItemManagement
account$153,089,496$62,178,355

OffsetTotal(Assets)
Loans$215,267,851

3,362,466

3,362,466

Cash and bank deposits

5,128,216

5,128,216

Cash collateral paid for financial instruments

113,993

113,993

Other assets

33,874

Tangible fixed assets

25,54925,549Intangible fixed assets

10,098

10,098Due from general accountTotal assets

38,63472,508$(5,361,917)

161,763,692

67,578,906(5,361,917)

122,827,720

61,288,773

223,980,681(Liabilities)
Bonds

1,867,525

1,867,525

Cash collateral received for financial instruments

534,250534,250

17,37928,98746,366535

535

Reserve for bonuses for directors and corporate auditors

96

96

Reserve for retirement benefits

572

572

Reserve for retirement benefits for directors and corporate
auditors

295

295

8,466,307

8,466,307

8,466,307

8,466,307

Basic fund for lending rate reduction

5,361,917

Reserves under special laws

20,239,190

Reserve for interest rate volatility

5,729,325

25,968,515

20,239,190

Management account reserve for interest rate volatility
Reserve for interest rate reduction
Total liabilities(5,361,917)

159,315,786

20,239,190
5,571,370

5,571,370

157,955

157,955

67,047,085(5,361,917)

221,000,954

CapitalRetained earnings
General account surplus reserve
Valuation, translation adjustments and others

152,733

152,733

2,193,044

2,193,044

2,193,044

2,193,044

102,129

102,129

Management account surplus reserve
Total net assets
Total liabilities and net assets

531,821531,8212,447,906

531,8212,979,727$161,763,692$67,578,906$(5,361,917) $223,980,681

Income¥136,945¥189,867Interest income

131,327

182,458

Fees and commissions
Other operating income
Other income
Contributions from fund for lending rate reduction
OthersAdministrative fee for management account

JFM ANNUAL REPORT 2020

Total

Offset¥(7,949)¥318,863
313,785

93

93

21

21

4,962

4,962

4,949

4,949

12

12

540

Interest on due from general accountTransfer from general account for fund for lending rate
reduction

(540)
30

(30)

7,378

(7,378)(7,949)

Expenses

113,765

73,611

Interest expenses

100,348

72,087

172,436

Fees and commissions

166

133

300

Other operating expenses

2,493

777

3,270

General and administrative expenses

3,324

72

3,397

Other expenses

23

Interest on due to management account

30

(30)

7,378

(7,378)Transfer to management account for fund for lending rate
reduction
Administrative fee for management accountOrdinary income

23

540
23,179179,428(540)

116,255

139,434

Special gains

406,190

406,190

Reversal of management account reserve for interest rate
volatility

400,064

400,064

6,125

6,125

Special losses

522,445

522,445

Provision for management account reserve for interest
rate volatility

122,381

122,381

Reversal of reserve for interest rate reduction

Payment to national treasury
Net income

96Management
account

400,064¥23,179¥-

Appendix / JFM Data

(Net Assets)

Generalaccount

Financial Section

Due to management account

Item

JFM’s Role in Local
Government FinanceReserve for bonuses

Fund for lending rate reduction(Millions of yen)

184,116,493

Borrowed money

Other liabilities

16. Information by Account (Statements of income)Statements of income of general account and management account from 1 April 2018 through 31 March 2019 wereas follows:

Management Structure

5,361,917

Operations

Securities

Review and Plan

Generalaccount

Notes: 1. General account and management accountIn accordance with the provisions of Article 13, Section 1 of the Supplementary Provisions of the Law,
management account is used to conduct administration, collection and other related operations of the assetsthat the JFM inherited from the Predecessor (management of the assets of the Predecessor).
Management account is separated from the other account (general account) pursuant to the provisions ofArticle 13, Section 3 of the Supplementary Provisions of the Law.
2. General account surplus reserve and management account surplus reserve“Net income” of the general account is posted as “General account surplus reserve” in accordance withthe provisions of Article 39, Section 1 of the Law, while “Net income” of management account is posted as“Management account surplus reserve” in accordance with the provisions of Article 13, Section 8 of the
Supplementary Provisions of the Law.
3. Due from general account and due to management account
These amounts represent funds lent between the general account and management account pursuant to theprovisions of Article 13, Section 4 of the Supplementary Provisions of the Law.

400,064¥-¥23,179

JFM ANNUAL REPORT 202097

Financial Section | Financial Statements

Statements of income of general account and management account from 1 April 2019 through 31 March 2020 wereas follows:(Millions of yen)

Generalaccount

Management
account

Income¥133,662¥162,962

Interest income

126,123

156,499

Offset

Item

Total

¥(6,897)

Generalaccount

Management
account¥289,727

Income$1,229,646$1,499,196

282,623

Interest income

1,160,289

1,439,739

OffsetTotal$(63,457)$ 2,665,385
2,600,028

Fees and commissions

87

87

Fees and commissions

805

805

Other operating income

8

8

Other operating income

78

78

Other income
Contributions from fund for lending rate reduction
Administrative fee for management account

7,008
6,996

12

12

434

Interest on due from general account

(434)
8

Transfer from general account for fund for lending rate
reduction(6,454)(6,897)

107,871

59,690Interest expenses

Others64,47464,47464,36164,361

113

113

4,000

Interest on due from general accountTransfer from general account for fund for lending rate
reduction(4,000)79(79)

59,378(59,378)(63,457)

160,663

Expenses

992,375

549,131

Interest expenses

1,478,049

95,472

58,798154,271878,312

540,929

1,419,241

Fees and commissions

179

119

299

Fees and commissions

1,653

1,099

2,752

Other operating expenses

2,627

299

2,926

Other operating expenses

24,172

2,751

26,923General and administrative expenses

3,128

38

3,166

General and administrative expenses

28,780353

29,133

Interest on due to management accountTransfer to management account for fund for lending rate
reduction

8
6,454

Special gains

Transfer to management account for fund for lending rate
reduction(6,454)79(79)

59,378(59,378)

434

(434)

25,791

103,272-

129,063

Ordinary income-

105,259-

105,259

Special gains

100,000

100,000

Reversal of management account reserve for interest rate
volatility

919,963

919,963

5,259

5,259

Reversal of reserve for interest rate reduction

48,386

48,386

Reversal of management account reserve for interest rate
volatility
Reversal of reserve for interest rate reduction
Special losses

23

Loss on disposal of fixed assets

23

208,531

208,555

Payment to national treasury

100,000
¥-

¥-

4,000

(4,000)237,271

950,065-

1,187,336-

968,349-

968,349

Special losses

219

Loss on disposal of fixed assets

219

1,918,414-

1,918,633
219

108,531

Provision for management account reserve for interest
rate volatility

998,451

998,451

100,000

Payment to national treasury

919,963

919,963¥25,767

Net income$237,052$-$-$237,052

Financial Section

108,531¥25,767-

Administrative fee for management account

23

Provision for management account reserve for interest
rate volatility
Net income

Interest on due to management accountJFM’s Role in Local
Government Finance

Administrative fee for management accountOrdinary income(8)Management Structure

Expenses

Contributions from fund for lending rate reduction
Administrative fee for management account

(8)

6,454

Other income

Operations

Others

7,008
6,996

Review and Plan

Item

(Thousands of U.S. dollars)

Appendix / JFM Data98

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 202099

Financial Section | Financial Statements

17. Fair Value of Marketable Securities
Marketable held-to-maturity securities as of 31 March 2019 consisted of the following:Book value

-

-

-

-

-

Negotiable certificates ofdeposit¥180,000¥180,000-

Sub total

180,000

180,000-¥180,000¥180,000-

Sub total

Securities with fair values
that do not exceed the balance
sheet amount

Difference--

Securities with fair values
exceeding the balance
sheet amount

Fair value

Total

Type

Book value

Difference

-

-

-

-

Negotiable certificates ofdeposit¥365,500¥365,500-

Sub total

365,500

365,500-¥365,500¥365,500

-

Total

Type

Book value

-

-

-

-

Negotiable certificates ofdeposit$3,362,466$3,362,466-

Sub total

3,362,466

3,362,466

-

Total

$3,362,466$3,362,466-

100

JFM ANNUAL REPORT 2020

19. Notes on error correction(1) Contents of errors
During fiscal 2018, the JFM discovered that the provisioned amount from the general account and the reversal
amount of reserve for interest rate reduction in the management account for the loans extended by thePredecessor in fiscal 2007 were posted incorrectly. In order to correct this error, the management accountreserve for interest rate volatility and the management account surplus reserve increased by 4,142 million yen
and the reserve for interest rate reduction and the general account surplus reserve decreased by 2,453 million
yen as of the beginning of the year ended 31 March 2019.

Appendix / JFM Data

18. Information on Derivative Transactions(1) Types of derivative transactions
Derivative transactions entered into by the JFM are interest rate swaps for interest rate related transactions, andcurrency swaps and foreign exchange forward contracts for currency related transactions.
(2) Policies and purposes of derivative transactions
The JFM uses interest rate swaps, currency swaps and foreign exchange forward contracts as a means ofhedging exposure to interest rate and foreign exchange fluctuation risks, and does not enter into derivatives for
speculative purposes.
Interest rate swaps are used to hedge exposure to interest rate risk on funding activities. Currency swaps
and foreign exchange forward contracts are used to hedge exposure to foreign exchange risk associated withissuance of foreign currency-denominated bonds and foreign currency-denominated deposits.
Hedge accounting is applied to interest rate swaps, currency swaps and foreign exchange contracts.

Financial Section-

Sub total

Securities with fair values
that do not exceed the balance
sheet amount

Difference--

Securities with fair values
exceeding the balance
sheet amount

Fair value

JFM’s Role in Local
Government Finance(Thousands of U.S. dollars)Management Structure-

Sub total

Securities with fair values
that do not exceed the balance
sheet amount

Fair value--

Securities with fair values
exceeding the balance
sheet amount(Millions of yen)

Operations

Marketable held-to-maturity securities as of 31 March 2020 consisted of the following:

Review and Plan

Type

(Millions of yen)(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest rate fluctuations that qualify for hedge accounting andmeet specific matching criteria are not measured at fair value, but the differential paid or received under theswap agreements is recognized and included in interest expense or income. If swap contracts or forward
contracts used to hedge the risk of foreign currency fluctuation qualify for deferral hedge accounting, the foreign
currency-denominated assets and liabilities are translated at the contracted rate.
(b) Hedging instruments and hedged items( i ) Hedging instruments: Interest rate swaps
Hedged items: Bonds and long-term borrowed money(ii) Hedging instruments: Currency swaps
Hedged items: Foreign currency-denominated bonds(iii) Hedging instruments: Foreign exchange forward contracts
Hedged items: Foreign currency-denominated bank deposits(c) Hedging policy
The JFM uses hedging instruments as a means of hedging exposure to interest rate risk and foreign exchangerisk. Hedged items are identified by each individual contract.
As a means of hedging foreign exchange fluctuation risks associated with the receipt of interest and principal offoreign currency-denominated bank deposits, a foreign exchange forward contract is entered into at the time ofeach deposit to hedge the risks.
(d) Assessment of hedge effectiveness
The JFM ensures hedging instruments and hedged items have the same major terms when entering into hedgetransactions to offset market fluctuation risks associated with bonds and long-term borrowed money.
Accordingly, the JFM deems these to be highly effective and thus does not assess effectiveness. Moreover, aperiodic assessment of hedge effectiveness for interest rate swaps and currency swaps and forward contracts
that qualify for deferral hedge accounting is omitted when the exceptional accrual method is applied.
(3) Risks on derivative transactions
Major risks on derivative transactions are market risk and credit risk. Market risk is the risk of future revenue
fluctuations due to market value changes. Credit risk is the risk of losses incurred when counterparties areunable to fulfill their contracts due to bankruptcy or other reasons.
As for derivative transactions used for hedging purposes, market risk is offset by the corresponding change inthe underlying hedged items.
The JFM enters into the ISDA Master Agreements and the CSA with financial institutions, which are its derivativetransactions counterparties, to reduce credit risk. Moreover, the JFM constantly monitors restructuring costs ofthe transactions and the counterparties’ credit profiles, and deals with multiple counterparties.
(4) Risk management system for derivative transactions
Execution and management of derivative transactions are conducted by the Finance Department of the JFM
with the approval of persons in charge in accordance with the operational guidelines which specify transaction
authority and limits on the transaction amount.
Additionally, the total amount of derivative transactions, the status of risks, the assessed fair value, and thecreditrisk on counterparties are regularly reported to the Integrated Risk Management Committee.

(2) Effects on the net assets as of the beginning balance of the year ended 31 March 2019
The effect of correcting this error on net assets of 1,688 million yen is shown as “Cumulative effects of error
correction” on the “Statements of Changes in Net Assets.”

JFM ANNUAL REPORT 2020

101Financial Section | Independent Auditor’s Report

Review and Plan

Operations

Management Structure

JFM’s Role in Local
Government Finance
Financial Section

Appendix / JFM Data103
JFM ANNUAL REPORT 2020
JFM ANNUAL REPORT 2020102

Appendix / JFM Data | Appendix

Members of the Representative Board and the Supervisory Committee

105 Appendix

The Representative Board members of the JFM as of 1 August 2020 are as follows:
Name

Title

Background

IDO Toshizo

ChairmanVice Chairman, National Governors’ Association
Governor, Hyogo prefecture

MATSUURA Masataka

Deputy Chairman

Chairman, Finance committee of Japan Association of City Mayors
Mayor, Matsue City, Shimane prefectureMembers of the Representative Board and the Supervisory Committee

105

Redemption of Loans in Fiscal 2019

ARAKI Yasuomi

Deputy Chairman

106

Outstanding Loans by Business

Chairman, National Association of Towns & Villages
Mayor, Kashima Town, Kumamoto prefecture

OBATA Junko

MemberProfessor, Sophia University Law School

107

Additional data regarding liquidity risk

JINNO NaohikoMemberProfessor Emeritus, The University of Tokyo

108

Outstanding Loans by Borrower

SUMIHIRO Isao

MemberChairman of The Hiroshima Bank, Ltd.

112

Bond Issuance in Fiscal 2019

116

Outstanding International Bonds

Operations

105

The Supervisory Committee members of JFM as of 1 August 2020 are as follows:
Name

Title

Background

MITANI Takahiro

Chairman

Chairman, Tanshi Association

SUZUKI Yutaka

Deputy Chairman

Professor Emeritus, Aoyama Gakuin University

Organization History

SEIICHI Tomoko

MemberProfessor, Seinan Gakuin University

118

Organization Chart

YONEDA Yasuharu

MemberProfessor Emeritus, Shinshu University

119

Directors and Corporate Auditors

TAMAOKI Hitomi

MemberChief Executive Officer of Tsumugi Co., Ltd.

119

Contact Information

KAMIZAKI Masanori

MemberDirector, Jiji Press, Ltd.

JFM’s Role in Local
Government Finance

117

Management Structure

117 JFM Data

Review and Plan

Appendix / JFM Data

Redemption of Loans in Fiscal 2019
Interest

Amount(USD millions)

Number of loans

Amount(USD millions)454,546

16,118511,757

2,600

289

64

289

4

454,835

16,181

512,046

2,604

General loans

256

81

34

0

Loans to local government
corporations

5

4

-

-

Subtotal

261

85

34

0

Redemption of loans with pre-consent or pre-approval

-

-

-

-

Redemption of short-term loans

-

-

-

-

455,096

16,266

512,080

2,604

General loans
Regular redemption of
long-term loans

Loans to local government
corporations
Subtotal

Prepayment of longterm loans

Total

Appendix / JFM Data

Number of loans

Financial Section

Principal
Classification

Note: Totals may not add up due to rounding.

104

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 2020

105

Appendix / JFM Data | Appendix

Outstanding Loans by Business

Additional data regarding liquidity risk
Number of Loans
MadeBusiness% of Total

Public Projects, etc.

4,391

4,613

2.1

Public Housing

3,772

2,320

1.1

National Disaster Prevention

1,277

1,249

0.6

Educational Facilities Development

1,387

705

0.3

Social Welfare Facilities Development

1,542

1,022

0.5

General Waste Disposal

429

426

0.2

General Projects

872

758

0.4

(As of 31 March 2020)(USD millions)

Total of liquid assets *1

715

0.3

Disaster Management and Mitigation

10,6637,294

3.5

Local Road Development

5,790

4,651

2.2

Special Municipal Mergers

5,674

9,977

4.6

Outflows related to unsecured
funding (excluding debt securities)

Disaster Prevention

2,543

1,569

0.7

Debt securities

Others

16,2058,365

3.8

Total cash outflows

56,17043,663

20.3

Cash inflows from investment

54,91429,538

13.6

Cash inflows from collection of loans

Subtotal
Water Supply
Transportation

2,411

2,411

2,364

2,364

-

2,411

-

2,364

1,720

-

2,346

1,773

0

-

0

0

184

-

0

0

1,904

1,808

2,346

1,773

High quality liquid assets

-

690

-

690

Net cash outflows

-

603

-

591

-

115

-

117

-

6,058

-

2,396

-

1120

-

522

Other cash inflows*2*3

123,660

66,978

31.1

2,208

1,580

0.7

Electricity and Gas

808

728

0.3

Total of semi liquid assets

Port Facilities

851

378

0.2

Semi liquidity coverage ratio *6

Markets and Slaughterhouses

714

883

0.4

Tourism and Others

197

142

0.1

188,757

117,833

54.7

Temporary Financial Countermeasures Funding

8,080

53,572

24.9

Total

253,007

215,067

99.9

113

200

0.1

253,120

215,268

100.0

Local Government Road Corporation, Toll Roads *1
Grand Total

Total cash inflows

Liquidity coverage ratio*5

Note *1 Amount includes bank current deposits, short term Japanese government bonds held by the JFM. Bank current deposits are protected under deposit
insurance system in Japan.
*2 Amount includes investment with par redemptions and certain maturities which is defined under JFM law, article 45 section 2 and 3.
*3 Amount of bond guaranteed by government of Japan.
*4 Maximum amount for cash inflows are 75% of cash outflows.
*5 Amount of normal bank cash deposits.
*6 Calculated by dividing the total amount of semi liquid assets and liquid assets by net cash outflows.

Appendix / JFM Data

4.7

*4

Financial Section

0

10,216

Subtotal

After applying
cash outflow/inflow
rate

0

4,561

Municipal Enterpriserelated Loans

Before applying
cash outflow/inflow
rate

0

3.4

Industrial Water Supply

After applying
cash outflow/inflow
rate

0

7,390

Sewerage$690

Before applying
cash outflow/inflow
rate

844

Hospitals and Elderly Care Services$690

JFM’s Role in Local
Government Finance

1,625

31 March 2020

Management Structure

Regional Revitalization

31 March 2019

Operations

General Account-related
Loans

Loan Amount (USD millions)

The JFM has been managing liquidity risk independently from March 2015 with reference to the Basel III regulation, bysetting up an internal policy to secure liquid assets under the supervision of our ALM committee. The JFM holds highquality liquid assets in order to prevent any disruptions regarding redemptions and interest payments for the following
month’s JFM bonds.
Fund inflows and outflows of the JFM are mainly consisted of lending and collecting loans from municipalities, bondissuance related payment such as notional or interest amount payment when funding from the capital markets.
Therefore, inflow and outflow of funds in the JFM are limited which makes it possible to predict next month’s inflows
and outflows. (The) finance management division of the JFM hold high quality liquid assets based on the calculation
at the end of the month to secure liquidity for the following month, which is also monitored by the risk management
division, a division who is independent from the finance management division.

Review and Plan

(As of 31 March 2020)

Notes: 1. No loans will be extended to local government road corporations by the JFM. The outstanding loans shown above were extended by the Predecessor.
2. Totals may not add up due to rounding.

106

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 2020107

Appendix / JFM Data | Appendix

Outstanding Loans by Borrower

BorrowerTowns and Villages

Local Government Associations

Local Government Road
Corporations

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Number of Loans
Made

Loan Amount(USD millions)

Hokkaido

296

4,339

5,386

6,203

8,387

1,853

294

240

-

Aomori

193

339

2,085

2,413

1,434

413

110

140

Iwate

255

506

2,743

2,339

826

282

215

Miyagi

337

1,118

4,647

3,764

2,650

482

Akita

210

271

4,689

2,419

1,068

Yamagata

229

734

2,805

1,546

Fukushima

426

808

3,650

Ibaraki

486

1,300

Tochigi

272

Gunma

Loan Amount(USD millions)

14,363

12,636

5.9

-

-

3,822

3,305

1.5

175

-

-

4,039

3,303

1.5

126

60

-

-

7,760

5,424

2.5

95

11

13

-

-

5,978

2,798

1.3

1,927

317

172

81

-

1

5,133

2,679

1.2

2,274

3,055

491

186

176

-

-

7,317

3,749

1.7

6,933

4,292

1,436

379

263

239

1

0

9,119

6,209

2.9

738

3,235

2,043

845

257

16

27

3

0

4,371

3,065

1.4

238

313

3,479

1,844

1,802

313

221

256

-

-

5,740

2,725

1.3

Saitama

249

2,409

6,647

6,354

1,836

526

324

172

3

0

9,059

9,461

4.4

Chiba

389

1,143

5,249

6,545

926

243

594

443

3

7

7,161

8,381

3.9

Tokyo

105

1,031

2,218

2,892

176

47

33

148

-

-

2,532

4,118

1.9

Kanagawa

212

2,031

3,289

7,731

1,238

433

60

402

-

-

4,799

10,596

4.9

Niigata

266

527

8,130

4,053

966

163

236

151

-

-

9,598

4,893

2.3

Toyama

252

263

3,695

2,683

552

209

146

125

-

-

4,645

3,279

1.5

Ishikawa

148

287

2,844

1,701

1,275

396

32

28

-

-

4,299

2,412

1.1

Fukui

218

304

2,246

1,462

808

102

69

27

-

-

3,341

1,896

0.9

Yamanashi

150

306

2,873

1,008

1,005

153

156

47

-

-

4,184

1,514

0.7

Nagano

261

354

4,240

2,389

3,209

530

184

121

3

0

7,897

3,394

1.6

Gifu

221

1,468

4,379

1,959

1,342

367

11

9

-

-

5,953

3,804

1.8

Shizuoka

309

451

5,154

3,331

813

246

81

91

7

2

6,364

4,121

1.9

Aichi

230

2,135

5,370

5,967

893

224

77

22

32

114

6,602

8,462

3.9

Mie

410

1,422

4,075

2,871

1,092

263

32

45

-

-

5,609

4,600

2.1

Shiga

197

731

4,173

2,132

603

128

150

72

-

-

5,123

3,063

1.4

Kyoto

195

285

3,699

4,413

1,139

279

31

59

6

2

5,070

5,038

2.3

Osaka

92

1,536

5,844

11,716

932

340

459

662

-

-

7,327

14,255

6.6

Hyogo

321

3,948

8,267

8,949

2,179

808

415

442

13

5

11,195

14,151

6.6

Nara

274

1,059

2,475

1,796

2,063

616

55

52

-

-

4,867

3,523

1.6

Wakayama

110

448

1,771

2,034

1,552

528

96

74

-

-

3,529

3,083

1.4

Tottori

357

890

1,303

997

1,867

413

33

20

-

-

3,560

2,320

1.1

JFM ANNUAL REPORT 2020

Appendix / JFM Data-

% of Total

Financial Section

Loan Amount(USD millions)

JFM’s Role in Local
Government Finance

Number of LoansMade

JFM ANNUAL REPORT 2020

Number of Loans
MadeManagement Structure

Number ofLoans Made

Total

Operations

108

Cities and Special Wardsof TokyoPrefectures

Review and Plan

(As of 31 March 2020)

109

Appendix / JFM Data | Appendix

Borrower

Cities and Special Wardsof TokyoPrefectures
Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Number of Loans
Made

Loan Amount(USD millions)

Number of Loans
Made

Loan Amount(USD millions)

Total
Number of Loans
Made

Loan Amount(USD millions)% of Total

2,705

1,844

305

75

77

37

-

-

3,376

2,846

1.3

Okayama

243

800

4,632

3,085

1,277

252

106

128

-

-

6,258

4,265

2.0

Hiroshima

471

1,746

4,303

4,064

928

268

16

19

14

32

5,732

6,129

2.8

Yamaguchi

418

517

4,255

2,448

617

108

108

56

-

-

5,398

3,128

1.5

Tokushima

199

395

1,484

1,146

843

264

3

1

-

-

2,529

1,806

0.8

Kagawa

164

246

1,765

1,001

711

188

619

234

-

-

3,259

1,669

0.8

Ehime

87

265

2,298

1,849

664

235

19

9

-

-

3,068

2,357

1.1

Kochi

161

885

1,716

1,254

826

241

10

76

-

-

2,713

2,456

1.1

Fukuoka

95

1,348

5,265

7,923

2,210

908

388

233

21

36

7,979

10,447

4.9

Saga

65

341

1,663

1,473

670

269

101

94

-

-

2,499

2,178

1.0

Nagasaki

136

499

2,786

2,463

717

171

15

27

5

1

3,659

3,162

1.5

Kumamoto

152

704

2,733

1,837

1,681

457

45

59

2

0

4,613

3,057

1.4

Oita

84

234

2,274

1,268

195

65

0

0

-

-

2,553

1,568

0.7

Miyazaki

146

642

2,033

1,359

729

177

14

7

-

-

2,922

2,186

1.0

Kagoshima

178

1,263

2,328

1,530

871

261

18

18

-

-

3,395

3,072

1.4

Okinawa

229

936

1,613

1,492

918

238

51

20

-

-

2,811

2,686

1.2

Total

11,02545,206

171,446

148,157

64,05816,067

6,478

5,638

113

201

253,120

215,269100.0

Note: Totals may not add up due to rounding.

JFM’s Role in Local
Government Finance890

Management Structure

289

Operations

Shimane

Review and Plan

Number ofLoans Made

Local Government Road
Corporations

Local Government Associations

Towns and Villages

Financial Section
Appendix / JFM Data

110

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 2020111

Appendix / JFM Data | Appendix

Bond Issuance in Fiscal 2019

SeriesNumberTenor(yr)FormatCurrency

Issue Size(in millions)

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

69

5

Global

USD

1,000

1.750

99.8905 Sep 2019

5 Sep 2024

70

5

Euro

USD

60

1.650

99.99028 Jan 2020

28 Jan 2025

71

5

Euro

AUD

50

1.160

99.99028 Jan 2020

28 Jan 2025

72

7

Euro

EUR

500

0.050

99.867

12 Feb 2020

12 Feb 2027

Tenor
(yr)

Maturity Date

119

10

25

230

0.125

100

18 Apr 201927 Apr 2029

120

10

30

276

0.115

100

23 May 201928 May 2029

121

10

25

230

0.049

100

14 Jun 201928 Jun 2029

122

10

30

276

0.065

100

19 Jul 201927 Jul 2029

123

10

30

276

0.060

100

20 Aug 201928 Aug 2029

124

10

30

276

0.050

100

20 Sep 201928 Sep 2029

125

10

30

276

0.050

100

18 Oct 201926 Oct 2029

126

10

35

322

0.115

100

22 Nov 201928 Nov 2029

127

10

30

276

0.151

100

20 Dec 201928 Dec 2029

128

10

30

276

0.155

100

24 Jan 2020

28 Jan 2030

129

10

30

276

0.095

100

25 Feb 2020

28 Feb 2030

130

10

30

276

0.050

100

23 Mar 2020

28 Mar 2030

74

20

15

138

0.434

100

18 Apr 201928 Apr 2039

75

20

15

138

0.323

100

14 Jun 201928 Jun 2039

76

20

20

184

0.268

100

19 Jul 201928 Jul 2039

77

20

20

184

0.200

100

20 Sep 201928 Sep 2039

78

20

20

184

0.251

100

18 Oct 201928 Oct 2039

79

20

20

184

0.345

100

20 Dec 201928 Dec 2039

80

20

20

184

0.354

100

24 Jan 2020

27 Jan 2040

81

20

20

184

0.232

100

23 Mar 2020

28 Mar 2040

25

5

10

92

0.010

100

18 Apr 201926 Apr 2024

26

5

10

92

0.001

100

22 Nov 201928 Nov 2024

8

30

15

138

0.646

100

18 Apr 201928 Apr 2049

9

30

15

138

0.446

100

18 Oct 201928 Oct 2049

2

40

15

138

0.646

100

28 Jan 2020

28 Jan 2060

F457

9

20

184

0.105

100

24 Apr 201928 Apr 2028

F458

17

3

28

0.360

100

24 Apr 201928 Apr 2036

F459

21

3

28

0.460

100

24 Apr 201927 Apr 2040

F460

5

7

64

0.012

100

25 Apr 201925 Jun 2024

F461

9

3

28

0.120

100

25 Apr 201915 Sep 2028

F462

11

3

28

0.157

100

25 Apr 201922 Nov 2029

JFM ANNUAL REPORT 2020

11

3

28

0.465

100

25 Apr 201924 Feb 2040

28

0.155

100

28 May 201920 Jun 2030

F465

21

3

28

0.436

100

28 May 201928 Dec 2039

F466

21

5

46

0.322

100

25 Jun 201928 Mar 2040

F467

5

20

184

0.010

100

26 Jun 2019

31 May 2024

F468

5

3

28

0.006

100

25 Jul 201925 Sep 2024

F469

5

13

120

0.006

100

25 Jul 201927 Sep 2024

F470

7

9

83

0.015

100

25 Jul 2019

1 Jul 2026

F471

7

4

37

0.015

100

25 Jul 201928 Jul 2026

F472

9

3

28

0.043

100

25 Jul 201928 Feb 2028

F473

9

20

184

0.060

100

25 Jul 201928 Jul 2028

F474

7

3

28

0.015

100

26 Jul 201922 Jul 2026

F475

15

3

28

0.160

100

26 Jul 201926 Jul 2034

F476

16

3

28

0.198

100

26 Jul 201926 Oct 2035

F477

17

3

28

0.218

100

26 Jul 201928 Jul 2036

F478

18

3

28

0.230

100

26 Jul 201928 Jul 2037

F479

22

3

28

0.317

100

26 Jul 201926 Jul 2041

F480

6

3

28

0.009

100

30 Jul 201928 May 2025

F481

6

3

28

0.010

100

30 Jul 201928 Jul 2025

F482

19

3

28

0.281

100

23 Aug 201928 Feb 2039

F483

21

3

28

0.295

100

30 Jul 201928 Mar 2040

F484

25

3

28

0.373

100

30 Jul 201928 Jul 2044

F485

5

20

184

0.007

100

21 Aug 20192 Dec 2024

F486

16

3

28

0.099

100

23 Aug 201923 Aug 2035

F487

5

7

64

0.003

100

27 Sep 201927 Jan 2025

F488

5

20

184

0.003

100

27 Sep 201925 Feb 2025

F489

7

20

184

0.041

100

24 Oct 201928 Oct 2026

F490

5

20

184

0.003

100

25 Oct 201925 Mar 2025

F491

11

3

28

0.050

100

24 Oct 201927 May 2030

F492

11

3

28

0.050

100

24 Oct 201928 May 2030

F493

17

3

28

0.217

100

24 Oct 201928 Oct 2036

F494

34

3

28

0.532

100

24 Oct 201928 Oct 2053

F495

5

9

83

0.003

100

25 Oct 201928 Feb 2025

F496

7

4

37

0.021

100

25 Oct 201928 Oct 2026

F497

11

3

28

0.050

100

25 Oct 201929 May 2030

F498

12

3

28

0.083

100

25 Oct 201928 Oct 2031

F499

18

3

28

0.238

100

25 Oct 201928 Oct 2037

F500

34

3

28

0.531

100

25 Oct 201924 Oct 2053

F501

11

3

28

0.050

100

31 Oct 201930 May 2030

F502

11

3

28

0.050

100

31 Oct 2019

31 May 2030

F503

11

3

28

0.050

100

31 Oct 201920 Jun 2030

F504

34

3

28

0.544

100

31 Oct 201931 Oct 2053

F505

12

3

28

0.106

100

27 Nov 201927 Jun 2031

F506

12

3

28

0.178

100

25 Dec 201928 Jul 2031

F507

7

20

184

0.027

100

30 Jan 2020

28 Jan 2027

F508

5

14

129

0.003

100

28 Feb 2020

28 Apr 2025

JFM ANNUAL REPORT 2020

Appendix / JFM Data

Issue Date

F464

Maturity Date

Financial Section

Issue Price(%)

3

Issue Date

JFM’s Role in Local
Government FinanceCoupon (%)(JPY in billions) (USD in millions)21

Issue Price(%)

Management Structure

112

Issue Size

SeriesNumber

F463

Coupon (%)(JPY in billions) (USD in millions)Operations(2) Domestic public offerings

Tenor
(yr)

Review and Plan

1. JFM bonds(1) International bonds

Issue Size

SeriesNumber113

Appendix / JFM Data | Appendix

Issue Size

Tenor
(yr)

Coupon (%)

Issue Price(%)

Issue Date

Maturity Date

SeriesNumber

Tenor
(yr)

F509

5

20

184

0.006

100

28 Feb 2020

28 Jul 2025

F510

7

6

55

0.021

100

28 Feb 2020

26 Feb 2027

C52

20

F511

12

3

28

0.139

100

28 Feb 2020

27 Feb 2032

C53

20

F512

18

4

37

0.251

100

28 Feb 2020

26 Feb 2038

D37

20

F513

19

3

28

0.286

100

28 Feb 2020

26 Aug 2039

D38

20

D39

20

(JPY in billions) (USD in millions)

Tenor
(yr)

A111

10

20

Coupon (%)

Issue Price(%)

Issue Date

Maturity Date

184

0.155

100

18 Apr 201918 Apr 2029

(JPY in billions) (USD in millions)

A112

10

10

92

0.145

100

23 May 201923 May 2029

A113

10

10

92

0.079

100

20 Jun 201920 Jun 2029

A114

10

20

184

0.095

100

19 Jul 201919 Jul 2029

A115

10

10

92

0.090

100

20 Aug 201920 Aug 2029

A116

10

10

92

0.080

100

20 Sep 201920 Sep 2029

A117

10

20

184

0.080

100

18 Oct 201918 Oct 2029

10

10

92

0.145

100

22 Nov 201922 Nov 2029

10

10

92

0.181

100

19 Dec 201919 Dec 2029

A120

10

20

184

0.185

100

24 Jan 2020

A121

10

10

92

0.125

100

A122

10

10

92

0.080

B42

10

2

18

B43

10

4

B44

10

B45

10

B46

10

Maturity Date

92

0.316

100

25 Feb 2020

24 Feb 2040

8

74

0.252

100

25 Mar 2020

23 Mar 2040

20

184

0.454

100

18 Apr 201918 Apr 2039

10

92

0.451

100

23 May 201923 May 2039

10

92

0.343

100

20 Jun 201920 Jun 2039

10

D40

20

10

92

0.288

100

19 Jul 201919 Jul 2039

D41

20

10

92

0.220

100

20 Aug 201919 Aug 2039

D42

20

10

92

0.220

100

20 Sep 201920 Sep 2039

D43

20

20

184

0.271

100

18 Oct 201918 Oct 2039

D44

20

10

92

0.389

100

22 Nov 201922 Nov 2039

D45

20

10

92

0.365

100

19 Dec 201919 Dec 2039

D46

20

10

92

0.374

100

24 Jan 2020

24 Jan 2040

D47

20

10

92

0.316

100

25 Feb 2020

24 Feb 2040

D48

20

10

92

0.252

100

25 Mar 2020

23 Mar 2040

Coupon (%)

Issue Price(%)

Issue Date

Maturity Date

3. Government-guaranteed domestic bonds
Issue Size

Tenor
(yr)

24 Jan 2030

119

10

20

184

0.040

100

15 Apr 201913 Apr 2029

25 Feb 2020

25 Feb 2030

120

10

20

184

0.001

100

16 Jul 201913 Jul 2029

100

25 Mar 2020

25 Mar 2030

121

10

20

184

0.001

100

15 Oct 201915 Oct 2029

0.155

100

18 Apr 201918 Apr 2029

122

10

20

184

0.070

100

16 Dec 201914 Dec 2029

37

0.145

100

23 May 201923 May 2029

123

10

20

184

0.070

100

21 Jan 2020

21 Jan 2030

4.5

41

0.079

100

20 Jun 201920 Jun 2029

9

83

0.095

100

19 Jul 201919 Jul 2029

8.5

78

0.090

100

20 Aug 201920 Aug 2029

B47

10

6

55

0.080

100

20 Sep 201920 Sep 2029

10

5.5

51

0.080

100

18 Oct 201918 Oct 2029

B49

10

7.5

69

0.145

100

22 Nov 201922 Nov 2029

B50

10

6.5

60

0.181

100

19 Dec 201919 Dec 2029

B51

10

12.5

115

0.185

100

24 Jan 2020

24 Jan 2030

B52

10

9

83

0.125

100

25 Feb 2020

25 Feb 2030

10

7

64

0.080

100

25 Mar 2020

25 Mar 2030

20

3.5

32

0.454

100

18 Apr 201918 Apr 2039

C43

20

4.5

41

0.451

100

23 May 201923 May 2039

C44

20

5

46

0.343

100

20 Jun 201920 Jun 2039

C45

20

11

101

0.288

100

19 Jul 201919 Jul 2039

C46

20

11.5

106

0.220

100

20 Aug 201919 Aug 2039

C47

20

7

64

0.220

100

20 Sep 201920 Sep 2039

C48

20

6

55

0.271

100

18 Oct 201918 Oct 2039

C49

20

8

74

0.389

100

22 Nov 201922 Nov 2039

C50

20

7.5

69

0.365

100

19 Dec 201919 Dec 2039

C51

20

15

138

0.374

100

24 Jan 2020

24 Jan 2040

Appendix / JFM Data

B53
C42

(JPY in billions) (USD in millions)

Financial Section

SeriesNumberB48

JFM ANNUAL REPORT 2020

Issue Date

JFM’s Role in Local
Government Finance

A118
A119

Issue Price(%)

Management Structure

114

Issue Size

SeriesNumberCoupon (%)(JPY in billions) (USD in millions)Operations

2. Private placements with pension funds and mutual aids for local government officials

Issue Size

Review and Plan

SeriesNumberJFM ANNUAL REPORT 2020115

Appendix / JFM Data | Appendix

Appendix / JFM Data | JFM Data

Outstanding International Bonds

Organization History

SeriesNumberTenor(yr)FormatCurrency

Issue Size(in millions)

CouponIssue Price(%)

Issue Date

Maturity Date

39

7

Euro

USD

100

3mL+65bp

100

22 Jul 201322 Jul 2020

43

10

Euro

AUD

85

5.092%

100

1 May 2014

1 May 2024

44

10

Euro

USD

90

3.250%

99.055

1 May 2014

2 May 2024

45

7

Euro

EUR

1,000

0.875%

99.29322 Sep 2014

22 Sep 2021

47

10

GlobalUSD

1,000

2.375%

99.611

13 Feb 2015

13 Feb 2025

48

10

Euro

AUD

70

3.600%

100

18 Mar 201518 Mar 2025

49

7

GlobalUSD

1,000

2.000%

99.39121 Apr 2015

21 Apr 2022

50

5

Euro

USD

13

2.010%

99.99021 Dec 201521 Dec 2020

5

Euro

AUD

95

3.060%

99.99021 Dec 201521 Dec 2020

5

GlobalUSD

500

2.125%

99.77412 Feb 2016

12 Feb 2021

53

5

GlobalUSD

1,500

2.125%

99.78013 Apr 201613 Apr 2021

54

7

GlobalUSD

1,000

2.125%

99.29725 Oct 2016

25 Oct 2023

55

5

Euro

USD

53

2.390%

99.99030 Jan 201728 Jan 2022

56

5

Euro

AUD

106

3.040%

99.99030 Jan 201757

5

GlobalUSD

1,000

2.625%

99.82320 Apr 2017

2009

Reorganized as the Japan Finance Organization for Municipalities based on the partial amendment of the Japan
Finance Organization for Municipal Enterprises Law (1 June 2009).

2011

Created a new special lending rate programme by integrating the existing special lending rate and the extra-special
lending rate programmes.

2015

Introduced semi-annual principal and interest equal repayment method and semi-annual capital equal repayment
on JFM loans.

2017

Organized study group report on ideal JFM operation and business.
Set forth updated management principles “Supporting local economies through finance to create a future for regions.”

History of the Predecessor
FY1957

Established pursuant to the Japan Finance Corporation for Municipal Enterprises Law (1 June 1957).

1960

Started making loans entrusted by Agriculture, Forestry and Fisheries Finance Corporation.

1966

Started a lending programme that applied special lending rates.

28 Jan 2022

1967

Started receiving subsidies from the national treasury.

20 Apr 2022

1970

Started a programme of contributions of the earnings from municipally operated racing and established the Fundfor Lending Rate Reduction.

1972

Started lending to local government road corporations and local government land development corporations.

10

Euro

AUD

22

3.418%

99.85026 Jun 201721 Jun 2027

3

GlobalUSD

1,000

2.000%

99.7408 Sep 2017

8 Sep 2020

60

3

Euro

NZD

58

2.270%

99.98020 Nov 201719 Nov 2020

5

Euro

USD

44

2.570%

99.99030 Jan 201830 Jan 2023

5

Euro

AUD

28

2.760%

99.99030 Jan 201830 Jan 2023

63

5

GlobalUSD

1,000

3.250%

99.98224 Apr 201824 Apr 2023

64

10

Euro

AUD

73

3.370%

100

26 Jun 2018

21 Jun 2028

65

4

Euro

AUD

125

2.400%

99.99026 Sep 2018

26 Sep 2022

66

5

GlobalUSD

1,000

3.375%

99.49927 Sep 2018

27 Sep 2023

67

11

Euro

EUR

80

1.106%

100

24 Jan 201924 Jan 2030

68

5GlobalUSD

1,000

3.000%

99.68212 Mar 201912 Mar 2024

69

5

GlobalUSD

1,000

1.750%

99.8905 Sep 2019

5 Sep 2024

70

5

Euro

USD

60

1.650%

99.99028 Jan 2020

28 Jan 2025

71

5

Euro

AUD

50

1.160%

99.99028 Jan 2020

28 Jan 2025

72

7

Euro

EUR

500

0.050%

99.867

12 Feb 2020

12 Feb 2027

1989

Established the Reserve for Losses on Refinancing of Bonds.

1990

Started a lending programme that applied extra-special lending rates.

1998

Based on the policy titled “Regarding Reorganization and Rationalization of Special Public Institutions,” which wasapproved by the Cabinet on 24 September 1997, one part-time senior executive director was added; the Japan
Finance Corporation for Municipal Enterprises Management Council was established; and addressed the phased
abolition of subsidies from the national treasury over a three-year period.

2001

Subsidies from the national treasury were abolished and the Reserve for Interest Rate Reduction was established.
Started offering borrowers two interest rate options: fixed rates or adjustable rates.
Established the prepayment with penalty system. Started issuing FILP agency bonds.
The Special Public Institutions Reform Basic Law was passed, and the Reorganizations and Rationalization Plan forSpecial Public Institutions was approved by the Cabinet.

2002

The policy titled the “Reform of the Four Highway-Related Public Corporations, International Hub Airports andPolicy-Based Finance Institutions” was approved by the Cabinet.

2005

The “Priority Policy for Administrative Reform,” which included the proposal for abolition of the Predecessor in fiscal
2008, a new structure utilizing capital markets, and transitional measures to prepare for the abolition, was approvedby the Cabinet.

2006

The Administrative Reform Promotion Law was passed.
The Headquarters for the Promotion of the Reform of Policy-Based Finance and the Cabinet Headquarters for the
Promotion of Administrative Reform (HQPAR) set forth the plan titled “System Design Regarding the Reform of
Policy-Based Finance.”
The six associations of local governments submitted the “Local governments’ draft proposal for designing a new
system after the abolition of the Predecessor.”

2007

The Japan Finance Organization for Municipal Enterprises Law was passed. The Act on Assurance of Sound
Financial Status of Municipalities was passed.
Implemented prepayment without penalty and other measures in accordance with the national government’s policy
on reducing local governments’ debt service burden. The programme ended in fiscal 2008.

2008

Dissolved based on the Japan Finance Organization for Municipal Enterprises Law (1 October 2008).

JFM ANNUAL REPORT 2020

Appendix / JFM Data

Included the three types of special projects (in the general account-related business category) in the scope of lending.
Started issuing foreign currency-denominated bonds.

Financial Section

61
62

1978
1983

JFM’s Role in Local
Government Finance

58
59

JFM ANNUAL REPORT 2020

The Japan Finance Organization for Municipal Enterprises (the Predecessor of the JFM) was established pursuant to
the Japan Finance Organization for Municipal Enterprises Law on 1 August 2008.
Succeeded the assets and assumed the liabilities of the Predecessor and commenced operations on 1 October 2008.

Management Structure

51
52

FY2008Operations

116

History of the JFM

Review and Plan

1. JFM bonds(As of 31 March 2020)

117

Appendix / JFM Data | JFM Data

Organization Chart

Directors and Corporate Auditors
As of 1 April 2020

(As of 1 October 2020)

SATO Fumitoshi
ENDO Yutaka
YOSHIKAWA Hiromi, TSUKADA Yuji, OKAMOTO Noboru
ISONO Masayoshi, OMORI Masaaki(part-time)

Review and Plan

President and CEO
Deputy President
Senior Executive Directors
Corporate Auditors

Management Structure

Postal address: Shisei Kaikan, 1-3 Hibiya Koen,
		
Chiyoda-ku, Tokyo 100-0012, JapanTel:+81-3-3539-2697
Fax:+81-3-3539-2615
E-mail: funds-d@jfm.go.jp
Bloomberg ticker: JFM Govt

Operations

Contact Information

JFM’s Role in Local
Government Finance(Photo provided by the Tokyo Institute for Municipal Research)

Financial Section
Appendix / JFM Data118

JFM ANNUAL REPORT 2020

JFM ANNUAL REPORT 2020119