Fiscal 2018
(1 April 2018 to 31 March 2019)Japan Finance Organization for Municipalities

Financial Statements

Japan Finance Organization for Municipalities

Contents
Balance Sheets

1

Statements of Income2Statements of Appropriation of Profit [General account/Management account]3

Statements of Changes in Net Assets

5Statements of Cash Flows7

Notes to Financial Statements

8

■Balance Sheets (As of 31 March 2018 and 2019)
Item

AssetsLoans (Note 3)
Securities (Note 17)
Cash and bankdeposits
Cash collateral
paid for financial
instruments
Other assets
Tangible fixed
assets (Note 6)
Intangible fixed
assets (Note 6)

Fiscal 2017(31 March
2018)
AmountFiscal 2018(31 March 2019)

Item¥23,768,240
170,000
747,767¥23,503,092
180,000
870,480$211,892,288
1,622,791
7,847,824

56,277

22,847

205,977

9,783
2,549

8,859
2,884

79,86926,005

1,211

1,035

9,339

Liabilities
Bonds (Notes 7 and 8)
Borrowed money (Note 9)
Cash collateral received
for financial instruments
Other liabilities
Reserve for bonuses¥20,284,520
159,500
12,260¥20,392,179
128,000
27,630$183,845,828
1,153,985
249,098

6,692
57

6,261
57

56,446
520

8

10

92

47

52

475

24

24

220

920,287920,287

8,296,859

920,287920,287

8,296,859

3,105,003
2,200,000

2,819,505
2,200,000

25,419,271
19,834,115

870,453

597,076

5,382,945

34,55022,429202,21124,488,401

24,294,008

219,022,794

16,602
191,890
191,890

16,602
212,616
212,616

149,676
1,916,844
1,916,844

5,268

8,163

73,60253,66657,808521,177

267,427

295,191

2,661,299¥24,755,829¥24,589,199$221,684,093(Note 10)

Reserve for bonuses
for directors and corporate
auditors (Note 10)
Reserve for retirement
benefits (Notes 10 and 13)
Reserve for retirement
benefits for directors andcorporate auditors (Note 10)
Fund for lending rate
reduction
Basic fund for lending rate
reduction (Note 12)
Reserves under special laws
Reserve for interest rate
volatility (Note 11)
Management accountreserve for interest rate
volatility (Note 11)
Reserve for interest rate
reduction
Total liabilities
Net Assets
CapitalRetained earnings
General account surplus
reserve
Valuation, translation
adjustments and others
Management accountsurplus reserve
Total net assets

Total assets(Millions of yen) (Thousands of U.S. dollars)
Fiscal 2017
Fiscal 2018(31 March(31 March 2019)2018)
Amount¥24,755,829¥24,589,199$221,684,093

Total liabilities and net assets

See notes to financial statements.

1

■Statements of Income (For the years ended 31 March 2018 and 2019)

Item

IncomeInterest income
Fees and commissions
Other operating income
Other income
Contributions from fund for lending rate
reduction (Note 12)
OthersFiscal 2017
(1 April 2017 to
31 March 2018)
Amount¥347,476
343,305
98
46
4,026
4,011

(Millions of yen) (Thousands of U.S. dollars)
Fiscal 2018
(1 April 2018 to 31 March 2019)
Amount¥318,863
313,785
93
21
4,962
4,949

$2,874,714
2,828,939
840
197
44,73844,625

14

12

113

Expenses
Interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Ordinary income

195,499
187,970
300
3,934
3,295
151,976

179,428
172,436
300
3,270
3,397
23
139,434

1,617,638
1,554,600
2,708
29,48830,627215
1,257,076

Special gains
Reversal of management accountreserve for interest rate volatility

626,467
620,000

406,190
400,064

3,662,009
3,606,782

6,467

6,125

55,227752,332
220,000

522,445-

4,710,110-

132,332

122,381

1,103,328

Payment to national treasury (Notes 4 and 11)

400,000

400,064

3,606,782

Net income¥26,111¥23,179$208,975(Note 11)

Reversal of reserve for interest rate
reduction
Special losses
Provision for reserve for interest rate
volatility (Note 11)
Provision for management accountreserve for interest rate volatility(Note 11)

See notes to financial statements.

2

■Statements of Appropriation of Profit [General account](For the year ended 31 March 2018)
1 Profit available for appropriation
Net income
Accumulated deficit brought forward
2 Profit appropriatedSurplus reserve(Millions of yen)
¥26,111¥26,111
26,111

26,111■Statements of Appropriation of Profit [General account](For the year ended 31 March 2019)
1 Profit available for appropriation
Net income
Accumulated deficit brought forward
2 Profit appropriatedSurplus reserve

1 Profit available for appropriation
Net income
Accumulated deficit brought forward
2 Profit appropriatedSurplus reserve(Millions of yen)
¥23,179¥23,179
23,17923,179(Thousands of U.S. dollars)$208,975$208,975
208,975

208,975

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

See notes to financial statements.

3

■Statements of Appropriation of Profit [Management account](For the year ended 31 March 2018)
1 Profit available for appropriation
Net income
Accumulated deficit brought forward
2 Profit appropriatedSurplus reserve(Millions of yen)¥¥--

■Statements of Appropriation of Profit [Management account](For the year ended 31 March 2019)
1 Profit available for appropriation
Net income
Accumulated deficit brought forward
2 Profit appropriatedSurplus reserve

1 Profit available for appropriation
Net income
Accumulated deficit brought forward
2 Profit appropriatedSurplus reserve(Millions of yen)¥¥-(Thousands of U.S. dollars)$-$-

See notes to financial statements.

4-

■Statements of Changes in Net Assets(For the year ended 31 March 2018)(Millions of yen)
Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Net changes duringaccounting period in
items other thanstockholders’ equity
Net changes duringaccounting period
Balance as of 31 March
2018

Total
net
assetsTotal
stockholders’equityUnrealized
gain/(loss)
fromhedging
instruments¥165,779¥182,381¥5,035¥53,666¥241,082¥16,602

Generalaccount
surplusreserve¥165,779-

26,111

26,111

26,111--

26,111

-

-

-

-

233

-

233

-

26,111

26,111

26,111

233-

26,345¥16,602¥191,890¥191,890¥208,492¥5,268¥53,666¥267,427

CapitalBalance as of 1 April
2017
Changes duringaccounting period
Net income

Management
account
surplusreserve

Total
retainedearnings5

(For the year ended 31 March 2019)(Millions of yen)
Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Management
account
surplusreserve

Total
net
assetsTotal
stockholders’equityUnrealized
gain/(loss)
fromhedging
instruments¥191,890¥208,492¥5,268¥53,666¥267,427

Balance as of 1 April
2018
Cumulative effects oferror correction (Note 19)
Balance at the beginningof current period after
retrospective adjustment
for error correction
Changes duringaccounting period
Net income¥16,602

Generalaccount
surplusreserve¥191,890-(2,453)(2,453)(2,453)

-

4,142

1,688

¥16,602¥189,436¥189,436¥206,038¥5,268¥57,808¥269,116-

23,17923,17923,179--23,179Net changes duringaccounting period in
items other thanstockholders’ equity
Net changes duringaccounting period
Balance as of 31 March
2019

-

-

-

-

2,895

-

2,895

-

23,17923,17923,1792,895-

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

CapitalTotal
retainedearnings(For the year ended 31 March 2019)(Thousands of U.S. dollars)
Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Management
account
surplusreserve

Total
net
assetsTotal
stockholders’equityUnrealized
gain/(loss)
fromhedging
instruments$1,729,992$1,879,668$47,501$483,827$2,410,996

Balance as of 1 April
2018
Cumulative effects oferror correction (Note 19)
Balance at the beginningof current period after
retrospective adjustment
for error correction
Changes duringaccounting period
Net income$149,676

Generalaccount
surplusreserve$1,729,992-(22,123)(22,123)(22,123)-

37,35015,227$149,676$1,707,869$1,707,869$1,857,545$47,501$521,177$2,426,223-

208,975

208,975

208,975--

208,975

Net changes duringaccounting period in
items other thanstockholders’ equity
Net changes duringaccounting period
Balance as of 31 March
2019

-

-

-

-

26,101-

26,101-

208,975

208,975

208,975

26,101-

235,076$149,676$1,916,844$1,916,844$2,066,520$73,602$521,177$2,661,299

CapitalTotal
retainedearnings

See notes to financial statements.

6

■Statements of Cash Flows (For the years ended 31 March 2018 and 2019)
Item

Fiscal 2017
(1 April 2017 to
31 March 2018)
AmountⅠ Cash flows from operating activities
Net income
Depreciation and amortization
Interest income
Interest expenses
Increase in reserve for bonuses
Increase in reserve for bonuses for directors andcorporate auditors
Increase in reserve for retirement benefits
Increase in reserve for retirement benefits
for directors and corporate auditors
Decrease in fund for lending rate reduction
Increase in reserve for interest rate volatility
Increase/(decrease) in management account reservefor interest rate volatility
Decrease in reserve for interest rate reduction
Net (increase)/decrease in loans
Net increase in bonds
Net increase/(decrease) in borrowed money
Interest received
Interest paid
OthersNet cash provided by operating activities
Ⅱ Cash flows from investing activities
Proceeds from redemption of securities
Purchases of securities
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Net cash used in investing activities
Ⅲ Cash flows from financing activities
Payment to national treasury
Revenue from contributions made from municipally
operated racing
Net cash used in financing activities
Ⅳ Effect of exchange rate changes on cash and cash
equivalents
Ⅴ Net increase/(decrease) in cash and cash equivalents
Ⅵ Cash and cash equivalents at beginning of year
Ⅶ Cash and cash equivalents at end of year
See notes to financial statements.

7(Millions of yen) (Thousands of U.S. dollars)
Fiscal 2018
(1 April 2018 to 31 March 2019)
Amount¥26,111659(343,305)
187,9702
0¥23,179726(313,785)
172,4360
2$208,975
6,546(2,828,939)
1,554,600
1
19

2
6

5
0

45
2

(4,011)
220,000(87,667)(4,949)122,381(44,625)
1,103,329(6,467)(48,218)
326,799(11,000)
344,134(187,420)(130,597)(6,125)
265,147
105,848(31,500)
314,710(171,555)
51,734(55,227)
2,390,441
954,279(283,988)
2,837,270(1,546,656)
466,413

286,997528,254

4,762,485

612,000(616,000)
(51)
(416)

578,000(588,000)
(91)
(336)

5,210,963(5,301,118)(821)(3,033)(4,467)(10,427)(94,009)(400,000)
4,011(400,064)
4,949(3,606,782)
44,625(395,988)-(395,114)-(3,562,157)-(113,458)
861,226¥747,767

122,712
747,767¥870,480

1,106,319
6,741,505$7,847,824

■Notes to Financial Statements
1. Basis of Presentation
Japan Finance Organization for Municipalities (hereinafter, “JFM”) has prepared financial statements in accordance with
the Japan Finance Organization for Municipalities Law (Law No. 64, 2007; hereinafter the “Law”), the ordinances basedon the Law and other regulations applicable to 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 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 2019, the final day of the fiscal year, which was ¥110.92 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.
2. Summary of Significant Accounting Policies(1) Securities
Held-to-maturity securities are carried at amortized cost (straight-line method).
(2) Derivative transactions
Derivative transactions are carried at fair value with changes in unrealized gain or loss charged or credited 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 calculated by the straight-line method based on the estimated useful lives andthe residual value determined by management. The estimated useful lives of major items are as follows:
Buildings: 23 to 47 years
Others: 2 to 19 years(b) Intangible fixed assets
Amortization of intangible fixed assets is calculated by the straight-line method based on the estimated useful lives
and the residual value determined by management. Software for internal use owned by JFM is amortized over 5 years.
(4) Deferred assets
Bond issuance costs are expensed in full when incurred.
(5) Translation of assets and liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies, for which foreign currency swaps or foreign exchange
forward contracts are used to hedge the risk of foreign currency fluctuation, are translated at the contracted rate as theseswap contracts or the forward contracts qualify for deferral hedge accounting.
(6) Reserves(a) Reserve for possible loan losses
JFM has never experienced any loan losses. Accordingly, no reserve for possible loan losses has been maintained.
(b) Reserve for bonuses
The reserve for bonuses is provided for payment of bonuses to employees, in the amount of estimated bonuses, which
are attributable to the fiscal year.
(c) Reserve for bonuses for directors and corporate auditors
The reserve for bonuses for directors and corporate auditors is provided for payment of bonuses to directors andcorporate auditors, in the amount of estimated bonuses, which are attributable to the fiscal year.
(d) Reserve for retirement benefits
The reserve for retirement benefits is provided for payment of retirement benefits to employees, in the amount 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 and pension expenses are calculated using the simplified method,which assumes JFM’s retirement benefit obligation to be equal to the benefits payable if all eligible employees
voluntarily terminated their employment at the fiscal year-end.
(e) Reserve for retirement benefits for directors and corporate auditors
The reserve for retirement benefits for directors and corporate auditors is provided for payment of retirement benefits
to directors and corporate auditors, in the amount deemed accrued at the fiscal year-end based on the internal policies.
(7) Hedge accounting(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest rate fluctuations that qualify for hedge accounting and meet
specific matching criteria are not measured at fair value, but the differential paid or received under the swap
agreements is recognized and included in interest expense or income. If swap contracts or forward contracts used tohedge the risk of foreign currency fluctuation qualify for deferral hedge accounting, the foreign currency-denominatedassets 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

8

Hedged items・・・・・・・・・Foreign currency-denominated bonds(iii) Hedging instruments・・・Foreign exchange forward contracts
Hedged items・・・・・・・・・Foreign currency-denominated bank deposits(c) Hedging policy
JFM uses hedging instruments as a means of hedging exposure to interest rate risk and foreign exchange risk. Hedged
items are identified by each individual contract.
As a means of hedging foreign exchange fluctuation risks associated with the receipt of interest and principal offoreign currency-denominated bank deposits, a foreign exchange forward contract is entered into at the time of eachdeposit by JFM.
(d) Assessment of hedge effectivenessJFM 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, JFM deems
these to be highly effective and thus does not assess effectiveness. Moreover, a periodic assessment of hedge
effectiveness for interest rate swaps and currency swaps and forward contracts that qualify for deferral hedge
accounting is omitted when the exceptional accrual method is applied.
(8) Cash and cash equivalents
Cash and cash equivalents in the statements of cash flows consist of “Cash and bank deposits” on the balance sheets.
(9) Fund for lending rate reduction
In accordance with the provisions of Article 46, Section 1 of the Law, JFM has established the fund for lending rate
reduction to reserve contributions as stipulated in Article 32-2 of the Local Government Finance Law (Law No. 109,
1948). Also, pursuant to the provisions of Article 46, Section 5 of the Law, income arising from the investment of thefund (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 most current fiscal year.
(10) Reserve for interest rate volatility and management account reserve for interest rate volatility
The reserve for interest rate volatility is set aside to prepare for interest rate risk associated with refinancing of JFM
bonds (excluding the bonds issued by the former Japan Finance Corporation for Municipal Enterprises; hereinafter, the“Predecessor”) pursuant to the provisions of Article 38, Sections 1 and 3 of the Law, and Article 9, Sections 8 and 10 of
the Supplementary Provisions of the Law, and is calculated and accounted for based on 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; hereinafter, “Ordinance on Finance and Accounting”)
and Articles 22 and 23 of the Government Ordinance on preparation of relevant government ordinances and provisional
measures for the abolishment of the Japan Finance Corporation for Municipal Enterprises Law (Government OrdinanceNo. 226, 2008; hereinafter, “Preparation Ordinance”).
The management account reserve for interest rate volatility is set aside to manage interest rate risk associated withrefinancing of bonds issued by the Predecessor pursuant to the provisions of Article 9, Sections 9 and 10, and Article 13,
Sections 5 and 7 of the Supplementary Provisions of the Law, and is calculated and accounted for based on theprovisions of Articles 1 through 3 of the Ministerial Ordinance on the operations of the Management Account at Japan
Finance Organization for Municipal Enterprises (Ordinance No. 2 of the Ministry of Internal Affairs andCommunications, and the Ministry of Finance, 2008; hereinafter, “Management Account Operations Ordinance”) and
Articles 3 and 5 of the Supplementary Provisions of the above ordinance.
(11) Reserve for interest rate reduction
Reserve for interest rate reduction is set aside to reduce interest rates on the loans made by the Predecessor to local
governments pursuant to the provisions of Article 9, Section 13, and Article 13, Section 8 of the Supplementary
Provisions of the Law, and Article 26, Sections 1, 3 and 4 of the Preparation Ordinance, and is calculated and accounted
for based on the provisions of Article 5 of the Management Account Operations Ordinance.
(12) Management account surplus reserve
Profits generated in the management account are accounted for as the management account surplus reserve separatelyfrom retained earnings in accordance with the provisions of Article 13, Section 8 of the Supplementary Provisions of the
Law and Article 26, Section 2 of the Preparation Ordinance.
(13) Consumption taxes
National and local consumption taxes are accounted for using the tax exclusion method.

9

3. Loans
There are no bankrupt loans, non-accrual loans, past due loans (three months or more), or restructured loans. Since JFM
has never experienced loan losses in the past, it does not record a reserve for possible loan losses.
Bankrupt loans represent loans to borrowers as defined in Article 96, Section 1, Clause 3 (a) through (e) and Clause 4 of
the Enforcement Ordinance of the Corporate Income Tax Law (Government Ordinance No. 97, 1965), and on which
accrued interest is not accounted in revenue as there is no expectation of collection of either principal or interest because
they are past due for a considerable period of time or for other reasons (excluding loans on which bad debts are written off;hereinafter, “Non-accrual loans”).
Non-accrual loans represent loans on which accrued interest is not accounted in revenue, excluding loans to bankrupt
borrowers and loans with grace periods for interest payments to assist in corporate reorganization or to support business.
Past due loans (three months or more) represent loans on which payment of principal or interest is in arrears for morethan three months, calculated from the day following the contractual due date, excluding bankrupt loans and non-accrualloans.
Restructured loans represent loans, given certain favorable terms and conditions, such as reduction or exemption ofinterest, grace periods for interest or principal payments, and debt waivers, to assist borrowers in corporate rehabilitation or
to support business, excluding bankrupt loans, non-accrual loans and past due loans (three months or more).
4. Payment to the National Treasury of a Portion of JFM’s Management Account Reserve for Interest Rate Volatility
In accordance with the Supplementary Provisions of the Law, a portion of JFM’s management account reserve for interest
rate volatility is being attributed to the Japanese national government over a period of three years from fiscal 2015 throughfiscal 2017, with the aim of transferring up to 600 billion yen over this period. Furthermore, it has been also determined thatan additional amount of up to 900 billion yen from fiscal 2017 through fiscal 2019 shall be attributed to the government.
In fiscal 2017, 400,000 million yen was reversed from the Management Account Reserve for Interest Rate Volatility andthe same amount was transferred to the national treasury by JFM, pursuant to Article 14 of the Supplementary Provisions of
the Law for fiscal 2017 (Ordinance No. 2 of the Ministry of Internal Affairs and Communications, and the Ministry of
Finance, 2017). And, in fiscal 2018, 400,064 million yen (3,606,782 thousand U.S. dollars) was reversed from theManagement Account Reserve for Interest Rate Volatility and the same amount was transferred to the national treasury by
JFM, pursuant to Article 14 of the Supplementary Provision of the Law for fiscal 2018 (Ordinance No. 1 of the Ministry ofInternal Affairs and Communications, and the Ministry of Finance, 2018).
Additional information
In fiscal 2019, 100 billion yen is scheduled to be transferred to the national treasury by JFM, pursuant to Article 14 of the
Supplementary Provision of the Law for fiscal 2019 (Ordinance No. 4 of the Ministry of Internal Affairs and Communications,and the Ministry of Finance, 2019).
The Act on Promotion of Private Finance Initiative (Law No. 60, 2018) was amended on 20 June 2018 and it wasdetermined that an amount of up to 1.5 billion yen of a portion of JFM’s Management Account Reserve for Interest Rate
Volatility would be transferred to the national treasury over a six-year period ending 31 March 2024 for securing funds of
the Trust Fund Bureau Fund for exemptions of early redemption charges in relation to concessions of water supply andsewerage businesses.
5. Financial Instruments(1) Status of financial instruments(a) Policy for financial instruments
In order to maintain a sound and good financial standing as well as the solid confidence of capital markets, JFM needs
to appropriately manage various risks including interest rate risk.
JFM adopts an integrated risk management approach to appropriately respond to various risks while endeavoring tofurther advance its 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, which monitors the risks in each department. The content of risk management can then be appropriatelyreflected in management decisions.
(b) Details and risks of financial instruments
JFM makes loans to local governments. The maximum term to maturity is 40 years, but the majority of the funds forthese loans are raised mainly through issuance of 10-year bonds. Therefore, a large duration gap is created between
lending and funding, and JFM is exposed to the interest rate risk associated with bond and long-term borrowed money
refinancing.
JFM has set aside reserves for interest rate fluctuations (the reserve for interest rate volatility), and has set up the
ALM Committee separately from the Integrated Risk Management Committee to comprehensively analyze andmanage JFM’s assets and liabilities in a timely and appropriate manner. At the meeting, medium- and long-term
management analysis as well as risk analysis and evaluation are conducted through scenario analysis, VaR analysis,
and duration analysis, among other methods. In addition, JFM reflects the findings in its bond issuance plans and otheraspects of management and endeavors to reduce interest rate risk.
(c) Risk management for financial instruments(i) Credit risk
Credit risk is the risk of loss arising from a credit event, such as deterioration in the financial condition of a borrower,

10which causes an asset to lose value or become worthless. In addition to credit risk associated with loans, market
transactions also involve credit risk.
A. Credit risk on loans
JFM extends loans exclusively to local governments. Local governments have a zero Bank of International
Settlements (BIS) risk weighting and JFM does not expect any default on loans made to local governments for thereasons outlined below. 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 and interest
payments by individual local governments by including a portion of such principal and interest in the Standard
Financial Needs when calculating local allocation tax.
• Under the consultation system for local government bonds and loans, credit reviews must include checks on therepayment status of local governments, and tax revenue and necessary revenue sources to be secured.
Additionally, under the Early Warning System, the local governments whose principal and interest payments orfinancial deficits exceed a certain level must apply for approval to issue bonds or obtain loans, so that the credit
standing of local government bonds and loans is maintained.
• Under the Law Relating to the Financial Soundness of Local Governments, which was promulgated in June2007 (No. 94), local governments whose fiscal indicators exceed the early warning limits must make their own
efforts toward achieving fiscal soundness, and local governments whose fiscal indicators exceed thereconstruction limits must take necessary actions to restore their finances under the supervision of the national
government or the respective prefectural governments with regard to redemption of local government bonds andloans, and other operations.
• JFM is not subject to the “Banking Law” (1981, No. 59) or the “Financial Reconstruction Law” (1998, No. 132)
but performs self-assessment of loans in accordance with the “Financial Inspection Manual” of the Financial
Services Agency (FSA).
B. Credit risk on transactions
JFM is exposed to the risk of loss arising from credit events, such as deterioration in the financial condition of acounterparty, which causes an asset to lose value or become worthless. However, JFM appropriately manages
credit risk of this type by constantly monitoring counterparties’ financial standing, taking measures including
suspension of new deals and cancellation of transactions in case of a deterioration of their credit standings.
Moreover, JFM limits counterparties to financial institutions that achieve a certain credit rating and other criteria,
and conducts transactions within the credit lines for each counterparty in order to diversify risks. In addition, 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 inearnings generated from assets and liabilities. Market risk includes interest rate risk, foreign exchange risk, inflation
risk and price change risk.
A. Interest rate risk
Interest rate risk is the risk of losses incurred or a decrease in profits due to fluctuations in interest rates when
there is an interest rate or duration gap between assets and liabilities. The interest rate risk at JFM includes theinterest rate risk associated with bond and borrowed money refinancing and pipeline risk.
Interest rate risk associated with bond and borrowed money refinancing
JFM makes loans to local governments. The maximum term to maturity is 40 years, but the majority of thefunds for these loans are raised mainly through issuance of 10-year bonds, which creates interest rate risk
associated with bond refinancing. JFM takes the following measures to address the interest rate risk resulting
from a duration gap between lending and funding.
• JFM maintains necessary reserves to cope with the interest rate risk resulting from a duration gap between
lending and funding.
• As assets and liabilities in JFM’s general account will expand as a result of lending to local governments andfunding, JFM carries out an ALM analysis of this account in a timely and appropriate manner to further enhancethe effectiveness of its management of interest rate risk. In order to reduce exposure to interest rate risk, JFM
has established a medium-term management target for five years from fiscal 2018, in which the duration gap isto be maintained below approximately two years.
• To achieve its objective, from the viewpoint of controlling the duration on assets (lending), the interest rates for
temporary financial countermeasures funding which accounts for approximately 1/3 of the overall outstandingloans in the general account, are revised every 5 or 10 years. In addition, JFM will revise its lending rate by the
30th year at the latest for its loans with maturities longer than 30 years. And, in terms of funding, JFM has taken
measures to manage the duration on liabilities (bonds and loans) by issuing bonds with maturities longer than 10
years continuously under the ultra-low interest rate circumstances and carefully choosing maturities of bonds tobe issued by utilizing its FLIP and Open Issuance scheme.
• The management account, which manages assets related to loans extended by the Predecessor, is exposed tointerest rate risk. To address such risk, JFM contributes to the required reserves for interest rate volatility as

11described above. In accordance with Article 14 of the Supplementary Provisions of the Law, a portion of JFM’s
management account reserve for interest rate volatility is to be transferred to the Japanese national government.
The transfer is scheduled to occur over a period of three years from fiscal 2017 through fiscal 2019, with theaim of transferring up to 900 billion yen of which the transfer of 100 billion yen is pursuant to the January 2015
determination, and over a period of six years from fiscal 2018 through fiscal 2023, with the aim of transferring
up to 1.5 billion yen for securing funds of the Trust Fund Bureau Fund for exemptions of early redemption
charges in relation to concessions of water supply and sewerage businesses. The amount of transfer is to bewithin the amount which the Japanese national government deems as an amount exceeding the requisite amountof reserve necessary for the smooth operation of JFM’s management account at the time of transfer and in the
future, in light of JFM’s financial condition.
Pipeline risk
JFM is also exposed to pipeline risk, whereby losses would be incurred or profits decreased as a result ofinterest rate fluctuations during the time from when JFM raises money until the point at which the money isloaned to local governments. JFM, in principle, uses swap transactions to hedge against pipeline risk.
B. Foreign exchange and other risks
Various risks associated with bond principal and interest payments are hedged by swap transactions. These risks
include foreign exchange risk related to foreign currency-denominated bonds and interest rate risk related tofloating rate bonds.
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 the cancellation of foreign currency-denominated deposits
resulting from fluctuations in foreign exchange rates. Accordingly, in principle, JFM minimizes the risk of pricefluctuation by holding investments until maturity, and hedges foreign exchange risk by using foreign exchange
contracts.
C. Quantitative information on market risk
Loans, bonds and long-term borrowed money are primarily affected by interest rate risk, which is a major risk
variable among the market risks.
With respect to loans, bonds and long-term borrowed money in the general account, JFM establishes amanagement target for the duration gap in order to manage interest rate risk appropriately. With regard to thequantitative analysis of interest rate risk, while JFM does not have a management target for the quantitative
figures, it reports the results of calculating the quantitative information to the ALM Committee and tracks thestatus of the interest rate risk.
With respect to these financial instruments in the general account, based on an assumption that the risk
variables, except for interest rate risk, hold steady, for an indicative interest rate that is 10 basis points higher
than the actual rate, it is assumed that the fair value of the net amount (assets side), after offsetting suchfinancial instruments with the financial liabilities, would decline by 42,454 million yen and 38,399 million yen(346,189 thousand U.S. dollars) as of 31 March 2018 and 2019, respectively. On the contrary, for an indicativeinterest rate that is 10 basis points lower than the actual rate, it is assumed that the fair value of the net amount(assets side), after offsetting such financial instruments with the financial liabilities, would increase by 43,181
million yen and 39,013 million yen (351,726 thousand U.S. dollars) as of 31 March 2018 and 2019,respectively. These basis point values are presented in the financial statements from fiscal 2017 instead of theoutlier ratio (A maximum loss of market value expressed as a percentage of net assets in the event of a parallel
rate hike or drop of 200 basis points) in accordance with an amendment to Comprehensive Guidelines forSupervision of Major Banks, etc. issued by the FSA in Japan.
With respect to loans and bonds in the management account, JFM raises funds by the issuance of bonds asnecessary in order to manage existing loans until their redemption. For this reason, while JFM reports thecalculation results of the quantitative information regarding the interest rate risk to the ALM Committee andconfirms the status of interest rate risk as is the case in the general account, JFM does not establish amanagement target or use the quantitative analysis for the management account.
With respect to these financial instruments in the management account, based on an assumption that the risk
variables, except for interest rate risk, hold steady, for an indicative interest rate that is 10 basis points higher
than the actual rate, it is assumed that the fair value of the net amount (assets side), after offsetting suchfinancial instruments with the financial liabilities, would decline by 15,157 million yen and 10,560 million yen(95,209 thousand U.S. dollars) as of 31 March 2018 and 2019, respectively. On the contrary, for an indicativeinterest rate that is 10 basis points lower than the actual rate, it is assumed that the fair value of the net amount(assets side), after offsetting such financial instruments with the financial liabilities, would increase by 15,352
million yen and 10,692 million yen (96,396 thousand U.S. dollars) as of 31 March 2018 and 2019, respectively.
(iii) Liquidity risk
Liquidity risk is the risk that 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 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 otherdifficult situations (market liquidity risk).
JFM’s exposure to liquidity risk is extremely low because loans are made to local governments according to a preset schedule, and the daily cash and liquidity management is carried out based on a quarterly plan for fund12

management. Moreover, JFM has entered into overdraft agreements with several financial institutions to prepare forthe unexpected events, and invests surplus funds only in short-term financial products.
In addition, JFM has implemented a plan to secure liquidity support assets in advance in order to prepare forpotential market disruption which may prevent JFM from securing the necessary funds for scheduled bond principal
and interest payments.
(iv) Supplemental remarks on fair value of financial instruments
In addition to the amount based on the market price, the fair value of illiquid financial instruments includes a valuethat has been rationally calculated. Since certain assumptions were made when calculating the fair value, the value
may differ in the event that the assumptions change.

13(2) Items related to fair value of financial instruments
The book value, fair value and difference between them as of 31 March 2018 are as follows:(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial
instruments
Total assets(1) Bonds(2) Borrowed money(3) Cash collateral received for financial
instruments
Total liabilities

Book value¥23,768,240

Fair value¥25,641,198(Millions of yen)
Difference¥1,872,958

170,000
747,767
56,277

170,000
747,767
56,277-

24,742,285
20,284,520
159,500
12,26026,615,243
21,100,871
161,601
12,2601,872,958
816,350
2,101-

20,456,280

21,274,733

818,452

-

-

-

-

-

-

Book value¥23,503,092

Fair value¥25,369,115(Millions of yen)
Difference¥1,866,022

180,000
870,480
22,847

180,000
870,480
22,847-

24,576,420
20,392,179
128,000
27,63026,442,443
21,226,384
130,272
27,6301,866,022
834,205
2,272-

20,547,809-

21,384,287-

836,478----

Derivative transactions
Hedge accounting applied
Total of derivative transactions

The book value, fair value and difference between them as of 31 March 2019 are as follows:
Loans
Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial
instruments
Total assets(1) Bonds(2) Borrowed money(3) Cash collateral received for financial
instruments
Total liabilities
Derivative transactions
Hedge accounting applied
Total of derivative transactions(1)(2)(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial
instruments
Total assets(1) Bonds(2) Borrowed money(3) Cash collateral received for financial
instruments
Total liabilities
Derivative transactions
Hedge accounting applied
Total of derivative transactions

Book value$211,892,288

14(Thousands of U.S. dollars)
Fair value
Difference$228,715,430$16,823,142

1,622,791
7,847,824
205,977

1,622,791
7,847,824
205,977-

221,568,880
183,845,828
1,153,985
249,098

238,392,022
191,366,614
1,174,474
249,098

16,823,142
7,520,786
20,489-185,248,911-

192,790,186-

7,541,275
-

-

-

-

Note 1. Method for calculating fair value of financial instruments and items related to marketable securities and derivativetransactions
Assets(1) Loans
The fair value of loans is calculated by discounting future cash flows assuming prepayment at the discount rate
calculated using the Japanese government bond rates as of 31 March 2018 and 2019.
(2) Securities
All bonds are held until maturity, and the fair value of treasury discount bills is the market price.
Since all negotiable certificates of deposit are short-term, the fair value approximates the book value. As a result,the book value is deemed to be the fair value.
As of 31 March 2018--

(Millions of yen)
Difference-

Sub total
Negotiable certificates ofdeposit¥170,000¥170,000-

Sub total

170,000

170,000-¥170,000¥170,000-

Type
Securities withfair values
exceedingthe balance sheet
amountSecurities withfair values
that do not
exceedthe balance sheet
amountBook value

-

Total

Fair value

As of 31 March 2019--

(Millions of yen)
Difference-

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

Sub total

180,000

180,000-¥180,000¥180,000-

Type
Securities withfair values
exceedingthe balance sheet
amountSecurities withfair values
that do not
exceedthe balance sheet
amountBook value

-

Total
Type
Securities withfair values
exceedingthe balance sheet
amountSecurities withfair values
that do not
exceedthe balance sheet
amountFair value

Book value-

Fair value-(Thousands of U.S. dollars)
Difference-

Sub total
Negotiable certificates ofdeposit$1,622,791$1,622,791-

Sub total

1,622,791

1,622,791-$1,622,791$1,622,791

-

Total

(3) Cash and bank deposits
The book value is used as the fair value for deposits without maturities. Since all deposits with maturities are short-15

term, the fair value approximates the book value. As a result, the book value is deemed to be the fair value.
(4) Cash collateral paid for financial instruments
Cash collateral is associated with derivative transactions. The book value is used as the fair value of cash collateral
paid for financial instruments since both values are approximately equal as a result of each deposit period being shortterm.
Liabilities(1) Bonds
The fair value of bonds issued by JFM that have a market price is based on the market price. The fair value of bonds
without a market price is calculated by discounting the future cash flows using the interest rate that would be applied
when issuing similar bonds with the same total principal and interest and payment term.
Deferral hedge accounting is used for currency swaps, and the fair value of foreign currency-denominated bonds isthus calculated using the total of the fair value of that bond and the fair value of the swap transaction.
Hedge accounting is used for interest rate swaps, and the fair value of floating rate bonds is thus calculated bydetermining the present value using the total of the corresponding interest rate swap accounted for together with theprincipal and interest and discounting the future cash flows using the interest rate that would be applied when issuinga similar bond.
(2) Borrowed money
The fair value of long-term borrowed money is calculated by discounting the future cash flows using the interest ratethat would presumably be applied when issuing bonds with the same total principal and interest and payment term.
On the other hand, the book value is used as the fair value of short-term borrowed money since both values areapproximately equal as a result of each loan period being short term.
(3) Cash collateral received for financial instruments
Cash collateral is associated with derivative transactions. The book value is used as the fair value of cash collateral
received for financial instruments since both values are approximately equal as a result of each deposit period being
short term.
Derivative transactions
Transactions for which hedge accounting is applied
For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent to
the principal in the contract under each hedge accounting method as of 31 March 2018 is as follows:
Hedge accounting
methodType ofderivativetransactions

Principal
accounting method

Interest rate
swap
transactions

Hedge accounting forinterest rate swaps

Interest rate
swap
transactions
Receive/floating
and pay/fixed
Currency swap
transactions

Deferral hedge
accounting for
currency swaps
Deferral hedge
accounting for foreignexchange contracts

Foreignexchange
contracts
Total

Primary hedged items

Contract amount
Of which 1
year or
more

Bonds
Long-term borrowed
money(Millions of yen)
Method for
calculating
Fair
fair value
value

-

-

Bonds

¥35,000¥35,000(*1)

Foreign currencydenominated bonds

1,411,742

1,117,763(*2)

Foreign currencydenominated deposits

140,000-(*2)¥1,586,742¥1,152,763

16

-

-

Based onpricesprovided by
thecounterparty
financial
institution

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

Principal
accounting method

Interest rate
swap
transactions

Hedge accounting forinterest rate swaps

Interest rate
swap
transactions
Receive/floating
and pay/fixed
Currency swap
transactions

Deferral hedge
accounting for
currency swaps
Deferral hedge
accounting for foreignexchange contracts

Hedge accounting
methodForeignexchange
contracts
Total

Type ofderivativetransactions

Primary hedged items

Contract amount
Of which 1
year or
more

Bonds
Long-term borrowed
money(Millions of yen)
Method for
calculating
Fair
fair value
value

-

-

Bonds

¥35,000¥20,000(*1)

Foreign currencydenominated bonds

1,474,819

1,436,071(*2)

Foreign currencydenominated deposits

3,000

-

(*2)

¥1,512,819¥1,456,071

Primary hedged items--(Thousands of U.S. dollars)
Method for
calculating
Fair
Of which 1
fair value
value
year ormore
Based onpricesprovided by- thecounterparty
financial
institution

Contract amountPrincipal
accounting method

Interest rate
swap
transactions

Hedge accounting forinterest rate swaps

Interest rate
swap
transactions
Receive/floating
and pay/fixed

Bonds$315,543$180,310(*1)

Currency swap
transactions

Foreign currencydenominated bonds

13,296,241

12,946,912(*2)

Foreignexchange
contracts

Foreign currencydenominated deposits

27,047-(*2)$13,638,831$13,127,222

Deferral hedge
accounting for
currency swaps
Deferral hedge
accounting forforeign exchange
contracts

Bonds
Long-term borrowed
money

Total

Based onpricesprovided by
thecounterparty
financial
institution--(*1) Since interest rate swaps for which hedge accounting is applied are accounted for together with the bond being hedged,

the fair value is presented together with the fair value of the relevant bond.
(*2) Since currency swaps and foreign exchange contracts for which deferral hedge accounting is applied are accounted for17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 2018

Loans
Securities
Held-tomaturity
securities
Deposits

Within 1 year

After 1 year
through 2
years¥1,728,937(Millions of yen)
After 20After 30
years
years
through 30 through 40
years
years
¥1,694,676¥25,815¥1,758,517

After 2years
through 3
years¥1,760,017

After 3years
through 4
years¥1,719,241

After 4years
through 5
years¥1,642,751

After 5years
through 10
years¥6,624,170

After 10years
through 20
years¥6,814,112

170,000

-

-

-

-

-

-

-

-

747,767

-

-

-

-

-

-

-

-

¥1,763,913¥1,784,040

After 2years
through 3
years¥1,769,220

After 3years
through 4
years¥1,709,516

After 4years
through 5
years¥1,605,880

After 5years
through 10
years¥6,520,793

After 10years
through 20
years¥6,648,578

180,000

-

-

-

-

-

-

-

-

870,480

-

-

-

-

-

-

-

-

As of 31 March 2019
Within 1
year
Loans
Securities
Held-tomaturity
securities
Deposits

Within 1
year
Loans
Securities
Held-tomaturity
securities
Deposits

After 1 year
through 2
years(Millions of yen)
After 20After 30
years
years
through 30 through 40
years
years
¥1,665,063¥36,084(Thousands of U.S. dollars)
After 20After 30
years
years
through 30 through 40
years
years

After 1year
through 2
years

After 2years
through 3
years

After 3years
through 4
years

After 4years
through 5
years

After 5years
through 10
years

After 10years
through 20
years$15,902,575$16,084,033$15,950,421$15,412,160$14,477,830$58,788,257$59,940,306$15,011,387$325,319

1,622,791

-

-

-

-

-

-

-

-

7,847,824

-

-

-

-

-

-

-

-

18

Note 3. The repayment schedule for bonds and borrowed money is as follows:
As of 31 March 2018
Within 1
year

Bonds
Borrowedmoney

After 1year
through 2
years¥1,804,268
80,000¥2,078,327
10,000After 2years
through 3
years

After 3years
through 4
years

After 4years
through 5
years

After 5years
through 10
years

After 10years
through 20
years¥2,069,865-¥2,345,072
1,000¥2,094,780-¥6,960,448
68,500¥2,736,600-

After 2years
through 3
years

After 3years
through 4
years

After 4years
through 5
years

After 5years
through 10
years

After 10years
through 20
years¥2,345,072
1,000¥2,124,677-¥2,332,910
86,200¥6,272,932
30,800¥2,917,863-(Millions of yen)
After 20After 30
years
years
through 30 through 40
years
years
¥175,500-¥26,000-

As of 31 March 2019
Within 1
year

Bonds
Borrowedmoney¥2,078,327
10,000Within 1
year
Bonds
Borrowedmoney

After 1year
through 2
years$18,737,175
90,155¥2,072,865-

After 1year
through 2
years$18,687,929-

After 2years
through 3
years$21,142,015
9,016

After 3years
through 4
years$19,155,048-(Millions of yen)
After 20After 30
years
years
through 30 through 40
years
years
¥183,000-¥70,000-

After 4years
through 5
years

After 5years
through 10
years(Thousands of U.S. dollars)
After 10After 20After 30
years
years
years
through 20 through 30 through 40
years
years
years

$21,032,366
777,137$56,553,666
277,678$26,306,019-$1,649,838-$631,085-

6. Tangible and Intangible Fixed Assets
Tangible and intangible fixed assets as of 31 March 2018 consisted of the following:

Balance asof 31 March2018(Acquisition
costs)-¥1,185

¥442

¥33

¥742

¥4

1,659
439

292

71

1,659
147

51

4

3,284

735

105

2,549

261
79
¥341

23
48
¥71

2,930
31
¥2,962

1,750¥1,750

554
¥554

1,180
31
¥1,211

Balance asof 1 April
2017(Acquisition
costs)

Increaseduringthe year

Buildings¥1,182¥2

Land
Other tangible fixed assets

1,659
395

48

Total tangible fixed assets

3,237

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

2,692
0¥2,692Type of assets(Millions of yen)
Balance as
Depreciation
of 31
and
March
amortization2018
during(Net bookthe yearvalue)

Accumulated
depreciation
andamortization
as of 31
March 2018

Decreaseduringthe year

Tangible fixed assets

19

Tangible and intangible fixed assets as of 31 March 2019 consisted of the following:

Balance asof 31 March
2019(Acquisition
costs)-¥1,185

¥476

¥33

¥708

0

1,659
893

377

85

1,659
515

454

0

3,738

853

119

2,884

339
122
¥461

3
30
¥33

3,266
123
¥3,3892,353¥2,353

606
¥606

912
123
¥1,035

Balance asof 31 March
2019(Acquisition
costs)

Accumulated
depreciation
andamortization
as of 31
March 2019

Balance asof 1 April
2018(Acquisition
costs)

Increaseduringthe year

Buildings¥1,185-Land
Other tangible fixed assets

1,659
439

454

Total tangible fixed assets

3,284

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

2,930
31
¥2,962Type of assets(Millions of yen)
Balance as
Depreciation
of 31
and
March
amortization
2019
during(Net bookthe yearvalue)

Accumulated
depreciation
andamortization
as of 31
March 2019

Decreaseduringthe year

Tangible fixed assets(Thousands of U.S. dollars)
Balance as
Depreciation
of 31
and
March
amortization
2019
during(Net bookthe yearvalue)

Balance asof 1 April
2018(Acquisition
costs)

Increaseduringthe year

Buildings$10,684--$10,684$4,295$303$6,389Land
Other tangible fixed assets

14,964
3,965

4,096

8

14,964
8,053

3,401

773

14,964
4,652

Total tangible fixed assets

29,6134,096

833,701

7,696

1,076

26,005Intangible fixed assets
Software26,4183,059

30

29,447

21,220

5,470

8,227

287

1,100

275

1,112

-

-

1,112

$26,705$4,159$305$30,559$21,220$5,470$9,339Type of assets

Decreaseduringthe year

Tangible fixed assets

Other intangible fixed assets
Total intangible fixed assets

7. Assets Pledged as Collateral
Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as general collateral for JFM
bonds in the amount of 20,284,520 million yen and 20,392,179 million yen (183,845,828 thousand U.S. dollars) as of 31
March 2018 and 2019, respectively.

20

8. Bonds
Bonds as of 31 March 2018 consisted of the following:(Millions of yen)Type of bondDate of

Balance as of

Balance as of

Couponissue

1 April 201731 March 2018rate

Maturity(%)
Government-guaranteed bonds issued by JFM(domestic)

6/15/20093/14/2018

0.005¥4,792,105 to 1.500

10Y¥4,186,197

0.001
420,086 to 0.576

8Y

420,100

6Y

1,330,732

0.001
1,130,594(320,000) to 0.400
0.001
200,336 to 0.249

4Y

150,126

83,170

4.0

10Y

83,1700.030

2Y

10-year bonds (Series 1-106)
Government-guaranteed bonds issued by JFM(domestic)

9/26/20132/24/2017

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

9/27/2011-(domestic)

10/28/2016

6-year bonds (Series 1-20)
Government-guaranteed bonds issued by JFM(domestic)

6/24/20132/26/2018

4-year bonds (Series 5-10)
Government-guaranteed bonds issued by JFM

1/13/2011(international)[USD 1,000 million]

Global U.S. dollar bonds (Series 1)
Non-guaranteed bonds issued by JFM

2/19/2016(domestic)

25,000-190,000

0.001
160,000(45,000) to 0.360

20,00020,0002-year bonds (Series 3)
Non-guaranteed bonds issued by JFM(domestic)

4/19/201210/20/2017

5Y

5-year bonds (Series 9-22)
Non-guaranteed bonds issued by JFM

8/20/2012(domestic)

0.446

7Y

0.060

10Y

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

6/18/2009-(domestic)

3/19/2018

2,755,000

2,970,000 to 1.648

1.161
50,000 to 1.334

15Y

50,0000.180
1,295,000 to 2.266

20Y

1,195,000

10-year bonds (Series 1-106)
Non-guaranteed bonds issued by JFM(domestic)

1/31/20131/22/2014

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

6/25/20091/26/2018

20-year bonds (Series 1-65)
Non-guaranteed bonds issued by JFM

6/26/2014-(domestic)

10/20/2017

0.569
35,00055,000 to 1.864

2,029,401

0.001
2,206,530(167,500) to 2.334

30Ｙ30-year bonds (Series 1-5)
Non-guaranteed bonds issued by JFM(domestic)

7/22/20092/27/2018

FLIP bonds (Series F1-F6, F8-F20, F22-F29, F31,

21

2Y
to 40YF33-F37, F39, F41-F52, F54-F153, F155-F164,
F166-F169, F171-F210, F212-F243, F245-F401)
Non-guaranteed bonds issued by JFM

2/1/2011-

Floating(domestic)

7/25/2014

35,00035,000 rate

9Y
to 30YFLIP bonds (Floater, Series F53, F211, F244)
1,257,266

Non-guaranteed bonds issued by JFM

3/1/2012-(international)

1/30/2018

1,211,337(Series 15, 31, 33-35, 40-62)
Non-guaranteed bonds issued by JFM(international)[USD 9,825 million][AUD 516 million][NZD 58 million][EUR 1,000 million]

0.875

3Y

to 5.092

to 10Y(273,832)
40,376 Floating

5/22/20127/22/2013

74,465(20,146)(Floater, Series 29, 30, 32, 36，38，39)
Non-guaranteed bonds issued by JFM

7/31/2009-(domestic)

3/26/2018[USD 330 million][AUD 100 million]

2,330,000

2,480,000

5Y

rate

to 7Y

0.069

10Y

to 1.53

Private placements with pension funds
for local government officials (Series A1-A98)
Non-guaranteed bonds issued by JFM

11/24/2015-

0.069(domestic)

3/26/2018

to 0.511
75,500Private placements with pension funds for

10Y

159,000

local government officials(Series B1-B29)
Non-guaranteed bonds issued by JFM

11/24/2015-(domestic)

3/26/2018

0.190
to 1.154
134,000

Private placements with pension funds for

20Y

248,500

local government officials(Series C1-C29)
Non-guaranteed bonds issued by JFM(domestic)

4/21/2016-

0.190

3/26/2018

Private placements with pension funds for20Y

to 0.778
150,000

300,000

16,480,031

17,902,966 (826,478)

local government officials(Series D1-D24)
Bonds issued by JFM - Sub-total-

Government-guaranteed bonds issued by Japan

10/16/2008-

Finance Organization for Municipal Enterprises

5/25/2009

1.3
562,010(domestic)-

10Y

562,285 to 1.6(422,500)

10-year bonds (Series 1-8)
Non-guaranteed bonds issued by

11/25/2008-

Japan Finance Organization for Municipal

5/28/2009

1.59
139,991

Enterprises (domestic)

10Y

139,996 to 1.77
(80,000)

10-year bonds (Series 1-4)
Non-guaranteed bonds issued by

1/26/2009-

2.07

Japan Finance Organization for Municipal

4/30/2009

to 2.29Enterprises (domestic)
20-year bonds (Series 1, 2)

22

84,96484,96720Y

Non-guaranteed bonds issued by

4/30/2009-

1.69

Japan Finance Organization for Municipal

5/26/2009

to 1.73

Enterprises (domestic)

120,000

120,000

906,967

907,249(502,500)

10Y

Private placements with pension funds
for local government officials (Series A1, A2)
Bonds issued by Japan Finance Organization for-

Municipal Enterprises - Sub-total
Government-guaranteed bonds issued by-

1.4
221,115(221,120) to 1.9

10Y

808,536

7/18/2007

1.6
184,815 to 2.2

15Y

184,793

Government-guaranteed bonds issued by

8/9/1999-

223,122103,366 1.9

10Y

the Predecessor (international)

6/25/2008

the Predecessor (domestic)

4/19/2007--

6/19/200810-year bonds (Series 874-886)
Government-guaranteed bonds issued by
the Predecessor (domestic)

6/22/2005-

15-year bonds (Series 1-5)

[GBP 150 million] to 5.75

Euro-sterling bonds (Series 4), Global-yen bonds

to 20Y[USD 1,000 million](Series 5), etc.

(75,000)

Non-guaranteed bonds issued by
the Predecessor (domestic)

7/30/20076/16/2008

1.77
49,999(50,000) to 2.02

10Y

159,997

1.03
569,809 to 2.58

20Y

569,784

10-year bonds (Series 27-30)
Non-guaranteed bonds issued by
the Predecessor (domestic)

7/30/20026/16/2008

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

1/29/2004-

the Predecessor (domestic)

9/20/2006

2.39

30Y

189,891

189,897 to 2.95

Floating- rate15Y

20,0001.39
28,300(2,170) to 2.01

28Y

30,47030-year bonds (Series 1-10)
Non-guaranteed bonds issued by

10/31/2002

the Predecessor (domestic)
Floating rate bonds (Series 1)
Non-guaranteed bonds issued by
the Predecessor (domestic)

2/14/20036/9/2004

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

5/28/2007-

the Predecessor (domestic)

7/31/2008

1.59

10Y

to 2.03

382,000

127,000(127,000)-

2,568,595

1,474,304 (475,290)--¥19,955,593¥20,284,520 (1,804,268)-

Private placements with pension funds
for local government officials (Series Special
No.1-24–No.1-31)
Bonds issued by the Predecessor - Sub-total

Total

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as general collateralfor JFM bonds in the amount of 20,284,520 million yen as of 31 March 2018.
2. Amounts in square brackets under “Balance as of 31 March 2018” for “Government-guaranteed bonds issued by JFM

23

(international)—Global U.S. dollar bonds (Series 1),” “Non-guaranteed bonds issued by JFM (international)— (Series
15, 31, 33-35, 40-62),” “Non-guaranteed bonds issued by JFM (international)— (Floater, Series 29, 30, 32, 36, 38,39)” and “Government-guaranteed bonds issued by the Predecessor (international)—Euro-sterling bonds (Series 4),
Global-yen bonds (Series 5), etc.” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2018” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:
Bonds as of 31 March 2019 consisted of the following:(Millions of yen)Type of bondDate of

Balance as of

Balance as of

Couponissue

1 April 2018

31 March 2019rate

Maturity(%)
Government-guaranteed bonds issued by JFM

6/15/2009-(domestic)

3/18/2019¥4,792,105

0.005¥5,053,012(683,910) to 1.500

10Y

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

9/26/2013-(domestic)

2/24/2017

0.001
420,086

420,073 to 0.576

1,130,594

0.001
810,455(290,000) to 0.385

8Y

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

4/26/201210/28/2016

6Y

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

6/30/2016-(domestic)

2/26/2018

200,336200,223

83,17083,170

0.001

4Y

4.0

10Y

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

1/13/2011(international)[USD 1,000 million]

Global U.S. dollar bonds (Series 1)
Non-guaranteed bonds issued by JFM(domestic)

4/22/201311/19/2018

160,000

0.001
135,000(30,000) to 0.360

20,00020,000(20,000)

5Y

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

8/20/2012(domestic)

0.446

7Y

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

6/18/2009-(domestic)

3/22/201910Y

2,970,000

0.060
3,250,000(245,000) to 1.648
1.161
50,000 to 1.334

15Y

50,0000.180
1,425,000 to 2.266

20Y

1,295,000

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

1/31/20131/22/2014

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

6/25/20093/22/2019

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

6/26/2014-(domestic)

10/19/2018

0.569
55,00030Y75,000 to 1.864

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

2/26/2019-(domestic)24

15,0000.882

40Y

40-year bonds (Series 1)

Non-guaranteed bonds issued by JFM

7/23/2009-

0.001

2Y

(domestic)

3/26/2019

to 2.334

to 40YFLIP bonds (Series F2-F6, F8-F17,F19, F20, F22-25,

2,206,530

F31, F34-F37, F39, F41-F52, F54-F153,

2,380,659(153,500)

F155-F164, F166-F169, F171-F210, F212-F243,
F245-F276, F278-F456)
Non-guaranteed bonds issued by JFM(domestic)

2/1/20117/25/2014

35,000Floating
35,000(15,000) rate

9Y
to 30YFLIP bonds (Floater, Series F53, F211, F244)
1,340,300

Non-guaranteed bonds issued by JFM

3/1/2012-(international)

3/12/2019

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

0.875

3Y

to 5.092

to 10Y(Series 15, 35, 40-45, 47-68)
20,230 Floating

Non-guaranteed bonds issued by JFM

6/6/2012-(international)

7/22/2013

40,376(10,367)(Floater, Series 30, 36，38，39)
Non-guaranteed bonds issued by JFM

7/31/2009-(domestic)

3/26/2019[USD 230 million]

2,480,000

Private placements with pension funds

5Y

rate

to 7Y

0.069

10Y

2,630,000 to 1.53
(280,000)

for local government officials (Series A1-A110)
Non-guaranteed bonds issued by JFM

11/24/2015-(domestic)

3/26/2019

0.069
to 0.511
159,000

Private placements with pension funds for

10Y

229,500

local government officials(Series B1-B41)
Non-guaranteed bonds issued by JFM

11/24/2015-(domestic)

3/26/2019

0.190
to 1.154
248,500

Private placements with pension funds for

20Y

365,500

local government officials(Series C1-C41)
Non-guaranteed bonds issued by JFM(domestic)

4/21/2016-

0.190

3/26/2019

Private placements with pension funds for20Y

to 0.778
300,000

450,000

17,902,966

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

local government officials(Series D1-D36)
Bonds issued by JFM - Sub-total-

Government-guaranteed bonds issued by Japan

10/16/2008-

Finance Organization for Municipal Enterprises

5/25/2009(domestic)
10-year bonds (Series 1-8)25

1.3
562,285

140,000 to 1.6(140,000)-

10Y

Non-guaranteed bonds issued by

11/25/2008-

Japan Finance Organization for Municipal

5/28/2009

1.59
139,996

Enterprises (domestic)

10Y

60,000 to 1.77
(60,000)

10-year bonds (Series 1-4)
Non-guaranteed bonds issued by

1/26/2009-

Japan Finance Organization for Municipal

4/30/2009

2.07
84,967

84,97020Y

to 2.29Enterprises (domestic)
20-year bonds (Series 1, 2)
Non-guaranteed bonds issued by

4/30/2009-

Japan Finance Organization for Municipal

5/26/2009

1.69
to 1.73
120,000

Enterprises (domestic)

10Y

120,000(120,000)

Private placements with pension funds
for local government officials (Series A1, A2)
Bonds issued by Japan Finance Organization for-

907,249

Municipal Enterprises - Sub-total
Government-guaranteed bonds issued by

-

-

1.4
- to 1.8

10Y

221,115

7/18/2007

1.6
184,838 to 2.2

15Y

184,815

Government-guaranteed bonds issued by

8/9/1999-

103,366

28,376 1.9

10Y

the Predecessor (international)

6/25/2008

the Predecessor (domestic)

4/17/2008-

404,970(320,000)

6/19/200810-year bonds (Series 884-886)
Government-guaranteed bonds issued by
the Predecessor (domestic)

6/22/2005-

15-year bonds (Series 1-5)

[GBP 150 million] to 5.75

Euro-sterling bonds (Series 4), Global-yen bonds

to 20Y(28,380)(Series 5), etc.
Non-guaranteed bonds issued by

6/16/2008

1.97

the Predecessor (domestic)

49,999-569,809

1.03
569,834 to 2.58

10Y

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

7/30/20026/16/2008

20Y

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

1/29/2004-

the Predecessor (domestic)

9/20/2006

2.39
189,897

189,903 to 2.95

28,3001.39
26,130(2,170) to 2.01

30Y30-year bonds (Series 1-10)
Non-guaranteed bonds issued by
the Predecessor (domestic)

2/14/20036/9/2004

28Y

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

4/30/2008-

the Predecessor (domestic)

7/31/2008

1.59
to 1.91
127,000

Private placements with pension funds

10Y-

for local government officials (Series Special
No.29-31)
Bonds issued by the Predecessor - Sub-total-

1,474,304

26

999,082 (30,550)-

Total-¥20,284,520¥20,392,179 (2,078,327)-(Thousands of U.S. dollars)
Type of bondDate of

Balance as of

Balance as of

Couponissue

1 April 2018

31 March 2019rate

Maturity(%)
Government-guaranteed bonds issued by JFM

6/15/2009-(domestic)

3/18/201910Y$43,203,257

0.005$45,555,470(6,165,796) to 1.500
0.001
3,787,172 to 0.576

8Y

3,787,294

0.001
7,306,664(2,614,497) to 0.385

6Y

10,192,886

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

9/26/20132/24/2017

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

4/26/201210/28/2016

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

6/30/2016-(domestic)

2/26/2018

1,806,133

1,805,119

749,819

749,819

0.001

4Y

4.0

10Y

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

1/13/2011(international)[USD 1,000 million]

Global U.S. dollar bonds (Series 1)
Non-guaranteed bonds issued by JFM(domestic)

4/22/201311/19/2018

1,442,481

0.001
1,217,093(270,465) to 0.360

5Y

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

8/20/2012
180,310(domestic)

180,310(180,310)

0.446

7Y

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

6/18/20093/22/2019

0.060
29,300,397(2,208,799) to 1.648

10Y

26,776,055

1.161
450,775 to 1.334

15Y

450,775

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

1/31/20131/22/2014

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

6/25/2009-(domestic)

3/22/20190.180
11,675,081

12,847,097 to 2.266

495,853

0.569
676,163 to 1.864

20Y

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

6/26/201410/19/2018

30Y

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

2/26/2019

0.882-(domestic)
40-year bonds (Series 1)

27

135,233

40Y

Non-guaranteed bonds issued by JFM

7/23/2009-

0.001

2Y

(domestic)

3/26/2019

to 2.334

to 40YFLIP bonds (Series F2-F6, F8-F17,F19, F20, F22-25,

19,892,993

F31, F34-F37, F39, F41-F52, F54-F153,

21,462,853(1,383,880)

F155-F164, F166-F169, F171-F210, F212-F243,
F245-F276, F278-F456)
Non-guaranteed bonds issued by JFM(domestic)

2/1/20117/25/2014

315,543

Floating
315,543(135,233) rate

9Y
to 30YFLIP bonds (Floater, Series F53, F211, F244)
12,083,489

Non-guaranteed bonds issued by JFM

3/1/2012-(international)

3/12/201911,334,891[USD 10,200 million][AUD 604 million][NZD 58 million][EUR 1,080 million]

0.875

3Y

to 5.092

to 10Y(Series 15, 35, 40-45, 47-68)
Non-guaranteed bonds issued by JFM(international)

182,388 Floating

6/6/20127/22/2013

364,016(93,468)(Floater, Series 30, 36，38，39)
Non-guaranteed bonds issued by JFM

7/31/2009-(domestic)

3/26/2019[USD 230 million]

22,358,457

Private placements with pension funds

5Y

rate

to 7Y

0.069

10Y

23,710,783 to 1.53
(2,524,342)

for local government officials (Series A1-A110)
Non-guaranteed bonds issued by JFM

11/24/2015-(domestic)

3/26/2019

0.069
to 0.511
1,433,466

Private placements with pension funds for

10Y

2,069,059

local government officials(Series B1-B41)
Non-guaranteed bonds issued by JFM

11/24/2015-(domestic)

3/26/2019

0.190
to 1.154
2,240,353

Private placements with pension funds for

20Y

3,295,168

local government officials(Series C1-C41)
Non-guaranteed bonds issued by JFM(domestic)

4/21/2016-

0.190

3/26/2019

Private placements with pension funds for20Y

to 0.778
2,704,652

4,056,978161,404,315

171,187,573 (15,576,790)

local government officials(Series D1-D36)
Bonds issued by JFM - Sub-total-

Government-guaranteed bonds issued by Japan

10/16/2008-

Finance Organization for Municipal Enterprises

5/25/2009

1.3
5,069,288(domestic)-

10Y

1,262,171 to 1.6(1,262,171)10-year bonds (Series 1-8)
Non-guaranteed bonds issued by

11/25/2008-

Japan Finance Organization for Municipal

5/28/2009Enterprises (domestic)
10-year bonds (Series 1-4)

28

1.59
1,262,141

540,930 to 1.77
(540,930)

10Y

Non-guaranteed bonds issued by

1/26/2009-

2.07

Japan Finance Organization for Municipal

4/30/2009

to 2.29

766,027

766,054

20Y

Enterprises (domestic)
20-year bonds (Series 1, 2)
Non-guaranteed bonds issued by

4/30/2009-

1.69

Japan Finance Organization for Municipal

5/26/2009

to 1.73

Enterprises (domestic)

1,081,861

1,081,861(1,081,861)

8,179,317

3,651,016 (2,884,962)

10Y

Private placements with pension funds
for local government officials (Series A1, A2)
Bonds issued by Japan Finance Organization for-

Municipal Enterprises - Sub-total
Government-guaranteed bonds issued by

4/17/2008-

the Predecessor (domestic)

6/19/2008

1.4
1,993,467-

10Y- to 1.8

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

6/22/2005-

1.6

the Predecessor (domestic)

7/18/2007

1,666,209

1,666,410 to 2.2

Government-guaranteed bonds issued by

8/9/1999-

931,899

255,832 1.9

the Predecessor (international)

6/25/2008

15Y

15-year bonds (Series 1-5)

[GBP 150 million]

Euro-sterling bonds (Series 4), Global-yen bonds

10Y

to 5.75

to 20Y

1.97

10Y(255,860)(Series 5), etc.
Non-guaranteed bonds issued by

6/16/2008

the Predecessor (domestic)

450,774-

1.03
5,137,345 to 2.58

20Y

5,137,122

2.39
1,712,077 to 2.95

30Y

1,712,022

1.39
235,575(19,564) to 2.01

28Y

255,139

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

7/30/20026/16/2008

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

1/29/20049/20/2006

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

2/14/2003-

the Predecessor (domestic)

6/9/2004

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

4/30/2008-

the Predecessor (domestic)

7/31/2008

1.59
to 1.91
1,144,969

Private placements with pension funds

10Y-

for local government officials (Series Special
No.29-31)
Bonds issued by the Predecessor - Sub-total

Total

-

13,291,601

9,007,239 (275,424)--$182,875,233$183,845,828 (18,737,176)-

29

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as general collateral for
JFM bonds in the amount of 20,392,179 million yen (183,845,828 thousand U.S. dollars) as of 31 March 2019.
2. Amounts in square brackets under “Balance as of 31 March 2019” for “Government-guaranteed bonds issued by JFM(international)—Global U.S. dollar bonds (Series 1),” “Non-guaranteed bonds issued by JFM (international)— (Series
15, 35, 40-45, 47-68),” “Non-guaranteed bonds issued by JFM (international)— (Floater, Series 30, 36, 38, 39)” and“Government-guaranteed bonds issued by the Predecessor (international)—Euro-sterling bonds (Series 4), Globalyen bonds (Series 5), etc.” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2019” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:
As of 31 March 2018
Within 1
year
Bonds

¥1,804,268

After 3years
through 4 years¥2,345,072(Millions of yen)
After 4years
through 5 years¥2,094,780

After 1year
through 2 years¥2,078,327

After 2years
through 3 years¥2,069,865

After 1year
through 2 years¥2,072,865

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

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

After 1year
through 2 years$18,687,929

After 2years
through 3 years$21,142,015(Thousands of U.S. dollars)
After 3After 4years
years
through 4 years
through 5 years$19,155,048$21,032,366

As of 31 March 2019
Within 1
year
Bonds

¥2,078,327
Within 1
year

Bonds

$18,737,175(Millions of yen)
After 4years
through 5 years¥2,332,910

9. Borrowed Money
Borrowed money as of 31 March 2018 consisted of the following:(Millions of yen)Classification of borrowed money

Balance as of

Balance as of

Average interest

Repayment

1 April 201731 March 2018rate (%)

date

Short-term borrowed money-

Long-term borrowed money¥ 25,000- --¥80,000 0.456

9/26/2018-(repayment within 1 year)

3/26/2019

Long-term borrowed money

145,500

79,500 0.541

3/9/2020-(excluding repayment within 1 year)
Total¥170,500

3/27/2028-¥159,500 -Borrowed money as of 31 March 2019 consisted of the following:(Millions of yen)Classification of borrowed money

Balance as of

Balance as of

Average interest

Repayment

1 April 2018

31 March 2019

rate (%)

date

- -

Short-term borrowed money-

Long-term borrowed money¥80,000¥10,000 0.210

3/9/2020

79,500118,000 0.445

9/27/2021--(repayment within 1 year)
Long-term borrowed money(excluding repayment within 1 year)
Total

3/15/2029¥159,50030¥128,000 --(Thousands of U.S. dollars)
Classification of borrowed money

Balance as of

Balance as of

Average interest

Repayment

1 April 2018

31 March 2019

rate (%)

date

- -

Short-term borrowed money-

Long-term borrowed money$721,241$90,155 0.210

3/9/2020

716,733

1,063,830 0.445

9/27/2021-$1,153,985 ---(repayment within 1 year)
Long-term borrowed money(excluding repayment within 1 year)

3/15/2029$1,437,974

Total

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 2018
Within 1
year¥ 80,000

Borrowed money

After 1year
through 2 years¥ 10,000

After 2years
through 3 years

After 1year
through 2 years¥-

After 2years
through 3 years¥ 1,000$-

After 2years
through 3 years$9,016¥-After 3years
through 4 years¥ 1,000(Millions of yen)
After 4years
through 5 years¥-

As of 31 March 2019
Within 1
year¥ 10,000

Borrowed money

Within 1
year
Borrowed money

After 1year
through 2 years$90,155

31

After 3years
through 4 years¥-(Millions of yen)
After 4years
through 5 years¥86,200(Thousands of U.S. dollars)
After 3After 4years
years
through 4 years
through 5 years$$777,137

10. Reserves
Reserves as of 31 March 2018 consisted of the following:(Millions of yen)Classificationof reserve
Reserve for bonuses
Reserve for bonuses for
directors andcorporate auditors
Reserve for retirement
benefits
Reserve for retirement
benefits for directors
and corporate auditors

Balance as of
1 April 2017

Decrease during the year

Increaseduring the year

Intended
purposeBalance as of
31 March 2018

Other

¥55

¥57

¥55

¥-

¥57

8

8

8

-

8

45

12

2

8

47

17

7

-

1

24

Reserves as of 31 March 2019 consisted of the following:(Millions of yen)Classificationof reserve
Reserve for bonuses
Reserve for bonuses for
directors andcorporate auditors
Reserve for retirement
benefits
Reserve for retirement
benefits for directors
and corporate auditors

Balance as of
1 April 2018

Decrease during the year

Increaseduring the year

Intended
purposeBalance as of
31 March 2019

Other

¥57

¥57

¥57

¥-

¥57

8

10

8

-

10

47

16

4

7

52

24

8

6

1

24

(Thousands of U.S. dollars)
Classificationof reserve
Reserve for bonuses
Reserve for bonuses for
directors andcorporate auditors
Reserve for retirement
benefits
Reserve for retirement
benefits for directors
and corporate auditors

Balance as of
1 April 2018

Increaseduring the year

Decrease during the year
Intended
purposeBalance as of
31 March 2019

Other

$519

$520

$519

$-

$520

74

92

74

-

92

430

153

38

70

475

218

75

62

11

220

11. Reserve for Interest Rate Volatility
Reserve for interest rate volatility as of 31 March 2018 consisted of the following:(Millions of yen)Classificationof reserve
Reserve for interest rate
volatility
Management accountreserve forinterest rate volatility
Total

Balance as of
1 April 2017

Increase during the year

Decrease during the year

Amountprovided¥1,980,000¥220,000

1,358,120

132,332¥3,338,120¥352,332

32¥220,000¥220,000

Amountwithdrawn¥-

Balance asof 31 March2018¥2,200,000

620,000¥220,000

870,453¥620,000¥220,000¥3,070,453

Reserve for interest rate volatility as of 31 March 2019 consisted of the following:(Millions of yen)Classification ofreserve

Reserve forinterest rate
volatility
Management
account
reserve forinterest rate
volatility
Total

Balance asof
1 April 2018

Cumulative
effects oferror
correction

Balance atthebeginning ofcurrent
period after
retrospectiv
e adjustment
for error
correction¥2,200,000¥-¥2,200,000¥-

870,453

4,306

874,759

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

Balance asof
1 April 2018

Cumulative
effectsoferror
correction

Balance atthebeginning ofcurrent
period after
retrospectiv
e adjustment
for error
correction$19,834,115$-$19,834,115$-

7,847,575

38,8237,886,398

1,103,329$27,681,690$38,823$27,720,513$1,103,329

Increase during the year

Decrease during the year

Amountprovided

Balance as of
31
March
2019

Amountwithdrawn

¥-

¥-

¥-

¥2,200,000

400,064-

597,076¥400,064¥-¥2,797,076(Thousands of U.S. dollars)

Classification ofreserve

Reserve forinterest rate
volatility
Management
account
reserve forinterest rate
volatility
Total

Increase during the year

Decrease during the year

Amountprovided

Balance as of
31
March
2019

Amountwithdrawn

$-

$-

$-

$19,834,115

3,606,782-

5,382,945$3,606,782$-$25,217,060

Note: The “decrease during the year” for the “management account reserve for interest rate volatility” in the amount of 400,064
million yen (3,606,782 thousand U.S. dollars) consists of the payment to the national treasury in accordance with an
ordinance pursuant to Article 14 of the Supplementary Provisions of the Law for fiscal 2018 (Ordinance No. 1 of the
Ministry of Internal Affairs and Communications, and the Ministry of Finance, 2018).

33

12. Fund for Lending Rate Reduction
Fund for lending rate reduction as of 31 March 2018 consisted of the following:

Classification of fund
Basic fund for lending rate
reduction
Total

Balance as of
1 April 2017

Increase during
the yearAmount of Amountreservetransferred(Millions of yen)
Decrease during
the year
Balance as ofAmountOthers 31 March 2018
withdrawn¥920,287¥4,011¥-¥4,011¥-¥920,287¥920,287¥4,011¥-¥4,011¥-¥920,287

Fund for lending rate reduction as of 31 March 2019 consisted of the following:

Classification of fund
Basic fund for lending rate
reduction
Total

Classification of fund
Basic fund for lending rate
reduction
Total

Balance as of
1 April 2018

Increase during
the yearAmount of Amountreservetransferred(Millions of yen)
Decrease during
the year
Balance as ofAmountOthers 31 March 2019withdrawn¥920,287¥4,949¥-¥4,949¥-¥920,287¥920,287¥4,949¥-¥4,949¥-¥920,287

Balance as of
1 April 2018

Increase during
the yearAmount of Amountreservetransferred(Thousands of U.S. dollars)
Decrease during
the year
Balance as ofAmountOthers 31 March 2019withdrawn$8,296,859$44,625$-$44,625$-$8,296,859$8,296,859$44,625$-$44,625$-$8,296,859

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 provisions of Article 46,
Section 6 of the Law.
13. Reserve for Retirement Benefits
As of and for the year ended 31 March 2018
(1) Outline of retirement benefits system
JFM has a defined benefit plan that contributes to the Corporate Pension Fund and offers lump-sum payments uponretirement of employees and a defined contribution plan. The reserve for retirement benefits and pension expenses arecalculated using the simplified method.
(2) Defined benefit plan(a) Reconciliation of outstanding amounts of reserve for retirement benefits:
Reserve for retirement benefits at the beginning of the fiscal year:
Pension expenses:
Employee retirement benefits paid:
Contributions to the defined benefit plan:
Reserve for retirement benefits at the end of the fiscal year:

45 million yen
12 million yen
2 million yen
8 million yen
47 million yen(b) Retirement benefit obligation, plan assets, and reconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:
Plan assets:
Balance:Unfunded retirement benefit obligation:

190 million yen(181) million yen
8 million yen
39 million yen

34

Net liability for retirement benefits in the balance sheet:
Reserve for retirement benefits at the end of the fiscal year:
Net liability for retirement benefits in the balance sheet:47 million yen
47 million yen
47 million yen(c) Profit and loss associated with employee retirement benefits
Pension expenses calculated based on the simplified method: 12million yen
As of and for the year ended 31 March 2019(1) Outline of retirement benefits system
JFM has a defined benefit plan that contributes to the Corporate Pension Fund and offers lump-sum payments uponretirement of employees and a defined contribution plan. The reserve for retirement benefits and pension expenses arecalculated using the simplified method.
(2) Defined benefit plan(a) Reconciliation of outstanding amounts of reserve for retirement benefits:
Reserve for retirement benefits at the beginning of the fiscal year:
Pension expenses:
Employee retirement benefits paid:
Contributions to the defined benefit plan:
Reserve for retirement benefits at the end of the fiscal year:

47 million yen
16 million yen
4 million yen
7 million yen
52 million yen(430 thousand U.S. dollars)(153 thousand U.S. dollars)(38 thousand U.S. dollars)(70 thousand U.S. dollars)(475 thousand U.S. dollars)(b) Retirement benefit obligation, plan assets, and reconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:
Plan assets:
Balance:Unfunded retirement benefit obligation:
Net liability for retirement benefits in the balance sheet:
Reserve for retirement benefits at the end of the fiscal year:
Net liability for retirement benefits in the balance sheet:

184 million yen(171) million yen
13 million yen
39 million yen
52 million yen
52 million yen
52 million yen(1,668 thousand U.S. dollars)((1,549) thousand U.S. dollars)(119 thousand U.S. dollars)(356 thousand U.S. dollars)(475 thousand U.S. dollars)(475 thousand U.S. dollars)(475 thousand U.S. dollars)(c) Profit and loss associated with employee retirement benefits
Pension expenses calculated based on the simplified method: 16 million yen (153 thousand U.S. dollars)
Additional information
JFM obtained the approval of the Minister of Health, Labour and Welfare, dated 1 October 2014, for the transfer to theJapanese national government of the payment obligation of the substitutional portion of the Employees’ Pension Fundestablished under the Japanese Welfare Pension Insurance Law. Furthermore, on 22 September 2017, JFM completed thetransfer of the total amount of the refund (minimum policy reserve) to the Japanese national government. There will be no
impact on JFM’s profit or loss in conjunction with this because Clause 46 of “Guidance on Accounting Standard for
Retirement Benefits” (Accounting Standards Board of Japan Guidance No. 25) has been applied.
14. Net Income by Account(For the year ended 31 March 2018)
Net income of the general account was 26,111 million yen, while there was no net income of management account.

(For the year ended 31 March 2019)
Net income of the general account was 23,179 million yen (208,975 thousand U.S. dollars), while there was no net
income of management account.

35

15. Information by Account (Balance sheets)
Balance sheets of general account and management account as of 31 March 2018 were as follows:
Item(Assets)
Loans
Securities
Cash and bank deposits
Cash collateral paid for financial
instruments
Other assets
Tangible fixed assets
Intangible fixed assets
Due from general accountTotal assets(Liabilities)
Bonds
Borrowed money
Cash collateral received for financial
instruments
Other liabilities
Reserve for bonuses
Reserve for bonuses for directors andcorporate auditors
Reserve for retirement benefits
Reserve for retirement benefits for
directors and corporate auditors
Fund for lending rate reduction
Basic fund for lending rate reduction
Due to management accountReserves under special laws
Reserve for interest rate volatility
Management account reserve forinterest rate volatility
Reserve for interest rate reduction
Total liabilities(Net Assets)
CapitalRetained earnings
General account surplus reserve
Valuation, translation adjustments andothersManagement account surplus reserve
Total net assets
Total liabilities and net assets

General accountManagement
account

Offset(Millions of yen)Total

¥14,806,412
170,000
747,767
56,277¥8,961,827¥23,768,240
170,000
747,767
56,277

4,029
2,549
1,211

5,753

9,783
2,549
1,211

658,396¥(658,396)

15,788,248

9,625,977(658,396)

11,621,637
159,500
12,2608,662,882

20,284,520
159,500
12,260

2,267
57
8

4,425

6,692
57
8

24,755,829

47
24

47
24

920,287920,287
658,396
2,200,000
2,200,000

920,287920,287

15,574,486(658,396)
905,003
870,453

3,105,003
2,200,000
870,453

34,55034,5509,572,311(658,396)

16,602
191,890
191,890
5,268

24,488,401
16,602
191,890
191,890
5,268

53,666

53,666

213,761

53,666

267,427¥15,788,248¥9,625,977

36¥(658,396)¥24,755,829

Balance sheets of general account and management account as of 31 March 2019 were as follows:
Item(Assets)
Loans
Securities
Cash and bank deposits
Cash collateral paid for financial
instruments
Other assets
Tangible fixed assets
Intangible fixed assets
Due from general accountTotal assets(Liabilities)
Bonds
Borrowed money
Cash collateral received for financial
instruments
Other liabilities
Reserve for bonuses
Reserve for bonuses for directors andcorporate auditors
Reserve for retirement benefits
Reserve for retirement benefits for
directors and corporate auditors
Fund for lending rate reduction
Basic fund for lending rate reduction
Due to management accountReserves under special laws
Reserve for interest rate volatility
Management account reserve forinterest rate volatility
Reserve for interest rate reduction
Total liabilities(Net Assets)
CapitalRetained earnings
General account surplus reserve
Valuation, translation adjustments andothersManagement account surplus reserve
Total net assets
Total liabilities and net assets

General accountManagement
account

Offset(Millions of yen)Total

¥15,743,380
180,000
870,480
22,847¥7,759,711¥23,503,092
180,000
870,480
22,847

3,948
2,884
1,035

4,910

8,859
2,884
1,035

622,397¥(622,397)

16,824,577

8,387,019(622,397)

12,686,161
128,000
27,6307,706,017

20,392,179
128,000
27,630

2,573
57
10

3,687

6,261
57
10

24,589,199

52
24

52
24

920,287920,287
622,397
2,200,000
2,200,000

920,287920,287

16,587,195(622,397)
619,505
597,076

2,819,505
2,200,000
597,076

22,42922,4298,329,210(622,397)

16,602
212,616
212,616
8,163

24,294,008
16,602
212,616
212,616
8,163

57,80857,808237,382

57,808295,191¥16,824,577¥8,387,019

37¥(622,397)¥24,589,199

Item(Assets)
Loans
Securities
Cash and bank deposits
Cash collateral paid for financial
instruments
Other assets
Tangible fixed assets
Intangible fixed assets
Due from general accountTotal assets(Liabilities)
Bonds
Borrowed money
Cash collateral received for financial
instruments
Other liabilities
Reserve for bonuses
Reserve for bonuses for directors andcorporate auditors
Reserve for retirement benefits
Reserve for retirement benefits for
directors and corporate auditors
Fund for lending rate reduction
Basic fund for lending rate reduction
Due to management accountReserves under special laws
Reserve for interest rate volatility
Management account reserve forinterest rate volatility
Reserve for interest rate reduction
Total liabilities(Net Assets)
CapitalRetained earnings
General account surplus reserve
Valuation, translation adjustments andothersManagement account surplus reserve
Total net assets
Total liabilities and net assets

General account(Thousands of U.S. dollars)
OffsetTotal

Management
account$141,934,553
1,622,791
7,847,824
205,977$69,957,735$211,892,288
1,622,791
7,847,824
205,977

35,601
26,0059,339

44,26879,86926,0059,339

5,611,226$(5,611,226)

151,682,090

75,613,229(5,611,226)

114,372,174
1,153,985
249,098

69,473,654

183,845,828
1,153,985
249,098

23,204520
92

33,24256,446520
92

221,684,093

475
220

475
220

8,296,859
8,296,859
5,611,226
19,834,115
19,834,115

8,296,859
8,296,859

149,541,968(5,611,226)
5,585,156
5,382,945

25,419,271
19,834,115
5,382,945

202,211202,21175,092,052(5,611,226)

149,676
1,916,844
1,916,844
73,602

219,022,794
149,676
1,916,844
1,916,844
73,602

521,177

521,177

2,140,122

521,177

2,661,299$151,682,090$75,613,229$(5,611,226)$221,684,093

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

38

16. Information by Account (Statements of income)Statements of income of general account and management account from 1 April 2017 through 31 March 2018 were as
follows:(Millions of yen)
Item
General account Management
OffsetTotal
account
Income¥137,907¥218,401¥(8,832)¥347,476
Interest income
133,064
210,240
343,305
Fees and commissions
98
98
Other operating income46
46
Other income
4,024
1
4,026
Contributions from fund for lending
4,011
4,011
rate reduction
Others12114Administrative fee for management
673
(673)
account
Interest on due from general account24(24)
Transfer from general account for fund
8,134
(8,134)for lending rate reduction
Expenses
Interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Interest on due to management accountTransfer to management account forfund for lending rate reduction
Administrative fee for management
account

111,795
98,475
155
1,885
3,119
24
8,134

Ordinary income

92,53689,495
144
2,048
175

(8,832)

195,499
187,970
300
3,934
3,295

(24)
(8,134)673(673)

26,111

125,864-

151,976

Special gains
Transfer from management accountReversal of management accountreserve for interest rate volatility
Reversal of reserve for interest rate
reduction

220,000
220,000

626,467(220,000)(220,000)

626,467

Special losses
Provision for reserve for interest rate
volatility
Provision for management accountreserve for interest rate volatility
Transfer to general accountPayment to national treasury

220,000
220,000

Net income¥26,111620,000

620,000

6,467

6,467

752,332(220,000)

132,33239

752,332
220,000
132,332

220,000
400,000(220,000)¥-¥-

400,000¥26,111

Statements of income of general account and management account from 1 April 2018 through 31 March 2019 were as
follows:(Millions of yen)
Item
General account Management
OffsetTotal
account
Income¥136,945¥189,867¥(7,949)¥318,863
Interest income
131,327
182,458
313,785
Fees and commissions
93
93
Other operating income
21
21
Other income
4,962
4,962
Contributions from fund for lending
4,949
4,949
rate reduction
Others1212Administrative fee for management
540
(540)
account
Interest on due from general account30(30)
Transfer from general account for fund
7,378
(7,378)for lending rate reduction
Expenses
Interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Interest on due to management account
Other expenses
Transfer to management account forfund for lending rate reduction
Administrative fee for management
account

113,765
100,348
166
2,493
3,324
30
23
7,378

Ordinary income

23,17973,611
72,087133
777
72(7,949)179,428
172,436
300
3,270
3,397

(30)
23
(7,378)540(540)

116,255-

139,434

Special gains
Reversal of management accountreserve for interest rate volatility
Reversal of reserve for interest rate
reduction

406,190
400,064

406,190
400,064

6,125

6,125

Special losses
Provision for management accountreserve for interest rate volatility
Payment to national treasury

522,445
122,381

522,445
122,381400,064

400,064

Net income¥23,179

40

¥-

¥-

¥23,179

Item

General accountIncomeInterest income
Fees and commissions
Other operating income
Other income
Contributions from fund for lending rate
reduction
OthersAdministrative fee for management
account
Interest on due from general accountTransfer from general account for fundfor lending rate reduction$1,234,631
1,183,985
840
197
44,73844,625

Expenses
Interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Interest on due to management accountTransfer to management account forfund for lending rate reduction
Administrative fee for management
account

1,025,656
904,696
1,502
22,48029,969215
274
66,520Ordinary income

Management
account$1,711,748
1,644,954

113
4,871

208,975

Offset(Thousands of U.S. dollars)
Total$(71,665)$2,874,714
2,828,939
840
197
44,73844,625113(4,871)
274
66,520(274)(66,520)

663,647
649,904
1,206
7,008
658

(71,665)

1,617,638
1,554,600
2,708
29,48830,627215(274)(66,520)
4,871(4,871)

1,048,101-

1,257,076

Special gains
Reversal of management accountreserve for interest rate volatility
Reversal of reserve for interest rate
reduction

3,662,009
3,606,782

3,662,009
3,606,782

55,22755,227

Special losses
Provision for management accountreserve for interest rate volatility
Payment to national treasury

4,710,110
1,103,328

4,710,110
1,103,328

3,606,782

3,606,782

Net income$208,975

41

$-

$-

$208,975

17. Fair Value of Marketable Securities
Marketable held-to-maturity securities as of 31 March 2018 consisted of the following:

Negotiablecertificates ofdepositBook value¥170,000Fair value¥170,000

Difference(Millions of yen)
Unrealized losses

Unrealized gains---

Marketable held-to-maturity securities as of 31 March 2019 consisted of the following:

Negotiablecertificates ofdeposit

Negotiablecertificates ofdepositBook value¥180,000Fair value¥180,000

DifferenceBook value

Fair value

Difference$1,622,791$1,622,791

-

-

-

(Thousands of U.S. dollars)
Unrealized gains
Unrealized losses-

Notes: 1. The balance sheet amount for negotiable certificates of deposit is the fair value.
2. Difference is the net amount of “unrealized gains” and “unrealized losses.”

42(Millions of yen)
Unrealized losses

Unrealized gains--

18. Information on Derivative Transactions(1) Types of derivative transactions
Derivative transactions entered into by JFM are interest 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
JFM uses interest rate swaps, currency swaps and foreign exchange forward contracts as a means of hedging exposure
to interest rate and foreign exchange fluctuation risks, and does not enter into derivatives for speculative purposes.
Interest rate swaps are used to hedge exposure to interest rate risk on funding activities. Currency swaps and foreignexchange forward contracts are used 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 contracts.
(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest rate fluctuations that qualify for hedge accounting and meet
specific matching criteria are not measured at fair value, but the differential paid or received under the swap
agreements is recognized and included in interest expense or income. If swap contracts or forward contracts used tohedge the risk of foreign currency fluctuation qualify for deferral hedge accounting, the foreign currency-denominatedassets and liabilities are translated at the contracted rate.
(b) Hedging instruments and hedged items(i) Hedging instruments: Interest rate swaps
Hedged items: Bonds and long-term borrowed money(ii) Hedging instruments: Currency swaps
Hedged items: Foreign currency-denominated bonds(iii) Hedging instruments: Foreign exchange forward contracts
Hedged items: Foreign currency-denominated bank deposits(c) Hedging policy
JFM uses hedging instruments as a means of hedging exposure to interest rate risk and foreign exchange risk. Hedged
items are identified by each individual contract.
As a means of hedging foreign exchange fluctuation risks associated with the receipt of interest and principal offoreign currency-denominated bank deposits, a foreign exchange forward contract is entered into at the time of eachdeposit to hedge the risks.
(d) Assessment of hedge effectivenessJFM 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, JFM deems these to be highly effective and thus does not assess effectiveness. Moreover, a periodic
assessment of hedge effectiveness for interest rate swaps and currency swaps and forward contracts that qualify fordeferral hedge accounting is omitted when the exceptional accrual method is applied.
(3) Risks on derivative transactions
Major risks on derivative transactions are market risk and credit risk. Market risk is the risk of future revenue
fluctuations due to market value changes. Credit risk is the risk of losses incurred when counterparties are unable tofulfill their contracts due to bankruptcy or other reasons.
As for derivative transactions used for hedging purposes, market risk is offset by the corresponding change in theunderlying hedged items.
JFM enters into ISDA Master Agreements and CSA with financial institutions, which are its derivative transactions
counterparties, to reduce credit risk. Moreover, JFM constantly monitors restructuring costs of the transactions and thecounterparties’ credit profiles, and deals with multiple counterparties.
(4) Risk management system for derivative transactions
Execution and management of derivative transactions are conducted by the Finance Department of JFM with theapproval of persons in charge in accordance with the operational guidelines which specify transaction authority andlimits on the transaction 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.
19. Notes on error correction(1) Contents of errors
During fiscal 2018, JFM discovered that the provisioned amount from the general account and the reversal amount ofreserve for interest rate reduction in the management account for the loans extended by the Predecessor in fiscal 2007
were posted incorrectly. In order to correct this error, the management account reserve for interest rate volatility andthe management account surplus reserve increased by 4,142 million yen (37,350 thousand U.S. dollars) and thereserve for interest rate reduction and the general account surplus reserve decreased by 2,453 million yen (22,123
thousand U.S. dollars) as of the beginning of the year ended 31 March 2019.
(2) Effects on the net assets as of the beginning balance of the year ended 31 March 2019
The effect of correcting this error on net assets of 1,688 million yen (15,227 thousand U.S. dollars) is shown as“Cumulative effects of error correction” on the “Statements of Changes in Net Assets.”4344