Japan Finance Organization
for Municipalities

A N N UA L R E P ORT 2 022

DISCLAIMER
By reading these materials, you agree to be bound by the following limitations:

No representation or warranty, express or implied, is made as to, and no reliance should be placedon, the fairness, accuracy, completeness or correctness of the information, or opinions contained
herein. Neither Japan Finance Organization for Municipalities (“JFM”) nor any of JFM’s advisors or

representatives shall have any responsibility or liability whatsoever (for negligence or otherwise) for
any loss howsoever arising from any use of these materials or their contents or otherwise arising inconnection with these materials. The information set out herein may be subject to updating, completion,
revision, verification and amendment and such information may change materially.

These materials are based on the economic, regulatory, market and other conditions as in effect on

the date hereof. It should be understood that subsequent developments may affect the information

contained in these materials, which neither JFM nor its advisors or representatives are under anobligation to update, revise or affirm.

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

available to JFM at the time they were prepared and involve potential risks and uncertainties. Actual

results, therefore, may differ from those described in these materials due to changes in a variety offactors, such as market trends, economic conditions and regulations. Accordingly, investors areadvised to use their own discretion and exercise great caution when making investment decisions.

These materials and the information contained herein do not constitute or form part of any offer forsale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities
of JFM.

Securities of JFM not registered under the U.S. Securities Act of 1933, as amended (the “SecuritiesAct”), may not be offered, sold or delivered within the United States or to U.S. persons absent

registration under or an applicable exemption from the registration requirements of the United States
securities laws.

These materials and the information contained herein are being furnished to you solely for yourinformation and may not be reproduced or redistributed to any other person, in whole or in part. In
particular, neither the information contained in these materials nor any copy hereof may be, directly or

indirectly, taken or transmitted into or distributed in the United States, Canada, Australia, Japan, Hong
Kong or any other jurisdiction which prohibits the same except in compliance with applicable securities

laws. Any failure to comply with this restriction may constitute a violation of U.S. or other national
securities laws. No money, securities or other consideration is being solicited, and, if sent in responseto this presentation or the information contained herein, will not be accepted.
Note to Financial Statements

The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenienceof readers outside Japan, using the prevailing exchange rate as of 31 March 2022, the final day of the

fiscal year, which was JPY 122.40 to USD 1. This translation should not be construed as a representationthat all amounts shown could be converted into U.S. dollars at such rate.


ANNUAL REPORT 2022 JFM

Review and Plan

CONTENTS
02
03
06
08
09

Management StructureManagement Philosophy

42

Message from the President and CEO
JFM at a Glance
Outline of JFM Operations
Capital

Review and Plan
12
12
14
18
18
19
19

1. Lending Operations

22
26
26
29
32
32
33
34
35
36

47
54
55

3. Internal Audit
General Account and Management AccountRisk Management
Compliance
Disclosure

JFM’s Role in Local Government Finance

3. Financial Review

56

Management Plan for Fiscal 2022
1. Lending Operations
2. Funding Operations
3. Scheduled Payment to the National Treasury

Lending Operations

57
58
58
58
59
60

1. Japanese Local Government System
2. Local Government Finance Programme
3. Local Allocation Tax
4. Local Government Borrowings
5. Security of Local Government Borrowings
6. Local Government Borrowing Programme
7. JFM Funds in Local Government Borrowing Programme

1. Outline

Financial Section

2. Loan Interest Rates

62

3. Credit Check System
4. Trends in Lending Operations
5. Lending Operations by Business
Funding Operations
1. Issue Type
2. Basic Funding Policy
3. Features of JFM Bonds
4. Trends in Funding Operations
Support for Local Governments
JFM and SDGs related operations

102

Financial Statements
Independent Auditor’s Report

Appendix / JFM Data
105
117
117
118
119
119

Appendix
JFM Data
Organization History
Organization Chart
Directors and Corporate Auditors
Contact Information

The Pillow Book - Depicting the Beauty of the Four Seasons and Reflecting the Spirit of JapanJFM ANNUAL REPORT 2022

Appendix / JFM Data

The Makura no Soshi, or “Pillow Book,” is the world’s first example of essay as literature. It was written by Sei
Shonagon during Japan’s Heian era, in roughly the year 1001. The famed first line of the book, which begins
haru wa akebono (“For spring, it is…”), touches on the charms of the seasons. Sei Shonagon used a uniqueperspective, drawing beauty from time in her depictions of nature. The spirit gazing at beautiful vistas intricately
woven by the seasons and the changing face of nature is one that continues unchanged in the hearts of theJapanese people even now, over 1,000 years later. The photographs on the cover of this annual report and theTable of Contents page are beautiful slices of time from the spring, summer, fall, and winter.

Financial Section

38

45

2. Internal Control over Financial Reporting

JFM’s Role in Local
Government Finance24

44

1. Corporate Governance2. Funding Operations

Operations
22

44

Corporate GovernanceManagement
Structure

16

Review of Operations for Fiscal 2021

42

Operations

04

Profile of JFM

01

Profile of JFM
Name

Japan Finance Organization for Municipalities (JFM)

Establishment

1 August 2008 (Reorganized on 1 June 2009)

Governing Law

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

Address

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

President and CEO

SATO Fumitoshi

CapitalUSD 135.6 million

Number of Employees

92 (as of April 2022)

Outstanding Loans

USD 192.4 billion

as of 31 March 2022
Outstanding Bonds and

USD 167.5 billion

Bank Loans
as of 31 March 2022
Credit Ratings

S&P: A+as of 31 March 2022

Moody’s : A1
R&I: AA+

02

JFM ANNUAL REPORT 2022

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

1

Being Responsive to Local Government Needs

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

2

Strengthening Confidence from the Capital Markets

JFM aims to strengthen its market confidence and secure low-cost funding
through appropriate disclosure as required in capital markets, as well as its soundfinancial standing maintained through prudent risk management. Furthermore,
JFM, as a leading public-sector bond issuer, is committed to contributing to thesound development of capital markets.

3

Ensuring Responsible Corporate Governance as a Joint
Organization of Local Governments

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

JFM ANNUAL REPORT 2022

03

Japan Finance
Organization for
Municipalities
Message2022

Message fromthe President and CEO

SATO Fumitoshi

President and CEO
2022

04

JFM ANNUAL REPORT 2022

The JFM is a joint funding organization established under the law of Japan, which iswholly owned by all the Japanese local governments, with the objective to provide longterm and low-interest funds for local governments.
Fiscal 2021 was another year in which COVID-19 raged around the world. In the UnitedStates, the reduction of the quantitative easing monetary policy started in November lastyear. In addition, the invasion of Ukraine by Russia and the economic sanctions imposedin response, as well as the further rise in energy prices, have had a major impact on the
global economy. In Japan, the Japanese government has compiled “Economic measures
to overcome new coronavirus infections and to carve out a new era” and a related
supplementary budget and initial budget for fiscal 2022 have been compiled.
The JFM has decided to lend appropriately for the proper management of public facilities,
for which JFM funds are allocated more than twice in fiscal 2022 municipal bond plan asmuch as in fiscal 2021, as well as the remote place improvement projects, for which JFM
funds were allocated for the first time. These are based on strong requests from local
governments, and we believe that they meet the expectations of local governments for
JFM funds as a form of “mutual aid”.
Also, the JFM will strive to improve the funding condition and support local governments’funding demands timely and appropriately, in line with the trends of ESG investment suchas green bond issuances.
In our local government support operations, the JFM will continue to steadily implement“Project to strengthen administration and finance management of local governments” inwhich the JFM sends advisers to local governments based on their situations and requests.
Additionally, the JFM further will expand e-learning and enhances the analytical content of
the financial analysis chart “New Octagon” through the use of ICT technology.
The JFM, under the management philosophy and motto “Supporting local economies
through finance to create a future for regions”, will continue to make more effort to fulfill its
required role as a joint funding organization and contribute to the sound financial
management of local governments, which directly relates to the credibility of the JFM itself,
fully considering a wide range of opinions, issues and needs of local governments, while
the environment surrounding the JFM and local governments is changing significantly.
We appreciate the cooperation and support of all related persons.

JFM ANNUAL REPORT 2022

05

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

local governments with the capital contribution from 1,789*1
local governments*2■ Operates as a non-profit organization under the JFM Law withthe objective to provide long-term and low-interest-rateloans exclusively to Japanese local governments■ JFM has never experienced any default on its loans.

Japanese Local Governments

LGBP Volume by Funding Source (Initial Plan)
Publicly Offered Bonds
National Government(USD bn)

180

16.1

160

16.1

15.6

Other Private Sectors
JFM
JFM Ratio

15.3

15.3

15.5

16.0

(％)

17.2

18
16

140

14

120

12

100

10

80

8

60

6
4

40
20
0

16.1

14.8

14.8

14.5

15.0

14.9

17.8

14.3

FY 2015 2016 2017 2018 2019 2020 2021 2022

20

■ Japanese local governments include 47 prefectures and a

total of 1,741*1 cities and special wards of Tokyo, governmentdesignated cities, as well as towns and villages.
■
Revenue sources for the local governments are secured by
the national government.
• The national government allocates a part of national tax
revenue to the local governments, in order to adjust revenue
disparities among the local governments (Local Allocation
Tax system) .
• The national government also prepares the Local Government
Borrowing Programme (LGBP) each fiscal year, which
specifies the amount of local government borrowing as well
as funding sources.
• In the case of each local government funding, consent orapproval must, in principle, be obtained from the relevant
authorities.
■ The national government also establishes a legal framework
to monitor fiscal indices for each local government andimplement early correction measures if the local governmentswith the indices exceeding the early warning limits orreconstruction limits shall restore their financial soundness.
■ Thus, none of the local governments has defaulted.
■ BIS 0% risk weight for Japanese local governments*3

Annual Lending Volume(USD bn)

20
18
16
14
12
10
8
6
4
2
0

FY 2015 2016 2017 2018 2019 2020 2021 2022**Planned amount; subject to change depending on market
conditions and other factors.

Outstanding Loans by Business*1

Total
USD
192.4bn

Lending■ JFM funds have accounted for around 15%-18% of the LGBP

since fiscal 2015.

Outstanding Loans by Borrower *1
Prefectures USD 42.2 bn 21.9%■ JFM provides loans to almost all local governments.

■ Loans planned to be made in fiscal 2022 ending 31 March2023 are amounted to USD 13.6 bn.
■ Maximum term to maturity of JFM loans is 40 years.

Note: Figures in USD are converted at USD 1 = JPY 122.40 as of 31 March 2022,
unless otherwise noted.

06

JFM ANNUAL REPORT 2022

Sewerage USD 56.1 bn 29.2%
Temporary Financial Countermeasures
Funding USD 49.2 bn 25.6%
Loans Covering Decrese in Local Tax
Revenues USD 4.3 bn 2.2%
Water Supply USD 24.9 bn 12.9%
Three Special Projects
USD 3.3 bn 1.7%
Transportation USD 6.0 bn 3.2%
Special Municipal Mergers
USD 9.0 bn 4.7%
Hospitals USD 9.3 bn 4.8%
Disaster Management and
Mitigation USD 6.8 bn 3.5%
Public Projects USD 4.2 bn 2.2%
Industrial Water Supply
USD 1.3 bn 0.7%
Local Road Development
USD 3.9 bn 2.0%
Others USD 14.2 bn 7.3%

Government-designated Cities

Total
USD
192.4bn

USD 25.5 bn 13.3%

Cities, Special Wards of Tokyo,
Towns and Villages
USD 119.9 bn 62.3%
Local Government Corporations
and Associations
USD 4.8 bn 2.5%

Funding■ Leading issuer in the Japanese bond market with an averageannual funding volume of USD 16 bn over the past five fiscal
years.
■ Aiming to diversify its funding sources and expand its investor
base – continues to access the international market throughbenchmark transactions as well as private placements,
making use of its MTN Programme.
■ In the international market, only non-government guaranteedbonds will be issued.
■ In fiscal 2021, JFM issued a total of USD 2.9 bn worth ofinternational bonds through 3 benchmark transactions and
Uridashi Bonds.

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

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

Funding Plan
Type of
Funding Instruments

USD 14.1 bn

USD 15.3 bn

USD 5.4 bn

USD 8.0 bn

Domestic Private Placements

USD 4.3 bn

USD 4.4 bn

Benchmarksovereign.
■ BIS risk weight*3: 10% for JFM bonds (non-guaranteed)
denominated in JPY
Note: A rating is not a recommendation to buy, sell or hold securities and may besubject to suspension, reduction or withdrawal at any time by the assigning
rating agencies.
*1: As of 31 March 2022.
*2: Local governments comprise all of the prefectures, cities and special wards ofTokyo, government-designated cities, towns and villages, as well as some local
government associations.
*3: Value for investors in Japan. For overseas bonds, the value is determined byrespective authorities in each country (as of 31 March 2022).

USD 2.9 bn ( 2)
USD 68 mm ( 2)
- ( 2)

Private Placements
USD 2.0 bn-

Guaranteed Bonds (4)-USD 1.3 bn

Long-Term Bank Loans

USD 0.6 bn

USD 0.9 bn

Open Issuance(3)(1) Planned amount; subject to change depending on lending status,
market conditions and other factors.
(2) Includes USD, EUR and AUD denominated 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.
(4) Denominated in JPY only and issued In the domestic market forrefinancing our predecessor’s government-guaranteed bonds.
(5) Totals may not add up due to rounding.

Bond Issuance

20■The ratings of JFM are the same as those of the Japanese

USD 2.5 bn

Uridashi Bonds■ JFM maintained USD 18.0 bn of reserves for interest rate

■ A1 (Moody’s), A+ (S&P)

USD 2.9 bn ( 2)Overseas Offerings - GMTN

Solid Risk Management

Credit Ratings

FY2021(Achieved)

Domestic Public Offerings

Non-Guaranteed Bonds(USD bn)volatility for the purpose of dealing with interest rate risk
resulting from a duration gap between lending (7.85 years)
and funding (7.53 years).
■
The duration gap of 0.32 years*1 in the general accountqualifies JFM’s management target of the duration gap below
2 years.

FY2022(Plan) (1)

Bonds without government guarantee
Bonds with government guarantee

25

15
10
5
0

FY 2015 2016 2017 2018 2019 2020 2021 2022** Planned amount; subject to change depending on lending
status, market conditions and other factors.

Outstanding Non-JPY Public Bonds*1(non-guaranteed)
Issue Date

Currency

27-Jan-22
3-Sep-21
20-Apr-21
10-Feb-21
2-Feb-21
2-Sep-20
21-May-20
12-Feb-20
5-Sep-19
12-Mar-19
27-Sep-18
24-Apr-18
20-Apr-17
25-Oct-16
21-Apr-15
13-Feb-15

USD
EUR
USD
USD
EUR
USD
USD
EUR
USD
USD
USD
USD
USD
USD
USD
USD

Issue
Amount

750 mm
1,000 mm
1,250 mm
1,250 mm
500 mm
1,500 mm1,500 mm
500 mm
1,000 mm
1,000 mm
1,000 mm
1,000 mm
1,000 mm
1,000 mm
1,000 mm
1,000 mm

Coupon(%)

Tenor

1.500
0.100
1.125
1.375
0.010
0.625
1.000
0.050
1.750
3.000
3.375
3.250
2.625
2.125
2.000
2.375

3y
10y
5y
10y
7y
5y
5y
7y
5y
5y
5y
5y
5y
7y
7y
10y

JFM ANNUAL REPORT 202207

Outline of JFM Operations
Outstanding
Bonds
JPY 20.1 tn(USD 164.2 bn)

Outstanding
Long-term
Bank Loans
JPY 0.3 tn(USD 3.3 bn)

Proceeds from
Public Racing*

Japan Finance
Organization for
Municipalities(JFM)

Reserve forInterest Rate
Volatility, etc.
JPY 2.8 tn(USD 23.6 bn)

Lending(Long-term/
low-interest rates)
Outstanding
Loans
JPY 23.5 tn(USD 192.4 bn)

Reduction ofLending Rates

Local Governments

Financial Markets

Funding(Bonds andBank Loans)Fund forLending Rate
Reduction
JPY 0.9 tn(USD 7.5 bn)* A portion of the earnings from municipally operated racing(horse, bicycle, motorcycle and speedboat).

As of 31 March 2022

08

Public Institution Wholly Owned by
Japanese Local Governments

Joint Funding Organization for All Local
Governments

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

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 fundingis usually desirable given that it takes a long time torecoup such capital expenditures, and also the costburden should be shared across generations. However,
local governments generally raise funds in capital

JFM ANNUAL REPORT 2022

cope with the interest rate risk associated with bondrefinancing (a potential negative margin caused by theinterest payable exceeding the interest receivable), JFM
maintains reserves for interest rate volatility.

markets for terms of 10 years or less.
In response to this situation, JFM issues bonds incapital markets with a wide variety of maturities ranging
from medium-term to super long-term to provide stable
and low-interest funds to local governments.
Under the JFM Law, local governments have an
obligation to bear the cost necessary to satisfy all JFM
obligations in the event JFM is to be dissolved and its
obligations remain unpaid.

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

Solid Financial Foundation
JFM primarily issues 10-year bonds to raise funds andextends long-term loans to local governments, which
creates a duration gap between lending and funding. To

Capital Contribution by
Local Government Group

Capital
As of 31 March 2022, JFM's capital was USD
135.6million contributed by 1,789 Japanese
local governments, i.e., all of the prefectures,cities, special wards of Tokyo, governmentdesignated cities, towns and villages, as well assome local government associations.
The amount of capital contribution from each
local government is decided based on 1)
outstanding JFM loans to each local government,
and 2) the amount of revenue of each local
government (mainly comprised of local taxes,
local allocation taxes and temporary financial
countermeasures funding).

Towns, villages andlocal government associations
USD 8.5 mm

6.2%

Prefectures
USD 52.0 mm

38.4%
USD
135.6 mm

Governmentdesignated cities(2)USD 23.5 mm

17.3%(As of 31 March 2022)

Cities(1) and special wards of Tokyo
USD 51.6 mm

38.1%

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.

JFM ANNUAL REPORT 2022

09

Review and Plan

NATSUWA YORU.
“For summer, it is the night that is most beautiful.
It is better when the moon is out.
But a moonless night sky is also pretty with fireflies
dancing everywhere in the dark,or even the faint light from one or two fireflies in the dark is pretty.
Rain at night is also nice in the summer.”
Fireflies dance in Nishiki River, Yamaguchi Prefecture
10

JFM ANNUAL REPORT 2022

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

12
14
16

Review and Plan

Review of Operations for Fiscal 2021

Management Plan for Fiscal 2022
18
19
19

Operations

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

Management
Structure
JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

11

Review and Plan
Review of Operations for Fiscal 2021

1. Lending Operations
In fiscal 2021, JFM provided loans totaling USD 18.4
billion.
General account-related loans totaled USD 4.7 billion(25%) of the total lending volume, mainly represented
by disaster management and mitigation and special
municipal mergers. Loans for temporary financial
countermeasures funding*1 were USD 4.4 billion (24%),loans covering decrease in local tax revenues*2 were USD
3.7 billion (20%) and loans for municipal enterprise-relatedloans were USD 5.5 billion (30%), of which sewerage
and water supply businesses were the main contributors.

Notes:
1. 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).
2. Represents local government funding to cover shortfalls in local tax revenues pursuant to the provisionsof the Local Government Finance Law (Act No. 109 of1948, as amended).

Lending Operations by Business Type in Fiscal 2021
Business

Loan Amount (USD Millions)

Number ofLoans Made

% of total

General Account-related Loans
Public Projects, etc.

485

271

1.5%

Public Housing

120

94

0.5%

Educational Facilities Development

177

76

0.4%

Social Welfare Facilities Development

178

65

0.4%

General Waste Dispoal

50

30

0.2%

General Service Facilities Development

8

5

0.0%

General Projects

73

41

0.2%

Regional Revitalization

124

58

0.3%

Disaster Prevention

387

84

0.5%

Local Road Development

320

182

1.0%

Special Municipal Mergers

342

747

4.1%

1,467

1,152

6.3%

478

648

3.5%

1,254

771

4.2%

903

462

2.5%

6,366

4,685

25.5%

1,340

1,399

7.6%

Disaster Management and Mitigation
Proper Management of Public Facilities and Infrastructures
National Disaster Prevention
Anti-depopulation Measure Project
Subtotal
Municipal Enterprise–related Loans
Water Supply
Industrial Water Supply

52

58

0.3%

Transportation

28

297

1.6%

Electricity and Gas Supply

37

64

0.3%

Port Facilities

25

18

0.1%

Hospitals and Elderly Care Services

455

739

4.0%

Markets and Slaughterhouses

45

126

0.7%

2,738

2,805

15.3%

19

14

0.1%

4,739

5,520

30.0%

-

-

0.0%

Temporary Financial Countermeasures Funding

714

4,443

24.2%

Loans Covering Decrease in Local Tax Revenues

486

3,746

20.4%

12,305

18,393100.0%

Sewerage
Tourism and Others
Subtotal
Refinancing Loans for Facilities Affected by Earthquake

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

12

JFM ANNUAL REPORT 2022

Review and Plan

Disaster Management
and Mitigation

Others2% (USD 0.3 bn)

6% (USD 1.2 bn)

2% (USD 0.3 bn)
Hospitals and Elderly
Care Services

Special Municipal
Mergers

FY2021 Loans
Extended byBusiness Type

4% (USD 0.7 bn)
Water Supply

4% (USD 0.8 bn)

Public Projects, etc.

1% (USD 0.3 bn)

8% (USD 1.4 bn)
Sewerage

Others30%(USD 5.5 bn)

14% (USD 2.5 bn)
Loans Covering Decreasein Local Tax Revenues

20%(USD 3.8 bn)

Temporary Financial
Countermeasures Funding

24%(USD 4.4 bn)

25%(USD 4.7 bn)

Prefectures

30% (USD 5.6 bn)

2% (USD 0.3 bn)

Towns and Villages

FY2021 Loans
Extended by
Borrower Type

9% (USD 1.7 bn)

Government-designated
Cities5% (USD 0.9 bn)

54% (USD 9.9 bn)

Appendix / JFM Data

Total

USD

Financial Section

Cities and Special
Wards of Tokyo

JFM’s Role in Local
Government Finance

Local Government
Corporations andAssociations

General Account-related
LoansManagement
Structure

15% (USD 2.8 bn)
Municipal Enterprise –related Loans

Operations

Transportation

18.4 bn

Note: Totals may not add up due to rounding.

JFM ANNUAL REPORT 2022

13

Review and Plan
Review of Operations for Fiscal 2021

2. Funding Operations
1. Overview*1
In fiscal 2021, JFM raised a total of USD 17.5 billion
including USD 15.3 billion in JFM bonds (non-government
guaranteed), and USD 1.3 billion in government-guaranteed bonds for the repayment of existing bonds issued
by Japan Finance Corporation for Municipal Enterprises(the “Predecessor”). In addition, JFM raised USD 0.9
billion through long-term bank loans.
With regard to JFM bonds, a total of USD 11.0 billion
was raised by the regular issuance of 5-year, 10-year,
20-year and 30-year domestic bonds, as well as opportunistic issuances through JFM’s Flexible Issuance
Programme (“FLIP”) and the MTN Programme.
As for domestic public offerings, a total of USD 8.0
billion was issued in the fiscal year. In order to cope withhighly volatile market condition through the period, JFM
increased 5-year, 10-year, 20-year and 30-year of theregular issuance and FLIP from the initial plan by utilizing
the budget of Open Issuance scheme.
In overseas offerings, JFM issued USD denominatedbenchmark bonds in 5-year tenor (USD 1.25 billion) in

May and EUR denominated benchmark bonds in 10year tenor (EUR 1.0 billion) in September. In January2022, JFM also issued its first USD denominated green
bond in 3-year tenor (USD 0.75 billion). In addition tothese successful public offerings, JFM issued a total of
USD 68 million equivalent Uridashi Bonds. Throughthese activities, the total volume of international bonds
issued for fiscal 2021 amounted to USD 2.9 billion.
Private placements with pension funds for local
government officials were totaled USD 4.4 billion.
As a result, JFM’s outstanding bonds were USD 164.2
billion, including the Predecessor’s bonds to which JFM
succeeded. Outstanding long-term bank loans totaled
USD 3.3 billion as of 31 March 2022.
Notes: 1. Issued amounts are calculated based on issue prices.
2. Totals may not add up due to rounding.
Flexible Issuance Programme (“FLIP”)
FLIP is JFM’s unique framework for domestic bond issuance which is similar
to the MTN Programme in some ways. JFM issues domestic bonds under
the FLIP in a minimum issue amount of JPY 3 billion (USD 24.5 million), withflexibility in terms of issue amount and maturity to meet the needs of investors.

Funding in Fiscal 2021

1. JFM Bonds (Non-government Guaranteed)(1) Domestic and Overseas Offerings

14

Type of Bonds

Plan (Initial)

Achieved

Domestic Public Offerings

USD 6.3 bn

USD 8.0 bn

10-year

USD 2.3 bn

USD 3.2 bn

20-year

USD 0.9 bn

USD 1.0 bn

5-year

USD 0.2 bn

USD 0.3 bn

30-year

USD 0.2 bn

USD 0.2 bn

Opportunistic Issuance*1

USD 2.8 bn

USD 3.3 bn

Overseas Offerings - MTN

USD 2.9 bn

USD 2.9 bn

Open Issuance

USD 2.2 bn

-

Total

USD 11.4 bn

USD 11.0 bn

JFM ANNUAL REPORT 2022

(2) P rivate Placements with Pension Funds for Local
Government Officials
Type of Bonds

Plan

Achieved

10-year

USD 2.1 bn

USD 2.1 bn

20-year

USD 2.2 bn

USD 2.2 bn

Total

USD 4.3 bn

USD 4.4 bn

3. Long-term Bank Loans

Type of Bonds

Plan

Achieved

4-year

USD 2.0 bn

USD 1.3 bn

Total

USD 2.0 bn

USD 1.3 bn

Long-term Bank Loans

Plan

Achieved

USD 0.6 bn

USD 0.9 bn

Review and Plan

2. Government-guaranteed Domestic Bonds

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

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

(%)

16.0

0.40

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

13.0

13.0

0.35

13.0
12.0

12.0

0.30
11.0

0.274
10.0

10.0

10.0

10.0
9.0

8.0

8.0

0.25

0.224

9.0

8.0

8.0
0.185

0.155

0.155

0.150

0.135

0.160
0.145

0.145

0.125

4.0

0.160

0.150

0.145

7.0
6.0

6.0

6.0

6.0

6.0

0.155
6.0
0.135

0.130

0.125

0.090

0.100

6.0

6.0

6.0

6.0

0.130

0.15
0.10

0.115

0.05

2.0
0.0

0.20

Apr

Mar

Jun

Jul

Aug Sep

Oct

Nov DecJan

Feb Mar

Mar

Jun

Jul

Aug Sep

Oct

Nov DecJan

Feb Mar

0.00

F Y 2021

Appendix / JFM DataF Y 2020

Apr

Financial Section

6.0

0.229

0.204

JFM’s Role in Local
Government Finance

14.0

Management
Structure

In the domestic market, JFM bonds had been priced
under the low-interest-rate environment on the back of
the introduction of BOJ’s QQE with yield curve control.
Due to the strong investors’ demands in the relatively
stable environment of Japanese government’s bond(“JGB”) yield, the premium of JFM 10-year domestic
bonds over respective JGB yield curve tightened by 1.0
bp in May and June, after that, JFM continued issuing
6.0 bp spreads. During the fiscal 2021, the yield of JFM

Operations

10-year bonds ranged from 0.090% to 0.274%.
There were strong demands from the investor for
5-year, 20-year and 30-year JFM bonds. 5 year bonds
attracted investors as substitutes for JGB, while 20-yearand 30-year bonds had been supported by investors
looking for higher yields.
JFM’s international bonds have been issued based oninvestor demands and market conditions by referring tocredit spreads observed in the international primary andsecondary markets at the time of pricing.

Issue Spreads

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

JFM ANNUAL REPORT 2022

15

Review and Plan
Review of Operations for Fiscal 2021

3. Financial Review
1. Income Statement

2. Balance Sheet

In fiscal 2021, JFM’s income was USD 1.9 billion, adecrease of USD 0.2 billion from the previous year. Thisdecrease was mainly due to a decrease in interest
income caused by a decrease in the average interest
rate on loans as a result of redemptions of loans made in
the past with relatively high interest rates. Expenses also
decreased by USD 0.1 billion from the previous fiscal
year resulting in USD 1.0 billion. As a result, ordinary
income has decreased by USD 0.1 billion from previous
year, resulting in USD 0.9 billion.
Pursuant to the relevant laws, a portion of the revenue
generated by the refinancing of bonds and borrowed
money of JFM* is to be directed into the reserves forinterest rate volatility. As a result of such provisions aswell as other factors, net income remains similar level tothe previous year at USD 0.3 billion.

As of 31 March 2022, JFM’s total assets amounted to
USD 202.9 billion, a decrease of USD 0.2 billion from theprevious year. This mainly resulted from a decrease in
cash and bank deposits by USD 6.2 billion.
Total liabilities decreased by USD 0.4 billion resulting
in USD 199.9 billion. This decrease primarily reflected adecrease of USD 2.5 billion in bonds.
Total net assets were USD 3.0 billion, up USD 0.2
billion. This mainly reflected net income of USD 0.3
billion in the general account being recorded as thegeneral account surplus reserve.
Financial highlights since fiscal 2019 are on the next
page.

Note: The difference between fiscal 2020 and 2021 is calculated using theexchange rate as of 31 March 2022.
*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.

16

JFM ANNUAL REPORT 2022

1. Income Statement(USD Millions)

FY2019

2020

2021

YoY

Income

2,367

2,124

1,927

-197

Expenses

1,313

1,157

1,026

-132

Ordinary Income

1,054

966

901

-65

211

224

264

40

Net Income

Operations(USD mm)
3,000

Review and Plan

Financial Highlights

2,000

1,000

0

FY20192020

2021

2. Balance Sheet(USD Millions)

End of FY2019

End of FY2020

End of FY2021

Total Assets

198,911203,085

202,899

-186

Loans

191,173

189,088

192,409

3,321

Others

7,738

13,997

10,491-3,506

Total Liabilities

196,265

200,302

199,892

-410

Bonds

163,509

166,755

164,240-2,514

1,659

2,402

3,264

862

474

274

1,205

931

Fund for lending rate reduction

7,519

7,519

7,519

-

Reserves under special laws

23,062

23,314

23,625311

Reserve for interest rate volatility

17,974

17,974

17,974-

Management account reserve for interest rate
volatility

4,948

5,236

5,577

341

140

104

74

-30

43

39

39

-0.2

2,646

2,783

3,007

225

Cash collateral received for financial instruments

OthersTotal Net assets(USD mm)210,000

Appendix / JFM Data

200,000
190,000
0

End of FY2019

2020

Financial Section

Reserve for interest rate reduction

YoY

JFM’s Role in Local
Government Finance

Borrowed money

Management
Structure

Note: Totals may not add up due to rounding.

2021

Note: Totals may not add up due to rounding.

JFM ANNUAL REPORT 2022

17

Review and Plan
Management Plan for Fiscal 2022

1. Lending Operations
Borrowing Programme (the “LGBP”).
Based on the LGBP, JFM plans to extend loans in theamount of USD 13.6 billion in fiscal 2022, USD 6.9 billion
or 33.5% decrease from fiscal 2021.

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

Lending Plan
Planned AmountFY2022

FY2021

YoY

USD 13.6 bn

USD 20.5 bn-33.5%

Lending Plan by business type for fiscal 2022
Business(USD Millions)

FY2022
FY2021
Funding Plan(A) Funding Plan(B)Difference(A)-(B)=(C)Change (%)(C)/(B)×100

The amount of JFM
Funds in the LGBPGeneral Account-related Loans
Public Projects, etc.

261.4

259.0

2.5

0.9

294.9

Public Housing

91.5

101.3

-9.8

-9.7

102.1

Educational Facilities Development

53.1

66.2

-13.1

-19.8

119.3

Social Welfare Facilities Development

65.4

73.5

-8.2

-11.1

74.3

General Waste Dispoal

46.6

53.9

-7.4

-13.6

89.9

General Projects

48.2

49.0

-0.8

-1.7

67.8

Regional Revitalization

69.4

87.4

-18.0

-20.6

70.3

Disaster Prevention

94.0

109.5

-15.5

-14.2

112.7
247.5

Local Road Development

183.8

210.0

-26.1

-12.5

Special Municipal Mergers

688.7

762.3

-73.5

-9.6

656.0

1,049.8

1,187.1-137.3-11.6

1,370.9

Disaster Management and Mitigation
Proper Management of Public Facilities and Infrastructures

870.1

678.9

191.2

28.2

1,705.9

National Disaster Prevention

785.1

710.8

74.3

10.5

822.7

Remote Place Improvement Projects

13.1

-

13.1

All increased

13.1

Anti-depopulation Measure Project

535.9

485.3

50.7

10.4

596.4

4,856.2

4,834.2

22.1

0.5

6,344.0
1,721.4

Subtotal
Municipal Enterprise–related Loans
Water Supply

1,650.3

1,664.2

-13.9

-0.8

Industrial Water Supply

64.5

60.5

4.1

6.8

62.9

Transportation

264.7

236.1

28.6

12.1

321.1

Electricity and Gas Supply

54.7

40.0

14.7

36.7

60.5

Port Facilities

19.6

15.5

4.1

26.3

23.7

Hospitals and Elderly Care Services

904.4

829.2

75.2

9.1

1,072.7

Markets and Slaughterhouses
Sewerage
Tourism and Others

72.7

-9.0

-12.4

26.1

2,935.5-318.6-10.9

2,712.4

16.3

3.3

13.1

400.0

3.3

5,655.2

5,857.0-201.8-3.4

6,004.1

3,132.4

4,913.4-1,781.0-36.2

1,919.9-

4,902.0-4,902.0-100.0-13,643.8

20,506.5-6,862.7-33.5

14,268.0

Subtotal
Temporary Financial Countermeasures Funding
Loans Covering Decrease in Local Tax Revenues
Total

63.7
2,616.8

Notes: 1. Business names are classified based on the LGBP for fiscal 2022.
2. Totals may not add up due to rounding.

JFM Funds in Local Government Borrowing Programme
FY2022

FY2021

YoY

USD 14.3 bn

USD 17.8 bn-20.0%

General Account-related Loans

USD 6.3 bn

USD 5.4 bn

18.5%

Municipal Enterprise-related Loans

USD 6.0 bn

USD 6.1 bn-2.3%

Temporary Financial Countermeasures Funding

USD 1.9 bn

USD 6.3 bn-69.7%JFM Funds

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

18

JFM ANNUAL REPORT 2022

In order to raise funds for lending operations, JFM
primarily issues non-government guaranteed bonds
through domestic public offerings and overseas offerings.
For fiscal 2022, JFM plans to issue USD 9.8 billion of
JFM bonds through these methods.

Moreover, private placements with pension funds for
local government officials are projected to amount to
USD 4.3 billion in fiscal 2022. In addition to issuing JFM
bonds, JFM plans to raise USD 0.6 billion through longterm bank loans.

Review and Plan

2. Funding Operations

Funding Plan for Fiscal 2022
(1) Domestic and Overseas Offerings
Type of Bonds

FY2021 (Achieved)

USD 5.4 bn

USD 8.0 bn

10-year

USD 2.2 bn

USD 3.2 bn

20-year

USD 0.8 bn

USD 1.0 bn

5-year

USD 0.2 bn

USD 0.3 bn

30-year

USD 0.2 bn

USD 0.2 bn

Opportunistic Issuance

Domestic Public Offerings

USD 2.0 bn

USD 3.3 bn

Overseas Offerings - MTN

USD 2.5 bn

USD 2.9 bn

Open Issuance

USD 2.0 bn-

USD 9.8 bn

USD 11.0 bn

Total

Notes: 1. Subject to change depending on lending status, market conditions and other factors.
2. For Open Issuance, details of issuance such as tenor, issue size and issue market will be determined as necessary based on the lending status, market
conditions and other factors.
3. Totals may not add up due to rounding.

Type of Bonds

FY2021 (Achieved)

10-year

USD 2.0 bn

USD 2.1 bn

20-year

USD 2.3 bn

USD 2.2 bn

USD 4.3 bn

USD 4.4 bn

FY2022 (Plan)

FY2021 (Achieved)-

USD 1.3 bn-

USD 1.3 bn

FY2022 (Plan)

FY2021 (Achieved)

USD 0.6 bn

USD 0.9 bn

Total

2. Government-guaranteed Domestic Bonds
Type of Bonds
4-yearTotal

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

In accordance with the provisions of Article 14 of the
Supplementary Provisions of the Law, an amount of up
to USD 1.9 billion is being attributed to the government
over a period of 5 years from fiscal 2020 through 2024
for the purpose of securing the increase in the concession
amount charged for Forest Environment Concession

Tax, and USD 0.4 billion shall be transferred in fiscal
2022. In addition, an amount of up to USD 12.3 million
from fiscal 2018 through fiscal 2023 shall be attributed
to the government for exemptions of early redemption
charges in relation to concessions of water supply andsewerage businesses.

JFM ANNUAL REPORT 2022

Appendix / JFM Data

3. Scheduled Payment to the National Treasury

Financial Section

FY2022 (Plan)

JFM’s Role in Local
Government Finance(2) Private Placements with Pension Funds for Local Government Officials

Management
Structure

FY2022 (Plan)

Operations

1. JFM Bonds (Non-government Guaranteed)

19

Operations

AKIWA YUGURE.
“For autumn, it is the evening that is most beautiful.
The sky shines red, and just as the sun is about to sink
Into the mountains, you see three or four crows flying home,sometimes it’s only one or two.
But somehow that sight makes me sigh and finds a way into my heart.
Wild geese flying in lines far away in the distance are also a beautiful sight.
Or the sound of wind and insects singing their songs after the sun
has completely gone down.”
Goose take off in Izunuma, Miyagi Prefecture
20

JFM ANNUAL REPORT 2022

Review and Plan
Operations
Management
Structure

22
24
26
26
29

Funding Operations
32
33
34
35

Local Government Support Operations 36
JFM and Sustainable Development Goals 38
JFM ANNUAL REPORT 2022

Appendix / JFM Data

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

Financial Section

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

JFM’s Role in Local
Government Finance

Lending Operations

21

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

1. Outline
As public funds included in the LGBP, JFM loans areoffered to local governments which have the consent

or approval of the Minister for Internal Affairs andCommunications or the respective prefectural governors.

1. Eligible Borrowers

2. Types of Loans

JFM provides loans exclusively to local governments.

JFM classifies general loans into the following two
categories depending on the term.

• Long-Term Loans
Loans provided to local governments that have the consent or approval, and mature in or after the second
fiscal year.
• Short-Term Loans
Loans to be repaid with revenues in the same fiscal year.

22

JFM ANNUAL REPORT 2022

JFM lends mainly to the following local government businesses with respective loan maturities.
Loans for FY2022
Business Type

Adjustbale Lending Rate*1

Within(Years)
5

Within(Years)
25

Within(Years)
5

25

5

25

5

Educational Facilities Development

25

3

25

3

Social Welfare Facilities Development

25

3

25

3

General Waste Dispoal

20

3

20

3

General Projects*2

30

5

30

5

Regional Revitalization

30

5

30

5

Disaster Prevention

30

5

30

5

Local Road Development

20

5

20

5

Special Municipal Mergers

30

5

30

5

Disaster Management and Mitigation

30

5

30

5

Public Facilities Optimization

30

5

30

5

Emergency Natuaral Disaster Prevention

30

5

30

5

Remote Place Improvement Projects*2

30

5

40

5

Anti-depopulation Measure Project*2

30

5

40

5

Water Supply

30

5

40

5

Industrial Water Supply

30

5

40

5

Transportation*2

30

5

40

5

Electricity Supply*2

30

5

30

5

Gas Supply

25

5

25

5

Port Facilities*2

30

5

40

5

Hospitals*2

30

5

30

5

Markets

30

5

40

5

Slaughterhouses

30

5

30

5

Sewerage

30

5

40

5

Prefectures and GovernmentDesignated Cities

-

-

30

3

Cities, Towns and Villages

-

-

20

3

Public Housing
Educational andSocial Welfare
Facilities
Projects

Unsubsidized
Projects

Municipal
Enterprise-related
Loans

Temporary Financial
Countermeasures
Funding

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

JFM ANNUAL REPORT 2022

Appendix / JFM Data

Within(Years)
25

Financial Section

Grace Period
for Principal
Repayment

JFM’s Role in Local
Government FinanceMaturity

Management
Structure

Grace Period
for Principal
Repayment

Operations

Maturity

Public Projects, etc.*2

General Account-relared Loans

Fixed Lending Rate

Review and Plan

3. Lending Scopes and Maturities of Loans

23

Operations
Lending Operations

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

1. Loan Interest Rates
JFM offers two types of loan interest rates: thestandard 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 thediscounted 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

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

for principal repayment and repayment methods. The
special lending rate is set at 0.35% per annum below thestandard rate.
The trends of JFM loan interest rates since April 2020are shown below. The special lending rate has been at
the same level as the national government’s lending rates
that are applicable to loans for specific public projects(the Fiscal Loan Fund). This is due to the floor rates ofthe special lending rates being set equal to respective
lending rates of the Fiscal Loan Fund which haveidentical terms on redemptions to those of JFM loans.

Trends of Lending Rates
Standard Lending Rate
Special Lending Rate = Fiscal Loan Fund Interest Rate

0.80%
0.70%
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%

Apr

Jun

Aug
2020

Oct

Dec

Feb

Apr

Jun

2021

Aug

Oct

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

24

JFM ANNUAL REPORT 2022

Dec

Feb Mar2022

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

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

0.15%

Reduction using investment gains

0.20%

0.20%

Reduction using JFM’s own funds

0.15%Standard
Lending Rate(funding costs)

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

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

Management
Structure

SpecialLending Rate

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

Operations

Reduction
0.35%

Review and Plan

2. Lending Rate Reduction

JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

25

Operations
Lending Operations

3. Credit Check System
JFM conducts the following credit check process for
all loans on the assumption that the details and legalityof each project as well as assurance of loan repayment
have been confirmed during the consultation andchecking process to obtain the consent or approval forloans.
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 check process may include aninterview of the staff of prefectures, cities, towns, andvillages.
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 assemblyand 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 andoperational status of the borrower.

2 Verification at the time

1 Check of local

3 Subsequent review

of lending
Check of the loan
application documents

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

Onsite credit review

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

4. Trends in Lending Operations
1. Overview
JFM’s annual lending volume had dropped since fiscal
2015 due mainly to decrease in the budget of disastermanagement and mitigation and temporary financial

countermeasures funding but the lending volume
amounted to USD 18.4 billion in fiscal 2021 due to copewith the impact of COVID-19. At the fiscal year-end,
outstanding loans were USD 192.4 billion.

Annual Lending Volume

Outstanding Loans(USD bn)(USD bn)

25

200
193.3 193.8

20

15

18.4
15.2

14.1

14.2

13.5

13.6

12.7

194.2

192.0 191.2

190

192.4
189.1

180

10
170

5

0

26

FY 2015

2016

JFM ANNUAL REPORT 2022

2017

2018

2019

2020

2021

0

FY 2015

2016

2017

2018

2019

2020

2021

In fiscal 2021, temporary financial countermeasuresfunding was USD 4.4 billion, accounting for the largest

share of lending, at 24% of the total. Ranked next
were USD 3.7 billion in the loans covering decrease inlocal tax revenues, representing 20% of the total, and
USD 2.8 billion in the sewerage, for 15% of the total.

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

Sewerage

14.1

2.5

2017

14.2

2.6

2018

13.5

2019

13.6

Water Supply
1.3

Hospitals
1.0

4.0

4.8

Transportation
1.2

OthersGeneral Account-related Loans

0.3

1.2

0.4

Temporary Financial Countermeasures Funding
4.0

4.6

0.3

0.2
2.8

1.2

0.2

1.1

3.9
0.2

3.3

0.2

0.8

1.5

4.2
0.2
3.8

3.8

0.2

2020 12.7

2.7

1.5

0.9

2.8

1.4

0.7

0.2
4.4

0.3

2021 18.4

4.7

Operations

2016

Review and Plan

2. Annual Lending Volume by Businessand Borrower

2.2

0.6

Loans Covering Decrese in Local Tax Revenues
4.4

0.3

3.7

Note: Totals may not add up due to rounding.

Management
Structure

FY2021 Loans Extended by Borrower
Local Government Corporations
and Associations

Total

18.4 bnTowns and villages

9% (USD 1.7 bn)

Cities andSpecial Wards of Tokyo

54% (USD 9.9 bn)

Prefectures

30% (USD 5.6 bn)

Government-designated
Cities5% (USD 0.9 bn)

JFM’s Role in Local
Government Finance

USD

2% (USD 0.3 bn)

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

27

Operations
Lending Operations
3. Outstanding Loans by Business andBorrower
At the end of fiscal 2021, the outstanding loans were
USD 192.4 billion, of which the sewerage businessaccounted for the largest share at 29.2%, followed bytemporary financial countermeasures funding at 25.6%
and water supply at 12.9%.

There was a total of 2,175 local governments, local
government associations and corporations withoutstanding JFM loans, including all prefectures. Cities,
special wards of Tokyo, towns and villages accounted
for the largest portion at 62.3% of the total, followed by
prefectures at 21.9% and government-designatedcities at 13.3%. Local government associations andcorporations represented the remaining 2.5%.

6.3

29.2%

Others%(USD 12.0 bn)

Local Road
Development(USD 3.9 bn)

Sewerage(USD 56.1 bn)

2.0%

Public Projects(USD 4.2 bn)

Water Supply(USD 24.9 bn)

2.2%

Outstanding
Loans
by Business

Disaster Management
and Mitigation%(USD 6.8 bn)

3.5

4.8%

Hospitals(USD 9.3 bn)(as of 31 March
2022)

Special Municipal
Mergers%(USD 9.0 bn)

12.9%

Transportation(USD 6.0 bn)

3.2%

Industrial Water
Supply%(USD 1.3 bn)

0.7

4.7

Three Special Projects*1(USD 3.3 bn)

1.7%

1.0

Others%(USD 2.1 bn)

General Accountrelated Loans

Toll Road
Public Loans

Temporary Financial
Countermeasures Funding

Loans Covering Decreasein Local Tax Revenues

Municipal Enterprisse
related Loans(USD 39.2 bn)(USD 0.1 bn)(USD 49.2 bn)(USD 4.3 bn)(USD 99.6 bn)

20.4%

0.0 %

25.6%

2.2%

51.8%

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

Local Government Corporations
and Associations%(USD 4.8 bn)

2.5

21.9%

Outstanding
Loans by
Borrower

Cities, Special Wardsof Tokyo, Towns
and Villages%(USD 119.9 bn)(as of 31 March
2022)

62.3

Note: Totals may not add up due to rounding.

28

JFM ANNUAL REPORT 2022

Government-designated
Cities%(USD 25.5 bn)

192.4 bn
Total

USD

Prefectures(USD 42.2 bn)

13.3

Water Supply BusinessTransportation BusinessAt the end of fiscal 2020, the water supply coverage
was 97.3% of the population. The water supply business(including small-scale water supply) operated by local
governments totaled 1,794 projects and provided about
13.5 billion cubic meters of water annually for approximately 123.29 million people.
In fiscal 2021, loans extended to the water supply business amounted to USD 1.4 billion.

At the end of fiscal 2020, the transportation projects
managed by local governments totaled 85 projects andpublic transportation is used by approximately 2.5 billion
people annually (6.77 million people on an average daily
basis).
In fiscal 2021, loans extended to the transportation
business amounted to USD 0.3 billion.

Kaneda Raw Water Reservoir (Kisarazu City, Chiba Prefecture)

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

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

Operations

JFM provides loans to local government businesses
specified in the LGBP that the national government

Review and Plan

5. Lending Operations by Business

2.0

2,000

Loan Amount
Number of
Loans

1,500

(USD bn)(Number of loans)

100

0.4

0.3

80

Number of Loans
Loan Amount

1,000

1.0

60

0.2
40

0.5

FY2017 18

19

20

21

0.1

0

0

20

FY2017 18

19

20

21

0

JFM ANNUAL REPORT 2022

Appendix / JFM Data

0500

Financial Section

1.5(Number of Loans)

JFM’s Role in Local
Government Finance(USD bn)29

Operations
Lending Operations
Hospitals BusinessSewerage BusinessAt the end of fiscal 2020, hospital projects managed
by local governments totaled 683 with 856 hospitals,
which included 816 general hospitals and 40 mental
hospitals.
In fiscal 2021, loans extended to the hospitals business(including those run by local independent administrative
institutions) totaled USD 0.7 billion.

At the end of fiscal 2020, the sewerage systemcovered 92.1% of the nation’s total population. There
were 3,606 projects involved, with a total annual
sewerage processing capacity (combined storm waterand sewerage treatment, excluding river basin sewerage)of around 15.3 billion cubic meters serving areas with apopulation of nearly 105.26 million people.
In fiscal 2021, loans extended to the seweragebusiness totaled USD 2.8 billion.

Atsugi City Hospital (Atsugi City, Kanagawa Prefecture)

Sewage Purification Center (Shiojiri City, Nagano Prefecture)(USD bn)(Number of loans)

800

2.0

Loan
Amount(USD bn)(Number of loans)

3,000

4.0

Number of
Loans

Number of
Loans

1.5

600

Loan
Amount

3.0

2,000
1.0

400

2.0

0.5

200

1.0

0

0

1,000

0

30

FY2017 18

JFM ANNUAL REPORT 2022

19

20

21

FY2017 18

19

20

21

0

Disaster management and mitigation represents
projects to support and build strong disaster-resistantcities and towns by extending loans to facilities that cangather information promptly in case of emergent situations
and other projects that can increase disaster prevention
capability.
In fiscal 2021, loans extended for Disaster Management
and Mitigation amounted to USD 1.2 billion.

Temporary Financial Countermeasures
Funding

Operations

Temporary financial countermeasures funding represents
the funding for local governments in order to cover
general resource shortfalls pursuant to the provisionsof the Local Government Finance Law.
In order to secure the payments of the principal andinterest of funds borrowed by local governments under
temporary financial countermeasures funding, thenational government includes the entire amount of suchpayments in the total amount of local allocation tax
grants, which are to be allocated to local governments
in subsequent years.
In fiscal 2021, loans extended for temporary financial
countermeasures funding amounted to USD 4.4 billion.

Review and Plan

Disaster Management and Mitigation

Management
Structure

1.2

0.9

(Number of loans)

Number of Loans
Loan
Amount(USD bn)

2,400

8.0

1,800

6.0

(Number of loans)

800

Number of
Loans

600
Loan Amount

1,200

4.0

400

0.3

600

2.0

200

0

0

0

FY2017 18

19

20

21

FY2017 18

19

20

21

0

Financial Section

0.6

JFM’s Role in Local
Government Finance(USD bn)

Appendix / JFM Data
JFM ANNUAL REPORT 2022

31

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

1. Issue TypeJFM primarily issues non-government guaranteedbonds (i.e., JFM bonds) through public offerings in order
to raise funds for its lending operations. Private
placements with pension funds for local government
officials are also taken as a means of fund-raising.
JFM issues government-guaranteed bonds only for

JFM Bonds

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

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

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

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

International
Bonds

Bonds issued in international markets through the MTN Programme

Government-Guaranteed Bonds

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

Long-term Bank Loans

32

JFM ANNUAL REPORT 2022

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

1. Diversification of Funding Methods

JFM proactively discloses information on its operations,financial conditions and risk management status in orderto support investment decisions by investors. In thiscontext, JFM announces its annual funding plan prior to
the start of the new fiscal year and its second half-year
funding plan in August.
In addition, JFM performs investor relations activities,
including presentation meetings and/or one-on-one
meetings with investors in both domestic and international
markets. JFM thereby helps investors correctly understandJFM’s management and bonds as well as strengthensmarket confidence toward JFM.
Since fiscal 2019, JFM has issued green bonds
financing sewerage projects managed by local
governments.

3. Contribution to the Sound Development of Capital Markets

JFM’s Role in Local
Government Finance

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

Management
Structure

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

2. 
Proactive Disclosure and Investor
RelationsOperations

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

Review and Plan

2. Basic Funding Policy

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

33

Operations
Funding Operations

3. 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.
• JFM has a solid financial foundation, backed by its reserve for interest rate volatility and the Fund forLending Rate Reduction prescribed in the JFM Law.
• JFM is a joint funding organization established with a capital contribution from Japanese local governments
encompassing all prefectures, cities, special wards of Tokyo, government-designated cities, towns
and villages, as well as some local government associations.
• Under the JFM Law, local governments have an obligation to bear the costs necessary to satisfy all JFM
obligations in the event JFM is to be dissolved and its obligations remain unpaid.

JFM has received the highest credit rating among theJapanese public-sector bond issuers from Standard andPoor’s (S&P), Moody’s Investors Service (Moody’s) and
Rating and Investment Information, Inc. (R&I). The BIS
risk weighting is 10% for JFM bonds denominated in yen.
In addition to JGBs and local government bonds,

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

(As of 31 March 2022)

S&P: A+
Moody's: A1
R&I: AA+BIS Risk Weighting(denominated in yen)

JFM bonds:

For reference:

10%

Japanese Government Bonds: 0%
Japanese Government-Guaranteed Bonds: 0%
Local Government Bonds: 0%

Preferential Rights
for JFM Bonds

All holders of JFM bonds (as well as JFM’ s government-guaranteed bonds) have a preferential rightto 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 and Paragraph 3 of the JFM Law)

Note: The risk weights are values for investors in Japan. For international bonds, the values are determined by respective authorities in each country.(as of 31
March 2022).

34

JFM ANNUAL REPORT 2022

In fiscal 2021, JFM raised a total of USD 17.5 billion,
decreased from the previous year. This was mainly the
result of a decrease in the amount of non-government
guaranteed bonds while the issuance volume of govern-

ment-guaranteed bonds increased.
As of 31 March 2022, outstanding bonds were USD
164.3 billion. Outstanding long-term bank loans totaled
USD 3.3 billion. The total amount of outstanding bonds
and long-term bank loans was USD 167.5 billion, which
was comprised of USD 128.4 billion in the general accountand USD 39.1 billion in the management account. Since
the end of fiscal 2016, the volume of outstanding debt in
the general account exceeds that of the management
account as a result of the trend that the management
account has been decreasing while the general accounthas been increasing.
Note: The figures related to outstanding volume are based on face value.

Outstanding Bonds and Bank Loans(USD bn)(USD bn)

25

200
20.9

20
17.3

15

5

0.1
4.1

4.0

3.9

2.9

1.4

0.7

1.9

4.9

0

0.4

0.8

FY2017

6.6

2018

7.7

2019

4.4

4.9

167.5

46.6

39.1

110.8

122.6

128.4

2019

2020

2021

165.2

63.0

54.4

70.8

100

2.9

50

10.3

104.7

96.3

8.0

2020

2021

0

FY2017

2018Management AccountLong-term Bank Loans

General AccountFinancial Section

Government-guaranteed Domestic Bonds

JFM’s Role in Local
Government Finance

10

6.3

1.3
0.9

14.6

169.2

167.7

150

17.5

4.5

16.0
2.1

167.1

0.5
0.7

Management
Structure

Funding Volume

Operations

JFM issues JFM bonds (non-government guaranteedbonds to be issued through domestic public offerings orunder the MTN Programme, or private placements withpension funds for local government officials) andgovernment-guaranteed bonds for the purpose of refinancing existing government-guaranteed bonds of thePredecessor. In addition, long-term bank loans are also
important for JFM’s funding operations.

Review and Plan

4. Trends in Funding Operations

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

Note: Totals may not add up due to rounding.

Appendix / JFM Data
JFM ANNUAL REPORT 2022

35

Operations

Support for Local Governments
1. Research and Studies
Conduct research on financial management of local governments, local government finance in other countries,
regional finance and financial analysis, and provide results
and necessary support to local governments which can beused for human resource development, practical support andinformation dissemination.

2 . Personnel Training Support
Initiatives

Initiatives▶ Collaboration project with GRIPSWork on the project on education, researchand studies in collaboration with the National
Graduate Institute for Policy Studies (GRIPS) in
the medium and long term, with the theme of
local government finance under social structuraltransformation such as the era of depopulation.

▶ Research and studies on regional
financing

Conduct research on borrowing environment oflocal governments from local financial institutions.

▶ Research and studies on local government
finance in other countries

Conduct research by cooperating with specialized
agencies on local government finance and its operation inother countries such as the latest funding methods of local
governments-owned joint funding organizations.

▶ Research and studies on advanced case of local
governments

Conduct research by cooperating with specialized
agencies on advanced case study on topics of interest
to local governments with the intention of sharing
them on the advanced case studies search system.

▶ Project to strengthen
administration andfinance management oflocal governments

Send advisors to cities andtowns depending on individual situations and requests asa joint project with the Ministry of Internal Affairs andCommunications, regarding
topics such as municipal
enterprise accounting applications and local public
accounting development, inorder to improve quality of
local governments’ financial
management.

▶ Hold JFM local
government
finance seminars,
JFM municipal
enterprise seminarand more

Hold seminars on timely
issues related to local
finance and local public
enterprises that are ofgreat interest to local
governments such as joint
seminars for chiefs andexecutives of local publicorganizations with local
administrative and financial research committee.

3. Information Dissemination
Initiatives▶ Financial analysis and diagnosis by utilizing
the financial information

Enhance the analysis content of the fiscal analysis chart “New Octagon” and consider expanding
financial analysis and diagnosis by utilizing thefinancial information of local governments.

▶ Studies on local government financeConduct studies on local financial issues
faced by local governments by cooperatingwith the Ministry of Internal Affairs and Communications (MIC) with the aim of resolving
policy issues of local governments andachieving sustainable local government
financial management.

▶ Studies to understand the needs
and issues of local governments

JFM offers support for issues related to the overall financial management of local governments, which
includes ensuring financial healthand fund-raising.

36

JFM ANNUAL REPORT 2022

▶ Provide the“New Octagon”
financial analysis
chart

Provide local governments’ financial analysis
chart “New Octagon”
which is a tool to analyze the financial status
and changes in local
governments.

▶ Operation ofadvanced casesearch system

Consolidation ofadvanced cases that
contribute to solving
issues faced by local
governments, such as
finance management
and management ofmunicipal enterprise.

Hold seminars, trainings and on-site lectures for local governments for the purpose of solving issues and questions regarding financial management and funding, as well as set up a new operation to send advisors to individual cities and towns in order to improve
quality of local governments’ financial management.

Review and Plan

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

Operations▶ Hold local
government
seminarHold on-site and on-line
lectures on topics which
are of interest to local
governments at theirtraining workshops by
local government financial advisors.

Provide individual
practical support fromlocal government financeadvisors on financial
management and funding for local governments
such as helping local
governments issue
publicly offered local
bonds by phone, email,web conference, etc.

▶ Conduct e-learning

Utilize e-learning todevelop and provide
training contents related to local government
finance while delivering
lectures held at JFM
seminars.

TopicsE-learning site launched to offer a wide variety of training programs, related to finance, investment, andaccounting.

JFM’s Role in Local
Government Finance

Strengthen information dissemination by effectively
using the website.

▶ Practical support
for financial
management andfunding

Management
Structure

Hold introductory
seminar on funding andinvestment, and joint
accommodation typetraining with Japan
Academy of Municipal
Personnel and Japan
Intercultural Academyof Municipalities.

▶ Hold on-site
lectures

Financial Section▶ Provide learning materials and relevant economic
and financial data/knowledge

Appendix / JFM Data
JFM ANNUAL REPORT 2022

37

Operations

JFM and SDGs related operations
Support sustainable community development through lending operations
Local governments are facing various administrative issues, such as promoting the revitalization of regions, measuresagainst the declining birth rate and an aging population, deteriorating infrastructure, measures against large-scale andintensifying natural disasters.
To address these challenges, JFM provides loans to local governments who develop infrastructure and administrative
services to their residents of the region and contributes to a sustainable development of the region’s community andenvironment.
█ JFM lending operations and SDGs mapping

Sewerage

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

Nagano Prefecture, Iida City, Matsuo Purification CenterTransportation

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

Kumamoto Prefecture, Kumamoto City, 0800 Series Low Floor Tram

Hospitals and Elderly Care Services

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

Hyogo Prefecture, Kobe City, Kobe Proton Center38

JFM ANNUAL REPORT 2022

Review and Plan

Disaster Management and Mitigation
Operations

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

Social Welfare and Educational Facilities Development

Aomori Prefecture, Hirosaki City, Susono Elementary School

Financial Section

Supporting local governments through local
government support operations

JFM’s Role in Local
Government Finance

Maintaining educational facilities such as schools managed
by local governments.

Management
Structure

Kochi Prefecture, Kuroshio Town, Tsunami Evacuation Tower

JFM offers various support for sound financial managementof local governments by providing services such as researchand studies, personnel training and information dissemination,
based on local government needs.

Green bond issuance

JFM ANNUAL REPORT 2022

Appendix / JFM Data

JFM issued inaugural USD denominated green bond in
January 2022 with an amount of USD 750 million for the purpose of allocating the net proceeds to seweragebusiness as well as the previous year. JFM is planning to publish its third impact report summarizing thedescription of projects and environment impacts and support the SDGs activities managed by local governments
in Japan continuously. JFM green bond framework have obtained the highest level of assurance from Vigeo Eiris,a second party opinion provider.
(Link to JFM green bond website : https://www.jfm.go.jp/en/investors/greenbond.html)

39

Management
Structure

FUYUWA TSUTOMETE.
“For winter, it is the early morning that is most beautiful.
It is beautiful when snow has fallen during the night.
But splendid too when the ground is white with the frost.
But even when there is no snow or frost, the cold makes you feel that it is a winter morning.
People rush to start a fire on those chilly mornings.
Then they run from room to room carrying hot charcoal for the stoves. It's all very winter like.
But the morning cold starts to disappear around noon thenyou find that the charcoal in the stoves has turned into white ash that looks a little foolish.”Diamond dust in Tokachi, Hokkaido
40

JFM ANNUAL REPORT 2022

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

42
44
44
45
47
54
55

Review and Plan

Corporate GovernanceOperations
Management
Structure
JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

41

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

1. Corporate GovernanceCorporate Governance System

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

Appointmentof members

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

Appointment and dismissal of
the President and CEO
Agreement for appointment
and dismissal of the Deputy
President / Senior Executive
Directors

Decisions on importantmatters, including budgets
and accounts

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

AuditsPresident and CEO,
Deputy President, etc.

Budgetsubmissions

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

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

42

JFM ANNUAL REPORT 2022

Appointment of
Accounting Auditors
and Corporate
Auditors

Accounting
Auditors(Certified public
accountants or an
audit corporation)

Corporate Auditors

4. Audits by External Accounting Auditors
As JFM raises funds in capital markets, the proper
disclosure of information and external checks on
accounting procedures are essential in order to build
market confidence toward JFM.
From this viewpoint, JFM has its financial statements
audited not only by corporate auditors but also by external
accounting auditors (certified public accountants oran audit corporation) appointed by the Representative
Board.
In addition, to enhance the communicative value of theauditor’s report by providing greater transparency about
the audit, “key audit matters” (KAM) were voluntarily
introduced and the independent auditor described each
KAM in the auditor’s report for the fiscal 2021.

JFM’s Role in Local
Government Finance

JFM has focused on establishing highly transparent
management that incorporates unbiased opinions ofexternal parties, and responsible corporate governance.
To ensure such a governing structure, JFM has theSupervisory 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 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 andCommunications.

Management
Structure

2. Supervisory Committee

3. Audits by Corporate Auditors

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, theRepresentative Board consists of one prefectural
governor, one city mayor, one town/village mayor andthree members from among experts in local
administration, economics, finance, law or accounting.
The Representative Board has the authority to makedecisions on important matters related to the overallmanagement of JFM, including budgets, settlement ofaccounts and business plans and to appoint and dismiss
the President and CEO as well as Corporate Auditors.
As its supervisory function, the Board is also authorized
to obtain from the President and CEO information
relating to JFM's operations and financial condition, andto order the President and CEO to take corrective
actions with respect to any illegal or other inappropriate
activities.

The Supervisory Committee has the function ofmonitoring the operations of JFM and may offer its
opinions on important matters such as JFM’s operations
including budgets, settlement of accounts and businessplans. The Committee may also, if necessary, requestthat the President and CEO reports on those matters.
The President and CEO must respect and report theCommittee’s opinions to the Representative Board.

Review and Plan

1. Representative Board

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

43

Management Structure
Corporate Governance

2. Internal Control over Financial Reporting
Pursuant to the Ministerial Ordinance on Financeand Accounting of Japan Finance Organization for
Municipalities, JFM has set up a system which is similar
to the internal control reporting system under the
Financial Instruments and Exchange Law in Japan. In
accordance with the system, JFM prepares the Internal
Control Report to evaluate the effectiveness of internal
control over financial reporting to ensure the reliability of
its financial statements, the base date of which is theend of the fiscal year (31 March), and it is audited by theaccounting auditors and released together with thefinancial statements.
As for the Internal Control Report in which JFM viewed
its internal controls on financial reporting as effective asof the end of fiscal 2021, the accounting auditors gave
their opinion (unqualified audit opinion pursuant toMinisterial Ordinance Article 32, Paragraph 2, Clause 1)
that, in all material respects, evaluation results of
JFM’s internal controls over financial reporting were inconformity with the standards of evaluation for internal
controls over financial reporting generally accepted inJapan.

3. Internal Audit
An internal auditor, who is independent from otherdepartments, divisions and offices, examines andassesses the appropriateness and effectiveness of
JFM’s internal control systems, thereby helping ensure
reliable financial reporting and appropriate and efficient
operations.
On completing this task, the internal auditor submits areport to the president and CEO.

If the internal auditor identifies deficiencies, related
divisions and offices must immediately take the required
corrective actions. The internal auditor will then submit
to the president and CEO an internal audit report that
includes the progress of corrective actions.
The internal auditor also performs follow-up audits
and reports the results to the president and CEO asnecessary.

Internal Audit System
President and CEO
Deputy President

SeniorExecutive
Directors
Departments
Divisions44

JFM ANNUAL REPORT 2022

Internal Audit

Internal
AuditorManagement Structure
General Account and Management AccountBegan operations on
1 October 2008

Operations

Established on
1 August 2008

Under the JFM Law, JFM requires managing loans
and bonds issued since JFM began its operations in thegeneral account of JFM, whereas loans and operations
carried over from the Predecessor are administered in
the separate account known as the management
account of JFM.
With regard to the management account, JFM issues
government-guaranteed bonds solely for the purpose ofrefinancing government-guaranteed bonds of thePredecessor.

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

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

Management
Structure

Japan Finance
Organization for
Municipal Enterprises

Established on
1 June 1957

Review and Plan

Japan Finance Organization for Municipal Enterprises
was established on 1 August 2008, with capital
contributed by all prefectures, cities, special wards ofTokyo, government-designated cities, towns andvillages, as well as some local government associations,to provide funds to local governments. JFM commenced
its operations after succeeding to the assets andliabilities of the Predecessor on 1 October 2008.
As a result of the reorganization on 1 June 2009, JFM’slending scope was extended to overall general accountrelated loans.

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

Special governmental institution(wholly owned by the national government)

Reserve for Losseson the Refinancingof Bonds
JPY 3.4 tn(USD 28.4 bn)

Ensure a financial
foundation needed tosustain the businesses
into the future

Japan Finance Organization for Municipalities (JFM)
General Account

JPY 0.2 tn (USD 1.6 bn)
Management AccountJPY 3.2 tn (USD 26.6 bn)

FY2009-2017
JPY 220 bn (USD 1.8 bn)
transferred each year

Management Account Reservefor Interest Rate Volatility

JPY 0.6 tn(USD 5.6 bn)

JFM ANNUAL REPORT 2022

Appendix / JFM Data

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

JPY 2.2 tn
Reserve for(USD 18.0 bn)
Interest Rate Volatility

Financial Section

Predecessor

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

JFM’s Role in Local
Government Finance

When JFM was founded, it succeeded to the Reservefor Losses on the Refinancing of Bonds in the amount ofapproximately JPY 3.4 trillion (USD 28.4 billion) to ensure
its future stable management from the Predecessor.
Of this amount which was recorded in the management
account, the JPY 2.2 trillion (USD 18.0 billion) needed toensure the future continuity of JFM’s operations was

45Management Structure
General Account and Management AccountUnder the JFM Law, if any assets remain when theasset management operations of the Predecessor arecompleted and the management account is closed,
those assets shall be returned to the national treasury.
Even before the management account is closed, in theevent that the businesses of JFM are determined tohave been executed smoothly in light of the condition of
the management of JFM, the Minister for Internal Affairs
and Communications and the Minister of Finance shall,
if the management account reserve for interest rate
volatility and the management account surplus reserve
are determined to exceed the amount necessary for the46

JFM ANNUAL REPORT 2022

smooth operation of the asset management operationsof the Predecessor in the future, cause the amount thatis determined to be in excess to belong to the nationaltreasury (Article 14 of the Supplementary Provisions of
the JFM Law).
In accordance with this provision, JFM has transferreda portion of its reserve for interest rate volatility within
the management account to the Japanese national
government and such portion has been allocated to thenational treasury, mainly for the purpose of forest
environment transfer tax increase.

Management Structure
Risk Management

1. Risk Management System
JFM adopts an integrated risk management approachto respond to various risks, while pursuing for a higher
level of risk analysis and management.
Accordingly, JFM has developed a system for appropri-ate risk management, including the establishment 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 appropriatelyreflected in management decisions.

Operations

Risk Management System

Integrated Risk
Management
Committee

President and CEO

Senior Executive
Director in Charge

ALM Committee

Loan
Department

JFM lends to local governments with the maximum
maturity of 40 years while JFM raises funds primarily by
issuing 10-year bonds. Among other risks, JFM
considers the interest rate risk associated with bondrefinancing as its major risk (the risk of the negative
margin caused by the interest payable exceeding theinterest receivable).
To address such interest rate risk, JFM maintains

Administration
Department

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

JFM’s Role in Local
Government Finance

2. Characteristics of JFM’s Risks

Management
Structure

Risk Management OfficeFinance
Department

Review and Plan

1. Overall Risk Management

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

47

Management Structure
Risk Management

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

1) Credit risk on loans
The JFM extends loans exclusively to local governments. Local governments have a zero Basel Committeeon Banking Supervision risk weighting and the JFM
does not expect any default on loans made to local
governments for the reasons outlined below. The
JFM and the Predecessor have never experienced
any loan losses.

• The Japanese national government includes principal and interest payments of local government bonds andloans in the expenditure of the Local Government Finance Program, and secures the total amount of local
allocation tax which balances local governments’ total expenditures including principal and interest
payments, and total revenue. Thus, the national government effectively secures revenue sources for principal
and interest payments by local governments. The national government also secures revenue sources forprincipal and interest payments by individual local governments by including a portion of such principal andinterest 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 (No. 94, 2007), local governments
whose fiscal indicators exceed the early warning limits must make their own efforts toward achieving fiscal
soundness, and local governments whose fiscal indicators exceed the reconstruction limits must takenecessary actions to restore their finances under the supervision of the national government or the respective
prefectural governments with regard to redemption of local government bonds and loans, and otheroperations.
The JFM is not subject to the “Banking Law” (No. 59, 1981) or the “Financial Reconstruction Law” (No. 132,
1998) but performs self-assessment of loans in accordance with the JFM's internal rules in order to manage
risks appropriately.

48

JFM ANNUAL REPORT 2022

Operations

2) Credit risk on transactions
The JFM is exposed to the risk of loss arising fromcredit events, such as deterioration in the financial
condition of a counterparty, which causes an asset tolose value or become worthless. However, the JFM

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

Review and Plan

As of 31 March 2022, JFM's total outstanding loans
stood at USD 192.4 billion. The amount of loans outstanding
made to local governments whose fiscal indicators
exceeded the early warning limits or the reconstruction
limits accounted for 0.03% in aggregate of total loans
outstanding as of 31 March 2022.

Management
Structure
JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

49

Management Structure
Risk Management
2. Market Risk
Market risk is the risk of loss resulting from changes inthe value of assets and liabilities due to fluctuations inrisk factors such as interest rates, securities prices andforeign exchange rates, or the risk of loss resulting fromchanges in earnings generated from assets and liabilities.
Market risk includes interest rate risk, foreign exchange
risk and price change risk.
1) Interest rate risk
• Interest rate risk associated with bond and borrowed
money refinancing
The JFM makes loans to local governments. The
maximum term to maturity is 40 years, but the majority

50

JFM ANNUAL REPORT 2022of the funds for these loans are raised mainly throughissuance of 10-year bonds, which creates interest
rate risk associated with bond refinancing. The JFM
takes the measures described on page 51 to address
the interest rate risk resulting from a duration gap
between lending and funding.
• Pipeline risk
The JFM is also exposed to pipeline risk, whereby
losses would be incurred or profits decreased as aresult of interest rate fluctuations during the time fromwhen the JFM raises money until the point at which
the money is loaned to local governments. The JFM,
in principle, uses swap transactions to hedge against
pipeline risk.

• The JFM maintains necessary reserves to cope with the interest rate risk resulting from a duration gap
between lending and funding. At the end of fiscal 2021, the total amount of the reserves stood at USD 23.6
billion, which consisted of USD 18.0 billion in the general account and USD 5.6 billion in the management
account.

JFM’s Role in Local
Government Finance• The management account, which manages assets related to loans extended by the Predecessor, is exposed
to interest rate risk. To address such risk, the JFM contributes to the required reserves for interest rate
volatility as described above. In accordance with the provisions of Article 14 of the Supplementary Provisionsof the Law, a portion of the JFM’s management account reserve for interest rate volatility is to be transferredto the Japanese national government. The following transfers are scheduled:(1) Up to 230 billion yen due to the increase in concession amount charged for Forest Environment
Concession Tax, which promotes forest maintenance over a period of five years from fiscal 2020 throughfiscal 2024; and(2) Up to 1.5 billion yen for securing funds of the Trust Fund Bureau for exemptions of early redemption
charges in relation to concessions of water supply and sewerage business over a period of six years fromfiscal 2018 through 2023.
The amount of transfer is to be within the amount which the Japanese national government deems as an
amount exceeding the requisite amount of reserve necessary for the smooth operation of the JFM’s
management account at the time of transfer and in the future, in light of the JFM’s financial condition.

Management
Structure• To achieve its objective, from the viewpoint of controlling the duration on assets (lending), the interest rates
for temporary financial countermeasures funding which accounts for approximately 1/3 of the overall
outstanding loans in the general account, are revised every 5 or 10 years. In addition, the JFM will revise its
lending rate by the 30th year at the latest for its loans with maturities longer than 30 years. And, in terms offunding, the JFM has taken measures to manage the duration on liabilities (bonds and loans) by issuingbonds with maturities longer than 10 years continuously under the ultra-low interest rate circumstances andcarefully choosing maturities of bonds to be issued by utilizing its FLIP and Open Issuance scheme.

Operations• As assets and liabilities in the JFM’s general account will expand as a result of lending to local governments
and funding, the JFM carries out an ALM analysis of this account in a timely and appropriate manner tofurther enhance the effectiveness of its management of interest rate risk. In order to reduce exposure tointerest rate risk, the JFM has established a medium-term management target for five years from fiscal 2018,
in which the duration gap is to be maintained below approximately two years.

Review and Plan

Managing interest rate risk associated with bond refinancing

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

51

Management Structure
Risk Management
Maturity Ladder (JFM Loans, Bonds and Bank Loans)

USD mmGeneral Account(As of 31 March 2022)

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

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

F Y 2022 23 24 25 26 27 28 29 30

31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50 51

Lending duration 7.85 years • Funding duration 7.53 years • Duration gap 0.32 years (YoY change: -0.08 years)•

Management AccountInterest Receipt (Lending)Principal Redemption (Lending)Principal Redemption (Funding)Interest Payment (Funding)Gap

USD mm

16,00014,00012,00010,000
8,000
6,000
4,000
2,000
0
-2,000-4,000-6,000-8,000-10,000-12,000-14,000-16,000(As of 31 March 2022)

FY 2022

•

23

24

25

26

27

28

29

30

31

32

33

34

35

36

Lending duration 4.43 years • Funding duration 3.53 years • Duration gap 0.90 years (YoY change: -0.02 years)

JFM as a whole
Lending duration 7.10 years • Funding duration 6.58 years • Duration gap 0.52 years (YoY change: -0.07 years)•

2) Foreign exchange and other risks
Various risks associated with bond principal andinterest payments are hedged by swap transactions.
These risks include foreign exchange risk related toforeign currency-denominated bonds and interest raterisk related to floating rate bonds.
The JFM’s investments of surplus funds are exposedto the risk of losses on the sale of securities resulting

52

JFM ANNUAL REPORT 2022

from price declines and the risk of realized losses on thecancellation of foreign currency-denominated deposits
resulting from fluctuations in foreign exchange rates.
Accordingly, in principle, the JFM minimizes the risk ofprice fluctuation by holding investments until maturity,and hedges foreign exchange risk by using foreignexchange contracts.

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

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

JFM’s Role in Local
Government FinanceOperational risk is the risk of loss resulting frominadequate operation processes, inadequate activities
by management and staff, and inadequate computer
systems, or from external events.

2) Systems risk

Management
Structure

4. Operational Risk

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

Operations

Liquidity risk is the risk that the 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 of amismatch between the maturities of assets and liabilities
or an unexpected outflow of funds (funding liquidityrisk). It also includes the risk that the JFM would incur
losses because it is unable to conduct market
transactions or is forced to conduct transactions at far
more unfavorable prices than under normal conditions
due to market disruption or other difficult situations(market liquidity risk).
The JFM’s exposure to liquidity risk is extremely low
because loans are made to local governments according
to a pre-set schedule, and the daily cash and liquidity
management is carried out based on a monthly plan forfund management. Moreover, the JFM has entered into
overdraft agreements with several financial institutions
to prepare for the unexpected events, and invests
surplus funds only in short-term financial products.
In addition, the JFM has implemented a plan to secureliquidity support assets in advance in order to prepare
for potential market disruption which may prevent theJFM from securing the necessary funds for scheduledbond principal and interest payments.

1) Administrative risk

Review and Plan

3. Liquidity Risk

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

53

Management Structure
Compliance

1. Basic Policy
JFM has prepared the Compliance Rules to ensurethat operations are conducted in accordance with laws
and regulations and indicate what actions management

and staff should take when a breach of laws or regulations
is identified. The rules include the following basic policy
on compliance.

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

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

Compliance System
President and CEO
Appointment

Compliance Committee
Instruction

ReportCompliance Division (Administration Department)
Instruction and training

ReportDirectors and Employees

54

JFM ANNUAL REPORT 2022

Management Structure
Disclosure

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

2. Materials for Disclosure

1. 
Materials for Disclosure Pursuant toLaws and Regulations• Budgets, business plans, funding plans, and medium-term plans on income and expenditures• Management plan
• Funding plan
• Brochure• Annual Report• JFM News magazine• JFM Green BondManagement
Structure• Financial statements• Business reports and statement of accounts (inJapanese only)• Explanatory documents based on Article 36, Paragraph
3 of the JFM Law (Documents corresponding toannual securities reports specified in the Financial
Instruments and Exchange Act and the Internal
Control Report) (in Japanese only)

2. Other Documents for Disclosure
Operations

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

Review and Plan

1. Basic Stance on Information Disclosure

JFM’s Role in Local
Government Finance

Annual Report

Financial Section

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

Appendix / JFM Data
JFM ANNUAL REPORT 2022

55

JFM’s Role in Local Government Finance

1. 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 the international
community, local governments engage in administrationthat relates to the daily lives of citizens. Local governments are responsible for social welfare, education, fire

defense, and infrastructure such as road and waterways.
The Japanese local government system adopts a
two-tier system with prefectures serving broader geographic areas, and cities, special wards of Tokyo, as wellas government-designated cities, towns and villages
providing local services.

National Government
Prefectures
Local Government

Cities, Special Wards of Tokyo,
Towns and Villages

Number of Japanese Local Governments
Prefectures

47

Cities, special wards of Tokyo, etc.
Government-designated cities

20

Cities772

Special wards of Tokyo

23

Towns

743

Villages

183
Total

(As of 1 April 2022)

56

1,741

JFM ANNUAL REPORT 2022

1,788

Local Government Finance Programme(Initial Plan for FY2022)
Annual Expenditure(USD 743.4 bn)

Annual Revenue(USD 743.4 bn)

Local TaxUSD 358.7 bn

Local Allocation Tax
USD 148.4 bn

Management
Structure- Social welfare- Education- Fire defense- Infrastructureetc.

Operations

OthersUSD 174.2 bn
Local Government
Bonds and Loans
USD 62.2 bn
Note: The above programme includes Great East Japan Earthquake related
budgets.
Note: Totals may not add up due to rounding.

JFM’s Role in Local
Government Finance

Each local government is unique in terms of its naturaland historic situations, industrial structures, population
sizes, and other attributes. As a result, each local
government handles diverse administration. The term
“local government finance” collectively refers to funding
for individual local governments engaging in suchadministration. Just as with national finance, local
government finance plays a major role in the nation’s
economy and the lives of citizens. In fiscal 2022, local
government finance will total JPY 91.0 trillion (USD
743.4 billion) (based on the Local Government Finance
Programme (the “LGFP”).
Because local governments engage in numerous
activities that closely relate to residents, they need toprovide stable public services regardless of regional
differences stemming from varying populations, industry
densities, and/or tax revenue fluctuations over years.
Accordingly, the national government formulates the
LGFP each fiscal year based on assessments of thescales of local government finance and forecasts ofoverall revenues and expenditures. In response toannual national budget plans, the national government
balances the total amount of local government revenues
and expenditures in the LGFP. Under this Programme,
revenue sources for all local governments, including
Local Allocation Tax grants as well as bonds and loans
to be issued or borrowed, are secured so that local
governments can ensure uniform public service standards.

Review and Plan

2. Local Government Finance Programme

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

57

JFM’s Role in Local Government Finance

3. Local Allocation Tax
Local governments would ideally cover the expenditures
necessary to provide public services with their local tax
revenues. In reality, however, tax revenues are distributed
unevenly. In order to adjust disparities and secure funds
for local governments that have low tax revenues, thenational government distributes Local Allocation Tax,

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

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

ShortageStandard
Local
Tax revenue*2

Local Allocation Tax
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 and Communications.
2. Local governments have taxation rights in Japan, but there are regional imbalances in tax revenues.

4. Local Government Borrowings
Local government borrowings are bonds and loans to
be issued by local governments for securing necessary
external funds, and mature no earlier than the first fiscal
year. In principle, a local government should cover
expenditures with its revenues other than local government

borrowings. However, local governments can financethrough borrowings in the case that it is desirable toshare costs with future residents such as for constructionsof facilities, or that large temporary expenses are
required due to disasters.

5. Security of Local Government Borrowings
The following framework secures principal and interest
payments of local government borrowings. On the backof this framework, the BIS risk weighting for local
government borrowings is 0%, based on the standardized
approach (as of 31 March 2022).
1) Secured funds for repayments of local government
borrowings
The national government effectively secures revenue
sources for repayments of local government borrowings
from both macro and micro perspectives.
( i ) Local tax revenues are secured by taxation rights
of local governments.

( ii ) The national government includes repayments oflocal government borrowings (i.e., principal andinterest payments) in the amount of expendituresin the LGFP.
(iii) The total amount of Local Allocation Tax grants is
set aside so that the total amount of local
government expenditures, including the principal
and interest payments, is equivalent to the total
amount of local government revenues in the LGFP.
(iv) In the calculation of Local Allocation Tax grants tobe allocated to an individual local government, aportion of the principal and interest payments areincluded in the Standard Financial Requirementsof an individual local government.

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

58

JFM ANNUAL REPORT 2022

6. Local Government Borrowing Programme3) G uideline for local government borrowings
The LGBP is published as well as local financial plan
which specifies the guideline for each business on local
government borrowings.

JFM’s Role in Local
Government Finance1) Consent (approval) based on LGBPThe LGBP specifies the total scheduled amount oflocal government borrowings including the amount bybusiness type. Typically, the consent or approval for
local government borrowings is given based on the
LGBP.

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

Management
Structure

The LGBP is an annual plan that the national government
prepares for local government funding. The LGBP isclosely linked to the national government budgetmaking. The LGBP plays the following crucial roles interms of local government finance.

Operations3) Supervision of financial soundness
The Law Relating to the Financial Soundness of Local
Governments of Japan, which was promulgated in June
2007, requires local governments to fulfill the following
measures in order to securely manage their fiscal
soundness:(i)S pecified fiscal indicators to be disclosed( ii ) L ocal governments with those fiscal indicators
exceeding certain early warning limits to restore
fiscal soundness through their own efforts(iii) L ocal governments with those fiscal indicators
exceeding certain reconstruction limits to takenecessary actions under the supervision of thenational government or the respective prefectural
governments, in order to restore their fiscal
soundness

Review and Plan

2) Issuance restriction
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.

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

59

JFM’s Role in Local Government Finance

7. JFM Funds in Local Government Borrowing
Programme
and private funds.

The sources for local government funding areclassified into national government funds, JFM funds

Local Government Borrowing Programme

Private Funds

Public Funds(USD in billions)

FY2021

FY2022Publicly Offered Bonds

37

30

36%

Other Private Sectors

27

18

21%

JFM

18

14

17%

National Government

30

21

26%

Total

111

83

100%

Share

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

Since fiscal 2018, JFM funds have accounted foraround 15-18% of the LGBP. JFM plays a major role inJapanese local government finance, making a substantial

contribution to project implementation and financial
management of local governments.

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

180

160 15.3

15.3

15.5

16.0

(%)
17.2 18

16
14

140
120
100
80
60
40
20
0

12

111.4
95.2

98.1

31.2

32.2

26.5

26.8

95.9
36.5
31.5

25.6

27.0

30.1

83.2
29.9

10

Publicly Offered Bonds

8

Other Private Sectors

6

JFM

17.6

4

21.5

2

23.0

24.1

24.0

14.5

15.0

14.9

17.8

14.3

FY2018

2019

2020

2021

2022

0

Source: The Ministry of Internal Affairs and Communications
Note: Totals may not add up due to rounding.

60

JFM ANNUAL REPORT 2022

National Government
JFM Ratio

Review and Plan

Financial Statements 

Operations

Financial Section
62
62

Statements of Income 63Statements of Appropriation of Profit [General account] 64Statements of Appropriation of Profit [Management account] 65Statements of Changes in Net Assets 

66Statements of Cash Flows 

68Notes to Financial Statements 69
102

JFM’s Role in Local
Government FinanceIndependent Auditor’s Report Management
Structure

Balance Sheets 

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

61

Financial Section
Financial Statements

Balance Sheets(As of 31 March 2021 and 2022)
Item

Fiscal 2020
(31 March
2021)(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2021
(31 March 2022)

Item

Fiscal 2020
(31 March
2021)

AmountAmountAssetsLoans (Note 5)

Fiscal 2021
(31 March 2022)

Liabilities¥23,144,389 ¥23,550,819 $192,408,658

Securities(Note 19)

Bonds (Notes 9 and 10)¥20,410,767 ¥20,103,035 $164,240,486

593,000

920,000

7,516,340

Borrowed money(Note 11)

294,000

399,500

3,263,889

Cash and bankdeposits

1,106,432

353,4912,888,002

Cash collateral received
for financial instruments

33,480147,451

1,204,665

Cash collateral
paid for financial
instruments

3,282

812

6,634

Other liabilities

4,670

4,644

37,947

Other assets

6,914

6,193

50,599Reserve for bonuses(Note 12)

59

59

489

10

10

84

Tangible fixed
assets (Note 8)

2,654

2,572

21,017

Reserve for bonuses
for directors andcorporate auditors(Note 12)Intangible fixed
assets (Note 8)

933

976

7,982

Reserve for retirement
benefits (Notes 12 and 15)

52

64

528

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

21

15

124

920,287920,287

7,518,689

920,287920,287

7,518,689

2,853,636

2,891,692

23,624,942

Reserve for interest rate
volatility (Note 13)

2,200,000

2,200,000

17,973,856

Management accountreserve for interest rate
volatility (Note 13)

640,921682,675

5,577,418

Reserve for interest rate
reduction

12,714

9,017

73,66824,516,985

24,466,761

199,891,843

Capital16,602

16,602

135,638

Retained earnings

265,772

298,035

2,434,931

265,772

298,035

2,434,931

437(4,342)(35,477)

Management accountsurplus reserve

57,80857,808472,297

Total net assets

340,621368,104

3,007,389

Fund for lending rate
reduction
Basic fund for lending
rate reduction (Note 14)
Reserves under special
laws

Total liabilities
Net Assets

General account surplus
reserve
Valuation, translation
adjustments and others

Total assets¥24,857,606 ¥24,834,865 $202,899,232 Total liabilities and net assets ¥24,857,606 ¥24,834,865 $202,899,232

See notes to financial statements.

62

JFM ANNUAL REPORT 2022

(For the years ended 31 March 2021 and 2022)
Item

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

Fiscal 2020
(1 April 2020 to
31 March 2021)

Fiscal 2021
(1 April 2021 to 31 March 2022)

AmountAmount222,071

1,814,311

Fees and commissions

83

76

629

Other operating income

7

15

131

9,052

13,703111,954

9,041

13,691

111,862

Others11

11

92

Expenses

141,675

125,548

1,025,723

134,580

118,786

970,481Fees and commissions

292

294

2,403

Other operating expenses

3,713

3,081

25,177

General and administrative expenses

3,088

3,385

27,6620--

Ordinary income

118,247

110,319

901,302

Special gains

64,454

43,697357,008

Reversal of management account reserve for interest rate
volatility (Note 13)60,00040,000326,798

Reversal of reserve for interest rate reduction

4,454

3,697

30,210155,314

121,754994,723

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

95,31481,754

667,925

Payment to national treasury (Notes 6 and 13)

60,00040,000326,798¥27,388¥32,263$263,587

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

Interest expenses

Other expenses

Special losses

Net income
See notes to financial statements.

Financial Section

250,780

Interest income

JFM’s Role in Local
Government Finance$1,927,025

Management
Structure¥235,867

Operations¥259,923

Review and Plan

Statements of Income

Appendix / JFM Data
JFM ANNUAL REPORT 2022

63

Financial Section
Financial Statements

Statements of Appropriation of Profit[General account](For the year ended 31 March 2021)(Millions of yen)

1 Profit available for appropriation¥27,388

Net income
Accumulated deficit brought forward¥27,388-

2 Profit appropriatedSurplus reserve

27,38827,388

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

1 Profit available for appropriation¥32,263

Net income
Accumulated deficit brought forward¥32,263-

2 Profit appropriatedSurplus reserve

32,26332,263(Thousands of U.S. dollars)

1 Profit available for appropriation$263,587

Net income
Accumulated deficit brought forward$263,587-

2 Profit appropriatedSurplus reserve263,587

263,587

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.

64

JFM ANNUAL REPORT 2022

(For the year ended 31 March 2021)(Millions of yen)

1 Profit available for appropriation¥-

Net income
Accumulated deficit brought forward¥-

Surplus reserve--

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

1 Profit available for appropriation¥-

Net income¥-

2 Profit appropriatedSurplus reserve

-

-

$-

Net income
Accumulated deficit brought forward$-

2 Profit appropriatedSurplus reserve--

See notes to financial statements.

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

1 Profit available for appropriation

Management
Structure(For the year ended 31 March 2022)

Operations

2 Profit appropriatedAccumulated deficit brought forward

Review and Plan

Statements of Appropriation of Profit[Management account]

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

65

Financial Section
Financial Statements

Statements of Changes in Net Assets(For the year ended 31 March 2021)(Millions of yen)

Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Total
net
assetsTotal
stockholders’equityUnrealized
gain/(loss)
from hedging
instruments¥238,383¥254,985¥11,101¥57,808¥323,896

27,38827,38827,388--27,388----(10,663)-(10,663)-

27,38827,38827,388(10,663)-

16,725¥16,602¥265,772¥265,772¥282,374¥437¥57,808¥340,621

Generalaccount
surplusreserve

Total
retainedearnings¥16,602¥238,383

Net income-

Net changes duringaccounting period in
items other thanstockholders’ equity

CapitalBalance as of 1 April 2020

Management
account
surplusreserve

Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March 2021

66

JFM ANNUAL REPORT 2022

(Millions of yen)

Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Total
net
assets¥265,772¥282,374¥437¥57,808¥340,621

32,26332,26332,263--32,263----(4,780)-(4,780)-32,26332,26332,263(4,780)-27,482¥16,602¥298,035¥298,035¥314,637¥(4,342)¥57,808¥368,104¥16,602¥265,772

Net income-

Net changes duringaccounting period in
items other thanstockholders’ equity

CapitalChanges duringaccounting period

Net changes duringaccounting period
Balance as of 31 March 2022

(Thousands of U.S. dollars)

Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Total
net
assets$2,171,344$2,306,982$3,576$472,297$2,782,855

263,587

263,587

263,587--

263,587

-

-

-

-

(39,053)-(39,053)-

263,587

263,587

263,587(39,053)-

224,534$135,638$2,434,931$2,434,931$2,570,569$(35,477)$472,297$3,007,389$135,638$2,171,344

Net income-

Net changes duringaccounting period in
items other thanstockholders’ equity

Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March 2022
See notes to financial statements.

JFM ANNUAL REPORT 2022

Appendix / JFM Data

Unrealized
gain/(loss)
from hedging
instruments

Total
retainedearnings

Financial Section

Totalstockholders’equityGeneralaccount
surplusreserve

CapitalBalance as of 1 April 2021

Management
account
surplusreserve

JFM’s Role in Local
Government Finance(For the year ended 31 March 2022)

Management
Structure

Unrealized
gain/(loss)
from hedging
instruments

Total
retainedearnings

Operations

Total
stockholders’equityGeneralaccount
surplusreserve

Balance as of 1 April 2021

Management
account
surplusreserve

Review and Plan

(For the year ended 31 March 2022)

67

Financial Section
Financial Statements

Statements of Cash Flows(For the years ended 31 March 2021 and 2022)

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

Fiscal 2020
(1 April 2020 to
31 March 2021)

Fiscal 2021
(1 April 2021 to 31 March 2022)

AmountAmountⅠ Cash flows from operating activities
Net income¥27,388¥32,263$263,587

512

495

4,046

Interest income(250,780)(222,071)(1,814,311)

Interest expenses

134,580

118,786

970,481

Increase in reserve for bonuses

0

0

6

Increase/(decrease) in reserve for bonuses for directors andcorporate auditors

(0)

-

-

Increase/(decrease) in reserve for retirement benefits

(9)

12

98

Decrease in reserve for retirement benefits for directors andcorporate auditors

(10)

(5)

(48)

Decrease in fund for lending rate reduction(9,041)(13,691)(111,862)

Increase in management account reserve for interest rate volatility

95,31481,754

667,925

Decrease in reserve for interest rate reduction(4,454)(3,697)(30,210)Net (increase)/decrease in loans

255,225(406,430)(3,320,507)

Net increase/(decrease) in bonds

396,027(308,649)(2,521,649)

Net increase in borrowed money

91,000105,500

861,928

Interest received

251,747

222,793

1,820,211

Interest paid

(133,682)(118,238)(966,004)

Others(26,153)

111,819

913,555

827,664(399,361)(3,262,754)

Proceeds from redemption of securities

1,858,500

3,458,300

28,254,085

Purchases of securities(2,086,000)(3,785,300)(30,925,654)

Purchases of tangible fixed assets

(6)

(21)

(178)

Purchases of intangible fixed assets

(203)

(249)

(2,040)(227,710)(327,271)(2,673,787)(60,000)(40,000)(326,797)

9,041

13,691

111,862(50,958)(26,308)(214,935)---

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

548,994(752,940)(6,151,476)

Ⅵ Cash and cash equivalents at beginning of year

557,437

1,106,432

9,039,478¥1,106,432¥353,491$2,888,002

Depreciation and amortization

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

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

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

68

JFM ANNUAL REPORT 2022

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

JFM ANNUAL REPORT 2022

Management
Structure

2. Summary of Significant Accounting Policies(1) Securities
Held-to-maturity securities are carried at amortizedcost (straight-line method).
(2) Derivative transactions
Derivative transactions are carried at fair value withchanges in unrealized gain or loss charged or credited to income, except for those which meet thecriteria for hedge accounting.
(3) Depreciation and amortization(a) Tangible fixed assets
Depreciation of tangible fixed assets is calculatedby the straight-line method based on the estimateduseful lives and the residual value determined bymanagement. The estimated useful lives of major
items are as follows:
Buildings: 23 to 47 years
Others: 2 to 19 years(b) Intangible fixed assets
Amortization of intangible fixed assets is calculated by the straight-line method based on the estimated useful lives and the residual value determined by management. Software for internal use
owned by the JFM is amortized over 5 years.
(4) Deferred assets
Bond issuance costs are expensed in full whenincurred.
(5) T ranslation of assets and liabilities denominated inforeign currencies into Japanese yenMonetary assets and liabilities denominated in foreign currencies, for which foreign currency swaps
or foreign exchange forward contracts are used tohedge the risk of foreign currency fluctuation, aretranslated 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
The JFM has never experienced any loan losses.
Accordingly, no reserve for possible loan losses
has been maintained.
(b) Reserve for bonuses
The reserve for bonuses is provided for payment ofbonuses to employees, in the amount of estimatedbonuses, which are attributable to the fiscal year.
(c) R eserve for bonuses for directors and corporate
auditors
The reserve for bonuses for directors and corporate auditors is provided for payment of bonuses todirectors and corporate auditors, in the amount of
estimated bonuses, which are attributable to thefiscal year.
(d) Reserve for retirement benefitsThe reserve for retirement benefits is provided for
payment of retirement benefits to employees, inthe amount deemed accrued at the fiscal year-end,
based on the projected retirement benefit obligation and fair value of plan assets at the fiscal yearend. The reserve for retirement benefits and pension expenses are calculated using the simplified
method, which assumes the JFM’s retirement benefit obligation to be equal to the benefits payable if
all eligible employees voluntarily terminated theiremployment at the fiscal year-end.
(e) R eserve for retirement benefits for directors andcorporate auditors
The reserve for retirement benefits for directors
and corporate auditors is provided for payment of
retirement benefits to directors and corporate auditors, in the amount deemed accrued at the fiscal
year-end based on the internal policies.
(7) Revenue recognition
The JFM applies the “Accounting Standard for
Revenue Recognition” (ASBJ Statement No. 29,
March 31, 2020) and the “Guidance on AccountingStandard for Revenue Recognition” (ASBJ Guidance No. 30, March 31, 2020), and recognizes revenue when control of promised goods or services

Operations

1. Basis of Presentation
Japan Finance Organization for Municipalities (hereinafter, the “JFM”) has prepared financial statements inaccordance with the Japan Finance Organization for
Municipalities Law (Law No. 64, 2007; hereinafter the“Law”), the ordinances based on the Law and otherregulations applicable to the JFM and accounting
principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.
Since the JFM does not have any subsidiaries or affiliates, it does not prepare consolidated financial statements.
Amounts less than 1 million yen have been omitted.
As a result, the totals in Japanese yen shown in thefinancial statements do not necessarily agree with thesum 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 2022, the final day of the fiscal year, whichwas ¥122.40 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

69

Financial Section
Financial Statements
is transferred to the customer in the amount expected to be received in exchange for those goods
or services.
(8) Hedge accounting(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest rate fluctuations that qualify for hedge accounting and meet specific matching criteria are notmeasured at fair value, but the differential paid or
received under the swap agreements is recognized
and included in interest expense or income. If swap
contracts or forward contracts used to hedge therisk of foreign currency fluctuation qualify for deferral hedge accounting, the foreign currency-denominated assets and liabilities are translated at thecontracted rate.
(b) Hedging instruments and hedged items
( i ) Hedging instruments···Interest rate swaps
Hedged items··············Bonds and long-termborrowed money(ii) Hedging instruments···Currency swaps
Hedged items··············Foreign currency-denominated bonds(iii) Hedging instruments···Foreign exchange forward contracts
Hedged items··············Foreign currency-denominated bank deposits(c) Hedging policy
The JFM uses hedging instruments as a means ofhedging exposure to interest rate risk and foreignexchange risk. Hedged items are identified by eachindividual contract.
As a means of hedging foreign exchange fluctuation risks associated with the receipt of interest
and principal of foreign currency-denominatedbank deposits, a foreign exchange forward contract is entered into at the time of each deposit by
the JFM.
(d) Assessment of hedge effectiveness
The JFM ensures hedging instruments and hedged
items have the same major terms when entering
into hedge transactions to offset market fluctuation
risks associated with bonds and long-term borrowed money. Accordingly, the JFM deems these
to be highly effective and thus does not assess effectiveness. Moreover, a periodic assessment ofhedge effectiveness for interest rate swaps andcurrency swaps and forward contracts that qualify
for deferral hedge accounting is omitted when the
exceptional accrual method is applied.
(9) Cash and cash equivalents
Cash and cash equivalents in the statements ofcash flows consist of “Cash and bank deposits” on
the balance sheets.

70

JFM ANNUAL REPORT 2022

(10) Fund for lending rate reduction
In accordance with the provisions of Article 46,
Section 1 of the Law, the JFM has established thefund for lending rate reduction to reserve 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 5of the Law, income arising from the investment of
the fund (hereinafter, “investment income”) is used
to reduce interest rates of the loans to municipalities, and if there is any surplus in the investment
income after this interest rate reduction process,the surplus amount is added to the fund. Further,pursuant to the provisions of Article 46, Section 6of the Law, if there is any shortfall after the interest
rate reduction process, the shortfall is covered bywithdrawal of the fund within the limits of the totalof the additional portion to the fund made up to theprevious fiscal year and the contributions made in
the most current fiscal year.
(11) R eserve for interest rate volatility and management
account reserve for interest rate volatility
The reserve for interest rate volatility is set aside toprepare for interest rate risk associated with refinancing of the JFM bonds (excluding the bonds
issued by the former Japan Finance Corporation
for Municipal Enterprises; hereinafter, the “Predecessor”) pursuant to the provisions of Article 38,
Sections 1 and 3 of the Law, and Article 9, Sections
8 and 10 of the Supplementary Provisions of theLaw, and is calculated and accounted for based on
the provisions of Article 34 of the Ministerial Ordinance on Finance and Accounting of Japan Finance Organization for Municipalities (Ordinance
No. 87 of the Ministry of Internal Affairs and Communications, 2008) and Articles 22 and 23 of theGovernment Ordinance on preparation of relevant
government ordinances and provisional measures
for the abolishment of the Japan Finance Corporation for Municipal Enterprises Law (Government
Ordinance No. 226, 2008; hereinafter, “Preparation
Ordinance”).
The management account reserve for interest rate
volatility is set aside to manage interest rate risk
associated with refinancing of bonds issued by thePredecessor pursuant to the provisions of Article 9,Sections 9 and 10, and Article 13, Sections 5 and 7of the Supplementary Provisions of the Law, and is
calculated and accounted for based on the provisions of Articles 1 through 3 of the Ministerial Ordinance on the operations of the Management Account at Japan Finance Organization for MunicipalEnterprises (Ordinance No. 2 of the Ministry of Internal Affairs and Communications, and the Minis-

Financial Section
Appendix / JFM Data

JFM ANNUAL REPORT 2022

JFM’s Role in Local
Government Finance

6. P ayment to the National Treasury of a Portion of
the JFM’s Management Account Reserve forInterest Rate Volatility
For the purpose of securing the increase in the concession amount charged for Forest Environment Concession Tax, in accordance with the Supplementary
Provisions of the Law, a portion of the JFM’s management account reserve for interest rate volatility is be-

Management
Structure

4. Changes in Accounting Policies(1) Adoption of revenue recognition accounting standards
The JFM has adopted the revenue recognition accounting standards from the beginning of this fiscal
year. The application of the standards has no impact on the annual financial statements.
(2) 
Adoption of accounting standards for fair value
measurement

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

Operations

3. Significant Accounting Estimates
Reserve for possible loan losses(a) Amount of reserve for possible loan losses recorded in fiscal 2021: N/A(b) Information on significant accounting estimates for
identified items
The JFM has not recorded reserves for possible
loan losses due to the following reasons:• Currently, there are no bankrupt loans and theJFM has never experienced any loan losses, as
stated in Note 5 “Loans”.
• The JFM provides loans exclusively to local governments and there is a system to prevent local
governments from default, as stated in Note 7“Financial Instruments (c) ( i ) A. Credit risk on loans”.
The above situation is expected to remain thesame for the next fiscal year and will not materially
impact the financial statements for the next fiscalyear.

 he JFM has adopted the “Accounting Standard
T
for Fair Value Measurement” (ASBJ Statement No.
30, issued on July 4, 2019) and the “Guidance on
Accounting Standard for Fair Value Measurement”(ASBJ Guidance No. 31, issued on July 4, 2019)from the beginning of this fiscal year. In accordance with Paragraph 19 of the “Accounting Standard for Fair Value Measurement”, the JFM applies
the new accounting policies set forth by the standard prospectively. The adoption of the standard
has no impact on the annual financial statements.

Review and Plantry of Finance, 2008; hereinafter, “Management
Account Operations Ordinance”) and Articles 3
and 5 of the Supplementary Provisions of theabove ordinance.
(12) 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 theprovisions of Article 9, Section 13, and Article 13,
Section 8 of the Supplementary Provisions of theLaw, and Article 26, Sections 1, 3 and 4 of the
Preparation Ordinance, and is calculated and accounted for based on the provisions of Article 5 of
the Management Account Operations Ordinance.
(13) Management account surplus reserve
Profits generated in the management account are
accounted for as the management account surplus
reserve separately from retained earnings in accordance with the provisions of Article 13, Section 8 of
the Supplementary Provisions of the Law and Article 26, Section 2 of the Preparation Ordinance.
(14) Consumption taxes
National and local consumption taxes are accounted for using the tax exclusion method.

71

Financial Section
Financial Statements
ing attributed to the Japanese national government
over a period of five years from fiscal 2020 throughfiscal 2024, with the aim of transferring up to 230 billion yen over this period.
In addition, for the purpose of securing the Trust Fund
Bureau Fund for exemptions of early redemption
charges in relation to concessions of water supply andsewerage businesses in accordance with the Supplementary Provisions of the Law, a portion of the JFM’s
management account reserve for interest rate volatility is being attributed to the Japanese national government over a period of six years from fiscal 2018
through fiscal 2023, with the aim of transferring up to
1.5 billion yen over this period.
In fiscal 2020, 60 billion yen was reversed from theManagement account reserve for interest rate volatility and the same amount was transferred to the national treasury by the JFM, pursuant to “Ministerial Ordinance Specifying the Amount to be Attributed to the
National Government pursuant to the provisions ofArticle 14 of the Supplementary Provision of the Law
for the period from fiscal 2020 through fiscal 2024 (Ordinance No. 1 of the Ministry of Internal Affairs andCommunications, and the Ministry of Finance, 2020”).”In fiscal 2021, 40 billion yen (326,797 thousand U.S.
dollars) was reversed from the Management accountreserve for interest rate volatility and the same amount
was transferred to the national treasury by the JFM,
pursuant to “Ministerial Ordinance Specifying theAmount to be Attributed to the National Government
pursuant to the provisions of Article 14 of the Supplementary Provision of the Law for the period from fiscal
2021 through fiscal 2024 (Ordinance No. 1 of the Ministry of Internal Affairs and Communications, and theMinistry of Finance, 2020; hereinafter the “Ministerial
ordinance for attribution to the national government”).” The ministerial ordinance was amended by“Partial Amendment of the Ministerial OrdinanceSpecifying the Amount to be Attributed to the National
Government pursuant to the provisions of Article 14 of
the Supplementary Provision of the Law for the period
from fiscal 2021 through fiscal 2024 (Ordinance No. 4of the Ministry of Internal Affairs and Communications, and the Ministry of Finance, 2021).”Additional information
In accordance with the provisions of Article 14 of the
Supplementary Provisions of the Law, a portion of the
JFM’s management account reserve for interest rate volatility is being attributed to the Japanese national government over a period of three years from fiscal 2022
through fiscal 2024, with the aim of transferring up to
130 billion yen over this period.
In fiscal 2022, the JFM will reverse 50 billion yen from72

JFM ANNUAL REPORT 2022

the management account reserve for interest rate volatility and transfer the same amount to the national treasury, in accordance with the “Ministerial OrdinanceSpecifying the Amount to be Attributed to the National
Government pursuant to the provisions of Article 14 of
the Supplementary Provisions of the Law for the period
from fiscal 2022 through fiscal 2024 (Ordinance No.1 of
the Ministry of Internal Affairs and Communications, andthe Ministry of Finance, 2020).” The ministerial ordinance was amended by the “Ministerial Ordinance forPartial Revision of the Ministerial Ordinance for Specifying the Amount to be Attributed to the National Government pursuant to the provisions of Article 14 of the Supplementary Provisions of the Law for the period fromfiscal 2021 through fiscal 2024 (Ordinance No. 2 of the
Ministry of Internal Affairs and Communications, and theMinistry of Finance, 2022).”
7. Financial Instruments(1) Status of financial instruments(a) Policy for financial instruments
In order to maintain a sound and good financial
standing as well as the solid confidence of capital
markets, which are experiencing increasing volatility and face various risks, such as geopolitical risk,
the JFM needs to appropriately manage theserisks including interest rate risk.
The JFM adopts an integrated risk management
approach to appropriately respond to risks while
endeavoring to further advance its risk analysis
and management.
Accordingly, the JFM has developed a system forappropriate risk management, including the establishment of the Integrated Risk Management Committee, which supervises the JFM’s overall risk
management, and the Risk Management Office,which monitors the risks in each department. The
content of risk management can then be appropriately reflected in management decisions.
(b) Details and risks of financial instruments
The JFM makes loans to local governments. The
maximum term to maturity is 40 years, but the majority of the funds for these loans are raised mainly
through issuance of 10-year bonds. Therefore, alarge duration gap is created between lending andfunding, and the JFM is exposed to the interest
rate risk associated with bond and long-term borrowed money refinancing.
The JFM has set aside reserves for interest rate
fluctuations (the reserve for interest rate volatility),and has set up the ALM Committee separatelyfrom the Integrated Risk Management Committee
to comprehensively analyze and manage the JFM’s
assets and liabilities in a timely and appropriate

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

JFM ANNUAL REPORT 2022

Operations

toward achieving fiscal soundness, and local
governments whose fiscal indicators exceed thereconstruction limits must take necessary actions
to restore their finances under the supervision of
the national government or the respective prefectural governments with regard to redemption of
local government bonds and loans, and other operations.
The JFM is not subject to the “Banking Law” (No.
59, 1981) or the “Financial Reconstruction Law”
(No. 132, 1998) but performs self-assessment ofloans in accordance with the JFM's internal rules
in order to manage risks appropriately.
B. Credit risk on transactions
The JFM is exposed to the risk of loss arising fromcredit events, such as deterioration in the financial
condition of a counterparty, which causes an asset
to lose value or become worthless. However, theJFM appropriately manages credit risk of this typeby constantly monitoring counterparties’ financial
standing, taking measures including suspension of
new deals and cancellation of transactions in caseof a deterioration of their credit standings. Moreover, the JFM limits counterparties to financial institutions that achieve a certain credit rating andother criteria, and conducts transactions within thecredit lines for each counterparty in order to diversify risks. In addition, the JFM enters into ISDA (International Swaps and Derivatives Association)
Master Agreements and CSA (Credit Support Annex) with all derivatives counterparties to reduce
credit risk.
(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 riskof loss resulting from changes in earnings generated from assets and liabilities. Market risk includes
interest rate risk, foreign exchange risk and pricechange risk.
A. Interest rate risk
Interest rate risk is the risk of losses incurred or adecrease in profits due to fluctuations in interest
rates when there is an interest rate or duration gap
between assets and liabilities. The interest rate risk
at the JFM includes the interest rate risk associated with bond and borrowed money refinancing andpipeline risk.
- Interest rate risk associated with bond and borrowed money refinancing
The JFM makes loans to local governments. The
maximum term to maturity is 40 years, but the majority of the funds for these loans are raised mainly

Review and Planmanner. At the meeting, medium- and long-term
management analysis as well as risk analysis andevaluation are conducted through scenario analysis, VaR analysis, and duration analysis, among
other methods. In addition, the JFM reflects thefindings 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 a borrower, which causes an asset to lose
value or become worthless. In addition to credit
risk associated with loans, market transactions
also involve credit risk.
A. Credit risk on loans
The JFM extends loans exclusively to local governments. Local governments have a zero Basel Committee on Banking Supervision risk weighting and
the JFM does not expect any default on loans
made to local governments for the reasons outlined below. The JFM and the Predecessor havenever 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
secures revenue sources for principal and interest
payments by local governments. The national
government also secures revenue sources forprincipal and interest payments by individual local governments by including a portion of suchprincipal 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 orfinancial deficits exceed a certain level must apply for approval to issue bonds or obtain loans, sothat the credit standing of local government
bonds and loans is maintained.
• Under the Law Relating to the Financial Soundness of Local Governments (No. 94, 2007), local
governments whose fiscal indicators exceed theearly warning limits must make their own efforts

73

Financial Section
Financial Statements
through issuance of 10-year bonds, which createsinterest rate risk associated with bond refinancing.
The JFM takes the following measures to address
the interest rate risk resulting from a duration gap
between lending and funding.
• The JFM maintains necessary reserves to copewith the interest rate risk resulting from a duration
gap between lending and funding.
• As assets and liabilities in the JFM’s generalaccount will expand as a result of lending to local
governments and funding, the JFM carries out an
ALM analysis of this account in a timely andappropriate manner to further enhance the effectiveness of its management of interest rate risk. In
order to reduce exposure to interest rate risk, theJFM has established a medium-term management target for five years from fiscal 2018, in
which the duration gap is to be maintained below
approximately two years.
• To achieve its objective, from the viewpoint ofcontrolling the duration on assets (lending), theinterest rates for temporary financial countermeasures funding which accounts for approximately
1/3 of the overall outstanding loans in the generalaccount, are revised every 5 or 10 years. In addition, the JFM will revise its lending rate by the
30th year at the latest for its loans with maturities
longer than 30 years. And, in terms of funding, theJFM has taken measures to manage the duration
on liabilities (bonds and loans) by issuing bonds
with maturities longer than 10 years continuously
under the ultra-low interest rate circumstancesand carefully choosing maturities of bonds to beissued by utilizing its FLIP and Open Issuancescheme.
• The management account, which manages assets
related to loans extended by the Predecessor,
is exposed to interest rate risk. To address suchrisk, the JFM contributes to the required reserves
for interest rate volatility as described above. In
accordance with the provisions of Article 14 of
the Supplementary Provisions of the Law, a portion of the JFM’s management account reservefor interest rate volatility is to be transferred to theJapanese national government. The following
transfers are scheduled:• Up to 230 billion yen due to the increase inconcession amount charged for Forest Environment Concession Tax, which promotes forest
maintenance over a period of five years fromfiscal 2020 through fiscal 2024; and• Up to 1.5 billion yen for securing funds of theTrust Fund Bureau for exemptions of early redemption charges in relation to concessions of74

JFM ANNUAL REPORT 2022

water supply and sewerage business over a
period of six years from fiscal 2018 through 2023.
The amount of transfer is to be within the amountwhich the Japanese national government deems
as an amount exceeding the requisite amount ofreserve necessary for the smooth operation of the
JFM’s management account at the time of transfer
and in the future, in light of the JFM’s financial
condition.
- Pipeline risk
The JFM is also exposed to pipeline risk, whereby
losses would be incurred or profits decreased as aresult of interest rate fluctuations during the timefrom when the JFM raises money until the point at
which the money is loaned to local governments.
The JFM, in principle, uses swap transactions tohedge against pipeline risk.
B. Foreign exchange and other risks
Various risks associated with bond principal andinterest payments are hedged by swap transactions.
These risks include foreign exchange risk related toforeign currency-denominated bonds and interest
rate risk related to floating rate bonds.
The JFM’s investments of surplus funds are exposed to the risk of losses on the sale of securities
resulting from price declines and the risk of realized
losses on the cancellation of foreign currency-denominated deposits resulting from fluctuations inforeign exchange rates. Accordingly, in principle,
the JFM minimizes the risk of price fluctuation byholding investments until maturity, and hedges
foreign exchange risk by using foreign exchange
contracts.
C. Quantitative information on market risk
Loans, bonds and long-term borrowed money are
primarily affected by interest rate risk, which is amajor risk variable among the market risks.
With respect to loans, bonds and long-term borrowed money in the general account, the JFM
establishes a management target for the duration
gap in order to manage interest rate risk appropriately. With regard to the quantitative analysis ofinterest rate risk, while the JFM does not have amanagement target for the quantitative figures, it
reports the results of calculating the quantitative
information to the ALM Committee and tracks thestatus of the interest rate risk.
With respect to these financial instruments in thegeneral account, based on an assumption that therisk variables, except for interest rate risk, holdsteady, for an indicative interest rate that is 10 basis
points higher than the actual rate, it is assumed
that the fair value of the net amount (assets side),
after offsetting such financial instruments with theOperations
Management
Structure
JFM’s Role in Local
Government Finance(assets side), after offsetting such financial instruments with the financial liabilities, would increaseby 7,683 million yen and 6,383 million yen (52,155
thousand U.S. dollars) as of 31 March 2021 and
2022, respectively.
(iii) Liquidity risk
Liquidity risk is the risk that the 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 of a mismatch between the maturities ofassets and liabilities or an unexpected outflow offunds (funding liquidity risk). It also includes therisk that the JFM would incur losses because it isunable to conduct market transactions or is forced
to conduct transactions at far more unfavorable
prices than under normal conditions due to market
disruption or other difficult situations (market
liquidity risk).
The JFM’s exposure to liquidity risk is extremely
low because loans are made to local governments
according to a pre-set schedule, and the daily cash
and liquidity management is carried out based on amonthly plan for fund management. Moreover, theJFM has entered into overdraft agreements withseveral financial institutions to prepare for theunexpected events, and invests surplus funds onlyin short-term financial products.
In addition, the JFM has implemented a plan tosecure liquidity support assets in advance in orderto prepare for potential market disruption which
may prevent the JFM from securing the necessary
funds for scheduled bond principal and interest
payments.

Review and Plan

financial liabilities, would decline by 26,577 million
yen and 29,584 million yen (241,703 thousand U.S.
dollars) as of 31 March 2021 and 2022, respectively.
On the contrary, for an indicative interest rate thatis 10 basis points lower than the actual rate, it isassumed that the fair value of the net amount(assets side), after offsetting such financial instruments with the financial liabilities, would increase by
26,936 million yen and 29,985 million yen (244,982
thousand U.S. dollars) as of 31 March 2021 and
2022, respectively.
With respect to loans and bonds in the management account, the JFM raises funds by the issuanceof bonds as necessary in order to manage existingloans until their redemption. For this reason, while
the JFM reports the calculation results of thequantitative information regarding the interest raterisk to the ALM Committee and confirms the status
of interest rate risk as is the case in the generalaccount, the JFM does not establish a managementtarget 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 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 thefinancial liabilities, would decline by 7,601 million
yen and 6,319 million yen (51,628 thousand U.S.
dollars) as of 31 March 2021 and 2022, respectively.
On the contrary, for an indicative interest rate thatis 10 basis points lower than the actual rate, it isassumed that the fair value of the net amountFinancial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

75

Financial Section
Financial Statements(2) Items related to fair value of financial instruments
The book value, fair value and difference between them as of 31 March 2021 are as follows:(Millions of yen)Book value

Fair value

Difference(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments¥23,144,389¥24,261,858¥1,117,468

593,000
1,106,432
3,282

593,000
1,106,432
3,282-

Total assets

24,847,103

25,964,572

1,117,468(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments

20,410,767
294,000
33,48020,921,734
295,557
33,480510,966
1,557-

Total liabilities

20,738,247

21,250,771

512,524

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

(*)

The book value, fair value and difference between them as of 31 March 2022 are as follows:(Millions of yen)Book value

Fair value

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

920,000
353,491812

920,000
353,491812-

Total assets

24,825,123

25,484,172

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

20,103,035
399,500
147,451

20,372,729
398,522
147,451

269,694(977)-

Total liabilities

20,649,986

20,918,702

268,716

Derivative transactions(*)
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

(Thousands of U.S. dollars)Book value

Fair value(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments$192,408,658$197,793,048$5,384,390

7,516,340
2,888,002
6,634

7,516,340
2,888,002
6,634-

Total assets

202,819,634

208,204,024

5,384,390(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments

164,240,486
3,263,889
1,204,665

166,443,869
3,255,900
1,204,665

2,203,383(7,989)-Total liabilities

168,709,040

170,904,434

2,195,394

Derivative transactions(*)
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

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

76

Difference

JFM ANNUAL REPORT 2022

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

(2) Derivative transactions (Transactions for which hedge
accounting is applied)For derivative transactions for which hedge accounting is applied, the contractual amount or the amountequivalent to the principal in the contract under eachhedge accounting method as of 31 March 2021 is asfollows:

Review and Plan

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

Principal
accounting
methodInterest rate
swap transactions
Receive/fixedand pay/floating

Bonds
Long-term borrowed
money

Hedge
accounting forinterest rate swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreignexchange
contracts

Of which
1 year or more

Fair
value

Method for
calculating fairvalue
Based on prices
provided by thecounterparty
financial institution--¥20,000¥20,000(*1)

Foreigncurrency-denominatedbonds

1,938,045

1,619,503(*2)

Foreigncurrency-denominateddeposits

4,000

-

(*2)

¥1,962,045¥1,639,503

Total

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 2022 is as follows:(Millions of yen)Contract amountPrimary hedged items

Principal
accounting
methodInterest rate
swap transactions
Receive/fixedand pay/floating

Bonds
Long-term borrowed
money

Hedge
accounting forinterest rate swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreignexchange
contracts
Total

Of which
1 year or more

Fair
value

Method for
calculating fairvalue
Based on prices
provided by thecounterparty
financial institution

-

-

-

¥20,000¥20,000(*1)

Foreigncurrency-denominatedbonds

1,979,994

1,733,986(*2)

Foreigncurrency-denominateddeposits

14,000-(*2)¥2,013,994¥1,753,986

Appendix / JFM Data

Type of derivativetransactions

Financial Section

Hedge accounting
methodJFM’s Role in Local
Government Finance-Management
Structure

Type of derivativetransactions

Operations

Hedge accounting
methodJFM ANNUAL REPORT 2022

77

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

Contract amount

Hedge accounting
methodType of derivativetransactions

Primary hedged items

Principal
accounting
methodInterest rate
swap transactions
Receive/fixedand pay/floating

Bonds
Long-term borrowed
money

Hedge
accounting forinterest rate swaps

Interest rate
swap transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreignexchange
contracts

Of which
1 year or more

Fair
value

Method for
calculating fairvalue
Based on prices
provided by thecounterparty
financial institution

-

-

-

$163,399$163,399(*1)

Foreigncurrency-denominatedbonds

16,176,427

14,166,559(*2)

Foreigncurrency-denominateddeposits

114,379-(*2)$16,454,205$14,329,958

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

Note 2. The repayment schedule for monetary claims and securities with maturities is as follows:
As of 31 March 2021
After
20 years
through
30 years

After
30 years
through
40 years¥1,827,111 ¥1,807,446 ¥1,738,903 ¥1,639,048 ¥1,550,567 ¥6,474,349 ¥6,434,507 ¥1,618,862¥53,593

Within1 year
Loans

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

After
10 years
through
20 years

Securities
Held-tomaturity
securities

593,000

-

-

-

-

-

-

-

-

Deposits

1,106,432

-

-

-

-

-

-

-

-

JFM ANNUAL REPORT 2022

After
1 yearthrough
2 yearsAfter
20 years
through
30 years

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

Within1 year
Loans(Millions of yen)After
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

920,000

-

-

-

-

-

-

-

-

Deposits

353,491

-

-

-

-

-

-

-

-

(Thousands of U.S. dollars)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
30 years
through
40 years

Loans$14,974,371 $14,533,552 $14,064,611 $13,518,988 $12,873,586 $53,880,460 $54,284,943 $13,748,764$529,383

Securities
Held-tomaturity
securities

7,516,340

-

-

-

-

-

-

-

-

Deposits

2,888,002

-

-

-

-

-

-

-

-

Management
StructureAfter
20 years
through
30 yearsWithin1 yearOperations

Securities
Held-tomaturity
securities

Review and Plan

As of 31 March 2022

Note 3. The repayment schedule for bonds and borrowed money is as follows:After
1 yearthrough
2 yearsAfter
10 years
through
20 years

After
20 years
through
30 years

After
30 years
through
40 years¥2,345,072 ¥2,142,677 ¥2,335,910 ¥1,927,159 ¥1,855,037 ¥5,839,242 ¥3,581,596¥263,500¥125,000--

Within1 year
Bonds
Borrowed
money(Millions of yen)

1,000

After
2 years
through
3 years-

86,200After
3 years
through
4 years

83,400After
4 years
through
5 years

88,000After
5 years
through
10 years

31,800

3,600

After
1 yearthrough
2 yearsAfter
10 years
through
20 years

After
20 years
through
30 years

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

Within1 year
Bonds(Millions of yen)

Borrowedmoney-

86,200After
2 years
through
3 years

83,400After
3 years
through
4 years

88,000After
4 years
through
5 years

104,500

After
5 years
through
10 years

33,800

3,600

After
1 yearthrough
2 yearsAfter
10 years
through
20 years

After
20 years
through
30 years

After
30 years
through
40 years$17,505,538 $19,084,232 $16,446,053 $16,462,722 $11,175,216 $49,403,606 $30,871,281$2,324,346$996,732--

Within1 year
Bonds
Borrowedmoney-

704,248After
2 years
through
3 years

681,373After
3 years
through
4 years

718,954After
4 years
through
5 years

853,758After
5 years
through
10 years

276,144

29,412

JFM ANNUAL REPORT 2022

Appendix / JFM Data

(Thousands of U.S. dollars)

Financial Section

As of 31 March 2022

JFM’s Role in Local
Government Finance

As of 31 March 2021

79

Financial Section
Financial Statements
Note 4. Items related to breakdown by level of fair value of financial instruments
The fair value of financial instruments is classified into the following three levels based on the observability andmateriality of the inputs used to calculate the fair value.
Level 1: F air value calculated using quoted (unadjusted) market prices in active markets for identical assets or
liabilities.
Level 2: Fair value calculated using inputs that are directly or indirectly observable other than Level 1 inputs.
Level 3: Fair value calculated using significant and unobservable inputs
In cases where multiple inputs are used that have a significant impact on the calculation of fair value, the fairvalue is classified as the lowest priority level in the calculation of fair value.
( i ) Financial assets and liabilities for which fair value is used as the balance sheet amountNot applicable(ii) Financial assets and liabilities for which fair value is not used as the balance sheet amount
As of 31 March 2022

(Millions of yen)

Fair value
Level 1

Level 2

Total

Level 3

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

920,000
353,491812-

920,000
353,491812

Total assets-

1,274,303

24,209,869

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

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

20,372,729
398,522
147,451

Total liabilities-

20,918,702-

20,918,702

Derivative transactions
Hedge accounting applied

-

-

-

-

Total of derivative transactions

¥-

¥-

¥-

¥-

(Thousands of U.S. dollars)

Fair value
Level 1

Level 2

(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments$-$-$197,793,048$197,793,048-

7,516,340
2,888,002
6,634-

7,516,340
2,888,002
6,634

Total assets-

10,410,976

197,793,048

208,204,024(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments-

166,443,869
3,255,900
1,204,665-

166,443,869
3,255,900
1,204,665

Total liabilities-

170,904,434-

170,904,434

Derivative transactions
Hedge accounting applied

-

-

-

-

Total of derivative transactions

$-

$-

$-

$-

(iii) Description of valuation techniques and inputs used to calculate fair value

80

Total

Level 3

JFM ANNUAL REPORT 2022

(iv) Information on the Level 3 fair value of financial
assets and liabilities whose fair value is recorded in
the balance sheet
Not applicable

Financial Section(3) Cash collateral received for financial instruments
Cash collateral is associated with derivative transactions. The fair value is classified as Level 2 and thebook value is used as the fair value of cash collateral
received for financial instruments since both values
are approximately equal as a result of each deposit
period being short term.

JFM’s Role in Local
Government Finance(4) Cash collateral paid for financial instruments
Cash collateral is associated with derivative transactions. The fair value is classified as Level 2 and thebook value is used as the fair value of cash collateral
paid for financial instruments since both values areapproximately equal as a result of each deposit period being short term.

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

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

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

Liabilities(1) Bonds
The fair value of bonds issued by the JFM that have amarket price is based on the market price. The fairvalue of bonds without a market price is calculatedby discounting the future cash flows using the interest
rate that would be applied when issuing similar bonds
with the same total principal and interest and payment
term. Although the JFM can quote a market price, themarket is not active, the fair value is classified as
Level 2.
Deferral hedge accounting is used for currency swaps,
and the fair value of foreign currency-denominatedbonds is calculated by discounting the total amount ofprincipal and interest accounted for as an integral partof the relevant currency swap by the interest ratethat would be applied if similar bonds were issued.
Therefore, the fair value is classified as Level 2.
Hedge accounting is used for interest rate swaps,
and the fair value of floating rate bonds is calculatedby discounting the total amount of principal and interest accounted for as an integral part of the relevantinterest rate swap by the interest rate that would beapplied if similar bonds were issued. Therefore, thefair value is classified as Level 2.

Review and Plan

Assets(1) Loans
The fair value of loans is calculated by discounting
future cash flows assuming prepayment at the discountrate calculated using the Japanese government
bond rates as of 31 March 2022.
For early redemption, the actual amount of early redemption during the past certain period is calculated
as a percentage of the regular redemption amountduring the past certain period, and multiplied by theregular redemption amount in subsequent years.
For loans subject to interest rate review, the averagerate of interest rate reduction of the loans subject
to interest rate review is applied to the applicableinterest rate at the time of calculation of fair value.
As the estimated amount of early redemption and theinterest rate reduction rate are unobservable, the fairvalue is classified as Level 3.

Appendix / JFM Data
JFM ANNUAL REPORT 2022

81

Financial Section
Financial Statements
8. Tangible and Intangible Fixed Assets
Tangible and intangible fixed assets as of 31 March 2021 consisted of the following:(Millions of yen)

Balanceas of
1 April2020(Acquisition
costs)

Increaseduringthe year

Decreaseduringthe year

Buildings¥1,187¥-¥-¥1,187

¥538

¥30

¥649

Land

1,659

-

-

1,659

-

-

1,659

606

18

-

625

279

110

345

3,454

18

-

3,472

818

140

2,654

1,844

205

359

1,691

760

371

930

1

2

1

2

-

-

2

¥1,846¥208¥360¥1,694

¥760

¥371

¥933

Type of assets

BalanceAccumulated
Depreciation
as ofdepreciation
and
31 Marchandamortization
2021
amortization
during(Acquisition
as of
the yearcosts)
31 March 2021

Balanceas of
31 March
2021(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

Tangible and intangible fixed assets as of 31 March 2022 consisted of the following:(Millions of yen)

Balanceas of
1 April
2021(Acquisition
costs)

Increaseduringthe year

Decreaseduringthe year

Buildings¥1,187¥9¥-¥1,196

¥565

¥27

¥630

Land

1,659

-

-

1,659

-

-

1,659

625

52

8

669

387

112

281

3,472

61

8

3,525

953

139

2,572

1,691

399

273

1,816

842

355

974

2

2

2

2

-

-

2

¥1,694¥402¥276¥1,819

¥842

¥355

¥976

Type of assets

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

Balanceas of
31 March
2022(Net bookvalue)

Tangible fixed assets

Other tangible fixed assets
Total tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed assets
Total intangible fixed assets(Thousands of U.S. dollars)

Balanceas of
1 April
2021(Acquisition
costs)

Increaseduringthe year

Decreaseduringthe year

Buildings$9,703$75$-$9,778Land

13,560--13,560

Other tangible fixed assets

5,108

428

69

5,467

28,371503

69

28,805

13,816

3,264

2,236

24

21

24

$13,840$3,285$2,260Type of assets

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

Balanceas of
31 March
2022(Net bookvalue)

Tangible fixed assets

Total tangible fixed assets$4,624$224$5,154--

13,560

3,164

917

2,303

7,788

1,141

21,017

14,844

6,883

2,905

7,961

21

-

-

21

$14,865$6,883$2,905$7,982Intangible fixed assets
Software
Other intangible fixed assets
Total intangible fixed assets

82

JFM ANNUAL REPORT 2022

10. Bonds
Bonds as of 31 March 2021 consisted of the following:

Review and Plan

9. Assets Pledged as CollateralPursuant to the provisions of Article 40, Section 2 of the Law, the JFM’s total assets are pledged as general collateral
for the JFM bonds in the amount of 20,410,767 million yen and 20,103,035 million yen (164,240,486 thousand U.S.
dollars) as of 31 March 2021 and 2022, respectively.

(Millions of yen)Type of bond

Balance as of
1 April 2020

Balance as of
31 March 2021

Couponrate (%)

Maturity¥3,817,710(512,860)

0.001
to 1.400

10Y

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

9/26/20132/24/2017

420,059

420,046(200,000)

0.001
to 0.576

8Y

Government-guaranteed bonds issued by the JFM(domestic) 6-year bonds (Series 13-20)

4/24/201410/28/2016

520,315

320,175(120,000)

0.001
to 0.202

6Y

Government-guaranteed bonds issued by the JFM(domestic) 4-year bonds (Series 7-11)

6/30/20168/28/2020

200,111220,112(160,000)

0.001

4Y

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

1/13/2011

83,170

-

4.0

10Y

Non-guaranteed bonds issued by the JFM(domestic) 5-year bonds (Series 17-28)

4/20/201511/20/2020

125,000

135,000(35,000)

0.001
to 0.15

5Y

Non-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 11-142)

4/22/20103/18/2021

3,360,000

3,385,000(400,000)

0.049
to 1.465

10Y

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

1/31/20131/22/2014

50,00050,0001.161
to 1.334

15Y

Non-guaranteed bonds issued by the JFM(domestic) 20-year bonds (Series 1-89)

6/25/20093/18/2021

1,575,000

1,765,000

0.180
to 2.266

20Y

Non-guaranteed bonds issued by the JFM(domestic) 30-year bonds (Series 1-12)

6/26/201411/20/2020

105,000

150,000

0.446
to 1.864

30Y

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

2/26/20199/24/2020

30,00040,0000.646
to 0.882

40Y

Non-guaranteed bonds issued by the JFM(domestic) FLIP bonds (Series F2-F6, F8-F14, F16-F17,
F24, F28-F29, F37, F42-F43, F45-F47, F49,
F51-F52, F54-F69, F71-F73, F75-F80, F82-F85,
F87-F90, F92-F93, F95-F98, F100-F109, F111-F112,
F115-F139, F141-F153, F155-F164, F166-F169,
F171-F210, F212-F243, F245-F276, F278-F310,
F312-F400, and F402-F607)

7/23/20093/24/2021

2,600,288

3,117,917(216,500)

0.001
to 2.334

2Y
to 40Y

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

2/26/20147/25/2014

20,00020,000Floatingrate

20Y
to 30Y

0.010
to 5.092

3Y
to 15Y

5/1/20142/10/2021

1,517,247

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

7/22/2013

9,863

-

Floating
rate

7Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds
for local government officials (Series A7-A134)

4/27/20103/24/2021

2,510,000

2,260,000(300,000)

0.069
to 1.480

10Y

JFM ANNUAL REPORT 2022

Appendix / JFM Data

Non-guaranteed bonds issued by the JFM(international) (Series 43-45, 47-87)

1,935,253[USD 14,057
million][AUD 1,662 million][EUR 2,080 million](318,542)

Financial Section¥4,469,844

JFM’s Role in Local
Government Finance

4/19/20101/21/2020

Management
Structure

Government-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 11-123)

Operations

Date ofissue

83

Financial Section
Financial Statements
Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series B1-B65)

11/24/20153/24/2021

311,500

429,000

0.069
to 0.511

10Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series C1-C65)

11/24/20153/24/2021

462,500

594,000

0.190
to 1.154

20Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series D1-D60)

4/21/20163/24/2021

590,000

740,000

0.190
to 0.778

20Y

18,959,899

19,399,215(2,262,902)--

Bonds issued by the JFM - Sub-total-

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

1/26/20094/30/2009

84,973

84,9762.07
to 2.29

20Y

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

84,973

84,976--

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

6/22/20057/18/2007

184,860

144,985(80,000)

1.6
to 2.2

15Y

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

7/30/20026/16/2008

569,858

569,883

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

189,909

189,915

2.39
to 2.95

30Y

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

2/14/20036/9/2004

23,96021,790(2,170)1.39
to 2.01

28Y

Bonds issued by the Predecessor - Sub-total-

968,589926,574(82,170)

-

-

Total

-

¥20,013,462¥20,410,767(2,345,072)--

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, the JFM’s total assets are pledged as general collateral for JFM bonds in the amount of
20,410,767 million yen as of 31 March 2021.
2. Amounts in square brackets under “Balance as of 31 March 2021” for “Non-guaranteed bonds issued by the JFM (international)— (Series 43-45, 47-87)”
are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2021” are to be repaid within one year.

84

JFM ANNUAL REPORT 2022

(Millions of yen)Type of bondDate of
issue

Balance as of
1 April 2021

Balance as of
31 March 2022

Couponrate (%)

Maturity¥3,305,000(490,000)

0.001
to 1.300

10Y

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

9/26/20132/24/2017

420,046

220,0320.001
to 0.576

8Y

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

5/28/201510/28/2016

320,175

200,036(200,036)

0.001
to 0.150

6Y

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

6/29/20178/26/2021

220,112220,388

0.001

4Y

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

4/21/201611/18/2021

135,000

135,000(30,000)

0.001
to 0.040

5Y

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

4/21/20113/17/2022

3,385,000

3,375,000(485,000)

0.049
to 1.418

10Y

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

1/31/20131/22/2014

50,00050,0001.161
to 1.334

15Y

Non-guaranteed bonds issued by the JFM(domestic) 20-year bonds (Series 1-96)

6/25/20091/21/2022

1,765,000

1,890,000

0.180
to 2.266

20Y

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

6/26/201411/18/2021

150,000

180,000

0.446
to 1.864

30Y

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

2/26/20199/24/2020

40,00040,0000.646
to 0.882

40Y

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

7/23/20093/24/2022

3,117,917

3,303,546(274,500)

0.001
to 2.334

2Y
to 40Y

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

2/26/20147/25/2014

20,00020,000Floatingrate

20Y
to 30Y

0.010
to 5.092

3Y
to 15Y

1,935,253

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

4/21/20113/24/2022

2,260,000

2,110,000(300,000)

0.069
to 1.460

10Y

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

11/24/20153/24/2022

429,000

541,500

0.069
to 0.511

10Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series C1-C77)

11/24/20153/24/2022

594,000

715,500

0.190
to 1.154

20Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series D1-D72)

4/21/20163/24/2022

740,000

890,000

0.190
to 0.778

20Y

19,399,215

19,173,606--

84,976

84,9792.07
to 2.29

20Y

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

1/26/20094/30/2009

JFM ANNUAL REPORT 2022

Appendix / JFM Data

5/1/20141/27/2022

Financial Section

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

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

JFM’s Role in Local
Government Finance¥3,817,710

Management
Structure

4/18/20111/21/2020

Operations

Government-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 23-123)

Review and Plan

Bonds as of 31 March 2022 consisted of the following:85

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

86-

84,976

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

4/18/20067/18/2007

144,985

64,999(64,999)

2.0
to 2.2

15Y

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

7/30/20026/16/2008

569,883

569,908(49,998)

1.03
to 2.58

20Y

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

1/29/20049/20/2006

189,915

189,9212.39
to 2.95

30Y

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

2/14/20036/9/2004

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

28Y

Bonds issued by the Predecessor - Sub-total-

926,574

844,449

-

-

Total

-

¥20,410,767¥20,103,035--

JFM ANNUAL REPORT 2022

Date of
issue

Balance as of
1 April 2021

Government-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 23-123)

4/18/20111/21/2020$31,190,445

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

9/26/20132/24/2017

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

Balance as of
31 March 2022

0.001
to 1.300

10Y

3,431,749

1,797,652

0.001
to 0.576

8Y

5/28/201510/28/2016

2,615,816

1,634,283(1,634,283)

0.001
to 0.150

6Y

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

6/29/20178/26/2021

1,798,301

1,800,561

0.001

4Y

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

4/21/201611/18/2021

1,102,941

1,102,941(245,098)

0.001
to 0.040

5Y

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

4/21/20113/17/2022

27,655,229

27,573,530(3,962,418)

0.049
to 1.418

10Y

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

1/31/20131/22/2014

408,497

408,497

1.161
to 1.334

15Y

Non-guaranteed bonds issued by the JFM(domestic) 20-year bonds (Series 1-96)

6/25/20091/21/2022

14,419,935

15,441,176

0.180
to 2.266

20Y

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

6/26/201411/18/2021

1,225,490

1,470,588

0.446
to 1.864

30Y

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

2/26/20199/24/2020

326,797

326,7970.646
to 0.882

40Y

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

7/23/20093/24/2022

25,473,182

26,989,759(2,242,647)

0.001
to 2.334

2Y
to 40Y

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

2/26/20147/25/2014

163,399

163,399

Floatingrate

20Y
to 30Y

0.010
to 5.092

3Y
to 15Y

15,810,894

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

4/21/20113/24/2022

18,464,052

17,238,562(2,450,980)

0.069
to 1.460

10Y

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

11/24/20153/24/2022

3,504,902

4,424,020

0.069
to 0.511

10Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series C1-C77)

11/24/20153/24/2022

4,852,941

5,845,588

0.190
to 1.154

20Y

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series D1-D72)

4/21/20163/24/2022

6,045,752

7,271,242

0.190
to 0.778

20Y-

158,490,322

156,647,111--

694,254694,279

2.07
to 2.29

20Y

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

1/26/20094/30/2009

JFM ANNUAL REPORT 2022

Appendix / JFM Data

5/1/20141/27/2022

Financial Section

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

16,156,882[USD 14,556
million][AUD 1,584 million][EUR 2,080 million](2,009,868)

JFM’s Role in Local
Government Finance$27,001,634(4,003,268)

Management
Structure

Maturity

Operations

Couponrate(%)

Type of bond

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

87

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

694,254694,279--

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

4/18/20067/18/2007

1,184,522

531,039(531,039)

2.0
to 2.2

15Y

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

7/30/20026/16/2008

4,655,912

4,656,114(408,484)

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

1,551,599

1,551,649

2.39
to 2.95

30Y

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

2/14/20036/9/2004

178,023

160,294(17,729)

1.39
to 2.01

28Y

Bonds issued by the Predecessor - Sub-total-

7,570,056

6,899,096

-

-

Total

-

$166,754,632$164,240,486--

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, the JFM’s total assets are pledged as general collateral for JFM bonds in the amount of
20,103,035 million yen (164,240,486 thousand U.S. dollars) as of 31 March 2022.
2. Amounts in square brackets under “Balance as of 31 March 2022” for “Non-guaranteed bonds issued by the JFM (international)— (Series 43-45, 47-49,
53-58 and 61-92)” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2022” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:

88

JFM ANNUAL REPORT 2022

(Millions of yen)

Within 1 year
Bonds

¥2,345,072

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥2,142,677¥2,335,910¥1,927,159¥1,855,037

As of 31 March 2022

(Millions of yen)

Within 1 year
Bonds

¥2,142,677

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

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

Within 1 year
Bonds

$17,505,538

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years$19,084,232$16,446,053$16,462,722$ 11,175,216(Millions of yen)Classification of borrowed money

Balance as of
1 April 2020

Balance as of
31 March 2021

Average interest rate(%)

Repayment date

¥-

¥-

-

-

Long-term borrowed money(repayment within 1 year)¥-¥1,0000.080

9/27/2021¥203,000¥293,000

0.259

5/29/20233/16/2040¥203,000¥294,000--

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

Borrowed money as of 31 March 2022 consisted of the following:(Millions of yen)Classification of borrowed money

Balance as of
1 April 2021

Balance as of
31 March 2022

Average interest rate(%)

Repayment date

¥-

¥-

-

-

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

0.219

5/29/20233/16/2040¥294,000¥399,500--

Long-term borrowed money(excluding repayment within 1 year)
Total(Thousands of U.S. dollars)

Classification of borrowed money

Balance as of
1 April 2021

Balance as of
31 March 2022

Average interest rate(%)

Repayment date

$-

$-

-

-

Long-term borrowed money(repayment within 1 year)$8,170$---$2,393,791$3,263,889

0.219

5/29/20233/16/2040$2,401,961$3,263,889

-

-

Total

JFM ANNUAL REPORT 2022

Appendix / JFM Data

Short-term borrowed money

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

Financial Section

Short-term borrowed money

JFM’s Role in Local
Government Finance

Short-term borrowed money

Management
Structure

11. Borrowed Money
Borrowed money as of 31 March 2021 consisted of the following:

Operations(Thousands of U.S. dollars)

Review and Plan

As of 31 March 2021

89

Financial Section
Financial Statements
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:
As of 31 March 2021

(Millions of yen)

Within 1 year
Borrowed money¥1,000After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

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

As of 31 March 2022

(Millions of yen)

Within 1 year
Borrowed money¥-

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥86,200¥83,400¥88,000¥104,500(Thousands of U.S. dollars)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$704,248$681,373$718,954$853,758

12. Reserves
Reserves as of 31 March 2021 consisted of the following:(Millions of yen)

Balanceas of
31 March2021

Decrease during the year

Balance as of
1 April 2020

Increaseduring theyear

Reserve for bonuses

¥58

¥59

¥58

¥-

¥59

Reserve for bonuses for directors andcorporate auditors

10

10

10

-

10

Reserve for retirement benefits

62

6

2

13

52

Reserve for retirement benefits for directors
and corporate auditors

32

6

15

1

21

Classification of reserve

Intended
purposeOther

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

Increaseduring theyear

Reserve for bonuses

¥59

¥59

¥59

¥-

¥59

Reserve for bonuses for directors andcorporate auditors

10

10

10

-

10

Reserve for retirement benefits

52

22

2

7

64

Reserve for retirement benefits for directors
and corporate auditors

21

9

13

1

15

Classification of reserve

90

Balanceas of
31 March2022

Decrease during the year

Balanceas of
1 April 2021

JFM ANNUAL REPORT 2022

Intended
purposeOtherClassification of reserve

Balanceas of
1 April 2021

Increaseduring theyear

Reserve for bonuses

Balanceas of
31 March2022

Decrease during the year
Intended
purpose

Other

$483

$489

$483

$-

$489

Reserve for bonuses for directors andcorporate auditors

84

84

84

-

84

Reserve for retirement benefits

430

182

23

61

528

Reserve for retirement benefits for directors
and corporate auditors

172

78

112

14

124

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

Operations

13. Reserve for Interest Rate Volatility
Reserve for interest rate volatility as of 31 March 2021 consisted of the following:(Millions of yen)

Decrease during the year

AmountprovidedAmountwithdrawn

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

Management account reserve forinterest rate volatility

605,607

95,314¥2,805,607¥95,314

Total

¥-

¥-

¥-

Balanceas of
31 March
2021¥2,200,000

60,000¥-640,921¥60,000¥-¥2,840,921

Management
Structure

Increase during the year

Balanceas of
1 April 2020

Reserve for interest rate volatility as of 31 March 2022 consisted of the following:(Millions of yen)

Decrease during the year

AmountprovidedAmountwithdrawn

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

Management account reserve forinterest rate volatility

640,92181,754¥2,840,921¥81,754

Total

¥-

¥-

¥-

Balanceas of
31 March
2022¥2,200,000

40,000¥-682,675¥40,000¥-¥2,882,675

JFM’s Role in Local
Government Finance

Increase during the year

Balanceas of
1 April 2021

(Thousands of U.S. dollars)

Decrease during the year

AmountprovidedAmountwithdrawn

Classification of reserve
Reserve for interest rate volatility$17,973,856$-

Management account reserve forinterest rate volatility

5,236,291

667,925$23,210,147$667,925

Total

$-

$-

$-

Balanceas of
31 March
2022$17,973,856

326,798$-

5,577,418$326,798$-$23,551,274

Financial Section

Increase during the year

Balanceas of
1 April 2021

Appendix / JFM Data
JFM ANNUAL REPORT 2022

91

Financial Section
Financial Statements
Note: The “Decrease during the year” for the “Management account reserve for interest rate volatility” in the amount of
40,000 million yen (326,798 thousand U.S. dollars) consists of the payment to the national treasury in accordancewith the ministerial ordinance for attribution to the national government.

14. Fund for Lending Rate Reduction
Fund for lending rate reduction as of 31 March 2021 consisted of the following:(Millions of yen)Classification of fund

Balanceas of
1 April 2020

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn

OthersBalanceas of
31 March
2021

Basic fund for lending rate
reduction¥920,287¥9,041¥-¥9,041¥-¥920,287

Total¥920,287¥9,041¥-¥9,041¥-¥920,287

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

Balanceas of
1 April 2021

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn

OthersBalanceas of
31 March
2022

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

Total¥920,287¥13,691¥-¥13,691¥-¥920,287(Thousands of U.S. dollars)

Classification of fund

Balanceas of
1 April 2021

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn

OthersBalanceas of
31 March
2022

Basic fund for lending rate
reduction$7,518,689$111,862$-$111,862$-$7,518,689

Total$7,518,689$111,862$-$111,862$-$7,518,689

Notes: 1. The “Amount of reserve” in the “Increase during the year” for the “Basic fund for lending rate reduction”
represents the payment of the amount stipulated in Article 46, Section 1 of the Law and received in accordancewith Article 46, Section 2 of the Law.
2. The “Amount withdrawn” in the “Decrease during the year” for the “Basic fund for lending rate reduction”
represents the payment of the amount reduced in the fund for interest rate reduction pursuant to the provisionsof Article 46, Section 6 of the Law.

92

JFM ANNUAL REPORT 2022

As of and for the year ended 31 March 2021
(1) Outline of retirement benefits system
The JFM has a defined benefit plan that contributes to the Corporate Pension Fund and offers
lump-sum payments upon retirement of employees and a defined contribution plan. The reserve
for retirement benefits and pension expenses arecalculated using the simplified method.

(For the year ended 31 March 2022)
Net income of the general account was 32,263 million
yen (263,587 thousand U.S. dollars), while there wasno net income of management account.

JFM ANNUAL REPORT 2022

Appendix / JFM Data

16. Net Income by Account(For the year ended 31 March 2021)
Net income of the general account was 27,388 million
yen, while there was no net income of management
account.

Financial Section

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

JFM’s Role in Local
Government Finance(c) Profit and loss associated with employee retirement benefitsPension expenses calculated based on the simplified method: 0 million yen(c) P rofit and loss associated with employee retirement benefitsPension expenses calculated based on the simplified method: 22 million yen (182 thousand U.S.
dollars)

Management
Structure(b) Retirement benefit obligation, plan assets, and reconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:

184 million yen
Plan assets: (181) million yen
Balance: 
2 million yen
Unfunded retirement benefit obligation:
49 million yen
Net liability for retirement benefits in the balance
sheet: 
52 million yen
Reserve for retirement benefits at the end of the
fiscal year: 
52 million yen
Net liability for retirement benefits in the balance
sheet: 
52 million yen(b) R etirement benefit obligation, plan assets, and reconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:
196 million yen (1,605 thousand U.S. dollars)
Plan assets:(186) million yen ((1,520) thousand U.S. dollars)
Balance:
10 million yen (85 thousand U.S. dollars)
Unfunded retirement benefit obligation:

54 million yen (443 thousand U.S. dollars)
Net liability for retirement benefits in the balance
sheet:
64 million yen (528 thousand U.S. dollars)
Reserve for retirement benefits at the end of the
fiscal year:
64 million yen (528 thousand U.S. dollars)
Net liability for retirement benefits in the balance
sheet:
64 million yen (528 thousand U.S. dollars)

Operations(2) Defined benefit plan(a) Reconciliation of outstanding amounts of reserve
for retirement benefits:
Reserve for retirement benefits at the beginningof the fiscal year: 
62 million yen
Pension expenses: 
0 million yen
Employee retirement benefits paid:  2 million yen
Contributions to the defined benefit plan:
7 million yen
Reserve for retirement benefits at the end of the
fiscal year: 
52 million yen(2) Defined benefit plan(a) R econciliation of outstanding amounts of reserve
for retirement benefits:
Reserve for retirement benefits at the beginningof the fiscal year:
52 million yen (430 thousand U.S. dollars)
Pension expenses:

22 million yen (182 thousand U.S. dollars)
Employee retirement benefits paid:
2 million yen (23 thousand U.S. dollars)
Contributions to the defined benefit plan:
7 million yen (61 thousand U.S. dollars)
Reserve for retirement benefits at the end of the
fiscal year:
64 million yen (528 thousand U.S. dollars)

Review and Plan

15. Reserve for Retirement Benefits

93

Financial Section
Financial Statements
17. Information by Account (Balance sheets)
Balance sheets of general account and management account as of 31 March 2021 were as follows:(Millions of yen)

Item

Generalaccount

Management
account¥17,329,790¥5,814,599

OffsetTotal(Assets)
Loans
Securities¥23,144,389

593,000

593,000

1,106,432

1,106,432

Cash collateral paid for financial instruments

3,282

3,282

Other assets

3,381

Tangible fixed assets

2,654

2,654

Intangible fixed assets

933

933

Cash and bank deposits

Due from general accountTotal assets

3,533

6,914

600,823¥(600,823)

19,039,474

6,418,956(600,823)

14,706,147

5,704,619

24,857,606(Liabilities)
Bonds

20,410,767

Borrowed money

294,000

294,000

Cash collateral received for financial instruments

33,48033,480

Other liabilities

1,779

2,891

4,670

Reserve for bonuses

59

59

Reserve for bonuses for directors and corporate auditors

10

10

Reserve for retirement benefits

52

52

Reserve for retirement benefits for directors and corporate
auditors

21

21

920,287920,287920,287920,287

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

600,823

Reserves under special laws

2,200,000

Reserve for interest rate volatility(600,823)
653,636

2,853,636

2,200,000

2,200,000

Management account reserve for interest rate volatility

640,921640,921

Reserve for interest rate reduction

12,714

12,714

Total liabilities

18,756,661

6,361,147(600,823)

24,516,985(Net Assets)
Capital16,602

16,602Retained earnings

265,772

265,772

265,772

265,772

437

437

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

94

JFM ANNUAL REPORT 2022

57,80857,808282,81257,808340,621¥19,039,474¥6,418,956¥(600,823)¥24,857,606

(Millions of yen)

Item

Generalaccount

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

OffsetTotal(Assets)
Loans¥23,550,819

920,000

920,000

Cash and bank deposits

353,491

353,491

812

812

Other assets

3,260

Tangible fixed assets

2,572

2,572

Intangible fixed assets

976

976

Due from general accountTotal assets

2,932

6,193

600,043¥(600,043)

19,892,632

5,542,276(600,043)

15,313,128

4,789,906

Operations

Securities

Cash collateral paid for financial instruments

Review and Plan

Balance sheets of general account and management account as of 31 March 2022 were as follows:

24,834,865(Liabilities)
20,103,035

Borrowed money

399,500

399,500

Cash collateral received for financial instruments

147,451

147,451

Other liabilities

1,776

2,868

4,644

59

59

Reserve for bonuses for directors and corporate auditors

10

10

Reserve for retirement benefits

64

64

Reserve for retirement benefits for directors and corporate
auditors

15

15

920,287920,287920,287920,287

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

600,043

Reserves under special laws

2,200,000

Reserve for interest rate volatility

691,692

2,891,692

2,200,000

Reserve for interest rate reduction
19,582,337

2,200,000
682,675

682,675

9,017

9,017

5,484,467(600,043)

24,466,761(Net Assets)
16,602

16,602Retained earnings

298,035

298,035

298,035

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

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

57,80857,808310,295

57,808368,104¥19,892,632¥5,542,276¥(600,043)¥24,834,865

JFM ANNUAL REPORT 2022

Appendix / JFM Data

CapitalFinancial Section

Management account reserve for interest rate volatility

Total liabilities(600,043)

JFM’s Role in Local
Government FinanceReserve for bonuses

Management
Structure

Bonds

95

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

Item

Generalaccount

Management
account$152,054,895$40,353,763

OffsetTotal(Assets)
Loans$192,408,658

Securities

7,516,340

7,516,340

Cash and bank deposits

2,888,002

2,888,002

Cash collateral paid for financial instruments

6,634

6,634

Other assets

26,642

Tangible fixed assets

21,01721,017

Intangible fixed assets

7,982

7,982

Due from general accountTotal assets

23,95750,5994,902,319$(4,902,319)

162,521,512

45,280,039(4,902,319)

125,107,261

39,133,225

202,899,232(Liabilities)
Bonds

164,240,486

Borrowed money

3,263,889

3,263,889

Cash collateral received for financial instruments

1,204,665

1,204,665

Other liabilities

14,51423,43337,947

Reserve for bonuses

489

489

Reserve for bonuses for directors and corporate auditors

84

84

Reserve for retirement benefits

528

528

Reserve for retirement benefits for directors and corporate
auditors

124

124

7,518,689

7,518,689

7,518,689

7,518,689

Fund for lending rate reduction
Basic fund for lending rate reduction
Due to management account4,902,319

Reserves under special laws

17,973,856

Reserve for interest rate volatility

5,651,086

23,624,942

17,973,856

Management account reserve for interest rate volatility
Reserve for interest rate reduction
Total liabilities(4,902,319)

159,986,418

17,973,856
5,577,418

5,577,418

73,66873,66844,807,744(4,902,319)

199,891,843(Net Assets)
CapitalRetained earnings
General account surplus reserve
Valuation, translation adjustments and others

135,638

135,6382,434,931

2,434,931

2,434,931

2,434,931(35,477)(35,477)

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

96

JFM ANNUAL REPORT 2022

472,297472,297

2,535,092

472,297

3,007,389$162,521,510$45,280,041$(4,902,319) $202,899,232

Operations

18. Information by Account (Statements of income)Statements of income of general account and management account from 1 April 2020 through 31 March 2021 wereas follows:

Review and Plan

Notes: 1. General account and management accountIn accordance with the provisions of Article 13, Section 1 of the Supplementary Provisions of the Law,
management account is used to conduct administration, collection and other related operations of the assetsthat the JFM inherited from the Predecessor (management of the assets of the Predecessor).
Management account is separated from the other account (general account) pursuant to the provisions ofArticle 13, Section 3 of the Supplementary Provisions of the Law.
2. General account surplus reserve and management account surplus reserve
“Net income” of the general account is posted as “General account surplus reserve” in accordance with theprovisions 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.

(Millions of yen)

IncomeInterest income
Fees and commissions
Other operating income

Generalaccount

Management
account¥127,026¥138,908

117,492

133,288

OffsetTotal¥(6,011)¥259,923
250,780

83

83

7

7

Other income

9,052

9,052

Contributions from fund for lending rate reduction

9,041

11

11

Administrative fee for management account391

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

(391)
5

(5)

5,615

(5,615)(6,011)

Expenses

99,63748,049Interest expenses

141,675

47,445

134,580

189

102

292

Other operating expenses

3,622

91

3,713

General and administrative expenses

3,069

19

3,088

Other expenses

0Interest on due to management account

5

(5)

5,615

(5,615)

Transfer to management account for fund for lending rate
reduction
Administrative fee for general accountOrdinary income
Special gains

0

391

(391)

27,38890,859-118,247-

64,454-64,45460,00060,000

Reversal of reserve for interest rate reduction

4,454

4,454

Special losses-

155,314-

155,314

Loss on disposal of fixed assets
Provision for management account reserve for interest rate
volatility

95,314

95,314

Payment to national treasury

60,00060,000Net income¥27,388¥-¥-¥27,388

JFM ANNUAL REPORT 2022

Appendix / JFM Data

Reversal of management account reserve for interest rate
volatility

Financial Section

87,135

Fees and commissions

JFM’s Role in Local
Government Finance

9,041

OthersManagement
Structure

Item

97

Financial Section
Financial Statements
 tatements of income of general account and management account from 1 April 2021 through 31 March 2022 wereS
as follows:(Millions of yen)

Item

Generalaccount

Management
account

Income¥124,505¥116,609

Interest income

110,310

111,760

OffsetTotal¥(5,246)¥235,867
222,071

Fees and commissions

76

76

Other operating income

15

15

13,703

13,703

13,691

13,691

11

11

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

398

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

(398)
5

(5)

4,843

(4,843)(5,246)

Expenses

92,24238,553

Interest expenses

125,548

81,00237,784

118,786

Fees and commissions

199

94

294

Other operating expenses

2,839

242

3,081

General and administrative expenses

3,352

33

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

(5)

4,843

(4,843)Administrative fee for general accountOrdinary income
Special gains

398

(398)

32,26378,056-110,319-

43,697-

43,697

Reversal of management account reserve for interest rate
volatility

40,000

Reversal of reserve for interest rate reduction
Special losses

3,385

5

40,0003,697-

121,754

3,697-

121,754

Loss on disposal of fixed assets
Provision for management account reserve for interest rate
volatility

81,754

Payment to national treasury
Net income

98

JFM ANNUAL REPORT 2022

81,75440,000¥32,263¥-

40,000¥-¥32,263

Item
IncomeInterest income

Generalaccount

Management
account$1,017,199$952,693

901,232

913,079

OffsetTotal$(42,867)$1,927,025
1,814,311

629

629

Other operating income

131

131

111,954

111,954

111,862

111,862

92

92

Other income
Contributions from fund for lending rate reduction
OthersAdministrative fee for management account3,253

Interest on due from general accountTransfer from general account for fund for lending rate
reduction(3,253)43(43)

39,571(39,571)(42,867)

Expenses753,612314,978

Interest expenses

1,025,723

308,699

970,481

1,633

770

2,403

Other operating expenses

23,196

1,981

25,177

General and administrative expenses

27,387275

Transfer to management account for fund for lending rate
reduction(43)

39,571(39,571)

Administrative fee for general accountSpecial gains

3,253(3,253)

263,587

637,715-

901,302-357,008-

357,008

Reversal of management account reserve for interest rate
volatility

326,798

Reversal of reserve for interest rate reduction
Special losses

326,798

30,210-994,723

30,210-994,723

Loss on disposal of fixed assets
Provision for management account reserve for interest rate
volatility

667,925

Payment to national treasury

326,798$263,587$-

326,798$-$263,587

Financial Section

Net income

667,925

JFM’s Role in Local
Government FinanceOrdinary income

27,662

43

Management
Structure

661,782

Fees and commissions

Interest on due to management accountOperations

Fees and commissions

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

Appendix / JFM Data
JFM ANNUAL REPORT 2022

99

Financial Section
Financial Statements
19. Fair Value of Marketable Securities
Marketable held-to-maturity securities as of 31 March 2021 consisted of the following:(Millions of yen)

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

Fair value

Difference

Negotiable certificates ofdeposit---

Sub total---

Negotiable certificates ofdeposit¥593,000¥593,000-

Sub total

593,000

593,000-¥593,000¥593,000-

Total

Marketable held-to-maturity securities as of 31 March 2022 consisted of the following:(Millions of yen)

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

Fair value

Difference

Negotiable certificates ofdeposit---

Sub total---

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

Sub total

920,000

920,000-¥920,000¥920,000-

Total(Thousands of U.S. dollars)

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

Difference

-

-

-

Sub total---

Negotiable certificates ofdeposit$7,516,340$7,516,340-

Sub total

7,516,340

7,516,340-$7,516,340$7,516,340-

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

JFM ANNUAL REPORT 2022

Fair value

Negotiable certificates ofdeposit

Total

100

Book value

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

JFM ANNUAL REPORT 2022

Operations

and principal of foreign currency-denominatedbank deposits, a foreign exchange forward
contract is entered into at the time of each deposit
to hedge the risks.
(d) Assessment of hedge effectiveness
The JFM ensures hedging instruments and hedged
items have the same major terms when entering
into hedge transactions to offset market fluctuation
risks associated with bonds and long-termborrowed money. Accordingly, The JFM deems
these to be highly effective and thus does notassess effectiveness.
Moreover, a periodic assessment of hedge effectiveness is omitted for interest rate swaps that
qualify for exceptional accrual method and currency
swaps and forward contracts that qualify fordeferral hedge accounting.
(3) Risks on derivative transactions
Major risks on derivative transactions are market
risk and credit risk. Market risk is the risk of future
revenue fluctuations due to market value changes.
Credit risk is the risk of losses incurred whencounterparties 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 in the underlying hedged items. The
JFM enters into ISDA Master Agreements and
CSA with financial institutions, which are its
derivative transactions counterparties, to reduce
credit risk.
Moreover, The JFM constantly monitors restructuring costs of the transactions and the counterparties’ credit profiles, and deals with multiple
counterparties.
(4) Risk management system for derivative transactions
Execution and management of derivative transactions are conducted by the Finance Departmentof The JFM with the approval of persons in chargein accordance with the operational guidelines
which specify transaction authority and limits on
the transaction amount.
Additionally, the total amount of derivativetransactions, the status of risks, the assessedfair value, and the credit risk on counterpartiesare regularly reported to the Integrated Risk
Management Committee.

Review and Plan

20. Information on Derivative Transactions(1) Types of derivative transactions
Derivative transactions entered into by the JFM
are interest rate swaps for interest rate relatedtransactions, and currency swaps and foreignexchange forward contracts for currency relatedtransactions.
(2) Policies and purposes of derivative transactions
The JFM uses interest rate swaps, currencyswaps and foreign exchange forward contracts
as a means of hedging exposure to interest rate
and foreign exchange fluctuation risks, and does
not enter into derivatives for speculative purposes.
Interest rate swaps are used to hedge exposure
to interest rate risk on funding activities. Currency
swaps and foreign exchange forward contracts
are used to hedge exposure to foreign exchange
risk associated with issuance of foreign currency-denominated bonds and foreign currency-denominated deposits.
Hedge accounting is applied to interest rateswaps, currency swaps and foreign exchange
contracts.
(a) Hedge accounting method
Interest rate swaps used to hedge the risk ofinterest rate fluctuations that qualify for hedge
accounting and meet specific matching criteria
are not measured at fair value, but the differential
paid or received under the swap agreements is
recognized and included in interest expense or
income. If swap contracts or forward contracts
used to hedge the risk of foreign currency fluctuation qualify for deferral hedge accounting, theforeign currency-denominated assets and liabilities
are translated at the contracted rate.
(b) Hedging instruments and hedged items( i ) Hedging instruments: Interest rate swaps
Hedged items: Bonds and long-term borrowed
money(ii) Hedging instruments: Currency swaps
Hedged items: Foreign currency-denominatedbonds(iii) Hedging instruments: Foreign exchange forward
contracts
Hedged items: Foreign currency-denominatedbank deposits(c) Hedging policy
The JFM uses hedging instruments, such as
interest rate swaps and currency swaps, as ameans 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

101

Financial Section
Independent Auditor’s Report

102

JFM ANNUAL REPORT 2022

Review and Plan
Operations

Management
Structure

JFM’s Role in Local
Government Finance

Financial Section

Appendix / JFM Data103

JFM ANNUAL REPORT 2022

Appendix / JFM Data
Appendix 

105

Members of the Representative Board and the Supervisory Committee  105
Redemption of Loans in Fiscal 2021 

105

Outstanding Loans by Business 

106Additional Data Regarding Liquidity Risk 

107

Outstanding Loans by Borrower 

108

Bond Issuance in Fiscal 2021 

112

Outstanding International Bonds 116

JFM Data 

104

JFM ANNUAL REPORT 2022

117

Organization History 

117

Organization Chart 

118

Directors and Corporate Auditors 

119Contact Information 

119Appendix / JFM Data
AppendixReview and Plan

Members of the Representative Board and theSupervisory Committee
The Representative Board members of JFM as of 10 March 2022 are as follows:
Title

Background

KOUNO Shunji

Chairman

Chairman, Committee for Local Taxes and Finance of National Governors' Asssociation
Governor, Miyazaki prefecture

USHIKOSHI Toru

Deputy Chairman

Chairman, Finance Committee of Japan Association of City Mayors
Mayor, Omachi City, Nagano prefecture

ARAKI Yasuomi

Deputy Chairman

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

OBATA Junko

MemberProfessor, Nihon University Law School

JINNO NaohikoMemberProfessor Emeritus, The University of Tokyo

IKEDA Koji

MemberChairman, Hirogin Holdings, Inc.

Operations

Name

Name

Title

Management
Structure

The Supervisory Committee members of JFM as of 1 August 2022 are as follows:
Background

Chairman

Chairman, Tanshi Association

SUZUKI Yutaka

Deputy Chairman

Auditor, Aoyama Gakuin
Professor Emeritus, Aoyama Gakuin University

SEIICHI Tomoko

MemberProfessor, Seinan Gakuin University

YONEDA Yasuharu

MemberProfessor Emeritus, Shinshu University

TAMAOKI Hitomi

MemberChief Executive Officer, Tsumugi Co., Ltd.

KAMIZAKI Masanori

MemberFormer Director, Jiji Press, Ltd.

JFM’s Role in Local
Government Finance

MITANI Takahiro

Redemption of Loans in Fiscal 2021
Principal

Interest

Amount(USD millions)

Number of loans

Amount(USD millions)461,206

14,825

521,811

1,813

162

39

162

2

461,368

14,864

521,973

1,815

General loans

328

209

291

0

Loans to local government
corporations

-

-

-

-

Subtotal

328

209

291

0

Redemption of loans with pre-consent or pre-approval

-

-

-

-

Redemption of short-term loans

-

-

-

-

461,696

15,073522,264

1,815

General loans
Regular redemption of
long-term loans

Loans to local government
corporations
Subtotal

Prepayment of long-term
loans

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

JFM ANNUAL REPORT 2022

Appendix / JFM Data

Number of loans

Financial Section

Classification

105

Appendix / JFM Data
Appendix

Outstanding Loans by Business(As of 31 March 2022)
Number ofLoans Made

Business

Loan Amount (USD millions)% of Total

Public Projects, etc.

5,334

4,207

2.2%

Public Housing

3,277

1,704

0.9%

National Disaster Prevention

1,264

926

0.5%

Educational Facilities Development

1,792

722

0.4%

Social Welfare Facilities Development

1,898

915

0.5%

519

430

0.2%

General Projects

1,001

681

0.3%

Regional Revitalization

1,817

688

0.4%

Disaster Management and Mitigation

12,875

6,835

3.5%

Local Road Development

6,364

3,915

2.0%

Special Municipal Mergers

6,154

8,961

4.7%

Disaster Prevention

3,064

1,389

0.7%

Others16,548

7,843

4.1%

61,907

39,217

20.4%

Water Supply

53,44624,864

12.9%

Transportation

848

6,005

3.2%

4,979

9,419

4.9%

119,445

56,123

29.2%

2,049

1,267

0.7%

Electricity and Gas

696

596

0.3%

Port Facilities

737

297

0.2%

Markets and Slaughterhouses

716

926

0.4%

Tourism and Others

178

101

0.1%

183,094

99,59951.8%

Temporary Financial Countermeasures Funding

9,340

49,20425.6%

Loans Covering Decrease in Local Tax Revenues

488

4,301

2.2%

254,829

192,320100.0%

63

89

0.0%

254,892

192,409100.0%

General Waste Disposal
General
Account-related
Loanssubtotal

Hospitals and Elderly Care Services
Sewerage
Municipal
Enterprise-related
Loans

Industrial Water Supply

subtotal

Total
Local Government Road Corporation, Toll Roads *1
Grand Total

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

106

JFM ANNUAL REPORT 2022

amount payment when funding from the capital markets.
Therefore, inflow and outflow of funds in JFM are limited
which makes it possible to predict next month’s inflows
and outflows. JFM finance management division holdhigh quality liquid assets based on the calculation at theend of the month to secure liquidity for the following
month, which is also monitored by the risk management
division which is independent from the finance management
division.

(As of 31 March 2022)(USD millions)

Item
Total of liquid assets*1

31 March 2021

31 March 2022

$817

$940

Outflows related to unsecured funding(excluding debt securities)

After applying
cash outflow/inflow
rate

Before applying
cash outflow/inflow
rate

After applying
cash outflow/inflow
rate

0

0

0

2,827

2,827

3,354

3,354

-

2,827

-

3,354

3,072

2,120

2,843

2,515

Cash inflows from collection of loans

0

0

0

0

Other cash inflows *3

0

0

0

0

3,072

2,120

2,843

2,515

High quality liquid assets

-

817

-

940

Net cash outflows

-

707

-

838

Liquidity coverage ratio

-

116%

-

112%

Debt securities
Total cash outflows
Cash inflows from investment *2

Total cash inflows

*4

-

7,740

-

Semi liquidity coverage ratio *6-

1,211%

-

1,662
310%

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

Financial Section

Total of semi liquid assets *5

JFM’s Role in Local
Government Finance0Management
Structure

Before applying
cash outflow/inflow
rate

Operations

JFM has been managing liquidity risk independently
from March 2015 with reference to the Basel III regulation,
by setting up an internal policy to secure liquid assets
under the supervision of our ALM committee. JFM holds
high quality liquid assets in order to prevent any
disruptions regarding redemptions and interest payments
for the following month’s JFM bonds.
JFM’s fund inflows and outflows are mainly consistedof lending and collecting loans from municipalities, bondissuance related payment such as notional or interest

Review and Plan

Additional Data Regarding Liquidity Risk

Appendix / JFM Data
JFM ANNUAL REPORT 2022

107

Appendix / JFM Data
Appendix

Outstanding Loans by Borrower(As of 31 March 2022)
Cities and Special Wardsof TokyoPrefectures
Borrower

108

Number ofLoans Made

Towns and Villages

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Hokkaido

286

4,010

5,539

5,450

8,857

1,809

Aomori

179

260

2,177

2,240

1,485

424

Iwate

244

477

2,717

2,046

901

273

Miyagi

305

949

4,558

3,079

2,656

450

Akita

203

253

4,579

2,226

1,032

73

Yamagata

205

641

2,850

1,410

1,942

289

Fukushima

381

773

3,658

1,940

3,093

457

Ibaraki

470

1,115

7,162

3,967

1,441

335

Tochigi

257

601

3,230

1,966

930

255

Gunma

194

293

3,346

1,759

1,758

263

Saitama

241

2,458

6,848

5,945

1,921

506

Chiba

367

1,287

5,462

6,064

936

220

Tokyo

85

738

2,261

2,503

170

37

Kanagawa

194

1,900

3,349

6,458

1,355

425

Niigata

258

424

7,774

3,254

960

134

Toyama

241

250

3,542

2,277

564

168

Ishikawa

127

219

2,838

1,423

1,296

370

Fukui

191

221

2,195

1,359

751

83

Yamanashi

136

233

2,700

858

940

125

Nagano

276

366

4,129

2,041

3,177

451

Gifu

225

1,336

4,353

1,754

1,379

349

Shizuoka

281

349

5,086

3,123

855

240

Aichi

202

2,193

5,343

5,097

919

214

Mie

388

1,301

4,017

2,608

1,103

243

Shiga

190

658

3,998

1,913

610

115

Kyoto

185

333

3,726

3,786

1,175

251

Osaka

79

2,068

6,216

10,294

970

319

Hyogo

302

3,888

8,378

7,863

2,247

722

Nara

250

771

2,489

1,689

2,157

598

Wakayama

104

411

1,840

1,934

1,734

543

Tottori

348

806

1,271

937

1,913

358

JFM ANNUAL REPORT 2022

Number ofLoans Made

Loan Amount(USD millions)

Local Government Road
Corporations
Number ofLoans Made

Total

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)% of Total

11,477

6.0

114

137

-

-

3,955

3,061

1.6

218

153

-

-

4,080

2,948

1.5

126

68

-

-

7,645

4,546

2.4

12

14

-

-

5,826

2,565

1.3

177

84

-

-

5,174

2,423

1.3

171

135

-

-

7,303

3,305

1.7

267

229

1

0

9,341

5,646

2.9

20

21

-

-

4,437

2,843

1.5

248

211

-

-

5,546

2,525

1.3

329

151

-

-

9,339

9,060

4.7

573

346

3

4

7,341

7,920

4.1

33

118

-

-

2,549

3,396

1.8

52

225

-

-

4,950

9,007

4.7

242

145

-

-

9,234

3,957

2.1

149

105

-

-

4,496

2,800

1.5

34

22

-

-

4,295

2,034

1.1

65

26

-

-

3,202

1,689

0.9

137

32

-

-

3,913

1,247

0.6

179

95

1

0

7,762

2,953

1.5

16

9

-

-

5,973

3,447

1.8

74

64

5

1

6,301

3,776

2.0

73

18

21

50

6,558

7,573

3.9

30

33

-

-

5,538

4,185

2.2

168

59

-

-

4,966

2,746

1.4

34

51

2

0

5,122

4,421

2.3

497

583

-

-

7,762

13,263

6.9

403

346

5

2

11,335

12,820

6.7

51

32

-

-

4,947

3,090

1.6

96

57

-

-

3,774

2,944

1.5

33

14

-

-

3,565

2,114

1.1

JFM ANNUAL REPORT 2022

Appendix / JFM Data

14,973Financial Section-

JFM’s Role in Local
Government Finance-Management
Structure208

Operations

291

Review and Plan

Local Government Associations

109

Appendix / JFM Data
Appendix
Cities and Special Wardsof TokyoPrefectures
Borrower

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Shimane

284

748

2,712

1,548

330

68

Okayama

195

674

4,516

2,493

1,264

206

Hiroshima

464

1,595

4,188

3,442

980

256

Yamaguchi

406

489

4,226

2,141

622

90

Tokushima

188

336

1,531

1,036

895

250

Kagawa

158

210

1,808

983

746

188

Ehime

72

264

2,291

1,567

741

216

Kochi

166

745

1,876

1,185

990

231

Fukuoka

92

1,427

5,468

6,786

2,323

865

Saga

71

308

1,628

1,236

662

235

Nagasaki

139

439

2,750

2,096

760

164

Kumamoto

152

728

2,747

1,549

1,833

447

Oita

77

237

2,361

1,134

215

60

Miyazaki

133

559

2,038

1,240

748

178

Kagoshima

175

1,088

2,353

1,331

933

228

Okinawa

215

774

1,649

1,358

942

249

10,381

42,202

171,773

130,389

66,211

15,026

Total

110

Number ofLoans Made

Towns and Villages

JFM ANNUAL REPORT 2022

Number ofLoans Made

Loan Amount(USD millions)

Local Government Road
Corporations
Number ofLoans Made

Total

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)% of Total

-

-

3,403

2,398

1.2

90

83

-

-

6,065

3,455

1.8

20

25

12

18

5,664

5,335

2.8

64

27

-

-

5,318

2,747

1.4

3

1

-

-

2,617

1,623

0.8

574

178

-

-

3,286

1,559

0.8

19

5

-

-

3,123

2,051

1.1

11

56

-

-

3,043

2,217

1.2

380

201

13

14

8,276

9,294

4.8

150

75

-

-

2,511

1,854

1.0

15

20

-

-

3,664

2,718

1.4

67

178

-

-

4,799

2,903

1.5

0

0

-

-

2,653

1,432

0.7

18

4

-

-

2,937

1,982

1.0

17

10

-

-

3,478

2,657

1.4

47

18

-

-

2,853

2,398

1.2

6,464

4,703

63

89

254,892

192,409

100.0

Management
Structure

34

Operations

77

Review and Plan

Local Government Associations

JFM’s Role in Local
Government FinanceNote: Totals may not add up due to rounding.

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

111

Appendix / JFM Data
Appendix

Bond Issuance in Fiscal 2021
1. JFM Bonds(1) International Bonds
SeriesNumberTenor(yr)FormatCurrency

Issue Size(in millions)

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

88

5

Global

USD

1,250

1.125

99.88420 Apr 2021

20 Apr 2026

89

10

Euro

EUR

1,000

0.100

99.8013 Sep 2021

3 Sep 2031

90

5

Euro

USD

52

1.060

99.99027 Oct 2021

27 Oct 2026

91

5

Euro

AUD

28

1.200

99.99027 Oct 2021

27 Oct 2026

92

3

Global

USD

750

1.500

99.93027 Jan 2022

27 Jan 2025

(2) Domestic Public Offerings
SeriesNumber

112

Tenor
(yr)

Issue Size
(JPY in billions) (USD in millions)

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

143

10

30

245

0.185

100

19 Apr 2021

28 Apr 2031

144

10

35

286

0.160

100

25 May 2021

28 May 2031
27 Jun 2031

145

10

35

286

0.130

100

17 Jun 2021

146

10

35

286

0.090

100

19 Jul 2021

28 Jul 2031

147

10

30

245

0.100

100

20 Aug 2021

28 Aug 2031

148

10

35

286

0.115

100

21 Sep 2021

26 Sep 2031

149

10

30

245

0.155

100

21 Oct 2021

28 Oct 2031

150

10

30

245

0.135

100

18 Nov 2021

28 Nov 2031

151

10

35

286

0.130

100

20 Dec 2021

26 Dec 2031

152

10

30

245

0.204

100

21 Jan 2022

28 Jan 2032

153

10

30

245

0.274

100

18 Feb 2022

27 Feb 2032

154

10

35

286

0.229

100

17 Mar 2022

26 Mar 2032

90

20

15

123

0.501

100

19 Apr 2021

26 Apr 2041

91

20

25

204

0.457

100

17 Jun 2021

28 Jun 2041

92

20

20

163

0.448

100

19 Jul 2021

26 Jul 2041

93

20

15

123

0.449

100

21 Sep 2021

27 Sep 2041

94

20

15

123

0.492

100

21 Oct 2021

28 Oct 2041

95

20

15

123

0.481

100

20 Dec 2021

27 Dec 2041

96

20

20

163

0.543

100

21 Jan 2022

28 Jan 2042

29

5

20

163

0.005

100

19 Jul 2021

28 Jul 2026

30

5

15

123

0.001

100

18 Nov 2021

27 Nov 2026

13

30

20

163

0.737

100

19 Apr 2021

28 Apr 2051

14

30

10

82

0.736

100

18 Nov 2021

28 Nov 2051

F608

5

10

82

0.013

100

27 Apr 2021

28 May 2026

F609

6

3

25

0.010

100

27 Apr 2021

27 Nov 2026

F610

8

3

25

0.057

100

27 Apr 2021

27 Nov 2028

F611

9

3

25

0.135

100

27 Apr 2021

25 Oct 2030

F612

9

6

49

0.138

100

27 Apr 2021

28 Oct 2030

F613

9

3

25

0.115

100

28 Apr 2021

26 Apr 2030

F614

9

3

25

0.125

100

28 Apr 2021

20 Jun 2030

F615

15

4

33

0.332

100

28 Apr 2021

28 Apr 2036

F616

15

3

25

0.339

100

28 Apr 2021

30 Apr 2036

F617

21

3

25

0.491

100

28 Apr 2021

28 Mar 2042

F618

9

20

163

0.118

100

30 Apr 2021

30 Apr 2030

F619

11

6

49

0.186

100

30 Apr 2021

30 Mar 2032

F620

15

3

25

0.323

100

30 Apr 2021

30 Apr 2036

F621

5

10

82

0.012

100

27 May 2021

18 Jun 2026

JFM ANNUAL REPORT 2022

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

F622

9

6

F623

9

10

49

0.112

100

27 May 2021

27 May 2030

82

0.136

100

27 May 2021

F624

21

28 Nov 2030

3

25

0.482

100

31 May 2021

27 Dec 2041

F625
F626

9

3

25

0.140

100

28 May 2021

28 Nov 2030

15

3

25

0.326

100

28 May 2021

20 May 2036

(JPY in billions) (USD in millions)

F627

5

20

163

0.012

100

29 Jun 2021

29 Jul 2026

F628

5

6

49

0.014

100

29 Jun 2021

28 Aug 2026

F629

9

3

25

0.055

100

29 Jun 2021

28 Jun 2030

F630

9

25

204

0.085

100

29 Jun 2021

27 Dec 2030

F631

6

3

25

0.005

100

29 Jul 2021

19 Feb 2027

F632

15

3

25

0.243

100

29 Jul 2021

29 Jul 2036

F633

8

20

163

0.051

100

29 Jul 2021

27 Jul 2029

15

4

33

0.249

100

30 Jul 2021

28 Jul 2036

15

4

33

0.249

100

30 Jul 2021

29 Jul 2036

F636

18

3

25

0.332

100

29 Jul 2021

28 Mar 2039

F637

15

3

25

0.240

100

30 Jul 2021

30 Jul 2036

F638

16

3

25

0.277

100

30 Jul 2021

30 Jul 2037

F639

19

3

25

0.378

100

30 Jul 2021

30 Mar 2040

F640

5

6

49

0.009

100

30 Sep 2021

30 Nov 2026

9

6

49

0.059

100

30 Sep 2021

30 Sep 2030

6

3

25

0.012

100

28 Oct 2021

28 Oct 2027

F643

8

10

82

0.070

100

28 Oct 2021

26 Oct 2029

F644

9

20

163

0.116

100

28 Oct 2021

28 Oct 2030

F645

5

6

49

0.005

100

26 Nov 2021

26 Jan 2027

9

6

49

0.040

100

24 Dec 2021

24 Dec 2030

8

10

82

0.095

100

27 Jan 2022

25 Jan 2030

F648

9

20

163

0.153

100

27 Jan 2022

27 Jan 2031

F649

8

3

25

0.072

100

28 Jan 2022

28 Mar 2030

F650

9

6.5

53

0.121

100

28 Jan 2022

28 Jan 2031

F651

9

3

25

0.150

100

28 Jan 2022

28 May 2031

F652

9

3

25

0.169

100

28 Jan 2022

25 Jul 2031

F653

9

3

25

0.170

100

28 Jan 2022

28 Jul 2031

F654

11

3

25

0.219

100

28 Jan 2022

23 Aug 2032

F655

11

3

25

0.223

100

28 Jan 2022

24 Aug 2032

F656

11

3

25

0.224

100

28 Jan 2022

25 Aug 2032

F657

11

3

25

0.225

100

28 Jan 2022

26 Aug 2032

F658

11

3

25

0.225

100

28 Jan 2022

27 Aug 2032

F659

13

3

25

0.305

100

28 Jan 2022

26 Jan 2035

F660

5

6

49

0.001

100

31 Jan 2022

18 Feb 2027

F661

5

12

98

0.001

100

31 Jan 2022

19 Feb 2027

F662

5

6

49

0.001

100

31 Jan 2022

22 Feb 2027

F663

5

12

98

0.001

100

31 Jan 2022

24 Feb 2027

F664

5

6

49

0.001

100

31 Jan 2022

25 Feb 2027

F665

5

5.5

45

0.001

100

31 Jan 2022

28 May 2027

F666

5

6

49

0.001

100

31 Jan 2022

29 Jun 2027

F667

5

7

57

0.113

100

25 Feb 2022

23 Apr 2027

F668

9

3

25

0.259

100

25 Feb 2022

25 Aug 2031

F669

7

10

82

0.115

100

24 Mar 2022

23 Mar 2029

JFM ANNUAL REPORT 2022

113

Financial Section

F646
F647

Appendix / JFM Data

JFM’s Role in Local
Government Finance

F641
F642

Management
Structure

F634
F635

Operations

Tenor
(yr)

Review and Plan

Issue Size

SeriesNumberAppendix / JFM Data
Appendix
2. Private Placements with Pension Funds for Local Government Officials

114

Issue Size

SeriesNumberTenor(yr)

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

A135

10

20

163

0.215

100

19 Apr 2021

18 Apr 2031

A136

10

A137

10

10

82

0.190

100

25 May 2021

23 May 2031

10

82

0.160

100

21 Jun 2021

20 Jun 2031

A138

10

A139

10

10

82

0.120

100

19 Jul 2021

18 Jul 2031

20

163

0.130

100

20 Aug 2021

20 Aug 2031

A140

10

10

82

0.145

100

21 Sep 2021

19 Sep 2031

A141

10

10

82

0.185

100

21 Oct 2021

21 Oct 2031

A142

10

10

82

0.165

100

18 Nov 2021

18 Nov 2031

A143

10

20

163

0.160

100

20 Dec 2021

19 Dec 2031

A144

10

10

82

0.234

100

21 Jan 2022

21 Jan 2032

(JPY in billions) (USD in millions)

A145

10

10

82

0.304

100

18 Feb 2022

18 Feb 2032

A146

10

10

82

0.259

100

24 Mar 2022

24 Mar 2032

B66

10

5

41

0.215

100

19 Apr 2021

18 Apr 2031

B67

10

5.5

45

0.190

100

25 May 2021

23 May 2031

B68

10

9

74

0.160

100

21 Jun 2021

20 Jun 2031

B69

10

17.5

143

0.120

100

19 Jul 2021

18 Jul 2031

B70

10

11.5

94

0.130

100

20 Aug 2021

20 Aug 2031

B71

10

6

49

0.145

100

21 Sep 2021

19 Sep 2031

B72

10

6.5

53

0.185

100

21 Oct 2021

21 Oct 2031

B73

10

8

65

0.165

100

18 Nov 2021

18 Nov 2031

B74

10

8.5

69

0.160

100

20 Dec 2021

19 Dec 2031

B75

10

16

131

0.234

100

21 Jan 2022

21 Jan 2032

B76

10

10.5

86

0.304

100

18 Feb 2022

18 Feb 2032

B77

10

8.5

69

0.259

100

24 Mar 2022

24 Mar 2032

C66

20

6

49

0.521

100

19 Apr 2021

19 Apr 2041

C67

20

6

49

0.516

100

25 May 2021

24 May 2041

C68

20

9.5

78

0.477

100

21 Jun 2021

21 Jun 2041

C69

20

18

147

0.468

100

19 Jul 2021

19 Jul 2041

C70

20

12.5

102

0.445

100

20 Aug 2021

20 Aug 2041

C71

20

7

57

0.469

100

21 Sep 2021

20 Sep 2041

C72

20

7

57

0.512

100

21 Oct 2021

21 Oct 2041

C73

20

8.5

69

0.487

100

18 Nov 2021

18 Nov 2041

C74

20

9

74

0.501

100

20 Dec 2021

20 Dec 2041

C75

20

17.5

143

0.563

100

21 Jan 2022

21 Jan 2042

C76

20

11.5

94

0.638

100

18 Feb 2022

18 Feb 2042

C77

20

9

74

0.639

100

24 Mar 2022

24 Mar 2042

D61

20

20

163

0.521

100

19 Apr 2021

19 Apr 2041

D62

20

10

82

0.516

100

25 May 2021

24 May 2041

D63

20

10

82

0.477

100

21 Jun 2021

21 Jun 2041

D64

20

10

82

0.468

100

19 Jul 2021

19 Jul 2041

D65

20

20

163

0.445

100

20 Aug 2021

20 Aug 2041

D66

20

10

82

0.469

100

21 Sep 2021

20 Sep 2041

D67

20

10

82

0.512

100

21 Oct 2021

21 Oct 2041

D68

20

10

82

0.487

100

18 Nov 2021

18 Nov 2041

D69

20

20

163

0.501

100

20 Dec 2021

20 Dec 2041

D70

20

10

82

0.563

100

21 Jan 2022

21 Jan 2042

D71

20

10

82

0.638

100

18 Feb 2022

18 Feb 2042

D72

20

10

82

0.639

100

24 Mar 2022

24 Mar 2042

JFM ANNUAL REPORT 2022

Issue Size

SeriesNumber

Tenor
(yr)

12

4

80

13

4

80

Coupon(%)

Issue Price
(%)

654

0.001

100.2230 Jun 2021

30 Jun 2025

654

0.001

100.2926 Aug 2021

26 Aug 2025

(JPY in billions) (USD in millions)Issue Date

Maturity Date

Review and Plan

3. Government-guaranteed Domestic Bonds

Operations
Management
Structure
JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

115

Appendix / JFM Data
Appendix

Outstanding International Bonds
1. JFM Bonds(As of 31 March 2022)
SeriesNumber

116

Tenor
(yr)

FormatCurrency

Issue Size(in millions)

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

43

10

Euro

AUD

85

5.092

100

1 May 2014

1 May 2024

44

10

Euro

USD

90

3.250

99.055

1 May 2014

2 May 2024

47

10

Global

USD

1,000

2.375

99.611

13 Feb 2015

13 Feb 2025

48

10

Euro

AUD

70

3.600

100

18 Mar 201518 Mar 2025

49

7

Global

USD

1,000

2.000

99.39121 Apr 2015

21 Apr 2022

54

7

Global

USD

1,000

2.125

99.29725 Oct 2016

25 Oct 2023

57

5

Global

USD

1,000

2.625

99.82320 Apr 201720 Apr 2022

58

10

Euro

AUD

22

3.418

100

26 Jun 201721 Jun 2027

61

5

Euro

USD

44

2.570

99.99

30 Jan 201830 Jan 2023

62

5

Euro

AUD

28

2.760

99.99

30 Jan 201830 Jan 2023

63

5

Global

USD

1,000

3.250

99.98224 Apr 201824 Apr 2023

64

10

Euro

AUD

73

3.370

100

26 Jun 2018

21 Jun 2028

65

4

Euro

AUD

125

2.400

99.99

26 Sep 2018

26 Sep 2022

66

5

Global

USD

1,000

3.375

99.49927 Sep 2018

27 Sep 2023

67

11

Euro

EUR

80

1.106

100

24 Jan 201924 Jan 2030

68

5Global

USD

1,000

3.000

99.68212 Mar 201912 Mar 2024

69

5

Global

USD

1,000

1.750

99.8905 Sep 2019

5 Sep 2024

70

5

Euro

USD

60

1.650

99.99

28 Jan 2020

28 Jan 2025

71

5

Euro

AUD

50

1.160

99.99

28 Jan 2020

28 Jan 2025

72

7

Euro

EUR

500

0.050

99.867

12 Feb 2020

12 Feb 2027

73

5

Global

USD

1,500

1.000

99.88821 May 2020

21 May 2025

74

10

Euro

AUD

210

1.866

100

11 Jun 2020

11 Jun 2030

75

10

Euro

AUD

120

1.831

100

12 Jun 2020

12 Jun 2030

76

10

Euro

USD

60

1.290

100

22 Jul 2020

22 Jul 2030

77

5Global

USD

1,500

0.625

99.432

2 Sep 2020

2 Sep 2025

78

15

Euro

AUD

40

1.878

100

15 Oct 2020

15 Oct 2035

79

5

Euro

AUD

43

0.400

99.99

28 Oct 2020

28 Oct 2025

80

10

Euro

AUD

70

1.436

100

28 Oct 2020

28 Oct 2030

81

15

Euro

AUD

250

2.004

100

27 Nov 2020

27 Nov 2035

82

10

Euro

AUD

200

1.490

100

27 Nov 2020

27 Nov 2030

83

10

Euro

AUD

30

1.453

100

27 Nov 2020

27 Nov 2030

84

10

Euro

AUD

100

1.485

100

9 Dec 2020

9 Dec 2030

85

5

Euro

AUD

40

0.470

99.99

17 Dec 202017 Dec 2025

86

7

Euro

EUR

500

0.010

101.07

2 Feb 2021

2 Feb 2028

87

10

Global

USD

1,250

1.375

99.06410 Feb 2021

10 Feb 2031

88

5Global

USD

1,250

1.125

99.88420 Apr 2021

20 Apr 2026

89

10

Euro

EUR

1,000

0.100

99.8013 Sep 2021

3 Sep 2031

90

5

Euro

USD

52

1.060

99.99

27 Oct 2021

27 Oct 2026

91

5

Euro

AUD

28

1.200

99.99

27 Oct 2021

27 Oct 2026

92

3

Global

USD

750

1.500

99.93027 Jan 2022

27 Jan 2025

JFM ANNUAL REPORT 2022

Appendix / JFM Data
JFM Data

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

2009

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

2011

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

2015

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

2017

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

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 programme that applied special lending rates.

1967

Started receiving subsidies from the national treasury.

1970

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

1972

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

1989

Established the Reserve for Losses on Refinancing of Bonds.

1990

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

1998

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

2001

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

2002

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

2005

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

2006

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

2007

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

2008

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

JFM ANNUAL REPORT 2022

Appendix / JFM Data

Started issuing foreign currency-denominated bonds.

Financial Section

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

1983

JFM’s Role in Local
Government Finance

1978

Management
Structure

FY1957117

Appendix / JFM Data
JFM Data

Organization Chart
As of 1 April 2022

Credit Researchand Analysis

118

JFM ANNUAL REPORT 2022

As of 1 October 2022

President and CEO
Deputy President
Senior Executive Directors
Corporate Auditors

SATO Fumitoshi
KATO Junichi
SUZUKI Kiyoshi, KOYAMA Tetsushi, OKAMOTO Noboru
SEWAKI Hajime, OMORI Masaaki (part-time)

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

Operations

Contact Information

Review and Plan

Directors and Corporate Auditors

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

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2022

119

https://www.jfm.go.jp/en/

HARUWA AKEBONO.
“For spring, it is the dawn that is most beautiful.
The skies on top of mountains
become lighter and lighter with the rising of the sun.
The long thin clouds that turnlight purple are a sight to be enjoyed, too.”
Makura no Soshi

Mount Fuji, Yamanashi Prefecture