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JFM Annual Report 2014
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Review and Plan

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Financial Section

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JFM’s Role in
Local Government Finance/RDQ,QWHUHVW5DWHV  

/RFDO$OORFDWLRQ7D[  Management Structure

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Appendix / JFM Data

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Message fromthe President and CEO
Yuji Watanabe President and CEO,Japan Finance Organization for Municipalities June 2014

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03

at a Glance
The Joint Funding Organization for
All Japanese Local Governments

Capital Contribution (As of 31 March 2014)■ Wholly owned by Japanese local governments, withthe capital contribution from 1,790*1 local governments*2

Towns, villages
and local
government
associations

Prefectures

USD 10 mm

USD 62 mm

6.3%

38.4%

■ Operates as a non-profit organization with the objec-

USD
161mm

tive to provide long-term and low-interest rate loans
exclusively to Japanese local governments■ Originally established in 1957 as a government

financial institution. In 2008, as part of a policy-based
financial reform conducted by the Japanese national

Governmentdesignatedcities (2)Cities (1) andspecial wardsof Tokyo

USD 28 mm

USD 61 mm

17.3%

38.0%

government, the new JFM was established under theContributed by 1,790 Japanese local governments

special law by succeeding to substantially all rights(1) Excludes government-designated cities.
(2) Government-designated cities:
Cities with populations of 500,000 or more designated in accordancewith Paragraph 1, Article 252-19 of the Local Autonomy Act.
Such government-designated cities are allowed to administer certain
matters such as social welfare, food safety, urban planning and so on,
for which prefectures are responsible in principle.

and obligations of the predecessor

Financial Highlights

Japanese Local Governments

Financial Highlights FY2013■ Japanese local governments include 47 prefectures(JPY mm)

YoY(JPY mm)(USD bn)

YoY(USD bn)

24,101,331+396,412

234

+3.8

23,082,976+414,341

224

+4.0

23,958,556+367,157

233

+3.6

Bonds

19,423,743+747,342

189

+7.3

Reserves underSpecial Laws

3,458,627-488,459

34-4.7

Capital16,60200.2

0Ordinary Income

188,051-25,019

1.8-0.2

and a total of 1,741 cities and special wards of*3

Total Assets

Tokyo, government-designated cities, as well as towns

Loans

and villages

Total Liabilities■ Revenue sources for the local governments are

secured by the national government●

The national government allocates a part of nationaltax revenue to the lo
local
ocal governments,
governments in order toadjust the imbalance
e of revenue sources among the

As of 31 March 2014.

local governments●

The national government also prerepares the Local

Annual Lending Volume

Government Borrow
wing Program each fiscal year,(USD bn)whic
ich sppecifies the amount of loocal government

25

fund
ndin
ing
g as well as fu
unding sourc
ce s
●

20

In the case of each local gooveverrnment funding,15

con ent or approval mustt, in principle, be obtained
co
cons
from
fr
om
m tthe
he
h
e rel
e ev
evan
ant auththor
o ities
●

10

Fina
Fi
Fina
nanc
n ia
ial
al co
cond
nd
ditio
ittio
ions
ons
ns of the local governments are
5

mo
oni
n to
tore
red unreundederr thhe lelega
al framewew
wor
orkk foor ea
earlyy
wa
arn
rnin
ing
in
g and
d re
reco
co
ons
n tr
truc
truc
u tiioonn of fiiscal sou
und
n ne
ness

0
FY 2009

■ Th
Thus
Thus
us, nonoone
ne of ththe loocacall govern
rnm
men
ntts h
ha
as de
d fa
f ul
ulte
ted
d

2010

2011

2012

2013

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

■ B
BIIS 0%0% riis
sk w
we
eig
gh
htt foror Jap
apan
an
a
nes
ese
e lo
loccal gove
governernmement
n s*4*
nt

04

2014(e)*Funding■ Leading issuer in the Japanese bond market with an

Funding Plan

average annual funding volume of JPY 2 tn (USD 19 bn)
FY 2014(plan)(1)

FY 2013(achieved)

Guaranteed

USD 6.1 bn

USD 12.4 bn

Non-Guaranteed

USD 13.6 bn

USD 15.9 bn

USD 10.0 bn

USD 12.7 bn

Type of Bonds■ Aiming to diversify its funding sources and expand its

investor base – continues to access the international
market through benchmark transactions as well asprivate placements, making use of its MTN Program

Domestic Issuance■ In the international market, only non-government

guaranteed bonds will be issued

BenchmarkUSD 2.5 bn

USD 2.1 bn■ In FY2013, JFM issued a total of USD 3.2 bn worth ofinternational bonds through 2 benchmark transactions,

Private Placements

USD 604 mm

Uridashi Bonds

AUD 110 mm

Open Issuance(3)5 private placements and an issuance of Uridashi
Bonds

USD 3.2 bn（2）MTN

USD 1.5 bn(1) Planned amount; subject to change depending on lending status,
market conditions and other factors.
(2) Includes AUD denominated private placement and Uridashi Bonds,
each converted at the exchange rate at the time of pricing.
(3) Details of issuance such as tenor, issue size and issue market will
be determined as necessary based on the lending status,
market conditions and other factors.

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

obligations cannot be satisfied in full with its assets,

Bond Issuance(USD bn)local governments bear all costs necessary to satisfy

18

the relevant obligations in full via payment to JFM

16

Bonds without government guarantee
Bonds with government guarantee■ Along with the solid institutional framework to support
14

the local governments, we believe JFM bonds are

12

generally regarded as a secure investment

1086Credit Ratings

4■ Aa3 (Moody’s), AA- (S&P)

2■ The ratings of JFM are the same as those of the0
FY 2009

Japanese sovereign

2010

2011

2012

2013

2014(e)* Planned amount; subject to change depending on lending status,
market conditions and other factors.

■ BIS risk weight*4 : 10% for JFM bonds (non-guaranteed)

denominated in JPY, 20% for those denominated inforeign currencies
Note : A rating is not a recommendation to buy, sell or hold securities and may be subject
to suspension, reduction or withdrawal at any time by the assigning rating agencies.

Notes: 1. As of 31 March 2014.
2. Local governments comprise all of the prefectures, cities and special wards, government-designated cities, towns and villages, as well as some local government associations.
3. As of 5 April 2014.
4. Value for investors in Japan. For international investors, values are determined by respective country authorities.

05

Financial Markets

Funding(JFM Bonds)
Outstanding
Bonds
JPY 19.4 tn(USD 189 bn)

Japan Finance
Organization for
Municipalities(JFM)

Lending(Long-term/low
interest rates)
Outstanding
Loans
JPY 23.0 tn(USD 224 bn)

Reserve forInterest Rate
Volatility, etc.
JPY 3.3 tn(USD 33 bn)

Reduction ofLending Rates

Fund forLending Rate
Reduction
JPY 0.9 tn(USD 9 bn)
Proceeds from
Public Races*

Local Governments

Outline of JFM Operations* A portion of the earnings from municipally operated racing(horse, bicycle, motorcycle and speedboat).

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

Joint Funding Organization for All Local Governments
JFM contributes to the sound financial operation of local governments and improves the welfare of local
residents with the aim of efficiently and effectively complementing local government fund-raising by
providing long-term funding at low-interest rates to local governments.
For social infrastructure improvements to be implemented by local governments, long-term funding is
usually desirable given that it takes a long time to recoup such capital expenditures, and also the cost06

burden should be shared across generations. However, local governments generally raise funds in capital
markets for terms of 10 years or less.
In response to this situation, JFM issues bonds in capital markets with a wide variety of maturities ranging
from medium-term to super long-term to provide stable and low-interest funds to local governments.
Under the JFM Law (Article 52, Paragraph 1), local governments have an obligation to bear the cost
necessary to satisfy all JFM obligations in the event JFM is to be dissolved and its obligations remain
unpaid.

Solid Financial Foundation
JFM primarily issues 10-year bonds to raise funds and extends long-term (maximum maturity of 30 years)
loans to local governments, which creates a duration gap between lending and funding. To cope with theinterest rate risk associated with bond refinancing (a negative margin caused by the interest payable
exceeding the interest receivable), JFM maintains reserves for interest rate volatility.

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

Capital
As of 31 March 2014, JFM's capital was USD
161 million contributed by 1,790 Japanese local

Capital Contribution by Local Government Group

governments, i.e., all of the prefectures, cities,
special wards of Tokyo, government-designatedcities, towns and villages, as well as some local
government associations.

Towns, villages
and local
government
associations

Prefectures

USD 10 mm

USD 62 mm

6.3%

38.4%

The amount of capital contribution from each

USD
161mm

local government is decided based on 1) outstanding JFM loans to each local government, and 2) the(mainly comprised of local taxes, local allocation

Governmentdesignatedcities *2

Cities *1 andspecial wardsof Tokyo

USD 28 mm

USD 61 mm

taxes and temporary financial countermeasures

17.3%

38.0%

amount of revenue of each local government

funding).

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

07Review and Plan
Review of Operations for Fiscal 2013
1. Lending Operations
2. Funding Operations
3. Financial Review

10
12
14

Management Plan for Fiscal 2014
1. Lending Operations
2. Funding Operations

16
17

Review
andPlan

Review and Plan

1

Review of Operations for Fiscal 2013

Lending Operations

In ﬁscal 2013, JFM provided loans totaling USD 20.6 billion, which marked the largest volume since
JFM’s establishment. The lending volume exceeded the plan by USD 1.4 billion, mainly as a resultof actual lending surpassing plan by USD 0.6 billion in disaster management and mitigation*1, USD
0.3 billion in special municipal mergers, and USD 0.2 billion in temporary financial countermeasuresfunding*2.
General account-related loans totaled USD 6.8 billion, or 33% of the total lending volume, andrepresents the disaster management and mitigation business. Loans for temporar y financial
countermeasures funding were USD 6.7 billion (33%), followed by municipal enterprise-related loans
in the amount of USD 6.1 billion (30%), of which sewerage and water supply businesses were the main
contributors.
Notes: 1. In response to the Great East Japan Earthquake, disaster management and mitigation business aims to build disasterresistant communities by managing initiatives such as the renovation for quake-resistant public facilities, developmentof emergency shelters, etc. Since ﬁscal 2013, the scope of this business category has expanded to ﬁre defense-related
facilities development.
2. Represents local government funding to cover shortfalls in local government revenue sources pursuant to the provisions of
the Local Government Finance Law (Act No. 109 of 1948, as amended).

Lending Operations by Business in Fiscal 2013
Number ofLoans Made

Business

Loan Amount (USD millions)% of total

General Account-related Loans
Public Projects, etc.

464

970

Public Housing

178

184

0.9

1,436

2,394

11.6

Disaster Management and Mitigation (Previous)
National Disaster Prevention

4.7

7

13

0.1

Educational Facilities Development

124

60

0.3

Social Welfare Facilities Development

176

187

0.9

General Projects

82

77

0.4

Regional Revitalization

143

69

0.3

Disaster Prevention

327

270

1.3

Local Road Development

636

629

3.0

Special Municipal Mergers

712

1,834

8.9

Disaster Management and Mitigation

99

124

0.6

4,384

6,811

33.0

Subtotal
Municipal Enterprise–related Loans
Water Supply

1,149

1,375

6.7

Industrial Water Supply

95

100

0.5

Transportation

38

276

1.3

Electricity and Gas Supply

45

71

0.3

Port Facilities

29

29

0.1

Hospitals and Elderly Care Services

410

804

3.9

Markets and Slaughterhouses

50

66

0.3

2,039

3,361

16.3

Sewerage
Tourism and Others

14

22

0.1

Subtotal

3,869

6,103

29.6

Refinancing Loans for Specified Local Governments Affected by Earthquake

2,167

1,016

4.9

Temporary Financial Countermeasures Funding
Total
Note: Totals may not add up due to rounding.
JFM Annual Report 2014 | 10

805

6,720

32.5

11,22520,650100.0

FY2013 Loans Extended by Business

5％ (USD 1.0 bn)

Total

USD

General Account-related Loans

Others20.6 bn

1% (USD 0.3 bn)

Municipal Enterpriserelated Loans

Transportation

1% (USD 0.3 bn)

12% (USD 2.4 bn)

Hospitals and Elderly
Care Services

Special Municipal Mergers

4% (USD 0.8 bn)

30％ (USD 6.1 bn)

33％ (USD 6.8 bn)
Disaster Management and
Mitigation (Previous)

7% (USD 1.4 bn)
Sewerage

16% (USD 3.4 bn)

9% (USD 1.8 bn)
Public Projects, etc.

5% (USD 1.0 bn)
Others8% (USD 1.6 bn)
Temporary Financial Countermeasures Funding

Operations

Water Supply

Review and Plan

Reﬁnancing Loans for Speciﬁed
Local Governments Affected by Earthquake

33％ (USD 6.7 bn)
FY2013 Loans Extended by Borrower
Local Government Associations

7％ (USD 1.4 bn)

3％ (USD 0.5 bn)

Total

USD

20.6 bn

Prefectures

24％ (USD 5.0 bn)

57％ (USD 11.8 bn)
Note: Totals may not add up due to rounding.

Government-designated Cities

9％ (USD 1.9 bn)

JFM’s Role in
Local Government Finance

Cities and Special
Wards of TokyoManagement Structure

Towns and Villages

Financial Section
Appendix / JFM Data

JFM Annual Report 2014 | 11

Review
and
Plan

Review and Plan

2

Review of Operations for Fiscal 2013

Funding Operations

1. Overview*1
In ﬁscal 2013, JFM raised a total of USD 28.7 billion, the largest volume since JFM’s establishment.
This amount included USD 15.9 billion in JFM bonds (non-guaranteed), and USD 12.4 billion ingovernment-guaranteed bonds for the repayment of existing bonds issued by Japan FinanceCorporation for Municipal Enterprises (the “Predecessor”).
With regard to JFM bonds, a total of USD 13.0 billion was raised by the regular issuance of 5-year, 10-year
and 20-year domestic bonds, as well as opportunistic issuances through JFM’s Flexible Issuance Program(“FLIP”) and the MTN Program. The amount raised by domestic public offerings and overseas offerings
exceeded from the initial funding plan (USD 11.6 billion) mainly due to the growth in the lending volume.
As for domestic public offerings, a total of USD 9.8 billion was issued in line with the plan. In order tocope with high market volatility experienced during the year, JFM reduced 10-year bond issuance fromthe initial plan while increasing opportunistic issuance.
In pursuit of enhancing ﬂexibility in overseas funding, in July 2013, JFM upgraded its MTN Program
to the Rule 144A-eligible Global MTN Program. In September 2013, JFM issued its first global USD
bonds (USD 1.5 billion), followed by a second issuance (USD 1 billion) in March 2014. In addition tothese successful benchmark transactions, JFM issued a total of USD 604 million through ﬁve private
placements denominated in multiple currencies and also AUD 110 million Uridashi Bonds targeting
Japanese retail investors. Through these activities, the total volume of international bonds issued
amounted to USD 3.2 billion*2.
The private placements of 10-year bonds with the Pension Fund Association for Local Government
Ofﬁcials were USD 2.9 billion.
Furthermore, JFM also utilized bank loans as a complementary means of funding, ﬁnancing USD 0.4
billion through long-term loans.
As a result, as of the end of ﬁscal 2013, JFM’s outstanding bonds were USD 188.7 billion, including thePredecessor’s bonds to which JFM succeeded. Outstanding bank loans totaled USD 0.9 billion, which
consisted of USD 0.7 billion of long-term loans and USD 0.2 billion of short-term loans.
Notes: 1. Issued amounts are calculated based on issue prices.
2. Includes AUD denominated private placement and Uridashi Bonds, each converted at the exchange rate at the time ofpricing.
Flexible Issuance Program (“FLIP”)
FLIP is JFM’s own framework for domestic bond issuance. Bond maturities range from 3 years to 30 years (except for 5-year, 10-year
and 20-year ﬁxed rate bullet bonds) with minimum and maximum issue sizes of JPY 3 billion (USD 29 million) and JPY 20 billion (USD
194 million), respectively.

Funding in Fiscal 2013
(2) Private placements with Pension Fund
Association for Local Government Ofﬁcials

1. JFM bonds (non-guaranteed)(1) Domestic and overseas offerings
Type of Bonds
Domestic Public Offerings

Plan (Initial)

Achieved

USD 9.5 bn

USD 9.8 bn

10-year

USD 4.7 bn

USD 4.0 bn

20-year

USD 1.2 bn

USD 1.2 bn

Type of Bonds

Plan

Achieved

10-year

USD 2.9 bn

USD 2.9 bn

2. Government-guaranteed domestic bonds

5-year

USD 0.5 bn

USD 0.4 bn

Type of Bonds

Plan

Achieved

Opportunistic Issuance

USD 3.2 bn

USD 4.1 bn

10-year

USD 6.6 bn

USD 6.6 bn

Overseas Offerings - MTN

USD 2.1 bn

USD 3.2 bn

8-year

USD 1.9 bn

USD 1.9 bn

Total

USD 11.6 bn

USD 13.0 bn

6-year

USD 2.8 bn

USD 2.8 bn

4-year

USD 1.1 bn

USD 1.1 bn

Total

USD 12.4 bn

USD 12.4 bn

Notes: 1. Figures in Plan (Initial) column show initially planned
amounts. In December 2013, the above plan wasrevised to a total of USD 12.6 billion.
2. In addition to the total achieved ﬁgure above, USD 0.4
billion was raised through bank loans.
JFM Annual Report 2014 | 12

Operations

In the domestic market, investor demand for bonds with high credit ratings rose after the Great East
Japan Earthquake interrupted the issuance of electric power bonds. As a result, since July 2011, JFM
had issued 10-year bonds with 2.5 basis point spreads over JGB yields. However, on the back of theheightened volatility in the Japanese bond market due to the Bank of Japan’s quantitative and qualitativeeasing announced in April 2013, the premium between JFM bonds and both JGBs and local government
bonds had continuously widened since July. In November, spreads of 10-year JFM bonds to JGBs
peaked at 12 bp and those to local government bonds at 6 bp. As the market environment stabilized,
widening of the spreads has stopped and then tightened to some degree since January 2014.
Twenty-year JFM bonds experienced a similar trend, in that, the spreads have gradually tightened
from peak levels.
JFM’s international bonds have been issued based on investor demand and market conditions byreferring to credit spreads observed in the international primary or secondary markets at the time ofpricing.

Review and Plan

2. Issue Spreads

Note: See pages 102-104 for the terms of issuances in ﬁscal 2013.

(bp)
16

(%)
1.6
Spread over major municipal bonds (bp)

14

1.418
.418

Spread over JGB yield curve (bp)*

1.4Management Structure

Issue Conditions of 10-Year JFM Bonds

JFM bonds (%)
1.208

12

1.178
78

12.0
2.012.0
2.0
11.5

1.149
1
.149

10

1.034
1
034
03
34

1 035
1.035
5

1.025

9.0

1.067
1.0
0 67

1.03
1.035
03
35

1.006
1.0
0 06

1.0

010
0.991 1.010
0.892
892
2

8

1.2
11.011.0
11.0
11.0

0.92
0.922
92
22
0.83 0.825
0.835
0.82
82
25
0.80
0.801
80
01
0.852
0
852
0.815 0.801

887
0.887
0.813
3
0
0.791
9 0.791
0 9 0.81

0.720

6

85
0.83
0.831
83
31 8.5

0.841
841

0 678
0.678
8

6.0
0 57
0.576
76

5.0

0 77
0.7
778
7
78
0.73
0.739
0
..73
.7
7
0.78
.7
78
83
0..7
0
739
73
7
39
0.730
73
730
7
30
6 .0 6 .0
5. 5
5 .0 5 .0

0.7
0.7
0.
739
73
70
7.0

0.8
0.6

4.5

4

4.0

0.4

4.0
3 .0

2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5
2.0

2

JFM’s Role in
Local Government Finance

1
1.048
.048
048
8

0.2

1.0
0
0 5 0.5
0.5
0 5 0.5
5 0.5
5 0. 5 0. 5 0. 5 0. 50

0.0FY2011FY2012

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

FY2013Financial Section

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Appendix / JFM Data

JFM Annual Report 2014 | 13

Review
and
Plan

Review and Plan

3

Review of Operations for Fiscal 2013

Financial Review

1. Income Statement
In ﬁscal 2013, JFM’s income was USD 4.4 billion, a decrease of USD 0.3 billion from the previous year.
This is mainly due to a downward trend in long-term interest rates in Japan, which led to lower interest
income from loans. Expenses experienced a similar trend, decreasing slightly to USD 2.6 billion, on theback of reduced interest expenses with respect to bonds. Ordinary income was thus down USD 0.2
billion to USD 1.8 billion, though still maintaining JFM’s income stability.
Pursuant to the relevant laws, a portion of the revenue generated by the reﬁnancing of bonds andborrowed money of JFM* is to be directed into reserves for interest rate volatility. As a result of suchprovisions as well as other factors, net income amounted to USD 0.3 billion, up USD 0.1 billion.
*This revenue is calculated based on the difference between JFM’s funding rates at the time the loans were made and the current
reﬁnancing rates.

2. Balance Sheet
As of 31 March 2014, JFM’s total assets amounted to USD 234.0 billion, up USD 3.8 billion from theprevious year. This mainly resulted from an increase in loans by USD 4.0 billion due to the amount of newloans for local governments exceeding that of loans repaid.
Total liabilities were up USD 3.6 billion to USD 232.6 billion. Despite a decrease of USD 6.8 billion in
JFM’s management account reserve for interest rate volatility primarily due to the payment to the nationaltreasury* of USD 6.3 billion, this increase reﬂected an increase of USD 7.3 billion in outstanding bonds
as a result of the issue amount exceeding the redemption amount.
Total net assets were USD 1.4 billion, up USD 0.3 billion. This reﬂected net income of USD 0.3 billion in
the general account being recorded as the general account surplus reserve.
Financial highlights since ﬁscal 2011 are as follows.
*See page 40 for details.

JFM Annual Report 2014 | 14

1. Income Statement(USD Millions)
FY2011FY2012FY2013
YoY

Income

4,968

4,729

4,450

-279

Expenses

2,735

2,661

2,624

-36

Ordinary Income

2,233

2,068

1,826

-243

210

202

257

55

Net Income

Review and Plan

Financial Highlights

Operations(USD mm)
6,000

IncomeExpenses
Ordinary Income

4,000

2,000

FY20112012

2013

2. Balance Sheet(USD Millions)
FY2011FY2012

Management Structure0

FY2013
YoY

230,123

233,971

3,848

Loans

217,332

220,062224,085

4,022

Others

9,254

10,060

9,886

-174

225,677

229,020

232,585

3,564

176,456

181,307

188,562

7,255

Fund for lending rate reduction

8,930

8,956

8,956

-0

Reserves under special laws

39,84938,31833,576-4,742

8,543

10,67912,8142,136

30,45926,902

20,124-6,779

847

737

638

-99

Others

443

440

1,491

1,051

Total Net assets

910

1,102

1,386

284

Total Liabilities
Bonds

Reserve for interest rate
volatility
Management account reservefor interest rate volatility
Reserve for interest rate
reduction

Financial Section

226,587

JFM’s Role in
Local Government FinanceTotal Assets(USD mm)240,000

Total Assets

230,000

220,000
FY201120122013

Note: Totals may not add up due to rounding.
JFM Annual Report 2014 | 15

Appendix / JFM Data

Total Liabilities

Review
and
Plan

Review and Plan

1

Management Plan for Fiscal 2014

Lending Operations

JFM’s lending plan is formulated based on the amount of local government borrowing for which theconsent or approval is scheduled to be given by the Minister for Internal Affairs and Communications or
the respective prefectural governors, under the Local Government Borrowing Program (the “LGBP”).
Based on the LGBP, JFM plans to extend loans in the amount of USD 17.5 billion in fiscal 2014, a
decrease of 9.1% from ﬁscal 2013. This reﬂects the termination of reﬁnancing loans for speciﬁed local
governments affected by the Great East Japan Earthquake.
The amount of JFM funds booked in the LGBP decreased by 5.6% from ﬁscal 2013 to USD 19.9 billion.
This decrease is primarily due to the termination of the reﬁnancing loans noted above, partially offset by
an increased budget for disaster management and mitigation projects, newly budgeted JFM funds forgeneral waste disposal projects, and so on.

Lending Plan

Planned Amount

FY2014FY2013YoY

USD 17.5 bn

USD 19.2 bn-9.1%

JFM Funds in Local Government Borrowing Program

JFM Funds
General Account-related Loans
Municipal Enterprise-related Loans
Refinancing Loans for Facilities Affected by Earthquake

FY2014FY2013YoY

USD 19.9 bn

USD 21.1 bn-5.6%

USD 5.4 bn

USD 4.9 bn

11.1%

USD 7 bn

USD 7.3 bn-4.4%

USD 0.01 bn

USD 0.05 bn-70.0%–USD 1.8 bn–

USD 7.5 bn

USD 7.1 bn

5.8%

Refinancing Loans for Specified Local Governments
Affected by Earthquake
Temporary Financial Countermeasures Funding

Notes: 1. The amount of JFM funds in the LGBP does not match JFM’s lending plan due to the timing for consent or approval being
different from when JFM loans will actually be extended.
2. See page 52 for more information on JFM funds in the LGBP.

JFM Annual Report 2014 | 16

Funding Operations

Operations

In order to raise funds for lending operations, JFM primarily issues non-guaranteed bonds throughdomestic public offerings and overseas offerings. For ﬁscal 2014, JFM plans to issue USD 10.7 billionof JFM bonds through these methods. In order to enhance ﬂexibility in funding under market changes,
JFM has newly created the Open Issuance category, which will be used for additional issuance of JFM
bonds.
In addition, private placements of 10-year bonds with the Pension Fund Association for Local
Government Ofﬁcials are projected to amount to USD 2.9 billion, at the same volume as last year.
As for government-guaranteed bonds, JFM plans to issue USD 6.1 billion, a decrease of USD 6.3
billion from the amount issued in ﬁscal 2013. JFM does not have a scheduled payment to the nationaltreasury in fiscal 2014, as it did in fiscal 2013, and this decrease equates the funds secured for thatpayment.

Review and Plan

2

Funding Plan for FY2014(1) Domestic and overseas offerings
FY2014 (Plan)

FY2013 (Achieved)

Domestic Public Offerings

USD 7.1 bn

USD 9.8 bn

10-year

USD 3.5 bn

USD 4.0 bn

20-year

USD 1.2 bn

USD 1.2 bn

5-year

USD 0.3 bn

USD 0.4 bn

Opportunistic Issuance

USD 2.1 bn

USD 4.1 bn

Overseas Offerings - MTN

USD 2.1 bn

USD 3.2 bn

Open Issuance

USD 1.5 bn–

USD 10.7 bn

USD 13.0 bn

Total

JFM’s Role in
Local Government Finance

Type of Bonds

Management Structure

1. JFM bonds (non-guaranteed)

Notes: 1. Subject to change depending on lending status, market conditions and other factors.
2. For Open Issuance, details of issuance such as tenor, issue size and issue market will be determined as necessary basedon the lending status, market conditions and other factors.
3. In addition to the above FY2013 ﬁgures, USD 0.4 billion was raised through long-term bank loans.

Type of Bonds
10-year

FY2014 (Plan)

FY2013 (Achieved)

USD 2.9 bn

USD 2.9 bn

Financial Section(2) Private placements with Pension Fund Association for Local Government Ofﬁcials

2. Government-guaranteed domestic bonds
Type of Bonds

FY2013 (Achieved)

10-year

USD 4.2 bn

USD 6.6 bn

8-year

–USD 1.9 bn

6-year

USD 1.9 bn

USD 2.8 bn

4-year

–USD 1.1 bn

USD 6.1 bn

USD 12.4 bn

Total

JFM Annual Report 2014 | 17

Appendix / JFM Data

FY2014 (Plan)Operations
Lending Operations
1. Outline
2. Loan Interest Rates
3. Credit Check System
4. Trends in Lending Operations
5. Lending Operations by Business

20
22
24
24
27

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

30
31
32
33

Operations

Lending Operations

JFM provides long-term and low-interest funds to Japanese local governments to
efﬁciently and effectively complement their funding in capital markets.

1

OutlineOperations

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

1. Eligible Borrowers
JFM provides loans exclusively to local governments.

2. Types of Loans• Long-Term Loans
Loans provided to local governments that have the consent or approval, and mature in orafter the second ﬁscal year.
• Pre-Consent or Pre-Approval Loans
Bridge loans to cover the period up to the disbursement of Long-Term Loans for projects forwhich the consent or approval is assured.
• Short-Term Loans
Loans to be repaid with revenues in the same ﬁscal year.

JFM Annual Report 2014 | 20

Review and Plan

3. Lending Scopes and Maturities of Loans
JFM lends mainly to the following local government businesses with respective loan maturities.
Loans for Fiscal 2014
Adjustable Lending Rate*1

Fixed Lending Rate
Business Type

Maturity

Grace Period
for Principal
Repayment

Within (Years)
20

Within (Years)
5

Within (Years)
20

Within (Years)
5

25

5

25

5

National Disaster Prevention
Educational andSocial Welfare
Facilities Projects

Unsubsidized
Projects

Temporary Financial
Countermeasures Funding

Educational Facilities Development

25

3

25

3

Social Welfare Facilities Development

20

3

20

3

General Waste Disposal

15

3

15

3

General Projects

20

5

20

5

Regional Revitalization

30

5

30

5

Disaster Prevention

30

5

30

5

Local Road Development

20

5

20

5

Special Municipal Mergers

30

5

30

5

Disaster Management and Mitigation

30

5

30

5

Water Supply

30

5

30

5

Industrial Water Supply

30

5

30

5

Transportation

30

5

30

5

Electricity Supply

30

5

30

5

Gas Supply

25

5

25

5

Port Facilities

20

5

30

5

Hospitals

30

5

30

5

Markets

25

5

25

5

Slaughterhouses

20

5

20

5

Sewerage

30

5

30

5

Prefectures and GovernmentDesignated Cities

–

–

30

3

Cities, Towns and Villages

–

–

20

3
Financial Section

Notes: 1. Lending rates are reviewed every 10 years.
2. Maturities for the national disaster prevention business are determined based on the business category to which actual
facilities planned for construction belongs.

JFM’s Role in
Local Government Finance

Municipal
Enterprise-related Loans*2

Management Structure

General Account-related Loans

Public Housing

Grace Period
for Principal
Repayment

Operations

Public Projects, etc.

Maturity

Appendix / JFM Data

JFM Annual Report 2014 | 21

Operations

2

Lending Operations

Loan Interest Rates

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

1. Loan Interest Rates
Operations

JFM offers two types of loan interest rates: the standard lending rate and the special lending rate.
The standard lending rate is calculated in order to balance JFM’s funding cost with interest income
from its lending. Speciﬁcally, this rate is determined in a manner that the discounted present value of the
cash ﬂows of the funds raised to make the loans equals the discounted present value of the cash ﬂows to
be generated by those loans with their respective terms to maturity, grace period for principal repayment
and repayment methods.
The special lending rate is set at a discount of 0.35% to the standard rate. At the end of ﬁscal 2013,
approximately 99% of outstanding JFM loans consisted of special interest rate loans.
The trends of JFM loan interest rates are shown below. The special lending rate has been at the samelevel as the national government’s lending rates that are applicable to loans for speciﬁc public projects(the Fiscal Loan Fund). This is due to the floor rates of the special lending rates being set equal torespective lending rates of the Fiscal Loan Fund which have identical terms on redemptions to those of
JFM loans.

Trends of Lending Rates
2.00%

Standard Lending Rate
Special Lending Rate = Fiscal Loan Fund interest rates

1.90%

1.80%

1.70%

1.60%

1.50%

1.40%

1.30%

1.20%
Jun

Sep

Dec

Mar

2012

Jun
2013

Sep

Dec

Note: The lending rates above represent a 30-year ﬁxed rate loan with a 5-year grace period for principal repayment.

JFM Annual Report 2014 | 22

Mar
2014

The interest rate differentials between the special lending rates and the standard lending rates arecovered by investment gains in the Fund for Lending Rate Reduction*, which consists of contributions
from local governments of a portion of the earnings from municipally operated racing, and also JFM’s
own funds.

Review and Plan

2. Lending Rate Reduction*From the viewpoint of equal revenue sharing among all local governments, local governments that operate horse, bicycle,
motorcycle and speedboat racing contribute a portion of their earnings from the races to the Fund.
Operations

0.15%

Reduction using in
nvestment gains

0.20%

Reduction usingg JFM’sJown funds

0.20%

Reduction
0.35%

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

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

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

Management Structure

0.15%Standard
Lending Rate(funding costs)

Financial Section
Appendix / JFM Data

JFM Annual Report 2014 | 23

Operations

3

Lending Operations

Credit Check System

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

Operations

1) JFM checks the ﬁnancial and operational status of local governments and municipal enterprises
to which it plans to lend, in light of the fiscal indicators as stipulated in the Law Relating to the
Financial Soundness of Local Governments of Japan (Act No. 94 of 2007). This credit checkprocess may include an interview of the staff of prefectures and government-designated cities.
2) JFM reviews loan applications submitted by local governments to determine if conditions are met.
The conditions include the consent or approval, any required resolution by the local government
assembly and budget appropriation for loans.
3) After a loan is disbursed, JFM conducts an onsite review to verify the use of funds and to check theoperational status of the project and the ﬁnancial and operational status of the borrower.

1 Check of local

2 Veriﬁcation at the timegovernments/municipal
enterprises applying
for loans•Check ﬁnancial andoperational status•Conduct interviews

4of lending
Check of the loan
application documents•Verify the consent or approval
for the loan amount•Check the loan application
documents

3 Subsequent review
Onsitecredit review

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

Trends in Lending Operations

1. Overview
JFM’s annual lending volume has risen since ﬁscal 2009 as a result of the expansion of its lending
scope to overall general account-related loans, the introduction of the Great East Japan Earthquakerelated loans, and so on.
In ﬁscal 2013, the lending volume amounted to USD 20.6 billion. At year-end, outstanding loans were
USD 224.1 billion.
Annual Lending Volume

Outstanding Loans(USD bn)
25(USD bn)
230
20.6

20
17.8

17.5

224 1
224.1

225

18.3

220.1

15

220
12.5

217.3
215.8

10

215 213.9

5

210

0
FY2009

2010

2011

2012

2013

JFM Annual Report 2014 | 24

0
FY2009

2010

2011

2012

2013

Operations

The general account-related businesses in its entirety and temporary financial countermeasuresfunding became eligible for JFM loans in ﬁscal 2009. As a result, the proportion of the annual lending
volume by business has changed signiﬁcantly.
In ﬁscal 2013, loans for temporary ﬁnancial countermeasures funding were USD 6.7 billion, accounting
for the largest share of lending, at 33% of the total. Ranked next were USD 3.4 billion in the seweragebusiness, representing 16% of the total, and USD 2.4 billion in the disaster management and mitigation
business (previous), for 12% of the total.
At year-end, the number of local governments with loans from JFM totaled USD 20.6 billion. Cities andspecial wards of Tokyo represented the highest share at 57% of the total, followed by prefectures at 24%
and government-designated cities at 9%.

Review and Plan

2. Annual Lending Volume by Business and Borrower

Long-Term Loans Extended by Business
Total
FY (USD bn)

Water Supply

2009 12.5

12%4%

Hospitals

Sewerage

4%

General Account-related Loans
12%
35%

32%

2010 17.8

8

3

3

20

20

42

2011 17.5

8

2

3

18

22

41

2012 18.3

732013 20.6

7

1

5
4

17
16

1%

Others
4
6

27

37

33

33

4
6

FY2013 Loans Extended by Borrower
Towns and Villages

Local Government Associations

7％ (USD 1.4 bn)

3％ (USD 0.5 bn)

JFM’s Role in
Local Government FinanceNotes: 1. Pre-consent or pre-approval loans are accounted for in the year when they are converted into long-term loans.
2. “Others” includes refinancing loans for municipal enterprise-related projects, and refinancing loans for facilities andspeciﬁed local governments affected by earthquake.
3. Totals may not add up due to rounding.

Management Structure

Temporary Financial Countermeasures Funding

Transportation

Total

20.6 bn

Prefectures

24％ (USD 5.0 bn)
Cities and Special
Wards of Tokyo

57％ (USD 11.8 bn)

Government-designated Cities

9％ (USD 1.9 bn)

Financial Section

USD

Note: Totals may not add up due to rounding.
Appendix / JFM Data

JFM Annual Report 2014 | 25

Operations

Lending Operations

3. Outstanding Loans by Business and Borrower
At the end of fiscal 2013, the outstanding loans were USD 224.1 billion, of which the seweragebusiness accounted for the largest share at 36%, followed by water supply at 16% and temporaryﬁnancial countermeasures funding at 14%.
There were a total of 2,140 local governments with outstanding loans from JFM, including all
prefectures. Cities and special wards of Tokyo accounted for the largest portion at 51% of the total,
followed by prefectures and government-designated cities, both at 19%. Towns, villages, as well as local
government associations and corporations, represented the remaining 11%.
Operations

Outstanding Loans by Business (as of 31 March 2014)
OthersIndustrial Water Supply

1% (USD 2.1 bn)

11% (USD 23.8 bn)

Public Housing

2% (USD 4.1 bn)

Sewerage

36% (USD 81.4 bn)

Total
Hospitals

USD

224.1 bn 3

Water Supply% (USD 6.9 bn)

16% (USD 36.5 bn)

Transportation

6% (USD 12.2 bn)
Local Road Development (Previous)

Temporary Financial
Countermeasures Funding

11％ (USD 24.8 bn)

14% (USD 32.2 bn)

Outstanding Loans by Borrower (as of 31 March 2014)
Local Government Corporations

0.4% (USD 0.8 bn)[25]
Local Government Associations

3% (USD 6.1 bn)
Total

USD
[2,140]Prefectures

19% (USD 43.5 bn)
[47]

[334]

224.1 bn 7

Towns and Villages% (USD 16.6 bn)[925]

Cities and Special Wards of Tokyo

Government-designated
Cities19% (USD 41.7 bn)
[20]

51

% (USD 115.2 bn)[789]*Figures in square brackets represent the number of borrowers.

Note: Totals may not add up due to rounding.

JFM Annual Report 2014 | 26

Lending Operations by Business

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

Review and Plan

5

Sewerage Business(Number of loans)

5,000
Number of Loans

4.0

4,000

3.0

3,000

2.0

2,000

1.0

1,000

0
FY2009 10

0
11

12

13

Water Supply Business(USD bn)(Number of loans)

2.0

Financial Section

At the end of ﬁscal 2011, the water supply coverage was 97.6% of the population. The water supply
business (including small-scale water supply) operated by local governments totaled 2,123 projects andprovided about 18.5 billion cubic meters of water annually for approximately 124.59 million people.
In ﬁscal 2013, loans extended to the water supply business amounted to USD 1.4 billion.

JFM’s Role in
Local Government Finance

Sewage Sludge
Gasiﬁcation System
in Kiyose Water
Reclamation Center(Tokyo)Loan AmountManagement Structure(USD bn)

5.0

Operations

At the end of ﬁscal 2012, the sewerage system covered 74.4% of people in cities, towns and villages
with a population of less than 50,000, or 88.1% of the nation’s total population. There were 3,633 projects
involved, with a total annual sewerage processing capacity (combined storm water and seweragetreatment, excluding river basin sewerage) of around 14.7 billion cubic meters serving areas with apopulation of 101.73 million people.
In ﬁscal 2013, loans extended to the sewerage business totaled USD 3.4 billion.

2,000

Number of Loans Loan Amount

1,500

1.0

1,000

0.5

500

0

0
JFM Annual Report 2014 | 27

FY2009 10

11

12

13

Appendix / JFM Data

Shiramizu Raw Water
Reservoir (Ishigaki City,
Okinawa Prefecture)

1.5

Operations

Lending Operations

Hospitals BusinessAt the end of fiscal 2012, hospital projects managed by local governments totaled 643 with 847
hospitals, which included 814 general hospitals, one tuberculosis hospital and 32 mental hospitals.
In ﬁscal 2013, loans extended to the hospitals business (including those run by local independentadministrative institutions) totaled USD 0.8 billion.
(USD bn)(Number of loans)

500

1.0
Operations

Loan Amount

400

0.8
Numb
mber of Loans

Tokushima
Prefectural
Central Hospital(Tokushima
Prefecture)

0.6

300

0.4

200

0.2

100
0

0
FY2009 10

11

12

13

Transportation BusinessAt the end of fiscal 2012, the transportation projects managed by local governments totaled 93
projects, which were operated by 75 entities, and public transportation is used by approximately 4 billion
people annually (10.97 million people on an average daily basis).
In ﬁscal 2013, loans extended to the transportation business amounted to USD 0.3 billion.
(USD bn)(Number of loans)

0.8

100
Loan Amount

0.6

75
Number of Loans

Sendai City Subway
Tozai Line (Sendai
City, Miyagi
Prefecture)

JFM Annual Report 2014 | 28

0.4

50

0.2

25

0
FY2009 10

11

12

13

0

(USD bn)

(Number of loans)

1,000

8.0

Numberr of Loans
Loan Amo
ount

6.0

800

4.0

600

2.0

400

200

0
FY2009 10

Operations

Temporary financial countermeasures funding represents thefunding for local governments in order to cover general resource
shortfalls pursuant to the provisions of the Local Government
Finance Law.
In order to secure the payments of the principal and interestof funds borrowed by local governments under temporar yfinancial countermeasures funding, the national government
includes the entire amount of such payments in the total amountof local allocation tax grants, which are to be allocated to local
governments in subsequent years.
In f iscal 2013, loans ex tended for tempor ar y f inancial
countermeasures funding amounted to USD 6.7 billion.

Review and Plan

Temporary Financial Countermeasures Funding

11

12

13

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

JFM Annual Report 2014 | 29

Operations

Funding Operations

As a joint funding organization for local governments, JFM raises funds in aconsistent manner to provide local governments with long-term and low-interest funds,
while endeavoring to reduce its funding costs.

1

Issue TypeOperations

JFM primarily issues non-guaranteed bonds (i.e., JFM bonds) through public offerings in order toraise funds for its lending operations. Private placements with the Pension Fund Association for Local
Government Ofﬁcials are also taken as a means of fund-raising.
JFM issues government-guaranteed bonds only for reﬁnancing the existing government-guaranteedbonds of the Predecessor in order to manage the Predecessor’s assets to which JFM has succeeded.

JFM Bonds

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

Domestic
Bonds
Public•Regular issuance of 5-year, 10-year and 20-year bonds

Offerings•Opportunistic bond issuance (maturities except for 5-year, 10-year and 20-year)

Private Placements with Pension Fund Association
for Local Government Ofﬁcials

International
Bonds

Bonds issued in international markets through the MTN Program

Government-Guaranteed Bonds

To be issued only for the purpose of reﬁnancing existing governmentguaranteed bonds of the Predecessor.

JFM Annual Report 2014 | 30

Basic Funding Policy

To secure stable and low-cost funding, JFM pursues diversified funding options and strives tobuild confidence in capital markets by proactively disclosing information and thoroughly fulfilling
responsibilities. JFM also endeavors to issue bonds in response to the market environment and market
needs.

Review and Plan

2

1. Diversiﬁcation of Funding Methods
Operations
Management Structure

From the viewpoint of stable funding, JFM endeavors to issue bonds with various maturities andstructures, including medium-term and super-long-term bonds in response to the market environment
and market needs, in order to broaden its investor base, while also considering funding costs and risk
management.
JFM’s basic means of funding is the issuance of bonds. JFM accesses the domestic market throughthe regular issuance of 5-year, 10-year and 20-year bonds, and also continues to take advantage of
its Flexible Issuance Program (FLIP) for opportunistic funding as well as bank loans. JFM also utilizes
the MTN Program, being committed to the regular issuance of benchmark bonds to the international
investors and Uridashi Bonds to Japanese retail investors.

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

JFM’s Role in
Local Government Finance3. Contribution to the Sound Development of Capital Markets

Financial Section

While capturing funding opportunities in response to the needs of capital markets, JFM will further
strengthen its role as a leading public-sector bond issuer and be committed to contributing to the sounddevelopment of capital markets.

Appendix / JFM Data

JFM Annual Report 2014 | 31

Operations

3

Funding Operations

Features of JFM Bonds

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

• JFM’s assets can be deemed to be highly stable based on the fact that JFM lends
exclusively to local governments, and no local governments have ever defaulted.
Operations• JFM has a solid ﬁnancial foundation, backed by its reserve for interest rate volatility and theFund for Lending Rate Reduction prescribed in the JFM Law.
• JFM is a joint funding organization established with a capital contribution from Japanese
local governments encompassing all prefectures, cities, special wards of Tokyo, governmentdesignated cities, towns and villages, as well as some local government associations.
• Under the JFM Law, local governments have an obligation to bear the costs necessary tosatisfy all JFM obligations in the event JFM is to be dissolved and its obligations remain
unpaid.

JFM has received the highest credit rating among the Japanese public-sector bond issuers fromStandard and Poor’s (S&P), Moody’s Investors Service (Moody’s) and Rating and Investment Information,
Inc. (R&I). Furthermore, the BIS risk weighting is 10% for JFM bonds denominated in yen, and 20% for
those denominated in foreign currencies.
In addition to JGBs and local government bonds, interest received by foreign investors (non-residents,
foreign corporations, etc.) on JFM’s domestic bonds in book-entry form as well as JFM’s internationalbonds (both of which include government-guaranteed bonds) shall be exempted from Japanese income
tax, subject to certain procedural requirements.

(as of 31 March 2014)

S&P: AA-

Issuer Credit Rating

Moody's: Aa3
R&I: AA+BIS Risk Weighting

JFM bonds:(For reference)

10% (denominated in yen)

Government-Guaranteed Bonds: 0%

20% (denominated in foreign currencies)

Japanese Government Bonds,
Local Government Bonds: 0%

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

Preferential Rights
for JFM Bonds

preferential right to be paid prior to other unsecured indebtedness, and such preferential
right shall rank immediately after the general preferential rights as provided for in the
Civil Code of Japan (Law No. 89 of 1896, as amended). (Article 40, Paragraph 2 andParagraph 3 of the JFM Law)

Note: The risk weights are values for investors in Japan. For foreign investors, values are determined by respective country
authorities. The risk weights for government-guaranteed bonds, JGBs and local government bonds are all 0% in terms of
those denominated in yen as well as foreign currencies (as of 31 March 2014).

JFM Annual Report 2014 | 32

Trends in Funding Operations

Outstanding Bonds and Bank Loans(USD bn)30

20 18.8

19.7

12.4

150

19.9
10.0

0.8

129.1

6.9

6.3

0.4
2.9

8.0
0.3
2.9

3.9

0.7

3.9

120.9

Financial Section

10(USD bn)
200
189.6
181 7
180 1 178.1
180.1
178 1 176.9
176 9 181.7

24.5

25

15

28.7

100

167.7

138.8

153.0

2.9
2.2

3.1

50
5

JFM’s Role in
Local Government FinanceFunding Volume

Management Structure

Notes: 1. FILP stands for Fiscal Investment and Loan Program, which is prepared by the national government and determines the
allocation of funds and extent of government guarantees available for certain institutions. FILP agency bonds are nonguaranteed bonds issued under the FILP.
2. See page 40 for details.

Operations

JFM issues JFM bonds (non-guaranteed bonds to be issued through domestic public offerings orunder the MTN Program, or private placements with the Pension Fund Association for Local Government
Officials) and government-guaranteed bonds for the purpose of refinancing existing governmentguaranteed bonds of the Predecessor.
Historically, the Predecessor had issued government-guaranteed bonds and private placement
bonds subscribed by the Pension Fund Association for Local Government Ofﬁcials and, for the period
from ﬁscal 2001 to ﬁscal 2008, non-guaranteed FILP agency bonds*1. Then, since JFM commenced its
operations in ﬁscal 2008, JFM has issued JFM bonds. In recent years, the issuance of JFM bonds has
been increasing, and this trend is expected to continue for the future. On the other hand, aside from anincrease over the last two years due to the scheduled payment to the national treasury*2, the issuance ofguaranteed bonds will gradually decrease.
In ﬁscal 2013, JFM raised a total of USD 28.7 billion, an increase of USD 4.2 billion from the previous
year. This increase was due to the payment made to the national treasury of USD 6.3 billion fundedthrough government-guaranteed bonds, and also an increase in the annual lending volume.
At year-end, outstanding bonds were USD 188.7 billion. Outstanding bank loans totaled USD 0.9
billion, which consisted of USD 0.7 billion of long-term loans and USD 0.2 billion of short-term loans.
The total amount of outstanding bonds and bank loans was USD 189.6 billion, which was comprisedof USD 68.7 billion in the general account and USD 120.9 billion in the management account. While
the outstanding bonds and bank loans in the general account have been increasing, the management
account has been decreasing. The management account is expected to gradually decrease as no new
bonds, other than bonds issued to reﬁnance Predecessor’s bonds, have been issued in this accountsince October 2008 and equally none are expected going forward.

Review and Plan

4

7.0

9.2

8.7

9.5

68.7

9.8

52.6
38.1

0

FY2009

2010

2011

2012

0

2013

12.4

FY2009

25.1

2010

2011

2012

2013

Management Account

Government-guaranteed domestic bonds

General AccountLong-term bank loans
Private placements with Pension Fund Association for
Local Government Officials
JFM bonds (international bonds)
JFM bonds (domestic bonds)
Non-guaranteed bonds
JFM Annual Report 2014 | 33

Appendix / JFM Data

Government-guaranteed international bonds

Management
Structure
Corporate Governance

3. Internal Audit

36
38
38

General Account and Management Account39

Risk Management

41

Compliance46

Disclosure47

1. Corporate Governance
2. Internal Control over Financial ReportingManagement
Structure

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

1

Corporate GovernanceCorporate Governance System

Representative Board

Management StructureMembers: (1) Representatives at local governments*(2) External experts*
Number of Members: 6 (3 from (1) above and 3 from (2) above)
Term of Ofﬁce: 3 years
Appointmentof members
Appointment
and dismissal of
the President
and CEO

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

Appointment of
Accounting Auditors
and Corporate
Auditors

Decisions onimportant matters,
including budgets
and accounts

Accounting
Auditors

Consultation andpropositions

AuditsPresident and CEO,
Deputy President, etc.

(Certiﬁed public
accountants or an
audit corporation)

AuditsCorporate Auditors
Budgetsubmissions

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

National Government*Elected by the national associations of prefectural governors, mayors of cities, and mayors of towns and villages.

JFM Annual Report 2014 | 36

Operations

As an organization autonomously managed by local governments, JFM has the Representative Board
as its supreme decision-making body.
To ensure independence and transparency, the Representative Board consists of one prefectural
governor, one city mayor, one town/village mayor and three members from among experts in local
administration, economics, ﬁnance, law or accounting.
The Representative Board has the authority to make decisions on important matters related to theoverall management of JFM, including budgets, settlement of accounts and business plans. As its
supervisory function, the Board also has the authority to order the President and CEO to report on theorganization’s business, assets and liabilities, and to take corrective actions with respect to any illegal orother inappropriate activities.

Review and Plan

1. Representative Board

2. Supervisory Committee

4. Audits by External Accounting Auditors

JFM Annual Report 2014 | 37

Appendix / JFM Data

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

Financial Section

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

JFM’s Role in
Local Government Finance

3. Audits by Corporate Auditors

Management Structure

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

Management
Structure2

Corporate GovernanceInternal Control over Financial Reporting

Pursuant to the Ministerial Ordinance on Finance and Accounting of the Japan Finance Organization
for Municipalities (Ordinance No. 87 of the Ministry of Internal Affairs and Communications, 2008; the“Ordinance”), JFM has a system of internal control over financial reporting to ensure the reliability of
its ﬁnancial statements, and also maintains and implements this system appropriately. In accordancewith the Ordinance, JFM prepares the Internal Control Report, the base date of which is the end of theﬁscal year (March 31), and it is audited by the external auditors and released together with the ﬁnancial
statements.
In the fiscal 2013 Internal Control Report, JFM viewed its internal controls on financial reporting
as effective. In the Auditors’ Report on Internal Controls, the accounting auditors gave their opinion(unqualiﬁed audit opinion pursuant to Ministerial Ordinance Article 32, Paragraph 4, Clause 1) that, in allmaterial respects, evaluation results of JFM’s internal controls over ﬁnancial reporting were in conformity
with the standards of evaluation for internal controls over financial reporting generally accepted inJapan.

Management Structure

3Internal Audit

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

Internal Audit System

President and CEO

Deputy President

SeniorExecutive
Directors
Departments
DivisionsInternal Audits

JFM Annual Report 2014 | 38

Internal
Auditors

Management
Structure

General Account and Management AccountBegan operations on
1 October 2008

Reorganized on
1 June 2009

Japan Finance
Organization for
Municipalities (JFM)

Established by capital
contributions only from Japanese local
governments

The lending scope was expanded tooverall general account-related loans

Succeeded to assets
and liabilities

Established on
1 June 1957

Japan Finance Corporation
for Municipal Enterprises(the “Predecessor”)

Abolished(and its capital returned to
the national government)

When JFM was founded, it succeeded to the Reserve for Losses on the Reﬁnancing of Bonds in theamount of approximately JPY 3.4 trillion (USD 33 billion) to ensure its future stable management.
Of this amount, the JPY 2.2 trillion (USD 21 billion) needed to ensure the future continuity of JFM’soperations was to be transferred to the general account in equal installments over 10 years, with theremainder to be transferred to the management account to ensure a sufﬁcient ﬁnancial foundation toappropriately manage the Predecessor’s bonds and loans and prepare for the risk with refinancing
bonds of the Predecessor.

Japan Finance Organization for Municipalities (JFM)
Ensure a financial
foundation needed to sustain
the businesses into the future

General AccountReserve for JPY 2.2 tn
Interest Rate Volatility (USD 21 bn)
Management Account

Ensure a financial foundationthat can withstandthe refinancing risk posed by thegovernment-guaranteed bonds, etc.

FY2008-2017
JPY 220 bn (USD 2.1 bn)
transferred each year

Management Account Reservefor Interest Rate Volatility

JFM Annual Report 2014 | 39

Appendix / JFM Data

Reserve for Losseson the Refinancingof Bonds
JPY 3.4 tn(USD 33 bn)

Financial Section

Predecessor

JFM’s Role in
Local Government FinanceSpecial governmental institution(wholly owned by the national government)

Management Structure

Japan Finance
Organization for
Municipal Enterprises

Operations

Established on
1 August 2008

Review and Plan

The Japan Finance Organization for Municipal Enterprises was established on 1 August 2008,
with capital contributed by all prefectures, cities, special wards of Tokyo, government-designatedcities, towns and villages, as well as some local government associations, to provide funds to local
governments. JFM commenced its operations after succeeding to the assets and liabilities of thePredecessor on 1 October 2008.
As a result of the reorganization on 1 June 2009, JFM’s lending scope was extended to overall generalaccount-related loans.
New loans made and bonds issued since JFM’s operations began are accounted for in the generalaccount of JFM, whereas operations to administer loans carried over from the Predecessor are
accounted for in the management account.
With regard to the management account, JFM issues government-guaranteed bonds solely for the
purpose of reﬁnancing government-guaranteed bonds of the Predecessor.

Management
Structure

General Account and Management AccountIf any assets remain when the asset management operations of the Predecessor are completed andthe management account is closed, those assets shall be returned to the national treasury.
Even before the management account is closed, in the event that the businesses of JFM aredetermined to have been executed smoothly in light of the condition of the management of JFM, theMinister for Internal Affairs and Communications and the Minister of Finance shall, if the management
account reserve for interest rate volatility and so on are determined to exceed the amount necessary
for the smooth operation of the asset management operations of the Predecessor in the future, cause
the amount that is determined to be in excess to belong to the national treasury (Article 14 of the
Supplementary Provisions of the JFM Law).
In accordance with this provision, the Ministers required that a portion of JFM’s reserve for interest
rate volatility within the management account be transferred to the Japanese national government over
the three-year period from ﬁscal 2012 to ﬁscal 2014, with the aim of transferring a total of JPY 1 trillion(USD 10 billion). Such portion is to be transferred to the national government’s special account for local
allocation taxes.
In ﬁscal 2012, JFM transferred JPY 350 billion (USD 3.4 billion) to the national treasury, followed by
JPY 650 billion (USD 6.3 billion) in ﬁscal 2013. JFM is not currently aware of and does not anticipate
further transfers in ﬁscal 2014.
Management Structure
JFM Annual Report 2014 | 40

Management
Structure

Risk Management

Overall Risk Management

Review and Plan

1

1. Risk Management System

Operations

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

Risk Management System

President and CEO

Senior Executive
Director in Charge

ALM Committee

Management Structure

Integrated Risk
Management
Committee

Risk Management
Ofﬁce

Loan
Department

Administration
Department

JFM’s Role in
Local Government Finance

Finance
Department

2. Characteristics of JFM’s Risks

Appendix / JFM Data

JFM Annual Report 2014 | 41

Financial Section

Among other risks, JFM considers the interest rate risk associated with bond reﬁnancing as its majorrisk (the risk of the negative margin caused by the interest payable exceeding the interest receivable).
JFM raises funds primarily by issuing 10-year bonds and making loans with a maximum maturity of
30 years with principal and interest payments in equal installments. Therefore, a duration gap is createdbetween lending and funding, which causes JFM the interest rate risk.
To address such interest rate risk, JFM maintains reserves for interest rate ﬂuctuations (the Reservefor Interest Rate Volatility) and has set up the ALM Committee to comprehensively analyze and manage
JFM’s assets and liabilities in a timely and appropriate manner.
The ALM Committee conducts medium-term and long-term management and risk analysis throughscenario, Value at Risk, duration, and other analyses. JFM reﬂects the ﬁndings in its bond issuance plansand other aspects of management and endeavors to lower interest rate risk.

Management
Structure2

Risk Management

Management of Speciﬁc Risks

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

1) Credit risk associated with loans
JFM lends exclusively to local governments. Local government bonds and loans have a zero risk
weighting under the regulations of the Bank for International Settlements (as of 31 March 2014). For thereasons outlined below, JFM does not expect any default on loans made to local governments. In fact,
JFM and its Predecessor have never experienced any loan losses.

Management Structure2) Credit risk associated with market transactions
JFM is, however, exposed to the risk of loss arising from credit events, such as deterioration in theﬁnancial condition of a counterparty, which causes an asset to lose value or become worthless. JFM
works to appropriately manage credit risk of this type by constantly monitoring counterparties’ ﬁnancial
standings and taking measures including suspension of new deals and cancellation of transactions withcounterparties that have come to poor credit standings. Moreover, JFM limits counterparties to ﬁnancial
institutions that meet the credit rating and other criteria, and conducts transactions within the credit lines
for each counterparty in order to diversify risks.
In addition, JFM entered into the ISDA Master Agreement and the CSAs (Credit Support Annexes) withits derivatives counterparties to reduce the credit risk resulting from fluctuations in the value of derivativetransactions.

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

1) Interest rate risk

• Interest rate risk associated with bond reﬁnancing
JFM is exposed to the interest rate risk resulting from a duration gap between lending and funding. To
address such risk, JFM takes measures described on page 43.

• Interest rate risk associated with a gap in lending and funding schedules
JFM generally raises funds required to finance a loan by issuing bonds prior to making the loan.
Proceeds from bond issuances may not be earmarked for a particular loan. Thus, fluctuations ininterest rates in the period where lending and funding schedules differ affect the proﬁtability of loans(“pipeline” risk). In order to hedge against pipeline risk, JFM utilizes interest rate swaps.

JFM Annual Report 2014 | 42

• JFM maintains reserves to prepare for interest rate risk associated with bond reﬁnancing.
At the end of ﬁscal 2013, the amount of the reserves stood at USD 12.8 billion in its generalaccount and USD 20.1 billion in its management account for a total of USD 32.9 billion in bothaccounts.

(2) Extending funding duration – Utilizing its FLIP and Open Issuance scheme, JFM aims toextend the funding duration by carefully choosing maturities of bonds to be issued e.g.,continuously issuing long-dated bonds with maturities over 10 years.
• At the end of ﬁscal 2013, the duration gap was 1.07 years, staying within the managementtarget.

Financial Section• Pursuant to Article 14 of the Supplementary Provisions of the JFM Law, a portion of JFM’s
management account reserve for interest rate volatility was set to be transferred to thenational government over the three-year period from ﬁscal 2012 to ﬁscal 2014, with the aimof transferring a total of JPY 1 trillion. The amount of transfer is to be within the amount which
the Minister for Internal Affairs and Communications and the Minister of Finance deem as
an amount exceeding the requisite amount of reserve necessary for the smooth operationof JFM’s management account at the time of transfer and in the future, in light of JFM’s
financial condition. In fiscal 2012, JFM transferred JPY 350 billion (USD 3.4 billion) to thenational treasury, followed by JPY 650 billion (USD 6.3 billion) in ﬁscal 2013. Even after thesetransfers, JFM maintains sufﬁcient reserves to deal with the interest rate risk, and no material
effect has been experienced, or is expected, on JFM’s business.

JFM’s Role in
Local Government Finance• The management account, which manages assets transferred from the Predecessor, iscurrently exposed to more interest rate risk than the general account. To address such risk,
JFM maintains the management account reserve for interest rate volatility in the amountof USD 32.9 billion as described above. But in the future, assets and liabilities in the
management account will decline over time and interest risk decline because new loans havenot been made since October 2008.

Management Structure(1) Controlling lending duration – Lending rates for loans for temporar y financial
countermeasures funding, which account for approximately 40% of outstanding JFM
loans in its general account, are revised every 10 years, while maturities of the loans are
set to be a maximum of 30 years.

Operations• As assets and liabilities in the general account are expected to expand as a result of anincrease in loans and fund-raising, JFM carries out an ALM analysis of this account in orderto further enhance the effectiveness of its interest rate risk management. Furthermore, JFM
has established a medium-term management target of ﬁve years from ﬁscal 2013, in which
the duration gap is maintained below two years. In order to implement the managementtarget, JFM takes the following measures:

Review and Plan

Managing interest rate risk associated with bond reﬁnancing

Appendix / JFM Data

JFM Annual Report 2014 | 43

Management
Structure

Risk Management

Maturity Ladder (JFM Loans, Bonds and Bank Loans)
General Account(as of 31 March 2014)

12,00010,0008,000
6,000

USD mm

4,000
2,000
0

-2,000Interest Receipt (Lending)-4,000Principal Redemption (Lending)-6,000Principal Redemption (Funding)-8,000Interest Payment (Funding)Gap between Cash Inflows
and Outflows-10,000-12,000

FY2014 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43

Management Account(as of 31 March 2014)

25,00020,00015,00010,000
USD mmManagement Structure• Lending duration 9.11 years • Funding duration 8.04 years • Duration gap 1.07 years (YoY change: -0.04 years)

5,000
0

-5,000Interest Receipt (Lending)-10,000

Principal Redemption (Lending)Principal Redemption (Funding)-15,000

Interest Payment (Funding)Gap between Cash Inflows
and Outflows-20,000-25,000

FY2014 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43• Lending duration 6.49 years • Funding duration 4.44 years • Duration gap 2.05 years (YoY change: -0.32 years)
JFM as a whole• Lending duration 7.50 years • Funding duration 5.75 years • Duration gap 1.75 years (YoY change: -0.30 years)

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

JFM Annual Report 2014 | 44

Operations

Liquidity risk is the risk that JFM would incur losses because of difﬁculty in funding, or because offunding at far higher interest rates than under ordinary conditions. It also includes the risk that JFM
would incur losses because of the inability to conduct market transactions or because of transactions at
prices far more unfavorable than under normal conditions due to market disruption or other situations.
However, JFM’s current exposure to liquidity risk is low because loans are made based on a pre-set
schedule, and the daily cash and liquidity management is carried out. Moreover, JFM has entered into
overdraft agreements with a wide range of ﬁnancial institutions to prepare for unexpected fund shortfalls,
and invests surplus funds only in short-term ﬁnancial products.

Review and Plan

3. Liquidity Risk

4. Operational Risk

1) Administrative risk

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

JFM has prepared the Contingency Plan to minimize the scope of losses and the impact on operations
and restore normal operations promptly and efﬁciently in the event that computer systems break down orcannot be used due to unexpected incidents, disasters or malfunctions. Furthermore, in order to prepare
for a contingency, JFM has a backup server outside JFM so that its business can be continued.

Financial Section

5. Contingency Measures

JFM’s Role in
Local Government Finance

Administrative risk is the risk of loss resulting from the neglect or inadequacy of attention by
management and employees to properly conduct administrative work, accidents and/or violation oflaws caused by them in the course of the administrative work process. JFM endeavors to mitigate its
exposure to administrative risk by preparing operational manuals, holding educational seminars andtraining sessions, and reducing operational workload through systematization.

Management Structure

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

Appendix / JFM Data

JFM Annual Report 2014 | 45

Management
Structure1

Compliance

Basic Policy

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

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

Management Structure2Compliance System

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

Compliance System

President and CEO

Appointment
Compliance Committee
Instruction

ReportCompliance Division (Administration Department)

ReportInstruction and training

Employees

JFM Annual Report 2014 | 46

Management
Structure

Disclosure

Basic Stance on Information Disclosure

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

2

Review and Plan

1

Materials for Disclosure
Operations

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

1. Materials for Disclosure Pursuant to Laws and Regulations• Budgets, business plans, funding plans, and medium-term plans on income and expenditures• Management plan
• Funding plan
• Brochure• Annual Report• JFM News magazine

JFM’s Role in
Local Government Finance2. Other Documents for DisclosureManagement Structure• Financial statements• Business reports and statement of accounts (in Japanese only)• Explanatory documents based on Article 36, Paragraph 3 of the JFM Law (Documents corresponding
to annual securities reports speciﬁed in the Financial Instruments and Exchange Act and the Internal
Control Report) (in Japanese only)

Financial Section
Appendix / JFM Data

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

Annual Report

JFM Annual Report 2014 | 47

JFM’s Role in Local Government Finance1

Japanese Local Government System

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

National Government
Prefectures
Local Government

Cities, Towns, Villages,
and Special Wards

Number of Japanese Local Governments

JFM’s Role in
Local Government FinancePrefectures
Cities, special wards, etc.

47
1,741

Government-designated cities

20

Cities

770

Special wards

23

Towns

745

Villages

183

Total

1,788
(as of 5 April 2014)

JFM Annual Report 2014 | 48

Local Government Finance Program
Local Government Finance Program(Initial Plan for FY2014)

Annual Expenditure(USD 830.7 bn)

Annual Revenue(USD 830.7 bn)

Local TaxUSD 367.3 bn

Local Allocation Tax
USD 170.6 bn
Local Government
Bonds and Loans
USD 103.9 bn

Management Structure- Social welfare- Education- Fire defense- Infrastructure, etc.

Operations

OthersUSD 188.9 bn
Note: The above program includes Great East Japan
Earthquake related budgets.

JFM’s Role in
Local Government Finance

Each local government is unique in terms of its
natural and historic situations, industrial structures,
population sizes, and other attributes. As a result,each local government handles diverse administration.
The term “local government ﬁnance” collectively refers
to funding for individual local governments engaging insuch administration. Just as with national ﬁnance, local
government ﬁnance plays a major role in the nation’s
economy and the lives of citizens. In ﬁscal 2014, local
government finance will total JPY 85.6 trillion (USD
830.7 billion) (based on the Local Government Finance
Program (the “LGFP”), while the nation’s General
Account Budget for the year is JPY 95.9 trillion (USD
930.8 billion)).
Because local governments engage in numerous
activities that closely relate to residents, they need toprovide stable public services regardless of regional
dif ferences stemming from var ying populations,industry densities, and/or tax revenue ﬂuctuations overyears. Accordingly, the national government formulates
the LGFP each fiscal year based on assessments ofthe scales of local government ﬁnance and forecastsof overall revenues and expenditures. In response toannual national budget plans, the national government
balances the total amount of local gover nment
revenues and expenditures in the LGFP. Under thisprogram, revenue sources for all local governments,
including local allocation tax grants as well as bonds
and loans to be issued or borrowed, are secured sothat local governments can ensure uniform public
service standards.

Review and Plan

2

Financial Section
Appendix / JFM Data

JFM Annual Report 2014 | 49

JFM’s Role in Local Government Finance3

Local Allocation Tax

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

Local Allocation Tax System
Example: City A
ShortageStandard
Financial
Requirements*1—

Standard
Local
Tax revenue*2

Allocation Tax= Local for
City A

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

JFM’s Role in
Local Government Finance4

Local Government Borrowings

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

5

Security of Local Government Borrowings

The following framework secures principal and interest payments of local government borrowings. On
the back of this framework, the BIS risk weighting for local government borrowings is 0%, based on thestandardized approach (as of 31 March 2014).

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

JFM Annual Report 2014 | 50

2) Issuance restriction

Operations

Note: In (ii), (iii) and (iv) above, only the local government borrowings to which the consent or approval has been given arecovered.

Review and Plan(i) Local tax revenues are secured by taxation rights of local governments(ii) The national government includes repayments of local government borrowings (i.e., principal andinterest payments) in the amount of expenditures in the LGFP(iii) The total amount of Local Allocation Tax grants is set aside so that the total amount of local
government expenditures, including the principal and interest payments, is equivalent to the total
amount of local government revenues in the LGFP(iv) In the calculation of Local Allocation Tax grants to be allocated to an individual local government, aportion of the principal and interest payments are included in the Standard Financial Requirementsof an individual local government

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

The Law Relating to the Financial Soundness of Local Governments of Japan, which was promulgatedin June 2007, requires local governments the following measures in order to securely manage their ﬁscal
soundness:

6

JFM’s Role in
Local Government Finance(i) Speciﬁed ﬁscal indicators to be disclosed(ii) Local governments with those ﬁscal indicators exceeding certain early warning limits to restore
ﬁscal soundness through their own efforts(iii) Local governments with those fiscal indicators exceeding certain reconstruction limits to takenecessary actions under the supervision of the national government or the respective prefectural
governments, in order to restore their ﬁscal soundness

Management Structure3) Supervision of ﬁnancial soundness

Local Government Borrowing Program*See page 33.

Financial Section

The LGBP is an annual plan that the national government prepares for local government funding. The
LGBP is closely linked to the LGFP and the FILP* prepared by the national government with its budgetmaking. The LGBP plays the following crucial roles in terms of local government ﬁnance.

1) Consent (approval) based on LGBP

2) Secured funding sources for local government borrowings
The national government balances the amount of local government funding needs and the amount offunding sources, and speciﬁes funding sources for each business under the LGBP.
JFM Annual Report 2014 | 51

Appendix / JFM Data

The LGBP speciﬁes the total scheduled amount of local government borrowings including the amountby business type. Typically, the consent or approval for local government borrowings is given based on
the LGBP.

JFM’s Role in Local Government Finance

7

JFM Funds in Local Government Borrowing Program

The sources for local government funding are classiﬁed into national government funds, JFM funds
and private funds.

Local Government Borrowing Program
FY2013

FY2014
Share

Publicly Offered Bonds

USD 43 bn

USD 41 bn

33%

Other Private Sectors

USD 33 bn

USD 31 bn

25%

JFM

USD 21 bn

USD 20 bn

16%

National Government

USD 36 bn

USD 34 bn

27%

USD 133 bn

USD 126 bn

100%

1. Private Funds

2. Public Funds

Total

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

Since ﬁscal 2012, JFM funds have accounted for around 16% of the LGBP. JFM plays a major role inJapanese local government finance, making a substantial contribution to project implementation andﬁnancial management of local governments.

JFM’s Role in
Local Government Finance

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

(%)

180

18

160

154

140

13.6

120

42

15.5

15.9

13.8
13
133
13
33
3

136
6

133

41

43

14
126
41

10

50
38

34

33

8
31

60

6
21
18

40
20
0

16

12
43

100
80

15.8

21

21

20

Publicly Offered Bondss
Other Private Sectors
JFM
National Government
JFM Ratio

4
2

42

36

38

36

34

FY2010

2011

2012

2013

2014

0

Source: Ministry of Internal Affairs and Communications

JFM Annual Report 2014 | 52

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

Financial Statements
Balance Sheets

Statements of Appropriation of Proﬁt[General account/Management account]Notes to Financial Statements

56
58
60
61

Independent Auditor’s Report93Statements of Changes in Net Assets
Statements of Cash Flows

Appendix / JFM Data

Statements of Income

54
54
55

Financial
SectionFinancial Statements

Balance Sheets(As of 31 March 2013 and 2014)

Item

Fiscal 2012
(31 March
2013)(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2013
(31 March 2014)

Item

Fiscal 2012
(31 March
2013)

AmountFiscal 2013
(31 March 2014)
AmountAssetsLiabilities

Loans (Note 5) ¥22,668,634 ¥23,082,976 $224,084,812

Bonds (Notes 9 and 10)

Securities(Notes 9 and 19)

598,994533,998

5,183,952

Borrowed money (Note 11)

Cash andbank deposits

419,267

467,175

4,535,241

Cash collateral received
for financial instruments

Cash collateral
paid for financial
instruments

-

370

3,592

Other assets

14,173

13,036

126,555

Tangible fixed
assets (Note 8)

2,964

2,836

Intangible fixed
assets (Note 8)

883

938

¥18,676,401 ¥19,423,743 $188,561,726

Financial Section

30,00095,500927,094-

43,530422,580

15,121

14,397

139,763

Reserve for bonuses (Note 12)

47

50

493

27,532

Reserve for bonuses
for directors and corporate
auditors (Note 12)

5

7

71

9,111

Reserve for retirement
benefits (Notes 12 and 15)

141

116

1,129

Reserve for retirement
benefits for directors andcorporate auditors (Note 12)

27

22

222

Fund for lending rate
reduction

922,568

922,561

8,956,040

Basic fund for lending rate
reduction (Note 14)915,698

918,775

8,919,286

Additional fund for lending
rate reduction (Note 14)

6,869

3,785

36,754

Reserves under special laws

3,947,086

3,458,627

33,575,644

Reserve for interest rate
volatility (Note 13)

1,100,000

1,320,000

12,814,290

Management account reserve forinterest rate volatility (Note 13)

2,771,200

2,072,945

20,123,726

Reserve for interest rate reduction

75,88565,681

637,628

23,591,399

23,958,556

232,584,762

Capital16,602

16,602

161,170

Retained earnings

50,221

76,732744,902

General account surplus
reserve

50,221

76,732744,902

Valuation, translation
adjustments and others(6,970)(4,225)(41,019)

Management accountsurplus reserve

53,666

53,666

520,980

Total net assets

113,520

142,775

1,386,033

Other liabilities

Total liabilities
Net Assets

Total assets¥23,704,919 ¥24,101,331 $233,970,795 Total liabilities and net assets ¥23,704,919 ¥24,101,331 $233,970,795

See notes to ﬁnancial statements.

JFM Annual Report 2014 | 54

(For the years ended 31 March 2013 and 2014)

Item

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

Fiscal 2012
(1 April 2012 to
31 March 2013)

Fiscal 2013
(1 April 2013 to 31 March 2014)

AmountAmount455,158

4,418,587

Fees and commissions

123

117

1,142

Other operating income

-

0

0

1,348

3,112

30,213

1,066

3,084

29,939

281

28

274

274,076

270,337

2,624,379

265,647

260,947

2,533,227

Fees and commissions

280

281

2,728

Other operating expenses

5,519

6,509

63,197

General and administrative expenses

2,629

2,598

25,223-0

4Ordinary income

213,070

188,051

1,825,563

Special gains

581,402880,2038,544,836

Reversal of management account reserve forinterest rate volatility (Note 13)

570,000

870,000

8,445,782

Reversal of reserve for interest rate reduction

11,402

10,203

99,054

773,643

1,041,744

10,113,041

Provision for reserve for interest rate volatility (Note 13)

220,000

220,000

2,135,715

Provision for management account reserve forinterest rate volatility (Note 13)

203,643

171,744

1,667,259

Payment to national treasury (Note 6)

350,000

650,000

6,310,067¥20,828¥26,510$257,358

Other income
Contributions from fund for lending rate reduction(Note 14)
OthersExpenses
Interest expenses

Other expenses

Special losses

Net income

Financial Section

485,675

Interest income

JFM’s Role in
Local Government Finance$4,449,942

Management Structure¥458,388

Operations¥487,146

Review and Plan

Statements of Income

See notes to ﬁnancial statements.

Appendix / JFM Data

JFM Annual Report 2014 | 55

Financial
SectionFinancial Statements

Statements of Appropriation of Profit [General account](For the year ended 31 March 2013)(Millions of yen)

1 Profit available for appropriation¥20,828

Net income¥20,828

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

20,82820,828

Statements of Appropriation of Profit [General account](For the year ended 31 March 2014)(Millions of yen)

1 Profit available for appropriation¥26,510Net income¥26,510

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

26,51026,510(Thousands of U.S. dollars)

1 Profit available for appropriation$257,358

Net income$257,358

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

257,358

257,358

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

Financial Section
JFM Annual Report 2014 | 56

(For the year ended 31 March 2013)(Millions of yen)

1 Profit available for appropriation¥-

Net income

Review and Plan

Statements of Appropriation of Profit [Management account]¥-

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve-

Operations

Statements of Appropriation of Profit [Management account](For the year ended 31 March 2014)(Millions of yen)

1 Profit available for appropriation¥¥-

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve--

Management Structure

Net income(Thousands of U.S. dollars)

1 Profit available for appropriation$$-

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve-

See notes to ﬁnancial statements.

-

JFM’s Role in
Local Government Finance

Net income

Financial Section
Appendix / JFM Data

JFM Annual Report 2014 | 57

Financial
SectionFinancial Statements

Statements of Changes in Net Assets(For the year ended 31 March 2013)(Millions of yen)

Valuation,translation
Stockholders’ equity
adjustments
and others Management
account
Retained earnings
Unrealized
surplusgain/
Total
reserve
GeneralTotal
stockholders’ (loss) fromaccount
retainedhedging
equitysurplusearnings
instruments
reserve

Total
net
assets¥16,602¥29,393¥29,393¥45,995¥(5,964)¥53,666¥93,696

Net income-

20,82820,82820,828--20,828Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

(1,005)-(1,005)-20,82820,82820,828(1,005)-19,823¥16,602¥50,221¥50,221¥66,824¥(6,970)¥53,666¥113,520

CapitalBalance as of 1 April 2012
Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March2013

Financial Section
JFM Annual Report 2014 | 58

(For the year ended 31 March 2014)(Millions of yen)

¥50,221¥50,221¥66,824¥(6,970)¥53,666¥113,520

Net income-

26,51026,51026,510--26,510Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

2,744

-

2,744

-

26,51026,51026,5102,744-

29,255¥16,602¥76,732¥76,732¥93,334¥(4,225)¥53,666¥142,775

Balance as of 1 April 2013
Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March
2014(Thousands of U.S. dollars)$161,170$487,544$487,544$648,714$(67,664)$520,980$1,102,030

Net income-

257,358

257,358

257,358--

257,358

Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

26,645-26,645-257,358

257,358

257,358

26,645-

284,003$161,170$744,902$744,902$906,072$(41,019)

CapitalBalance as of 1 April 2013
Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March2014
See notes to ﬁnancial statements.

JFM Annual Report 2014 | 59

$520,980 $1,386,033

Appendix / JFM Data

Total
net
assetsFinancial Section

Valuation,translation
Stockholders’ equity
adjustments
and others Management
account
Retained earnings
Unrealized
surplusgain/
Total
reserve
GeneralTotal
stockholders’ (loss) fromaccount
retainedhedging
equitysurplusearnings
instruments
reserve

JFM’s Role in
Local Government Finance(For the year ended 31 March 2014)

Management Structure¥16,602

CapitalOperations

Total
net
assets

Review and Plan

Valuation,translation
Stockholders’ equity
adjustments
and others Management
account
Retained earnings
Unrealized
surplusgain/
Total
reserve
GeneralTotal
stockholders’ (loss) fromaccount
retainedhedging
equitysurplusearnings
instruments
reserveFinancial
SectionFinancial Statements

Statements of Cash Flows(For the years ended 31 March 2013 and 2014)

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

Fiscal 2012
(1 April 2012 to
31 March 2013)

Fiscal 2013
(1 April 2013 to 31 March 2014)

AmountAmountⅠ Cash flows from operating activities

Net income
Depreciation and amortization
Interest income
Interest expenses
Increase/(decrease) in reserve for bonuses
Increase/(decrease) in reserve for bonuses for
directors and corporate auditors
Decrease in reserve for retirement benefits
Increase/(decrease) in reserve for retirement
benefits for directors and corporate auditors
Decrease in fund for lending rate reduction
Increase in reserve for interest rate volatility
Decrease in management account reserve forinterest rate volatility
Decrease in reserve for interest rate reduction
Net (increase)/decrease in loans
Net increase/(decrease) in bonds
Net increase/(decrease) in borrowed money
Interest received
Interest paid
Others¥20,828345(485,675)
265,647(0)¥26,510294(455,158)
260,9473$257,358
2,855(4,418,587)
2,533,227
37

(1)

1

19

(4)

(25)

(249)

3

(4)

(44)

(1,066)220,000(3,084)220,000(29,939)
2,135,715(16,356)(48,255)(468,456)(11,402)(281,223)
495,783
486,149(262,457)(981)(10,203)(414,341)
743,787
65,500455,628(214,605)
3,025(99,055)(4,022,347)
7,220,535
635,861
4,423,151(2,083,342)
29,375

Net cash provided by/(used in) operating activities

429,597

630,020

6,116,114

Proceeds from redemption of securities
Purchases of securities
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sales of tangible fixed assets

5,027,000(4,862,748)
(450)
(145)
-

4,189,000(4,123,929)
(37)
(558)
335

40,665,955(40,034,265)(361)(5,422)
3,253

Net cash provided by/(used in) investing activities

163,656

64,809629,160(350,000)(650,000)(6,310,067)

3,763

3,105

30,149

-

(28)

(280)

(346,236)(646,923)(6,280,198)

-

-

-

247,01747,907465,077

Ⅵ Cash and cash equivalents at beginning of year

172,250

419,267

4,070,164

Ⅶ Cash and cash equivalents at end of year

¥419,267¥467,175$4,535,241

Ⅱ Cash flows from investing activities

Financial Section

Ⅲ Cash flows from financing activities

Payment to national treasury
Revenue from contributions made frommunicipally operated racing
Refund of contributions made frommunicipally operated racing
Net cash provided by/(used in) financing activities
Ⅳ Effect of exchange rate changes on cash andcash equivalents
Ⅴ Net increase/(decrease) in cash and cash

equivalents

See notes to ﬁnancial statements.
JFM Annual Report 2014 | 60

1. Basis of Presentation

Operations

Japan Finance Organization for Municipalities (hereinafter, “JFM”) has prepared financial statements in accordancewith the Japan Finance Organization for Municipalities Law (Law No. 64, 2007; hereinafter the “Law”), the ordinances
based on the Law and other regulations applicable to JFM and accounting principles generally accepted in Japan,
which are different in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards.
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 2014, the final day of the fiscal year, which was¥103.01 to U.S.$1. This translation should not be construed as a representation that all amounts shown could be
converted into U.S. dollars at such rate.

Review and Plan

Notes to Financial Statements

2. Summary of Signiﬁcant Accounting Policies

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

JFM Annual Report 2014 | 61

Management Structure(1) Securities
Held-to-maturity securities are carried at amortized cost (straight-line method).
(2) Derivative transactions
Derivative transactions are carried at fair value with changes in unrealized gain or loss charged or credited toincome, except for those which meet the criteria for hedge accounting.
(3) Depreciation and amortization(a) Tangible fixed assets
Depreciation of tangible fixed assets is calculated by the straight-line method based on the estimated useful
lives and the residual value determined by management. The estimated useful lives of major items are as
follows:
Buildings: 20 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 amortizedover 5 years.
(4) Deferred assets
Bond issuance costs are expensed in full when incurred.
(5) Translation of assets and liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies, for which foreign currency swaps or foreignexchange forward contracts are used to hedge the foreign currency fluctuation, are translated at the contracted
rate as these swap 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 estimatedbonuses, which are attributable to the fiscal year.
(c) Reserve for bonuses for directors and corporate auditors
The reserve for bonuses for directors and corporate auditors is provided for payment of bonuses to directors
and corporate auditors, in the amount of estimated bonuses, which are attributable to the fiscal year.
(d) Reserve for retirement benefits
The reserve for retirement benefits is provided for payment of retirement benefits to employees, in the amountdeemed accrued at the fiscal year-end, based on the projected retirement benefit obligation and fair value ofplan assets at the fiscal year-end. The retirement benefit liability and pension expenses are calculated using thesimplified method, which assumes JFM's retirement benefit obligation to be equal to the benefits payable if alleligible 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.

Financial
SectionFinancial Statements

Financial Section(7) Hedge accounting(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest rate fluctuations that qualify for hedge accounting andmeet specific matching criteria are not measured at fair value, but the differential paid or received under theswap agreements is recognized and included in interest expense or income. If swap contracts or forward
contracts used to hedge the risk of foreign currency fluctuation qualify for deferral hedge accounting, the foreign
currency-denominated assets and liabilities are translated at the contracted rate.
(b) Hedging instruments and hedged items(ⅰ) Hedging instruments・・・Interest rate swaps
Hedged items・・・・・・・・・Bonds and long-term borrowed money(ⅱ) Hedging instruments・・・Currency swaps
Hedged items・・・・・・・・・Foreign currency-denominated bonds(ⅲ) Hedging instruments・・・Foreign exchange forward contracts
Hedged items・・・・・・・・・Foreign currency-denominated bank deposits(c) Hedging policy
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 principalof foreign currency-denominated bank deposits, a foreign exchange forward contract is entered into at the timeof each deposit by JFM.
(d) Assessment of hedge effectivenessJFM ensures hedging instruments and hedged items have the same major terms when entering into hedgetransactions to offset market fluctuation risks associated with bonds and long-term borrowed money.
Accordingly, JFM deems these to be highly effective and thus does not assess effectiveness. Moreover, aperiodic assessment of hedge effectiveness for interest rate swaps and currency swaps and forward contracts
that qualify for deferral hedge accounting is omitted when the exceptional accrual method is applied.
(8) Cash and cash equivalents
Cash and cash equivalents in the statement 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 investmentof the fund (hereinafter, “investment income”) is used to reduce interest rates of the loans to municipalities, andif 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 thetotal of the additional portion to the fund made up to the previous fiscal year and the contributions made in themost 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 Article 22 and 23 of the Government Ordinance on preparation of
relevant government ordinances and provisional measures for the abolishment of the Japan Finance Corporation
for Municipal Enterprises Law (Government Ordinance No. 226, 2008; hereinafter, “Preparation Ordinance”).
The management account reserve for interest rate volatility is set aside to manage interest rate risk associatedwith refinancing of bonds issued by the Predecessor pursuant to the provisions of Article 9, Sections 9 and 10,
and Article 13, Sections 5 and 7 of the Supplementary Provisions of the Law, and is calculated and accounted forbased on the provisions of Articles 1 through 3 of the Ministerial Ordinance on the operations of the Management
Account at Japan Finance Organization for Municipal Enterprises (Ordinance No. 2 of the Ministry of Internal
Affairs and Communications, and the Ministry of Finance, 2008; hereinafter, “Management Account Operations
Ordinance”) and Articles 3 and 5 of the Supplementary Provisions of the above ordinance.
(11) Reserve for interest rate reduction
Reserve for interest rate reduction is set aside to reduce interest rates on the loans made by the Predecessor
to local governments pursuant to the provisions of Article 9, Section 13, and Article 13, Section 8 of the
Supplementary Provisions of the Law, and Article 26, Sections 1, 3 and 4 of the Preparation Ordinance, andis calculated and accounted for based on the provisions of Article 5 of the Management Account Operations
Ordinance.

JFM Annual Report 2014 | 62

Review and Plan

(12) Management account surplus reserve
Profits generated in the management account are accounted for as the management account surplus reserve
separately from retained earnings in accordance with the provisions of Article 13, Section 8 of the Supplementary
Provisions of the Law and Article 26, Section 2 of the Preparation Ordinance.
(13) Consumption taxes
National and local consumption taxes are accounted for using the tax exclusion method.

3. Change in Presentation

4. Additional Information

5. Loans

In accordance with the Supplementary Provisions of the Law, a portion of JFM’s management account reserve forinterest rate volatility is being attributed to the Japanese national government over a period of three years from fiscal
2012 through fiscal 2014, with the aim of transferring 1 trillion yen over this period.
In fiscal 2013, 650,000 million yen (6,310,067 thousand U.S. dollars) was transferred to the national treasury by
JFM, pursuant to Article 14 of the Supplementary Provisions of the Law for fiscal 2013 (Ordinance No. 1 of the
Ministry of Internal Affairs and Communications, and the Ministry of Finance, 2013).
As a result, a total of 1 trillion yen has been transferred to the national treasury, which includes the 350,000 million
yen transferred in fiscal 2012.

(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 risks.
JFM adopts an integrated risk management approach to appropriately respond to various risks while
endeavoring to further advance its risk analysis and management.
Accordingly, JFM has developed a system for appropriate risk management, including the establishment of

JFM Annual Report 2014 | 63

Appendix / JFM Data

7. Financial Instruments

Financial Section

6. Payment to the National Treasury of a Portion of JFM’s Management Account Reserve for Interest Rate Volatility

JFM’s Role in
Local Government Finance

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 loss.
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), andon which accrued interest is not accounted in revenue as there is no expectation of collection of either principal orinterest because they are past due for a considerable period of time or for other reasons (excluding loans on which
bad debts are written off; hereinafter, “Non-accrual loans”).
Non-accrual loans represent loans on which accrued interest is not accounted in revenue, excluding loans tobankrupt borrowers and loans with grace periods for interest payments to assist in corporate reorganization or to
support business.
Past due loans (three months or more) represent loans on which payment of principal or interest is in arrears formore than three months, calculated from the day following the contractual due date, excluding bankrupt loans andnon-accrual loans.
Restructured loans represent loans, given certain favorable terms and conditions, such as reduction or exemptionof interest, grace periods for interest or principal payments, and debt waivers, to assist borrowers in corporate
rehabilitation or to support business, excluding bankrupt loans, non-accrual loans and past due loans (three months
or more).

Management Structure

JFM obtained the approval of the Minister of Health, Labour and Welfare, dated 1 April 2013, for the transfer to theJapanese national government of the future payment obligation of the substitutional portion of the Employees’ Pension
Fund established under the Japanese Welfare Pension Insurance Law.
The total amount of the refund (minimum policy reserve) measured in the Employees’ Pension Fund as of 31 March2014 was 55,980 million yen (543,446 thousand U.S. dollars). Based on the assumption that the refund was paid at
the fiscal year-end, JFM estimates that its profit and loss will not be affected in the event that Clause 46 of Retirement
Benefits Guidance is applied.

Operations

Effective fiscal 2013, JFM has adopted “Accounting Standard for Retirement Benefits” (Accounting Standards Boardof Japan (ASBJ) Statement No. 26, issued May 17, 2012, hereinafter “Retirement Benefits Standard”) and “Guidanceon Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25, issued May 17, 2012, hereinafter “Retirement
Benefits Guidance”), excluding Clause 30 of the Retirement Benefits Standard and Clauses 52 to 60 of the Retirement
Benefits Guidance. Due to this adoption, the presentation in the notes with regard to employee retirement benefits
has been changed.

Financial
SectionFinancial Statements

Financial Section

the Integrated 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 thenbe appropriately reflected in management decisions.
(b) Details and risks of financial instruments
JFM raises funds by primarily issuing 10-year bonds, and makes loans with a maximum maturity of 30 years
and with repayment of interest and principal in equal installments. Therefore, a large duration gap is createdbetween lending and funding, and JFM is exposed to the interest rate risk associated with bond and long-termborrowed 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
and manage JFM’s assets and liabilities in a timely and appropriate manner. The ALM Committee is held fourtimes a year in principle. 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 othermethods. In addition, JFM reflects the findings in its bond issuance plans and other aspects of management
and endeavors to reduce interest rate risk.
(c) Risk Management for Financial Instruments(ⅰ) Credit risk
Credit risk is the risk of loss arising from a credit event, such as deterioration in the financial condition of aborrower, which causes an asset to lose value or become worthless. In addition to credit risk associatedwith 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 ofInternational Settlements (BIS) risk weighting and JFM does not expect any default on loans made to
local governments for the reasons 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 and loans in the expenditure of the Local Government Finance Program, and secures thetotal amount of local allocation tax which balances local governments’ total expenditures including
principal and interest payments, and total revenue. Thus, the national government effectively securesrevenue sources for principal and interest payments by local governments. The national government
also secures revenue sources for principal and interest payments by individual local governments by
including a portion of such principal 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 the repayment status of local governments, and tax revenue and necessary revenue sources
to be secured. Additionally, under the Early Warning System, the local governments whose principal
and interest payments or financial deficits exceed a certain level must apply for approval to issue bonds
or obtain loans, so that the credit standing of local government bonds and loans is maintained.
• Under the Law Relating to the Financial Soundness of Local Governments, which was promulgatedin June 2007 (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 the reconstruction limits must take necessary actions to restore their finances under
the supervision of the national government or the respective prefectural governments with regard toredemption of local government bonds and loans, 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 a counterparty, 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 caseof 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

JFM Annual Report 2014 | 64

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

JFM Annual Report 2014 | 65

Review and Planfrom changes in earnings generated from assets and liabilities. Market risk includes interest rate risk, foreignexchange 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. JFM makes loans to local
governments. The maximum term to maturity is 30 years, but the majority of the funds for these loans
are raised mainly through issuance of 10-year bonds, which creates interest rate risk associated withbond refinancing. JFM takes the following measures to address the interest rate risk resulting from aduration 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
and funding, JFM carries out an ALM analysis of this account in a timely and appropriate manner tofurther enhance the effectiveness of its management of interest rate risk. In order to reduce exposure tointerest rate risk, JFM has established a medium-term management target for five years from fiscal 2013,
in which the duration gap is to be maintained below approximately two years, and also JFM will continue
to regularly issue super-long bonds with maturities exceeding 10 years.
• The management account, which manages assets related to loans extended by the Predecessor, iscurrently exposed to greater interest rate risk than the general account. To address such risk, JFM
contributes to the required reserves for interest rate volatility as described above. In accordance with
Article 14 of the Supplementary Provisions of the Law, a portion of JFM’s reserve for interest rate volatility
within the management account was required to be transferred to the Japanese national government.
The transfer was scheduled to occur over a period of three years from fiscal 2012 through fiscal 2014,
with the aim of transferring 1 trillion yen.
JFM is also exposed to pipeline risk, whereby losses would be incurred or profits decreased as a resultof interest rate fluctuations during the time from when JFM raises money until the point at which the money
is loaned 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, interest raterisk related to floating rate bonds, and risk of fluctuations in the amount of principal and interest of
inflation-indexed bonds.
JFM’s investments of surplus funds are exposed to the risk of losses on the sale of securities resulting
from price declines and the risk of realized losses on foreign currency-denominated deposits resulting
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 foreignexchange contracts.
C. Quantitative information on market risk
Loans, bonds and long-term borrowed money are primarily affected by interest rate risk, which is a majorrisk variable among the market risks.
With respect to loans, bonds and long-term borrowed money in the general account, JFM establishesa management target for the duration gap in order to manage interest rate risk appropriately. With regard
to the quantitative analysis of interest rate risk, while JFM does not have a management target for thequantitative figures, it reports the results of calculating the quantitative information, such as the “outlier
ratio”, to the ALM Committee and tracks the status of the interest rate risk.
The “outlier ratio” is calculated by dividing JFM's “decline in economic value” as a result of hypotheticalinterest rate shocks by JFM's net assets, including the reserve for interest rate volatility in the generalaccount and the fund for lending rate reduction. The “decline in economic value” is the largest possible
loss in net present market value of its loans and bonds and long-term borrowings that JFM would suffer
following a hypothetical 200 basis point increase or decrease in market interest rates.
The outlier ratio is calculated based on the following conditions.
• Future Cash Flows
With respect to loans, future cash flows regarding such loans are calculated based on the type ofinterest rate of the loans. In addition, the advanced redemption in the future is not expected by JFM.
With respect to fixed-rate bonds, future cash flows regarding such fixed-rate bonds are calculated
based on the redemption schedule. With respect to floating rate bonds hedged by interest rate swaps,that qualify for hedge accounting and meet specific matching criteria, future cash flows corresponding
to such floating rate bonds are calculated in a manner similar to fixed-rate bonds.
• Indicative Interest Rate
For the assessment of loans, bonds and long-term borrowed money, the corresponding interest rate ofJapanese government bonds as of 31 March 2014 is used.

Financial
SectionFinancial Statements• Calculation of Outlier Ratio
Based on an assumption that risk variables, except for interest rate risk, are fixed as of 31 March
2014, the outlier ratio is calculated by dividing the change in fair value in the case where the indicativeinterest rate (government bonds) rises across-the-board by 200 basis points (2.00%) or the change
in fair value in the case such rate falls across-the-board by 200 basis points (2.00%), whichever isgreater, by net assets including the reserve for interest rate volatility and the fund for lending rate
reduction.
JFM calculates the outlier ratio reflecting a rise of 200 basis points of the indicative interest rate as
JFM understands that the change in fair value in the case of rising interest rates would be greater thanthat in the case of falling interest rates.
Until fiscal 2012, the outlier ratio has been used as a management target, however, it will not be
used from fiscal 2013 due to the unique situation of the JFM outlier ratio being at a high level. This
unique situation exists for the following reasons:a. JFM maintains a sufficient reserve for interest rate volatility in order to secure its financial soundness,and uses the reserve for its lending operations. This means that bond issuances to match lendingneeds are not necessary.
b. JFM provides long-term fixed rate loans, thus both of its assets and liabilities have a long duration.
Due to such institutional design and operational nature of JFM, a large duration gap between
lending and funding is created.
Information of the outlier ratio as of 31 March 2014 is as follows:(Millions of yen) (Thousands of U.S. dollars)
Change in fair value in the case of 200 basis points rise in interest rates
Outlier
ratio(a)=-(b)/(e)Generalaccount

20.7%[+0.4%]

Total(b)=(c)+(d)

Loans
(c)

Bonds and long-termborrowed money(d)¥(482,037) $(4,679,517) ¥(1,569,733) $(15,238,647) ¥+1,087,695 $+10,559,120[(59,251)][(575,197)][(243,780)] [(2,366,566)][+184,529] [+1,791,370]

Net assets including
reserve for interest rate
volatility and the fund for
lending rate reduction (e)¥2,331,670 $22,635,433[+249,247] [+2,419,697]

Note: Amounts posted in square brackets indicate the change from 31 March 2013.

Financial Section

With respect to loans and bonds in the management account, JFM raises funds by the issuanceof bonds as necessary in order to manage existing loans until their redemption. For this reason, while
JFM reports the calculation results of the quantitative information regarding the interest rate risk to the
ALM Committee and confirms the status of interest rate risk as is the case for the general account,
JFM does not establish a management target or use the quantitative analysis for the management
account.
With respect to these financial instruments in the management account, based on an assumptionthat the risk variables, except for interest rate risk, hold steady, for an indicative interest rate as of 31
March 2014 that is 10 basis points higher than the actual rate, it is assumed that the fair value of the
net amount (assets side), after offsetting such financial instruments with the financial liabilities, would
decline by 42,286 million yen (410,513 thousand U.S. dollars). On the contrary, for an indicative interest
rate as of 31 March 2014 that is 10 basis points lower than the actual rate, it is assumed that thefair value of the net amount (assets side), after offsetting such financial instruments with the financial
liabilities, would increase by 42,993 million yen (417,373 thousand U.S. dollars).
(ⅲ) Liquidity risk
Liquidity risk is the risk that JFM would incur losses due to difficulties in securing the necessary funds or
the necessity of obtaining funds at far higher interest rates than under normal conditions as a result ofa 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 other difficult situations (market liquidity risk).
JFM’s exposure to liquidity risk is extremely low because loans are made to local governments according
to a pre-set schedule, and the daily cash and liquidity management is carried out based on a quarterly planfor fund management. Moreover, JFM has entered into overdraft agreements with several financial institutions
to prepare for the unexpected events, and invests surplus funds only in short-term financial products.
(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 value that has been rationally calculated. Since certain assumptions were made when calculating the fairvalue, the value may differ in the event that the assumptions change.

JFM Annual Report 2014 | 66

(Millions of yen)Book value(1) Loans

Fair value¥22,668,634

Difference¥24,537,510¥1,868,876

598,994598,995

0(3) Cash and bank deposits

419,267

419,267-

Total assets

23,686,896

25,555,773

1,868,877(1) Bonds

18,676,401

19,632,909

956,508

30,00030,860860

18,706,401

19,663,770

957,369

Derivative transactions(*1)
Hedge accounting applied

240

240

-

Total of derivative transactions

240

240

-

(2) Borrowed money
Total liabilities(Millions of yen)Book value(1) Loans

Fair value

Difference¥24,608,923¥1,525,946

533,998

533,998(0)(3) Cash and bank deposits

467,175

467,175-

Total assets

24,084,150

25,610,096

1,525,945(1) Bonds

19,423,743

20,180,752

757,009(2) Borrowed money

95,50096,096596(3) Cash collateral received for financial instruments

43,53043,530-19,562,773

20,320,379

757,606

Derivative transactions(*1)
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

Total liabilities

Book value(1) Loans

Fair value

Difference$224,084,812$238,898,390$14,813,578(2) Securities
held-to-maturity securities

5,183,952

5,183,943(9)(3) Cash and bank deposits

4,535,241

4,535,241-

Total assets

233,804,005

248,617,574

14,813,569(1) Bonds

195,910,619

7,348,893

927,094

932,888

5,794(3) Cash collateral received for financial instruments

422,580

422,580-

189,911,400

197,266,087

7,354,687

Derivative transactions(*1)
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

Total liabilities(*1) Assets and liabilities resulting from derivative transactions are presented on a net basis with liabilities in parentheses.

JFM Annual Report 2014 | 67

Appendix / JFM Data

188,561,726(2) Borrowed money

Financial Section(Thousands of U.S. dollars)

JFM’s Role in
Local Government Finance¥23,082,976(2) Securities
held-to-maturity securities

Management Structure

The book value, fair value and difference between them as of 31 March 2014 are as follows:

Operations(2) Securities
held-to-maturity securities

Review and Plan

(2) Items related to fair value of financial instruments
The book value, fair value and difference between them as of 31 March 2013 are as follows:Financial
SectionFinancial Statements

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 2013 and 2014.
(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 2013
(Millions of yen)
Type
Securities with fair values
exceeding the balance sheet
amountSecurities with fair values that
do not exceed the balance sheet
amountBook value

Fair value

Difference

Treasury discount bills¥44,994¥44,995¥0

Sub total

44,99444,9950

Negotiable certificatesof deposit

554,000

554,000-

Sub total

554,000

554,000-¥598,994¥598,995

¥0

Total

As of 31 March 2014
(Millions of yen)
Type
Securities with fair values
exceeding the balance sheet
amountSecurities with fair values that
do not exceed the balance sheet
amountBook value

Fair value

Difference

-

-

-

-

Sub total---

Treasury discount bills¥19,998¥19,998¥(0)

Negotiable certificatesof deposit

514,000

514,000-

Sub total

533,998

533,998(0)¥533,998¥533,998

¥(0)

Total
Financial Section(Thousands of U.S. dollars)
Type
Securities with fair values
exceeding the balance sheet
amountSecurities with fair values that
do not exceed the balance sheet
amountBook value

Fair value

Difference

-

-

-

-

Sub total---

Treasury discount bills$194,145$194,136$(9)

Negotiable certificatesof deposit

4,989,807

4,989,807-

Sub total

5,183,952

5,183,943(9)$5,183,952$5,183,943

$(9)

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 shortterm, the fair value approximates the book value. As a result, the book value is deemed to be the fair value.

JFM Annual Report 2014 | 68

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 2013 is as follows:

Management Structure(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.

Operations(2) Borrowed money
The fair value of long-term borrowed money is calculated by discounting the future cash flows using the interest
rate that 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.

Review and Plan

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 ofbonds 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
is thus 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 current value using the total of the corresponding interest rate swap accounted for together withthe principal and interest and discounting the future cash flows using the interest rate that would be applied whenissuing a similar bond.

(Millions of yen)Primary
hedged items

Interest rate swap
transactions
Receive/fixed andpay/floating

Bonds
Borrowed money¥40,000

Hedge
accounting forinterest rate
swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts

accounting
methodMethod for
calculating fairvalue

¥40,000¥240

Based on prices
provided by
the counterparty
financial institution

95,00095,000(*1)

Foreign currencydenominatedbonds

774,751

774,751(*2)

Foreign currencydenominateddeposits

120,000-(*2)¥1,029,751¥909,751

JFM Annual Report 2014 | 69

¥240

Appendix / JFM Data

Total

Fair
value

Of which
1 year or
more

Financial Section

Type ofderivativetransactions

JFM’s Role in
Local Government FinanceContract amountHedge
accounting
methodFinancial
SectionFinancial Statements

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 2014 is as follows:(Millions of yen)Contract amountHedge
accounting
methodType ofderivativetransactions

Primary
hedged items

Interest rate swap
transactions
Receive/fixed andpay/floating

Bonds
Long-term
borrowed money

Hedge
accounting forinterest rate
swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

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

accounting
method

-

-

Bonds

¥105,000¥105,000(*1)

Currency swap
transactions

Foreign currencydenominatedbonds

1,097,523

1,097,523(*2)

Foreign exchange
contracts

Foreign currencydenominateddeposits

103,000-(*2)¥1,305,523¥1,202,523

Total

Method for
calculating fair
value

Fair
value

Of which
1 year or
more-

Based on prices
provided by
the counterparty
financial institution-(Thousands of U.S. dollars)

Contract amountHedge
accounting
methodType ofderivativetransactions

Primary
hedged items

Interest rate swap
transactions
Receive/fixed andpay/floating

Bonds
Long-term
borrowed money

Hedge
accounting forinterest rate
swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

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

accounting
methodFinancial Section

-

-

Bonds

$1,019,319$1,019,319(*1)

Currency swap
transactions

Foreign currencydenominatedbonds

10,654,532

10,654,532(*2)

Foreign exchange
contracts

Foreign currencydenominateddeposits

999,903-(*2)$12,673,754$11,673,851

Total

Method for
calculating fair
value

Fair
value

Of which
1 year or
more-

Based on prices
provided by
the counterparty
financial institution-(*1) Since interest rate swaps for which hedge accounting is applied are accounted for together with the bondbeing 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 areaccounted for together with the foreign currency-denominated bond or foreign currency-denominated deposit
being hedged, the fair value is presented together with the fair value of the relevant hedged item.

JFM Annual Report 2014 | 70

Note 2. The repayment schedule for monetary claims and securities with maturities is as follows:(Millions of yen)After
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥1,584,836¥1,567,116¥1,589,729¥1,547,561¥1,477,282¥6,486,636¥6,953,013¥1,462,458

Securities
held-tomaturity
securities

599,000

-

-

-

-

-

-

-

Deposits

419,267

-

-

-

-

-

-

-

Loans

Operations

Within1 yearReview and Plan

As of 31 March 2013

As of 31 March 2014
(Millions of yen)After
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥1,572,391¥1,626,590¥1,619,955¥1,571,660¥1,532,455¥6,673,031¥6,970,977¥1,515,913

Securities
held-tomaturity
securities

534,000

-

-

-

-

-

-

-

Deposits

467,175

-

-

-

-

-

-

-

Loans

(Thousands of U.S. dollars)Within1 year

Loans

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

After
10 years
through
20 years

After
20 years
through
30 years

JFM’s Role in
Local Government FinanceAfter
1 yearthrough
2 years

Management Structure

Within1 year$15,264,455 $15,790,605 $15,726,199 $15,257,358 $14,876,768 $64,780,424 $67,672,827 $14,716,177

5,183,963

-

-

-

-

-

-

-

Deposits

4,535,241

-

-

-

-

-

-

-

Financial Section

Securities
held-tomaturity
securities

Appendix / JFM Data

JFM Annual Report 2014 | 71

Financial
SectionFinancial Statements

Note 3. The repayment schedule is as follows:

As of 31 March 2013
(Millions of yen)After
1 yearthrough
2 years

Within1 year

Bonds

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

After
10 years
through
20 years

After
20 years
through
30 years¥2,164,070¥1,931,670¥1,680,970¥1,780,228¥1,626,489¥7,572,183¥1,718,450¥217,000

-

-

-

-

-

30,000--Borrowedmoney

As of 31 March 2014
(Millions of yen)

Bonds
Borrowedmoney

Within1 yearAfter
1 yearthrough
2 years¥1,952,196¥1,730,970¥1,822,228

20,000--After
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥1,736,489¥1,804,268¥8,238,330¥1,959,780¥193,500-

30,00045,500--(Thousands of U.S. dollars)Within1 year

Bonds

After
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years$18,951,519 $16,803,903 $17,689,826 $16,857,483 $17,515,471

Borrowed
money

194,156---

291,234After
10 years
through
20 years

After
20 years
through
30 years$79,976,027 $19,025,143
441,705-$1,878,458-

8. Tangible and Intangible Fixed Assets
Tangible and intangible fixed assets as of 31 March 2013 consisted of the following:(Millions of yen)
Financial Section

Increaseduringthe year

Buildings

¥652

¥451

¥-

¥1,104

¥195

¥46

¥908

Land

1,994

-

-

1,994

-

-

1,994

102

24

12

114

53

20

61

2,750

475

12

3,213

249

66

2,964

1,376

86

111

1,351

950

285

400

0

482

-

482

-

-

482

¥1,376¥568¥111¥1,834

¥950

¥285

¥883

Type of assets

Balance asof 31 March2013(Acquisition
costs)

Accumulated
Depreciation
depreciation
andand
amortizationamortization
duringas of 31
the yearMarch 2013

Balance asof 1 April
2012(Acquisition
costs)

Decreaseduringthe year

Balance asof 31 March
2013(Net bookvalue)

Tangible fixed assets

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

JFM Annual Report 2014 | 72

Tangible and intangible fixed assets as of 31 March 2014 consisted of the following:

Balance asof 1 April
2013(Acquisition
costs)

Increaseduringthe year

Buildings¥1,104

Land

1,994

Type of assets

Accumulated
Depreciation
depreciation
andand
amortizationamortization
duringas of 31
the yearMarch 2014

Decreaseduringthe year

Balance asof 31 March2014(Acquisition
costs)¥20¥29¥1,094

¥244

¥54

¥850

-

335

1,659

-

-

1,659

114

282

19

377

52

18

325

3,213

302

384

3,132

296

73

2,836

1,351

11

725

637

444

218

193

482

262

-

744

-

-

744

¥1,834¥273¥725¥1,382

¥444

¥218

¥938

Balance asof 31 March
2014(Net bookvalue)

Review and Plan

(Millions of yen)Tangible fixed assets

Total tangible fixed assets

Operations

Other tangible fixed assets

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

Balance asof 1 April
2013(Acquisition
costs)

Increaseduringthe year

Buildings$10,722Land

19,365

Other tangible fixed assets

Type of assets

Accumulated
Depreciation
depreciation
andand
amortizationamortization
duringas of 31
the yearMarch 2014

Decreaseduringthe year

Balance asof 31 March2014(Acquisition
costs)$196$289$10,629$2,369$531$8,260-3,252

16,113--

16,113

1,112

2,745

188

3,668

509

178

3,160

31,199

2,941

3,729

30,4102,878

710

27,532

Balance asof 31 March
2014(Net bookvalue)

Management Structure(Thousands of U.S. dollars)

Tangible fixed assets

Intangible fixed assets
Software13,121

111

7,040

6,191

4,313

2,124

1,879

Other intangible fixed assets

4,687

2,545

-

7,232

-

-

7,232

$17,808$2,656$7,040$13,423$4,313$2,124$9,111

Total intangible fixed assets

9. Assets Pledged as Collateral(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 18,676,401 million yen and 19,423,743 million yen (188,561,726 thousand U.S.
dollars) as of 31 March 2013 and 2014, respectively.
(2) Securities in the amount of 9,238 million yen and 409 million yen (3,979 thousand U.S. dollars) are pledged ascollateral for derivative transactions as of 31 March 2013 and 2014, respectively.

Financial Section

Note: Accumulated depreciation of tangible fixed assets amounted to 249 million yen and 296 million yen (2,878
thousand U.S. dollars) as of 31 March 2013 and 2014, respectively.

JFM’s Role in
Local Government FinanceTotal tangible fixed assets

Appendix / JFM Data

JFM Annual Report 2014 | 73

Financial
SectionFinancial Statements

10. Bonds
Bonds as of 31 March 2013 consisted of the following:(Millions of yen)

Financial Section

Type of bondDate of
issue

Balance
as of 1
April 2012

Balance as of 31
March 2013

Couponrate (%)

Maturity

Government-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-46)

6/15/20093/18/2013¥1,841,660¥2,332,567

0.668
to 1.5

10Y

Government-guaranteed bonds issued by JFM(domestic) 6-year bonds (Series 1-8)

9/27/20111/29/2013

199,964

519,9710.199
to 0.4

6Y

Government-guaranteed bonds issued by JFM(domestic) 4-year bonds (Series 1-4)

5/28/20122/26/2013-

220,000

0.093
to 0.151

4Y

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

1/13/2011

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

4.0

10Y

Non-guaranteed bonds issued by JFM(domestic) 5-year bonds (Series 1-11)

5/25/201010/22/2012

170,000

230,000

0.230
to 0.639

5Y

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

8/20/2012-

20,0000.446

7Y

Non-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-46)

6/18/20093/25/2013

1,005,000

1,490,000

0.678
to 1.648

10Y

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

1/31/2013-

15,000

1.334

15Y

Non-guaranteed bonds issued by JFM(domestic) 20-year bonds (Series 1-27)

6/25/20091/28/2013

525,000

670,000

1.680
to 2.266

20Y

Non-guaranteed bonds issued by JFM(domestic) FLIP bonds (Series F1-F52, F54-F153)

7/22/20091/31/2013

754,500

1,003,000(4,000)0.185
to 2.334

3Y
to 30Y

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

2/1/2011

15,00015,000Floating
rate

9Y

Non-guaranteed bonds issued by JFM(international) Private placements (Series 2, 3, 7,
14-16, 19, 28, 31, 33, 34)

1/12/20123/25/2013

17,795

196,197[USD 2,227 million][AUD 100 million]

1.375
to 3.65

5Y
to 7Y

Non-guaranteed bonds issued by JFM(international) Private placements (Floater,
Series 1, 4-6, 8-13, 17, 18, 20-27, 29, 30, 32)

1/17/201211/7/2012

50,60895,064[USD 1,148 million][NZD 40 million][AUD 20 million]

Floating
rate

5Y
to 7Y

Non-guaranteed bonds issued by JFM(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1-A38)

7/31/20093/25/2013

980,000

1,280,000

0.69
to 1.53

10Y

Bonds issued by JFM - Sub-total-

5,642,699

8,169,971(4,000)--Government-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic) 4-year bonds (Series 1)

2/27/2009

299,962

-

0.7

4Y

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

10/16/20085/25/2009

560,636

560,9111.3
to 1.6

10Y

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 5-year bonds (Series 1)

2/24/2009

29,99629,998(30,000)

1.01

5Y

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

11/25/20085/28/2009

139,967

139,972

1.59
to 1.77

10Y

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

1/26/20094/30/2009

84,94984,9522.07
to 2.29

20Y

JFM Annual Report 2014 | 74

10Y

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

1,235,513

935,835(30,000)--

Government-guaranteed bonds issued by thePredecessor (domestic) 10-year bonds (Series 814-886)

4/26/20026/19/2008

6,018,749

4,912,647(1,395,900)

0.5
to 2.0

10Y

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

6/22/20057/18/2007

184,682

184,704

1.6
to 2.2

15Y

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

8/9/19996/25/2008

723,848

724,131(130,000)[USD 2,200 million][EUR 900 million][GBP 150 million]

1.35
to 5.75

10Y
to 20Y

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

2/29/2008

129,989

-

1.14

5Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 2-30)

6/27/20026/16/2008

1,179,870

929,908(120,000)

0.64
to 2.07

10Y

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

7/30/20026/16/2008

569,661

569,686

1.03
to 2.58

20Y

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

1/29/20049/20/2006

189,861

189,867

2.39
to 2.95

30Y

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

10/31/2002

20,00020,000Floating
rate

15Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Inflation-indexed bonds (Series 1, 2)

3/2/20057/19/2005

40,00040,0000.45
to 0.47

10Y

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

2/14/20036/9/2004

41,32039,150(2,170)1.39
to 2.01

28Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
CMS-linked floating rate bonds (Series 1)

9/13/2006

20,00020,000Floating
rate

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Private placements with Pension Fund
Association for Local Government Officials(Series Special No.1-1–No.1-31)

7/31/20027/31/2008

2,180,500

1,940,500(482,000)

0.67
to 2.18

10Y

Bonds issued by the Predecessor - Sub-total-

11,298,483

9,570,594(2,130,070)

-

-

Total

-

¥18,176,696¥18,676,401(2,164,070)--

JFM Annual Report 2014 | 75

Appendix / JFM Data

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as generalcollateral for JFM bonds in the amount of 18,676,401 million yen as of 31 March 2013.
2. Amounts in square brackets under “Balance as of 31 March 2013” for “Government-guaranteed bonds
issued by JFM (international)—Global U.S. dollar bonds (Series 1),” “Non-guaranteed bonds issued by JFM(international)—Private placements (Series 2, 3, 7, 14-16, 19, 28, 31, 33, 34),” “Non-guaranteed bonds
issued by JFM (international)—Private placements (Floater, Series 1, 4-6, 8-13, 17, 18, 20-27, 29, 30, 32)”
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 2013” are to be repaid within one year.

Financial Section

1.69
to 1.73

JFM’s Role in
Local Government Finance

120,000

Management Structure

120,000

Operations

4/30/20095/26/2009

Review and Plan

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1, A2)

Financial
SectionFinancial Statements

Bonds as of 31 March 2014 consisted of the following:(Millions of yen)

Financial Section

Type of bondDate of
issue

Balance
as of 1
April 2013

Balance as of 31
March 2014

Couponrate (%)

Maturity

Government-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-58)

6/15/20093/17/2014¥2,332,567¥3,013,475

0.541
to 1.5

10Y

Government-guaranteed bonds issued by JFM(domestic) 8-year bonds (Series 1-3)

9/26/20132/27/2014-

200,000

0.460
to 0.576

8Y

Government-guaranteed bonds issued by JFM(domestic) 6-year bonds (Series 1-12)

9/27/20113/10/2014

519,971

809,978

0.186
to 0.4

6Y

Government-guaranteed bonds issued by JFM(domestic) 4-year bonds (Series 1-6)

5/28/20128/29/2013

220,000

330,000

0.093
to 0.249

4Y

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

1/13/2011

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

4.0

10Y

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

2/19/2014-

50,0000.135

2Y

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

8/19/2013-

20,0000.170

3Y

Non-guaranteed bonds issued by JFM(domestic) 5-year bonds (Series 1-14)

5/25/201010/21/2013

230,000

275,000

0.230
to 0.639

5Y

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

8/20/2012

20,00020,0000.446

7Y

Non-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-58)

6/18/20093/24/2014

1,490,000

1,905,000

0.576
to 1.648

10Y

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

1/31/20131/22/2014

15,00050,0001.161
to 1.334

15Y

Non-guaranteed bonds issued by JFM(domestic) 20-year bonds (Series 1-35)

6/25/20093/24/2014

670,000

795,000

1.396
to 2.266

20Y

Non-guaranteed bonds issued by JFM(domestic) FLIP bonds (Series F1-F52, F54-F210)

7/22/20092/4/2014

1,003,000

1,304,514(23,000)

0.185
to 2.334

3Y
to 30Y

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

2/1/20112/26/2014

15,00025,000Floatingrate

9Y
to 30Y

Non-guaranteed bonds issued by JFM(international) Private placements(Series 2, 3, 7, 14-16, 19, 28, 31, 33-35, 40-42)

1/12/20123/6/2014

196,197468,212[USD 4,832 million][AUD 210 million]

1.375
to 4.25Y
to 7Y

Floating
rate

1.5Y
to 7Y

Non-guaranteed bonds issued by JFM(international) Private placements(Floater, Series 1, 4-6, 8-13, 17, 18, 20-27, 29,
30, 32, 36-39)

1/17/20127/22/2013

95,064

145,599[USD 1,548 million][NZD 40 million][AUD 120 million](20,526)

Non-guaranteed bonds issued by JFM(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1-A50)

7/31/20093/24/2014

1,280,000

1,580,000

0.64
to 1.53

10Y

Bonds issued by JFM - Sub-total-

8,169,971

11,074,950(43,526)--

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

10/16/20085/25/2009

560,911561,186

1.3
to 1.6

10Y

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 5-year bonds (Series 1)

2/24/2009

29,998

-

1.01

5Y

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

11/25/20085/28/2009

139,972

139,977

1.59
to 1.77

10Y

JFM Annual Report 2014 | 76

20Y

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1, A2)

4/30/20095/26/2009

120,000

120,000

1.69
to 1.73

10Y

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

935,835

906,119--

Government-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 826-886)

4/23/20036/19/2008

4,912,647

3,518,536(1,136,460)

0.5
to 2.0

10Y

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

6/22/20057/18/2007

184,704

184,726

1.6
to 2.2

15Y

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

8/9/19996/25/2008

724,131594,406[GBP 150 million][USD 2,200 million][EUR 900 million](122,040)

1.9
to 5.75

10Y
to 20Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 7-30)

9/19/20036/16/2008

929,908

809,940(220,000)

1.31
to 2.07

10Y

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

7/30/20026/16/2008

569,686

569,7101.03
to 2.58

20Y

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

1/29/20049/20/2006

189,867

189,873

2.39
to 2.95

30Y

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

10/31/2002

20,00020,000Floating
rate

15Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Inflation-indexed bonds (Series 1, 2)

3/2/20057/19/2005

40,00040,000(20,000)

0.45
to 0.47

10Y

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

2/14/20036/9/2004

39,15036,980(2,170)1.39
to 2.01

28Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
CMS-linked floating rate bonds (Series 1)

9/13/2006

20,00020,000Floating
rate

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Private placements with Pension Fund
Association for Local Government Officials(Series Special No.1-5–No.1-31)

5/28/20037/31/2008

1,940,500

1,458,500(408,000)

0.67
to 2.18

10Y

Bonds issued by the Predecessor - Sub-total-

9,570,594

7,442,673(1,908,670)

-

-

Total

-

¥18,676,401¥19,423,743(1,952,196)--

Financial Section

2.07
to 2.29

JFM’s Role in
Local Government Finance

84,955

Management Structure

84,952

Operations

1/26/20094/30/2009

Review and Plan

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

Appendix / JFM Data

JFM Annual Report 2014 | 77

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

Financial Section

Type of bondDate of
issue

Balance
as of 1
April 2013

Balance as of 31
March 2014

Couponrate (%)

Maturity

Government-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-58)

6/15/20093/17/2014$22,644,089$29,254,200

0.541
to 1.5

10Y

Government-guaranteed bonds issued by JFM(domestic) 8-year bonds (Series 1-3)

9/26/20132/27/2014-

1,941,559

0.460
to 0.576

8Y

Government-guaranteed bonds issued by JFM(domestic) 6-year bonds (Series 1-12)

9/27/20113/10/2014

5,047,779

7,863,1040.186
to 0.4

6Y

Government-guaranteed bonds issued by JFM(domestic) 4-year bonds (Series 1-6)

5/28/20128/29/2013

2,135,715

3,203,572

0.093
to 0.249

4Y

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

1/13/2011

807,397

807,397[USD 1,000 million]

4.0

10Y

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

2/19/2014-

485,390

0.135

2Y

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

8/19/2013-

194,156

0.170

3Y

Non-guaranteed bonds issued by JFM(domestic) 5-year bonds (Series 1-14)

5/25/201010/21/2013

2,232,793

2,669,6440.230
to 0.639

5Y

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

8/20/2012

194,156

194,156

0.446

7Y

Non-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-58)

6/18/20093/24/2014

14,464,615

18,493,350

0.576
to 1.648

10Y

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

1/31/20131/22/2014

145,617

485,390

1.161
to 1.334

15Y

Non-guaranteed bonds issued by JFM(domestic) 20-year bonds (Series 1-35)

6/25/20093/24/2014

6,504,223

7,717,697

1.396
to 2.266

20Y

Non-guaranteed bonds issued by JFM(domestic) FLIP bonds (Series F1-F52, F54-F210)

7/22/20092/4/2014

9,736,919

12,663,958(223,279)

0.185
to 2.334

3Y
to 30Y

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

2/1/20112/26/2014

145,617242,695

Floatingrate

9Y
to 30Y

Non-guaranteed bonds issued by JFM(international) Private placements(Series 2, 3, 7, 14-16, 19, 28, 31, 33-35, 40-42)

1/12/20123/6/2014

1,904,645

4,545,314[USD 4,832 million][AUD 210 million]

1.375
to 4.25Y
to 7Y

Non-guaranteed bonds issued by JFM(international) Private placements(Floater, Series 1, 4-6, 8-13, 17, 18, 20-27, 29,
30, 32, 36-39)

1/17/20127/22/2013

922,869

1,413,454[USD 1,548 million][NZD 40 million][AUD 120 million](199,262)

Floating
rate

1.5Y
to 7Y

Non-guaranteed bonds issued by JFM(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1-A50)

7/31/20093/24/2014

12,425,977

15,338,316

0.64
to 1.53

10Y

Bonds issued by JFM - Sub-total-

79,312,411

107,513,352(422,541)--

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

10/16/20085/25/2009

5,445,216

5,447,883

1.3
to 1.6

10Y

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 5-year bonds (Series 1)

2/24/2009

291,220

-

1.01

5Y

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

11/25/20085/28/2009

1,358,821

1,358,869

1.59
to 1.77

10Y

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

1/26/20094/30/2009

824,704

824,733

2.07
to 2.29

20Y

JFM Annual Report 2014 | 78

10Y

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

9,084,896

8,796,420--

Government-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 826-886)

4/23/20036/19/2008

47,690,972

34,157,230(11,032,521)

0.5
to 2.0

10Y

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

6/22/20057/18/2007

1,793,073

1,793,289

1.6
to 2.2

15Y

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

8/9/19996/25/2008

7,029,718

5,770,373[GBP 150 million][USD 2,200 million][EUR 900 million](1,184,739)

1.9
to 5.75

10Y
to 20Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 7-30)

9/19/20036/16/2008

9,027,361

7,862,738(2,135,715)

1.31
to 2.07

10Y

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

7/30/20026/16/2008

5,530,396

5,530,636

1.03
to 2.58

20Y

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

1/29/20049/20/2006

1,843,192

1,843,251

2.39
to 2.95

30Y

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

10/31/2002

194,156

194,156

Floating
rate

15Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Inflation-indexed bonds (Series 1, 2)

3/2/20057/19/2005

388,312388,312(194,156)0.45
to 0.47

10Y

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

2/14/20036/9/2004

380,060

358,994(21,066)

1.39
to 2.01

28Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
CMS-linked floating rate bonds (Series 1)

9/13/2006

194,156

194,156

Floating
rate

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Private placements with Pension Fund
Association for Local Government Officials(Series Special No.1-5–No.1-31)

5/28/20037/31/2008

18,837,976

14,158,819(3,960,781)

0.67
to 2.18

10Y

Bonds issued by the Predecessor - Sub-total-

92,909,372

72,251,954(18,528,978)

-

-

Total

-

$181,306,679$188,561,726(18,951,519)--

JFM Annual Report 2014 | 79

Appendix / JFM Data

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as generalcollateral for JFM bonds in the amount of 19,423,743 million yen (188,561,726 thousand U.S. dollars) as of
31 March 2014.
2. Amounts in square brackets under “Balance as of 31 March 2014” for “Government-guaranteed bonds
issued by JFM (international)—Global U.S. dollar bonds (Series 1),” “Non-guaranteed bonds issued by JFM(international)—Private placements (Series 2, 3, 7, 14-16, 19, 28, 31, 33-35, 40-42),” “Non-guaranteedbonds issued by JFM (international)—Private placements (Floater, Series 1, 4-6, 8-13, 17, 18, 20-27, 29,
30, 32, 36-39)” and “Government-guaranteed bonds issued by the Predecessor (international)—Euro-sterlingbonds (Series 4), Global-yen bonds (Series 5), etc.” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2014” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:

Financial Section

1.69
to 1.73

JFM’s Role in
Local Government Finance

1,164,935

Management Structure

1,164,935

Operations

4/30/20095/26/2009

Review and Plan

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1, A2)

Financial
SectionFinancial Statements

As of 31 March 2013
Within 1 year
Bonds

¥2,164,070(Millions of yen)
After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥1,931,670¥1,680,970¥1,780,228¥1,626,489

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥1,730,970¥1,822,228¥1,736,489¥1,804,268

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years$16,803,903$17,689,826$16,857,483$17,515,471

As of 31 March 2014
Within 1 year
Bonds

¥1,952,196(Millions of yen)(Thousands of U.S. dollars)Within 1 year
Bonds

$18,951,519

11. Borrowed Money
Borrowed money as of 31 March 2013 consisted of the following:(Millions of yen)
Balance as of
1 April 2012

Balance as of
31 March 2013

Averageinterest rate (%)

Short-term borrowed money

¥-

¥-

-

-

Long-term borrowed money(repayment within 1 year)

-

-

-

-

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

30,00030,000

0.69

Total

¥30,000¥30,000-

Classification of borrowed money

Repayment
date

3/26/2019-

Borrowed money as of 31 March 2014 consisted of the following:(Millions of yen)
Balance as of
1 April 2013

Balance as of
31 March 2014

Averageinterest rate (%)

Short-term borrowed money¥-¥20,000

0.150-

Long-term borrowed money(repayment within 1 year)

-

-

-

-

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

30,00075,500

0.709

Total

¥30,000¥95,500-

Classification of borrowed money

Repayment
date

Financial Section

3/26/2019~3/13/2024-(Thousands of U.S. dollars)
Balance as of
1 April 2013

Balance as of
31 March 2014

Averageinterest rate (%)

Short-term borrowed money$-$194,155

0.150-

Long-term borrowed money(repayment within 1 year)

-

-

-

-

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

291,234

732,939

0.709

Total

$291,234$927,094-

Classification of borrowed money

JFM Annual Report 2014 | 80

Repayment
date

3/26/2019~3/13/2024-

As of 31 March 2013

Review and Plan

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

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years

¥-

¥-

¥-

¥-

Within 1 year
Borrowed money¥20,000(Millions of yen)
After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years

¥-

¥-

¥-

¥30,000

Operations

As of 31 March 2014

(Thousands of U.S. dollars)

Borrowed money$194,156

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years

$-

$-

$-

$291,234

12. Reserves

Management Structure

Within 1 year

Reserves as of 31 March 2013 consisted of the following:(Millions of yen)
Balanceas of
31 March
2013

¥47

¥47

¥47

¥-

¥47

6

5

6

-

5

Reserve for retirement benefits

146

5

10

-

141

Reserve for retirement benefits for directors
and corporate auditors

23

5

1

-

27

Classification of reserve

Reserve for bonuses
Reserve for bonuses for directors andcorporate auditors

Intended
purposeOther

Reserves as of 31 March 2014 consisted of the following:(Millions of yen)
Decrease during the year

Balanceas of
31 March
2014

Increaseduring the
year

¥47

¥50

¥47

¥-

¥50

5

7

5

-

7

Reserve for retirement benefits

141

12

28

9

116

Reserve for retirement benefits for directors
and corporate auditors

27

6

3

7

22

Reserve for bonuses
Reserve for bonuses for directors andcorporate auditors

JFM Annual Report 2014 | 81

Intended
purposeOther

Appendix / JFM Data

Balanceas of
1 April 2013

Classification of reserve

Financial Section

Increaseduring theyear

JFM’s Role in
Local Government FinanceDecrease during the year

Balanceas of
1 April 2012

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

Classification of reserve

Decrease during the year

Balanceas of
31 March
2014

Balanceas of
1 April 2013

Increaseduring the
year

$456

$493

$456

$-

$493

52

71

52

-

71

1,378

122

279

92

1,129

266

59

34

69

222

Reserve for bonuses
Reserve for bonuses for directors andcorporate auditors
Reserve for retirement benefits
Reserve for retirement benefits for directors
and corporate auditors

Intended
purposeOther

13. Reserve for Interest Rate Volatility
Reserve for interest rate volatility as of 31 March 2013 consisted of the following:(Millions of yen)
Balanceas of
31 March
2013

Classification of reserve

Balanceas of
1 April2012

Reserve for interest rate volatility¥880,000¥220,000¥220,000¥-

Management account reserve forinterest rate volatility

3,137,557

203,643

203,643

570,000

220,000

2,771,200

Total¥4,017,557¥423,643¥423,643¥570,000¥220,000¥3,871,200

Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn¥1,100,000

Reserve for interest rate volatility as of 31 March 2014 consisted of the following:(Millions of yen)
Balanceas of
31 March
2014

Financial Section

Classification of reserve

Balanceas of
1 April2013

Reserve for interest rate volatility¥1,100,000¥220,000¥220,000¥-

Management account reserve forinterest rate volatility

2,771,200

171,744

171,744

870,000

220,000

2,072,945

Total¥3,871,200¥391,744¥391,744¥870,000¥220,000¥3,392,945

Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn¥1,320,000(Thousands of U.S. dollars)
Balanceas of
31 March
2014

Increase during the year

Decrease during the year

Classification of reserve

Balanceas of
1 April2013

AmountprovidedAmountwithdrawn

Reserve for interest rate volatility$10,678,575$2,135,715$2,135,715$-

Management account reserve forinterest rate volatility

26,902,249

1,667,259

1,667,259

8,445,782

2,135,715

20,123,726

Total$37,580,824$3,802,974$3,802,974$8,445,782$2,135,715$32,938,016$12,814,290

Note: The “decrease during the year” for the “management account reserve for interest rate volatility” in the amountof 870,000 million yen (8,445,782 thousand U.S. dollars) partly consists of 650,000 million yen (6,310,067
thousand U.S. dollars) 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 2013 (Ordinance No. 1 of the Ministry of Internal
Affairs and Communications, and the Ministry of Finance, 2013).
JFM Annual Report 2014 | 82

14. Fund for Lending Rate Reduction(Millions of yen)Classification of fund

Basic fund for lending rate
reduction

Total

Balanceas of
31 March
2013

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn¥911,935¥3,763¥-¥-¥-¥915,698

7,936

-

-

1,066

-

6,869

¥919,871¥3,763¥-¥1,066¥-¥922,568

OthersOperations

Additional fund for lending rate
reduction

Balanceas of
1 April2012

Review and Plan

Fund for lending rate reduction as of 31 March 2013 consisted of the following:

Fund for lending rate reduction as of 31 March 2014 consisted of the following:(Millions of yen)

Basic fund for lending rate
reduction
Additional fund for lending rate
reduction
Total

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn¥915,698¥3,105

¥-

¥-

¥28

¥918,775

6,869

-

-

3,084

-

3,785

¥922,568¥3,105¥-¥3,084¥28¥922,561

Balanceas of
1 April2013

OthersBalanceas of
31 March
2014

Classification of fund

Basic fund for lending rate
reduction
Additional fund for lending rate
reduction

Balanceas of
31 March
2014

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn$8,889,417$30,149

$-

$-

$280

$8,919,286

66,692--29,939-36,753$8,956,110$30,149$-$29,939$280$8,956,040

Others

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

Financial Section

Total

Balanceas of
1 April2013

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

Classification of fundAppendix / JFM Data

JFM Annual Report 2014 | 83

Financial
SectionFinancial Statements

15. Reserve for Employee Retirement Beneﬁts
As of and for the year ended 31 March 2013
(1) Outline of retirement benefits system
JFM has a defined benefit plan that contributes to the Employees’ Pension Fund and offers lump-sum payments
upon retirement of employees.
(2) Projected benefit obligation
Projected benefit obligation : 318 million yen
Plan assets : 176 million yen
Reserve for employee retirement benefits : 141 million yen(3) Pension expenses
Pension expenses : 5 million yen
Pension expenses related to lump-sum payments upon retirement : 4 million yen
Pension expenses related to the Employees’ Pension Fund : 0 million yen(4) Basis of calculation of projected benefit obligation
Projected benefit obligation is calculated by the simplified method.
As of and for the year ended 31 March 2014
(1) Outline of retirement benefits system
JFM has a defined benefit plan that contributes to the Employees’ Pension Fund and offers lump-sum payments
upon retirement of employees. The reserve for employee retirement benefits and pension expenses are calculatedusing the simplified method.
(2) Defined benefit plan
Reconciliation of outstanding amounts of reserve for retirement benefits:
Reserve for employee retirement benefits at the beginning of the fiscal year : 141 million yen (1,377 thousand U.S.
dollars)
Pension expenses : 12 million yen (121 thousand U.S. dollars)
Employee retirement benefits paid : (28) million yen ((278) thousand U.S. dollars)
Contributions to the defined benefit plan : (9) million yen ((91) thousand U.S. dollars)
Reserve for retirement benefits at the end of the fiscal year : 116 million yen (1,129 thousand U.S. dollars)(3) Retirement benefit obligation, plan assets, and reconciliation of retirement benefit asset and liability
Funded retirement benefit obligation : 305 million yen (2,968 thousand U.S. dollars)
Plan assets : (218) million yen ((2,122) thousand U.S. dollars)
Balance : 87 million yen (846 thousand U.S. dollars)
Unfunded retirement benefit obligation : 29 million yen (283 thousand U.S. dollars)
Net liability for retirement benefits in the balance sheet : 116 million yen (1,129 thousand U.S. dollars)
Reserve for employee retirement benefits : 116 million yen (1,129 thousand U.S. dollars)
Net liability for retirement benefits in the balance sheet : 116 million yen (1,129 thousand U.S. dollars)(4) Profit and loss associated with employee retirement benefits
Pension expenses calculated based on the simplified method : 12 million yen (121 thousand U.S. dollars)

16. Net Income by AccountFinancial Section(For the year ended 31 March 2013)
Net income of the general account was 20,828 million yen, while there was no net income of management
account.
(For the year ended 31 March 2014)
Net income of the general account was 26,510 million yen (257,358 thousand U.S. dollars), while there was no net
income of management account.

JFM Annual Report 2014 | 84

17. Information by Account (Balance sheets)(Millions of yen)
Item

Generalaccount

Management
account¥7,175,673¥15,492,961

OffsetTotal

Review and Plan

Balance sheets of general account and management account as of 31 March 2013 were as follows:(Assets)
Loans
Securities

598,994

Cash and bank deposits

419,267
3,251

Tangible fixed assets

2,964

Intangible fixed assets

883

598,994419,267
10,922

2,964
883

Due from general accountDue to management account for fund for lending
rate reduction
Total assets

14,173

939,648242,831¥(939,648)(242,831)

16,443,532

5,389,185

13,287,215(1,182,479)

23,704,919

Borrowed money

30,000

Other liabilities

2,388

18,676,401
30,00012,732

15,121

47

47

Reserve for bonuses for directors and corporate
auditors

5

5

Reserve for retirement benefits

141

141

Reserve for retirement benefits for directors andcorporate auditors

27

27

922,568

922,568

915,698

915,698

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

6,869

6,869

939,648(939,648)

Due from general account for fund for lending rate
reduction
Reserves under special laws
Reserve for interest rate volatility

242,831
1,100,000

2,847,086

3,947,086

1,100,000

1,100,000

Management account reserve for interest rate
volatility

8,384,012

2,771,200

2,771,200

75,88575,885

16,389,866(1,182,479)

23,591,399(Net Assets)
Capital16,602

16,602Retained earnings

50,22150,22150,22150,221

General account surplus reserve
Valuation, translation adjustments and others(6,970)(6,970)Management account surplus reserve

Total liabilities and net assets

53,666

53,66659,85353,666

113,520¥8,443,866¥16,443,532

JFM Annual Report 2014 | 85¥(1,182,479)¥23,704,919

Appendix / JFM Data

Total net assets

Financial Section

Reserve for interest rate reduction
Total liabilities(242,831)

JFM’s Role in
Local Government FinanceReserve for bonuses

Management Structure

8,443,866(Liabilities)
Bonds

Operations

Other assets¥22,668,634

Financial
SectionFinancial Statements

Balance sheets of general account and management account as of 31 March 2014 were as follows:(Millions of yen)
Item

Generalaccount

Management
account¥9,178,637¥13,904,339

OffsetTotal(Assets)
Loans¥23,082,976

Securities

533,998

533,998

Cash and bank deposits

467,175

467,175

Cash collateral paid for financial instruments

370

Other assets

3,524

Tangible fixed assets

2,836

Intangible fixed assets

938

Due from general account

370
9,512

2,836
938
923,486

Due to management account for fund for lending
rate reduction
Total assets

13,036

192,831¥(923,486)(192,831)

10,380,311

14,837,337

6,983,259

12,440,483(1,116,317)

24,101,331(Liabilities)
Bonds
Borrowed money

95,500Cash collateral received for financial instruments

43,530

Other liabilities

2,667

19,423,743
95,50043,53011,72914,397

Reserve for bonuses

50

50

Reserve for bonuses for directors and corporate
auditors

7

7

Reserve for retirement benefits

116

116

Reserve for retirement benefits for directors andcorporate auditors

22

22

922,561

922,561

918,775

918,775

Fund for lending rate reduction
Basic fund for lending rate reduction
Additional fund for lending rate reduction

3,785

Due to management accountDue from general account for fund for lending rate
reduction
Reserves under special laws

(923,486)
192,831

1,320,000

Reserve for interest rate volatility(192,831)

2,138,627

3,458,627

1,320,000

Financial Section

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

3,785

923,486

10,291,202

1,320,000
2,072,945

2,072,945

65,681

65,681

14,783,671(1,116,317)

23,958,556(Net Assets)
Capital16,602

16,602Retained earnings

76,732

76,732

76,732

76,732

General account surplus reserve
Valuation, translation adjustments and others(4,225)

Management account surplus reserve
Total net assets
Total liabilities and net assets(4,225)53,666

53,666

89,10953,666

142,775¥10,380,311¥14,837,337

JFM Annual Report 2014 | 86¥(1,116,317)¥24,101,331

Item

Generalaccount

Management
account$89,104,332$134,980,480

OffsetTotal(Assets)
Loans$224,084,812

Securities

5,183,952

5,183,952

Cash and bank deposits

4,535,241

4,535,241

3,592

Other assets

34,212

Tangible fixed assets

27,532Intangible fixed assets

9,111

3,592
92,343

27,5329,111

Due from general accountDue to management account for fund for lending
rate reduction
Total assets

126,555

8,965,018
1,871,968$(8,965,018)(1,871,968)

100,769,940

144,037,841

67,792,057

120,769,669(10,836,986)

Operations

Cash collateral paid for financial instruments

Review and Plan(Thousands of U.S. dollars)

233,970,795(Liabilities)
Bonds

927,094

Cash collateral received for financial instruments

422,580

Other liabilities

25,893

188,561,726
927,094
422,580

113,870

139,763

493

493

Reserve for bonuses for directors and corporate
auditors

71

71

1,129

1,129

222

222

8,956,040

8,956,040

8,919,286

8,919,286

Reserve for retirement benefits
Reserve for retirement benefits for directors andcorporate auditors
Fund for lending rate reduction
Basic fund for lending rate reduction
Additional fund for lending rate reduction
Due to management account36,75436,754

8,965,018(8,965,018)

Due from general account for fund for lending rate
reduction
Reserves under special laws
Reserve for interest rate volatility

1,871,968
12,814,290

20,761,354

33,575,644

12,814,290

12,814,290

Management account reserve for interest rate
volatility
Reserve for interest rate reduction
99,904,887

20,123,726

20,123,726

637,628

637,628

143,516,861(10,836,986)

232,584,762(Net Assets)
Capital161,170

161,170

Retained earnings

744,902744,902744,902744,902

General account surplus reserve
Valuation, translation adjustments and others(41,019)(41,019)

Management account surplus reserve

Total liabilities and net assets

520,980

520,980

865,053

520,980

1,386,033$100,769,940$144,037,841$(10,836,986)$233,970,795

Notes: 1. General account and management accountIn accordance with the provisions of Article 13, Section 1 of the Supplementary Provisions of the Law,
management account is used to conduct administration, collection and other related operations of the assetsthat JFM inherited from the Predecessor (management of the assets of the Predecessor).
Management account is separated from the other account (general account) pursuant to the provisions ofArticle 13, Section 3 of the Supplementary Provisions of the Law.

JFM Annual Report 2014 | 87

Appendix / JFM Data

Total net assets

Financial Section

Total liabilities(1,871,968)

JFM’s Role in
Local Government FinanceReserve for bonuses

Management Structure

Borrowed money

Financial
SectionFinancial Statements

2. General account surplus reserve and management account surplus reserve“Net income” of the general account is posted as “General account surplus reserve” in accordance withthe provisions of Article 39, Section 1 of the Law, while “Net income” of management account is posted
as “Management account surplus reserve” in accordance with the provisions of Article 13, Section 8 of the
Supplementary Provisions of the Law.
3. Due from general account and due to management account
These amounts represent funds lent between the general account and management account pursuant to theprovisions of Article 13, Section 4 of the Supplementary Provisions of the Law.
4. Due from general account for fund for lending rate reduction and due to management account for fund for
lending rate reduction
These amounts represent cash received for “Fund for lending rate reduction,” which was lent to management
account from the general account pursuant to the provisions of Article 9, Section 12 of the Supplementary
Provisions of the Law.

18. Information by Account (Statements of income)Statements of income of general account and management account from 1 April 2012 through 31 March 2013 wereas follows:(Millions of yen)
Item

General account Management accountIncomeInterest income
Fees and commissions

OffsetTotal¥(22,268)¥487,146¥101,284¥408,131

91,436394,238

485,675

0

1,348

123

Other income

1,348

Contributions from fund for lending rate
reduction

123

1,066

Others281

Administrative fee for management account965

Interest on fund for lending rate reduction

7,410

Interest on due from general account

1,066
0

281
(965)
(7,410)

622

(622)

13,270(13,270)

80,455215,998(22,268)

61,098204,548

Fees and commissions

61

219

280

Other operating expenses

2,914

2,604

5,519

General and administrative expenses

2,488

141

Transfer from general account for fund for
lending rate reduction
Expenses
Interest expenses

Interest on due to management accountFinancial Section

Transfer to management account for fund for
lending rate reduction

274,076
265,647

2,629

622

(622)

13,270(13,270)

Administrative fee for management account

965

(965)

Interest on fund for lending rate reduction

7,410(7,410)Ordinary income

20,828

192,241-

213,070

Special gains

220,000

581,402(220,000)

581,402

Transfer from management account

220,000

Reversal of management account reserve forinterest rate volatility

570,000

Reversal of reserve for interest rate reduction
Special losses
Provision for reserve for interest rate volatility(220,000)

11,402220,000

773,643

11,402(220,000)

220,000
203,643

Transfer to general account

220,000

Payment to national treasury

350,000¥20,828

JFM Annual Report 2014 | 88773,643
220,000

Provision for management account reservefor interest rate volatility

Net income

570,000¥-

203,643(220,000)
350,000¥-¥20,828

(Millions of yen)
Item
IncomeInterest income

General account Management account¥117,626¥360,076

107,355

347,803

OffsetTotal¥(19,313)¥458,388
455,158

117

Other operating income

0

0

3,112

3,112

3,084

3,084

Contributions from fund for lending rate
reduction
Others117

28

Administrative fee for management account

1,035Interest on fund for lending rate reduction

6,004Interest on due from general account28(1,035)(6,004)(314)

11,958(11,958)

91,115

198,535(19,313)73,289187,658

Fees and commissions

78

202

281

Other operating expenses

3,058

3,451

6,509

General and administrative expenses

2,415

182

2,598

Expenses
Interest expenses

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

270,337
260,947

0

0

314

(314)

11,958(11,958)
1,035(1,035)Interest on fund for lending rate reduction

6,004(6,004)

Ordinary income

26,510161,540-

188,051

Special gains

220,000

880,203(220,000)

880,203

Transfer from management account

220,000

Reversal of management account reserve forinterest rate volatility

870,000

Reversal of reserve for interest rate reduction
Special losses
Provision for reserve for interest rate volatility(220,000)

10,203220,000

1,041,744

10,203(220,000)

220,000

Transfer to general account

220,000

Payment to national treasury

650,000¥-

171,744(220,000)
650,000¥-¥26,510

Financial Section

171,744¥26,510

1,041,744
220,000

Provision for management account reservefor interest rate volatility

Net income

870,000

JFM’s Role in
Local Government Finance

Administrative fee for management accountManagement Structure

314

Transfer from general account for fund for
lending rate reduction

Operations

Fees and commissions
Other income

Review and Plan

Statements of income of general account and management account from 1 April 2013 through 31 March 2014 wereas follows:

Appendix / JFM Data

JFM Annual Report 2014 | 89

Financial
SectionFinancial Statements(Thousands of U.S. dollars)
Item

General account Management accountIncomeInterest income$1,141,889$3,495,546

1,042,186

3,376,401

OffsetTotal$(187,493)$4,449,942
4,418,587

Fees and commissions

1,142

Other operating income

0030,21330,21329,93929,939Other income
Contributions from fund for lending rate
reduction
Others1,142274

Administrative fee for management account10,057

Interest on fund for lending rate reduction

58,291

Interest on due from general account274(10,057)(58,291)
3,050(3,050)116,095(116,095)

884,5311,927,341(187,493)

711,475

1,821,752

Fees and commissions

765

1,963

2,728

Other operating expenses

29,69233,50563,197

General and administrative expenses

23,4501,773

25,223

Transfer from general account for fund for
lending rate reduction
Expenses
Interest expenses

Other expenses

2,533,227

4Interest on due to management accountTransfer to management account for fund for
lending rate reduction

4

3,050

(3,050)116,095(116,095)

Administrative fee for management account10,057(10,057)

Interest on fund for lending rate reduction

58,291(58,291)

Ordinary income
Special gains
Transfer from management account257,358

1,568,205-

1,825,563

2,135,715

8,544,836(2,135,715)

8,544,836

2,135,715

Reversal of management account reserve forinterest rate volatility

Provision for reserve for interest rate volatility(2,135,715)
8,445,782

Reversal of reserve for interest rate reduction
Special losses

8,445,782

99,0542,135,715

10,113,041

99,054(2,135,715)

2,135,715

Financial Section

1,667,259

Transfer to general account2,135,715

Payment to national treasury

6,310,067$257,358

JFM Annual Report 2014 | 90

10,113,041
2,135,715

Provision for management account reservefor interest rate volatility

Net income

2,624,379$-

1,667,259(2,135,715)
6,310,067$-$257,358

19. Fair Value of Marketable Securities(Millions of yen)Book value

Fair value

Difference

Unrealized gains Unrealized losses

Treasury discount bills¥44,994

44,995¥0¥0¥-

Negotiable certificatesof deposit

554,000

554,000---¥598,994¥598,995

¥0

¥0

¥-

Total

Review and Plan

Marketable held-to-maturity securities as of 31 March 2013 consisted of the following:

Operations

Marketable held-to-maturity securities as of 31 March 2014 consisted of the following:(Millions of yen)Book value

Fair value

Difference

Unrealized gains Unrealized losses¥19,998¥19,998

¥(0)

¥-

¥(0)

Negotiable certificatesof deposit

514,000

514,000---¥533,998¥533,998

¥(0)

¥-

¥(0)

Total

(Thousands of U.S. dollars)Book value

Fair value

Difference

Unrealized gains Unrealized losses$194,145$194,136

$(9)

$-

$(9)

Negotiable certificatesof deposit

4,989,807

4,989,807---$5,183,952$5,183,943

$(9)

$-

$(9)

Notes: 1. The fair value of treasury discount bills is based on market price at the end of the fiscal year.
2. The balance sheet amount for negotiable certificates of deposit is the fair value.
3. Difference is the net amount of “unrealized gains” and “unrealized losses.”

JFM’s Role in
Local Government Finance

Treasury discount bills

TotalManagement Structure

Treasury discount bills

Financial Section
Appendix / JFM Data

JFM Annual Report 2014 | 91

Financial
SectionFinancial Statements

20. Information on Derivative Transactions

Financial Section(1) Types of derivative transactions
Derivative transactions entered into by JFM are interest rate swaps for interest rate related transactions, andcurrency swaps and foreign exchange forward contracts for currency related transactions.
(2) Policies and purposes of derivative transactions
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 andforeign exchange forward contracts are used to hedge exposure to foreign exchange risk associated with issuanceof 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 andmeet specific matching criteria are not measured at fair value, but the differential paid or received under theswap agreements is recognized and included in interest expense or income. If swap contracts or forward
contracts used to hedge the risk of foreign currency fluctuation qualify for deferral hedge accounting, the foreign
currency-denominated assets and liabilities are translated at the contracted rate.
(b) Hedging instruments and hedged items(ⅰ) Hedging instruments: Interest rate swaps
Hedged items: Bonds and long-term borrowed money(ⅱ) Hedging instruments: Currency swaps
Hedged items: Foreign currency-denominated bonds(ⅲ) Hedging instruments: Foreign exchange forward contracts
Hedged items: Foreign currency-denominated bank deposits(c) Hedging policy
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 principalof foreign currency-denominated bank deposits, a foreign exchange forward contract is entered into at the timeof each deposit by JFM.
(d) Assessment of hedge effectivenessJFM ensures hedging instruments and hedged items have the same major terms when entering into hedgetransactions to offset market fluctuation risks associated with bonds and long-term borrowed money.
Accordingly, JFM deems these to be highly effective and thus does not assess their 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.
(3) Risks on derivative transactions
Major risks on derivative transactions are market risk and credit risk. Market risk is the risk of future revenue
fluctuations due to market value changes. Credit risk is the risk of losses incurred when counterparties are unable
to fulfill their contracts due to bankruptcy or other reasons.
As for derivative transactions used for hedging purposes, market risk is offset by the corresponding change into
underlying 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 andthe counterparties’ credit profiles, and deals with multiple counterparties.
(4) Risk management system for derivative transactions
Execution and management of derivative transactions are conducted by the Finance Department of JFM with theapproval of persons in charge in accordance with the operational guidelines which specify transaction authority
and limits on the transaction amount.
Additionally, the total amount of derivative transactions, the status of risks, the assessed fair value, and the credit
risk on counterparties are regularly reported to the Integrated Risk Management Committee.

JFM Annual Report 2014 | 92

Independent Auditor’s Report
Financial
Section

Review and Plan

Operations

Management Structure

JFM’s Role in
Local Government Finance

Financial Section

Appendix / JFM Data

JFM Annual Report 2014 | 93

JFM Annual Report 2014 | 94

Appendix / JFM Data
Review and Plan
Operations
Management Structure
JFM’s Role in
Local Government FinanceMembers of the Representative Board and theSupervisory Committee

96

Outstanding International Bonds105

JFM Data

107
107
108
109

Redemption of Loans in Fiscal 2013
Outstanding Loans by Business
Outstanding Loans by Borrower

Organization History
Organization Chart
Directors and Corporate Auditors/Contact Information

Appendix / JFM Data

Bond Issuance in Fiscal 2013

96
96
97
98
102

Financial Section

AppendixAppendix
JFM Data

Appendix

Members of the Representative Board and the Supervisory Committee
The Representative Board members of JFM as of 31 March 2014 are as follows:
Name

Title

Background

Yuichiro Ito

Chairman

Former Chairman of the Japan Finance Corporation for MunicipalEnterprises Reform Sub-committee, National Governors' Association
Governor, Kagoshima prefecture

Tamio Mori

Deputy Chairman

Chairman, Japan Association of City Mayors
Mayor, Nagaoka City, Niigata prefecture

Tadahiko Fujiwara

Deputy Chairman

Chairman, National Association of Towns & Villages
Mayor, Kawakami Village, Nagano prefecture

Junko Obata

MemberProfessor, Sophia University Law School

Isao Horiba

MemberProfessor, Aoyama Gakuin University

Tomijiro Morita

MemberPresident, The 21st Century Public Policy Institute, Keidanren
Special Advisor, The Dai-ichi Life Insurance Company, Limited

The Supervisory Committee members of JFM as of 31 March 2014 are as follows:
Name

Title

BackgroundYoshitsugu Hayashi

ChairmanProfessor, Kwansei Gakuin University

Yutaka Suzuki

Deputy Chairman

Professor, Aoyama Gakuin University Graduate School
Certified Public Accountant

Tetsuya Kayamori

MemberFormer Director, Jiji Press, Ltd.

Yukiko Shinozaki

MemberRepresentative Director, Urban Life Research Institute

Tomoko Seiichi

MemberProfessor, Seinan Gakuin University

Yasuharu Yoneda

MemberProfessor, Shinshu University Law School

Redemption of Loans in Fiscal 2013
Principal
Classification

Interest

Number ofloans

Amount(USD millions)

Number ofloans

Amount(USD millions)

407,779

14,757474,500

4,393

771

141

772

18

Subtotal

408,550

14,898475,272

4,411

General loans

3,876

1,684

0

0

Loans to local
government corporations

44

44

0

0

Subtotal

3,920

1,728

0

0

Redemption of loans with pre-consent or pre-approval

-

-

-

-

Redemption of short-term loans

-

-

-

-

412,470

16,627475,272

4,411

General loans
Regular redemption ofLoans to local
long-term loans
government corporations

Appendix / JFM Data

Prepayment oflong-term loans

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

JFM Annual Report 2014 | 96(as of 31 March 2014)
Number ofLoans Made

Business

Public Projects, etc.

Loan Amount (USD millions)% of total

1.8

7

13

0.0

Educational Facilities Development

132

94

0.0

Social Welfare Facilities Development

481

518

0.2

General Projects

308

369

0.2

Regional Revitalization

514

334

0.2

Disaster Prevention

1,065

984

0.4

Local Road Development*1

30,61928,868

12.9

Special Municipal Mergers

2,723

7,024

3.1

Disaster Management and Mitigation

2,147

3,297

1.5

Others

3,246

1,694

0.8

46,97848,81021.8

Water Supply

51,40336,474

16.3

Transportation

929

12,232

5.5

3,076

7,148

3.2

122,736

81,426

36.3

2,253

2,101

0.9

964

811

0.4

1,144

726

0.3

Markets and Slaughterhouses

582

794

0.4

Tourism and Others

470

560

0.2

183,557

142,272

63.5

Temporary Financial Countermeasures Funding

4,013

32,209

14.4

Total

234,548

223,291

99.6

310

794

0.4

234,858

224,085

100.0

National Disaster Prevention

General Account-related
Loans

Subtotal

Hospitals and Elderly Care Services
Sewerage
Municipal Enterpriserelated Loans

Industrial Water Supply
Electricity and Gas
Port Facilities

Subtotal

Local Government Road Corporation, Toll Roads*2
Grand Total

Notes: 1. Includes the former development projects for local roads.
2. No loans will be extended to local government road corporations by JFM. The outstanding loans shown above was extended by thePredecessor.
3. Totals may not add up due to rounding.
JFM Annual Report 2014 | 97

Appendix / JFM Data

4,106

Financial Section

4,980

JFM’s Role in
Local Government Finance

0.7

Management Structure

1,508

Operations

756

Public Housing

Review and Plan

Outstanding Loans by BusinessAppendix
JFM Data

Appendix

Outstanding Loans by Borrower(as of 31 March 2014)
Cities and Special Wardsof TokyoPrefectures
BorrowerTowns and Villages

Number of Loan Amount Number of Loan Amount Number of Loan Amount
Loans Made (USD millions) Loans Made (USD millions) Loans Made (USD millions)

Hokkaido

281

3,570

4,979

7,150

7,786

2,060

Aomori

214

406

1,921

2,351

1,383

461

Iwate

232

606

2,712

2,596

742

297

Miyagi

385

1,404

4,586

3,763

2,595

555

Akita

223

304

4,497

2,312

1,134

147

Yamagata

253

746

2,619

1,830

1,899

377

Fukushima

367

753

3,420

2,572

2,962

575

Ibaraki

472

1,168

6,057

3,910

1,283

396

Tochigi

224

519

3,185

2,202

820

266

Gunma

284

591

3,581

2,070

1,794

402

Saitama

251

2,341

5,809

5,871

1,556

478

Chiba

397

1,132

4,455

5,421

756

214

Tokyo

134

1,858

1,840

2,641

193

50

Kanagawa

238

1,490

2,655

8,446

917

328

Niigata

272

468

8,142

4,894

875

197

Toyama

280

439

3,620

2,707

506

226

Ishikawa

178

252

2,728

2,240

1,168

427

Fukui

262

527

2,092

1,293

901

167

Yamanashi

151

434

3,052

1,175

1,068

175

Nagano

235

464

4,226

3,059

3,051

741

Gifu

201

1,343

4,309

2,302

1,172

365

Shizuoka

367

760

4,780

3,774

635

213

Aichi

302

1,803

5,134

6,902

837

245

Mie

404

1,364

3,861

2,694

1,034

281

Appendix / JFM Data
JFM Annual Report 2014 | 98

Local Government Road
Corporations

Number of Loan Amount Number of Loan Amount
Loans Made (USD millions) Loans Made (USD millions)

Review and Plan

Local Government
Associations

Total
Number ofLoans Made

Loan Amount(USD millions)% of Total

13,33813,043

5.8

103

126

-

-

3,621

3,344

1.5

71

51

-

-

3,757

3,550

1.6

127

98

-

-

7,693

5,819

2.6

5

0

-

-

5,859

2,763

1.2

133

41

10

1

4,914

2,994

1.3

189

217

3

2

6,941

4,120

1.8

206

189

4

5

8,022

5,668

2.5

6

32

9

5

4,244

3,024

1.3

22

50

-

-

5,681

3,113

1.4

227

165

14

11

7,857

8,865

4.0

366

473

12

22

5,986

7,263

3.2

27

169

-

-

2,194

4,719

2.1

79

986

-

-

3,889

11,251

5.0

129

126

-

-

9,418

5,686

2.5

130

122

12

6

4,548

3,500

1.6

15

24

-

-

4,089

2,942

1.3

69

38

-

-

3,324

2,025

0.9

152

67

2

1

4,425

1,852

0.8

155

93

14

10

7,681

4,367

1.9

7

12

-

-

5,689

4,023

1.8

68

146

14

10

5,864

4,903

2.2

115

59

53

332

6,441

9,342

4.2

31

39

-

-

5,330

4,378

2.0

Financial Section-

JFM’s Role in
Local Government Finance-Management Structure

263

Operations

292

Appendix / JFM Data

JFM Annual Report 2014 | 99

Appendix
JFM Data

Appendix

Cities and Special Wardsof TokyoPrefectures
BorrowerTowns and Villages

Number of Loan Amount Number of Loan Amount Number of Loan Amount
Loans Made (USD millions) Loans Made (USD millions) Loans Made (USD millions)

Shiga

220

727

4,125

2,344

551

139

Kyoto

215

514

3,285

4,385

970

261

Osaka

125

754

4,838

13,255

770

276

Hyogo

320

3,644

7,306

9,021

1,786

776

Nara

259

1,018

2,258

1,562

1,711

505

Wakayama

112

337

1,439

1,693

1,183

480

Tottori

264

404

1,261

949

1,802

473

Shimane

222

930

2,382

2,030

295

85

Okayama

298

1,213

4,589

3,819

1,268

322

Hiroshima

385

1,439

4,250

5,076

907

294

Yamaguchi

424

649

4,197

2,419

527

125

Tokushima

190

490

1,288

990

754

246

Kagawa

244

304

2,076

1,171

793

201

Ehime

127

278

2,303

1,977

599

228

Kochi

143

729

1,372

1,316

598

157

Fukuoka

110

1,032

4,362

8,701

1,805

885

Saga

53

323

1,517

1,464

577

289

Nagasaki

146

501

2,681

2,633

605

180

Kumamoto

176

475

2,718

2,136

1,477

442

Oita

125

289

2,190

1,431

140

46

Miyazaki

180

679

2,031

1,523

689

204

Kagoshima

172

1,228

2,345

1,732

761

190

Okinawa

230

836

1,372

1,192

821

204

11,34743,535

160,445

156,99358,456

16,650Total

Note: Totals may not add up due to rounding.

Appendix / JFM Data
JFM Annual Report 2014 | 100

Local Government Road
Corporations

Number of Loan Amount Number of Loan Amount
Loans Made (USD millions) Loans Made (USD millions)

Total
Number ofLoans Made

Loan Amount(USD millions)% of Total

4,982

3,258

1.5

14

34

12

11

4,496

5,206

2.3

234

736

18

78

5,985

15,099

6.7

444

688

55

66

9,911

14,195

6.3

15

17

3

10

4,246

3,112

1.4

42

49

-

-

2,776

2,558

1.1

21

16

-

-

3,348

1,842

0.8

48

24

-

-

2,947

3,069

1.4

104

237

-

-

6,259

5,592

2.5

5

9

17

78

5,564

6,896

3.1

107

91

-

-

5,255

3,283

1.5

3

1

-

-

2,235

1,727

0.8

7

6

-

-

3,120

1,683

0.8

11

13

-

-

3,040

2,495

1.1

7

115

-

-

2,120

2,316

1.0

237

225

29

135

6,543

10,979

4.9

98

132

-

-

2,245

2,209

1.0

17

22

10

5

3,459

3,341

1.5

32

26

10

1

4,413

3,080

1.4

-

-

-

-

2,455

1,767

0.8

6

5

-

-

2,906

2,411

1.1

8

15

5

3

3,291

3,169

1.4

34

16

-

-

2,457

2,247

1.0

4,300

6,113

310

794

234,858

224,084

100.0

Financial Section

1

JFM’s Role in
Local Government Finance4

Management Structure

47

Operations

82

Review and Plan

Local Government
Associations

Appendix / JFM Data

JFM Annual Report 2014 | 101

Appendix
JFM Data

Appendix

Bond Issuance in Fiscal 2013
1. JFM bonds(1) International bonds
SeriesNumberFormatCurrency

Issue Size(in millions)

CouponIssue Price(%)

Issue Date

Maturity Date

Euro

USD

105

1.375%

99.95218 Apr 201318 Apr 2018

36

Euro

AUD

100

3mBBSW+83bp

100

21 May 2013

21 May 2018

37

Euro

USD

200

3mL+17bp100

28 May 201328 Nov 2014

38

Euro

USD

100

3mL+50bp

100

11 Jul 201311 Jul 2018

39

Euro

USD

100

3mL+65bp

100

22 Jul 201322 Jul 2020

40

GlobalUSD

1,500

2.500%

99.855

12 Sep 201312 Sep 2018

41

Euro

AUD

110

4.20%

99.98

26 Nov 201326 Nov 201842

GlobalUSD

1,000

2.125%

99.892

6 Mar 2014

6 Mar 2019(2) Domestic public offerings
Series Number

Issue Size

Appendix / JFM Data

Coupon (%)

Issue Price (%)

388

0.576

100

18 Apr 201328 Apr 2023

388

0.813

100

23 May 2013

26 May 2023

40

388

0.887

100

20 Jun 201328 Jun 2023

40

388

0.922

100

22 Jul 201328 Jul 2023

51

40

388

0.841

100

19 Aug 2013

28 Aug 2023

52

40

388

0.831

100

24 Sep 201328 Sep 2023

53

40

388

0.739

100

21 Oct 2013

27 Oct 2023

54

20

194

0.730

100

25 Nov 201328 Nov 2023

55

25

243

0.778

100

24 Dec 201328 Dec 2023

56

30

291

0.783

100

27 Jan 2014

26 Jan 2024

57

30

291

0.739

100

19 Feb 2014

28 Feb 2024

58

30

291

0.739

100

24 Mar 2014

28 Mar 2024

28

15

146

1.396

100

18 Apr 201328 Apr 2033

29

10

97

1.725

100

20 Jun 201328 Jun 2033

30

10

97

1.812

100

22 Jul 201328 Jul 2033

31

15

146

1.744

100

24 Sep 201328 Sep 2033

32

15

146

1.624

100

21 Oct 2013

28 Oct 2033

33

20

194

1.668

100

24 Dec 201328 Dec 2033

34

25

243

1.624

100

27 Jan 201427 Jan 2034

35

15

146

1.569

100

24 Mar 2014

28 Mar 2034

12

15

146

0.314

100

22 Apr 201327 Apr 2018

13

15

146

0.360

100

22 Jul 201327 Jul 2018

14

15

146

0.245

100

21 Oct 2013

26 Oct 2018

1

50

485

0.135

100

19 Feb 2014

26 Feb 2016

1

20

194

0.170

100

19 Aug 2013

26 Aug 2016

2

20

194

1.161

100

24 Dec 201328 Dec 2028

3

15

146

1.176

100

22 Jan 2014

26 Jan 2029

F154

9

87

0.199

100

25 Apr 201320 Jun 2016

F155

20

194

0.618

100

25 Apr 201320 Jun 2022

F156

5

49

0.908

100

24 Apr 2013

28 May 2026

F157

3

29

1.122

100

25 Apr 2013

25 Apr 2028

F158

8

78

1.226

100

25 Apr 201319 Mar 2029

F159

6

58

1.119

100

25 Apr 2013

31 Mar 2028

(JPY billions)(USD millions)

47

40

48

40

49
50

JFM Annual Report 2014 | 102

Issue Date

Maturity Date

Issue Size

Coupon (%)

Issue Price (%)

Issue Date

Maturity Date

F160

3

29

1.052

100

26 Apr 2013

26 May 2028

F161

3

29

1.257

100

30 Apr 2013

28 May 2030

F162

5.5

53

1.027

100

30 Apr 201330 Nov 2027

F163

3

29

1.050

100

30 Apr 201328 Apr 2028

F164

3.5

34

1.552

100

20 May 201328 Dec 2033

F165

10

97

0.239

100

28 May 201328 Jun 2016

F166

3

29

0.961

100

28 May 2013

28 May 2024

F167

3

29

1.048

100

28 May 201327 Jun 2025

F168

3

29

1.425

100

28 May 2013

28 May 2029

F169

3.5

34

1.753

100

28 May 2013

26 May 2034

F170

3

29

0.243

100

29 May 201327 May 2016

F171

5

49

0.783

100

29 May 2013

28 May 2021

F172

3

29

1.155

100

29 May 2013

29 May 2026

F173

4

39

1.276

100

29 May 2013

28 May 2027

F174

3

29

1.889

100

29 May 2013

28 May 2038

F175

20

194

0.850

100

24 Jul 2013

20 Sep 2022

F176

4

39

0.929

100

24 Jul 201324 Jul 2024

F177

3

29

1.299

100

24 Jul 201324 Jul 2028

F178

3

29

1.831

100

24 Jul 201327 Jul 2035

F179

3

29

0.991

100

30 Jul 201330 Jul 2025

F180

6

58

0.570

100

30 Jul 201328 Jul 2020

F181

5

49

1.109

100

30 Jul 201328 Jul 2026

F182

3

29

1.309

100

30 Jul 201328 Jul 2028

F183

3

29

1.703

100

30 Jul 201328 Jul 2032
27 Aug 2027

4

39

1.208

100

30 Jul 2013

F185

11

107

0.50

76.60

31 Jul 201328 Jul 2033

F186

3

29

0.767

100

27 Aug 2013

26 Aug 2022

F187

20

194

0.713

100

23 Oct 201320 Dec 2022

F188

4

39

0.813

100

23 Oct 2013

29 Oct 2024

F189

3

29

1.103

100

23 Oct 2013

28 Oct 2027

F190

3

29

0.792

100

24 Oct 2013

24 Oct 2024

F191

4

39

0.990

100

24 Oct 201322 Jan 2027

F192

3.5

34

1.167

100

24 Oct 2013

24 Oct 2028

F193

3

29

1.685

100

24 Oct 2013

20 Sep 2035

3

29

1.066

100

29 Oct 201326 Nov 2027

3.5

34

1.325

100

29 Oct 201319 Mar 2030

F196

3

29

0.854

100

29 Oct 2013

29 Oct 2025

F197

5

49

1.052

100

29 Oct 2013

29 Oct 2027

7

68

1.735

99.88

26 Nov 201328 Sep 2038

F199

20

194

0.734

100

29 Jan 2014

20 Mar 2023

F200

5

49

0.820

100

30 Jan 201428 Jan 2025

F201

3

29

0.983

100

29 Jan 201428 Jan 2027

F202

3

29

0.929

100

30 Jan 2014

26 Jun 2026

F203

3

29

1.063

100

30 Jan 2014

28 Feb 2028

F204

3

29

1.772

100

30 Jan 201428 Jan 2039

F205

3

29

0.922

100

30 Jan 2014

30 Jan 2026

F206

5

49

1.065

100

30 Jan 201428 Jan 2028

F207

3

29

1.679

100

30 Jan 2014

30 Jan 2035

F208

6.5

63

0.857

100

4 Feb 2014

4 Feb 2026

F209

3

29

0.990

100

4 Feb 2014

4 Feb 2028

F210

11

107

1.602

100

4 Feb 2014

20 Mar 2035

F211

10

97

3mL+16bp

100

26 Feb 2014

26 Feb 2044

JFM Annual Report 2014 | 103

Appendix / JFM Data

F198

Financial Section

F194
F195

JFM’s Role in
Local Government Finance

F184

Management Structure(USD millions)Operations(JPY billions)

Review and Plan

Series Number

Appendix
JFM Data

Appendix

2. Private placements with Pension Fund Association for Local Government Ofﬁcials
Series Number
A39

Issue Size
(JPY billions)(USD millions)

25

243

Coupon (%)

Issue Price (%)

Issue Date

Maturity Date

0.640

100

18 Apr 201318 Apr 2023

A40

25

243

0.910

100

23 May 2013

23 May 2023

A41

25

243

0.922

100

20 Jun 201320 Jun 2023

A42

25

243

0.937

100

22 Jul 2013

21 Jul 2023

A43

25

243

0.851

100

19 Aug 201318 Aug 2023

A44

25

243

0.832

100

24 Sep 201322 Sep 2023

A45

25

243

0.774

100

21 Oct 2013

20 Oct 2023

A46

25

243

0.760

100

25 Nov 201324 Nov 2023

A47

25

243

0.803

100

24 Dec 201322 Dec 2023

A48

25

243

0.808

100

27 Jan 2014

26 Jan 2024

A49

25

243

0.764

100

26 Feb 2014

26 Feb 2024

A50

25

243

0.764

100

24 Mar 2014

22 Mar 2024

Coupon (%)

Issue Price (%)

Issue Date

Maturity Date

3. Government-guaranteed domestic bonds
Series Number

Issue Size
(JPY billions)(USD millions)

47

60

582

0.541

100

22 Apr 2013

21 Apr 2023

48

60

582

0.605

100

16 May 201316 May 2023

49

60

582

0.882

100

17 Jun 201316 Jun 2023

50

60

582

0.911

100

16 Jul 201314 Jul 2023

51

55

534

0.835

100

14 Aug 2013

14 Aug 2023

52

55

534

0.801

100

17 Sep 201315 Sep 2023

53

55

534

0.699

100

15 Oct 201313 Oct 2023

54

55

534

0.669

100

19 Nov 201317 Nov 2023

55

55

534

0.693

100

18 Dec 201318 Dec 2023

56

55

534

0.747

100

21 Jan 201419 Jan 2024

57

55

534

0.660

100

18 Feb 201416 Feb 2024

58

55

534

0.645

100

17 Mar 2014

15 Mar 2024

1

70

680

0.576

100

26 Sep 201324 Sep 2021

2

65

631

0.502

100

25 Dec 201324 Dec 2021

3

65

631

0.460

100

27 Feb 2014

25 Feb 2022

9

80

777

0.320

100

25 Apr 2013

25 Apr 2019

10

70

680

0.385

100

24 Jul 201324 Jul 2019

Appendix / JFM Data

11

70

680

0.250

100

23 Oct 2013

23 Oct 2019

12

70

680

0.186

100

10 Mar 2014

10 Mar 2020

5

55

534

0.249

100

24 Jun 201323 Jun 2017

6

55

534

0.205

100

29 Aug 2013

29 Aug 2017

JFM Annual Report 2014 | 104

Review and Plan

Outstanding International Bonds
1. JFM bonds(as of 31 March 2014)
Currency

Issue Size(in millions)

CouponIssue Price(%)

Issue Date

Maturity Date

1

EURO

USD

105

3mL+73bp100

17 Jan 201217 Jan 2017

2

EURO

USD

40

2.035%

100

12 Jan 201212 Jan 2017

3

EURO

USD

57

2.00%

100

17 Jan 201217 Jan 2017

4

EURO

USD

35

3mL+75bp100

17 Jan 201217 Jan 2017

5

EURO

USD

30

3mL+75bp100

19 Jan 201219 Jan 2017

6

EURO

USD

51

3mL+70bp100

18 Jan 201218 Jan 2017

7

EURO

USD

20

2.00%

100

23 Jan 201223 Jan 2017

8

EURO

USD

20

3mL+73bp100

23 Jan 201223 Jan 2017

9

EURO

USD

20

3mL+70bp100

19 Jan 201219 Jan 2017

10

EURO

USD

20

3mL+75bp100

18 Jan 201218 Jan 2017100

24 Jan 201224 Jan 2017

40

12

EURO

USD

20

3mL+69bp100

26 Jan 201226 Jan 2017

13

EURO

USD

20

3mL+70bp100

24 Jan 201224 Jan 2017

14

EURO

USD

25

1.84%

100

1 Mar 2012

1 Mar 2017

15

EURO

USD

20

2.40%

100

1 Mar 2012

1 Mar 2019

16

EURO

USD

25

1.8725%100

1 Mar 2012

1 Mar 2017

17

EURO

USD

30

3mL+70bp100

1 Mar 2012

1 Mar 2017

18

EURO

USD

25

3mL+70bp100

1 Mar 2012

1 Mar 2017

19

EURO

USD

20

1.89%

100

1 Mar 2012

1 Mar 2017

20

EURO

USD

40

3mL+70bp

100

6 Mar 2012

6 Mar 2017

21

EURO

USD

30

3mL+70bp

100

6 Mar 2012

6 Mar 2017

22

EURO

USD

25

3mL+70bp

100

6 Mar 2012

6 Mar 2017

23

EURO

USD

30

3mL+70.5bp

100

6 Mar 2012

6 Mar 2017

24

EURO

USD

30

3mL+70bp

100

8 Mar 2012

8 Mar 2017

25

EURO

USD

30

3mL+70bp

100

6 Mar 2012

6 Mar 2017

26

EURO

AUD

20

3mBBSW+115bp

100

13 Mar 2012

13 Mar 2017

27

EURO

USD

30

3mL+70bp

100

8 Mar 2012

8 Mar 2017

28

EURO

USD

20

1.85%

100

13 Mar 2012

13 Mar 2017

29

EURO

USD

327

3mL+65bp100

22 May 2012

22 May 2017

30

EURO

USD

130

3mL+70bp

100

6 Jun 2012

6 Jun 2019

31

EURO

USD

1,000

1.500%

100

12 Sep 201212 Sep 2017

32

EURO

USD

100

3mL+52bp100

7 Nov 2012

7 Nov 2017

33

EURO

USD

1,000

1.375%

99.544

5 Feb 2013

5 Feb 2018

34

EURO

AUD

100

3.65%

99.99

25 Mar 2013

23 Mar 2018

JFM Annual Report 2014 | 105

Appendix / JFM Data

NZD

Financial SectionEURO

JFM’s Role in
Local Government Finance

11

3mNZD-BBRFRA+113bp

Management Structure

FormatOperations

SeriesNumberAppendix
JFM Data

Appendix

2. Government-guaranteed bonds(as of 31 March 2014)
SeriesNumberIssue Size(in millions)

CouponIssue Price(%)

Issue Date

Maturity Date

150

5.750

99.3379 Aug 1999

9 Aug 2019

EUR

900

4.500

99.85727 May 2004

27 May 2014

USD

1,200

4.625

99.04521 Apr 2005

21 Apr 2015

GLOBALJPY

120,000

2.000

99.8389 May 2006

9 May 2016

GLOBAL

USD

1,000

5.000

99.27816 May 2007

16 May 2017

5

GLOBALJPY

75,0001.900

99.90025 Jun 2008

22 Jun 2018

1

GLOBAL

USD

1,000

4.000

99.17013 Jan 201113 Jan 2021

FormatCurrency

EURO

GBP

1

EURO

2

GLOBAL4
3

Appendix / JFM Data
JFM Annual Report 2014 | 106

Appendix
JFM Data

JFM Data

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

2009

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

2011

Created a new special lending rate program by integrating the existing special lending rate and theextra-special lending rate programs.

Operations

FY2008

Review and Plan

Organization History

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

1960

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

1966

Started a lending program that applied special lending rates.

1967

Started receiving subsidies from the national treasury.

1970

Started a program of contributions of the earnings from municipally operated racing and established theFund for Lending Rate Reduction.

1972

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

1978

Included the three types of special projects (in the general account-related business category) in thescope of lending.

1983

Started issuing foreign currency–denominated bonds.

1998

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

2001

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

2002

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

2005

The “Priority Policy for Administrative Reform,” which included the proposal for abolition of thePredecessor in fiscal 2008, a new structure utilizing capital markets, and transitional measures toprepare for the abolition, was approved by the Cabinet.

2006

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

2007

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

2008

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

JFM Annual Report 2014 | 107

Appendix / JFM Data

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

Financial Section

Established the Reserve for Losses on Refinancing of Bonds.

JFM’s Role in
Local Government Finance

1989
1990

Management Structure

FY1957

Appendix
JFM Data

JFM Data

Organization Chart
As of 1 April 2014
Personnel and Secretariat … Secretariat, personnel, human resources
development

Corporate Planning…

Corporate planning, budget control, mattersrelated to the Representative Board and theSupervisory Committee, ALM, public relations,communication and coordination with otherorganizations

Risk Management…

Integrated risk management, systems
management

General Affairs…

General affairs including compensation andbenefits and legal review

Accounting…

Budgets, settlement of accounts, mattersrelated to contributions from municipally
operated racing, accounting, receipts anddisbursements, external audit

Finance…

Fund-raising planning, fund-raising operations,
IR, Rating

Corporate Planning
Department

Representative
Board

President and CEO
Deputy President
Senior Executive
Directors

Administration
Department

Corporate
Auditors
Supervisory Committee

Finance Department
Funding Administration … Funding administration and management offund investment

Loan Department

Lending Management … Planning and control of lending operations,calculation and setting of lending rates, lending
operations (excluding operations by Loan
Administration)

Local Government
Support Department

Loan Administration…

Lending operations (excluding municipal
enterprises with the exception of public
housing) management of loan receivables,
collection of loan principal and interest,
entrusted loan operations, and investigations ofregional financial conditions

Research Planning…

Research and planning to enhance the local
government support operations and research offinancial situation

Financial Activities Support … Financial advisory services to local governments

Appendix / JFM Data

Credit Researchand Analysis……………………………………… Credit analysis, credit management

Internal Auditor……………………………………… Internal audit, internal control

JFM Annual Report 2014 | 108

President and CEO
Yuji Watanabe
Deputy President
Noboru Mitsuhashi
Senior Executive Directors Yoshiyasu Hyotani, Hitoshi Shimura, Keiichi Hikita (part-time)
Corporate Auditors
Yutaka Ishikawa, Masaharu Hamakawa (part-time)

Review and Plan

Directors and Corporate Auditors

Operations(From left, M. Hamakawa, Corporate Auditor,
and Y. Ishikawa, Corporate Auditor)

Financial Section

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

JFM’s Role in
Local Government FinanceContact Information

Management Structure(From left, H. Shimura, Senior Executive Director; N. Mitsuhashi, Deputy President;
Y. Watanabe, President and CEO; Y. Hyotani, Senior Executive Director; andK. Hikita, Senior Executive Director)

Appendix / JFM Data

(Photo provided by The Tokyo Institute for Municipal Research)

JFM Annual Report 2014 | 109