Japan Finance Organization
for MunicipalitiesDISCLAIMER
By reading these materials, you agree to be bound by the following limitations:
No representation 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 Japan Finance Organization for Municipalities (JFM) nor any of JFM’s advisors or representatives
shall have any responsibility or liability whatsoever (for negligence or otherwise) for any loss howsoever
arising from any use of these materials or their contents or otherwise arising in connection with thesematerials. 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 be understood that subsequent developments may affect the information
contained in these materials, which neither JFM nor its advisors or representatives are under anobligation to update, revise or affirm.
Forward-looking statements, including the JFM’s plans in these materials, are based on information
available to JFM at the time they were prepared and involve potential risks and uncertainties. Actual
results, therefore, may differ from those described in these materials due to changes in a variety offactors, such as market trends, economic conditions and regulations. Accordingly, investors areadvised 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 forsale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities
of JFM.
Securities of JFM 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 registration requirements of the United States securities
laws.
These materials and the information contained herein are being furnished to you solely for yourinformation 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 other consideration is being solicited, and, if sent in responseto this presentation or the information contained herein, will not be accepted.
Note to Financial Statements
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenienceof readers outside Japan, using the prevailing exchange rate as of 31 March 2023, the final day of the
fiscal year, which was JPY 133.48 to USD 1. This translation should not be construed as a representationthat all amounts shown could be converted into U.S. dollars at such rate.


ANNUAL REPORT 2023 JFM   

CONTENTS
45

2. CapitalManagement Philosophy

46

Corporate Governance

Message from the President and CEO

46

1. Corporate Governance

JFM’s value creation story47

2. Internal Control over Financial ReportingJFM Approach to Sustainability

47

3. Internal Audit

Review and Plan
16

48 Members of the Representative Board and theSupervisory Committee, and Directors andCorporate Auditors

Review of Operations for Fiscal 2022
1 . Lending Operations

50

General Account and Management Account18

2. Funding Operations

51

Risk Management

20 3. Financial Review

56

Compliance

22 Management Plan for Fiscal 2023

58

Human Capital

22

1 . Lending Operations

59

Disclosure23

2. Funding Operations

23

3. Scheduled Payment to the National Treasury

Operations

JFM’s Role in Local Government Finance60

1. Japanese Local Government System

61

2. Local Government Finance Programme

26

Lending Operations

62

3. Local Allocation Tax

26

1 . Outline

62

4. Local Government Borrowings

28

2. Loan Interest Rates

62

5. Security of Local Government Borrowings

63 6. Local Government Borrowing Programme

30 4. Trends in Lending Operations

64

33

5. Lending Operations by Business

36

Funding Operations

7. JFM Funds in Local Government Borrowing Programme

Financial Section

36

1 . Issue Type66

Financial Statements

36

2. Basic Funding Policy

106

Independent Auditor’s Report37

3. Features of JFM Bonds

38 4. Trends in Funding Operations

Appendix / JFM Data

39 Support for Local Governments

109

Management Structure

Appendix121

JFM Data

121

Organization History

Outline122

Organization Chart

44

1. Outline of JFM Operations

123

Contact Information

Japanese traditional songs represent Japan's beautiful landscapes.

JFM ANNUAL REPORT 2023

Japan has traditional songs that are loved and sung by everyone in Japan, from children to adults. Parents
and grandparents sing them as lullabies to newborn babies. Mothers and fathers sing them with theirchildren when bathing. Children sing them in choirs and as nursery rhymes in nursery schools andelementary schools. They are learned naturally through daily life. The four seasons are an integral part ofthese traditional Japanese songs. The lyrics and melodies express the Japanese scenery of spring, summer,
Autumn, and winter, the changing of the seasons, and the feelings the seasons awaken in people. Singing
these Japanese songs, born of nature's beautiful majesty, passes on the unspoilt landscapes that live in thehearts of the Japanese people to future generations.

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44
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16

Profile of JFM

01

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 124.4 million

Number of Employees

102 (as of April 2023)

Outstanding Loans

USD 174.6 billion

as of 31 March 2023
Outstanding Bonds and

USD 151.0 billion

Bank Loans
as of 31 March 2023
Credit Ratings

S&P: A+as of 31 March 2023

Moody’s : A1
R&I: AA+

02 JFM ANNUAL REPORT 2023

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

1

Being Responsive to
Local Government Needs

2

Strengthening Confidence
from Capital Markets

3

Ensuring Responsible Corporate Governance as a
Joint Organization of Local Governments

As a reliable provider of long-term and low-interest funds for local governments,
JFM closely supports local government funding based on their needs as well as theenvironment.
JFM focuses on related investigation and research and offers information
with the aim of becoming a good partner in financial management for local
governments.

JFM aims to strengthen its market confidence and secure low-cost funding throughappropriate disclosure as required in capital markets, as well as its sound financial
standing maintained through prudent risk management. Furthermore, JFM, as aleading public-sector bond issuer, is committed to contributing to the sounddevelopment of capital markets.

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

JFM ANNUAL REPORT 2023

03

Message

2023

Message fromthe President and CEO

SATO Fumitoshi

President and CEO
2023

Japan Finance
Organization for
Municipalities
04 JFM ANNUAL REPORT 2023

In fiscal 2022, the supply constraints caused by the COVID-19 pandemic, combined with soaring
energy and raw material prices against the backdrop of the Ukraine crisis, resulted in record
inflation around the world, and policy rates were raised one after another, mainly in the UnitedStates and European countries. Although the Bank of Japan has maintained its stance of monetaryeasing, there have been some moves that could be regarded as policy corrections, and we
recognize that the financial markets are under an unstable environment, as evidenced by the
emergence of crises in some financial institutions overseas. While paying close attention to thesecircumstances, JFM will respond flexibly and appropriately to the implementation of various
projects to ensure the stable continuation of its operations.
In fiscal 2023, JFM will provide loans to meet the financing needs of local governments forvarious projects included in the local government finance programme, such as the newly
established decarbonization promotion projects, public facilities management promotion projects,
water supply projects, and sewerage projects, for which high demand for financing is expected tocontinue.
In the area of funding operations, JFM will strengthen various ESG-related initiatives, including
the issuance of green bonds, and will strive to constantly improve financing conditions throughflexible and agile responses utilizing a variety of means, even under changing financial conditions,in order to meet the long-term and low-interest financing needs of local governments.
Also, in the area of local government support operations, we will further enhance the Businessand Financial Management Enhancement Program by adding DX for local governments and otherareas of support from this fiscal year. As a contribution to local government finances, a portion of
JFM’s management account reserve for interest rate volatility will be attributed to the Japanesenational government in the amount of 100 billion yen in fiscal 2023 in order to secure funds for local
allocation tax. Together with the previously planned amount, a total of over 150 billion yen will be
attributed to the Japanese national government.
In addition, JFM has strengthened our promotion system for sustainability, which is a common
issue worldwide, by establishing Sustainability Committee. Based on its newly formulated
Sustainability Policy, JFM will give consideration to ESG factors throughout its entire businesscovering lending, funding, and local government support, and thereby will further contributeto the creation of sustainable local communities.
JFM, under the management philosophy and motto, "Supporting local governments
through finance to create a future for regions," will strive to fulfill its required role
as a joint funding organization and contribute to the sound financial
management of local governments, which directly relates to the credibilityof JFM itself, fully considering a wide range of opinions, issues andneeds of local governments.
We appreciate the cooperation and support of all related
persons.

JFM ANNUAL REPORT 2023

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06 JFM ANNUAL REPORT 2023

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JFM ANNUAL REPORT 2023

07

JFM Approach to Sustainability
JFM, as a joint organization of local governments, provides long-term, low-interest financing to local governments thatprovide a wide range of administrative services that are closely related to the lives of residents. JFM also contributes tothe creation of sustainable local communities and, in turn, sustainable society by helping to resolve the issues faced by
local governments through support for ensuring fiscal soundness.
In addition, JFM will consider ESG factors, such as consideration for the environment, improvement of the work environment, and the development of governance systems, throughout its entire business, and promote sustainability initiatives.

Overview of JFM Sustainability Policy
1. Introduction

2. Implementation System• This policy sets forth the basic policy
on sustainability matters of the Japan
Finance Organization for Municipalities (JFM).

• The Sustainability Committee, which is chaired by the President andCEO and composed of all senior executive directors, etc., has been
established.
• The committee deliberates on JFM's overall sustainability initiatives.

3. Basic Policy• Pursuant to its mission and management philosophy, JFM will, throughout its entire business covering lending,funding and support for local governments, give consideration to ESG factors and thereby contribute to thesustainable development of local communities.
3.1 Consideration for
the Environment
3.1.1. Loans to Projects thatContribute to Environmental
Improvement• Loans to various local governments-operated businesses
that serve to improve the environment, including sewerage
and water supply businesses.
• Use green bonds to procureloan capital.
3.1.2. Initiatives at JFM's Office• Promote initiatives that contribute to reducing environmental
burden, such as encouraging
energy conservation and promoting green procurement.

3.2 F ulfilling Social Responsibility

3.3. Robust Governance3.2.1. S ustainable Development of Local
Communities• Provide long-term, low-interest loans to local
governments offering a wide range of administrative services that are closely related to thelives of local residents, conduct research andstudies regarding issues they are facing, provide support to them, and thereby contribute to
the creation of sustainable local communities.

3.3.1. Organizational Structure• Autonomous and independent management system with the Representative Board, which is comprised ofrepresentatives from local governments, etc., serving as the highest
decision-making body.
• Robust governance with checking
functions, such as external audits andthe Supervisory Committee, which
consists of individuals with significant
expertise in various fields.

3.2.2. Contributing to Capital Markets• Contribute to the sound development of capital
markets as a key issuer in the public sectorbond market.
3.2.3. Inclusive and Vibrant Work Environment•P rohibits any type of harassment, ensures
work-life balance, and human resource development that respects autonomy and a willingness to take on new challenges.

3.3.2. Respect for Human Rights andLegal Compliance• Respect for human rights, compliancewith laws, regulations and ethicalstandards, and prompt and appropriate
response to violations of rules.

4. Dialogue and Disclosure
4.1. Dialogue with
Local Governments• Identify and analyze local governments’ needs through dialogue withthem, and carry out business accordingly.

08 JFM ANNUAL REPORT 2023

4.2. Dialogue with Investors

4.3. Appropriate Disclosure•H old constructive dialogue with domestic and foreign investors.

• Maintain and strengthen the confidence of the market and ensure transparency through active disclosure of
information.

JFM Sustainability Committee
JFM has established the Sustainability Committee topromote sustainability initiatives.
The Sustainability Committee deliberates on Environmental issues, such as climate change; Social issues,
such as diversity, the work environment, and humanrights; and Governance issues, such as ethics and legal
compliance.
The Committee is chaired by the President and CEO
and composed of all senior executive directors, all director generals, a chief credit officer, and an internal auditor.
In addition, the Sustainability Working Group has
been established under the Committee to examine andconduct research and studies on specific initiatives.

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JFM’s Action for Sustainability
JFM will give consideration to ESG factors throughout its entire business.
Major initiatives include the following.
Supporting Sustainable Community Development
through Lending Operations

Raising Funds by Sustainable FinanceJFM contributes to the development of sustainable communities and the creation of sustainable local communities
through lending to local governments who develop infrastructure and administrative services to local residents.

JFM will take advantage of sustainable finance, including
green bonds, to raise funds and direct ESG investment
funds toward solving environmental issues in local
communities.

Improvement of Local Governments’ Problem-Solving
Ability Through Support for Local Governments

Consideration for the Environment at the Office

Depending on needs of local governments, JFM will carry out necessary investigations, research and support onvarious issues, such as ensuring fiscal soundness andfinancing, and support them in solving those issues.

In addition to implementing environmentally friendly
initiatives at the office throughout the organization, JFM
will consider and promote further initiatives.

 upport sustainable community development through➡P.10 S
lending operations➡P.13 Support for Local Governments - Case Study

Creation of an Inclusive and Vibrant Work Environment
JFM takes measures such as human resource development that respects the autonomy of employees, prohibitionof acts of harassment, and ensuring good work-life balance,
which lead to the development of a safe work environment
where diverse human resources can play an active role.
➡P.56 Compliance➡P.12 Green Bonds• J FM will encourage employees at its office to conserve

electricity in all situations, including turning off lights
if unnecessary or during breaks, using energy-saving
equipment, and reducing overtime work.
• J FM will promote green procurement (purchasing goods

with less environmental burden) and minimize environmental impact.
• J FM will promote paperless practices at various meet-ings, etc., and reuse of office supplies.

➡P.58 Human Capital

Ensuring Robust Governance

Information Disclosure

JFM has a structure including the Representative Board
consisting of representatives from local governments, etc.,
the Supervisory Committee consisting of experts in eachfield, and external and internal audits. Under such a system, JFM will maintain a sound and appropriate financial
structure.

In addition to holding appropriate dialogue with local
governments and investors, JFM will proactively disclose
not only financial information but also non-financial information to ensure transparency.
➡P.59 Disclosure➡P.46 Corporate Governance

JFM ANNUAL REPORT 2023

09

JFM Approach to Sustainability

Support sustainable community
development through lending 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, measures against deteriorating infrastructure,and measures against large-scale and intensifying natural disasters.
To address these challenges, JFM provides loans to local governments who develop infrastructure and administrative
services to their residents of the region and contributes to a sustainable development of the region’s community andenvironment.
■ JFM lending operations and SDGs mapping

Sewerage

Public sewerage, basin sewerage, agricultural settlement
drainage facilities, wastewater treatment facilities.

Matsuo Purification Center (Iida City, Nagano Prefecture)

Transportation

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

0800 Series Low Floor Tram (Kumamoto City, Kumamoto Prefecture)

Hospital and Elderly Care Services

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

Kobe Proton Center (Kobe City, Hyogo Prefecture)

10 JFM ANNUAL REPORT 2023

Disaster Management and Mitigation

Building facilities and network for large-scale disasterprevention.
Updating public facilities with earthquake-resistantcapacity.

Tsunami Evacuation Tower (Kuroshio Town, Kochi Prefecture)

Social Welfare and Educational Facilities Development

Maintaining educational facilities such as schools
managed by local governments.

Susono Elementary School (Hirosaki City, Aomori Prefecture)

Regional Revitalization project

Projects implemented by local governments that contribute to thecreation of regional economic cycles, and projects that contributeto the development of a vibrant economy and living area.

PRO-SEED Arena HIKONE (Hikone City, Shiga Prefecture)

JFM ANNUAL REPORT 2023

11

JFM Approach to Sustainability

Green Bonds
In response to growing global interest in the SDGs, the issuance of ESG bonds* has been expanding. In order to provide
stable long-term, low-interest funding, JFM issued its first green bond in FY2019 to finance sewerage projects conductedby local governments, and has continuously issued them every fiscal year since then. Most recently, in February 2023, JFM
issued its fourth green bond worth 500 million euros (equivalent to 71.1 billion yen).
The sewerage project, which was established using proceeds from JFM green bonds, plays an important role in boththe environment and society by contributing to the improvement of public health, the conservation of the living conditions,and the conservation of water quality. For green bonds which have been issued, in cooperation with local governments,
JFM prepares and publishes impact reports that summarize the use of proceeds, project details, environmental improvement effects, etc., to disseminate local governments' initiatives on the SDGs to investors in Japan and overseas.
The JFM green bond framework has received a second-party opinion from Moody’s, a third-party organization, andhas attained a “Very good” score which is the second highest on the 5-point rating scale. The first green bond issued in
February 2020 was awarded a Special Prize in the foreign bond category at the Capital Eye Awards “BEST DEALS OF 2019.”*A general term for bonds that use their proceeds for projects that have some effect on improving the environment and contributing to society such as green
bonds, which are used for projects that contribute to solving environmental issues; social bonds, which are used for projects that contribute to solving social issues; and sustainability bonds, which are used for projects that have both characteristics or for both projects. Unlike ordinary bonds, it is desirable to disclose toinvestors the use of proceeds, the process for project evaluation and selection, the management of proceeds, and the method of impact reporting.

■ JFM Green Bond Issuance

SeriesCurrency

Issue Amount(mn)Tenor

Coupon(%)

Issue Date

1st

EUR

500

7-year

0.050

12 Feb 20

2nd

EUR

500

7-year

0.010

2 Feb 2 1

3rd

USD

750

3-year1.500

27 Jan 22

4th

EUR

500

5-year

3.375

22 Feb 23

JFM conducted a survey on the environmental improvement effects, etc. of sewerage projects with the local governments to which loans were made between February 3, 2022 and March 30, 2022, for which the proceeds from the green
bond issued in January 2022 were allocated. JFM published an impact report summarizing the results in December 2022.
The following is a summary of the results.
■ Summary
Total extension ofpipes (km)319. 5
Covered area
population
18,935,043■ Loan Amount by Project Type■ Loan Amount by Type of Borrower(1) (JPY mm)(3) 
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

4,653,649,358
Amount ofelectricity saved (kWh)577,278  






(1) Breakdown of green bond eligible projects from 3 February 2022 to 30 March 2022 (approximately JPY 95 bn)(2) Breakdown of all the sewerage projects related loans in FY2021(3) Does not add up to 100 due to rounding off

12 JFM ANNUAL REPORT 2023

Support for Local Governments- Case Study
Project to strengthen administration and financial management of local governments
In order to strengthen the administration and financial management of local governments and improve the quality offinancial management, JFM conducts a joint project with the Ministry of Internal Affairs and Communications to dispatch
advisers to individual municipalities, depending on the areas of support needed, such as management reform in municipal
enterprises and joint public-private ventures, etc., public facility management, and DX in local governments.

Study No.1

Aridagawa Town, Wakayama Prefecture(area of support: application of municipal enterprise accounting)

Outline of the organization
Aridagawa is a town with a population of approximately 25,000 (according to the 2020 census) that was established in 2006
as a result of the merger of three towns. The town utilized the support to receive accounting and other advice for sewerage
projects to which the financial provisions of the Local Public Enterprise Act were scheduled to apply from April 2023.

Comments from the adviser
Mr. Akitoshi Kikuchi (Former Director General, Iwate Chubu Water Supply Authority)
In Aridagawa Town, they were struggling with an interruption of the operation for application of the Act due to a situation of
the contractor to whom the operation was entrusted. In such a situation, JFM received an urgent request for an adviser.
We immediately established an asset register by reconstructing and scrutinizing the unfinished asset register, confirming
the allocation of overhead costs, etc. Then I provided advice on-site, or as necessary, on a series of procedures for
applying the Act (preparation of projected balance sheet, preparation of the budget, specification of consumption tax,
transfer to general account, etc.).
Thanks to the efforts of the person with bookkeeping qualifications in charge ofAridagawa Town, we were able to complete all operations for application of the Act injust six months from the situation where only about 40% of the asset register had been
completed. I was also able to conduct business analysis based on the completed projected financial statements and provide advice on future business management, which Kibi Purification Center(Aridagawa Town, Wakayama Prefecture)is the final purpose of applying the Act.

Study No.2

Takamatsu City, Kagawa Prefecture(area of support: public facility management)

Outline of the organization
Takamatsu City is the capital of Kagawa Prefecture and a core city with a population of approximately 417,000 (according
to the 2020 census). In revising the comprehensive management plan for public facilities, etc. and the plan for restructuring
and developing public facilities, the city utilized the support to receive advice on methods and approaches for considering
consolidation of the facilities, utilization of the facilities by the private sector, etc.

Comments from the adviser
Mr. Manabu Minami (Visiting Professor, Research Center for Public-Private Partnership, Toyo University)
Takamatsu City has developed as the gateway to Shikoku. The city had also taken advanced measures, such as evaluating
all public facilities on the assumption that they would be consolidated. At the practical stage, however, in the large organization of a core city, the departments in charge were fragmented, and it was difficult to think beyond the vertically divided
departments. Therefore, the development of complex and multifunctional facilities stagnated. In addition, sufficient efforts
were not made to promote the use of the private sector’s know-how and funds
through the introduction of public-private partnership methods.
In this adviser dispatch system, I provided training to staff in charge of facilities,
objectively analyzed the issues and actual usage of each facility as well as challenges
facing the departments, explained the perspective of the private sector (course ofaction for utilization, profitability, etc.), and confirmed the course of action for the A scene of the lecture
maximum utilization of public facilities.
(Takamatsu City, Kagawa Prefecture)

JFM ANNUAL REPORT 2023

13

色
露草
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14 JFM ANNUAL REPORT 2023  

露草色

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15

小鴨色

JFM ANNUAL REPORT 2023

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Review and Plan
Review of Operations for Fiscal 2022

1 Lending Operations
In fiscal 2022, JFM provided loans totaling USD 11.9
billion.
General account-related loans totaled USD 4.9 billion(41%) of the total lending volume, mainly represented bydisaster management and mitigation and special municipal mergers. Loans for temporary financial countermeasures funding* were USD 2.1 billion (18%), and loans formunicipal enterprise-related loans were USD 4.9 billion(41%), of which sewerage and water supply businesses
were the main contributors.

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

Lending Operations by Business Type in Fiscal 2022
Business

Number of Loans
Made

Loan Amount (USD Millions)% of total

General Account-related Loans
Public Projects

605

325

2.7%

Public Housing

110

82

0.7%

Educational Facilities Development

243

116

1.0%

Social Welfare Facilities Development

180

54

0.5%

General Waste Dispoal

70

61

0.5%

General Service Facilities Development

8

3

0.0%

General Projects

62

40

0.3%

Regional Revitalization

204

94

0.8%

Disaster Prevention

352

87

0.7%

Local Road Development

347

170

1.4%

Special Municipal Mergers

450

593

5.0%

Disaster Management and Mitigation

1,7 1 5

920

7. 7%

Proper Management of Public Facilities

776

963

8.1%

National Disaster Prevention

1,395

939

7.9%

8

0

0.0%

Remote Place Improvement Projects
Depopulation Measures
Subtotal

932

464

3.9%

7,457

4,912

41.3%

1,433

1,366

11.5%

Municipal Enterprise–related Loans
Water Supply
Industrial Water Supply

50

48

0.4%

Transportation

44

300

2.5%

Electricity and Gas Supply

31

37

0.3%

Port Facilities

25

17

0.1 %

Hospitals and Elderly Care Services

523

778

6.5%

Markets and Slaughterhouses
Sewerage
Tourism and Others

27

52

0.4%

2,736

2,246

18.9%

13

20

0.2%

4,882

4,863

40.9%

Temporary Financial Countermeasures Funding355

2 ,126

1 7.9%

Loans Covering Decrease in Local Tax Revenues

-

-

0.0%

12,694

11,901100.0%

Subtotal

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

16 JFM ANNUAL REPORT 2023

露草色

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17

小鴨色

JFM ANNUAL REPORT 2023

Review and Plan
Review of Operations for Fiscal 2022

2 Funding Operations
1. Overview *1
In fiscal 2022, JFM raised a total of USD 13.4 billion,
which includes USD 12.5 billion in JFM bonds (non-government guaranteed) and USD 1.0 billion through longterm bank loans. With regard to JFM bonds, a total of USD
8.5 billion was raised by the regular issuance of 5-year,
10-year, 20-year and 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 6.5 billion was issued in the fiscal year. In order to cope withhighly volatile market conditions through the period, JFM
increased 5-year, 10-year and 20-year of the regular issuance and FLIP from the initial plan by utilizing the budgetof the Open Issuance scheme.
In overseas offerings, JFM issued EUR denominatedbenchmark bonds in 5-year tenor (EUR 1.25 billion) in
September 2022 and its fourth green bond in EUR 5-year

tenor (EUR 500 million) in February 2023. In addition tothese successful public offerings, JFM issued a total of
USD 77 million equivalent *3 Private Placements and USD
107 million equivalent *3 Uridashi Bonds. Through these
activities, the total volume of international bonds issued
for fiscal 2022 amounted to USD 2.0 billion.
Private placements with pension funds for local government officials totaled USD 4.0 billion.
As a result, JFM’s outstanding bonds were USD 147.0
billion and outstanding long-term bank loans totaled
USD 3.9 billion as of 31 March 2023.
Notes: 1. Issued amounts are calculated based on issue prices.
2. Issued amounts of JPY denominated bonds are converted at theexchange rate at the end of fiscal 2022 and those of Non JPY
denominated bonds are calculated at the timing of pricing.
3. Totals may not add up due to rounding.
Flexible 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 the
FLIP in a minimum issue amount of JPY 3 billion (USD 22.5 million), withflexibility in terms of issue amount and maturity to meet the needs of investors.

Funding in Fiscal 2022
1. JFM Bonds (Non-government Guaranteed)(2) P rivate Placements with Pension Funds for Local
Government Officials(1) Domestic and Overseas Offerings
Type of Bond

Plan (Initial)

Achieved

Type of Bond

Plan

Achieved

Domestic Public Offerings

USD 4.9 bn

USD 6.5 bn

10-year

USD 1.9 bn

USD 1.9 bn

10-year

USD 2.0 bn

USD 2.3 bn

20-year

USD 2.1 bn

USD 2.1 bn

20-year

USD 0.7 bn

USD 1.0 bn

Total

USD 4.0 bn

USD 4.0 bn

5-year

USD 0.1 bn

USD 0.2 bn

30-year

USD 0.1 bn

USD 0.1 bn

Opportunistic Issuance*1

USD 1.8 bn

USD 2.8 bn

Overseas Offerings - MTN

USD 2.2 bn

USD 2.0 bn

Open Issuance

USD 1.8 bn

-

Total

USD 9.0 bn

USD 8.5 bn

Plan

Achieved

USD 0.6 bn

USD 1.0 bn

2. Long-term Bank Loans

Long-term Bank Loans

Notes: 1. D etails of issuance such as tenor, issue size and issue market will be determined as necessary based on the lending status, market conditions andother factors.
2. Totals may not add up due to rounding.

18 JFM ANNUAL REPORT 2023

露草色

In the domestic market, JFM bonds have been priced
under interest rates rise environment. The premium of
JFM 10-year domestic bonds over Japanese government
bond (JGB) was 6 bp until June but it became wider and it
reached 29bp in December under volatile market
conditions. After the peak, the bonds were priced at 25

(bps)

(%)

30.0

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

1.20

29.0
27.0
25.0

25.0

20.0

20.0

25.0

0.804

20.0

1.00

0.80

0.60

15.0
12.0

0.554
0.449 0.449

10.0
8.0

7.0

0.274
6.0

6.0

6.0

6.0

6.0

6.0

6.0

6.0
6.0

0.185

Apr

0.160

Mar

0.130

Jun

0.090 0.100

Jul

0.115

Aug Sep

0.155

Oct

0.204

6.0

0.304 0.299

0.314

6.0

6.0

6.0

0.40

0.384

0.364
0.295

0.20

0.229

0.135 0.130

Nov DecJan

Feb MarF Y2021

Apr

Mar

Jun

Jul

Aug Sep

Oct

Nov DecJan

Feb Mar

0.00

F Y2022

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


  

5.0

0.0

12.0




0.740 0.750

13.0

Issue Conditions of JFM 10-Year Domestic Bonds   

spreads over JGB in February and March 2023. The
spreads over JGB of other tenors of JFM domestic bonds
became wider during fiscal 2022, but they were same as
municipal bonds.
JFM’s international bonds have been issued based oninvestor demands and market conditions by referring tocredit spreads observed in the international primary andsecondary markets at the time of pricing.

Issue Spreads

19

小鴨色

JFM ANNUAL REPORT 2023

Review and Plan
Review of Operations for Fiscal 2022

3 Financial Review
1. Income Statement

2. Balance Sheet

In fiscal 2022, JFM’s income was USD 1.6 billion, adecrease of USD 0.1 billion from the previous year. Thisdecrease was mainly due to a decrease in interest income
caused by a decrease in the average interest rate on loans
as a result of redemptions of loans made in the past withrelatively high interest rates. Expenses also decreased by
USD 0.1 billion from the previous year, totaling USD 0.9
billion. As a result ordinary income decreased by USD 0.1
billion from the previous year, totaling USD 0.8 billion.
Pursuant to the relevant laws, a portion of the revenue
generated by the refinancing of bonds and borrowed
money of JFM* is to be directed into the reserves forinterest rate volatility. As a result of such provisions aswell as other factors, net income remains similar level tothe previous year at USD 0.3 billion.

As of 31 March 2023, JFM’s total assets amounted to
USD 184.0 billion, a decrease of USD 2.1 billion from theprevious year. This mainly resulted from a decrease inloans by USD 1.9 billion.
Total liabilities decreased by USD 2.3 billion, totaling
USD 181.0 billion. This decrease primarily reflected adecrease of USD 3.6 billion in bonds.
Total net assets were USD 3.0 billion, up USD 0.2 billion.
This mainly reflected net income of USD 0.3 billion in thegeneral account being recorded as the general accountsurplus reserve.
Financial highlights since fiscal 2020 are on the next
page.

Note: T he difference between fiscal 2021 and 2022 is calculated using theexchange rate as of 31 March 2023.
*This revenue is calculated based on the difference between JFM’s funding
rates at the time the loans were made and the current refinancing rates.

20 JFM ANNUAL REPORT 2023

露草色

1. Income Statement(USD Millions)

FY2020

2021

2022

YoY

Income1, 947

1,767

1,633

-134

Expenses

1,061

94 1

871

-70

Ordinary Income

886

826

762

-64

Net Income

205

242

270

29

   

Financial Highlights














2. Balance Sheet(USD Millions)

End of FY2020

End of FY2021

End of FY2022

Total Assets

186,227

186,057

183,970-2,087Loans

173,392

1 76,437

1 74,559- 1 ,878

Others12,8359,620

9,4 1 1

-209

Total Liabilities

183,675

183,299

181,019-2,280Bonds

1 52,913

150,607

147,037- 3,570

2,203

2,993

3,944

951

25 1

1 ,105

1,281

177

Fund for lending rate reduction

6,895

6,895

6,921

27

Reserves under special laws

2 1 ,379

21,664

21,782

119

Reserve for interest rate volatility

16,482

16,482

16,482-

Management account reserve for interest rate
volatility

4,802

5,1 1 4

5,256

14 2

95

68

45

-23

Others

36

36

52

16

Total Net Assets

2,552

2,758

2,95 1

1 94

Cash collateral received for financial instruments






  

Reserve for interest rate reduction

YoY
  

Borrowed money


Note: Totals may not add up due to rounding.



Note: Totals may not add up due to rounding.

21

小鴨色

JFM ANNUAL REPORT 2023

Review and Plan
Management Plan for Fiscal 2023

1 Lending Operations
Borrowing Programme (the LGBP).
Based on the LGBP, JFM plans to extend loans in theamount of USD 11.5 billion in fiscal 2023, USD 1.0 billion or
7.8% decrease from fiscal 2022.

JFM’s lending plan is formulated based on the amountof local government borrowing for which the consent orapproval is scheduled to be given by the Minister forInternal Affairs and Communications or the respective
prefectural governors, under the Local Government

Lending Plan
Planned AmountFY2023

FY2022

YoY

USD 11.5 bn

USD 12.5 bn-7.8%

Lending Plan by Business Type for Fiscal 2023

(USD Millions)

FY2023Funding Plan(A)FY2022
Funding Plan(B)Difference(A)-(B)=(C)Change (%)(C)/(B)×100

The amount of JFM
Funds in the LGBP

Public Projects

294.4

239.7

54.7

22.8

266.0

Public Housing

9 1.4

83.9

7.5

8.9

92. 1

Educational Facilities Development

1 79. 148.7

1 30.4

267.7

124.4
66.7

Business
General Account-related Loans

Social Welfare Facilities Development

66.7

59.9

6.7

1 1 .3General Waste Dispoal

83.9

42.7

41 .2

96.5

98.1

General Projects

45.7

44.2

1 .5

3.4

62.9

Regional Revitalization

74.2

63.7

10.5

16.5

63.7

Disaster Prevention

74.9

86.2

-1 1 .2-13.0

1 01 .9
223.3

Local Road Development

1 91 .8

168.6

23.2

13.8

Special Municipal Mergers

6 1 8.1

631 .6-1 3.5

-2. 1

516.2

Disaster Management and Mitigation

902.0

962.7

-60.7

-6.3

1 ,257. 1

Proper Management of Public Facilities

1, 294.6

1,262.4

797.9

464.5

58.2

National Disaster Prevention

767.9

720.0

47.9

6.7

754.4

Decarbonization Promotion Projects

12.7

-

1 2.7

All increased

269.7

Remote Place Improvement Projects

13.5

1 2.0

1 .5

1 2.5

1 9.5

Depopulation Measures

506.4

491 .5

1 5.0

3.0

696.7

5,185.0

4,453. 1

731 .916.4

5,907.3
1,502. 1

Subtotal
Municipal Enterprise–related Loans

1,431.7

1,513.3-8 1 .7-5.4

Industrial Water Supply

Water Supply

55.4

59.2

-3 .7

-6.3

49.4

Transportation

2 1 8.8

242.7

-24.0

-9.9

203.0

Electricity and Gas Supply

5 1 .7

50.2

1 .5

3.0

54.7

Port Facilities

18.7

1 8.0

0.7

4.2

1 7.2

Hospitals and Elderly Care Services

797. 1

829.3

-32.2

-3.9

950.0

Markets and Slaughterhouses
Sewerage
Tourism and Others
Subtotal
Temporary Financial Countermeasures Funding
Total

53.9

58.4

-4.5

-7.7

15.7

2,425. 1

2,399.6

25.5

1 .1

2,613.9

7.5

1 5 .0

-7.5

-50.0

3.7

5,059.9

5,185.8-125.9-2.4

5,409.8

1,292.3

2,872.3-1 ,580.0

-55.0

983.7

1 1,537.3

1 2,5 1 1.2-973.9- 7.8

12,300.7

Notes: 1 . Business names are classified based on the LGBP for fiscal 2023.
2. Totals may not add up due to rounding.

JFM Funds in Local Government Borrowing Programme
FY2023
JFM Funds

FY2022

YoY

USD 12.3 bn

USD 13. 1 bn

General Account-related Loans

USD 5 .9 bn

USD 5 .8 bn

-6.0%
1 .5%

Municipal Enterprise-related Loans

USD 5 .4 bn

USD 5 .5 bn- 1 .7%

Temporary Financial Countermeasures Funding

USD 1 .0 bn

USD 1 .8 bn-44.1 %

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 64 for more information on JFM funds in the LGBP.
3. Totals may not add up due to rounding.

22 JFM ANNUAL REPORT 2023

露草色

In order to raise funds for lending operations, JFM
primarily issues non-government guaranteed bonds
through domestic public offerings and overseas offerings.
For fiscal 2023, JFM plans to issue USD 8.6 billion of JFM
bonds through these methods.
Moreover, private placements with pension funds for

local government officials are projected to amount to
USD 4.0 billion in fiscal 2023. In addition to issuing JFM
bonds, JFM plans to raise USD 0.6 billion through longterm bank loans.
As for government-guaranteed bonds, JFM Plans to
issue USD 0.6 billion during fiscal 2023.

1. JFM Bonds (Non-government Guaranteed)(1) Domestic and Overseas Offerings
Types of Bond
Domestic Public Offerings

FY2023 (Plan)

FY2022 (Achieved)

USD 4.8 bn

USD 6.5 bn

USD 2.0 bn

USD 2.3 bn

20-year

USD 0.8 bn

USD 1 .0 bn

5-year

USD 0.1 bn

USD 0.2 bn

30-year

USD 0.1 bn

USD 0.1 bn

Opportunistic Issuance

USD 1 .6 bn

USD 2.8 bn

Overseas Offerings - MTN

USD 2.2 bn

USD 2.0 bn

Open Issuance

USD 1 .5 bn-

USD 8.6 bn

USD 8.5 bn

Total

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.
3. Totals may not add up due to rounding.

Types of Bond

FY2022 (Achieved)

USD 1 .9 bn

USD 1 .9 bn

20-year

USD 2.1 bn

USD 2.1 bn

USD 4.0 bn

USD 4.0 bn

FY2023 (Plan)

FY2022 (Achieved)

USD 0.6 bn

USD 1.0 bn

FY2023 (Plan)

FY2022 (Achieved)

USD 0.6 bn-

USD 0.6 bn

-

Total

2. Long-term Bank Loans
Long-term Bank Loans

3. Government-guaranteed Domestic Bonds
Types of Bond
4 -yearTotal

3 Scheduled Payment to the National Treasury
Tax, which promotes forest maintenance over a periodof five years from fiscal 2020 through fiscal 2024
• Up to USD 11.2 million for securing funds of the TrustFund Bureau for exemptions of early redemption
charges in relation to concessions of water supply andsewerage business over a period of six years from fiscal
2018 through 2023

23

小鴨色

JFM ANNUAL REPORT 2023

In accordance with the Supplementary Provisions of
the Law, a portion of the JFM’s management accountreserve for interest rate volatility is to be transferred to theJapanese national government as below.
• USD 0.7 billion for securing funds for local allocation tax
for fiscal 2023
• Up to USD 1.7 billion due to the increase in concession
amount charged for Forest Environment Concession

FY2023 (Plan)

1 0-year
  

(2) Private Placements with Pension Funds for Local Government Officials


10-year

Funding Plan for Fiscal 2023

   

2 Funding Operations

茜色

 
4
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茜色

薄浅葱

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25

薄 浅葱

JFM ANNUAL REPORT 2023�������������������    
             

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

1 Outline
As public funds included in the LGBP, JFM loans areoffered to local governments which have the consent orapproval of the Minister for Internal Affairs andCommunications or the respective prefectural governors.

1. Eligible Borrowers

2. Types of Loans

JFM provides loans exclusively to local governments.

JFM classifies general loans into the following two
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.

26 JFM ANNUAL REPORT 2023

茜色

JFM lends mainly to the following local government businesses with respective loan maturities.
Loans for FY 2023
Business Type

Adjustable Lending Rate*1

Within(Years)
25

Within(Years)
5

Within(Years)
25

Within(Years)
5

Public Housing

25

5

25

5

Educational Facilities Development

25

3

25

3

Social Welfare Facilities Development

25

3

25

3

General Waste Dispoal

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 Natuaral Disaster Prevention

30

5

30

5

Decarbonization Promotion Projects

30

5

30

5

Remote Place Improvement Projects*2

30

5

40

5

Depopulation Measures*2

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

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

Unsubsidized
Projects

Municipal
Enterprise-related
Loans

*2

Temporary Financial
Countermeasures
Funding

Notes: 1 . A djustable 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.

27

薄 浅葱

JFM ANNUAL REPORT 2023

Public Projects*2

Grace Period
for Principal
Repayment
  

Maturity


Grace Period
for Principal
Repayment

Maturity

Educational andSocial Welfare
Facilities Projects
General Account-related Loans

Fixed Lending Rate   

3. Lending Scopes and Maturities of LoansOperations
Lending Operations

2 Loan Interest Rates
JFM sets standard lending rates, which are determined
to balance its funding cost, and also offers special lending

1. Loan Interest Rates
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, this rate is determined in a manner in which
the discounted present value of the cash flows of thefunds raised to make the loans equals the discounted
present value of the cash flows to be generated by thoseloans with their respective terms to maturity, grace

rates at a discount to the standard rates by making use of
its Fund for Lending Rate Reduction.

period for principal repayment and repayment methods.
The special lending rate is set at 0.35% per annum below
the standard rate.
The trends of JFM loan interest rates since April 2020are shown below. The special lending rate has been at thesame level as the national government’s lending rates thatare applicable to loans for specific public projects (theFiscal Loan Fund). This is due to the floor rates of thespecial 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.







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 

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




















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

28 JFM ANNUAL REPORT 2023

 


茜色

The interest rate differentials between the special
lending rates and the standard lending rates are coveredby investment gains in the Fund for Lending Rate

Reduction. The fund is comprised of a portion of proceedsthat local governments earn from municipally operated
racing in accordance with the Local Government Finance
Law, and also JFM’s own funds.



 

 

  



 ­  
    




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).







 ­
   
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 ­­
    

2. Lending Rate Reduction
  


29

薄 浅葱

JFM ANNUAL REPORT 2023

Operations
Lending Operations

3 Credit Check System
JFM conducts the following credit check process for allloans on the assumption that the details and legality ofeach project as well as assurance of loan repayment havebeen confirmed during the consultation and checking
process to obtain consent or approval for loans.

2) J FM 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 assemblyand budget appropriation for loans.

1) JFM checks the financial and operational status of local
governments and municipal enterprises to which itplans 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 theoperational status of the project and the financial andoperational status of the borrower.

2 Verification at the time

1 Check of localof lending
Check of the loan
application documents

governments/municipal
enterprises applying
for loans• Verify the consent or approval
for the loan amount• Check the loan application
documents• Check financial andoperational status• Conduct interviews

3 Subsequent review

Onsite credit review

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

4 Trends in Lending Operations
1. Overview
Annual lending volume has been hovering around

USD 10 to 15 billion, except for fiscal 2021 when thevolume jumped due to the COVID-19 pandemic. At the endof fiscal 2022, outstanding loans were USD 174.6 billion.



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 

30 JFM ANNUAL REPORT 2023

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茜色

In fiscal 2022, the loan amount of sewerage was USD
2.2 billion, accounting for the largest share of lending, at

18.9% of the total. This was followed by USD 2.1 billion for
temporary financial countermeasures funding and USD
1.4 billion for water supply, representing 17.9% and 11.5%
respectively.

   

2. Annual Lending Volume by Businessand Borrower  


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Note: Totals may not add up due to rounding.

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
31

薄 浅葱

JFM ANNUAL REPORT 2023

Operations
Lending Operations

3. O utstanding Loans by Business andBorrower
At the end of fiscal 2022, the outstanding loans were
USD 174.6 billion, of which the sewerage businessaccounted for the largest share at 28.5%, followed bytemporary financial countermeasures funding at 25.6%
and water supply at 12.8%.

There was a total of 2,167 local governments, local
government corporations and associations withoutstanding JFM loans, including all prefectures. Cities,
special wards of Tokyo, towns and villages accounted forthe largest portion at 62.9% of the total, followed by
prefectures at 22.0% and government-designated cities
at 12.7%. Local government associations and corporations
represented the remaining 2.4%.

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 


       


 
 


 

 







   

 



  

    
 
 





        
 
 
     ­  

   
  





32 JFM ANNUAL REPORT 2023

茜色

Water Supply BusinessTransportation BusinessAt the end of fiscal 2021, the water supply coverage
was 97.5% of the population. The water supply business(including small-scale water supply) operated by local
governments totaled 1,787 projects and provided about
13.4 billion cubic meters of water annually for approximately 123.3 million people.
In fiscal 2022, loans extended to the water supply business amounted to USD 1.4 billion.

At the end of fiscal 2021, the transportation projects
managed by local governments totaled 85 projects andpublic transportation is used by approximately 2.6 billion
people annually (7.2 million people on an average daily
basis).
In fiscal 2022, loans extended to the transportation
business amounted to USD 0.3 billion.

Kaneda Raw Water Reservoir (Kisarazu City, Chiba Prefecture)

Kumamoto City 0800 Series Low Floor Tram (Kumamoto City, Kumamoto Prefecture)

  

 














 







  






formulates each fiscal year.
The major JFM-funded businesses are as follows.



JFM provides loans to local government businesses
specified in the LGBP that the national government   

5 Lending Operations by Business









 









33

薄 浅葱

JFM ANNUAL REPORT 2023



Operations
Lending Operations

Hospital BusinessSewerage BusinessAt the end of fiscal 2021, hospital projects managed by
local governments totaled 681 with 853 hospitals, which
included 813 general hospitals and 40 mental hospitals.
In fiscal 2022, loans extended to the hospital business(including those run by local independent administrative
institutions) totaled USD 0.8 billion.

At the end of fiscal 2021, the sewerage systemcovered 92.6% of the nation’s total population. There
were 3,605 projects involved, with a total annual
sewerage processing capacity (combined storm waterand sewerage treatment, excluding river basin sewerage)of around 15.2 billion cubic meters serving areas with apopulation of nearly 105.1 million people.
In fiscal 2022, loans extended to the seweragebusiness totaled USD 2.2 billion.

Atsugi City Hospital (Atsugi City, Kanagawa Prefecture)

Sewage Purification Center (Shiojiri City, Nagano Prefecture)

   







    
 




   




  













 

34 JFM ANNUAL REPORT 2023











 









茜色

Disaster management and mitigation represents projects to support and build strong disaster-resistant cities
and towns by extending loans to facilities that can gather
information promptly in case of emergent situations andother projects that can increase disaster prevention capability.
In fiscal 2022, loans extended for disaster management
and mitigation amounted to USD 0.9 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 andinterest of funds borrowed by local governments under
temporary financial countermeasures funding, thenational government includes the entire amount of suchpayments in the total amount of local allocation tax
grants, which are to be allocated to local governments
in subsequent years.
In fiscal 2022, loans extended for temporary financial
countermeasures funding amounted to USD 2.1 billion.



Temporary Financial Countermeasures
Funding   Disaster Management and Mitigation






 


  



   




  












  

 























 







 












35

薄 浅葱

JFM ANNUAL REPORT 2023

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.

1 Issue Typerefinancing the existing government-guaranteed bondsof the Predecessor in order to manage the Predecessor’s
assets to which JFM has succeeded.
In addition to issuing bonds, JFM raises money fromlong-term bank loans as a supplemental source foroverall funding operations.

JFM primarily issues non-government guaranteedbonds (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 as a means of fund-raising.
JFM issues government-guaranteed bonds only for

 

                        
  ­                                  

           

 





 

       

  

          

2 Basic Funding Policy
To secure stable funding at fair value, JFM pursues
diversified funding options and strives to build confidence
in capital markets by proactively disclosing informationand thoroughly fulfilling responsibilities. JFM alsoendeavors to seek more flexible funding operations thanever in response to volatile market conditions and shift ininvestor demands on the back of the change ofmonetary policy of major central banks.

1. Diversification of Funding Methods
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

36 JFM ANNUAL REPORT 2023

response to the market environment and market needs, inorder to broaden 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 aswell as long-term bank loans. JFM also utilizes the MTN
Programme, being committed to the regular issuance ofbenchmark bonds to the international investors and
Uridashi bonds to Japanese retail investors. In
addition to that, JFM is going to issue private placement
bonds in a flexible manner.

茜色

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 becommitted to contributing to the sound development of
capital markets.



JFM proactively discloses information on its operations,financial conditions and risk management status in orderto support investment decisions by investors. In thiscontext, 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 understandJFM’s management and bonds as well as strengthensmarket confidence toward JFM.
Since fiscal 2019, JFM has issued green bonds
financing sewerage projects managed by local
governments.

   

2. Proactive Disclosure and Investor
Relations

3 Features of JFM Bonds
JFM bonds are generally recognized as having high credit standing with the following features.

• 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.

•U
 nder 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.



   
(As of 31 March 2023)


     
      
    

­     ­    ­       ­  ­   ­ ­    ­   ­     ­  
   ­ ­ ­Note: T he 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 2023).

37

薄 浅葱

JFM ANNUAL REPORT 2023

   
 

interest received by foreign investors (non-residents,
foreign corporations, etc.) on JFM’s domestic bonds inbook-entry form as well as JFM’s international bonds(both of which include government-guaranteed bonds)
shall be exempted from Japanese income tax, subject tocertain procedural requirements.



JFM has received the highest credit rating among theJapanese public-sector bond issuers from Standard andPoor’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,
  

• J FM 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.




• 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.

Operations
Funding Operations

4 Trends in Funding Operations
JFM issues JFM bonds (non-government guaranteedbonds to be issued through domestic public offerings orunder the MTN Programme, or private placements withpension funds for local government officials) and government-guaranteed bonds for the purpose of refinancing
existing government-guaranteed bonds of the Predecessor. In addition, long-term bank loans are also importantfor JFM’s funding operations.
In fiscal 2022, JFM raised a total of USD 13.4 billion,
decreased from the previous year. This was mainly the result of a decrease in the amount of non-government guaranteed bonds and no issuance of government-guaranteed bonds.

As of 31 March 2023, outstanding bonds were USD 147.1
billion. Outstanding long-term bank loans totaled USD
3.9 billion. The total amount of outstanding bonds andlong-term bank loans was USD 151.0 billion, which wascomprised of USD 121.2 billion in the general account and
USD 29.8 billion in the management account. Since theend of fiscal 2016, the volume of outstanding debt in thegeneral account exceeds that of the management accountas a result of the trend that the management account has
been decreasing while the general account has been
increasing.
Note: The figures related to outstanding volume are based on face value.



   

































































































­

­     

 

                 

Note: Totals may not add up due to rounding.

38 JFM ANNUAL REPORT 2023



茜色

Operations
Support for Local Governments

Basic Stancegovernments will lead to the maintenance of JFM’s creditworthiness and the enhancement of its management
base.
In addition, JFM will conduct high-quality research andstudies on various fiscal issues, to utilize the findings andresults of advanced cases for personnel training supportand information dissemination, which will lead to the resolution of issues faced by local governments. In such away, the three pillars of “research and studies,” “personnel
training support,” and “information dissemination” will beorganically linked.




Three Pillars of Support for Local Governments


  
 


     
  


    

JFM will continue to provide comprehensive support
for local governments to ensure and improve the fiscal
soundness of local governments. JFM will do so in response
to, as well as in anticipation of, changes in social conditions, such as the demographic structure, and changes in
the policy needs of local governments, such as aging
infrastructure.
When implementing support for local governments,
JFM will take a broad, medium- to long-term perspective,
while taking into consideration that efforts to ensure andimprove the soundness of the fiscal management of local   

JFM will, according to the needs of local governments, conduct the necessary research on and give support for issues
related to the overall fiscal management of local governments, such as securing fiscal soundness and financing, and will
strive to meet their wide range of expectations as a good adviser to local governments.


39

薄 浅葱

JFM ANNUAL REPORT 2023

Operations
Support for Local Governments
      
   




 


       
 

   



 
   
  
 

 


  
      



  
   


 




  
   


      

40 JFM ANNUAL REPORT 2023

茜色  
     


 


 

           


 


   
   
  

  

   
        


 

   





       ­
   

 

­ 
    


    
   ­       


 
  
 
 

 ­

41

薄 浅葱

JFM ANNUAL REPORT 2023 




  
  







               



    

  

色涅
  44

         
42 JFM ANNUAL REPORT 2023

 



涅色

涅色

  


 
藁色

涅色






���������������������������������������������������������
��������������������������������������������������������������
��������������������������������������������������������������������������������������������������������������
������������������������������������������������������������������������������������������������������������

 

 ­­
    ­
  

藁色


   涅色
 
藁色

­
藁色涅色 
藁色涅色藁色涅色 
藁色涅色

       
  
         藁色

     
                          

43

藁色

JFM ANNUAL REPORT 2023

            
                      

Management Structure
Outline1 Outline of JFM Operations
 




 ­   
 
­
 




  ­

­
  

As of 31 March 2023

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; theJFM Law).
JFM loans are provided exclusively to local governments,and local governments must, in principle, receive consent
or approval of the Minister for Internal Affairs andCommunications or their respective prefectural
governors when they borrow from JFM. Within thisstructure, JFM has never had a default since its
establishment.

Joint Funding Organization for All Local
Governments
JFM contributes to the sound financial operation of

44 JFM ANNUAL REPORT 2023

   

     


  
        

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
usually desirable, given that it takes a long time to recoup
such capital expenditures, and also the cost burden
should be shared across generations. However, local
governments generally raise funds in capital markets
for terms of 10 years or less.
In response to this situation, JFM issues bonds incapital 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, 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.

藁色

JFM primarily issues 10-year bonds to raise funds andextends 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 theinterest 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 speedboat)
operated by local governments, which is directed to theFund for Lending Rate Reduction. The investment gains
from the fund are used for lowering interest rates on JFM
loans.

As of 31 March 2023, USD 124.4 million of JFM's capital
was contributed by 1,789 Japanese local governments(i.e., all of the prefectures, cities, special wards of Tokyo,
government-designated cities, towns and villages, as well
as some local government associations).
The amount of capital contribution from each local

government is decided based on 1) outstanding JFM
loans to each local government, and 2) the amount ofrevenue of each local government (mainly comprised of
local taxes, local allocation taxes and temporary financial
countermeasures funding).




 
 
­ 



 



2 Capital   

Solid Financial Foundation 




  







Notes: 1. E xcludes government-designated cities.
2. Government-designated cities:
Cities with populations of 500,000 or more designated in accordance with Paragraph 1, Article 252-19 of the Local Autonomy Act. Such governmentdesignated 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.
3. Totals may not add up due to rounding.


  




45

涅色

JFM ANNUAL REPORT 2023

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.

1 Corporate Governance


 
      


 

         
   



  
 


    



  ­­

 







  




    
   

1. Representative Board

2. Supervisory Committee

As an organization autonomously managed by local
governments, JFM has a Representative Board as its
supreme decision-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 makedecisions on important matters related to the overallmanagement of JFM, including budgets, settlement of accounts and business plans and to appoint and dismiss
the President and CEO as well as Corporate Auditors. As
its supervisory function, the Board is also authorized toobtain from the President and CEO information relating to
JFM's operations and financial condition, and to orderthe President and CEO to take corrective actions withrespect to any illegal or other inappropriate activities.

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 comprisedof external experts
The Representative Board appoints the members of theSupervisory Committee from among experts in local administration, economics, finance, law or accounting, andother 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
and CEO must respect and report the Committee’s opinions to the Representative Board.

46 JFM ANNUAL REPORT 2023

藁色

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

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.

2 Internal Control over Financial Reporting
financial statements.
As for the Internal Control Report in which JFM viewed
its internal controls on financial reporting as effective asof the end of fiscal 2022, the accounting auditors gave
their opinion (unqualified audit opinion pursuant toMinisterial Ordinance Article 32, Paragraph 2, Clause 1)
that, in all material respects, evaluation results of
JFM’s internal controls over financial reporting were inconformity with the standards of evaluation for internal
controls over financial reporting generally accepted inJapan.

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 andreports the results to the President and CEO as necessary.


 

An internal auditor, who is independent from otherdepartments, divisions and offices, examines andassesses the appropriateness 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 areport to the President and CEO.


  

3 Internal Audit


Pursuant to the Ministerial Ordinance on Financeand 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 and Exchange Law in Japan. In
accordance with the system, JFM prepares the Internal
Control Report to evaluate the effectiveness of internal
control over financial reporting to ensure the reliability of
its financial statements, the base date of which is the endof the fiscal year (31 March), and it is audited by theaccounting auditors and released together with the

4. Audits by External Accounting Auditors   

3. Audits by Corporate Auditors



     
  


 47

涅色

JFM ANNUAL REPORT 2023

Management Structure
Corporate Governance




 



    



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

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


 
   
 

­

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


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  

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

­




   


 
  
 
       ­

­

­ 

  




   
 
  
 48 JFM ANNUAL REPORT 2023

藁色

    

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  

­ 

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
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­  


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 

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  


49

涅色

JFM ANNUAL REPORT 2023

Management Structure
General Account and Management AccountJapan Finance Organization for Municipal Enterprises
was established on 1 August 2008, with capital contributedby 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 thePredecessor on 1 October 2008.
As a result of the reorganization on 1 June 2009, JFM’slending scope was extended to overall general account 

related loans.
Under the JFM Law, JFM is required to manage loans andbonds issued since JFM began its operations in the generalaccount of JFM, whereas loans and operations carried overfrom 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 thePredecessor.

 

 


   
   
      ­
  



     

           

When JFM was founded, it succeeded to the Reservefor Losses on the Refinancing of Bonds in the amount ofapproximately JPY 3.4 trillion (USD 26.0 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 16.5 billion) needed toensure the future continuity of JFM’s operations was    
     

 
   ­  
 
  



      

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 shallbe returned to the national treasury.
Even before the management account is closed, in theevent 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

50 JFM ANNUAL REPORT 2023

transferred to the general account in equal installments
over 10 years, with the remainder, which is expected toremain in the management account to ensure a sufficientfinancial foundation to appropriately manage thePredecessor’s bonds and loans and prepare for the risk
with refinancing bonds of the Predecessor.

    
  ­ 
    ­ 

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 governmentand such portion has been allocated to the nationaltreasury, mainly for the purpose of securing funds for local
allocation tax and forest environment transfer tax increase.

藁色Management Structure
Risk Management

1. Risk Management System
JFM adopts an integrated risk management approachto respond to various risks, while pursuing a higher levelof risk 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 appropriatelyreflected in management decisions.





   



 


 




 

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 bondrefinancing as its major risk (the risk of the negative
margin caused by the interest payable exceeding theinterest receivable).
To address such interest rate risk, JFM maintains  
 

reserves for interest rate fluctuations (the Reserve forInterest Rate Volatility) and has set up the ALM Committee
to comprehensively analyze and manage JFM’s assets andliabilities in a timely and appropriate manner.
The ALM Committee conducts medium-term andlong-term management and risk analysis throughscenario analysis, VaR analysis, duration analysis, andother analyses. JFM reflects the findings in its bondissuance plans and other aspects of management andendeavors to lower interest rate risk.


  

2. Characteristics of JFM’s Risks


   


    

1 Overall Risk Management

51

涅色

JFM ANNUAL REPORT 2023

Management Structure
Risk Management

2 Management of Specific Risks
1. Credit Risk
Credit risk is the risk of loss arising from a credit
event, such as deterioration in the financial conditionof a borrower, which causes an asset to lose value or
become worthless. In addition to credit risk associatedwith loans, market transactions also involve creditrisk.

1) Credit risk on loans
The JFM extends loans exclusively to local governments. Local governments have a zero Basel Committeeon 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
or financial deficits exceed a certain level must apply for approval to issue bonds or obtain loans, so that thecredit standing of local government bonds and loans is maintained.
• Under the Law Relating to the Financial Soundness of Local Governments (No. 94, 2007), local governments
whose fiscal indicators exceed the early warning limits must make their own efforts toward achieving fiscal
soundness, and local governments whose fiscal indicators exceed the reconstruction limits must takenecessary 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 (No. 59, 1981) or the Financial Reconstruction Law (No. 132, 1998)
but performs self-assessment of loans in accordance with the JFM's internal rules in order to manage risks
appropriately.

As of 31 March 2023, JFM's total outstanding loans
stood at USD 174.6 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 0.04% in aggregate of totalloans outstanding as of 31 March 2023.
2) Credit risk on transactions
The JFM is exposed to the risk of loss arising fromcredit events, such as deterioration in the financial
condition of a counterparty, which causes an asset tolose value or become worthless. However, the JFM

52 JFM ANNUAL REPORT 2023

appropriately manages credit risk of this type by
constantly monitoring counterparties’ financial standing,taking measures including suspension of new deals andcancellation of transactions in case of a deterioration of
their credit standings. Moreover, the JFM limits
counterparties to financial institutions that achieve acertain credit rating and other criteria, and conducts
transactions within the credit lines for each counterparty
in order to diversify risks. In addition, the JFM enters into
ISDA (International Swaps and Derivatives Association)
Master Agreements and CSA (Credit Support Annex)
with all derivatives counterparties to reduce credit risk.

藁色Market risk is the risk of loss resulting from changes inthe value of assets and liabilities due to fluctuations in risk
factors such as interest rates, securities prices and foreignexchange 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 andprice change risk.

• Pipeline risk
The JFM is also exposed to pipeline risk, whereby
losses would be incurred or profits decreased as aresult of interest rate fluctuations during the time fromwhen the JFM raises money until the point at which
the money is loaned to local governments. The JFM,
in principle, uses swap transactions to hedge against
pipeline risk.



1 ) Interest rate risk
• Interest rate risk associated with bond and borrowed
money refinancing
The JFM makes loans to local governments. The
maximum term to maturity is 40 years, but the majorityof the funds for these loans are raised mainly throughissuance of 10-year bonds, which creates interest raterisk associated with bond refinancing. The JFM takes
the measures described below to address the interest
rate risk resulting from a duration gap between
lending and funding.

   

2. Market Risk

Managing interest rate risk associated with bond refinancing• 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
outstanding loans 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 offunding, 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 interest rate environment at the time and carefully
choosing maturities of bonds to be issued by utilizing its FLIP and Open Issuance scheme.


53

涅色

JFM ANNUAL REPORT 2023

• 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 the provisions of Article 14 of the Supplementary Provisions of theLaw, a portion of the JFM’s management account reserve for interest rate volatility is to be transferred to theJapanese national government. The following transfers are scheduled:(1) 100 billion yen for securing funds for local allocation tax for fiscal 2023
(2) U p to 230 billion yen due to the increase in concession amount charged for Forest Environment Concession
Tax, which promotes forest maintenance over a period of five years from fiscal 2020 through fiscal 2024; and(3) Up to 1.5 billion yen for securing funds of the Trust Fund Bureau for exemptions of early redemption charges
in relation to concessions of water supply and sewerage business over a period of six years from fiscal 2018
through 2023.
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.


  • 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 indicator for three years from fiscal 2023, in
which the duration gap is to be maintained below approximately two years.




• The JFM maintains necessary reserves to cope with the interest rate risk resulting from a duration gap between
lending and funding. At the end of fiscal 2022, the total amount of the reserves stood at USD 21.7 billion, which
consisted of USD 16.5 billion in the general account and USD 5.3 billion in the management account.

Management Structure
Risk Management   
 ­ 

     



 ­  
 ­  



   

 











                                   

     



 ­  
 ­  



    











 

                    +      ­                         

54 JFM ANNUAL REPORT 2023

藁色1 ) Administrative risk
Administrative risk is the risk of loss resulting from theneglect or inadequacy of attention by management andemployees to properly conduct administrative work, orfrom accidents and/or violation of laws caused by themin the course of the administrative work process. JFM
endeavors to mitigate its exposure to administrative riskby preparing operational manuals, holding educationalseminars and training sessions, and reducing operational
workload through systematization.

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



JFM has prepared the Contingency Plan to minimize
the scope of losses and the impact on operations andrestore normal operations promptly and efficiently in theevent that computer systems break down or cannot be
used due to unexpected incidents, disasters or
malfunctions. In addition, in order to prepare for acontingency, JFM has a backup server outside JFM so thatits business operations can be continued. Furthermore,
JFM has taken necessary countermeasures against
COVID-19 (e.g., deciding its business structure in termsof business continuity and the management andemployees’ health while considering the spread of
COVID-19).


  

5. Contingency Measures


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 or other difficult situations (market liquidityrisk).
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 secureliquidity 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.

Operational risk is the risk of loss resulting frominadequate operation processes, inadequate activities bymanagement and staff, and inadequate computer
systems, or from external events.



3. Liquidity Risk

4. Operational Risk

   

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


55

涅色

JFM ANNUAL REPORT 2023

Management Structure
Compliance

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

• Management and employees must be aware of JFM’s social responsibility and public mission and realize thata breach of laws or regulations would cause a great hindrance to JFM’s business operations, such as a loss incredibility of JFM as a whole. Management and staff must also observe laws and regulations and fulfill theirduties with integrity and fairness.
• Management and employees must strive to earn the trust of society by appropriately disclosing information on
JFM’s operations.

2 Compliance System
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 anddepartment heads serving as committee members.
The committee deliberates on important complianceissues, such as the formulation, revision and abolitionof compliance-related rules and regulations and the
preparation of guidelines and action plans for compliance.
JFM has also established a Compliance Division to
oversee compliance arrangements. This unit deploys
compliance-based initiatives (providing system guidance
and training or producing manuals) in keeping withthe committee’s guidelines.











   






56 JFM ANNUAL REPORT 2023

藁色

1. Code of Ethics and Anti-bribery

2. Prohibition of Harassment andDiscrimination

JFM will recognize its social responsibility and public
mission, and will take a firm stance against anti-social
forces that pose a threat to social order and security.
Anti-social forces will be eliminated in bidding procedures, etc.

JFM will proactively disclose information and be accountable for its business activities in order to promote
fair business based on the accurate understanding andcriticism of the public.

7. Appropriate Response to Violationsand Whistleblowing System
In accordance with the Compliance Rules, etc., JFM
has established a system to promptly respond to compliance violation cases and has taken strict measures suchas disciplinary action for violation, as well as organizational measures to prevent recurrence.
In addition, JFM has established a whistleblowing
system utilizing external lawyers in addition to reporting
within the organization.



4. Proactive Disclosureand Accountability Practices

Each year at JFM, the Compliance Committee will
formulate a compliance action plan based on the Compliance Rules. Based on the action plan, JFM will mainly
implement the following initiatives.
1 ) JFM
has provided training on the importance ofcompliance and its role within the organization, in accordance with the responsibilities of each officer andemployee, to ensure that organizational efforts are
firmly established.
2) JFM has established a system to be prepared for
misconduct by collecting examples of cases of
non-compliance and disseminating them to officers
and employees.
3) JFM will review the Compliance Manual in a timely
manner and respond appropriately to revisions of thelaws and regulations, etc.


  

3. Elimination of Relations with
Anti-social Forces

6. Implementation of Training to
Establish Compliance


JFM will prohibit and strive to prevent acts of harassment and discriminatory behavior in the workplace basedon Regulations on Prevention of Harassment, etc. andothers. The aim is to ensure a work environment where
officers and employees can fully exercise their abilities.
The officers and employees will act with full awareness ofappropriate words and actions, etc.
In addition to providing necessary training to officers
and employees, JFM will establish an organizational
structure against harassment, etc., such as a consultation
system, and strictly deal with cases of harassment, etc.

Officers and employees will maintain the confidentiality of information obtained in the course of their duties.



JFM has prohibited the receipt of gifts, etc. from interested parties to maintain ethics pertaining to the duties ofofficers and employees, in accordance with the Code of
Ethics for Officers and Employees. In such a way, JFM has
worked to prevent acts that may cause public suspicion
or distrust of the fairness of the execution of duties.

5. Maintenance of Professional
Confidentiality   

3 Actions
57

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JFM ANNUAL REPORT 2023

Management Structure
Human Capital

1 Basic Policy
JFM carries out its business in response to the diversifying needs of local governments and the changing
trends in financial markets. In order to respond to diverse
and advanced duties, it is necessary for employees fromdiverse backgrounds, including those who have worked
in other organizations, to share their knowledge andexperience and mutually enhance each other.

Based on JFM’s work environment development policy
and human resource development policy, JFM will promote human resource development appropriately, taking
into account the backgrounds and capabilities of each
employee, and ensure a work environment in which
diverse employees can play an active role.

2 Securing and Developing Diverse Human
Resources
JFM will provide a work environment where employees
who have worked for the national government, local
governments, private companies, etc., can mutuallyenhance their knowledge and experience. In addition,
JFM will provide a place where each employee, irrespective of gender, age, etc., can fully demonstrate
their potential.

Based on the training plan formulated according toeach employee’s background and years of experience,necessary training such as on-the-job training andpractical training on finance will be provided. In addition,
JFM will respect the autonomy of employees and provide
support measures, etc. that contribute to the development of their own capabilities.

3 Safe and Healthy Work Environment
In order to create an environment in which each employee can maximize his or her potential, JFM prohibits
acts of harassment and discriminatory behavior, and has
established a system to respond promptly if any issue
arises.
JFM will further promote the following initiatives toensure a good work-life balance.

(1) D evelopment of a telework environment(2) R eduction of overtime work(3) Development of childcare and nursing care leave, etc.
and promotion of proactive use of them(4) Establishment of a Health Committee and implementation of measures to maintain and improve physicaland mental health

4 Status of Human Capital*As of April, 2023

Number of employees

102

Percentage of male and female
employees

Male: 64.7%
Female: 35.3%

Average age

40.6

Percentage of annual paid
leave taken (CY 2022)

67.9%

Average monthly overtime hours(FY 2022)

16 hours

Percentage of female employees
at the manager level

37.1%

58 JFM ANNUAL REPORT 2023

藁色Management Structure
Disclosure

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

2 Materials for Disclosure

1 . Materials for Disclosure Pursuant toLaws and Regulations• B udgets, business plans, funding plans, andmedium-term plans on income and expenditures• Management plan
• Funding plan
• Brochure• Annual Report• JFM News magazine• JFM Green Bond


• Financial statements• Business reports and statement of accounts (inJapanese only)• Explanatory documents based on Article 36, Paragraph
3 of the JFM Law (Documents corresponding toannual securities reports specified in the Financial
Instruments and Exchange Act and the Internal
Control Report) (in Japanese only)

2. Other Documents for Disclosure

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

   

1 Basic Stance on Information Disclosure
  


Website (https : // www.jfm.go.jp/en/)

Annual Report
59

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JFM ANNUAL REPORT 2023

JFM’s Role in Local Government Finance

1 Japanese Local Government System
Local governments are responsible for extensive areasof 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 administrationthat 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 wellas government-designated cities, towns and villages
providing local services.





   
    
Prefectures

47

Cities, special wards of Tokyo, etc.

1,741

Government-designated cities

20

Cities772

Special wards of Tokyo

23

Towns

743

Villages

183
Total

(As of 1 April 2023)

60 JFM ANNUAL REPORT 2023

1,788

桜桃色

  

 



 


 ­    







 

  
Notes: 1. The above program includes Great East Japan Earthquake-related
budgets.
2. Total may not add up due to rounding.


  

Each local government is unique in terms of its naturaland historic situations, industrial structures, population
sizes, and other attributes. As a result, each local
government handles diverse administrative duties. The
term local government finance collectively refers tofunding for individual local governments engaging insuch administration. Just as with national finance, local
government finance plays a major role in the nation’s
economy and the lives of citizens. In fiscal 2023, local
government finance will total JPY 92.3 trillion (USD 691.9
billion) (based on the Local Government Finance
Programme (the LGFP).
Because local governments engage in numerous
activities that closely relate to residents, they need toprovide 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 thescales of local government finance and forecasts ofoverall revenues and expenditures. In response to annual
national budget plans, the national government balances
the total amount of local government revenues andexpenditures in the LGFP. Under this Programme, 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
can ensure uniform public service standards.

   

2 Local Government Finance Programme

61

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JFM ANNUAL REPORT 2023

JFM’s Role in Local Government Finance3 Local Allocation Tax
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, thenational government distributes Local Allocation Tax,

which is composed of certain percentages of national
taxes, including personal and corporate income taxes andconsumption taxes. Local Allocation Tax is an importantsource of funds for local governments to maintain an
appropriate level of public services.




  

    


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.

4 Local Government Borrowings
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 sharecosts with future residents such as for constructions offacilities, or that large temporary expenses are required
due to disasters.

5 Security of Local Government Borrowings
The following framework secures principal and interest
payments of local government borrowings. On the backof this framework, the BIS risk weighting for local
government borrowings is 0%, based on the standardized
approach (as of 31 March 2023).
1) Secured funds for repayments of local government
borrowings
The national government effectively secures revenue
sources for repayments of local government borrowings
from both macro and micro perspectives.
( i ) Local tax revenues are secured by taxation rights oflocal governments.

( ii ) T he national government includes repayments oflocal government borrowings (i.e., principal andinterest payments) in the amount of expendituresin 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 tobe allocated to an individual local government, aportion of the principal and interest payments areincluded in the Standard Financial Requirements ofan 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.

62 JFM ANNUAL REPORT 2023

桜桃色

6 Local Government Borrowing Programme1) Consent (approval) based on LGBPThe LGBP specifies the total scheduled amount of local
government borrowings including the amount bybusiness type. Typically, the consent or approval for local
government borrowings is given based on the LGBP.

2) S ecured 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 businessunder the LGBP.
3) G uideline for local government borrowings
The LGBP is published along with the local financial
plan, which specifies the guideline for each business on
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.

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( ii ) L ocal governments with fiscal indicators exceedingcertain early warning limits to restore fiscal
soundness through their own efforts(iii) Local governments with fiscal indicators exceedingcertain 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   

2) Issuance restriction
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.


  


63

菫色

JFM ANNUAL REPORT 2023

JFM’s Role in Local Government Finance

7 JFM Funds in Local Government Borrowing
Programme
private funds.

The sources for local government funding areclassified into national government funds, JFM funds andLocal Government Borrowing Programme

1. Private Funds

2. Public Funds(USD in billions)

FY2022

FY2023Publicly Offered Bonds

27

26

36%

Other Private Sectors

16

15

21%

JFM

13

12

17%

National Government

20

18

26%

Total

76

71

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.

to project implementation and financial management oflocal governments.

Since fiscal 2019, JFM funds have accounted for around15-18% of the LGBP. JFM plays a major role in Japanese
local government finance, making a substantial contribution   




































































































Source: The Ministry of Internal Affairs and Communications

64 JFM ANNUAL REPORT 2023



  
    ­
    

Financial Statements 

Financial Section
66

Statement of Income 67Statement of Appropriation of Profit [General account] 

68Statement of Appropriation of Profit [Management account] 69Statement of Changes in Net Assets 

70Statement of Cash Flows 72Notes to Financial Statements 73

Independent Auditor’s Report 106
  

66


Balance Sheet 

JFM ANNUAL REPORT 2023

65

Financial Section
Financial Statements

Balance Sheet
Item

Fiscal 2021
(As of 31
March 2022)(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2022
(As of 31 March 2023)

Item

Fiscal 2021
(As of 31
March 2022)

AmountAmountAssetsLoans (Note 4)

Fiscal 2022
(As of 31 March 2023)

Liabilities¥23,550,819 ¥23,300,200 $174,559,491

Bonds (Notes 8 and 9)¥20,103,035 ¥19,626,484 $147,036,895

Securities(Note 19)920,000

747,000

5,596,344

Borrowed money(Note 10)399,500

526,500

3,944,411

Cash and bankdeposits

353,491

497,337

3,725,933

Cash collateral received
for financial instruments

147,451

171,013

1,281,188

Cash collateral
paid for financial
instruments

812

1,016

7,612

Other liabilities

4,644

6,832

51,190

6,193

5,748

43,065Reserve for bonuses(Note 11)

59

54

411

10

8

67

Other assets
Tangible fixed
assets (Note 7)

2,572

2,795

20,943

Reserve for bonuses
for directors andcorporate auditors(Note 11)

Intangible fixed
assets (Note 7)

976

2,231

16,716

Reserve for retirement
benefits (Notes 11 and 14)

64

74

562

Reserve for retirement
benefits for directors andcorporate auditors (Note 11)

15

15

118

920,287

923,873

6,921,441

920,287

923,873

6,921,441

2,891,692

2,907,523

21,782,469

Reserve for interest rate
volatility (Note 12)2,200,000

2,200,000

16,481,870

Management accountreserve for interest rate
volatility (Note 12)682,675

701,566

5,255,965

Reserve for interest rate
reduction

9,017

5,957

44,634

Fund for lending rate
reduction
Basic fund for lending
rate reduction (Note 13)
Reserves under special
laws

Total liabilities

24,466,761

24,162,382 181,018,752

Net Assets

Total assets

Capital16,602

16,602

124,379

Retained earnings

298,035

334,1142,503,106

General accountappropriated surplus
reserve

298,035

334,1142,503,106

Valuation, translation
adjustments and others(4,342)(14,579)(109,224)

Management accountsurplus reserve

57,80857,808433,091

Total net assets

368,104

393,946

2,951,352¥24,834,865 ¥24,556,329 $183,970,104 Total liabilities and net assets ¥24,834,865 ¥24,556,329 $183,970,104

See notes to financial statements.

66 JFM ANNUAL REPORT 2023

Item

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

Fiscal 2021
(For the year ended
31 March 2022)

Fiscal 2022
(For the year ended 31 March 2023)

AmountAmount222,071

201,415

1,508,957

Fees and commissions

76

71

537

Other operating income

15

81

608

13,703

16,420123,020

13,691

16,410122,945

11

10

75

125,548

116,212870,634

118,786

109,678

821,684

Fees and commissions

294

282

2,115

Other operating expenses

3,081

2,424

18,166

General and administrative expenses

3,385

3,826

28,669Ordinary income

110,319

101,776762,488

Special gains

43,69753,192398,504

-

133

997

Reversal of management account reserve for interest rate
volatility (Note 12)40,00050,000374,588

Reversal of reserve for interest rate reduction

3,697

3,059

22,919

121,754

118,890890,697

Provision for management account reserve for interest rate
volatility (Note 12)81,754

68,890516,109

Payment to the national treasury (Notes 5 and 12)

40,00050,000374,588¥32,263¥36,079$270,295Interest income

Other income
Contributions from fund for lending rate reduction (Note 13)
OthersExpenses
Interest expenses

Gain on disposal of fixed assets

Special losses

Net income
  

$1,633,122


¥217,989

¥235,867

Income   

Statement of Income

See notes to financial statements.


JFM ANNUAL REPORT 2023

67

Financial Section
Financial Statements

Statement of Appropriation of Profit[General account](For the year ended 31 March 2022)(Millions of yen)

Ⅰ Profit available for appropriation¥32,263

Net income
Accumulated deficit brought forward¥32,263-

Ⅱ Profit appropriatedSurplus reserve

32,26332,263

Statement of Appropriation of Profit[General account](For the year ended 31 March 2023)(Millions of yen)

Ⅰ Profit available for appropriation¥36,079

Net income
Accumulated deficit brought forward¥36,079-

Ⅱ Profit appropriatedSurplus reserve

36,07936,079(Thousands of U.S. dollars)

Ⅰ Profit available for appropriation$270,295

Net income
Accumulated deficit brought forward$270,295-

Ⅱ Profit appropriatedSurplus reserve

270,295

270,295

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 appropriated surplus reserve on the balance sheet.
See notes to financial statements.

68 JFM ANNUAL REPORT 2023

(For the year ended 31 March 2022)(Millions of yen)

Ⅰ Profit available for appropriation¥-

Net income
Accumulated deficit brought forward¥-

Surplus reserve--

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

Ⅰ Profit available for appropriation¥-

Net income¥-

Ⅱ Profit appropriatedSurplus reserve

-

-

$-

Net income
Accumulated deficit brought forward$-

Ⅱ Profit appropriatedSurplus reserve--

See notes to financial statements.


  

(Thousands of U.S. dollars)

Ⅰ Profit available for appropriation


(For the year ended 31 March 2023)

Ⅱ Profit appropriatedAccumulated deficit brought forward   

Statement of Appropriation of Profit[Management account]

JFM ANNUAL REPORT 2023

69

Financial Section
Financial Statements

Statement of Changes in Net Assets(For the year ended 31 March 2022)(Millions of yen)

Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Unrealized
Total
gain/(loss)
stockholders’fromequityhedging
instruments

Management
account
surplusreserve

Total
net
assetsGeneralaccount
appropriatedsurplusreserve

Total
retainedearnings¥16,602¥265,772¥265,772¥282,374¥437¥57,808¥340,621

Net income-

32,26332,26332,263--32,263

Net changes duringaccounting period in
items other thanstockholders’ equity

-

-

-

-

(4,780)-(4,780)-32,26332,26332,263(4,780)-27,482¥16,602¥298,035¥298,035¥314,637¥(4,342)¥57,808¥368,104

CapitalBalance as of 1 April 2021
Changes during accounting
periodNet changes duringaccounting period
Balance as of 31 March 2022

70 JFM ANNUAL REPORT 2023

(Millions of yen)

Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Total
net
assetsTotal
retainedearnings¥16,602¥298,035¥298,035¥314,637¥(4,342)¥57,808¥368,104

Net income-

36,07936,07936,079--36,079Net changes duringaccounting period in
items other thanstockholders’ equity

-

-

-

-

(10,236)-(10,236)-

36,07936,07936,079(10,236)-

25,842¥16,602¥334,114¥334,114¥350,716¥(14,579)¥57,808¥393,946

Balance as of 1 April 2022
Changes during accounting
periodNet changes duringaccounting period
Balance as of 31 March 2023

(Thousands of U.S. dollars)

Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Management
account
surplusreserve

Total
net
assets$124,379$2,232,811$2,232,811$2,357,190$(32,532)$433,091$2,757,749

Net income-

270,295

270,295

270,295--

270,295

Net changes duringaccounting period in
items other thanstockholders’ equity

-

-

-

-

(76,692)-(76,692)-

270,295

270,295

270,295(76,692)-

193,603$124,379$2,503,106$2,503,106$2,627,485$(109,224)$433,091$2,951,352

Balance as of 1 April 2022
Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March 2023
See notes to financial statements.

JFM ANNUAL REPORT 2023

Total
retainedearnings

Capital

Generalaccount
appropriatedsurplusreserve

Unrealized
Total
gain/(loss)
stockholders’fromequityhedging
instruments
  

(For the year ended 31 March 2023)




Generalaccount
appropriatedsurplusreserve

Capital

Unrealized
Total
gain/(loss)
stockholders’fromequityhedging
instruments

Management
account
surplusreserve   

(For the year ended 31 March 2023)

71

Financial Section
Financial Statements

Statement of Cash Flows
Item(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2021
(For the year
ended 31 March2022)

Fiscal 2022
(For the year ended 31 March 2023)

AmountAmountⅠ Cash flows from operating activities¥32,263¥36,079$270,295

495

511

3,829

Interest income(222,071)(201,415)(1,508,957)

Interest expenses

118,786

109,678

821,684

Increase/(decrease) in reserve for bonuses

0

(5)

(38)

Decrease in reserve for bonuses for directors and corporate auditors

-

(1)

(10)

Increase in reserve for retirement benefits

12

10

78

Increase/(decrease) in reserve for retirement benefits
for directors and corporate auditors

(5)

0

5

Decrease in fund for lending rate reduction(13,691)(16,410)(122,945)

Increase in management account reserve for interest rate volatility

81,754

68,890516,109

Decrease in reserve for interest rate reduction(3,697)(3,059)(22,919)

Net (increase)/decrease in loans(406,430)

250,618

1,877,576

Net decrease in bonds(308,649)(477,336)(3,576,093)

Net increase in borrowed money

105,500

127,000

951,453

Interest received

222,793

201,860

1,512,292

Interest paid

(118,238)(108,678)(814,191)

Others111,819

13,231

99,124(399,361)

973

7,292

Proceeds from redemption of securities

3,458,300

2,741,500

20,538,657

Purchases of securities(3,785,300)(2,568,500)(19,242,583)

Purchases of tangible fixed assets

(21)

(145)

(1,091)

Purchases of intangible fixed assets

(249)

(534)

(4,005)

-

555

4,165

(327,271)

172,875

1,295,143

Payment to the national treasury(40,000)(50,000)(374,588)

Revenue from contributions made from municipally operated racing

13,691

19,997

149,813(26,308)(30,002)(224,775)---

Ⅴ Net increase/(decrease) in cash and cash equivalents(752,940)

143,846

1,077,660

Ⅵ Cash and cash equivalents at beginning of year

1,106,432

353,4912,648,273

Ⅶ Cash and cash equivalents at end of year

¥353,491¥497,337$3,725,933

Net income
Depreciation and amortization

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

Proceeds from sales of tangible fixed assets
Net cash provided by/(used in) investing activities
Ⅲ Cash flows from financing activities

Net cash used in financing activities
Ⅳ Effect of exchange rate changes on cash and cash equivalents

See notes to financial statements.

72 JFM ANNUAL REPORT 2023
  



JFM ANNUAL REPORT 2023




2. Summary of Significant Accounting Policies(1) Securities
Held-to-maturity securities are carried at amortizedcost (straight-line method).
(2) Derivative transactions
Derivative transactions are carried at fair value withchanges in unrealized gain or loss charged or credited to income, except for those which meet the criteria for hedge accounting.
(3) Depreciation and amortization(a) Tangible fixed assets
Depreciation of tangible fixed assets is calculatedby the straight-line method based on the estimateduseful lives and the residual value determined bymanagement. The estimated useful lives of major
items are as follows:
Buildings: 41 to 47 years
Others: 2 to 20 years(b) Intangible fixed assets
Amortization of intangible fixed assets is calculatedby the straight-line method based on the estimateduseful lives and the residual value determined bymanagement. Software for internal use owned by
the JFM is amortized over 5 years.
(4) Deferred assets
Bond issuance costs are expensed in full whenincurred.

(5) Translation of assets and liabilities denominated inforeign currencies into Japanese yenMonetary assets and liabilities denominated inforeign currencies, for which foreign currency
swaps or foreign exchange forward contracts areused to hedge the risk of foreign currency fluctuation, are translated at the contracted rate as theseswap contracts or the forward contracts qualify fordeferral 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 ofbonuses to employees, in the amount of estimatedbonuses, 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 and corporate 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 theamount deemed 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 andpension expenses are calculated using the simplified method, which assumes the JFM’s retirement
benefit obligation to be equal to the benefits payable if all eligible employees voluntarily terminatedtheir employment at the fiscal year-end.
(e) Reserve for retirement benefits for directors andcorporate auditors
The reserve for retirement benefits for directors andcorporate auditors is provided for payment of retirement benefits to directors and corporate auditors,
in the amount deemed accrued at the fiscal yearend based on the internal policies.
(7) Revenue recognition
The JFM applies the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, 31 March
2020) and the “Guidance on Accounting Standard
for Revenue Recognition” (ASBJ Guidance No. 30,
31 March 2020), and recognizes revenue when control of promised goods or services is transferred tothe customer in the amount expected to be received
in exchange for those goods or services.



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 otherregulations applicable to the JFM and accounting principles generally accepted in Japan, which are different
in certain respects as to the application and disclosure
requirements of International Financial ReportingStandards.
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 2023, the final day of the fiscal year, whichwas ¥133.48 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.

   

Notes to Financial Statements

73

Financial Section
Financial Statements(8) 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 andincluded in interest expense or income. If swap
contracts or forward contracts used to hedge therisk of foreign currency fluctuation qualify for deferral
hedge accounting, the foreign currency-denominated assets and liabilities are translated at thecontracted rate.
(b) Hedging instruments and hedged items( i ) Hedging instruments···Interest rate swaps
Hedged items············B onds and long-termborrowed 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 ofhedging exposure to interest rate risk and foreignexchange risk. Hedged items are identified by eachindividual contract.
As a means of hedging foreign exchange fluctuation
risks associated with the receipt of interest andprincipal of foreign currency-denominated bankdeposits, a foreign exchange forward contract isentered into at the time of each 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 hedge transactions to offset market fluctuation
risks associated with bonds and long-term borrowed
money. Accordingly, the JFM deems these to behighly 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.
(9) Cash and cash equivalents
Cash and cash equivalents in the statement of cash
flows consist of “Cash and bank deposits” on thebalance sheet.
(10) Fund for lending rate reduction
In accordance with the provisions of Article 46,
Section 1 of the Law, the JFM has established thefund for lending rate reduction to reserve contribu-

74 JFM ANNUAL REPORT 2023

tions 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 from the investment of
the fund (hereinafter, “investment income”) is used
to reduce interest rates of the loans to municipalities,
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
the fund within the limits of the total of the additional portion to the fund made up to the previous
fiscal year and the contributions made in the mostcurrent fiscal year.
(11) Reserve for interest rate volatility and management
account reserve for interest rate volatility
The reserve for interest rate volatility is set aside toprepare 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 theLaw, and is calculated and accounted for based on
the provisions 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) and Articles 22 and 23 of theGovernment 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
associated with refinancing of bonds issued by thePredecessor pursuant to the provisions of Article 9,Sections 9 and 10, and Article 13, Sections 5 and 7of the Supplementary Provisions of the Law, and is
calculated and accounted for based 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 ofInternal Affairs and Communications, and the Ministry of Finance, 2008; hereinafter, “Management
Account Operations Ordinance”) and Articles 3
and 5 of the Supplementary Provisions of the above
ordinance.


  



JFM ANNUAL REPORT 2023




4. Loans
There are no bankrupt and quasi-bankrupt loans,doubtful 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 areserve for possible loan losses.
Bankrupt and quasi-bankrupt loans represent loans toborrowers who are in bankruptcy due to a petition tocommence bankruptcy proceedings, reorganization
proceedings or rehabilitation proceedings, and loans
equivalent to these.
Doubtful loans represent loans other than bankrupt

5. 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 accountreserve for interest rate volatility is being attributed to
the Japanese national government in fiscal 2023, withthe aim of transferring 100 billion yen for securing funds
for local allocation tax.
In addition, for the purpose of securing the increase in
the concession amount charged for Forest Environment
Concession Tax, in accordance with the Supplementary
Provisions of the Law, a portion of the JFM’s management account reserve for interest rate volatility is being
attributed to the Japanese national government over a
period of five years from fiscal 2020 through fiscal 2024,with the aim of transferring up to 230 billion yen overthis period.
Lastly, for the purpose of securing the Trust Fund Bureau
Fund for exemptions of early redemption charges inrelation to concessions of water supply and seweragebusinesses in accordance with the Supplementary Provisions of the Law, a portion of the JFM’s management
account reserve for interest rate volatility is being
attributed to the Japanese national government over a
period of six years from fiscal 2018 through fiscal 2023,
with the aim of transferring up to 1.5 billion yen over thisperiod.
In fiscal 2021, 40 billion yen was reversed from theManagement account reserve for interest rate volatility
and the same amount was transferred to the nationaltreasury by the JFM, pursuant to “Ministerial OrdinanceSpecifying the Amount to be Attributed to the National
Government pursuant to the provisions of Article 14 of
the Supplementary Provision of the Law for the period
from fiscal 2021 through fiscal 2024 (Ordinance No. 1 of

3. Significant Accounting Estimates
Reserve for possible loan losses(a) Amount of reserve for possible loan losses recorded
in fiscal 2022: N/A(b) Information on significant accounting estimates for
identified items
The JFM has not recorded reserves for possible loan
losses due to the following reasons:•C urrently, there are no bankrupt and quasi-bankrupt, etc. loans and the JFM has never experienced
any loan losses, as stated in Note 4 “Loans”.
• The JFM provides loans exclusively to local
governments and there is a system to prevent
local governments from default, as stated in
Note 6 “Financial Instruments (c) (i) A. Credit
risk on loans”.
The above situation is expected to remain thesame for the next fiscal year and will not materially
impact the financial statements for the next fiscal
year.

and quasi-bankrupt loans that the borrower is not inbankruptcy but on which principal and interest are
unlikely to be collected as stipulated in a contract due
to the borrower’s deteriorating financial conditions andoperating results.
Past due loans (three months or more) represent loans
on which payment of principal or interest is in arrears
for three months or more, calculated from the day
following the contractual due date, other than  bankrupt
and quasi-bankrupt loans and doubtful loans.
R estructured loans represent loans, given certain
favorable terms and conditions, such as reduction or
exemption of interest, grace periods for interest or
principal payments, and debt waivers, to assist borrowers in corporate rehabilitation or to support business,other than bankrupt and quasi-bankrupt loans, doubtful loans and past due loans (three months or more).

   (12) Reserve for interest rate reduction
Reserve for interest rate reduction is set aside to
reduce interest rates on the loans made by thePredecessor to local governments pursuant to theprovisions of Article 9, Section 13, and Article 13,
Section 8 of the Supplementary Provisions of theLaw, and Article 26, Sections 1, 3 and 4 of the
Preparation Ordinance, and is calculated andaccounted for based on the provisions of Article 5of the Management Account Operations Ordinance.
(13) 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.
(14) Consumption taxes
National and local consumption taxes are accounted for using the tax exclusion method.

75

Financial Section
Financial Statements
the Ministry of Internal Affairs and Communications,and the Ministry of Finance, 2020; hereinafter the“Ministerial ordinance for attribution to the national
government”).” The ministerial ordinance was amended
by “Partial Amendment of the Ministerial OrdinanceSpecifying the Amount to be Attributed to the National
Government pursuant to the provisions of Article 14 of
the Supplementary Provision of the Law for the period
from fiscal 2021 through fiscal 2024 (Ordinance No. 4 of
the Ministry of Internal Affairs and Communications,and the Ministry of Finance, 2021).”
In fiscal 2022, 50 billion yen (374,588 thousand U.S.
dollars) was reversed from the Management accountreserve for interest rate volatility and the same amount
was transferred to the national treasury by the JFM,
pursuant to “Ministerial Ordinance Specifying theAmount to be Attributed to the National Government
pursuant to the provisions of Article 14 of the Supplementary Provision of the Law for the period from fiscal
2022 through fiscal 2024 (Ordinance No. 1 of the
Ministry of Internal Affairs and Communications, andthe Ministry of Finance, 2020; hereinafter the “Ministerial
ordinance for attribution to the national government”).”
The ministerial ordinance was amended by “Partial
Amendment of the Ministerial Ordinance Specifying
the Amount to be Attributed to the National Government pursuant to the provisions of Article 14 of the
Supplementary Provision of the Law for the period fromfiscal 2021 through fiscal 2024 (Ordinance No. 2 of the
Ministry of Internal Affairs and Communications, andthe Ministry of Finance, 2022).”
Additional information
In accordance with the provisions of Article 14 of the
Supplementary Provisions of the Law, a portion of the
JFM’s management account reserve for interest rate
volatility is being attributed to the Japanese national
government over a period of two years for fiscal 2023 andfiscal 2024, with the aim of transferring up to 180 billion
yen over this period.
In fiscal 2023, the JFM will reverse 150 billion yen from the
management account reserve for interest rate volatility
and transfer the same amount to the national treasury, in
accordance with the “Ministerial Ordinance Specifying
the Amount to be Attributed to the National Government
pursuant to the provisions of Article 14 of the Supplementary Provisions of the Law for the periods for fiscal 2023
and fiscal 2024 (Ordinance No.1 of the Ministry of Internal
Affairs and Communications, and the Ministry of Finance,2020).” The ministerial ordinance was amended by the“Ministerial Ordinance for Partial Revision of the Ministerial Ordinance for Specifying the Amount to be Attributed
to the National Government pursuant to the provisions ofArticle 14 of the Supplementary Provisions of the Law for

76 JFM ANNUAL REPORT 2023

the period from fiscal 2022 through fiscal 2024 (Ordinance No. 1 of the Ministry of Internal Affairs and Communications, and the Ministry of Finance, 2023).”
6. 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 to appropriately manage these risks
including interest rate risk.
The JFM adopts an integrated risk management
approach to appropriately respond to risks while
endeavoring to further advance its risk analysis andmanagement.
Accordingly, the JFM has developed a system forappropriate 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 the funds for these loans are raised mainly
through issuance of 10-year bonds. Therefore, alarge duration gap is created between lending andfunding, and the JFM is exposed to the interest raterisk associated with bond and long-term borrowed
money refinancing.
The JFM has set aside required reserves for interest
rate fluctuations (the reserve for interest rate volatility), and has set up the ALM Committee separatelyfrom the Integrated Risk Management Committee
to comprehensively analyze and manage the JFM’s
assets and liabilities in a timely and appropriatemanner. At the meeting, medium- and long-term
management analysis as well as risk analysis andevaluation are conducted through scenario analysis,
VaR analysis, and duration analysis, among othermethods. In addition, the JFM reflects the findings
in its bond issuance plans and other aspects ofmanagement and endeavors to reduce interest raterisk.
(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 a borrower, which causes an asset to lose
value or become worthless. In addition to credit risk


  



JFM ANNUAL REPORT 2023

credit events, such as deterioration in the financial
condition of a counterparty, which causes an asset
to lose value or become worthless. However, theJFM appropriately manages credit risk of this typeby constantly monitoring counterparties’ financial
standing, taking measures including suspension of
new deals and cancellation of transactions in caseof a deterioration of their credit standings. Moreover,
the JFM limits counterparties to financial institutions
that achieve a certain credit rating and other criteria,
and conducts transactions within the credit lines foreach counterparty in order to diversify risks. In addition, the JFM enters into ISDA (International Swaps
and Derivatives Association) Master Agreements
and 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 in risk factors such as interest rates, securities
prices and foreign exchange rates, or the risk of loss
resulting from changes in earnings generated fromassets and liabilities. Market risk includes interest
rate risk, foreign exchange risk and price change
risk.
A. Interest rate risk
Interest rate risk is the risk of losses incurred or adecrease 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 associatedwith bond and borrowed money refinancing andpipeline risk.
- Interest rate risk associated with bond and borrowed money refinancing
The 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 createsinterest 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 copewith 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 effectivenessof its management of interest rate risk. In order toreduce exposure to interest rate risk, the JFM has
established a medium-term management indicator   

associated with loans, 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 madeto 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 and loans in the expenditure of the Local
Government Finance Program, and secures thetotal amount of local allocation tax which balances
local governments’ total expenditures including
principal and interest payments, and total revenue.
Thus, the national government effectively securesrevenue sources for principal and interest payments by local governments. The national government also secures revenue sources for principal
and interest payments by individual local governments by including a portion of such principal andinterest in the Standard Financial Needs whencalculating 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 or financial deficits
exceed a certain level must apply for approval toissue bonds or obtain loans, so that the credit
standing of local government bonds and loans ismaintained.
• Under the Law Relating to the Financial Soundnessof Local Governments (No. 94, 2007), local governments whose fiscal indicators exceed the early
warning limits must make their own efforts towardachieving fiscal soundness, and local governments
whose fiscal indicators exceed the reconstruction
limits must take necessary actions to restore theirfinances 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” (No.
59, 1981) or the “Financial Reconstruction Law”
(No. 132, 1998) but performs self-assessment ofloans in accordance with the JFM's internal rules inorder to manage risks appropriately.
B. Credit risk on transactions
The JFM is exposed to the risk of loss arising from77

Financial Section
Financial Statements
for five years from fiscal 2018, in which the duration
gap is to be maintained below approximately two
years.
• Based on the management indicator, from theviewpoint of controlling the duration on assets(lending), the interest rates for temporary financial
countermeasures funding which accounts forapproximately 1/3 of the overall outstanding loans
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 withmaturities longer than 30 years. And, in terms offunding, 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 interest rate environment
at the time and carefully choosing maturities ofbonds to be issued by utilizing its FLIP and OpenIssuance 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 forinterest rate volatility as described above. In accordance with the provisions of 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 Japanesenational government. The following transfers arescheduled:• 100 billion yen for securing funds for local allocation
tax for fiscal 2023
• Up to 230 billion yen due to the increase in concession amount charged for Forest Environment
Concession Tax, which promotes forest maintenance over a period of five years from fiscal 2020
through fiscal 2024; and• Up to 1.5 billion yen for securing funds of the TrustFund Bureau for exemptions of early redemption
charges in relation to concessions of water supply
and sewerage business over a period of six years
from fiscal 2018 through 2023.
The amount of transfer is to be within the amountwhich 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 risk
The JFM is also exposed to pipeline risk, whereby
losses would be incurred or profits decreased as aresult of interest rate fluctuations during the timefrom when the JFM raises money until the point at
which the money is loaned to local governments.

78 JFM ANNUAL REPORT 2023

The JFM, in principle, uses swap transactions tohedge against pipeline risk.
B. Foreign exchange and other risks
Various risks associated with bond principal andinterest payments are hedged by swap transactions.
These risks include foreign exchange risk related toforeign currency-denominated bonds and interest
rate risk related to floating rate bonds.
The JFM’s investments of surplus funds are exposedto 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-denominateddeposits resulting from fluctuations in foreignexchange rates. Accordingly, in principle, the JFM
minimizes the risk of price fluctuation by holding
investments until maturity, and hedges foreignexchange risk by using foreign exchange forward
contracts.
C. Quantitative information on market risk
Loans, bonds and long-term borrowed money are
primarily affected by interest rate risk, which is amajor risk variable among the market risks.
With respect to loans, bonds and long-term borrowed
money in the general account, the JFM establishes amanagement indicator by the duration gap in orderto manage interest rate risk appropriately. With
regard to the quantitative analysis of interest raterisk, while the JFM does not have a management
indicator for the quantitative figures, it reports theresults of calculating the quantitative information to
the ALM Committee and tracks the status of theinterest rate risk.
With respect to these financial instruments in thegeneral account, based on an assumption that therisk variables, except for interest rate risk, holdsteady, for an indicative interest rate as of 31 March2022 and 2023 that is 10 basis points higher than theactual 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 29,584 million yen and 27,521 million yen(206,182 thousand U.S. dollars), respectively. On thecontrary, for an indicative interest rate as of 31 March2022 and 2023 that is 10 basis points lower than theactual 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 29,985 million yen and 27,891 million yen(208,953 thousand U.S. dollars), respectively.
With respect to loans and bonds in the management
account, the JFM raises funds by the issuance ofbonds as necessary in order to manage existingloans until their redemption. For this reason, while
the JFM reports the calculation results of the


funds or the necessity of obtaining funds at far
higher interest rates than under normal conditions
as a result of a mismatch between the maturities ofassets and liabilities or an unexpected outflow offunds (funding liquidity risk). It also includes therisk that the JFM would incur losses because it isunable to conduct market transactions or is forced
to conduct transactions at far more unfavorable
prices than under normal conditions due to market
disruption or other 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 for fund 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 tosecure liquidity support assets in advance in orderto prepare for potential market disruption which
may prevent the JFM from securing the necessary
funds for scheduled bond principal and interest
payments.

   

quantitative information regarding the interest raterisk to the ALM Committee and confirms the status
of interest rate risk as is the case in the generalaccount, the JFM does not establish a management
indicator or use the quantitative analysis for the
management account.
With respect to these financial instruments in the
management account, based on an assumption thatthe risk variables, except for interest rate risk, holdsteady, for an indicative interest rate as of 31 March2022 and 2023 that is 10 basis points higher than theactual 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 6,319 million yen and 5,727 million yen(42,911 thousand U.S. dollars), respectively. On thecontrary, for an indicative interest rate as of 31 March2022 and 2023 that is 10 basis points lower than theactual 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 6,383 million yen and 5,780 million yen(43,303 thousand U.S. dollars), respectively.
(iii) Liquidity risk
Liquidity risk is the risk that the JFM would incur
losses due to difficulties in securing the necessary
  


JFM ANNUAL REPORT 2023

79

Financial Section
Financial Statements(2) Items related to fair value of financial instruments
The book value, fair value and difference between them as of 31 March 2022 are as follows:(Millions of yen)Book value

Fair value

Difference(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments¥23,550,819¥24,209,869¥659,049

920,000
353,491812

920,000
353,491812-

Total assets

24,825,123

25,484,172

659,049(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments

20,103,035
399,500
147,451

20,372,729
398,522
147,451

269,694(977)-

Total liabilities

20,649,986

20,918,702

268,716

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

(*)

The book value, fair value and difference between them as of 31 March 2023 are as follows:(Millions of yen)Book value(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments

Fair value

Difference¥23,300,200¥23,626,650¥326,449

747,000
497,337
1,016

747,000
497,337
1,016-

Total assets

24,545,554

24,872,004

326,449(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments

19,626,484
526,500
171,013

19,553,561
525,123
171,013(72,923)(1,376)-

Total liabilities

20,323,997

20,249,697(74,300)

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

(*)

(Thousands of U.S. dollars)Book value

Fair value

Difference(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments$174,559,491$177,005,173$2,445,682

5,596,344
3,725,933
7,612

5,596,344
3,725,933
7,612-

Total assets

183,889,380

186,335,062

2,445,682(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments

147,036,895
3,944,411
1,281,188

146,490,572
3,934,095
1,281,188(546,323)(10,316)-

Total liabilities

152,262,494

151,705,855(556,639)

Derivative transactions(*)
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

(*) Assets and liabilities resulting from derivative transactions are presented on a net basis with liabilities in parentheses.

80 JFM ANNUAL REPORT 2023

(1) Securities
Notes on securities classified by holding purpose aredescribed in Note 19.

(2) Derivative transactions (Transactions for which hedge
accounting is applied)For derivative transactions for which hedge accounting is applied, the contractual amount or the amountequivalent to the principal in the contract under eachhedge accounting method as of 31 March 2022 is asfollows:   

Note 1. Items related to securities and derivative transactions(Millions of yen)Contract amountPrimary hedged items

Principal
accounting

Interest rate
swap transactions
Receive/fixedand pay/floating

Bonds
Long-term borrowed
money

Hedge
accounting forinterest rate swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
forward contracts

Foreignexchange forward
contracts

Of which
1 year or more

Fair
value

Method for
calculating fairvalue
Based on prices
provided by
the counterparty
financial institution

-

-

-

¥20,000¥20,000(*2)

Foreigncurrency-denominatedbonds

1,979,994

1,733,986(*3)

Foreigncurrency-denominateddeposits

14,000-(*3)¥2,013,994¥1,753,986

Total




Type of derivativetransactions(Millions of yen)Contract amountPrincipal
accounting

Interest rate
swap transactions
Receive/fixedand pay/floating

Bonds
Long-term borrowed
money

Hedge
accounting forinterest rate swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
forward contracts

Foreignexchange forward
contracts
Total

Of which
1 year or more

Fair
value

-

-

-

¥20,000¥20,000(*2)

Foreigncurrency-denominatedbonds

2,005,257

1,570,017(*3)

Foreigncurrency-denominateddeposits

10,000-(*3)¥2,035,257¥1,590,017

Method for
calculating fair
value

(*1)



Primary hedged items

Type of derivativetransactions
  

For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent to theprincipal in the contract under each hedge accounting method as of 31 March 2023 is as follows:

Hedge accounting
method

Hedge accounting
methodJFM ANNUAL REPORT 2023

81

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

Contract amount

Hedge accounting
methodType of derivativetransactions

Primary hedged items

Principal
accounting

Interest rate
swap transactions
Receive/fixedand pay/floating

Bonds
Long-term borrowed
money

Hedge
accounting forinterest rate swaps

Interest rate
swap transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
forward contracts

Foreignexchange forward
contracts

Of which
1 year or more

Fair
value

-

-

-

$149,835$149,835(*2)

Foreigncurrency-denominatedbonds

15,022,906

11,762,193(*3)

Foreigncurrency-denominateddeposits

74,918-(*3)$15,247,659$11,912,028

Total

Method for
calculating fair
value

(*1)

(*1) The fair value of interest rate swaps for which the principal accounting is applied is calculated by the discounted cash flow method, which uses observable
inputs such as interest rates.
(*2) 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.
(*3) Since currency swaps and foreign exchange forward 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 the relevant
hedged item.

Note 2. The repayment schedule for monetary claims and securities with maturities is as follows:
As of 31 March 2022
After
20 years
through
30 years

After
30 years
through
40 years¥1,832,862 ¥1,778,906 ¥1,721,508 ¥1,654,724 ¥1,575,726 ¥6,594,968 ¥6,644,476 ¥1,682,848¥64,796

Within1 year
Loans(Millions of yen)After
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

Securities
Held-tomaturity
securities

920,000

-

-

-

-

-

-

-

-

Deposits

353,491

-

-

-

-

-

-

-

-

As of 31 March 2023
After
20 years
through
30 years

After
30 years
through
40 years¥1,802,401 ¥1,761,538 ¥1,716,614 ¥1,648,313 ¥1,573,696 ¥6,506,316 ¥6,563,314 ¥1,681,801¥46,201

Within1 year
Loans(Millions of yen)After
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

Securities
Held-tomaturity
securities

747,000

-

-

-

-

-

-

-

-

Deposits

497,337

-

-

-

-

-

-

-

-

82 JFM ANNUAL REPORT 2023

After
1 yearthrough
2 yearsAfter
20 years
through
30 years

After
30 years
through
40 years$13,503,161 $13,197,025 $12,860,465 $12,348,771 $11,789,758 $48,743,755 $49,170,771 $12,599,654$346,131

Within1 yearLoans

After
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

5,596,344

-

-

-

-

-

-

-

-

Deposits

3,725,933

-

-

-

-

-

-

-

-

Note 3. The repayment schedule for bonds and borrowed money is as follows:
As of 31 March 2022

(Millions of yen)After
1 yearthrough
2 years

Bonds

After
20 years
through
30 years

After
30 years
through
40 years¥2,142,677 ¥2,335,910 ¥2,012,996 ¥2,015,037 ¥1,367,846 ¥6,047,001 ¥3,778,644¥284,500¥122,000-

86,200After
2 years
through
3 years

83,400After
3 years
through
4 years

88,000After
4 years
through
5 years

104,500

After
5 years
through
10 years

33,8003,600

As of 31 March 2023
After
20 years
through
30 years

After
30years
through
40 years¥2,335,910 ¥2,012,996 ¥2,069,380 ¥1,367,846 ¥1,782,405 ¥5,555,523 ¥4,080,144¥304,000¥122,000--

86,200After
1 yearthrough
2 years

83,400After
2 years
through
3 years

88,000After
3 years
through
4 years

104,500

After
4 years
through
5 years

140,000

After
5 years
through
10 years

20,8003,600(Thousands of U.S. dollars)

Bonds
Borrowed
money

After
20 years
through
30 years

After
30 years
through
40 years$17,500,075 $15,080,888 $15,503,301 $10,247,576 $13,353,354 $41,620,640 $30,567,462$2,277,495$913,995--

645,790After
1 yearthrough
2 years

624,813After
2 years
through
3 years

659,275

After
3 years
through
4 years

782,889After
4 years
through
5 years

1,048,845

After
5 years
through
10 years

155,829

26,970(3) Items related to breakdown by level of fair value of financial instruments
The fair value of financial instruments is classified into the following three levels based on the observability andmateriality of the inputs used to calculate the fair value.

In cases where multiple inputs are used that have a significant impact on the calculation of fair value, the fair value
is classified as the lowest priority level in the calculation of fair value.

JFM ANNUAL REPORT 2023

Level 1: Fair value calculated using quoted (unadjusted) market prices in active markets for identical assets or
liabilities.
Level 2: Fair value calculated using inputs that are directly or indirectly observable other than Level 1 inputs.
Level 3: Fair value calculated using significant and unobservable inputs.



After
10 years
through
20 yearsWithin1 year
  

Bonds(Millions of yen)After
10 years
through
20 yearsWithin1 yearBorrowed
money

-

-




After
10 years
through
20 yearsWithin1 yearBorrowedmoney

Securities
Held-tomaturity
securities   

(Thousands of U.S. dollars)

83

Financial Section
Financial Statements(i) Financial assets and liabilities for which fair value is used as the balance sheet amountNot applicable(ii) Financial assets and liabilities for which fair value is not used as the balance sheet amount
As of 31 March 2022

(Millions of yen)

Fair value
Level 1
(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments

Level 2

Total

Level 3¥-¥-¥24,209,869¥24,209,869-

920,000
353,491812-

920,000
353,491812

Total assets-

1,274,303

24,209,869

25,484,172(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments-

20,372,729
398,522
147,451-

20,372,729
398,522
147,451

Total liabilities-

20,918,702-

20,918,702

Derivative transactions
Hedge accounting applied

-

-

-

-

Total of derivative transactions

¥-

¥-

¥-

¥-

As of 31 March 2023

(Millions of yen)

Fair value
Level 1
(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments

Level 2

Total

Level 3¥-¥-

¥23,626,650¥23,626,650-

747,000
497,337
1,016-

747,000
497,337
1,016

Total assets-

1,245,353

23,626,650

24,872,004(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments-

19,553,561
525,123
171,013-

19,553,561
525,123
171,013

Total liabilities-

20,249,697-

20,249,697

Derivative transactions
Hedge accounting applied

-

-

-

-

Total of derivative transactions

¥-

¥-

¥-

¥-

(Thousands of U.S. dollars)

Fair value
Level 1

Level 2

Total

Level 3

(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments$-$-$177,005,173$177,005,173-

5,596,344
3,725,933
7,612-

5,596,344
3,725,933
7,612

Total assets-

9,329,889

177,005,173

186,335,062(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments-

146,490,572
3,934,095
1,281,188-

146,490,572
3,934,095
1,281,188

Total liabilities-

151,705,855-

151,705,855

Derivative transactions
Hedge accounting applied

-

-

-

-

Total of derivative transactions

$-

$-

$-

$-

Note 1: Description of valuation techniques and inputs used to calculate fair value

84 JFM ANNUAL REPORT 2023

Derivative transactions
Derivative transactions
The fair value of interest rate swaps is calculated by thediscounted cash flow method, which uses observable
inputs such as interest rates. Therefore, the fair value isclassified as Level 2.


  

Note 2: Information on the Level 3 fair value of financial
assets and liabilities whose fair value is recordedin the balance sheet
Not applicable

Liabilities(1 ) Bonds
The fair value of bonds issued by the JFM that have amarket price is based on the market price. The fairvalue of bonds without a market price is calculatedby discounting the future cash flows using the interest
rate that would be applied when issuing similarbonds with the same total principal and interest andpayment term. Although the JFM can quote a market
price, the market is not active, the fair value is classified
as Level 2.
Deferral hedge accounting is used for currency swaps,
and the fair value of foreign currency-denominatedbonds is calculated by discounting the total amount of(4) Cash collateral paid for financial instruments
Cash collateral is associated with derivative transactions.
The fair value is classified as Level 2 and the book value
is used as the fair value of cash collateral paid forfinancial instruments since both values are approximately equal as a result of each deposit period being
short term.

(3) Cash collateral received for financial instruments
Cash collateral is associated with derivative transactions. The fair value is classified as Level 2 and thebook 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.




(3) Cash and bank deposits
The book value is used as the fair value for deposits
without maturities. All deposits with maturities areshort-term and the fair value approximates the bookvalue. Therefore, the fair value is classified as Level 2
and the book value is deemed to be the fair value.

(2) Borrowed money
The fair value of long-term borrowed money is calculated by discounting the future cash flows using theinterest rate that would presumably be applied whenissuing bonds with the same total principal and interest
and payment term. Therefore, the fair value is classified
as Level 2.



(2) Securities
All securities are negotiable certificates of deposit andshort-term, and the fair value approximates the bookvalue. Therefore, the fair value is classified as Level 2
and the book value is deemed to be the fair value.

principal and interest accounted for as an integral partof the relevant currency swap by the interest rate thatwould be applied if similar bonds were issued. Therefore,
the fair value is classified as Level 2.
Hedge accounting is used for interest rate swaps, andthe fair value of floating rate bonds is calculated bydiscounting the total amount of principal and interest
accounted for as an integral part of the relevant interest
rate swap by the interest rate that would be applied if
similar bonds were issued. Therefore, the fair value isclassified as Level 2.

   

Assets(1 ) Loans
The fair value of loans is calculated by discounting
future cash flows assuming prepayment at the discountrate calculated using the Japanese government bondrates as of 31 March 2023.
For early redemption, the actual amount of early redemption during the past certain period is calculated
as a percentage of the regular redemption amountduring the past certain period, and multiplied by theregular redemption amount in subsequent years. For
loans subject to interest rate review, the average rateof interest rate reduction of the loans subject to interest
rate review is applied to the applicable interest rate at
the time of calculation of fair value.
As the estimated amount of early redemption and theinterest rate reduction rate are unobservable, the fairvalue is classified as Level 3.

JFM ANNUAL REPORT 2023

85

Financial Section
Financial Statements
7. Tangible and Intangible Fixed Assets
Tangible and intangible fixed assets as of 31 March 2022 consisted of the following:(Millions of yen)

Balanceas of
1 April
2021(Acquisition
costs)

Increaseduringthe year

Decreaseduringthe year

Tangible fixed assets
Buildings
Land
Other tangible fixed assets¥1,187
1,659
625

¥9
52

¥8

¥1,196
1,659
669

¥565
387

¥27
112

¥630
1,659
281

Total tangible fixed assets

3,472

61

8

3,525

953

139

2,572

Intangible fixed assets
Software
Other intangible fixed assets

1,691
2

399
2

273
2

1,816
2

842
-

355
-

974
2

Total intangible fixed assets¥1,694¥402¥276¥1,819

¥842

¥355

¥976

Type of assets

BalanceAccumulated
Depreciation
as ofdepreciation
and
31 Marchandamortization2022
amortization
during(Acquisition
as of
the yearcosts)
31 March 2022

Balanceas of
31 March
2022(Net bookvalue)

Tangible and intangible fixed assets as of 31 March 2023 consisted of the following:(Millions of yen)

Balanceas of
1 April2022(Acquisition
costs)

Increaseduringthe year

Decreaseduringthe year

Tangible fixed assets
Buildings
Land
Other tangible fixed assets¥1,196
1,659
669

¥784

¥186
327
1

¥1,010
1,332
1,452

¥495
504

¥20
118

¥515
1,332
947

Total tangible fixed assets

3,525

784

515

3,795

999

139

2,795

Intangible fixed assets
Software
Other intangible fixed assets

1,816
2

475
1,153

216
2

2,075
1,153

997
-

372
-

1,077
1,153

Total intangible fixed assets¥1,819¥1,628¥219¥3,229¥997¥372¥2,231

Type of assets

BalanceAccumulated
Depreciation
as ofdepreciation
and
31 Marchandamortization
2023
amortization
during(Acquisition
as of
the yearcosts)
31 March 2023

Balanceas of
31 March
2023(Net bookvalue)(Thousands of U.S. dollars)

Balanceas of
1 April2022(Acquisition
costs)

Increaseduringthe year

Decreaseduringthe year

Tangible fixed assets
Buildings
Land
Other tangible fixed assets$8,966
12,4355,014$5,878$1,3952,456
9$7,571
9,979
10,883$3,709
3,781

$153
889

$3,862
9,979
7,102

Total tangible fixed assets

26,415

5,878

3,860

28,433

7,490

1,042

20,943

Intangible fixed assets
Software
Other intangible fixed assets

13,612
19

3,561
8,641

1,624
18

15,549
8,642

7,475
-

2,787
-

8,074
8,642

Total intangible fixed assets$13,631$12,202$1,642$24,191$7,475$2,787$16,716

Type of assets

86 JFM ANNUAL REPORT 2023

BalanceAccumulated
Depreciation
as ofdepreciation
and
31 Marchandamortization
2023
amortization
during(Acquisition
as of
the yearcosts)
31 March 2023

Balanceas of
31 March
2023(Net bookvalue)

9. Bonds
Bonds as of 31 March 2022 consisted of the following:   

8. 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 20,103,035 million yen and 19,626,484 million yen (147,036,895 thousand U.S. dollars) asof 31 March 2022 and 2023, respectively.

(Millions of yen)

Date of
issue

Balance as of
1 April 2021

Balance as of
31 March 2022

Couponrate (%)

Maturity

0.001
to 1.300

10Y

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

9/26/20132/24/2017

420,046

220,0320.001
to 0.576

8Y

Government-guaranteed bonds issued by the JFM(domestic) 6-year bonds (Series 16-20)

5/28/201510/28/2016

320,175

200,036(200,036)

0.001
to 0.150

6Y

Government-guaranteed bonds issued by the JFM(domestic) 4-year bonds (Series 8-13)

6/29/20178/26/2021

220,112220,388

0.001

4Y

Non-guaranteed bonds issued by the JFM(domestic) 5-year bonds (Series 19-30)

4/21/201611/18/2021

135,000

135,000(30,000)

0.001
to 0.040

5Y

Non-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 23-154)

4/21/20113/17/2022

3,385,000

3,375,000(485,000)

0.049
to 1.418

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 1-96)

6/25/20091/21/2022

1,765,000

1,890,000

0.180
to 2.266

20Y

Non-guaranteed bonds issued by the JFM(domestic) 30-year bonds (Series 1-14)

6/26/201411/18/2021

150,000

180,000

0.446
to 1.864

30Y

Non-guaranteed bonds issued by the JFM(domestic) 40-year bonds (Series 1-3)

2/26/20199/24/2020

40,00040,0000.646
to 0.882

40Y

Non-guaranteed bonds issued by the JFM(domestic) FLIP bonds (Series F2-F6, F8-F14, F16-F17,
F24, F28-F29, F37, F42-F43, F45-F47, F49, F51-F52,
F54-F56, F59-F68, F71-F73, F75-F80, F82-F85, F87-F90,
F92-F93, F95-F98, F100-F109, F111-F112, F115-F134,
F136-F139, F141-F143, F145-F153, F155-F164, F166-F169,
F171-F179, F181-F210, F212-F243, F245-F276, F278-F298,
F300-F310, F312-F319, F321-F369, F371-F400,
and F403-F669)

7/23/20093/24/2022

3,117,917

3,303,546(274,500)

0.001
to 2.334

2Y
to 40Y

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

2/26/20147/25/2014

20,00020,000Floatingrate

20Y
to 30Y

Non-guaranteed bonds issued by the JFM(international) (Series 43-45, 47-49, 53-58, and 61-92)

5/1/20141/27/2022

1,977,602[USD 14,556 million]
1,935,253 [AUD 1,584 million][EUR 2,080 million](246,007)

0.010
to 5.092

3Y
to 15Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds
for local government officials (Series A15-A146)

4/21/20113/24/2022

2,260,000

2,110,000(300,000)

0.069
to 1.460

10Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series B1-B77)

11/24/20153/24/2022

429,000

541,500

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-C77)

11/24/20153/24/2022

594,000

715,500

0.190
to 1.154

20Y

JFM ANNUAL REPORT 2023

¥3,305,000(490,000)

¥3,817,710


  

4/18/20111/21/2020


Government-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 23-123)

Type of bond87

Financial Section
Financial Statements

Type of bondNon-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series D1-D72)
Bonds issued by the JFM - Sub-total

Date of
issue

Balance as of
1 April 2021

Balance as of
31 March 2022

Couponrate (%)

Maturity

4/21/20163/24/2022

740,000

890,000

0.190
to 0.778

20Y-

19,399,215

19,173,606--

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

1/26/20094/30/2009

84,976

84,9792.07
to 2.29

20Y

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

84,976

84,979--Government-guaranteed bonds issued by the Predecessor(domestic) 15-year bonds (Series 2-5)

4/18/20067/18/2007

144,985

64,999(64,999)

2.0
to 2.2

15Y

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

7/30/20026/16/2008

569,883

569,908(49,998)

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

189,915

189,9212.39
to 2.95

30Y

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

2/14/20036/9/2004

21,79019,620(2,170)1.39
to 2.01

28Y

Bonds issued by the Predecessor - Sub-total-

926,574

844,449

-

-

Total

-

¥20,410,767¥20,103,035--

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 amount of
20,103,035 million yen as of 31 March 2022.
2. A mounts in square brackets under “Balance as of 31 March 2022” for “Non-guaranteed bonds issued by the JFM (international)— (Series 43-45, 47-49,
53-58 and 61-92)” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2022” are to be repaid within one year.

88 JFM ANNUAL REPORT 2023

(Millions of yen)Type of bondDate of
issue

Balance as of
1 April 2022

Balance as of
31 March 2023

Couponrate (%)

Maturity

0.001
to 0.977

10Y

Government-guaranteed bonds issued by the JFM(domestic) 8-year bonds (Series 4-7)

7/30/20152/24/2017

220,032

220,019(100,000)

0.001
to 0.311

8Y

Government-guaranteed bonds issued by the JFM(domestic) 6-year bonds (Series 18-20)

5/30/201610/28/2016

200,036

-

0.001

6Y

Government-guaranteed bonds issued by the JFM(domestic) 4-year bonds (Series 11-13)

8/28/20208/26/2021

220,388

220,262

0.001

4Y

Non-guaranteed bonds issued by the JFM(domestic) 5-year bonds (Series 21-32)

4/20/201712/20/2022

135,000

137,000(20,000)

0.001
to 0.249

5Y

Non-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 35-166)

4/19/20123/20/2023

3,375,000

3,200,000(415,000)

0.049
to 1.006

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 1-103)

6/25/20091/23/2023

1,890,000

2,020,000

0.180
to 2.266

20Y

Non-guaranteed bonds issued by the JFM(domestic) 30-year bonds (Series 1-16)

6/26/201410/21/2022

180,000

200,000

0.446
to 1.864

30Y

Non-guaranteed bonds issued by the JFM(domestic) 40-year bonds (Series 1-3)

2/26/20199/24/2020

40,00040,0000.646
to 0.882

40Y

Non-guaranteed bonds issued by the JFM(domestic) FLIP bonds (Series F2-F6, F8-F11, F13-F14, F16,
F24, F28-F29, F37, F42-F43, F45-F47, F49, F51-F52,
F54-F56, F59-F68, F71-F73, F75-F80, F82-F85, F87-F90,
F92-F93, F95-F98, F100-F109, F112, F115-F125, F127-F134,
F136-F139, F142-F143, F145-F152, F155-F164, F166-F169,
F172-F179, F181-F210, F213-F243, F245-F250, F252-F270,
F272-F276, F278-F298, F300-F310, F317-F319, F325,
F329-F333, F338-F345, F348-F369, F371-F400,
and F403-F733)

7/23/20093/31/2023

3,303,546

3,402,175(283,500)

0.001
to 2.334

2Y
to 40Y

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

2/26/20147/25/2014

20,00020,000Floatingrate

20Y
to 30Y

1,999,004[USD 12,529 million]
1,977,602 [AUD 1,564 million][EUR 3,880 million](435,075)

0.010
to 5.092

3Y
to 15Y

5/1/20142/22/2023

Non-guaranteed bonds issued by the JFM(international) (Series 99)

10/26/2022

-

3,730
[USD 25 million]

Floating
rate

5Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds
for local government officials (Series A27-A158)

4/19/20123/27/2023

2,110,000

1,960,000(300,000)

0.069
to 1.020

10Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series B1-B89)

11/24/20153/27/2023

541,500

641,500

0.069
to 0.834

10Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series C1-C89)

11/24/20153/27/2023

715,500

845,500

0.190
to 1.453

20Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series D1-D84)

4/21/20163/27/2023

890,000

1,040,000

0.190
to 1.453

20Y-

19,173,606

18,814,191--

Bonds issued by the JFM - Sub-total

JFM ANNUAL REPORT 2023

Non-guaranteed bonds issued by the JFM(international) (Series 43-44, 47-49, 54, 57-58, 61-98,
and 100-101)

¥2,815,000(680,000)
  

¥3,305,000


4/23/20121/21/2020

Government-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 35-123)   

Bonds as of 31 March 2023 consisted of the following:89

Financial Section
Financial Statements

Type of bondDate ofissue

Couponrate (%)

Maturity

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

1/26/20094/30/2009

84,97984,9822.07
to 2.29

20Y-

84,97984,982--Government-guaranteed bonds issued by the Predecessor(domestic) 15-year bonds (Series 4-5)

4/24/20077/18/2007

64,999-2.0
to 2.2

15Y

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

7/30/20026/16/2008

569,908

519,932(99,995)

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

189,921

189,927

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

19,62017,450(2,170)1.39
to 2.01

28Y

Bonds issued by the Predecessor - Sub-total-

844,449

727,310

-

-

Total

-

¥20,103,035¥19,626,484--

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

90 JFM ANNUAL REPORT 2023

Balance as of
1 April 2022

Balance as of
31 March 2023

Date of
issue

Balance as of
1 April 2022

Government-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 35-123)

4/23/20121/21/2020$24,760,263

Government-guaranteed bonds issued by the JFM(domestic) 8-year bonds (Series 4-7)

7/30/20152/24/2017

Government-guaranteed bonds issued by the JFM(domestic) 6-year bonds (Series 18-20)

1,648,431

1,648,330(749,176)0.001
to 0.311

8Y

5/30/201610/28/2016

1,498,623

-

0.001

6Y

Government-guaranteed bonds issued by the JFM(domestic) 4-year bonds (Series 11-13)

8/28/20208/26/2021

1,651,099

1,650,155

0.001

4Y

Non-guaranteed bonds issued by the JFM(domestic) 5-year bonds (Series 21-32)

4/20/201712/20/2022

1,011,387

1,026,371(149,835)

0.001
to 0.249

5Y

Non-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 35-166)

4/19/20123/20/2023

25,284,686

23,973,630(3,109,080)

0.049
to 1.006

10Y

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

1/31/20131/22/2014

374,588374,588

1.161
to 1.334

15Y

Non-guaranteed bonds issued by the JFM(domestic) 20-year bonds (Series 1-103)

6/25/20091/23/2023

14,159,425

15,133,353

0.180
to 2.266

20Y

Non-guaranteed bonds issued by the JFM(domestic) 30-year bonds (Series 1-16)

6/26/201410/21/2022

1,348,517

1,498,352

0.446
to 1.864

30Y

Non-guaranteed bonds issued by the JFM(domestic) 40-year bonds (Series 1-3)

2/26/20199/24/2020

299,670299,6700.646
to 0.882

40Y

Non-guaranteed bonds issued by the JFM(domestic) FLIP bonds (Series F2-F6, F8-F11, F13-F14, F16,
F24, F28-F29, F37, F42-F43, F45-F47, F49, F51-F52,
F54-F56, F59-F68, F71-F73, F75-F80, F82-F85, F87-F90,
F92-F93, F95-F98, F100-F109, F112, F115-F125, F127-F134,
F136-F139, F142-F143, F145-F152, F155-F164, F166-F169,
F172-F179, F181-F210, F213-F243, F245-F250, F252-F270,
F272-F276, F278-F298, F300-F310, F317-F319, F325,
F329-F333, F338-F345, F348-F369, F371-F400,
and F403-F733)

7/23/20093/31/2023

24,749,375

25,488,280(2,123,914)

0.001
to 2.334

2Y
to 40Y

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

2/26/20147/25/2014

149,835

149,835

Floatingrate

20Y
to 30Y

Non-guaranteed bonds issued by the JFM(international) (Series 43-44, 47-49, 54, 57-58, 61-98,
and 100-101)

5/1/20142/22/2023

14,976,060[USD 12,529 million]
14,815,721 [AUD 1,564 million][EUR 3,880 million](3,259,482)

0.010
to 5.092

3Y
to 15Y

Non-guaranteed bonds issued by the JFM(international) (Series 99)

10/26/2022-

27,944[USD 25 million]

Floating
rate

5Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds
for local government officials (Series A27-A158)

4/19/20123/27/2023

15,807,612

14,683,848(2,247,528)

0.069
to 1.020

10Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series B1-B89)

11/24/20153/27/2023

4,056,788

4,805,963

0.069
to 0.834

10Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series C1-C89)

11/24/20153/27/2023

5,360,354

6,334,282

0.190
to 1.453

20Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series D1-D84)

4/21/20163/27/2023

6,667,666

7,791,429

0.190
to 1.453

20Y-

143,644,040

140,951,393--

JFM ANNUAL REPORT 2023

10Y

0.001
to 0.977
  

$21,089,303(5,094,396)




Maturity

Bonds issued by the JFM - Sub-total

Balance as of
31 March 2023

Couponrate (%)

Type of bond   

(Thousands of U.S. dollars)91

Financial Section
Financial Statements

Type of bondDate of
issue

Balance as of
1 April 2022

Balance as of
31 March 2023

Couponrate (%)

Maturity

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

1/26/20094/30/2009

636,648636,670

2.07
to 2.29

20Y

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

636,648636,670--

Government-guaranteed bonds issued by the Predecessor(domestic) 15-year bonds (Series 4-5)

4/24/20077/18/2007

486,958-

2.0
to 2.2

15Y

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

7/30/20026/16/2008

4,269,617

3,895,207(749,146)

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

1,422,848

1,422,894

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

146,988

130,731(16,257)

1.39
to 2.01

28Y

Bonds issued by the Predecessor - Sub-total-

6,326,411

5,448,832

-

-

Total

-

$150,607,099$147,036,895--

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 amount of
19,626,484 million yen (147,036,895 thousand U.S. dollars) as of 31 March 2023.
2. Amounts in square brackets under “Balance as of 31 March 2023” for “Non-guaranteed bonds issued by the JFM (international)— (Series 43-44, 47-49, 54,
57-58, 61-98 and 100-101)” and “Non-guaranteed bonds issued by the JFM (international)— (Series 99)” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2023” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:

92 JFM ANNUAL REPORT 2023

(Millions of yen)

Within 1 year
¥2,142,677

Bonds

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥2,335,910¥2,012,996¥2,015,037¥1,367,846

As of 31 March 2023

   

As of 31 March 2022

(Millions of yen)

Within 1 year

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥2,012,996¥2,069,380¥1,367,846¥1,782,405(Thousands of U.S. dollars)Within 1 year
Bonds

$17,500,075

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years$15,080,888$15,503,301$10,247,576$13,353,354(Millions of yen)Classification of borrowed money

Balance as of
1 April 2021

Balance as of
31 March 2022

Average interest rate(%)

Repayment date

¥-

¥-

-

-

Long-term borrowed money(repayment within 1 year)¥1,000¥---Long-term borrowed money(excluding repayment within 1 year)¥293,000¥399,500

0.219

5/29/20233/16/2040

Total¥294,000¥399,500--

Borrowed money as of 31 March 2023 consisted of the following:(Millions of yen)Classification of borrowed money

Balance as of
1 April 2022

Balance as of
31 March 2023

Average interest rate(%)


  

Short-term borrowed money


10. Borrowed Money
Borrowed money as of 31 March 2022 consisted of the following:

¥2,335,910

Bonds

After 1 year
through 2 years

Repayment date

¥-

¥-

-

-

Long-term borrowed money(repayment within 1 year)¥-¥86,200

0.529

5/29/20233/15/2024-

Long-term borrowed money(excluding repayment within 1 year)¥399,500¥440,300

0.150

4/4/20243/16/2040

Total¥399,500¥526,500--

Short-term borrowed money(Thousands of U.S. dollars)

Balance as of
1 April 2022

Balance as of
31 March 2023

Average interest rate(%)

Repayment date

Short-term borrowed money

$-

$-

-

-

Long-term borrowed money(repayment within 1 year)$-$645,790

0.529

5/29/20233/15/2024-

Long-term borrowed money(excluding repayment within 1 year)$2,992,958$3,298,621

0.150

4/4/20243/16/2040

Total$2,992,958$3,944,411--

JFM ANNUAL REPORT 2023

Classification of borrowed money

93

Financial Section
Financial Statements
Notes: 1. Average interest rates are calculated by dividing the total amount of interest paid by the total amount of principal
multiplied by repayment years.
2. Annual schedule of repayments within five years after the fiscal year-end:

As of 31 March 2022

(Millions of yen)

Within 1 year¥-

Borrowed money

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥86,200¥83,400¥88,000¥104,500

As of 31 March 2023

(Millions of yen)

Within 1 year
¥86,200

Borrowed money

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥83,400¥88,000¥104,500¥140,000(Thousands of U.S. dollars)Within 1 year
Borrowed money$645,790

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years$624,813$659,275$782,889$1,048,846

11 . Reserves
Reserves as of 31 March 2022 consisted of the following:(Millions of yen)

Balanceas of
31 March2022

Decrease during the year

Balanceas of
1 April 2021

Increaseduring theyear

Reserve for bonuses

¥59

¥59

¥59

¥-

¥59

Reserve for bonuses for directors andcorporate auditors

10

10

10

-

10

Reserve for retirement benefits

52

22

2

7

64

Reserve for retirement benefits for directors
and corporate auditors

21

9

13

1

15

Classification of reserve

Intended
purposeOther

Reserves as of 31 March 2023 consisted of the following:(Millions of yen)

Balanceas of
31 March2023

Decrease during the year

Balanceas of
1 April 2022

Increaseduring theyear

Reserve for bonuses

¥59

¥54

¥59

¥-

¥54

Reserve for bonuses for directors andcorporate auditors

10

8

10

-

8

Reserve for retirement benefits

64

18

1

7

74

Reserve for retirement benefits for directors
and corporate auditors

15

9

6

1

15

Classification of reserve

94 JFM ANNUAL REPORT 2023

Intended
purposeOtherBalance
as of
31 March2023

Decrease during the year

Balanceas of
1 April 2022

Increaseduring the
year

$449

$411

$449

$-

$411

Reserve for bonuses for directors andcorporate auditors

77

67

77

-

67

Reserve for retirement benefits

484

140

9

53

562

Reserve for retirement benefits for directors
and corporate auditors

113

70

51

14

118

Classification of reserve

Reserve for bonuses

Intended
purposeOther   

(Thousands of U.S. dollars)

12 . Reserve for Interest Rate Volatility
Reserve for interest rate volatility as of 31 March 2022 consisted of the following:(Millions of yen)

Decrease during the year

AmountprovidedAmountwithdrawn

Classification of reserve
Reserve for interest rate volatility¥2,200,000¥-

Management account reserve forinterest rate volatility

640,92181,754¥2,840,921¥81,754

Total

¥-

¥-

¥-

Balanceas of
31 March
2022¥2,200,000

40,000¥-682,675¥40,000¥-¥2,882,675




Increase during the year

Balanceas of
1 April 2021

Reserve for interest rate volatility as of 31 March 2023 consisted of the following:

Classificationof reserve

Balanceas of
1 April 2022

Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn

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

Management account reserve forinterest rate volatility

682,675

68,890¥2,882,675¥68,890

Total

¥-

¥-

¥-

Balanceas of
31 March
2023¥2,200,000

50,000¥-701,566¥50,000¥-¥2,901,566

Classificationof reserve

Balanceas of
1 April 2022

Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn

Reserve for interest rate volatility$16,481,870$-

Management account reserve forinterest rate volatility

5,114,444

516,109$21,596,314$516,109

Total

$-

$-

$-

Balanceas of
31 March
2023$16,481,870

374,588$-5,255,965$374,588$-$21,737,835

(Thousands of U.S. dollars)
  

(Millions of yen)
JFM ANNUAL REPORT 2023

95

Financial Section
Financial Statements
Note: The “Decrease during the year” for the “Management account reserve for interest rate volatility” in the amount of
50,000 million yen (374,588 thousand U.S. dollars) consists of the payment to the national treasury in accordancewith the ministerial ordinance for attribution to the national government.

13. Fund for Lending Rate Reduction
Fund for lending rate reduction as of 31 March 2022 consisted of the following:(Millions of yen)Classification of fund

Balanceas of
1 April 2021

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn

OthersBalanceas of
31 March
2022

Basic fund for lending rate
reduction¥920,287¥13,691¥-¥13,691¥-¥920,287

Total¥920,287¥13,691¥-¥13,691¥-¥920,287

Fund for lending rate reduction as of 31 March 2023 consisted of the following:(Millions of yen)Classification of fund

Balanceas of
1 April 2022

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn

OthersBalanceas of
31 March
2023

Basic fund for lending rate
reduction¥920,287¥19,997¥-¥16,410¥-¥923,873

Total¥920,287¥19,997¥-¥16,410¥-¥923,873(Thousands of U.S. dollars)

Classification of fund

Balanceas of
1 April 2022

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn

OthersBalanceas of
31 March
2023

Basic fund for lending rate
reduction$6,894,573$149,813$-$122,945$-$6,921,441

Total$6,894,573$149,813$-$122,945$-$6,921,441

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 in accordance 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 the provisionsof Article 46, Section 6 of the Law.

96 JFM ANNUAL REPORT 2023

As of and for the year ended 31 March 2022
(1) Outline of retirement benefits system
The JFM has a defined benefit plan that contributes
to the Corporate Pension Fund and offers lumpsum payments upon retirement of employees anda defined contribution plan. The reserve forretirement benefits and pension expenses arecalculated using the simplified method.

16. Revenues
Revenues from contracts with customers are mainly
as follows:
Fees and commissions
Fees and commissions includes commissions related
to the lending of funds entrusted by Japan FinanceCorporation, and revenue is recognized at the point intime when the obligations is deemed to be satisfied
when the loan is executed or the interest collected is
paid to the customer.

JFM ANNUAL REPORT 2023

(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:(For the year ended 31 March 2023)
Net income of the general account was 36,079 million
yen (270,295 thousand U.S. dollars), while there wasno net income of management account.



As of and for the year ended 31 March 2023
(1) Outline of retirement benefits system
The JFM has a defined benefit plan that contributes
to the Corporate Pension Fund and offers lumpsum payments upon retirement of employees anda defined contribution plan. The reserve forretirement benefits and pension expenses arecalculated using the simplified method.

15. Net Income by Account(For the year ended 31 March 2022)
Net income of the general account was 32,263 million yen,while there was no net income of management account.


  (c) Profit and loss associated with employee retirement
benefits
Pension expenses calculated based on thesimplified method: 22 million yen(c) Profit and loss associated with employee retirement
benefits
Pension expenses calculated based on thesimplified method: 18 million yen (140 thousand U.S.
dollars)
(b) Retirement benefit obligation, plan assets, andreconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:
196 million yen
Plan assets:   (186) million yen
Balance:
10 million yen
Unfunded retirement benefit obligation:       54 million yen
Net liability for retirement benefits in the balance
sheet:
       64 million yen
Reserve for retirement benefits at the end of the
fiscal year:       64 million yen
Net liability for retirement benefits in the balance
sheet:
       64 million yen(b) Retirement benefit obligation, plan assets, andreconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:

189 million yen (1,421 thousand U.S. dollars)
Plan assets:   (174) million yen ((1,307) thousand U.S. dollars)
Balance:
15 million yen     (114 thousand U.S. dollars)
Unfunded retirement benefit obligation:        59 million yen   (448 thousand U.S. dollars)
Net liability for retirement benefits in the balance
sheet:
        74 million yen    (562 thousand U.S. dollars)
Reserve for retirement benefits at the end of the
fiscal year:       74 million yen    (562 thousand U.S. dollars)
Net liability for retirement benefits in the balance
sheet:
       74 million yen    (562 thousand U.S. dollars)(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:
22 million yen
Employee retirement benefits paid: 2 million yen
Contributions to the defined benefit plan:         7 million yen
Reserve for retirement benefits at the end of the
fiscal year:       64 million yen64 million yen   (484 thousand U.S. dollars)
Pension expenses:
18 million yen   (140 thousand U.S. dollars)Employee retirement benefits paid:
1 million yen       (9 thousand U.S. dollars)
Contributions to the defined benefit plan:          7 million yen     (53 thousand U.S. dollars)
Reserve for retirement benefits at the end of the
fiscal year:        74 million yen   (562 thousand U.S. dollars)   

14. Reserve for Retirement Benefits

97

Financial Section
Financial Statements
17. Information by Account (Balance sheet)
Balance sheet of general account and management account as of 31 March 2022 were as follows:(Millions of yen)

Item

Generalaccount

Management
account¥18,611,519¥4,939,300

OffsetTotal(Assets)
Loans¥23,550,819

Securities

920,000

920,000

Cash and bank deposits

353,491

353,491

812

812

Cash collateral paid for financial instruments
Other assets

3,260

Tangible fixed assets

2,572

2,572

Intangible fixed assets

976

976

6,193

600,043¥(600,043)

19,892,632

5,542,276(600,043)

15,313,128

4,789,906

Due from general accountTotal assets

2,932

24,834,865(Liabilities)
Bonds

20,103,035

Borrowed money

399,500

399,500

Cash collateral received for financial instruments

147,451

147,451

Other liabilities

1,776

2,868

4,644

Reserve for bonuses

59

59

Reserve for bonuses for directors and corporate auditors

10

10

Reserve for retirement benefits

64

64

Reserve for retirement benefits for directors and corporate
auditors

15

15

920,287920,287920,287920,287

Fund for lending rate reduction
Basic fund for lending rate reduction
Due to management account

600,043

Reserves under special laws

2,200,000

Reserve for interest rate volatility

691,692

2,891,692

2,200,000

Management account reserve for interest rate volatility
Reserve for interest rate reduction
Total liabilities(600,043)

19,582,337

2,200,000
682,675

682,675

9,017

9,017

5,484,467(600,043)

24,466,761(Net Assets)
Capital16,602

16,602Retained earnings

298,035

298,035

298,035

298,035(4,342)(4,342)

General account appropriated surplus reserve
Valuation, translation adjustments and others

57,80857,808310,295

57,808368,104¥19,892,632¥5,542,276

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

98 JFM ANNUAL REPORT 2023¥(600,043)¥24,834,865

(Millions of yen)

Item

Generalaccount

Management
account¥19,153,208¥4,146,992

OffsetTotal(Assets)
Loans¥23,300,200

747,000

747,000

Cash and bank deposits

497,337

497,337

Cash collateral paid for financial instruments

1,016

1,016

Other assets

3,336

Tangible fixed assets

2,795

2,795

Intangible fixed assets

2,231

2,231

Total assets

2,411

5,748

¥(601,213)

20,406,925

4,750,616(601,213)

15,643,892

3,982,591

24,556,329(Liabilities)
Bonds

19,626,484

Borrowed money

526,500

526,500

Cash collateral received for financial instruments

171,013

171,013

Other liabilities

4,140

2,691

6,832
54

Reserve for bonuses for directors and corporate auditors

8

8

Reserve for retirement benefits

74

74

Reserve for retirement benefits for directors and corporate
auditors

15

15

Fund for lending rate reduction

923,873923,873

Basic fund for lending rate reduction

923,873923,873

Due to management account

601,213

Reserves under special laws

2,200,000

Reserve for interest rate volatility

2,200,000

Management account reserve for interest rate volatility
Reserve for interest rate reduction
Total liabilities

20,070,788(601,213)
707,523

2,907,523
2,200,000

701,566

701,566

5,957

5,957

4,692,807(601,213)

24,162,382(Net Assets)
16,602

16,602Retained earnings

334,114334,114

General account appropriated surplus reserve334,114334,114

Valuation, translation adjustments and others(14,579)(14,579)
57,80857,808336,137

57,808393,946¥20,406,925¥4,750,616

Management account surplus reserve
Total net assets
Total liabilities and net assets¥(601,213)¥24,556,329

JFM ANNUAL REPORT 2023

Capital

54
  

Reserve for bonuses


601,213

Securities

Due from general account   

Balance sheets of general account and management account as of 31 March 2023 were as follows:99

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

Item

Generalaccount

Management
account$143,491,225$31,068,266

OffsetTotal(Assets)
Loans$174,559,491

Securities

5,596,344

5,596,344

Cash and bank deposits

3,725,933

3,725,933

Cash collateral paid for financial instruments

7,612

7,612

Other assets

25,000

Tangible fixed assets

20,943

20,943

Intangible fixed assets

16,716

16,71643,065

4,504,144$(4,504,144)

152,883,773

35,590,475(4,504,144)

117,200,276

29,836,619

Due from general accountTotal assets

18,065

183,970,104(Liabilities)
Bonds

147,036,895

Borrowed money

3,944,411

3,944,411

Cash collateral received for financial instruments

1,281,188

1,281,188

Other liabilities

31,023

20,167

51,190Reserve for bonuses

411

411

Reserve for bonuses for directors and corporate auditors

67

67

Reserve for retirement benefits

562

562

Reserve for retirement benefits for directors andcorporate auditors

118

118

Fund for lending rate reduction

6,921,441

6,921,441

Basic fund for lending rate reduction

6,921,441

6,921,441

Due to management account4,504,144

Reserves under special laws

16,481,870

Reserve for interest rate volatility

16,481,870

Management account reserve for interest rate volatility
Reserve for interest rate reduction
Total liabilities

150,365,511(4,504,144)
5,300,599

21,782,469
16,481,870

5,255,965

5,255,965

44,634

44,63435,157,385(4,504,144)

181,018,752(Net Assets)
124,379

124,379

Retained earnings

2,503,106

2,503,106

General account appropriated surplus reserve2,503,106

2,503,106

Valuation, translation adjustments and others(109,224)(109,224)

Capital

433,091

433,091

2,518,261

433,091

2,951,352$152,883,772$35,590,476

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

100 JFM ANNUAL REPORT 2023$(4,504,144)$183,970,104   


Notes: 1 . General account and management accountIn 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 assets that 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 appropriated surplus reserve and management account surplus reserve
“Net income” of the general account is posted as “General account appropriated surplus reserve” in accordancewith the 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.
18. Information by Account (Statement of income)Statements of income of general account and management account from 1 April 2021 through 31 March 2022 were as
follows:(Millions of yen)

Generalaccount

Management
account

Income¥124,505¥116,609

Interest income

110,310

111,760

OffsetTotal¥(5,246)¥235,867
222,071

Fees and commissions

76

76

Other operating income

15

15

Other income

13,703

13,703Contributions from fund for lending rate reduction

13,691

13,691

11
398

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

11
(398)
5

(5)

4,843

(4,843)(5,246)92,24238,553

Interest expenses

81,00237,784

118,786

199

94

294

Other operating expenses

2,839

242

3,081

General and administrative expenses

3,352

33

3,385

Fees and commissions

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

5

(5)

4,843

(4,843)398(398)

32,26378,056-110,319-

43,697-

43,697Administrative fee for general accountOrdinary income
Special gains

125,548

40,00040,000

Reversal of reserve for interest rate reduction

3,697

3,697

Special losses-

Provision for management account reserve for interest rate
volatility-

81,754¥32,263¥-

121,754
81,75440,000

Payment to the national treasury
Net income

121,754

40,000¥-¥32,263

JFM ANNUAL REPORT 2023

Reversal of management account reserve for interest rate
volatility

Expenses
  

OthersAdministrative fee for management account


Item

101

Financial Section
Financial Statements
Statements of income of general account and management account from 1 April 2022 through 31 March 2023 were as
follows:(Millions of yen)

Item

Generalaccount

Management
account

Income¥125,769¥96,771

Interest income

108,891

92,524

OffsetTotal¥(4,552)¥217,989
201,415

Fees and commissions

71

71

Other operating income

81

81

Other income

16,42016,420Contributions from fund for lending rate reduction

16,41016,410

Others1010Administrative fee for management account305

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

(305)
3

(3)

4,243

(4,243)(4,552)

Expenses

89,82330,940Interest expenses

116,21279,12430,553

109,678

Fees and commissions

207

74

282

Other operating expenses

2,424

General and administrative expenses

3,819

7

3,826

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

2,424

3

(3)

4,243

(4,243)305(305)

35,94565,830-101,776

Special gains

133

53,059-53,192Gain on disposal of fixed assets

133

Administrative fee for general accountOrdinary income

133

Reversal of management account reserve for interest rate
volatility

50,00050,000

Reversal of reserve for interest rate reduction

3,059

3,059

Special losses-

118,890-

118,890

Provision for management account reserve for interest rate
volatility

68,89068,890

Payment to the national treasury

50,00050,000Net income

102 JFM ANNUAL REPORT 2023

¥36,079¥-¥-¥36,079

Item

Generalaccount

Management
account

Income$942,237$724,989

Interest income

815,786

693,171

OffsetTotal$(34,104)$1,633,122
1,508,957

537

537

Other operating income

608

608

Other income

123,020

123,020

Contributions from fund for lending rate reduction

122,945

122,945

75

75

OthersAdministrative fee for management account

2,286Interest on due from general accountTransfer from general account for fund for lending rate
reduction(2,286)29(29)

31,789(31,789)(34,104)

Expenses

672,939

231,799

Interest expenses

870,634

228,899821,684

1,557

558

2,115

Other operating expenses

18,166

General and administrative expenses

28,61356

28,669Transfer to management account for fund for lending rate
reduction

18,16629(29)

31,789(31,789)(2,286)493,190-

762,488

Special gains

997

397,507-398,504

Gain on disposal of fixed assets

997

997

Reversal of management account reserve for interest rate
volatility

374,588374,588

Reversal of reserve for interest rate reduction

22,91922,919Special losses-

890,697-

890,697

Provision for management account reserve for interest rate
volatility

516,109516,109

Payment to the national treasury

374,588374,588$270,295$-$-$270,295

Net income
  

2,286
269,298

Administrative fee for general accountOrdinary income


592,785

Fees and commissions

Interest on due to management account

Fees and commissions   

(Thousands of U.S. dollars)
JFM ANNUAL REPORT 2023

103

Financial Section
Financial Statements
19. Fair Value of Marketable Securities
Marketable held-to-maturity securities as of 31 March 2022 consisted of the following:(Millions of yen)

Type
Securities with fair values
exceeding the balance
sheet amount
Securities with fair values
that do not exceed the balance
sheet amountBook value

Fair value

Difference

Negotiable certificates ofdeposit---

Sub total---

Negotiable certificates ofdeposit¥920,000¥920,000-

Sub total

920,000

920,000-¥920,000¥920,000-

Total

Marketable held-to-maturity securities as of 31 March 2023 consisted of the following:(Millions of yen)

Type
Securities with fair values
exceeding the balance
sheet amount
Securities with fair values
that do not exceed the balance
sheet amountBook value

Fair value

Difference

Negotiable certificates ofdeposit---

Sub total---

Negotiable certificates ofdeposit¥747,000¥747,000-

Sub total

747,000

747,000-¥747,000¥747,000-

Total(Thousands of U.S. dollars)

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

Fair value

Difference

Negotiable certificates ofdeposit---

Sub total---

Negotiable certificates ofdeposit$5,596,344$5,596,344-

Sub total

5,596,344

5,596,344-$5,596,344$5,596,344

-

Total
Note: Fair value of negotiable certificates of deposit is book value.

104 JFM ANNUAL REPORT 2023

Book value


  


deposits, a foreign exchange forward contract isentered into at the time of each 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 hedge transactions to offset market fluctuation
risks associated with bonds and long-term borrowed
money. Accordingly, The JFM deems these to behighly effective and thus does not assess effectiveness.
Moreover, a periodic assessment of hedge effectiveness is omitted for interest rate swaps that
qualify for exceptional accrual method and currency
swaps and forward contracts that qualify for deferral hedge accounting.
(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 are unable tofulfill their contracts due to bankruptcy or otherreasons.
As for derivative transactions used for hedging
purposes, market risk is offset by the corresponding
change in the underlying hedged items. The JFM
enters into ISDA Master Agreements and CSA
with financial institutions, which are its derivativetransactions counterparties, to reduce credit risk.
Moreover, The JFM constantly monitors restructuring costs of the transactions and the counterparties’
credit profiles, and deals with multiple counterparties.
(4) Risk management system for derivative transactions
E xecution and management of derivative transactions are conducted by the Finance Department of
The JFM with the approval of persons in charge inaccordance with the operational guidelines which
specify transaction authority and limits on thetransaction amount.
Additionally, the total amount of derivative transactions, the status of risks, the assessed fair value,
and the credit risk on counterparties are regularly
reported to the Integrated Risk Management
Committee.

   


20. Information on Derivative Transactions(1 ) Types of derivative transactions
Derivative transactions entered into by the JFM areinterest rate swaps for interest rate related transactions, and currency 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 ameans of hedging exposure to interest rate andforeign exchange fluctuation risks, and does notenter into derivatives for speculative purposes.
Interest rate swaps are used to hedge exposure tointerest rate risk on funding activities. Currency
swaps and foreign exchange forward contracts areused to hedge exposure to foreign exchange risk
associated with issuance of foreign currency-denominated bonds and foreign currency-denominated deposits.
Hedge accounting is applied to interest rate swaps,
currency swaps and foreign exchange forward
contracts.
(a) Hedge accounting method
Interest rate swaps used to hedge the risk ofinterest 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, theforeign 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-denominatedbonds(iii) Hedging instruments: Foreign exchange forward
contracts
Hedged items: Foreign currency-denominatedbank deposits(c) Hedging policy
The JFM uses hedging instruments, such as interest
rate swaps and currency swaps, as a means ofhedging exposure to interest rate risk and foreignexchange risk. Hedged items are identified byeach individual contract.
As a means of hedging foreign exchange fluctuation
risks associated with the receipt of interest andprincipal of foreign currency-denominated bank

JFM ANNUAL REPORT 2023

105

Financial Section
Independent Auditor’s Report

Independent Auditor’s Report

The President
Japan Finance Organization for Municipalities
OpinionPursuant to Article 37, paragraph 1 of the Japan Finance Organization for Municipalities Law (the“Law”), we have audited the accompanying financial statements of Japan Finance Organization
for Municipalities (the “JFM”), which comprise the balance sheet as at March 31, 2023, and thestatements of income, appropriation of profit, changes in net assets, and cash flows for the year
then ended, and notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the JFM as at March 31, 2023, and its financial performance and its cash
flows for the year then ended in accordance with the Law and regulations applicable to the JFM
and accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Financial Statements section of our report. We are independent of the JFM in
accordance with the ethical requirements that are relevant to our audit of the financial statements
in Japan, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the financial statements of the current period. These matters were addressed in thecontext of the audit of the financial statements as a whole, and in forming the auditor’s opinion
thereon, and we do not provide a separate opinion on these matters.
Applying hedge accounting to derivative transactions against pipeline risk (interest rate risk)
Description of Key Audit Matter

Auditor’s Response

As stated in Note 6 “Financial Instruments,”
the JFM applies hedge accounting to interest
rate swaps used to hedge against pipeline risk,
whereby losses would be incurred or profits
would decrease as a result of interest rate
fluctuations during the time from when the
JFM raises money until the point at which themoney is loaned to local governments.

The audit procedures we performed toconsider whether the JFM’s derivativetransactions qualify for hedge accounting
include the following, among others:

As stated in Note 20 “Information on Derivative
Transactions,” in applying hedge accounting,
the JFM designated bonds and long-termborrowed money as hedged items and interest
rate swaps as hedging instruments and adopted
deferral hedge accounting.
Since the JFM ensured hedging instruments
and hedged items have the same major terms,
when entering into hedge transactions, theJFM deemed these to be highly effective.
When entering into interest rate swap
transactions for which future bond issuance isdesignated as the hedged item, the JFM
determines whether the bond issuance is aforecast transaction and accordingly applies
hedge accounting.
Unrealized gain or loss from hedging instrumentsof (14,579) million yen ((109,224) thousand
U.S. dollars) was recorded on the balance
sheet at the fiscal year end.

(2) Consideration of whether all of JFM’s
derivative transactions are accurately
identified without exception
We performed the following procedures toconsider whether all derivative transactions
contracted by the JFM are recorded in thederivative transactions control table:
・ We inspected the authorized document inwhich the counterparties with which the
JFM may possibly enter into derivativetransactions are determined at the
beginning of the current fiscal year, andobtained external confirmations forderivative transactions up until the end of
the current fiscal year from all counterparties
described in this document.

With the diversification of financing methods
and the sophistication of risk management
methods, derivative transactions to hedge ・ We considered whether any transactions
other than those recorded in the derivative
against interest rate risks are expected to become
transactions control table are included in
more complicated, and the notional amount of
the obtained external confirmations.
interest rate swaps will be the same as financing
amounts (around several to tens of billions of ・ We considered whether any derivative
yen per transaction). Therefore, considering thetransactions are included inexternal
size and frequency of transactions, if a derivative
confirmations obtained from financialtransaction entered into does not qualify forinstitutions other than those that the JFM
hedge accounting as a result, principle
determined to be counterparties.
accounting treatment for the derivativetransaction must be applied, which may have agreat impact on profits and losses.
(3) Consideration of the assessment of hedge
effectiveness by the JFM
Based on the above, given that applying hedge
accounting to derivative transactions to hedge We performed the following procedures toagainst pipeline risk (interest rate risk) is consider whether the JFM enters into hedge
particularly significant in the current fiscal transactions such that the JFM ensures
year we determined it to be a key audit matter. hedging instruments and hedged items havethe same major terms to offset interest raterisks associated with bonds and long-termborrowed money:(1) Evaluation of design and operating
effectiveness of internal controls

・We considered whether the notionalamount and contract period of all interest
rate swaps recorded in the derivativetransaction control table match theprincipal amount and redemption period(or maturity) of the bond and long-termborrowed money to be hedged.

We performed the following procedures toconsider, if hedge accounting was
discontinued for interest rate swaps, whether
gains and losses on settlement at the time ofcancellation were transferred to unrealized
gain or loss from hedging instruments andamortized as an adjustment of the interest to
be hedged:

・We considered whether the interest payment
and receipt conditions on interest rate
swaps are such that fixed interest on bonds
and long-term borrowed money issubstantially converted into floatinginterest.

・ We considered whether interest rate swaps
have been cancelled and the gains andlosses on settlement at the time ofcancellation by inspecting evidence ofagreements with counterparties toterminate the contracts.

・ If a hedged item is a forecast transaction,
we considered whether the interest
payment and receipt conditions on interest
rate swaps are such that floating interest is
substantially converted into fixed interest.

・ We considered whether these gains andlosses on settlement were transferred tounrealized gain or loss from hedging
instruments.
・ We considered whether the amortizedamounts of the unrealized gain or loss fromhedging instruments were allocated to
profit or loss over the period until maturityof the hedged item by recalculating theseamounts.

(4) Consideration of the assessment ofprobability, etc. of forecast transactions by
the JFMWe performed the following procedures toevaluate the adequacy of determinations by the
JFM that the future bond issuance is a forecast
transaction (i.e., the contract has not been
formed but it is highly probable and its key
terms can be reasonably forecasted) and thus
qualify as the hedged item:
・ We inspected historical bond issuanceexperience of the JFM, as well as its
lending and funding plans, and madeinquiries of the persons in charge in thefinance department.
・ We considered whether the expectedamount of future bond issuances to behedged is within the range of the average
issuance for a given period in the past andwhether the period from lending to futurebond issuance to be hedged is generally
less than one year.
(5) Consideration of the accounting treatment
related to the discontinuation of hedge
accounting

106 JFM ANNUAL REPORT 2023

We evaluated the design and operating
effectiveness of the controls related to entering
into derivative transactions and applying hedge
accounting.

Other Information
The other information comprises the information included in the JFM’s Annual Report 2023 that
contains audited financial statements but does not include the financial statements and our
auditor's report thereon. The JFM’s Annual Report 2023 is expected to be made available to us
after the date of this auditor’s report. The President is responsible for preparation and disclosureof the other information. The Corporate Auditors are responsible for overseeing the JFM’s
reporting process of the other information.
Our opinion on the financial statements does not cover the other information and we will not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation identified above when it becomes available and, in doing so, consider whether theother information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
Responsibilities of the President, the Corporate Auditors for the Financial Statements
The President is responsible for the preparation and fair presentation of these financial statementsin accordance with the Law and regulations applicable to the JFM and accounting principles
generally accepted in Japan, and for such internal control as the President determines is necessary
to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.

The Corporate Auditors are responsible for overseeing the JFM’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s reportthat includes our opinion. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.

From the matters communicated with the Corporate Auditors, we determine those matters thatwere of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefitsof such communication.



As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:   

In preparing the financial statements, the President is responsible for assessing the JFM’s ability
to continue as a going concern and disclosing, as required by the Law and regulations applicableto the JFM and accounting principles generally accepted in Japan, matters related to going concern.

・ Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the financial statements is not expressing an opinion on the effectiveness of the JFM’s internal
control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the President.
・ Conclude on the appropriateness of the President’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the JFM’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the JFM to cease to continue as a going concern.




・ Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions andevents in a manner that achieves fair presentation in accordance with the Law and regulations
applicable to the JFM and accounting principles generally accepted in Japan.
We communicate with the Corporate Auditors regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Corporate Auditors with a statement that we have complied with the ethicalrequirements regarding independence that are relevant to our audit of the financial statements inJapan, and to communicate with them all relationships and other matters that may reasonably bethought to bear on our independence, and where applicable, related safeguards.


  


JFM ANNUAL REPORT 2023

107

Appendix / JFM Data
Appendix Redemption of Loans in Fiscal 2022 

109

Outstanding Loans by Business 

110Additional Data Regarding Liquidity Risk 

111

Outstanding Loans by Borrower 

112

Bond Issuance in Fiscal 2022 

116

Outstanding International Bonds 120

JFM Data 

108 JFM ANNUAL REPORT 2023

109

121

Organization History 

121

Organization Chart 

122Contact Information 

123Appendix / JFM Data
Appendix

Principal
Classification

Interest

Amount(USD millions)

Number of loans

Amount(USD millions)458,846

13,590522,806

1,502

123

29

123

1

458,969

13,618522,929

1,503

General loans

294

161

68

0

Loans to local government
corporations

-

-

-

-

Subtotal

294

161

68

0

Redemption of loans with pre-consent or pre-approval

-

-

-

-

Redemption of short-term loans

-

-

-

-

459,263

13,779522,997

1,503

General loans
Loans to local government
corporations

Regular redemption of
long-term loans

Subtotal

Prepayment of long-term
loans

Total




Note: Totals may not add up due to rounding.



Number of loans   

Redemption of Loans in Fiscal 2022
  


JFM ANNUAL REPORT 2023

109

Appendix / JFM Data
Appendix

Outstanding Loans by Business(As of 31 March 2023)
Number of Loans
MadeBusiness

Loan Amount (USD millions)% of Total

Public Projects

5,883

3,892

2.2%

Public Housing

3,040

1,465

0.8%

Disaster Prevention

1,261

764

0.4%

Educational Facilities Development

2,001

727

0.4%

Social Welfare Facilities Development

2,055

829

0.5%

571

422

0.2%

General Projects

1,057

604

0.2%

Regional Revitalization

1,945

676

0.4%

Disaster Prevention

3,242

1,271

0.7%

Local Road Development

6,647

3,450

2.0%

Special Municipal Merger

6,431

8,133

4.7%

Disaster Management and Mitigation

12,763

6,263

3.6%

88

136

0.1%

Proper Management of Public Facilities

2,850

2,955

1.7%

National Disaster Prevention

3,377

2,078

1.2%

8

0

0.0%

3,518

1,220

0.7%

39

44

0.0%

7,849

2,065

1.2%

64,62536,995

21.2%

Water Supply

51,72522,24912.7%

Transportation

854

5,340

3.1%

5,134

8,766

5.0%

115,467

49,752

28.5%

1,960

1,108

0.6%

Electricity and Gas

631

495

0.3%

Port Facilities

692

264

0.2%

Markets and Slaughterhouses

692

850

0.4%

Tourism and Others

171

98

0.1%

177,326

88,921

50.9%

Temporary Financial Countermeasures Funding

9,669

44,67225.6%

Loans Covering Decrease in Local Tax Revenues

486

3,918

2.2%

252,106

174,506

100.0%

42

53

0.0%

252,148

174,559

100.0%

General Waste Disposal

General
Account-related
Loans

Public Facilities Optimization

Remote Place Improvement Projects
Depopultion Measures
Construction of General Aid Facilities
Otherssubtotal

Hospitals and Elderly Care Services
Municipal
Enterprise-related
Loans

Sewerage
Industrial Water Supply

subtotal

Total
Local Government Road Corporation, Toll Roads *1
Grand Total

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

110 JFM ANNUAL REPORT 2023

amount payment when funding from the capital markets.
Therefore, inflow and outflow of funds in JFM are limited
which makes it possible to predict next month’s inflows
and outflows. JFM finance management division holdhigh quality liquid assets based on the calculation at theend of the month to secure liquidity for the following
month, which is also monitored by the risk management
division which is independent from the financemanagement division.

(As of 31 March 2023)(USD millions)

Item
Total of liquid assets

JFM has been managing liquidity risk independently
from March 2015 with reference to the Basel III regulation,
by setting up an internal policy to secure liquid assets
under the supervision of our ALM committee. JFM holds
high quality liquid assets in order to prevent any disruptions
regarding redemptions and interest payments for thefollowing month’s JFM bonds.
JFM’s fund inflows and outflows are mainly consistedof lending and collecting loans from municipalities, bondissuance related payment such as notional or interest   

Additional Data Regarding Liquidity Risk

*1

31 March 2022

31 March 2023

$862

$562

Outflows related to unsecured funding(excluding debt securities)

0

0

3,075

3,075

1,878

1,878

-

3,075

-

1,878

2,607

2,307

2,045

1,409

Cash inflows from collection of loans

0

0

0

0

Other cash inflows *3

0

0

0

0

2,607

2,307

2,045

1,409

High quality liquid assets

-

862

-

562

Net cash outflows

-

769

-

470

Liquidity coverage ratio

-

112%

-

120%

-

917

-

315%

Debt securities
Total cash outflows
Cash inflows from investment *2

Total cash inflows *4

Total of semi liquid assets *5-

Semi liquidity coverage ratio *6

-

1,524
310%

Notes 1. Amount includes bank current deposits, short term Japanese government bonds held by 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 the 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 bank ordinary deposits.
6. Calculated by dividing the total amount of semi liquid assets and liquid assets by net cash outflows.



0
  

0


Before applying
After applying
Before applying
After applying
cash outflow/inflow cash outflow/inflow cash outflow/inflow cash outflow/inflow
rate
rate
rate
rate


JFM ANNUAL REPORT 2023

111

Appendix / JFM Data
Appendix

Outstanding Loans by Borrower(As of 31 March 2023)
Cities and Special Wardsof TokyoPrefectures
BorrowerTowns and Villages

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Hokkaido

286

3,675

5,531

4,967

8,900

1,685

Aomori

168

220

2,178

2,032

1,475

392

Iwate

237

428

2,706

1,862

912

262

Miyagi

280

791

4,492

2,737

2,646

418

Akita

194

219

4,434

2,123

983

67

Yamagata

199

578

2,788

1,293

1,886

255

Fukushima

370

713

3,648

1,764

3,082

422

Ibaraki

469

1,035

7,192

3,633

1,445

310

Tochigi

246

557

3,198

1,811

957

257

Gunma

177

244

3,261

1,614

1,718

243

Saitama

236

2,284

6,887

5,416

1,956

463

Chiba

346

1,291

5,478

5,550

916

210

Tokyo

77

600

2,263

2,287

164

35

Kanagawa

178

1,760

3,360

5,783

1,372

396

Niigata

247

409

7,426

2,808

920

116

Toyama

225

221

3,391

2,002

569

145

Ishikawa

112

185

2,744

1,238

1,262

335

Fukui

174

181

2,179

1,251

709

71

Yamanashi

124

189

2,578

790

894

121

Nagano

286

332

4,000

1,813

3,079

404

Gifu

221

1,194

4,244

1,594

1,379

329

Shizuoka

265

292

4,978

2,960

864

219

Aichi

186

2,080

5,260

4,542

904

195

Mie

377

1,158

3,904

2,380

1,094

220

Shiga

183

574

3,834

1,707

599

109

Kyoto

174

280

3,730

3,422

1,178

224

Osaka

65

1,825

6,347

9,226

993

297

Hyogo

290

3,495

8,212

7,146

2,230

647

Nara

235

674

2,469

1,527

2,161

556

Wakayama

120

394

1,865

1,798

1,838

531

Tottori

336

705

1,227

856

1,871

319

112 JFM ANNUAL REPORT 2023

Local Government Road
Corporations   

Local Government Associations

Total

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

278

181

-

-

14,995

10,508

6.0

118

129

-

-

3,939

2,772

1.6

220

146

-

-

4,075

2,697

1.5

125

63

-

-

7,543

4,008

2.3

9

12

-

-

5,620

2,421

1.4

173

71

-

-

5,046

2,197

1.3

164

112

-

-

7,264

3,010

1.7

274

221

-

-

9,380

5,199

3.0

20

18

-

-

4,421

2,643

1.5

237

179

-

-

5,393

2,280

1.3

332

136

-

-

9,411

8,299

4.8

552

301

3

2

7,295

7,354

4.2

33

102

-

-

2,537

3,024

1.7

49

153

-

-

4,959

8,092

4.6

236

162

-

-

8,829

3,495

2.0

151

92

-

-

4,336

2,460

1.4

32

20

-

-

4,150

1,778

1.0

59

22

-

-

3,121

1,525

0.9

116

26

-

-

3,712

1,127

0.6

177

83

-

-

7,542

2,632

1.5

13

7

-

-

5,857

3,124

1.8

71

54

1

0

6,179

3,526

2.0

67

16

13

28

6,430

6,862

3.9

29

27

-

-

5,404

3,786

2.2

179

52

-

-

4,795

2,441

1.4

38

46

-

-

5,120

3,972

2.3

466

541

-

-

7,871

11,888

6.8

396

304

4

1

11,132

11,592

6.6

88

30

-

-

4,953

2,789

1.6

105

51

-

-

3,928

2,775

1.6

30

12

-

-

3,464

1,892

1.1

% of Total



  



JFM ANNUAL REPORT 2023

113

Appendix / JFM Data
Appendix
Cities and Special Wardsof TokyoPrefectures
Borrower

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)Towns and Villages
Number ofLoans Made

Loan Amount(USD millions)

Shimane

285

699

2,736

1,383

347

63

Okayama

179

608

4,386

2,165

1,257

190

Hiroshima

458

1,507

4,058

3,049

989

232

Yamaguchi

395

423

4,117

1,937

635

88

Tokushima

184

331

1,553

943

872

231

Kagawa

153

181

1,795

913

751

178

Ehime

62

228

2,238

1,398

761

203

Kochi

168

676

1,958

1,093

1,033

227

Fukuoka

92

1,367

5,566

6,171

2,357

799

Saga

69

270

1,642

1,175

647

218

Nagasaki

134

418

2,715

1,916

785

156

Kumamoto

157

665

2,719

1,414

1,887

409

Oita

75

212

2,379

1,040

216

54

Miyazaki

123

495

1,993

1,132

755

162

Kagoshima

179

1,000

2,331

1,210

972

217

Okinawa

208

659

1,633

1,226

942

246

10,00438,323

169,623

118,098

66,162

13,922Total

114 JFM ANNUAL REPORT 2023

Local Government Road
Corporations

Total

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

73

31

-

-

3,441

2,175

1.2

82

65

-

-

5,904

3,027

1.7

20

21

11

12

5,536

4,820

2.8

62

20

-

-

5,209

2,467

1.4

4

1

-

-

2,613

1,505

0.9

539

150

-

-

3,238

1,422

0.8

17

4

-

-

3,078

1,833

1.1

15

47

-

-

3,174

2,043

1.2

358

181

10

9

8,383

8,527

4.9

144

62

-

-

2,502

1,725

1.0

13

15

-

-

3,647

2,505

1.4

74

168

-

-

4,837

2,656

1.5

0

0

-

-

2,670

1,306

0.7

17

3

-

-

2,888

1,793

1.0

14

7

-

-

3,496

2,435

1.4

48

21

-

-

2,831

2,152

1.2

6,317

4,164

42

53

252,148

174,559

100.0% of Total
  

Number ofLoans Made


Loan Amount(USD millions)

Number ofLoans Made   

Local Government Associations

JFM ANNUAL REPORT 2023

115

Appendix / JFM Data
Appendix

Bond Issuance in Fiscal 2022
1. JFM Bonds(1) International Bonds
SeriesNumberTenor(yr)FormatCurrency

Issue Size(in millions)

Coupon
(%)

93

5

Euro

EUR

25

2.229

Issue Price(%)

Issue Date

Maturity Date

100.000

5 Jul 2022

5 Jul 2027

94

3

Euro

AUD

58

3.600

99.99025 Jul 2022

24 Jul 2025

95

6

Euro

EUR

25

1.957

100.000

26 Jul 2022

26 Jul 2028

96

5

Euro

EUR

1,250

2.375

99.5448 Sep 2022

8 Sep 2027

97

5

Euro

USD

17

3.720

99.99028 Sep 2022

28 Sep 2027

98

5

Euro

AUD

54

4.180

99.99028 Sep 2022

28 Sep 2027

99

5

Euro

USD

25

SOFR+73bp

100.000

26 Oct 2022

26 Oct 2027

100

5

Euro

AUD

21

3.750

99.9902 Feb 2023

20 Jan 2028

101

5

Euro

EUR

500

3.375

99.81022 Feb 2023

22 Feb 2028

(2) Domestic Public Offerings
SeriesNumber

Tenor
(yr)

155

Issue Size

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

225

0.304

100

21 Apr 2022

28 Apr 2032

30

225

0.299

100

24 May 2022

28 May 2032

10

30

225

0.314

100

20 Jun 2022

28 Jun 2032

158

10

25

187

0.364

100

22 Jul 2022

28 Jul 2032

(JPY inbillions)(USD inmillions)

10

30

156

10

157

159

10

25

187

0.295

100

19 Aug 2022

27 Aug 2032

160

10

25

187

0.384

100

20 Sep 2022

28 Sep 2032

161

10

26

195

0.449

100

21 Oct 2022

28 Oct 2032

162

10

26

195

0.449

100

17 Nov 2022

26 Nov 2032

163

10

24

180

0.554

100

20 Dec 2022

28 Dec 2032

164

10

25

187

0.804

100

23 Jan 2023

28 Jan 2033

165

10

20

150

0.740

100

20 Feb 2023

28 Feb 2033

166

10

24

180

0.750

100

20 Mar 2023

28 Mar 2033

97

20

15

112

0.772

100

21 Apr 2022

28 Apr 2042

98

20

20

150

0.796

100

20 Jun 2022

27 Jun 2042

99

20

20

150

0.944

100

22 Jul 2022

28 Jul 2042

100

20

15

112

0.947

100

20 Sep 2022

26 Sep 2042

101

20

18

135

1.114

100

21 Oct 2022

28 Oct 2042

102

20

18

135

1.172

100

20 Dec 2022

26 Dec 2042

103

20

24

180

1.433

100

23 Jan 2023

28 Jan 2043

31

5

13

97

0.115

100

22 Jul 2022

28 Jul 2027

32

5

19

142

0.249

100

20 Dec 2022

28 Dec 2027

15

30

10

75

1.055

100

21 Apr 2022

26 Apr 2052

16

30

10

75

1.467

100

21 Oct 2022

28 Oct 2052

F670

5

20

150

0.085

100

26 Apr 2022

26 May 2027

116 JFM ANNUAL REPORT 2023

Tenor(yr)

F671

Issue Size

Maturity Date

150

0.293

100

26 Apr 2022

20 Mar 2031

3

22

0.328

100

26 Apr 2022

25 Feb 2033

13

3

22

0.430

100

26 Apr 2022

26 Mar 2035

F674

7

10

75

0.218

100

27 Apr 2022

26 Apr 2029

F675

9

3

22

0.292

100

27 Apr 2022

27 Oct 2031

F676

11

3

22

0.328

100

27 Apr 2022

25 Nov 2032

F677

11

3

22

0.328

100

27 Apr 2022

26 Nov 2032

F678

21

3

22

0.808

100

27 Apr 2022

27 Apr 2043

F679

11

3

22

0.340

100

28 Apr 2022

26 Nov 2032

F680

13

3

22

0.449

100

28 Apr 2022

28 Mar 2035

F681

19

3

22

0.752

100

28 Apr 2022

26 Apr 2041

F682

9

6

45

0.273

100

31 May 2022

29 May 2031

F683

19

3

22

0.721

100

31 May 2022

30 May 2041

F684

5

5

37

0.116

100

24 Jun 2022

24 Aug 2027

F685

14

6

45

0.672

100

24 Jun 2022

24 Dec 2036

F686

15

3

22

0.711

100

24 Jun 2022

24 Dec 2037

F687

12

3

22

0.525

100

27 Jul 2022

26 Jan 2035

F688

15

4

30

0.669

100

27 Jul 2022

24 Jul 2037

F689

9

20

F672

11

F673

30

0.669

100

27 Jul 2022

27 Jul 2037

8

6

45

0.313

100

28 Jul 2022

26 Jul 2030

F691

15

3

22

0.679

100

28 Jul 2022

28 Jul 2037

F692

19

3

22

0.911

100

28 Jul 2022

28 Jan 2042

F693

7

6

45

0.279

100

27 Sep 2022

27 Sep 2029

F694

5

5

37

0.180

100

29 Sep 2022

29 Nov 2027

F695

7

20

150

0.305

100

29 Sep 2022

27 Sep 2029

F696

6

3

22

0.249

100

26 Oct 2022

25 Oct 2028

F697

7

20

150

0.353

100

26 Oct 2022

26 Sep 2029

F698

11

3

22

0.592

100

26 Oct 2022

26 May 2033

F699

6

3

22

0.264

100

27 Oct 2022

26 Oct 2028

F700

9

10

75

0.449

100

27 Oct 2022

27 Oct 2031

F701

12

3

22

0.762

100

27 Oct 2022

27 Mar 2035

F702

15

3

22

0.905

100

27 Oct 2022

27 Oct 2037

F703

6

3

22

0.298

100

28 Oct 2022

27 Oct 2028

F704

8

3

22

0.442

100

28 Oct 2022

20 Jun 2030

F705

11

3

22

0.714

100

28 Oct 2022

23 Mar 2034

F706

11

3

22

0.714

100

28 Oct 2022

24 Mar 2034

F707

11

3

22

0.714

100

28 Oct 2022

27 Mar 2034

F708

3

5

37

0.048

100

24 Nov 2022

24 Jun 2025

JFM ANNUAL REPORT 2023

4

15

F690


  

Issue Date


Issue Price(%)(USD inmillions)

Coupon(%)(JPY inbillions)   

SeriesNumber117

Appendix / JFM Data
AppendixSeriesNumber

Tenor
(yr)

F709

Issue Size

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

30

0.365

100

24 Nov 2022

22 Nov 2030

3

22

0.891

100

24 Nov 2022

24 Nov 2037

8

3

22

0.362

100

25 Nov 2022

25 Mar 2031

F712

11

3

22

0.553

100

25 Nov 2022

24 Jun 2033

F713

7

4

30

0.286

100

28 Nov 2022

28 Nov 2029

F714

9

4

30

0.393

100

28 Nov 2022

27 Nov 2031

(JPY inbillions)(USD inmillions)

8

4

F710

15

F711

F715

11

3

22

0.627

100

28 Nov 2022

27 Mar 2034

F716

5

5

37

0.253

100

22 Dec 2022

22 Feb 2028

F717

9

10

75

0.533

100

22 Dec 2022

22 Dec 2031

F718

15

3.5

26

0.919

100

22 Dec 2022

22 Dec 2037

F719

7

20

150

0.568

100

24 Feb 2023

24 Dec 2029

F720

15

5.5

41

1.137

100

24 Feb 2023

24 Feb 2038

F721

19

3

22

1.347

100

24 Feb 2023

24 Jun 2042

F722

20

3

22

1.371

100

24 Feb 2023

24 Feb 2043

F723

30

3

22

1.579

100

24 Feb 2023

24 Mar 2053

F724

3

20

150

0.100

100

27 Feb 2023

25 Feb 2026

F725

3

24

180

0.100

100

27 Feb 2023

26 Feb 2026

F726

6

3

22

0.465

100

27 Feb 2023

27 Feb 2029

F727

7

5

37

0.562

100

27 Feb 2023

27 Feb 2030

F728

9

3

22

0.744

100

27 Feb 2023

26 Feb 2032

F729

19

3

22

1.353

100

27 Feb 2023

27 Feb 2042

F730

20

4.5

34

1.095

100

23 Mar 2023

23 Mar 2043

F731

5

5

37

0.281

100

31 Mar 2023

30 May 2028

F732

20

3.5

26

1.196

100

24 Mar 2023

24 Mar 2043

F733

20

6

45

1.161

100

27 Mar 2023

27 Mar 2043

2. Private Placements with Pension Funds for Local Government Officials
SeriesNumber

Tenor
(yr)

A147

Issue Size

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

150

0.334

100

22 Apr 2022

22 Apr 2032

15

112

0.329

100

25 May 2022

25 May 2032

15

112

0.344

100

21 Jun 2022

21 Jun 2032

10

10

75

0.394

100

25 Jul 2022

23 Jul 2032

A151

10

15

112

0.325

100

22 Aug 2022

20 Aug 2032

A152

10

10

75

0.414

100

22 Sep 2022

17 Sep 2032

A153

10

10

75

0.479

100

24 Oct 2022

22 Oct 2032

A154

10

10

75

0.479

100

18 Nov 2022

18 Nov 2032

A155

10

10

75

0.584

100

20 Dec 2022

20 Dec 2032

A156

10

10

75

0.834

100

24 Jan 2023

24 Jan 2033

A157

10

15

112

0.770

100

21 Feb 2023

21 Feb 2033

A158

10

10

75

0.780

100

27 Mar 2023

25 Mar 2033

(JPY inbillions)(USD inmillions)

10

20

A148

10

A149

10

A150

118 JFM ANNUAL REPORT 2023

Tenor(yr)

B78

Issue Size

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

41

0.334

100

22 Apr 2022

22 Apr 2032

5

37

0.329

100

25 May 2022

25 May 2032

10

7.5

56

0.344

100

21 Jun 2022

21 Jun 2032

B81

10

15

112

0.394

100

25 Jul 2022

23 Jul 2032

B82

10

10.5

79

0.325

100

22 Aug 2022

20 Aug 2032

B83

10

7

52

0.414

100

22 Sep 2022

17 Sep 2032

(JPY inbillions)(USD inmillions)

10

5.5

B79

10

B80

5.5

41

0.479

100

24 Oct 2022

22 Oct 2032

10

7.5

56

0.479

100

18 Nov 2022

18 Nov 2032

B86

10

7

52

0.584

100

20 Dec 2022

20 Dec 2032

B87

10

14.5

109

0.834

100

24 Jan 2023

24 Jan 2033

B88

10

8

60

0.770

100

21 Feb 2023

21 Feb 2033

B89

10

7

52

0.780

100

27 Mar 2023

25 Mar 2033

C78

20

8.5

64

0.792

100

22 Apr 2022

22 Apr 2042

C79

20

7

52

0.797

100

25 May 2022

23 May 2042

C80

20

10

75

0.816

100

21 Jun 2022

20 Jun 2042

C81

20

17.5

131

0.964

100

25 Jul 2022

25 Jul 2042

20

12

90

0.841

100

22 Aug 2022

22 Aug 2042

20

9.5

71

0.967

100

22 Sep 2022

22 Sep 2042

C84

20

7.5

56

1.134

100

24 Oct 2022

24 Oct 2042

C85

20

9.5

71

1.269

100

18 Nov 2022

18 Nov 2042

C86

20

9.5

71

1.192

100

20 Dec 2022

19 Dec 2042

C87

20

18.5

139

1.453

100

24 Jan 2023

23 Jan 2043

C88

20

11

82

1.424

100

21 Feb 2023

20 Feb 2043

C89

20

9.5

71

1.378

100

27 Mar 2023

27 Mar 2043

D73

20

20

150

0.792

100

22 Apr 2022

22 Apr 2042

20

15

112

0.797

100

25 May 2022

23 May 2042

20

15

112

0.816

100

21 Jun 2022

20 Jun 2042

D76

20

10

75

0.964

100

25 Jul 2022

25 Jul 2042

D77

20

15

112

0.841

100

22 Aug 2022

22 Aug 2042

D78

20

10

75

0.967

100

22 Sep 2022

22 Sep 2042

D79

20

10

75

1.134

100

24 Oct 2022

24 Oct 2042

D80

20

10

75

1.269

100

18 Nov 2022

18 Nov 2042

D81

20

10

75

1.192

100

20 Dec 2022

19 Dec 2042

D82

20

10

75

1.453

100

24 Jan 2023

23 Jan 2043

D83

20

15

112

1.424

100

21 Feb 2023

20 Feb 2043

D84

20

10

75

1.378

100

27 Mar 2023

27 Mar 2043



D74
D75


  

C82
C83




10

B84
B85

   

SeriesNumber
JFM ANNUAL REPORT 2023

119

Appendix / JFM Data
Appendix

Outstanding International Bonds
1. JFM Bonds(As of 31 March 2023)
SeriesNumberTenor(yr)FormatCurrency

Issue Size(in millions)

43

10

Euro

AUD

85

44

10

Euro

USD

90

47

10

Global

USD

48

10

Euro

AUD

54

7

Global

58

10

Euro

63

5

Global

64

10

Euro

66

5

67

11

68
69

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

5.092

100

1 May 2014

1 May 2024

3.250

99.055

1 May 2014

2 May 2024

1,000

2.375

99.611

13 Feb 2015

13 Feb 2025

70

3.600

100

18 Mar 201518 Mar 2025

USD

1,000

2.125

99.29725 Oct 2016

25 Oct 2023

AUD

22

3.418

100

26 Jun 201721 Jun 2027

USD

1,000

3.250

99.98224 Apr 201824 Apr 2023

AUD

73

3.370

100

26 Jun 2018

21 Jun 2028

Global

USD

1,000

3.375

99.49927 Sep 2018

27 Sep 2023

Euro

EUR

80

1.106

100

24 Jan 201924 Jan 2030

5Global

USD

1,000

3.000

99.68212 Mar 201912 Mar 2024

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

73

5

Global

USD

1,500

1.000

99.88821 May 2020

21 May 2025

74

10

Euro

AUD

210

1.866

100

11 Jun 2020

11 Jun 2030

75

10

Euro

AUD

120

1.831

100

12 Jun 2020

12 Jun 2030

76

10

Euro

USD

60

1.290

100

22 Jul 2020

22 Jul 2030

77

5Global

USD

1,500

0.625

99.432

2 Sep 2020

2 Sep 2025

78

15

Euro

AUD

40

1.878

100

15 Oct 2020

15 Oct 2035

79

5

Euro

AUD

43

0.400

99.99

28 Oct 2020

28 Oct 2025

80

10

Euro

AUD

70

1.436

100

28 Oct 2020

28 Oct 2030

81

15

Euro

AUD

250

2.004

100

27 Nov 2020

27 Nov 2035

82

10

Euro

AUD

200

1.490

100

27 Nov 2020

27 Nov 2030

83

10

Euro

AUD

30

1.453

100

27 Nov 2020

27 Nov 2030

84

10

Euro

AUD

100

1.485

100

9 Dec 2020

9 Dec 2030

85

5

Euro

AUD

40

0.470

99.99

17 Dec 202017 Dec 2025

86

7

Euro

EUR

500

0.010

101.07

2 Feb 2021

2 Feb 2028

87

10

Global

USD

1,250

1.375

99.06410 Feb 2021

10 Feb 2031

88

5Global

USD

1,250

1.125

99.88420 Apr 2021

20 Apr 2026

89

10

Euro

EUR

1,000

0.100

99.8013 Sep 2021

3 Sep 2031

90

5

Euro

USD

52

1.060

99.99027 Oct 2021

27 Oct 2026

91

5

Euro

AUD

28

1.200

99.99027 Oct 2021

27 Oct 2026

92

3

Global

USD

750

1.500

99.93027 Jan 2022

27 Jan 2025

93

5

Euro

EUR

25

2.229

100.000

5 Jul 2022

5 Jul 2027

94

3

Euro

AUD

58

3.600

99.99025 Jul 2022

24 Jul 2025

95

6

Euro

EUR

25

1.957

100.000

26 Jul 2022

26 Jul 2028

96

5

Euro

EUR

1,250

2.375

99.5448 Sep 2022

8 Sep 2027

97

5

Euro

USD

17

3.720

99.99028 Sep 2022

28 Sep 2027

98

5

Euro

AUD

54

4.180

99.99028 Sep 2022

28 Sep 2027

99

5

Euro

USD

25

SOFR+73bp

100.000

26 Oct 2022

26 Oct 2027

100

5

Euro

AUD

21

3.750

99.9902 Feb 2023

20 Jan 2028

101

5

Euro

EUR

500

3.375

99.81022 Feb 2023

22 Feb 2028

120 JFM ANNUAL REPORT 2023

Appendix / JFM Data
JFM Data

History of the JFM
The Japan Finance Organization for Municipal Enterprises (the Predecessor of the JFM) was established pursuant to theJapan 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.

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.”

FY2008   

Organization History

History of the Predecessor
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.

1967

Started receiving subsidies from the national treasury.

1970

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

1972

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

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 FinanceCorporation for Municipal Enterprises Management Council was established; and addressed the phased abolition ofsubsidies 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 for Special
Public Institutions was approved by the Cabinet.

2002

The policy titled the “Reform of the Four Highway-Related Public Corporations, International Hub Airports and PolicyBased 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 approved by 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 PolicyBased Finance.”
The six associations of local governments submitted the “Local governments’ draft proposal for designing a new systemafter 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 2023

Started issuing foreign currency-denominated bonds.



Included the three types of special projects (in the general account-related business category) in the scope of lending.


  

1978
1983




FY1957121

Appendix / JFM Data
JFM Data

Organization Chart
As of 1 April 2023

Credit Researchand Analysis

122 JFM ANNUAL REPORT 2023

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

   

Contact Information

(Photo provided by the Tokyo Institute for Municipal Research)


  


JFM ANNUAL REPORT 2023

123  

https://www.jfm.go.jp/en/           

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     