Japan Finance Organization for Municipalities Annual Repor t 2013

ANNUALREPORT

2013

JFM
表紙.indd 1-3

Japan Finance Organization for Municipalities

2013/08/01 15:57:39

Directors and Corporate Auditors
Review and Plan

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

Operations

Name

Japan Finance Organization for Municipalities (JFM)

Establishment

1 August 2008 (Reorganized on 1 June 2009)

Governing Law

Japan Finance Organization for Municipalities Law(From left, H. Shimura, Senior Executive Director; Y. Watanabe, President and CEO;Y. Hyotani, Senior Executive Director; and K. Hikita, Senior Executive Director)(From left, Y. Ishikawa, Corporate Auditor,
and M. Hamakawa, Corporate Auditor)

Management Structure

Profile of JFM(Act No. 64 of 2007, as amended)
Shisei Kaikan, 1-3 Hibiya Koen, Chiyoda-ku, Tokyo

President and CEO

Yuji Watanabe

CapitalUSD 176 million

Number of Employees

90 (as of 1 April 2013)

Outstanding Loans
as of 31 March 2013

USD 240 billion

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

Outstanding Bonds and Bank Loans
USD 198 billion
as of 31 March 2013
Credit Ratings
as of 31 March 2013

S&P: AAMoody's : Aa3
R&I: AA+

Financial Section
Appendix / JFM DataDISCLAIMER
By reading these materials, you agree to be bound by the following limitations:
No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of theinformation, or opinions contained herein. Neither the company nor any of the company’s advisors or representatives shall have any responsibility or liability whatsoever(for negligence or otherwise) for any loss howsoever arising from any use of these materials or their contents or otherwise arising in connection with these materials. The
LQIRUPDWLRQVHWRXWKHUHLQPD\EHVXEMHFWWRXSGDWLQJFRPSOHWLRQUHYLVLRQYHUL¿FDWLRQDQGDPHQGPHQWDQGVXFKLQIRUPDWLRQPD\FKDQJHPDWHULDOO\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
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Forward-looking statements, including the company’s plans in these materials, are based on information available to the company at the time they were prepared andinvolve potential risks and uncertainties. Actual results, therefore, may differ from those described in these materials due to changes in a variety of factors, such as market
trends, economic conditions and regulations. Accordingly, investors are advised to use their own discretion and exercise great caution when making investment decisions.
These materials and the information contained herein do not constitute or form part of any offer for sale or subscription of or solicitation or invitation of any offer to buy
or subscribe for any securities of the company. Securities of the company not registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), may
not be offered, sold or delivered within the United States or to U.S. persons absent registration under or an applicable exemption from the registration requirements of theUnited States securities laws. These materials and the information contained herein are being furnished to you solely for your information and may not be reproduced or
redistributed to any other person, in whole or in part. In particular, neither the information contained in these materials nor any copy hereof may be, directly or indirectly,
taken or transmitted into or distributed in the United States, Canada, Australia, Japan, Hong Kong or any other jurisdiction which prohibits the same except in compliancewith applicable securities laws. Any failure to comply with this restriction may constitute a violation of U.S. or other national securities laws. No money, securities or otherconsideration is being solicited, and, if sent in response to this presentation or the information contained herein, will not be accepted.

JFM’s Role in Local Government Finance

Address(Photo provided by The Tokyo Institute for Municipal Research)

JFM Annual Report 2013 | 109

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Annual Report 2013

Management Philosophy --------------------------------- 03
JFM at a Glance -------------------------------------------- 04
Outline of JFM Operations ------------------------------- 06

Review and Plan
Review of Operations for Fiscal 2012 ---------------- 10
1. Lending Operations ---------------------------------- 10
2. Funding Operations --------------------------------- 12

Corporate Governance ------------------------------------ 36
1. Corporate Governance ------------------------------ 36
2. Internal Control over Financial Reporting ------ 38
3. Internal Audit ------------------------------------------- 38
General Account and Management Account ------- 39
Risk Management ------------------------------------------ 41
Compliance --------------------------------------------------- 46
Disclosure----------------------------------------------------- 47

1. Lending Operations ---------------------------------- 16
2. Funding Operations ---------------------------------- 17
3. Payment to National Treasury of Management
Account Reserve for Interest Rate Volatility ---- 17

JFM’s Role in Local
Government Finance
1. Japanese Local Government System ----------- 48
2. Local Government Finance Program ------------ 49
3. Local Allocation Tax --------------------------------- 50
4. Local Government Borrowings -------------------- 50

Lending Operations ---------------------------------------- 20

6. Local Government Borrowing Program --------- 51

2. Interest Rates of Loans ----------------------------- 22
3. Credit Check System -------------------------------- 24
4. Trends in Lending Operations--------------------- 24
5. Lending Operations by Business Type --------- 27
Funding Operations ---------------------------------------- 30
1. Issue Type ---------------------------------------------- 30
2. Basic Funding Policy -------------------------------- 31
3. Features of JFM Bonds ----------------------------- 32
4. Trends in Funding Operations -------------------- 33

5. Safety of Local Government Borrowings ------- 50
7. JFM Funds in Local Government Borrowing
Program ------------------------------------------------- 52

Financial Section
Financial Statements -------------------------------------- 54
Independent Auditor’s Report --------------------------- 93

Appendix / JFM Data
Appendix ------------------------------------------------------ 96
JFM Data --------------------------------------------------- 107
Organization Structure -------------------------------- 108
Directors and Corporate Auditors/
Contact Information ------------------------------------ 109

Appendix / JFM Data

Note: USD 1 = JPY 94.30 as of 31 March 2013 (based on the exchange rate on 29 March 2013, the last business dayof March).

Financial Section

Organization History ----------------------------------- 107

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JFM’s Role in Local Government FinanceOperations
1. Outline --------------------------------------------------- 20

Management Structure

3. Financial Review -------------------------------------- 14
Management Plan for Fiscal 2013 --------------------- 16

Operations

Capital --------------------------------------------------------- 07

Management Structure

Review and Plan

Message from the President and CEO--------------- 02

CON TE N TS

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Message from the President and CEO
Yuji Watanabe President and CEO, Japan Finance Organization for Municipalities June 2013

Review of Fiscal 2012
Fiscal 2012 has seen hopeful signs of recovery
for the Japanese economy since the second half ofthe year. We have seen changes such as a hike inshare prices and the correction of the yen's excessive
appreciation, on the back of rising expectations fora policy turnaround. At the same time, there weredifficult challenges to capital markets, such as
SURORQJHG¿QDQFLDOWXUPRLOLQ(XURSHQXFOHDUSRZHU
issues, and so on.
Under such an environment, JFM continued to be
responsive to the needs of the regions as a reliable
provider of long-term funding for local governments at
low-interest rates.
In terms of lending activities, JFM provided a
total of JPY 1,886.4 billion (USD 20 billion) to local
governments, which marked the largest volume since
JFM’s establishment.
On the funding front, among other capital market
transactions, we successfully issued our inaugural
public USD benchmark bonds without government
guarantees, and AUD denominated Uridashi Bonds
targeting Japanese retail investors. Through thoseefforts, we pursued further diversification of ourfunding options as well as the expansion of ourinvestor base. Consequently, the total issue volume
amounted to JPY 2,526.8 billion (USD 27 billion), thelargest volume since JFM’s establishment.

Initiative for Fiscal 2013
The Japanese government has implemented
the three pillars of Prime Minister Abe’s economic
policy – bold monetary easing, fiscal stimulus
and a growth strategy. We foresee various public
works projects to be implemented, related toreconstruction due to the Great East Japan
Earthquake, disaster prevention, local revitalizationor other issues, which address individual regional
challenges. JFM will continue to play an importantrole in local government funding, securely providing
long-term and low-interest funds, as well as
supporting restoration and reconstruction of the本文.indd 2

earthquake-affected regions through JFM special
lending initiatives.
5HÀHFWLQJRQWKHGLYHUVL¿HGQHHGVRIWKHUHJLRQVERWKRIRXUOHQGLQJDQGIXQGLQJYROXPHVIRU¿VFDODUHSODQQHGWREHJUHDWHUWKDQWKRVHIRU¿VFDO
2012.
Furthermore, in light of our solid business operations,a portion of JFM’s reserve has been set to betransferred to the national government over a period
RIWKUHH\HDUVIURP¿VFDOWKURXJK¿VFDO
with the aim of transferring JPY 1 trillion (USD
11 billion). This payment is to be used to secure
local allocation tax grants to be distributed to local
JRYHUQPHQWV,Q¿VFDO-)0SODQVWRSD\-3<
650 billion (USD 6.9 billion) to the national treasury,
following JPY 350 billion (USD 3.7 billion) paid in¿VFDO7KURXJKWKLVPRYHZHEHOLHYHWKDWZH
can further contribute to overall local government¿QDQFHV

JFM for Local Governments
JFM will continue to be committed to support
local government projects which are essential tothe daily lives of citizens, with concerted efforts by
our management and employees.
Thank you for your understanding and continued
support for our endeavors.

2013/08/01 16:05:51

Management Philosophy
The Japan Finance Organization for Municipalities (JFM),
as a joint funding organization of local governments, by local
governments and for local governments, sets forth the following
three policies as its management philosophy.

Ensuring Responsible Corporate Governance as a
Joint Organization of Local Governments
JFM ensures responsible corporate governance throughprudent risk management, monitoring and recommendations
by the Supervisory Committee, as well as audits by external
accounting auditors.

Being Responsive to Local Government Financial
Needs
As a reliable provider of long-term and low-interest funds
for local governments, JFM closely supports local government
funding based on their need as well as the environment.

%XLOGLQJ0DUNHW&RQ¿GHQFHWRZDUG-)0
JFM aims to build market confidence through proactive
disclosure as required in capital markets, as well as its sound¿QDQFLDOVWDQGLQJPDLQWDLQHGWKURXJKSUXGHQWULVNPDQDJHPHQWthereby securing low-cost funding. Furthermore, JFM, as aleading public-sector bond issuer, is committed to contributing to
the sound development of capital markets.

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at a Glance
July 2013
The Joint Funding Organization for
All Japanese Local Governments

Amount of Capital Contribution(As of 31 March 2013)● Wholly owned by Japanese local governments, with theTowns, villages
and local
government
associations

capital contribution from 1,790*1*2 local governments● Operates as a non-profit organization with the objective

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

financial institution. In 2008, as part of a policy-based
financial reform conducted by the Japanese national
government, the new JFM was established under thePrefectures

USD 68 mm

38.4%

USD 11 mm

6.3%

Governmentdesignatedcities(2)USD 176 mm

USD 31 mm

Cities(1) andspecial wardsof Tokyo

USD 67 mm

17.3%

38.0%

Contributed by 1,790 Japanese local governments(1) Excludes government-designated cities.
(2) Government-designated cities:
Cities with populations of 500,000 or more designated in accordancewith Paragraph 1, Article 252-19 of the Local Autonomy Act.
Such government-designated cities are allowed to administer certain
matters such as social welfare, food safety, urban planning and so on,
for which prefectures are responsible in principle.

special law by succeeding to substantially all rights
and obligations of the predecessor

Japanese Local Governments● Japanese local governments include 47 prefectures

Financial Highlights

and a total of 1,742*1 cities and special wards ofFinancial Highlights FY2012

Tokyo, government-designated cities, as well as towns(JPY mm)

YoY(JPY mm)23,704,919+346,212

251

+3.9

22,668,634+281,223

240

+3.0

23,591,399+344,389

250

+3.7

Bonds

18,676,401+499,705

198

+5.3

Reserves underSpecial Laws

3,947,086-157,75842-1.7

and villages● Revenue sources for the local governments are

secured by the national government▶

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

Total Assets
Loans
Total Liabilities

YoY(USD bn) (USD bn)

local governments

Capital16,6020

0.2

0The national government also prepares the Local

Ordinary Income

213,070-16,9852.3-0.2

Government Borrowing Program each fiscal year,

As of 31 March 2013.

2011

2012

2013(e)*which specifies the amount of local government
funding as well as funding sources▶

▶

(USD bn)consent or approval must, in principle, be obtained

25

from the relevant authorities

20

Financial conditions of the local governments are15

monitored under the legal framework for early10warning and reconstruction of fiscal soundness● Thus, none of the local governments has defaulted● BIS 0% risk weight for Japanese local governments*3
Notes : *1. As of 31 March 2013.
*2. 1,790 local governments, encompassing all of the prefectures, cities and special wards,
government-designated cities, towns and villages, as well as some local government
associations.
*3. Value for investors in Japan. For international investors, values are determined byrespective country authorities.

本文.indd 4

Annual Lending Volume

In the case of each local government funding,■ New JFM
■ Predecessor

50
FY 2008

2009

2010

*Planned amount; subject to change depending on market
circumstances.

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Funding

Funding PlanFY 2013(plan)(1)

FY 2012(achieved)

Guaranteed

USD 13.6 bn

USD 10.9 bn

Non-Guaranteed

USD 15.9 bn

USD 16.2 bn

USD 13.6 bn

USD 13.5 bn

Type of Bonds● Leading issuer in the Japanese bond market with anaverage annual funding volume of JPY 2 tn (USD 21 bn)● Aiming to diversify its funding sources and expand its

investor base – continues to access the international

Domestic Issuancemarket through benchmark transactions as well as

MTN

private placements, making use of its MTN Program

USD 2.3 bn

guaranteed bonds will be issued
international bonds through 2 benchmark transactions,
3 private placements and an issuance of Uridashi
Bonds

USD 2 bn

Benchmark● In the international market, only non-government● In FY2012, JFM issued a total of USD 2.7 bn worth of

USD 2.7 bn(2)Private Placements

USD 557 mm

Uridashi Bonds

AUD 100 mm(1) Planned amount; subject to change depending on market
circumstances.
(2) Includes AUD 100 mm Uridashi Bonds, converted at USD 1 = AUD
1.0419 as of 31 March 2013 (based on the exchange rate of the lastbusiness day of March, 29 March 2013).

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 in full via payment to JFM● Along with the solid institutional framework to support

the local governments, we believe JFM bonds are
generally regarded as a secure investment

Bond Issuance(USD bn)

18
16■ Bonds without government guarantee■ Bonds with government guarantee

14
12
10
8

Credit Ratings

6● Aa3 (Moody’s), AA- (S&P)

4● The ratings of JFM are the same as those of the2

Japanese sovereign● BIS risk weight: 10% for JFM bonds (non-guaranteed)

denominated in JPY, 20% for those denominated in

0

FY 2008

2009

2010

2011

2012

2013(e)**Planned amount; subject to change depending on market
circumstances.

foreign currencies*3
Note: A rating is not a recommendation to buy, sell or hold securities
and may be subject to suspension, reduction or withdrawal at
any time by the assigning rating agencies.

Note : *3. Value for investors in Japan. For international investors, values are determined by respective
country authorities.

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Funding(JFM Bonds)
Outstanding
Bonds
JPY 18.6 tn(USD 198 bn)

Proceeds from
Public Races*

Japan Finance
Organization for
Municipalities(JFM)
Reserve forInterest Rate
Volatility, etc.
JPY 3.9 tn(USD 42 bn)

Fund forLending Rate
Reduction
JPY 0.9 tn(USD 9.8 bn)

Lending(Long-term/low
interest rates)

Local Governments

Financial Markets

Outline of JFM Operations

Outstanding
Loans
JPY 22.6 tn(USD 240 bn)

Reduction ofLending Rates(as of 31 March 2013)＊ : A portion of the earnings from municipally operated racing (horse, bicycle, motorcycle and speedboat).

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

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Joint Funding Organization for All Local Governments-)0FRQWULEXWHVWRWKHVRXQG¿QDQFLDORSHUDWLRQRIORFDOJRYHUQPHQWVDQGLPSURYHWKHZHOIDUHRIORFDOUHVLGHQWVwith the aim of efficiently and effectively complementing local government fund-raising, by providing long-term
funding at low-interest rates to local governments.
Given that it takes a long time to recoup the capital expenditures for social infrastructure improvements by local
governments and the burden should be shared across generations, long-term funding is usually desirable. However,
local governments generally raise funds in capital markets for terms of 10 years or less.
In response to this situation, JFM issues bonds in capital markets with a wide variety of maturities ranging frommedium-term to super long-term to provide stable and low-interest funds to local governments.
Under the JFM Law (Article 52, Paragraph 1), local governments have an obligation to bear the cost necessary tosatisfy all JFM obligations in the event JFM is to be dissolved and its obligations remain unpaid.

Solid Financial Foundation
JFM primarily issues 10-year bonds to raise funds and extends long-term (maximum maturity of 30 years) loans to
ORFDOJRYHUQPHQWVZKLFKFUHDWHVDGXUDWLRQJDSEHWZHHQOHQGLQJDQGIXQGLQJ7RFRSHZLWKWKHLQWHUHVWUDWHÀXFWXDWLRQ
ULVNDVVRFLDWHGZLWKWKHUH¿QDQFLQJRIERQGV DQHJDWLYHPDUJLQFDXVHGE\WKHLQWHUHVWSD\DEOHH[FHHGLQJWKHLQWHUHVW
receivable), JFM maintains reserves for interest rate volatility.

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

Capital
As of 31 March 2013, JFM's capital was USD 176 million contributed by 1,790 Japanese local governments, i.e., all of
the prefectures, cities, special wards of Tokyo, government-designated cities, towns and villages, as well as some local
government associations.
The amount of capital contribution from each local government is decided based on 1) outstanding JFM loans toeach 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).

Capital Contribution by Type of Local Government
Towns, villages and local
government associations

Total

USD

176 mm

6.3% (USD 11 mm)

Prefectures

Government-designated cities*2(USD 68 mm)

38.4%

17.3% (USD 31 mm)
Cities and special wards of Tokyo*1

38.0% (USD 67 mm)
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.
Such government-designated cities are allowed to administer certain matters such as social welfare, food safety, urban planningand so on, for which prefectures are responsible in principle.

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Review and Plan

Review of Operations for Fiscal 2012
1. Lending Operations
2. Funding Operations
3. Financial Review

10
10
12
14

2. Funding Operations

16
16
17

3. Payment to National Treasury of Management AccountReserve for Interest Rate Volatility

17Management Plan for Fiscal 2013
1. Lending Operations

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Review
and
Plan

1

Review of Operations for Fiscal 2012

Lending Operations

Review and Plan

1. Lending Operations
In ﬁscal 2012, JFM provided loans totaling USD 20.0 billion, which marked the largest volume since
JFM’s establishment. Loans for Temporary Financial Countermeasures Funding*1 were USD 7.5 billion,
which accounted for 37% of the total, followed by loans for the sewerage business in the amount of USD
3.4 billion, representing 17% of the total. In addition, loans were made for the special municipal mergers
and other general account-related businesses in the amount of USD 5.3 billion, which accounted for 27%of the total. Municipal enterprise-related loans were USD 6.7 billion, which made up 34% of the total,
mainly via sewerage and water supply businesses.
In ﬁscal 2012, it is notable that restoration and reconstruction projects in connection with the Great
East Japan Earthquake as well as disaster management and mitigation*2 projects were carried on a fullscale, resulting in the lending volume of USD 1.2 billion for these projects.
Notes: 1. Represents the local government funding to cover shortfalls in local government revenue sources pursuant to theprovisions of the Local Government Finance Law (Act No. 109 of 1948, as amended).
2. Disaster management and mitigation business strives to build disaster-resistant communities by managing such as therenovation for quake-resistant public facilities, development of emergency shelters as well as wireless communication
systems for disaster prevention, etc. This business category, established in ﬁscal 2011, is required to be funded throughpublic funds, and in ﬁscal 2012, JFM lent this category USD 0.9 billion.

Results of Lending Operations by Business in Fiscal 2012
Business

Number of Loans Made

Loan Amount (millions of USD)
% of total

General Account-related Loans
Public Projects, etc.

290

588

Public Housing

107

160

3
1

Disaster Management and Mitigation

613

869

4

Educational Facilities Development

8

38

0

Social Welfare Facilities Development

146

198

1
1

General Projects

75

101

Regional Revitalization

114

100

0

Disaster Prevention

284

318

2

Local Road Development

744

1,049

5

Special Municipal Mergers

685

1,917

10

3,066

5,336

27

1,074

1,469

7

83

112

1

Transportation

37

550

3

Electricity and Gas Supply

32

52

0

Port Facilities

30

48

0

Hospitals and Elderly Care Services

350

959

5

Markets and Slaughterhouses

34

52

0

1,978

3,434

17

5

23

0

3,623

6,699

34

Refinancing Loans for Municipal Enterprise-related Projects

355

417

2

Refinancing Loans for Facilities Affected by Earthquake

453

63

0

Temporary Financial Countermeasures Funding

885

7,489

37

8,382

20,004100

Subtotal
Municipal Enterprise-related Loans
Water Supply
Industrial Water Supply

Sewerage
Tourism and Others
Subtotal

Total

Note: Totals may not add up exactly because of rounding off for each line item.

JFM Annual Report 2013 | 10

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FY 2012 Lending Volume by Business TypeUSD

Reﬁnancing Loans for
Facilities Affected by Quake

2％ (USD 0.4 bn)

0.3％ (USD 0.1 bn)

General Account-related Loans

Others20.0 bn
Municipal Enterpriserelated Loans

Transportation

3% (USD 0.5 bn)

27％ (USD 5.3 bn)
Special Municipal Mergers

10% (USD 1.9 bn)
Local Road Development

Hospitals and Elderly
Care Services

5% (USD 1.0 bn)

5% (USD 1.0 bn)

Disaster Management and
Mitigation

Water Supply

4% (USD 0.9 bn)

7% (USD 1.5 bn)
Sewerage

17% (USD 3.4 bn)

Others8% (USD 1.5 bn)

Operations

34％ (USD 6.7 bn)

1% (USD 0.3 bn)

Review and Plan

Total

Reﬁnancing Loans for MunicipalEnterprise-related Projects

Temporary Financial Countermeasures Funding

37％ (USD 7.5 bn)

Towns and Villages

Local Government Associations

7％ (USD 1.4 bn)

1％ (USD 0.3 bn)

Total

USD

20.0 bn

Management Structure

FY 2012 Lending Volume by Borrower Type

Prefectures

28％ (USD 5.5 bn)
53％ (USD 10.7 bn)

Government-designated Cities

11％ (USD 2.1 bn)

JFM’s Role in Local Government Finance

Cities and Special
Wards of Tokyo

Financial Section
Appendix / JFM Data

JFM Annual Report 2013 | 11

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Review
and
Plan

2

Review of Operations for Fiscal 2012

Funding Operations

Review and Plan

1. Amount Raised*1
In ﬁscal 2012, JFM’s total bond issuance amounted to USD 27.1 billion. This amount included USD
16.2 billion in JFM bonds (non-guaranteed), and USD 10.9 billion in government-guaranteed bonds forthe repayment of existing bonds issued by the Predecessor.
With regard to JFM bonds, USD 13.0 billion was issued through public offerings of 5 -year,
10-year and 20-year bonds, as well as opportunistic issuance through JFM’s Flexible Issuance Program(“FLIP”) and the MTN Program.
As for publicly-offered JFM bonds, a total of USD 10.3 billion were issued in the Japanese domestic
market. In particular, 10-year bonds were issued at the highest monthly volume in JFM’s history – morethan USD 424 million per month.
In international markets, JFM took a significant step toward reaching investors in September 2012
with its ﬁrst non-guaranteed benchmark bonds (USD 1 billion). In addition to this successful transaction,
JFM issued a total of USD 557 million through three private placements, achieving its initial funding planfor international bonds through the MTN Program. In November 2012, in response to favorable market
conditions, JFM doubled its funding plan to USD 2.4 billion. Following this move, in February 2013, JFM
issued its second non-guaranteed benchmark bonds (USD 1 billion), and also its inaugural Uridashi
Bonds (AUD 100 million) targeting Japanese retail investors. Through these activities, the total volume ofinternational bonds amounted to USD 2.7 billion*2.
The private placements of 10-year bonds with the Pension Fund Association for Local Government
Ofﬁcials were USD 3.2 billion.
As a result, as of the end of ﬁscal 2012, JFM’s outstanding bonds were USD 198.2 billion, including
the Predecessor’s bonds to which JFM succeeded, and bank loans totaled USD 0.3 billion.
Notes: 1. Issue amounts are shown at face value.
2. Includes AUD 100 million Uridashi Bonds, converted at USD 1 = AUD 1.0419 (as of 29 March 2013)
Flexible Issuance Program (“FLIP”)
FLIP is JFM’s own framework for domestic bond issuance. Bond maturities range from 3 years to 30 years (except for 5-year, 10-year
and 20-year ﬁxed rate bullet bonds) with a minimum issue size of JPY 3 billion (USD 32 million).

2. Funding in Fiscal 2012
(2) Private placements with Pension Fund
Association for Local Government Ofﬁcials

1. JFM bonds (non-guaranteed)(1) Public offerings

Type of Bonds

Plan

Achieved

10-year

USD 3.2 bn

USD 3.2 bn

Type of Bonds

Plan

Achieved

Domestic Issuance

USD 10.3 bn

USD 10.3 bn

10-year

USD 4.8 bn

USD 5.1 bn

20-year

USD 1.7 bn

USD 1.5 bn

Type of Bonds

Plan

Achieved

5-year

USD 0.8 bn

USD 0.6 bn

10-year

USD 5.2 bn

USD 5.2 bn

Opportunistic Issuance

USD 3.0 bn

USD 3.0 bn

6-yearUSD 3.4 bn

USD 3.4 bn

MTN

USD 2.4 bn

USD 2.7 bn

4-year

USD 2.3 bn

USD 2.3 bn

Total

USD 12.7 bn

USD 13.0 bn

Total

USD 10.9 bn

USD 10.9 bn

2. Government-guaranteed domestic bonds

Note: Funding plan for FY2012 was revised in November 2012
and increased by USD 1.1 bn.

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3. Issue Spreads
Review and Plan
Operations

Investor demand for bonds with high credit ratings rose after the Great East Japan Earthquake
interrupted the issuance of electric power bonds. As a result, since April 2011, JFM had issued 10-yearbonds that offered spreads to JGBs similar to those of local governments. However, in November 2012,spreads of local government bonds to JGBs tightened by 0.5 bp to 2.0 bp, while those of JFM bonds
remained at 2.5 bp, which has left 0.5 bp gap between JFM bonds and local government bonds since
then.
As of March 2013, spreads on 5-year and 20-year JFM bonds continued to be similar to those of local
governments.
JFM’s international bonds have been issued based on investor demand and market conditions, byreferring to credit spreads observed in the international primary or secondary markets at the time ofpricing.
Note: See page 102 for the terms of issuances in ﬁscal 2012.

(bp)
16

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

1.465
1.418

14

1.380

1.365
1.274

1.278

1.208

1.164

1.174

1.178

1.2

1.149
1.048

1.093

1.066

1.034

0.976

1.035

1.067

1.025

9.0

1.035

1.006

7.0

7.0 7.0

0.835 0.825
0.801
0.852
0.815 0.801

0.791 0.791

0.8

0.720
6.0

6
5.0 5.0 5.0 5.0 5.0

0.678
5.0

4.0

4

0.6

5.0

0.4
2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.52

2.0

2.0 2.0 2.0 2.0 2.0 2.0 2.0

0.2

1.5 1.5

1.5
1.0

0.5 0.5 0.5 0.5 0.5

00.0
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

FY2010FY2011FY2012

JFM’s Role in Local Government Finance

7.5
7.0

1.0

0.991 1.010
0.892

8

1.4

JFM bonds (%)

1.340

1.280

12
10

Spread over JGB yield curve (bp)*Management Structure

Issue Conditions of 10-Year JFM Bonds

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

Financial Section
Appendix / JFM Data

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Review
and
Plan

3

Review of Operations for Fiscal 2012

Financial Review

Review and Plan

1. Proﬁt and Loss Statement
In ﬁscal 2012, JFM’s income was USD 5.2 billion, declined by USD 0.3 billion from the previous year.
This is mainly due to a downward trend in long-term interest rates in Japan, which led to lower interest
income from loans. Expenses experienced a similar trend, decreasing by USD 0.1 billion to USD 2.9billion, on the back of reduced interest expenses with respect to bonds. Ordinary income was thus down
USD 0.2 billion to USD 2.3 billion, though still maintaining JFM’s income stability.
Pursuant to the relevant laws, a portion of the revenue generated by the reﬁnancing of bonds andborrowed money of JFM* is to be directed into reserves for interest rate volatility. As a result of suchprovisions as well as other factors, net income amounted to USD 0.2 billion, down USD 0.01 billion.
* This revenue is calculated based on the difference between JFM’s funding rates at the time the loans were made and the current
reﬁnancing rates.

2. Balance Sheet
As of 31 March 2013, JFM’s total assets amounted to USD 251 billion, up USD 3.9 billion from theprevious year. This mainly resulted from an increase in loans by USD 3.0 billion due to the amount of newloans for local governments exceeding that of loans repaid.
Total liabilities were up USD 3.7 billion to USD 250 billion. Despite a decrease of USD 3.9 billion in
JFM’s management account reserve for interest rate volatility due to the payment to the national treasuryof USD 3.7 billion, this increase was mainly because bonds increased by USD 5.3 billion due to the issue
amount exceeding the redemption amount.
Total net assets were USD 1.2 billion, up USD 0.2 billion. This reﬂected net income of USD 0.2 billion in
the general account being recorded as the general account surplus reserve.
Financial highlights since ﬁscal 2010 are as follows.

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Financial Highlights(thousands of USD)FY2010FY2011FY2012
YoY

5,726,373

5,427,413

5,165,928-261,485

Expenses

3,101,039

2,987,794

2,906,433-81,361

Ordinary Income

2,625,334

2,439,608

2,259,495-180,113

170,456

229,396

220,877-8,519Net Income(USD mm)
6,000

Operations

Income

Review and Plan

1. Proﬁt and Loss Statement

IncomeExpenses
Ordinary Income

4,000Management Structure

2,000

0

FY20102011

2012

2. Balance Sheet(thousands of USD)FY2010FY2011FY2012
YoY

247,515,451

251,377,721

3,862,270

Loans

235,756,691

237,406,267

240,388,489

2,982,222

Others

10,550,700

10,109,173

10,989,232

880,059

245,571,633

246,521,845

250,173,903

3,652,058

194,349,841

192,753,934

198,053,033

5,299,099

Fund for lending rate reduction

9,711,803

9,754,730

9,783,339

28,609Reserves under special laws

41,319,417

43,529,629

41,856,694-1,672,935

6,998,940

9,331,919

11,664,899

2,332,980

33,261,209

33,272,078

29,387,070-3,885,008

1,059,268

925,631804,725-120,906

Others190,551

483,542

480,837-2,705

Total Net assets

735,758

993,595

1,203,818

210,223

Total Liabilities
Bonds

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

Note: Totals may not match because of rounding off.
(USD mm)260,000

Financial Section

246,307,391

JFM’s Role in Local Government FinanceTotal Assets

Total Assets
Total Liabilities

Appendix / JFM Data

250,000

240,000
FY2010

2011

2012
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Review
and
Plan

1

Management Plan for Fiscal 2013

Lending Operations

Review and Plan

JFM’s lending plan is formulated based on the amount of local government borrowing for which theconsent or approval is scheduled to be given by the Minister for Internal Affairs and Communications or
the respective prefectural governors, under the Local Government Borrowing Program (the “LGBP”).
For ﬁscal 2013, JFM funds of USD 23.0 billion have been booked in the LGBP, which is as high as thevolume in ﬁscal 2012, on the back of new reﬁnancing loans introduced for speciﬁed disaster-affectedareas.
The planned lending volume for fiscal 2013 has expanded by USD 1.9 billion (9.9%), comparedto ﬁscal 2012. This is mainly a result of a large increase in loans following ﬁscal 2012 for emergency
disaster management and mitigation projects, and also reﬁnancing loans in the case of Prepayments
without Penalty* with regard to facilities affected by the Great East Japan Earthquake.
* Prepayment without Penalty
In light of the severe stagnation of local economies, the national government has been allowing local governments to prepay,
without early repayment charges, high interest rate public funds, should they establish a ﬁnancial soundness plan or a public
enterprise management reform plan and carry out thorough administrative and management reforms. Furthermore, local
governments can also choose to reﬁnance their loans at current lending rates for the remaining maturities.

Loan Amounts (Plan-based)

Loan Amounts

FY2013

FY2012

USD 21.0 bn

USD 19.1 bn

YoY
USD 1.9 bn

Lending Operations by Business for Fiscal 2013
Loan Amount (millions of USD)
% of total

Business
General Account-related Loans
Public Projects, etc.
Public Housing
Disaster Management and Mitigation
National Disaster Prevention
Educational Facilities Development
Social Welfare Facilities Development
General Projects
Regional Revitalization
Disaster Prevention
Local Road Development
Special Municipal Mergers
Subtotal
Municipal Enterprise-related Loans
Water Supply
Industrial Water Supply
Transportation
Electricity and Gas Supply
Port Facilities
Hospitals and Elderly Care Services
Markets and Slaughterhouses
Sewerage
Tourism and Others
Subtotal
Refinancing Loans for Municipal Enterprise-related Projects
Refinancing Loans for Facilities Affected by Earthquake
Temporary Financial Countermeasures Funding
Total

670
188
2,150
4
71
159
101
60
192
545
1,678
5,818

3
1
10
0
0
1
0
0
1
3
8
28

1,486
125
442
90
31
848
58
3,544
19
6,644
53
1,357
7,125
20,997

7
1
2
0
0
4
0
17
0
34
0
6
34
100

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2

Funding Operations

Operations

Note: This plan may change according to lending operations, market conditions, or other developments.

Review and Plan

In order to raise funds for lending operations, JFM primarily issues bonds through public offerings. In
ﬁscal 2013, JFM plans to issue USD 12.7 billion of public JFM bonds, at the same volume as last year. In
addition, private placements of 10-year bonds with the Pension Fund Association for Local Government
Ofﬁcials are projected to amount to USD 3.2 billion.
As for government-guaranteed bonds, JFM plans to issue USD 13.6 billion with an increase of USD
2.7 billion from ﬁscal 2012. This reﬂects the funding need created due to the scheduled payment of USD
6.9 billion to the national treasury from a portion of JFM’s management account reserve for interest rate
volatility.

1. JFM bonds (non-guaranteed)Type of Bonds
Domestic Issuance

FY 2013 (Plan)FY 2012 (Achieved)

USD 10.4 bn

USD 10.3 bn

10-year

USD 5.1 bn

USD 5.1 bn

20-year

USD 1.3 bn

USD 1.5 bn

5-year

USD 0.5 bn

USD 0.6 bn

Opportunistic Issuance

USD 3.5 bn

USD 3.0 bn

MTN
Total

USD 2.3 bn

USD 2.7 bn

USD 12.7 bn

USD 13.0 bn

Type of Bonds
10-year

FY2013 (Plan)

FY2012 (Achieved)

USD 3.2 bn

USD 3.2 bn

2. Government-guaranteed domestic bonds
FY 2013 (Plan)FY 2012 (Achieved)

10-yearType of Bonds

USD 7.2 bn

USD 5.2 bn

8-year

USD 2.1 bn–

6-yearUSD 3.1 bn

USD 3.4 bn

4-yearTotal

USD 1.2 bn

USD 2.3 bn

USD 13.6 bn

USD 10.9 bn

JFM’s Role in Local Government Finance(2) Private placements with Pension Fund Association for Local Government Ofﬁcials

Management Structure(1) Public offerings

Note: Subject to change depending on lending conditions, market circumstances, and other factors.

Payment to National Treasury of Management AccountReserve for Interest Rate Volatility

Appendix / JFM Data

In accordance with Article 14 of the Supplementary Provisions to the JFM Law, it was decided that a
portion of JFM’s reserve for interest rate volatility within its management account would be transferred to
the Japanese national government over a period of three years from ﬁscal 2012 through ﬁscal 2014. The
amount expected to be transferred over this period is JPY 1 trillion (USD 11 billion) in total. In ﬁscal 2012,
JPY 350 billion (USD 3.7 billion) was so transferred to the national treasury, and also in ﬁscal 2013, JPY
650 billion (USD 6.9 billion) is scheduled to be transferred, based on an ordinance pursuant to Article 14of the Supplementary Provisions to the JFM Law.

Financial Section

3

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Operations

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

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

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20
20
22
24
24
27
30
30
31
32
33

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Operations Lending Operations

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

1

OutlineOperations

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

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

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

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3. Lending Scopes and Maturities of Loans
Review and Plan

JFM lends mainly to the following local government businesses with respective loan maturities.
Loans for Fiscal 2013
Adjustable Lending Rate*1

Fixed Lending Rate
Business Type

Maturity

Grace Period
for Principal
Repayment

Within (Years)
20

Within (Years)
5

Within (Years)
20

Within (Years)
5

25

5

25

5

National Disaster Prevention
Educational andSocial Welfare
Facilities Projects

Unsubsidized
Projects

Temporary Financial
Countermeasures Funding

Educational Facilities Development

25

3

25

3

Social Welfare Facilities Development

20

3

20

3

General Projects

20

5

20

5

Regional Revitalization

30

5

30

5

Disaster Prevention

30

5

30

5
5

Local Road Development

20

5

20

Special Municipal Mergers

30

5

30

5

Disaster Management and Mitigation

30

5

30

5

Water Supply

30

5

30

5

Industrial Water Supply

30

5

30

5

Transportation

30

5

30

5

Electricity Supply

30

5

30

5

Gas Supply

25

5

25

5

Port Facilities

20

5

30

5

Hospitals

30

5

30

5

Markets

25

5

25

5

Slaughterhouses

20

5

20

5

Sewerage

30

5

30

5

Prefectures and GovernmentDesignated Cities

–

–

30

3

Cities, Towns and Villages

–

–

20

3

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

JFM’s Role in Local Government Finance

Municipal
Enterprise-related Loans*2

Management Structure

General Account-related Loans

Public Housing

Grace Period
for Principal
Repayment

Operations

Public Projects, etc.

Maturity

Financial Section
Appendix / JFM Data

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Operations Lending Operations

2

Interest Rates of Loans

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

1. Interest Rates of Loans
Operations

JFM offers two types of loan interest rates: the standard lending rate and the special lending rate.
The standard lending rate is calculated in order to balance JFM’s funding cost with interest income
from its lending. Speciﬁcally, this rate is determined in a manner that the discounted present value of the
cash ﬂows of the funds raised to make the loans equals the discounted present value of the cash ﬂows to
be generated by those loans with their respective terms to maturity, grace period for principal repayment
and repayment methods.
The special lending rate is set at a discount of 0.35% to the standard rate. At the end of ﬁscal 2012, it
was applied to 98.5% of JFM’s outstanding loans.
The trends of JFM loan interest rates are shown below. The special lending rate has been at the samelevel as the national government’s lending rates that are applicable to loans for speciﬁc public projects(the Fiscal Loan Fund). This is due to the floor rates of the special lending rates being set equal torespective lending rates of the Fiscal Loan Fund which have identical terms on redemptions to those of
JFM loans.

Trends of Lending Rates
2.20％

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

2.10％

2.00％

1.90％

1.80％

1.70％

1.60％

1.50％

1.40％
Jun

Aug
Oct
2010

Dec

Feb

Apr

Jun
2011

Aug

Oct

Dec

Feb

Apr

Jun
2012

Aug

Oct

Dec

Feb
2013

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

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2. Lending Rate Reduction
Review and Plan

The interest rate differentials between the special lending rates and the standard lending rates arecovered by investment gains in the Fund for Lending Rate Reduction*, which consists of contributions
from local governments of a portion of the earnings from municipally operated racing, and also JFM’s
own funds.
* From the viewpoint of equal revenue sharing among all local governments, local governments that operate horse, bicycle,
motorcycle and speedboat racing contribute a portion of their earnings from the races to the Fund.

Operations

Reduction using investment gains

0.20%

Reduction using JFM’s own funds

0.20%

Reduction
0.35%Standard
Lending Rate(funding costs)

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

0.15%

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

JFM’s Role in Local Government Finance

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

Management Structure

0.15%

Financial Section
Appendix / JFM Data

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Operations Lending Operations

3

Credit Check System

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

Operations

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

1 Check of local

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

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

3 Subsequent review
Onsitecredit review

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

Trends in Lending Operations

1. Overview
JFM’s annual lending volume has risen since ﬁscal 2009 as a result of the expansion of its lending
scope to overall general account-related loans, the introduction of the Great East Japan Earthquakerelated loans, etc.
In ﬁscal 2012, the lending volume amounted to USD 20.0 billion. At year-end, outstanding loans were
USD 240.4 billion.
Annual Lending Volume

Outstanding Loans(USD bn)
25(USD bn)
250

New JFM20

19.4

Predecessor
20.0
19.1

240.4

240
235.6

15

233.6

235.8

237.4

230

13.7
11.7

10

220

5.0

210

5
6.7

0
FY2008

2009

2010

2011

2012

0
FY2008

2009

2010

2011

2012

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2. Annual Lending Volume by Business and Borrower Types
Review and Plan
Operations

The general account-related businesses in its entirety and Temporary Financial Countermeasures
Funding became eligible for JFM loans in ﬁscal 2009. As a result, the proportion of the loan amounts bybusiness type has changed signiﬁcantly.
In fiscal 2012, loans for Temporary Financial Countermeasures Funding were USD 7.5 billion,
accounting for the largest share of lending, at 37% of the total. Ranked next were USD 3.4 billion in thesewerage business, representing 17% of the total, and USD 1.9 billion in special municipal mergers, for
10% of the total.
At year-end, the number of local governments with loans from JFM totaled USD 20.0 billion. Cities andspecial wards of Tokyo represented the highest share at 53% of the total, followed by prefectures at 28%
and government-designated cities at 11%.

Long-Term Loans Made by Business Type
Water Supply Industrial Water Supply

2008 11.7

14%

1% 5%

2009 13.7

124

Sewerage
41%

6%

Public Housing

32

8

3

3

Three Types of Special Projects
18%

12

1

35

Temporary Financial Countermeasures Funding

Hospitals

2010 19.4

13%

General Account-related Loans

Transportation
4

2%

20

20

4

42

Others

2011 19.1

8

2

2012 20.0

7

3

3

18
5

17

6

41

22
27

4

37

FY2012 Lending Volume by Borrower Type
Local Government Associations

Towns and Villages

Total

USD

20.0 bn

Prefectures

28％ (USD 5.5 bn)

JFM’s Role in Local Government FinanceNotes: 1. Pre-consent or pre-approval loans are accounted for in the year when they are converted into long-term loans.
2. “Others” includes reﬁnancing loans for municipal-related projects and reﬁnancing loans for disaster-affected facilities.
3. Figures may not add up exactly due to rounding off.
4. General account-related loans include loans for public housing and the three types of special projects.
5. The three types of special projects consist of development projects for local roads, rivers and other waterways, and highschool buildings at the time.

1％ (USD 0.3 bn)

Management Structure

Total
FY (USD bn)

7％ (USD 1.4 bn)

53％ (USD 10.7 bn)

Government-designated Cities

11％ (USD 2.1 bn)

Financial Section

Cities and Special Wards of Tokyo

Appendix / JFM Data

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Operations Lending Operations

3. Outstanding Loans by Business and Borrower Types
At the end of fiscal 2012, the outstanding loans were USD 240.4 billion, of which the seweragebusiness accounted for the largest share at 38%, followed by water supply at 17% and the three types of
special projects at 14%.
There were a total of 2,095 local governments with loans from JFM, including all prefectures. Cities
and special wards of Tokyo accounted for the largest portion at 51% of the total, followed by governmentdesignated cities at 20% and towns, villages as well as local government associations and corporations
at the remaining 10%.
Operations

Outstanding Loans by Business Type (as of 31 March 2013)
OthersIndustrial Water Supply

1% (USD 2.4 bn)

7% (USD 17.7 bn)

Public Housing

2% (USD 5.0 bn)
Total

USD

Sewerage

38% (USD 91.0 bn)

Hospitals

240.4 bn 3

% (USD 7.1 bn)

Transportation

6% (USD 14.0 bn)
Temporary Financial Countermeasures Funding

12％ (USD 28.1 bn)

Water Supply

17% (USD 41.2 bn)
Three Types of Special Projects

14% (USD 34.0 bn)

Outstanding Loans by Borrower Type (as of 31 March 2013)
Local Government Corporations

0.4% (USD 1.1 bn)[30]
Local Government Associations

3% (USD 6.7 bn)
Total

USD
[2,095]Prefectures

19% (USD 45.9 bn)
[47]

[285]

240.4 bn 7

Towns and Villages% (USD 17.9 bn)[925]

Cities and Special Wards of Tokyo

Government-designated
Cities20% (USD 47.1 bn)
[20]

51

% (USD 121.6 bn)[788]
Note: Figures in square brackets represent the number of borrowers.

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5

Lending Operations by Business Type
Review and Plan

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

Sewerage Business

4.86

4.0

(Number of loans)

5,000

Number of Loans
4.31
Loan Amount
3.95
4,000
3.39 3.43

3,000

2.0

2,000

1.0

1,000

0

0
FY2008 2009 2010 2011 2012

Water Supply BusinessAt the end of ﬁscal 2011, the water supply coverage was 97.5% of the population. The water supply
business (including small-scale water supply) managed by local governments totaled 2,134 projects andprovided about 18.5 billion cubic meters of water annually for approximately 124.77 million people.
In ﬁscal 2012, loans extended to the water supply business amounted to USD 1.5 billion.
(Number of loans)

2.0

2,000

Number of Loans
Loan Amount
1.60 1.64

JFM Annual Report 2013 | 27

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1.47 1.45 1.47 1,500

1.0

1,000

0.5

500

0.0

0

Appendix / JFM Data

Oigawa Wide Area
Waterworks
Association (Shizuoka
Prefecture)

1.5

Financial Section(USD bn)

JFM’s Role in Local Government Finance

Chiya Sewerage
Treatment Facility(Niimi City, Okayama
Prefecture)

3.0Management Structure(USD bn)

5.0

Operations

At the end of ﬁscal 2011, the sewerage system covered 73.9% of people in cities, towns and villages
with a population of less than 50,000, or 87.6% of the nation’s total population. There were 3,625 projects
involved, with a total annual sewerage processing capacity (combined storm water and seweragetreatment, excluding river basin sewerage) of around 14.9 billion cubic meters serving areas with apopulation of 101.01 million people.
In ﬁscal 2012, loans extended to the sewerage business totaled USD 3.4 billion.

FY2008 2009 2010 2011 20122013/08/01 16:05:54

Operations Lending Operations

Hospitals BusinessAt the end of fiscal 2011, hospital projects managed by local governments totaled 652 with 863
hospitals, which included 828 general hospitals, one tuberculosis hospital and 34 mental hospitals.
In fiscal 2012, loans extended to the hospitals business (including those run by local independentadministrative institutions) totaled USD 0.95 billion.
(USD bn)(Number of loans)

1.0
Operations

Loan Amount

0.95

0.8
0.72
Number of Loans
0.61
0.57

0.6

500
400
300

0.57

Kobe City Medical
Center General
Hospital (Kobe City,
Hyogo Prefecture)

0.4

200

0.2

100

0.0

0

FY2008 2009 2010 2011 2012

Transportation BusinessAt the end of fiscal 2011, the transportation projects managed by local governments totaled 98
projects, which were operated by 80 entities, and public transportation is used by approximately 4 billion
people annually (10.77 million people on an average daily basis).
In ﬁscal 2012, loans extended to the transportation business amounted to USD 0.55 billion.
(USD bn)(Number of loans)

0.8

100
Loan Amount Number of Loans

0.6

0.55 75

0.54 0.54 0.53
0.46

Kagoshima City
Electric Tramway(Kagoshima City,
Kagoshima Prefecture)

0.4

50

0.2

25

0.0

0

FY2008 2009 2010 2011 2012

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Temporary Financial Countermeasures Funding
Review and Plan
Operations

Temporary Financial Countermeasures Funding represents the funding for local governments in order
to cover general resource shortfalls pursuant to the provisions of the Local Government Finance Law.
In order to secure the payments of the principal and interest of funds borrowed by local governments
under Temporary Financial Countermeasures Funding, the national government includes the entire
amount of such payments in the total amount of local allocation tax grants, which are to be allocated to
local governments in subsequent years.
In ﬁscal 2012, loans extended for Temporary Financial Countermeasures Funding amounted to USD 7.5
billion.

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

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Operations Funding Operations

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

1

Issue TypeOperations

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

JFM Bonds

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

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

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

Private Placements with Pension Fund Association
for Local Government Ofﬁcials

International
Bonds

Bonds issued in international markets through the MTN Program

Government-Guaranteed Bonds

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

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2

Basic Funding Policy

Management Structure

From the viewpoint of stable funding, JFM endeavors to issue bonds with various maturities andstructures, including medium-term and super-long-term bonds in response to the market environment
and market needs, in order to broaden its investor base, while also considering funding costs and risk
management.
JFM’s basic means of funding is the issuance of bonds. JFM accesses the domestic market throughregular issuance of 10-year bonds in particular and also takes advantage of its Flexible Issuance
Program (FLIP) for opportunistic funding. In addition, JFM will continue to be committed to accessing
international markets with public benchmark transactions.

Operations

1. Diversiﬁcation of Funding Methods

Review and Plan

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

2. Proactive Disclosure and Investor Relations

3. Contribution to the Sound Development of Capital Markets

Financial Section

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

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

Appendix / JFM Data

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

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

(as of 31 March 2013)

S&P: AA-

Issuer Credit Rating

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

JFM bonds:(For reference)

10% (denominated in yen)

Government-Guaranteed Bonds: 0%

20% (denominated in foreign currencies)

Japanese Government Bonds,
Local Government Bonds: 0%

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

Preferential Rights
for JFM Bonds

preferential right to be paid prior to other unsecured indebtedness, and such preferential
right shall rank immediately after the general preferential rights as provided for in the
Civil Code of Japan (Article 40, Paragraph 2 and Paragraph 3, of the JFM Law).

Note: The risk weights are values for investors in Japan. For foreign investors, values are determined by respective country
authorities. The risk weights for government-guaranteed bonds, JGBs and local government bonds are all 0% in terms of
those denominated in yen as well as foreign currencies (as of 31 March 2013).

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4

Trends in Funding Operations(USD bn)
30(USD bn)
250
27.1

25
20.6

21.6

15

15.4

6.9

0.8

1.6
1.3
1.7

7.6

FY2008

2009

3.2

3.2

151.5

100

2.7

199.6

140.9

167.0

183.0

0.7

9.5

10.0

50

10.3

57.5

2010

2011

1.7

13.6

FY2008

2009

0

2012

27.4

2010

41.6

2011

2012

Government-guaranteed international bonds

Management Account

Government-guaranteed domestic bonds

General AccountFinancial Section

4.2

0

150

7.6

0.3

10.0

5

194.3 193.1 198.4

8.7

4.2

10

201.3 196.5

10.9

0.9

20

200

21.8

JFM’s Role in Local Government Finance

Outstanding Bonds and Bank LoansManagement Structure

Funding Volume

Operations

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

Review and Plan

JFM issues JFM bonds (non-guaranteed bonds to be issued through domestic public offerings, the
MTN Program or private placements with the Pension Fund Association for Local Government Ofﬁcials)
and government-guaranteed bonds for the purpose of refinancing existing government-guaranteedbonds of the Predecessor.
The Predecessor had issued government-guaranteed bonds and private placement bonds subscribedby the Pension Fund Association for Local Government Ofﬁcials, and for the period from ﬁscal 2001 to
ﬁscal 2008, non-guaranteed FILP agency bonds*1. Then, since JFM commenced its operations in ﬁscal
2008, JFM has issued JFM bonds. In recent years, the issuance of government-guaranteed bonds has
been decreasing, while that of JFM bonds has been increasing.
In fiscal 2012, the total bond issuance of USD 27.1 billion increased by USD 5.3 billion from theprevious year, which was greater than the average annual issuance volume of USD 20 billion for thelast three years. This increase was due to the payment made to the national treasury*2 of USD 3.7 billion
funded through government-guaranteed bonds.
At year-end, outstanding bonds were USD 198.1 billion and outstanding bank loans were USD 0.3
billion, totaling USD 198.4 billion. This total amount is comprised of USD 57.5 billion in the generalaccount and USD 140.9 billion in the management account. While the outstanding bonds and bankloans in the general account have been increasing, the management account has been decreasing. The
management account is expected to gradually decrease as no new bonds, other than bonds issued to
reﬁnance Predecessor’s bonds, have been issued in this account since October 2008 and equally none
are expected going forward.

Long-term bank loans

Private placements with Pension Fund Association for
Local Government Officials
JFM bonds (international bonds)
JFM bonds (domestic bonds)

Note: The amount for ﬁscal 2008 was a total of the Predecessor's
bonds and the bonds of Japan Finance Organization for
Municipal Enterprises.

Appendix / JFM DataFILP agency bonds

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Management
Structure

3. Internal Audit

36
36
38
38

General Account and Management Account39

Risk Management

41

Compliance46

Disclosure

47

Corporate Governance1. Corporate Governance
2. Internal Control over Financial Reporting

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Management
Structure

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

1

Corporate GovernanceCorporate Governance System

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

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

Appointment of
Accounting Auditors
and Corporate
Auditors

Decisions onimportant matters,
including budgets
and accounts

Accounting
Auditors

Consultation andpropositions

AuditsPresident and CEO,
Deputy President, etc.

(Certiﬁed public
accountants or an
audit corporation)

AuditsCorporate Auditors
Budgetsubmissions

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

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

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1. Representative Board

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 Chief Executive Ofﬁcer and the Minister
for Internal Affairs and Communications.

Appendix / JFM Data

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

Financial Section

4. Audits by External Accounting Auditors

JFM’s Role in Local Government Finance

3. Audits by Corporate Auditors

Management Structure

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

Operations

2. Supervisory Committee

Review and Plan

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

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Management
Structure2

Corporate GovernanceInternal Control over Financial Reporting

Pursuant to the Ministerial Ordinance on Finance and Accounting of the Japan Finance Organization
for Municipalities (Ordinance No. 87 of the Ministry of Internal Affairs and Communications, 2008; the“Ordinance”), JFM has a system of internal control over financial reporting to ensure the reliability of
its ﬁnancial statements, and also maintains and implements this system appropriately. In accordancewith the Ordinance, JFM prepares the Internal Control Report, the base date of which is the end of theﬁscal year (March 31), and it is audited by the external auditors and released together with the ﬁnancial
statements.
In the fiscal 2012 Internal Control Report, JFM viewed its internal controls on financial reporting
as effective. In the Auditors’ Report on Internal Controls, the accounting auditors gave their opinion(unqualiﬁed audit opinion pursuant to Ministerial Ordinance Article 32, Paragraph 4, Clause 1) that, in allmaterial respects, evaluation results of JFM’s internal controls over ﬁnancial reporting were in conformity
with the standards of evaluation for internal controls over financial reporting generally accepted inJapan.
Management Structure

3Internal Audit

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

Internal Audit System

President and CEO

Deputy President

SeniorExecutive
Directors
Departments
DivisionsInternal Audits

Internal
Auditors

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Management
Structure

General Account and Management AccountBegan operations on
1 October 2008

Reorganized on
1 June 2009

Japan Finance
Organization for
Municipalities (JFM)

Established by capital
contributions only from Japanese local
governments

The lending scope was expanded tooverall general account-related loans

Succeeded to assets
and liabilities

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

Management Structure

Japan Finance
Organization for
Municipal Enterprises

Established on
1 June 1957

Operations

Established on
1 August 2008

Review and Plan

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

Abolished(and its capital returned to
the national government)

When JFM was founded, it succeeded to the Reserve for Losses on the Reﬁnancing of Bonds, etc., in
the amount of approximately JPY 3.4 trillion (USD 36 billion) to ensure its future stable management.
Of this amount, the JPY 2.2 trillion (USD 23 billion) needed to ensure the future continuity of JFM’soperations was to be transferred to the general account in equal installments over 10 years, with theremainder to be transferred to the management account to ensure a sufﬁcient ﬁnancial foundation toappropriately manage the Predecessor’s bonds and loans and prepare for the risk with refinancing
bonds of the Predecessor.

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

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

General AccountReserve for Losseson the Refinancingof Bonds
JPY 3.4 tn(USD 36 bn)

Management AccountManagement Account Reservefor Interest Rate Volatility
Appendix / JFM Data

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

FY2008-2017
JPY 220 bn (USD 2.3 bn)
transferred each year

Financial Section

Reserve for JPY 2.2 tn
Interest Rate Volatility (USD 23 bn)

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Management
Structure

General Account and Management AccountIf any assets remain when the asset management operations of the Predecessor are completed andthe management account is closed, those assets shall be returned to the national treasury.
Even before the management account is closed, in the event that the businesses of JFM aredetermined to have been executed smoothly in light of the condition of the management of JFM, theMinister for Internal Affairs and Communications and the Minister of Finance shall, if the management
account reserve for interest rate volatility and so on are determined to exceed the amount necessary forthe smooth operation of the asset management operations of the Predecessor in the future, cause
the amount that is determined to be in excess to belong to the national treasury (Article 14 of the
Supplementary Provisions to the JFM Law).
In accordance with this provision, a portion of JFM’s reserve for interest rate volatility within the
management account are set to be attributed to the Japanese national government over a period of three
years from ﬁscal 2012 through ﬁscal 2014, with the aim of transferring a total of JPY 1 trillion (USD 11
billion). Such portion is to be transferred to the national government’s special account for local allocation
taxes.
In ﬁscal 2012, JPY 350 billion (USD 3.7 billion) was transferred to the national treasury, and in ﬁscal
2013, JPY 650 billion (USD 6.9 billion) is scheduled to be transferred.
Management Structure

JFM
Management AccountReserve forInterest Rate Volatility
JPY 2.7 tn (USD 29 bn)

National Government
FY2012-2014 total amount of
JPY 1 tn (USD 11 bn) aimed tobe paid•In FY2012, JPY 350 bn(USD 3.7 bn) paid
•In FY2013, JPY 650 bn(USD 6.9 bn) scheduled to be paid

National Treasury(as of 31 March)

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Management
Structure

Risk Management

1

Overall Risk Management
Review and Plan

1. Risk Management System

Operations

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

Risk Management System

Integrated Risk
Management
Committee

Senior Executive
Director in Charge

ALM Committee

Management Structure

President and CEO

Risk Management
Ofﬁce

Loan
Department

Administration
Department

2. Characteristics of JFM’s Risks

Financial Section

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

JFM’s Role in Local Government Finance

Finance
Department

Appendix / JFM Data

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Management
Structure2

Risk Management

Management of Speciﬁc Risks

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

1) Credit risk associated with loans
JFM lends exclusively to local governments. Local government bonds and loans have a zero risk
weighting under the regulations of the Bank for International Settlements (as of 31 March 2013). For thereasons outlined below, JFM does not expect any default on loans made to local governments. In fact,
JFM and its Predecessor have never experienced any loan losses.
Management Structure2) Credit risk associated with market transactions
JFM is, however, exposed to the risk of loss arising from credit events, such as deterioration in theﬁnancial condition of a counterparty, which causes an asset to lose value or become worthless. JFM
works to appropriately manage credit risk of this type by constantly monitoring counterparties’ ﬁnancial
standings and taking measures including suspension of new deals and cancellation of transactions withcounterparties that have come to poor credit standings. Moreover JFM limits counterparties to ﬁnancial
institutions that meet the credit rating and other criteria, and conducts transactions within the credit lines
for each counterparty in order to diversify risks.
In addition, JFM entered into the ISDA Master Agreement and the CSAs (Credit Support Annexes) withits derivatives counterparties to reduce the credit risk resulting from fluctuations in the value of derivativetransactions.

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

1) Interest rate risk
Interest rate risk is the risk of loss resulting from fluctuations in interest rates. There is a duration
gap between JFM’s lending and funding, which exposes JFM interest rate risks associated with bondreﬁnancing. To address such interest rate risk, JFM takes the following measures.

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• JFM maintains reserves for interest rate volatility. At the end of ﬁscal 2012, the amount of
the reserves stood at USD 11.7 billion in its general account and USD 29.4 billion in its
management account for a total of USD 41.1 billion in both accounts.

(1) The duration gap to be below approximately two years.

Operations• As assets and liabilities in the general account are expected to expand as a result of anincrease in loans and fund-raising, JFM carries out an ALM analysis of this account in orderto further enhance the effectiveness of its management of interest rate risk. Furthermore, JFM
established the following medium-term management targets for ﬁve years from ﬁscal 2009*:

Review and Plan

Managing interest rate risk

(2) The outlier ratio (the ratio of the interest risks (a 200-basis-point upward or downward
parallel shift in the yield curve) to net assets including the reserve for interest rate
volatility and the Fund for Lending Rates Reduction) to be below approximately 20%

Notes: From ﬁscal 2013, the outlier ratio will not be used as a management target due to the unique situation of JFM
outlier ratio being at a high level.
This unique situation exists for the following reasons:Management Structure• At the end of ﬁscal 2012, the duration gap was 1.11 years and the outlier ratio was 20.3%,
both within the management target.

(i) JFM maintains the sufﬁcient reserve for interest rate volatility in order to secure its ﬁnancial soundness, anduses the reserve for its lending operations. This means that bond issuances to match lending needs are notnecessary.

On the other hand, JFM will maintain the duration gap as described above in its renewed medium-term
management target for five years from fiscal 2013, and continue to regularly issue bonds with maturities
exceeding ten years to reduce its exposure to interest rate risk.

• The management account, which manages assets transferred from the Predecessor, iscurrently exposed to more interest rate risk than the general account. To address such risk,
JFM maintains the management account reserve for interest rate volatility in the amountof USD 29.4 billion as described above. But in the future, assets and liabilities in the
management account will decline over time and interest risk decline because new loans havenot been made since October 2008.

Financial Section• Pursuant to Article 14 of the Supplementary Provisions of the JFM Law, a portion of JFM’s
management account reserve for interest rate volatility will be transferred to the national
government over a period of three years from fiscal 2012 to fiscal 2014. The amount oftransfer is to be within the amount which the Minister for Internal Affairs and Communications
and the Minister of Finance deem as an amount exceeding the requisite amount of reserve
necessary for smooth operation of JFM’s management account at the time of transfer andin the future in light of the conditions of the management of JFM. JFM expects that such atransfer will not have a material effect on JFM’s business at the time of transfer and in the
future because it will continue to maintain sufﬁcient reserves going forward to deal with theinterest rate risk even after the transfer.

JFM’s Role in Local Government Finance(ii) JFM provides long-term ﬁxed rate loans, thus both of its assets and liabilities have a long duration. Due tosuch institutional design and operational nature of JFM, a large duration gap between lending and funding
is created.

Appendix / JFM Data

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Management
Structure

Risk Management

Maturity Ladder (JFM Loans, Bonds and Bank Loans)
General Account(as of 31 March 2013)

10,0008,000
6,000

USD mm

4,000
2,000
0

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

FY2013 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42• Lending duration 9.72 years • Funding duration 8.61 years • Duration gap 1.11 years (YoY change: +0.14 years)

Management Account(as of 31 March 2013)

30,00020,000

USD mm

10,0000Interest Receipt (Lending)-10,000

Principal Redemption (Lending)Principal Redemption (Funding)-20,000

Interest Payment (Funding)Gap between Cash Inflows
and Outflows-30,000
FY2013

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

• Lending duration 6.70 years • Funding duration 4.33 years • Duration gap 2.37 years (YoY change: -0.05 years)
JFM as a whole• Lending duration 7.63 years • Funding duration 5.58 years • Duration gap 2.05 years (YoY change: -0.11 years)

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

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3. Liquidity Risk
Review and Plan
Operations

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

4. Operational Risk

1) Administrative risk

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

JFM’s Role in Local Government Finance

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

Management Structure

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

5. Contingency Measures
Financial Section

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

Appendix / JFM Data

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Management
Structure1

Compliance

Basic Policy

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

• Management and employees must be aware of JFM’s social responsibility and public mission
and realize that a breach of laws or regulations would cause a great hindrance to JFM’sbusiness operations, such as a loss in credibility of JFM as a whole. Management and staff
must also observe laws and regulations and fulﬁll their duties with integrity and fairness.
• Management and employees must strive to earn the trust of society by appropriately
disclosing information on JFM’s operations.
Management Structure2Compliance System

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

Compliance System

President and CEO

Appointment
Compliance Committee
Instruction

ReportCompliance Division (Administration Department)

Instruction and training

ReportEmployees

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Management
Structure

Disclosure

1

Basic Stance on Information Disclosure

Materials for Disclosure

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

• Financial statements• Business reports and statement of accounts (in Japanese only)• Explanatory documents based on Article 36, Paragraph 3, of the JFM Law (Documents corresponding
to annual securities reports speciﬁed in the Financial Instruments and Exchange Act and the Internal
Control Report) (in Japanese only)• Budgets, business plans, funding plans, and medium-term plans on income and expenditures• Management plan
• Funding plan
• Brochure• Annual Report (Japanese and English)• JFM News magazine

2013

Website (http://www.jfm.go.jp/en/)Japan Finance Organization for Municipalities

Annual Report

Appendix / JFM Data

JFM

Financial Section

ANNUALREPORT

JFM’s Role in Local Government Finance2. Other Documents for DisclosureManagement Structure

1. Materials for Disclosure Pursuant to Laws and Regulations

Operations

2

Review and Plan

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

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JFM’s Role in Local Government Finance1

Japanese Local Government System

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

National Government
Prefectures
Local Government

Cities, Towns, Villages,
and Special Wards

Number of Japanese Local Governments

JFM’s Role in Local Government FinancePrefectures
Cities and special wards

47
1,742

Government-designated cities

20

Cities769

Special wards

23

Towns

746

Villages

184

Total

1,789
(as of 1 April 2013)

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2

Local Government Finance Program
Local Government Finance Program(Initial Plan for FY2013)

Annual Expenditure(USD 895.6 bn)

Review and Plan

Annual Revenue(USD 895.6 bn)
Operations

Local TaxUSD 385.8 bn- Social welfare- Education- Fire defense- Infrastructure, etc.

Local Allocation Tax
USD 188.8 bn

OthersUSD 201.4 bn

JFM’s Role in Local Government Finance

Local Government
Bonds and Loans
USD 119.5 bn

Management Structure

Each local government is unique in terms of its
natural and historic situations, industrial structures,
population sizes, and other attributes. As a result,each local government handles diverse administration.
The term “local government ﬁnance” collectively refers
to funding for individual local governments engaging insuch administration. Just as with national ﬁnance, local
government ﬁnance plays a major role in the nation’s
economy and the lives of citizens. In ﬁscal 2013, local
government finance will total JPY 84.4 trillion (USD
895.6 billion) (based on the Local Government Finance
Program (the “LGFP”), while the nation’s General
Account Budget for the year is JPY 92.6 trillion (USD
982.1 billion)).
Because local governments engage in numerous
activities that closely relate to residents, they need toprovide stable public services regardless of regional
dif ferences stemming from var ying populations,industry densities, and/or tax revenue ﬂuctuations overyears. Accordingly, the national government formulates
the LGFP each fiscal year based on assessments ofthe scales of local government ﬁnance and forecastsof overall revenues and expenditures. In response toannual national budget plans, the national government
balances the total amount of local gover nment
revenues and expenditures in the LGFP. Under thisprogram, revenue sources for all local governments,
including local allocation tax grants as well as bonds
and loans to be issued or borrowed, are secured sothat local governments can ensure uniform public
service standards.

Financial Section
Appendix / JFM Data

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JFM’s Role in Local Government Finance3

Local Allocation Tax

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

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

Standard
Local
Tax revenue*2

Allocation Tax= Local for
City A

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

JFM’s Role in Local Government Finance4

Local Government Borrowings

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

5

Safety of Local Government Borrowings

The following framework secures principal and interest payments of local government borrowings. On
the back of this framework, the BIS risk weighting for local government borrowings is 0%, based on thestandardized approach (as of 31 March 2013).

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.

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Operations

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

Review and Plan(i) Local tax revenues are secured by taxation rights of local governments(ii) The national government includes repayments of local government borrowings (i.e., principal andinterest payments) in the amount of expenditures in the LGFP(iii) The total amount of Local Allocation Tax grants is set aside so that the total amount of local
government expenditures, including the principal and interest payments, is equivalent to the total
amount of local government revenues in the LGFP(iv) In the calculation of Local Allocation Tax grants to be allocated to an individual local government, aportion of the principal and interest payments are included in the Standard Financial Requirementsof an individual local government2) Issuance restriction3) Supervision of ﬁnancial soundness
The Law Relating to the Financial Soundness of Local Governments of Japan, which was promulgatedin June 2007, requires local governments the following measures in order to securely manage their ﬁscal
soundness:

6

Local Government Borrowing Program

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

Management Structure

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

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

1) Consent (approval) based on LGBP

Financial Section*See page 33.

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

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

Appendix / JFM Data

2) Secured funding sources for local government borrowings

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JFM’s Role in Local Government Finance

7

JFM Funds in Local Government Borrowing Program

The sources for local government funding is classiﬁed into national government funds, JFM funds andprivate funds.

Local Government Borrowing Program
FY2012FY2013
Share (%)

Publicly Offered Bond

USD 47 bn

USD 36 bn

25

Other Private Sector

USD 37 bn

USD 47 bn

32

JFM

USD 23 bn

USD 23 bn

16

National Government

USD 41 bn

USD 39 bn

27

USD 149 bn

USD 145 bn

100

1. Private Funds

2. Public Funds

Total

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

The scale and proportion of JFM funds (on an initial plan basis) for ﬁscal 2013 is planned to stay at thesame level as in the previous ﬁscal year.

LGBP Volume by Funding Source (Initial Plan)
JFM’s Role in Local Government Finance(USD bn)

(%)

180

18
169

160
140
120

151
39

12.9

100
80

46

13.6

15.9 16

15.5 145

13.8
47

36

41

37

47

20

23

23

40

41

39

2011

2012

2013

45

19

10

42

46

8
6

23

40

14
12

54
50

60

20

149
146

Publicly Offered Bond
Other Private Sector
JFM
National Government
JFM Ratio

4
2

0

0
FY20092010

Source: Ministry of Internal Affairs and Communications

Thus, JFM plays a major role in Japanese local government finance. JFM makes a substantial
contribution to the project implementation and ﬁnancial management of local governments.

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

Balance Sheets
Statements of Income
Statements of Appropriation of Proﬁt[General account/Management account]

Independent Auditor’s Report93Statements of Cash Flows

Appendix / JFM Data

Notes to Financial Statements

56
58
60
61

Statements of Changes in Net Assets

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54
54
55

Financial Section

Financial Statements

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Financial
SectionFinancial Statements

Balance Sheets(As of 31 March 2012 and 2013)

Item

Fiscal 2011
(31 March
2012)(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2012
(31 March 2013)

Item

Fiscal 2011
(31 March
2012)

AmountAmountAssetsLoans (Note 5)

Fiscal 2012
(31 March 2013)

Liabilities¥22,387,411 ¥22,668,634 $240,388,489

Bonds (Notes 9 and 10)¥18,176,696 ¥18,676,401 $198,053,033

Securities (Note 18)762,987

598,994

6,352,012

Borrowed money (Note 11)30,00030,000318,134

Cash andbank deposits

172,250

419,267

4,446,104

Other liabilities

15,373

15,121

160,352

Other assets

14,894

14,173

150,306

Reserve for bonuses (Note 12)

47

47

498

Tangible ﬁxed
assets (Note 8)

2,563

2,964

31,439Reserve for directors’
bonuses (Note 12)

6

5

57

Intangible ﬁxed
assets (Note 8)

600

883

9,371

Reserve for retirement
beneﬁts (Notes 12 and 15)

146

141

1,505

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

23

27

291

Fund for lending rate
reduction

919,871922,568

9,783,339

Basic fund for lending rate
reduction (Note 14)

911,935

915,698

9,710,487

Additional fund for lending
rate reduction (Note 14)

7,936

6,869

72,852

Reserves under special laws

4,104,844

3,947,086

41,856,694

Reserve for interest rate
volatility (Note 13)

880,000

1,100,000

11,664,899

Management account reserve forinterest rate volatility (Note 13)

3,137,557

2,771,200

29,387,070

Reserve for interest rate reduction

87,28775,885

804,725

23,247,010

23,591,399

250,173,903

Capital16,602

16,602

176,056

Retained earnings

29,39350,221

532,576

General account surplus
reserve

29,39350,221

532,576

Valuation, translation
adjustments and others(5,964)(6,970)(73,914)

Management accountsurplus reserve

53,666

53,666569,100

Total net assets

93,696

113,520

1,203,818

Total liabilities
Net Assets

Financial Section

Total assets¥23,340,707 ¥23,704,919 $251,377,721 Total liabilities and net assets ¥23,340,707 ¥23,704,919 $251,377,721

See notes to ﬁnancial statements.

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Statements of Income

Item

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

Fiscal 2011
(1 April 2011 to
31 March 2012)

Fiscal 2012
(1 April 2012 to 31 March 2013)

AmountAmount485,675

5,150,324

Fees and commissions

128

123

1,308

Other income

34

1,348

14,296-

1,066

11,306

34

281

2,990

281,749

274,076

2,906,433

274,320

265,647

2,817,046

Fees and commissions

275

280

2,976

Other operating expenses

4,539

5,519

58,527

General and administrative expenses

2,385

2,629

27,884229--

Transfer to fund for lending rate reduction (Note 14)

216

-

-

Others12--

Ordinary income

230,055

213,0702,259,495

Special gains

232,601

581,4026,165,451

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

220,000

570,000

6,044,539

Reversal of reserve for interest rate reduction

12,601

11,402120,912441,024

773,643

8,204,069

Provision for reserve for interest rate volatility (Note 13)

220,000

220,000

2,332,980

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

221,024

203,643

2,159,530-

350,000

3,711,559¥21,632¥20,828$220,877

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

Other expenses

Special losses

Payment to national treasury (Note 4 and 6)
Net income
See notes to ﬁnancial statements.

Financial Section

511,641

Interest income

JFM’s Role in Local Government Finance$5,165,928

Management Structure¥487,146

Operations¥511,805

Review and Plan

(For the years ended 31 March 2012 and 2013)

Appendix / JFM Data

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Financial
SectionFinancial Statements

Statements of Appropriation of Profit [General account](For the year ended 31 March 2012)(Millions of yen)

1 Proﬁt available for appropriation¥15,532

Net income¥15,532

Accumulated deﬁcit brought forward-

2 Proﬁt appropriatedSurplus reserve

15,532

15,532

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

1 Proﬁt available for appropriation¥20,828

Net income¥20,828

Accumulated deﬁcit brought forward-

2 Proﬁt appropriatedSurplus reserve

20,82820,828(Thousands of U.S. dollars)

1 Proﬁt available for appropriation$220,877

Net income$220,877

Accumulated deﬁcit brought forward-

2 Proﬁt appropriatedSurplus reserve

220,877

220,877

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

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

1 Proﬁt available for appropriation¥6,100Net income¥6,100

Accumulated deﬁcit brought forward

Review and Plan

(For the year ended 31 March 2012)-

2 Proﬁt appropriated
6,100

6,100

Operations

Surplus reserve

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

1 Proﬁt available for appropriation¥-

Net income¥-

Accumulated deﬁcit brought forward-

2 Proﬁt appropriatedSurplus reserve-

Management Structure(For the year ended 31 March 2013)-(Thousands of U.S. dollars)

1 Proﬁt available for appropriation$$-

Accumulated deﬁcit brought forward-

2 Proﬁt appropriatedSurplus reserve--

Notes: 1. Proﬁt was appropriated at the end of this ﬁscal year in accordance with the provisions of Article 13, Section 8 of the Supplementary
Provisions of the Law.
2. Surplus reserve appropriated was posted as management account surplus reserve on the balance sheets.
See notes to ﬁnancial statements.

JFM’s Role in Local Government Finance

Net income

Financial Section
Appendix / JFM Data

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Financial
SectionFinancial Statements

Statements of Changes in Net Assets(For the year ended 31 March 2012)

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

CapitalBalance as of 1 April 2011

(Millions of yen)

Total
net
assets¥16,602¥13,860¥13,860¥30,462¥(8,645)¥47,565¥69,382

Net income-

15,532

15,532

15,532-

6,100

21,632

Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

2,681

-

2,681

-

15,532

15,532

15,532

2,681

6,100

24,314¥16,602¥29,393¥29,393¥45,995¥(5,964)¥53,666¥93,696

Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March2012

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

¥29,393¥29,393¥45,995¥(5,964)¥53,666¥93,696

Net income-

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

-

-

-

-

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

Balance as of 1 April 2012
Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March2013(Thousands of U.S. dollars)

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

Total
net
assets$176,056$311,699$311,699$487,755$(63,253)$569,100$993,602

Net income-

220,877

220,877

220,877--

220,877

Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

(10,661)-(10,661)-

220,877

220,877

220,877(10,661)-

210,216$176,056$532,576$532,576$708,632$(73,914)$569,100$1,203,818

Stockholders’ equity

CapitalBalance as of 1 April 2012

JFM’s Role in Local Government Finance(For the year ended 31 March 2013)

Management Structure¥16,602

CapitalOperations

Total
net
assets

Review and Plan

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

Changes duringaccounting period

Appendix / JFM Data

Balance as of 31 March2013

Financial Section

Net changes duringaccounting period

See notes to ﬁnancial statements.

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Financial
SectionFinancial Statements

Statements of Cash Flows(For the years ended 31 March 2012 and 2013)

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

Fiscal 2011
(1 April 2011 to
31 March 2012)

Fiscal 2012
(1 April 2012 to 31 March 2013)

AmountAmountⅠ Cash ﬂows from operating activities

Net income
Depreciation and amortization
Interest income
Interest expenses
Increase/(decrease) in reserve for bonuses
Decrease in reserve for directors’ bonuses
Decrease in reserve for retirement beneﬁts
Increase/(decrease) in reserve for retirement
beneﬁts for directors and corporate auditors
Increase/(decrease) in fund for lending rate
reduction
Increase in reserve for interest rate volatility
Increase/(decrease) in management accountreserve for interest rate volatility
Decrease in reserve for interest rate reduction
Net (increase)/decrease in loans
Net increase/(decrease) in bonds
Net increase/(decrease) in borrowed money
Interest received
Interest paid
Others¥21,632
345(511,641)
274,3206(0)(48)¥20,828354(485,675)
265,647
(0)
(1)
(4)

$220,877
3,757(5,150,324)
2,817,046
(9)
(16)
(52)

(3)

3

36

216

(1,066)(11,306)

220,000

220,000

2,332,980

1,024(16,356)(173,450)(12,601)(155,554)(154,272)
30,000513,086(271,287)
1,507(11,402)(281,223)
495,783
486,149(262,457)(981)(120,912)(2,982,222)
5,257,515
5,155,351(2,783,214)(10,408)

Net cash provided by/(used in) operating activities(43,268)

429,597

4,555,649

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

4,065,600(4,370,780)
(108)
(75)
421

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

53,308,590(51,566,794)(4,774)(1,539)-Net cash provided by/(used in) investing activities(304,944)

163,656

1,735,483-(350,000)(3,711,559)

3,830

3,763

39,9133,830(346,236)(3,671,646)

-

-

-

(344,382)

247,0172,619,486

Ⅵ Cash and cash equivalents at beginning of year

516,633

172,250

1,826,618

Ⅶ Cash and cash equivalents at end of year

¥172,250¥419,267$4,446,104

Ⅱ Cash ﬂows from investing activities

Financial Section

Ⅲ Cash ﬂows from ﬁnancing activities

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

equivalents

See notes to ﬁnancial statements.
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Notes to Financial Statements

Operations

Japan Finance Organization for Municipalities (hereinafter, “JFM”) has prepared ﬁnancial statements in accordancewith the Japan Finance Organization for Municipalities Law (Law No. 64, 2007; hereinafter the “Law”), the ordinances
based on the Law and other regulations applicable to JFM and accounting principles generally accepted in Japan.
Since JFM does not have any subsidiaries or afﬁliates, it does not prepare consolidated ﬁnancial statements.
Amounts less than one million yen have been omitted. As a result, the totals in Japanese yen shown in the ﬁnancial
statements do not necessarily agree with the sum of the individual amounts.
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers
outside Japan, using the prevailing exchange rate as of 31 March 2013, the final day of the fiscal year, which was¥94.30 to U.S. $1. The approximate rate of exchange prevailing at 21 May 2013 was ¥102.77 to U.S. $1. Thistranslation should not be construed as a representation that all amounts shown could be converted into U.S. dollars
at such rate.

Review and Plan

1. Basis of Presentation

2. Summary of Signiﬁcant Accounting Policies
Management Structure
JFM’s Role in Local Government Finance
Financial Section
Appendix / JFM Data

(1) Securities
Held-to-maturity securities are carried at amortized cost (straight-line method).
(2) Derivative transactions
Derivative transactions are carried at fair value with changes in unrealized gain or loss charged or credited toincome, except for those which meet the criteria for hedge accounting.
(3) Depreciation and amortization(a) Tangible ﬁxed assets
Depreciation of tangible fixed assets is calculated by the straight-line method based on the estimated useful
lives and the residual value determined by management. The estimated useful lives of major items are as
follows:
Buildings: 20 to 47 years
Others: 2 to 19 years(b) Intangible ﬁxed assets
Amortization of intangible ﬁxed assets is calculated by the straight-line method based on the estimated useful
lives and the residual value determined by management. Software for internal use owned by JFM is amortizedover 5 years.
(4) Deferred assets
Bond issuance costs are expensed in full when incurred.
(5) Translation of assets and liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies, for which foreign currency swaps or foreignexchange forward contracts are used to hedge the foreign currency fluctuation, are translated at the contracted
rate as these swap contracts or the forward contracts qualify for deferral hedge accounting.
(6) Reserves(a) Reserve for possible loan losses
JFM has never experienced any loan losses. Accordingly, no reserve for possible loan losses has been
maintained.
(b) Reserve for bonuses
The reserve for bonuses is provided for payment of bonuses to employees, in the amount of estimatedbonuses, which are attributable to the ﬁscal year.
(c) Reserve for directors’ bonuses
The reserve for directors’ bonuses is provided for payment of bonuses to directors, in the amount of estimatedbonuses, which are attributable to the ﬁscal year.
(d) Reserve for retirement beneﬁts
The reserve for retirement beneﬁts is provided for payment of retirement beneﬁts to employees, in the amountdeemed accrued at the fiscal year-end, based on the projected retirement benefit obligation and fair value ofplan assets at the ﬁscal year-end.
(e) Reserve for retirement beneﬁts for directors and corporate auditors
The reserve for retirement benefits for directors and corporate auditors is provided for payment of retirement
benefits to directors and corporate auditors, in the amount deemed accrued at the fiscal year-end based on
the internal policies.
(7) Hedge accounting(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest rate fluctuations that qualify for hedge accounting andmeet specific matching criteria are not measured at fair value, but the differential paid or received under the

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Financial
SectionFinancial Statements

Financial Section

swap agreements is recognized and included in interest expense or income. If swap contracts or forward
contracts used to hedge the risk of foreign currency ﬂuctuation qualify for deferral hedge accounting, the foreign
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 borrowed money(ⅱ) Hedging instruments・・・Currency swaps
Hedged items・・・・・・・・・Foreign currency-denominated bonds(ⅲ) Hedging instruments・・・Foreign exchange forward contracts
Hedged items・・・・・・・・・Receipt of interest and principal of foreign currency-denominated bank deposits(c) Hedging policy
JFM uses hedging instruments as a means of hedging exposure to interest rate risk and foreign exchange risk.
Hedged items are identiﬁed by each individual contract.
As a means of hedging foreign exchange ﬂuctuation risks associated with the receipt of interest and principalof foreign currency-denominated bank deposits, a foreign exchange forward contract is entered into at the timeof each deposit by JFM.
(d) Assessment of hedge effectivenessJFM ensures hedging instruments and hedged items have the same major terms when entering into hedgetransactions to offset bond and borrowed money market ﬂuctuation risks. Accordingly, JFM deems these to behighly effective and thus does not assess effectiveness. Moreover, a periodic assessment of hedge effectivenessfor interest rate swaps, currency swaps and forward contracts that qualify for deferral hedge accounting isomitted when the exceptional accrual method is applied.
(8) Cash and cash equivalents
Cash and cash equivalents in the statement of cash ﬂows consist of “Cash and bank deposits” on the balance sheets.
(9) Fund for lending rate reduction
In accordance with the provisions of Article 46, Section 1 of the Law, JFM has established the fund for lending
rate reduction to reserve contributions as stipulated in Article 32-2 of the Local Finance Law (Law No. 109, 1948).
Also, pursuant to the provisions of Article 46, Section 5 of the Law, income arising from the investment of thefund (hereinafter, “investment income”) is used to reduce interest rates of the loans to municipalities, and if there
is any surplus in the investment income after this interest rate reduction process, the surplus amount is added to
the fund. Further, pursuant to the provisions of Article 46, Section 6 of the Law, if there is any shortfall after theinterest rate reduction process, the shortfall is covered by withdrawal of the fund within the limits of the total of theadditional portion to the fund made up to the previous ﬁscal year and the contributions made in the most current
ﬁscal year.
(10) Reserve for interest rate volatility and management account reserve for interest rate volatility
The reserve for interest rate volatility is set aside to prepare for interest rate risk associated with reﬁnancing of JFM
bonds (excluding the bonds issued by the former Japan Finance Corporation for Municipal Enterprises; hereinafter,
the “Predecessor”) pursuant to the provisions of Article 38, Sections 1 and 3 of the Law, and Article 9, Section
8 of the Supplementary Provisions of the Law, and is calculated and accounted for based on the provisions ofArticle 34 of the Ministerial Ordinance on Finance and Accounting of Japan Finance Organization for Municipalities(Ordinance No. 87 of the Ministry of Internal Affairs and Communications, 2008; hereinafter, “Ordinance on Financeand Accounting”) and Article 22 of the Government Ordinance on preparation of relevant government ordinancesand provisional measures for the abolishment of the Japan Finance Corporation for Municipal Enterprises Law(Government Ordinance No. 226, 2008; hereinafter, “Preparation Ordinance”).
The management account reserve for interest rate volatility is set aside to manage interest rate risk associatedwith refinancing of bonds issued by the Predecessor pursuant to the provisions of Article 9, Sections 9 and 10,
and Article 13, Sections 5 and 7 of the Supplementary Provisions of the Law, and is calculated and accounted forbased on the provisions of Articles 1 through 3 of the Ministerial Ordinance on the operations of the Management
Account at Japan Finance Organization for Municipal Enterprises (Ordinance No. 2 of the Ministry of Internal Affairs
and Communication, and the Ministry of Finance, 2008; hereinafter, “Management Account Operations Ordinance”)
and Articles 3 and 5 of the Supplementary Provisions of the above ordinance.
(11) Reserve for interest rate reduction
Reserve for interest rate reduction is set aside to reduce interest rates on the loans made by the Predecessor
to local governments pursuant to the provisions of Article 9, Section 13, and Article 13, Section 8 of the
Supplementary Provisions of the Law, and Article 26, Sections 1, 3 and 4 of the Preparation Ordinance, andis calculated and accounted for based on the provisions of Article 5 of the Management Account Operations
Ordinance.
(12) Management account surplus reserve
Profits generated in the management account are accounted for as the management account surplus reserve
separately from retained earnings in accordance with the provisions of Article 13, Section 8 of the Supplementary
Provisions of the Law and Article 26, Section 2 of the Preparation Ordinance.

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(13) Consumption taxes
National and local consumption taxes are accounted for using the tax exclusion method.

Operations“Accounting Standard for Retirement Benefits” (Accounting Standards Board of Japan (ASBJ) Statement No. 26,
issued 17 May 2012) and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25,
issued 17 May 2012)(1) Overview
In light of improvements to ﬁnancial reporting and international convergence, the accounting standards have beenrevised, mainly focusing on (a) how unrecognized actuarial gains and losses and unrecognized past service costs
should be accounted for, (b) how retirement beneﬁt obligations and current service costs should be determined and (c)enhancement of disclosures.
(2) Date of Adoption
JFM will adopt the accounting standards as of the end of the ﬁscal year commencing on 1 April 2013.
(3) Impact of adoption of the accounting standards
JFM is currently evaluating the impact of the adoption of the accounting standards on its ﬁnancial statements.

Review and Plan

3. Accounting Standards Issued but Not Yet Effective

4. Additional Information

5. Loans

JFM’s Role in Local Government Finance

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

Management Structure

Payment to national treasury
In accordance with Article 14 of the Supplementary Provisions to the Law, a portion of JFM’s management accountreserve for interest rate volatility is being attributed to the Japanese national government over a period of three years
from ﬁscal 2012 through ﬁscal 2014, with the aim of transferring 1 trillion yen. In ﬁscal 2013, 650 billion yen is planned
to be transferred to the national treasury by JFM, based on an ordinance pursuant to Article 14 of the Supplementary
Provisions to the Law for ﬁscal 2013 (Ordinance No. 1 of the Ministry of Internal Affairs and Communication, and theMinistry of Finance, 2013). (In ﬁscal 2012, 350 billion yen (3,712 million U.S. dollars) was transferred.)

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

In accordance with the Supplementary Provisions to the Law, a portion of JFM’s management account reserve forinterest rate volatility is being attributed to the Japanese national government over a period of three years from ﬁscal
2012 through ﬁscal 2014, with the aim of transferring 1 trillion yen over this period.
In fiscal 2012, 350,000 million yen (3,712 million U.S. dollars) has been transferred to the national treasury by JFM,
pursuant to Article 14 of the Supplementary Provisions to the Law for ﬁscal 2012 (Ordinance No. 2 of the Ministry ofInternal Affairs and Communication, and the Ministry of Finance, 2012).

7. Financial Instruments

Appendix / JFM Data

(1) Status of ﬁnancial instruments(a) Policy for ﬁnancial instruments
In order to maintain a sound and good financial standing, as well as the solid confidence of capital markets,
JFM needs to appropriately manage various risks including interest rate risks.
JFM adopts an integrated risk management approach to appropriately respond to various risks while
endeavoring to further advance its risk analysis and management.
Accordingly, JFM has developed a system for appropriate risk management, including the establishment of
the Integrated Risk Management Committee, which supervises JFM’s overall risk management, and the Risk

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Financial
SectionFinancial Statements

Financial Section

Management Office, which monitors the risks in each department. The content of risk management can thenbe appropriately reﬂected in management decisions.
(b) Details and risks of ﬁnancial instruments
JFM raises funds by primarily issuing 10-year bonds, and makes loans with a maximum maturity of 30 years
and with repayment of interest and principal in equal installments. Therefore, a large duration gap is createdbetween lending and funding, and JFM is exposed to the interest rate risk associated with bond and borrowed
money reﬁnancing.
JFM has set aside reserves for interest rate ﬂuctuations (the reserve for interest rate volatility), and has set up
the ALM Committee separately from the Integrated Risk Management Committee to comprehensively analyze
and manage JFM’s assets and liabilities in a timely and appropriate manner. The ALM Committee is held fourtimes a year in principle. At the meeting, medium- and long-term management analysis as well as risk analysis
and evaluation are conducted through scenario analysis, VaR analysis, and duration analysis, among othermethods. In addition, JFM reflects the findings in its bond issuance plans and other aspects of management
and endeavors to reduce interest rate risk.
(c) Risk Management for Financial Instruments(ⅰ) Credit risk
Credit risk is the risk of loss arising from a credit event, such as deterioration in the ﬁnancial condition of aborrower, which causes an asset to lose value or become worthless. In addition to credit risk associatedwith loans, market transactions also involve credit risk.
A. Credit risk on loans
JFM extends loans exclusively to local governments. Local governments have a zero Bank ofInternational Settlements (BIS) risk weighting and JFM does not expect any default on loans made to
local governments for the reasons outlined below. JFM and the Predecessor have never experienced any
loan losses.
• The national government of Japan includes principal and interest payments of local government
bonds and loans in the expenditure of the Local Government Finance Program, and secures thetotal amount of local allocation tax which balances local governments’ total expenditures including
principal and interest payments, and total revenue. Thus, the national government effectively securesrevenue sources for principal and interest payments by local governments. The national government
also secures revenue sources for principal and interest payments by individual local governments by
including a portion of such principal and interest in the Standard Financial Needs when calculating local
allocation tax.
• Under the consultation system for local government bonds and loans, credit reviews must include
checks on the repayment status of local governments, and tax revenue and necessary revenue sources
to be secured. Additionally, under the Early Warning System, the local governments whose principal
and interest payments or ﬁnancial deﬁcits exceed a certain level must apply for approval to issue bonds
or obtain loans, so that the credit standing of local government bonds and loans is maintained.
• Under the Law Relating to the Financial Soundness of Local Governments, which was promulgatedin June 2007 (No.94), local governments whose fiscal indicators exceed the early warning limits
must make their own efforts toward achieving fiscal soundness, and local governments whose fiscal
indicators exceed the reconstruction limits must take necessary actions to restore their ﬁnances under
the supervision of the national government or the respective prefectural governments with regard toredemption of local government bonds and loans, and other operations.
• JFM is not subject to the “Banking Law” (1981, No. 59) or the “Financial Reconstruction Law” (1998,
No. 132) but performs self-assessment of loans in accordance with the “Financial Inspection Manual”
of the Financial Services Agency (FSA).
B. Credit risk on transactions
JFM is exposed to the risk of loss arising from credit events, such as deterioration in the financial
condition of a counterparty, which causes an asset to lose value or become worthless. However,JFM appropriately manages credit risk of this type by constantly monitoring counterparties’ financial
standing, taking measures including suspension of new deals and cancellation of transactions in caseof a deterioration of their credit standings. Moreover, JFM limits counterparties to financial institutions
that achieve a certain credit rating and other criteria, and conducts transactions within the credit lines
for each counterparty in order to diversify risks. In addition, JFM enters into ISDA (International Swaps
and Derivatives Association) Master Agreements and CSA (Credit Support Annex) with all derivatives
counterparties to reduce credit risk.
(ⅱ) Market risk
Market risk is the risk of loss resulting from changes in the value of assets and liabilities due to ﬂuctuations
in risk factors such as interest rates, securities prices and foreign exchange rates, or the risk of loss resulting
from changes in earnings generated from assets and liabilities. Market risk includes interest rate risk, foreignexchange risk, inﬂation risk and price change risk.

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Operations
Management Structure
JFM’s Role in Local Government Finance
Financial Section
Appendix / JFM Dataa. Maintain the “outlier ratio” below approximately 20%.
Notes: 1. “Outlier ratio” is the ratio of “decline in economic value” as a result of interest rate shocks
to net assets including reserves for interest rate volatility and the fund for lending rate
reduction.
2. “Decline in economic value” is the decline of present value after interest rate shocks (anupward or downward 200 bp parallel shift of the yield curve).
b. Maintain a duration gap of less than approximately 2 years.
The management account, which manages assets related to money loaned by the Predecessor, iscurrently exposed to greater interest rate risk than the general account, but JFM contributes to therequired reserves for interest rate volatility as described above.
In accordance with Article 14 of the Supplementary Provisions to the Law, it was decided that a portionof JFM’s reserves for interest rate volatility within the management account would be attributed to theJapanese national government. The transfer is projected to occur over a period of three years from ﬁscal
2012 through ﬁscal 2014, with the aim of transferring 1 trillion yen over this period.
JFM is also exposed to pipeline risk, whereby losses would be incurred or proﬁts decreased as a resultof interest rate fluctuations during the time from when JFM raises money until the point at which themoney is loaned to local governments. JFM uses swap transactions to hedge against pipeline risk.
B. Foreign exchange and other risks
Various risks associated with bond principal and interest payments are hedged by swap transactions.
These risks include foreign exchange risk related to foreign currency-denominated bonds, interest raterisk related to floating rate bonds, and risk of fluctuations in the amounts of principal and interest of
inﬂation-indexed bonds.
JFM’s investments of surplus funds are exposed to the risk of losses on the sale of securities resulting
from price declines and the risk of realized losses on foreign currency-denominated deposits resulting
from fluctuations in foreign exchange rates. Accordingly, in principle, JFM minimizes the risk of pricefluctuation by holding investments until maturity, and hedges foreign exchange risk by using foreignexchange contracts.
C. Quantitative information on market risk
Loans, bonds and borrowed money are primarily affected by interest rate risk, which is a major risk
variable among the market risks.
With respect to general account loans, bonds and borrowed money, JFM establishes a managementtarget and uses the outlier ratio for quantitative analysis in the management of interest rate risk.
Specifically, JFM is attempting to maintain the outlier ratio below approximately 20% by means of
issuing bonds of various terms, including super long-term bonds, which have a redemption period ofover 10 years, considering the composition of the remaining periods of the bonds held.
The outlier ratio is calculated based on the following conditions.
• Future Cash Flows
With respect to loans, future cash flows regarding such loans are calculated based on the type ofinterest rate of the loans. In addition, the advanced redemption in the future is not expected by JFM.
With respect to fixed-rate bonds, future cash flows regarding such fixed-rate bonds are calculated
based on the redemption schedule. With respect to ﬂoating rate bonds hedged by interest rate swaps,that qualify for hedge accounting and meet speciﬁc matching criteria, future cash ﬂows corresponding
to such ﬂoating rate bonds are calculated in a manner similar to ﬁxed-rate bonds.
• Indicative Interest Rate
For the assessment of loans, bonds and borrowed money, the corresponding interest rate of Japanese
government bonds as of 31 March 2013 is used.

Review and Plan

A. Interest rate risk
Interest rate risk is the risk of losses incurred or a decrease in proﬁts due to ﬂuctuations in interest rates
when there is an interest rate or duration gap between assets and liabilities. JFM makes loans to local
governments. The maximum term to maturity is 30 years, but the majority of the funds for these loans
are raised mainly through issuance of 10-year bonds, which creates interest rate risk associated withbond refinancing. JFM takes the following measures to address the interest rate risk resulting from aduration gap between lending and funding.
• JFM maintains necessary reserves to cope with the interest rate risk resulting from a duration gap
between lending and funding.
• As assets and liabilities in JFM’s general account will expand as a result of lending to local governments
and funding, JFM carries out an ALM analysis of this account in a timely and appropriate manner
to further enhance the effectiveness of its management of interest rate risk. JFM also endeavors to
reduce exposure to interest rate risk by setting the following medium-term management target, such ascontinuously issuing super-long bonds with maturities exceeding 10 years.

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Financial
SectionFinancial Statements• Calculation of Outlier Ratio
Based on an assumption that risk variables, except for interest rate risk, are fixed as of 31 March
2013, the outlier ratio is calculated by dividing the change in fair value in the case where the indicativeinterest rate (government bonds) rises across-the-board by 200 basis points (2.00%) or the change
in fair value in the case such rate falls across-the-board by 200 basis points (2.00%), whichever isgreater, by net assets including the reserve for interest rate volatility and the fund for lending rate
reduction.
Information the outlier ratio as of 31 March 2013, is as follows:
One outlier ratio reﬂecting a rise of 200 basis points of the indicative interest rate is calculated as JFM
has determined that the change in fair value in the case of rising interest rates would be greater thanthat in the case of falling interest rates.
(Millions of yen) (Millions of U.S. dollars)
Change in fair value in the case of 200 basis points rise in interest rates
Outlier
ratio(a)=-(b)/(e)Generalaccount

20.3%[+2.8%]

Total(b)=(c)+(d)¥(422,786)[(100,794)]

Loans
(c)

$(4,483) ¥(1,325,953) $(14,061)[(1,069)][(327,039)][(3,468)]

Bonds and borrowed
money
(d)

Net assets including
reserve for interest rate
volatility and the fund for
lending rate reduction (e)¥+903,166[+226,244]¥2,082,422[+242,521]$+9,578[+2,399]$22,083[+2,572]

Note: Amounts posted in square brackets indicate the change from 31 March 2012.

With respect to loans and bonds in the management account, JFM raises funds by the issuance ofbonds as necessary in order to manage existing loans until their redemption. For this reason, while
JFM reports the calculation results of the quantitative information regarding the interest rate risk to the
ALM Committee and conﬁrms the status or transition, etc. of interest rate risk, JFM does not establish
a management target or use the quantitative analysis in the management of interest rate risk.
With respect to these financial instruments in the management account, based on an assumptionthat the risk variables, except for interest rate risk, hold steady, for an indicative interest rate as of 31
March 2013 that is 10 basis points higher than the actual rate, it is assumed that the fair value of the
net amount (assets side), after offsetting such financial instruments with the financial liabilities, would
decline by 55,502 million yen (589 million U.S. dollars). On the contrary, for an indicative interest rate
as of 31 March 2013 that is 10 basis points lower than the actual rate, it is assumed that the fair valueof the net amount (assets side), after offsetting such financial instruments with the financial liabilities,
would increase by 56,639 million yen (601 million U.S. dollars).

Financial Section(ⅲ) Liquidity risk
Liquidity risk is the risk that JFM would incur losses due to difficulties in securing the necessary funds or
the necessity of obtaining funds at far higher interest rates than under normal conditions as a result ofa mismatch between the maturities of assets and liabilities or an unexpected outflow of funds (funding
liquidity risk). It also includes the risk that JFM would incur losses because it is unable to conduct market
transactions or is forced to conduct transactions at far more unfavorable prices than under normal
conditions due to market disruption or other difﬁcult situations (market liquidity risk).
JFM’s exposure to liquidity risk is extremely low because loans are made to local governments according
to a pre-set schedule, and the daily cash and liquidity management is carried out based on a quarterly planfor fund management. Moreover, JFM has entered into overdraft agreements with several ﬁnancial institutions
to prepare for the unexpected events, and invests surplus funds only in short-term ﬁnancial products.
(ⅳ) Supplemental remarks on fair value of ﬁnancial instruments
In addition to the amount based on the market price, the fair value of illiquid ﬁnancial instruments includes
a value that has been rationally calculated. Since certain assumptions were made when calculating the fairvalue, the value may differ in the event that the assumptions change.

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(2) Items related to fair value of ﬁnancial instruments
The book value, fair value and difference between them as of 31 March 2012 are as follows.

Book value(1) Loans

Fair value

Difference¥1,410,381

762,987

762,979(8)(3) Cash and bank deposits

172,250

172,250-

Total assets

23,322,648

24,733,021

1,410,373(1) Bonds(2) Borrowed money

18,176,696
30,00018,890,039
30,072

713,343
72

Total liabilities

18,206,696

18,920,112

713,416

Derivative transactions(*1)
Hedge accounting applied

222

222

-

Total of derivative transactions

222

222

-

The book value, fair value and difference between them as of 31 March 2013 are as follows.
(Millions of yen)Book value(1) Loans

Fair value

Difference¥24,537,510¥1,868,876

598,994598,995

0(3) Cash and bank deposits

419,267

419,267-

Total assets

23,686,896

25,555,773

1,868,877(1) Bonds(2) Borrowed money

18,676,401
30,00019,632,909
30,860956,508
860

Total liabilities

18,706,401

19,663,770

957,369

Derivative transactions(*1)
Hedge accounting applied

240

240

-

Total of derivative transactions

240

240

-

(Thousands of U.S. dollars)Book value(1) Loans

Fair value

Difference$19,818,413

6,352,012

6,352,020

8(3) Cash and bank deposits

4,446,104

4,446,104-

Total assets

251,186,605

271,005,026

19,818,421(1) Bonds(2) Borrowed money

198,053,033
318,134

208,196,287
327,256

10,143,254
9,122

Total liabilities

198,371,167

208,523,543

10,152,376

Derivative transactions(*1)
Hedge accounting applied

2,545

2,545

-

Total of derivative transactions

2,545

2,545

-

Appendix / JFM Data

$260,206,902

Financial Section$240,388,489(2) Securities
held-to-maturity securities(*1) Assets and liabilities resulting from derivative transactions are presented on a net basis with liabilities in parentheses.

JFM’s Role in Local Government Finance¥22,668,634(2) Securities
held-to-maturity securities

Management Structure¥23,797,792

Operations¥22,387,411(2) Securities
held-to-maturity securities

Review and Plan

(Millions of yen)

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Financial
SectionFinancial Statements

Note 1. Method for calculating fair value of ﬁnancial instruments and items related to marketable securities and derivativetransactions
Assets(1) Loans
The fair value of loans is calculated by discounting future cash flows assuming prepayment at the discount rate
calculated using the Japanese government bond rates as of 31 March 2012 and 2013.
(2) Securities
All bonds are held until maturity, and the fair value of treasury discount bills is the market price.
Since all negotiable certiﬁcates of deposit are short-term, the fair value approximates the book value. As a result,the book value is deemed to be the fair value.
As of 31 March 2012
(Millions of yen)
Type
Securities with fair values
exceeding the balance sheet
amountSecurities with fair values that
do not exceed the balance sheet
amountBook value-

Fair value

Difference

¥-

¥-

¥-

-

-

-

Treasury discount bills
Negotiable certiﬁcatesof deposit

96,987
666,000

96,979666,000(8)-

Sub total

762,987

762,979(8)¥762,987¥762,979¥(8)

Sub total

Total

As of 31 March 2013
(Millions of yen)
Type
Securities with fair values
exceeding the balance sheet
amountSecurities with fair values that
do not exceed the balance sheet
amountBook value

Fair value

Difference

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

Sub total

44,99444,9950

Negotiable certiﬁcatesof deposit

554,000

554,000-

Sub total

554,000

554,000-¥598,994¥598,995

¥0

Total

(Thousands of U.S. dollars)Type

Financial Section

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

Fair value

Difference

Treasury discount bills$477,145$477,153$8

Sub total

477,145477,153

8

Negotiable certiﬁcatesof deposit

5,874,867

5,874,867-

Sub total

5,874,867

5,874,867-$6,352,012$6,352,020

$8

Total

(3) Cash and bank deposits
The book value is used as the fair value for deposits without maturities. Since all deposits with maturities are shortterm, the fair value approximates the book value. As a result, the book value is deemed to be the fair value.

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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 2012 is as follows:(Millions of yen)Contract amountHedge
accounting
methodPrimary
hedged items

Principal
accounting
methodInterest rate swap
transactions
Receive/ﬁxed andpay/ﬂoating

Bonds
Borrowed money¥44,500

Hedge
accounting forinterest rate
swaps

Interest rate swap
transactions
Receive/ﬂoating
and pay/ﬁxed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts

Method for
calculating fairvalue

¥44,500¥222

Based on prices
provided by thecounterparty
ﬁnancial institution

95,00095,000(*1)

Foreign currencydenominatedbonds

551,494

551,494(*2)

Foreign currencydenominateddeposits

125,000-(*2)¥815,994¥690,994¥222

Financial Section

Total

Fair
value

Of which
1 year or
more

JFM’s Role in Local Government Finance

Type ofderivativetransactions

Management Structure

Derivative transactions
Transactions for which hedge accounting is applied

Operations(2) Borrowed money
The fair value of borrowed money is calculated by discounting the future cash ﬂows using the interest rate thatwould presumably be applied when issuing bonds with the same total principal and interest and payment term.

Review and Plan

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

Appendix / JFM Data

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Financial
SectionFinancial Statements

For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent
to the principal in the contract under each hedge accounting method as of 31 March 2013 is as follows:(Millions of yen)Contract amountHedge
accounting
methodType ofderivativetransactions

Primary
hedged items

Fair
value

Method for
calculating fairvalue

Principal
accounting
methodInterest rate swap
transactions
Receive/ﬁxed andpay/ﬂoating

Bonds
Borrowed money¥40,000¥40,000¥240

Based on prices
provided by
the counterparty
ﬁnancial institution

Hedge accountfor interest rate
swaps

Interest rate swap
transactions
Receive/ﬂoating
and pay/ﬁxed

Bonds

95,00095,000(*1)

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Foreign currencydenominatedbonds

774,751

774,751(*2)

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts

Foreign currencydenominateddeposits

120,000-(*2)¥1,029,751¥909,751

Total

Of which
1 year or
more

¥240

(Thousands of U.S. dollars)

Contract amountHedge
accounting
methodFinancial Section

Type ofderivativetransactions

Primary
hedged items

Principal
accounting
methodInterest rate swap
transactions
Receive/ﬁxed andpay/ﬂoating

Bonds
Borrowed money$424,178

Hedge accountfor interest rate
swaps

Interest rate swap
transactions
Receive/ﬂoating
and pay/ﬁxed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts

Total

Fair
value

Method for
calculating fairvalue$424,178$2,545

Based on prices
provided by
the counterparty
ﬁnancial institution

1,007,423

1,007,423(*1)

Foreign currencydenominatedbonds

8,215,817

8,215,817(*2)

Foreign currencydenominateddeposits

1,272,535-(*2)$10,919,953$9,647,418

Of which
1 year or
more$2,545(*1) Since interest rate swaps for which hedge accounting is applied are accounted for together with the bondbeing hedged, the fair value is presented together with the fair value of the relevant bond.
(*2) Since currency swaps and foreign exchange contracts for which deferral hedge accounting is applied areaccounted for together with the foreign currency-denominated bond or foreign currency-denominated deposit
being hedged, the fair value is presented together with the fair value of the relevant hedged item.

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

After
10 years
through
20 years

After
20 years
through
30 years¥1,555,010¥1,552,019¥1,548,246¥1,540,203¥1,481,212¥6,369,714¥6,939,819¥1,401,184

Securities
held-tomaturity
securities

762,987

-

-

-

-

-

-

-

Deposits

172,249

-

-

-

-

-

-

-

Loans

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

After
10 years
through
20 years

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

Securities
held-tomaturity
securities

599,000

-

-

-

-

-

-

-

Deposits

419,267

-

-

-

-

-

-

-

Loans

(Thousands of U.S. dollars)Within1 year

Loans

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

After
10 years
through
20 years

After
20 years
through
30 years$16,806,325 $16,618,413 $16,858,218 $16,411,044 $15,665,771 $68,787,234 $73,732,907 $15,508,578

Securities
held-tomaturity
securities

6,352,068

-

-

-

-

-

-

-

Deposits

4,446,104

-

-

-

-

-

-

-

JFM’s Role in Local Government FinanceWithin1 yearManagement Structure

As of 31 March 2013

Operations

Within1 yearReview and Plan

As of 31 March 2012

Financial Section
Appendix / JFM Data

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Financial
SectionFinancial Statements

Note 3. The repayment schedule is as follows:
As of 31 March 2012
(Millions of yen)

Bonds
Borrowedmoney

Within1 yearAfter
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥2,030,560-¥2,164,070-¥1,931,670-¥1,680,970-¥1,560,228-¥7,058,245
30,000¥1,549,120-¥220,000-

As of 31 March 2013
(Millions of yen)

Bonds
Borrowedmoney

Within1 yearAfter
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥2,164,070-¥1,931,670-¥1,680,970-¥1,780,228-¥1,626,489-¥7,572,183
30,000¥1,718,450-¥217,000-(Thousands of U.S. dollars)Within1 year
Bonds
Borrowed
money

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$22,948,780 $20,484,305 $17,825,769 $18,878,356 $17,248,031-

After
10 years
through
20 years

After
20 years
through
30 years$80,298,869 $18,223,224
318,134-$2,301,166-

8. Tangible and Intangible Fixed Assets
Tangible and intangible ﬁxed assets as of 31 March 2012 consisted of the following:(Millions of yen)
Balance asof 1 April
2011(Acquisition
costs)

Increaseduringthe year

Decreaseduringthe year

Balance asof 31 March2012(Acquisition
costs)

Buildings

¥568

¥95

¥10

¥652

Land

2,403

-

408

1,994

140

36

74

102

3,111

131

493

2,750

1,332

118

74

0

-

-

¥1,332¥118¥74Type of assets

Accumulated
Depreciation
depreciation
andand
amortizationamortization
duringas of 31
the yearMarch 2012

Balance asof 31 March
2012(Net bookvalue)

Tangible ﬁxed assets
Financial Section

Other tangible ﬁxed assets
Total tangible ﬁxed assets

¥149

¥43

¥502

-

-

1,994

37

25

65

186

68

2,563

1,376

776

274

600

0

-

-

0

¥1,376

¥776

¥274

¥600

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

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Tangible and intangible ﬁxed assets as of 31 March 2013 consisted of the following:

Increaseduringthe year

Buildings

¥652

¥451

¥-

¥1,104

¥195

¥46

¥908

Land

1,994

-

-

1,994

-

-

1,994

102

24

12

114

53

20

61

2,750

475

12

3,213

249

66

2,964

1,376

86

111

1,351

950

285

400

0

482

-

482

-

-

482

¥1,376¥568¥111¥1,834

¥950

¥285

¥883

Type of assets

Balance asof 31 March2013(Acquisition
costs)

Accumulated
Depreciation
depreciation
andand
amortizationamortization
duringas of 31
the yearMarch 2013

Balance asof 1 April
2012(Acquisition
costs)

Decreaseduringthe year

Balance asof 31 March
2013(Net bookvalue)

Review and Plan

(Millions of yen)Tangible ﬁxed assets

Total tangible ﬁxed assets

Operations

Other tangible ﬁxed assets

Intangible ﬁxed assets
SoftwareTotal intangible ﬁxed assets(Thousands of U.S. dollars)

Buildings$6,920$4,792$-$11,712$2,074$488$9,638Land

21,154--

21,154--

21,154

Other tangible ﬁxed assets

1,090

255

131

1,214

567

218

647

29,1645,047

131

34,0802,641

706

31,43914,600912

1,180

14,332

10,081

3,028

4,251

1

5,119

-

5,120

-

-

5,120

$14,601$6,031$1,180$19,452$10,081$3,028$9,371

Decreaseduringthe year

Balance asof 31 March
2013(Net bookvalue)

Tangible ﬁxed assets

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

JFM’s Role in Local Government Finance

Increaseduringthe yearType of assets

Balance asof 31 March2013(Acquisition
costs)

Accumulated
Depreciation
depreciation
andand
amortizationamortization
duringas of 31
the yearMarch 2013

Balance asof 1 April
2012(Acquisition
costs)

Management Structure

Other intangible ﬁxed assets

Note: 1. Accumulated depreciation of tangible ﬁxed assets amounted to 186 million yen and 249 million yen (2,642
thousand U.S. dollars) as of 31 March 2012 and 2013, respectively.

9. Assets Pledged as Collateral
Financial Section(1) Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as general collateralfor JFM bonds in the amounts of 18,176,696 million yen and 18,676,401 million yen (198,053,033 thousand U.S.
dollars) as of 31 March 2012 and 2013, respectively.
(2) Securities in the amounts of 469 million yen and 9,238 million yen (97,973 thousand U.S. dollars) are pledged ascollateral for derivative transactions as of 31 March 2012 and 2013.

Appendix / JFM Data

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Financial
SectionFinancial Statements

10. Bonds
Bonds as of 31 March 2012 consisted of the following:(Millions of yen)

Financial Section

Type of bondDate of
issue

Balance
as of 1
April 2011

Balance as of 31
March 2012

Couponrate (%)

Maturity

Government-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-34)

6/15/20093/14/2012¥1,330,908¥1,841,660

0.9
to 1.5

10Y

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

9/27/20113/26/2012-

199,964

0.4

6Y

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

1/13/2011

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

4.0

10Y

Non-government guaranteed bonds issued by
JFM (domestic) 5-year bonds (Series 1-8)

5/25/20102/20/2012

90,000170,000

0.384
to 0.639

5Y

Non-government guaranteed bonds issued by
JFM (domestic) 10-year bonds (Series 1-34)

6/18/20093/19/2012

605,000

1,005,000

0.976
to 1.648

10Y

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

6/25/20091/26/2012

355,000

525,000

1.752
to 2.266

20Y

Non-government guaranteed bonds issued by JFM(domestic) FLIP bonds (Series F1-F52, F54-F109)

7/22/20093/28/2012

461,000

754,500

0.185
to 2.334

3Y
to 30Y

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

2/1/2011

15,00015,000Floating
rate

9Y

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

1/12/20123/13/2012-

17,795[USD 227 million]

1.84
to 2.40

5Y
to 7Y

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

1/17/20123/13/2012-

50,608[USD 591 million][NZD 40 million][AUD 20 million]

Floating
rate

5Y

Non-government guaranteed bonds issued
by JFM (domestic) Private placementswith Pension Fund Association for Local
Government Ofﬁcials (Series A1-A26)

7/31/20093/19/2012

680,000

980,000

0.99
to 1.53

10Y

Bonds issued by JFM - Sub-total-

3,620,078

5,642,699--

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

2/27/2009

299,917299,962(300,000)

0.7

4Y

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

10/16/20085/25/2009

560,362

560,636

1.3
to 1.6

10Y

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

2/24/2009

29,99429,996

1.01

5Y

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

11/25/20085/28/2009

139,962

139,967

1.59
to 1.77

10Y

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

1/26/20094/30/2009

84,946

84,9492.07
to 2.29

20Y

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10Y

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

1,235,183

1,235,513(300,000)--Government-guaranteed bonds issued by thePredecessor (domestic) 10-year bonds (Series 801-886)

4/26/20016/19/2008

7,556,867

6,018,749(1,108,390)

0.5
to 2.0

10Y

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

6/22/20057/18/2007

184,659

184,682

1.6
to 2.2

15Y

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

8/9/19996/25/2008

923,913723,848[USD 2,200 million][EUR 900 million][GBP 150 million]

1.350
to 5.75

10Y
to 20Y

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

2/29/2008

129,976

129,989(130,000)

1.14

5Y

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

12/26/20016/16/2008

1,279,829

1,179,870(250,000)

0.64
to 2.07

10Y

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

7/30/20026/16/2008

569,636569,661

1.03
to 2.58

20Y

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

1/29/20049/20/2006

189,855

189,8612.39
to 2.95

30Y

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

10/31/2002

20,00020,000Floating
rate

15Y

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

3/2/20057/19/2005

40,00040,0000.45
to 0.47

10Y

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

2/14/20036/9/2004

43,49041,320(2,170)1.39
to 2.01

28Y

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

9/13/2006

20,00020,000Floating
rate

10Y

Non-government guaranteed bonds issued by
the Predecessor (domestic)
Private placements with Pension Fund
Association for Local Government Ofﬁcials(Series A-58, Series Special No.1-1–No.1-30)

7/31/20017/31/2008

2,513,700

2,180,500(240,000)

0.67
to 2.18

10Y-

13,471,927

11,298,483(1,730,560)

-

-

-

¥18,327,190¥18,176,696(2,030,560)--

Bonds issued by the Predecessor - Sub-total
Total

Appendix / JFM Data

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as generalcollateral for JFM bonds in the amount of 18,176,696 million yen as of 31 March 2012.
2. Amounts in square brackets under “Balance as of 31 March 2012” for “Government-guaranteed bonds
issued by JFM (international)—Global U.S. dollar bonds (Series 1),” “Non-government guaranteed bonds
issued by JFM (international)—Private placements (Series 2, 3, 7, 14-16, 19, 28),” “Non-government
guaranteed bonds issued by JFM (international)—Private placements (Floater, Series 1, 4-6, 8-13, 17, 18,
20-27)” and “Government-guaranteed bonds issued by the Predecessor (international)—Euro-sterling bonds(Series 4), Global-yen bonds (Series 5), etc.” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2012” are to be repaid within one year.

Financial Section

1.69
to 1.73

JFM’s Role in Local Government Finance

120,000

Management Structure

120,000

Operations

4/30/20095/26/2009

Review and Plan

Non-government guaranteed bonds issued
by Japan Finance Organization for MunicipalEnterprises (domestic) Private placementswith Pension Fund Association for Local
Government Ofﬁcials (Series A1, A2)

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Financial
SectionFinancial Statements

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

Financial Section

Type of bondDate of
issue

Balance
as of 1
April 2012

Balance as of 31
March 2013

Couponrate (%)

Maturity

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

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

0.668
to 1.5

10Y

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

9/27/20111/29/2013

199,964

519,9710.199
to 0.4

6Y

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

5/28/20122/26/2013-

220,000

0.093
to 0.151

4Y

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

1/13/2011

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

4.0

10Y

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

5/25/201010/22/2012

170,000

230,000

0.230
to 0.639

5Y

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

8/20/2012-

20,0000.446

7Y

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

6/18/20093/25/2013

1,005,000

1,490,000

0.678
to 1.648

10Y

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

1/31/2013-

15,000

1.334

15Y

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

6/25/20091/28/2013

525,000

670,000

1.680
to 2.266

20Y

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

7/22/20091/31/2013

754,500

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

3Y
to 30Y

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

2/1/2011

15,00015,000Floating
rate

9Y

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

1/12/20123/25/2013

17,795

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

1.375
to 3.65

5Y
to 7Y

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

1/17/201211/7/2012

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

Floating
rate

5Y
to 7Y

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

7/31/20093/25/2013

980,000

1,280,000

0.69
to 1.53

10Y

Bonds issued by JFM - Sub-total-

5,642,699

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

2/27/2009

299,962

-

0.7

4Y

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

10/16/20085/25/2009

560,636

560,9111.3
to 1.6

10Y

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

2/24/2009

29,99629,998(30,000)

1.01

5Y

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

11/25/20085/28/2009

139,967

139,972

1.59
to 1.77

10Y

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Non-government guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic) Private placementswith Pension Fund Association for Local
Government Ofﬁcials (Series A1, A2)

4/30/20095/26/2009

120,000

120,000

1.69
to 1.73

10Y

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

1,235,513

935,835(30,000)--

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

4/26/20026/19/2008

6,018,749

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

0.5
to 2.0

10Y

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

6/22/20057/18/2007

184,682

184,704

1.6
to 2.2

15Y

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

8/9/19996/25/2008

723,848

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

1.35
to 5.75

10Y
to 20Y

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

2/29/2008

129,989

-

1.14

5Y

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

6/27/20026/16/2008

1,179,870

929,908(120,000)

0.64
to 2.07

10Y

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

7/30/20026/16/2008

569,661

569,686

1.03
to 2.58

20Y

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

1/29/20049/20/2006

189,861

189,867

2.39
to 2.95

30Y

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

10/31/2002

20,00020,000Floating
rate

15Y

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

3/2/20057/19/2005

40,00040,0000.45
to 0.47

10Y

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

2/14/20036/9/2004

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

28Y

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

9/13/2006

20,00020,000Floating
rate

10Y

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

7/31/20027/31/2008

2,180,500

1,940,500(482,000)

0.67
to 2.18

10Y

Bonds issued by the Predecessor - Sub-total-

11,298,483

9,570,594(2,130,070)--¥18,176,696¥18,676,401(2,164,070)

-

-

Total

-

Appendix / JFM Data

20Y

Financial Section

2.07
to 2.29

JFM’s Role in Local Government Finance

84,952

Management Structure

84,949Operations

1/26/20094/30/2009

Review and Plan

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

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

Financial Section

Type of bondDate of
issue

Balance
as of 1
April 2012

Balance as of 31
March 2013

Couponrate (%)

Maturity

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

6/15/20093/18/2013$19,529,799$24,735,605

0.668
to 1.5

10Y

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

9/27/20111/29/2013

2,120,520

5,514,016

0.199
to 0.4

6Y

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

5/28/20122/26/2013-

2,332,980

0.093
to 0.151

4Y

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

1/13/2011

881,972

881,972[USD 1,000 million]

4.0

10Y

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

5/25/201010/22/2012

1,802,757

2,439,0240.230
to 0.639

5Y

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

8/20/2012-

212,089

0.446

7Y

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

6/18/20093/25/2013

10,657,476

15,800,636

0.678
to 1.648

10Y

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

1/31/2013-

159,067

1.334

15Y

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

6/25/20091/28/2013

5,567,338

7,104,984

1.680
to 2.266

20Y

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

7/22/20091/31/2013

8,001,060

10,636,267(42,418)0.185
to 2.334

3Y
to 30Y

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

2/1/2011

159,067

159,067

Floating
rate

9Y

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

1/12/20123/25/2013

188,715

2,080,568[USD 227 million][AUD 100 million]

1.375
to 3.65

5Y
to 7Y

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

1/17/201211/7/2012

536,680

1,008,109[USD 1,148 million][NZD 40 million][AUD 20 million]

Floating
rate

5Y
to 7Y

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

7/31/20093/25/2013

10,392,365

13,573,701

0.69
to 1.53

10Y

Bonds issued by JFM - Sub-total-

59,837,749

86,638,085(42,418)--

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

2/27/2009

3,180,938

-

0.7

4Y

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

10/16/20085/25/2009

5,945,249

5,948,162

1.3
to 1.6

10Y

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

2/24/2009

318,099

318,118(318,133)

1.01

5Y

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

11/25/20085/28/2009

1,484,276

1,484,328

1.59
to 1.77

10Y

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Non-government guaranteed bonds issued
by Japan Finance Organization for MunicipalEnterprises (domestic) Private placementswith Pension Fund Association for Local
Government Ofﬁcials (Series A1, A2)

4/30/20095/26/2009

1,272,534

1,272,534

1.69
to 1.73

10Y

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

13,101,943

9,924,021(318,133)--

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

4/26/20026/19/2008

63,825,552

52,095,939(14,802,757)

0.5
to 2.0

10Y

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

6/22/20057/18/2007

1,958,453

1,958,689

1.6
to 2.2

15Y

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

8/9/19996/25/2008

7,676,023

7,679,017(1,378,579)[USD 2,200 million][EUR 900 million][GBP 150 million]

1.35
to 5.75

10Y
to 20Y

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

2/29/2008

1,378,464

-

1.14

5Y

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

6/27/20026/16/2008

12,511,887

9,861,171(1,272,534)

0.64
to 2.07

10Y

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

7/30/20026/16/2008

6,040,948

6,041,210

1.03
to 2.58

20Y

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

1/29/20049/20/2006

2,013,373

2,013,438

2.39
to 2.95

30Y

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

10/31/2002

212,089

212,089

Floating
rate

15Y

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

3/2/20057/19/2005

424,178

424,1780.45
to 0.47

10Y

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

2/14/20036/9/2004

438,176

415,164(23,012)1.39
to 2.01

28Y

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

9/13/2006

212,089

212,089

Floating
rate

10Y

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

7/31/20027/31/2008

23,123,011

20,577,943(5,111,347)

0.67
to 2.18

10Y

Bonds issued by the Predecessor - Sub-total-

119,814,243

101,490,927(22,588,229)--$192,753,935$198,053,033(22,948,780)

-

-

Total

-

Notes:1. Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as generalcollateral for JFM bonds in the amount of 18,676,401 million yen (198,053,033 thousand U.S. dollars) as of
31 March 2013.

Appendix / JFM Data

20Y

Financial Section

2.07
to 2.29

JFM’s Role in Local Government Finance

900,879

Management Structure

900,847

Operations

1/26/20094/30/2009

Review and Plan

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

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Financial
SectionFinancial Statements

2. Amounts in square brackets under “Balance as of 31 March 2013” for “Government-guaranteed bonds
issued by JFM (international)—Global U.S. dollar bonds (Series 1),” “Non-government guaranteed bonds
issued by JFM (international)—Private placements (Series 2, 3, 7, 14-16, 19, 28, 31, 33, 34),” “Non-government
guaranteed bonds issued by JFM (international)—Private placements (Floater, Series 1, 4-6, 8-13, 17, 18,
20-27, 29, 30, 32)” and “Government-guaranteed bonds issued by the Predecessor (international)—Eurosterling bonds (Series 4), Global-yen bonds (Series 5), etc.” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2013” are to be repaid within one year.

11. Borrowed Money
Borrowed money as of 31 March 2012 consisted of the following:(Millions of yen)
Balance as of
1 April 2011

Balance as of
31 March 2012

Averageinterest rate (%)

Short-term borrowed money

¥-

¥-

-

-

Long-term borrowed money(repayment within 1 year)

-

-

-

-

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

30,0000.69

Other interest-bearing liabilities

-

-

-

-

Total

¥-

¥30,000--

Classiﬁcation of borrowed money

Repayment
date

3/26/2019

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

Balance as of
31 March 2013

Averageinterest rate (%)

Short-term borrowed money

¥-

¥-

-

-

Long-term borrowed money(repayment within 1 year)

-

-

-

-

30,00030,000

0.69

-

-

-

-

¥30,000¥30,000--

Classiﬁcation of borrowed money

Long-term borrowed money(excluding repayment within 1 year)
Other interest-bearing liabilities
Total

Repayment
date

3/26/2019

Financial Section(Thousands of U.S. dollars)
Balance as of
1 April 2012

Balance as of
31 March 2013

Averageinterest rate (%)

Short-term borrowed money

$-

$-

-

-

Long-term borrowed money(repayment within 1 year)

-

-

-

-

318,134

318,134

0.69

-

-

-

-

$318,134$318,134--Classiﬁcation of borrowed money

Long-term borrowed money(excluding repayment within 1 year)
Other interest-bearing liabilities
Total

Repayment
date

3/26/2019

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12. Reserves
Reserves as of 31 March 2012 consisted of the following:

Decrease during the year

Balanceas of
31 March
2012

Increaseduring the
year

¥41

¥47

¥41

¥-

¥47

Reserve for directors’ bonuses

6

6

6

-

6

Reserve for retirement beneﬁts

195

9

47

9

146

Reserve for retirement beneﬁts for directors
and corporate auditors

27

4

5

1

23

Reserve for bonuses

Intended
purpose

Other

Operations

Balanceas of
1 April 2011

Classiﬁcationof reserve

Review and Plan

(Millions of yen)

Reserves as of 31 March 2013 consisted of the following:

Decrease during the year

Balanceas of
31 March
2013

Increaseduring the
year

¥47

¥47

¥47

¥-

¥47

Reserve for directors’ bonuses

6

5

6

-

5

Reserve for retirement beneﬁts

146

5

10

-

141

Reserve for retirement beneﬁts for directors
and corporate auditors

23

5

1

-

27

Reserve for bonuses

Intended
purpose

Other(Thousands of U.S. dollars)
Decrease during the year

Balanceas of
31 March
2013

Balanceas of
1 April 2012

Increaseduring the
year

$508

$498

$508

$-

$498

Reserve for directors’ bonuses

73

57

73

-

57

Reserve for retirement beneﬁts

1,557

55

107

-

1,505

254

55

18

-

291

Classiﬁcationof reserve

Reserve for bonuses

Other

Financial Section

Reserve for retirement beneﬁts for directors
and corporate auditors

Intended
purpose

JFM’s Role in Local Government Finance

Balanceas of
1 April 2012

Classiﬁcationof reserve

Management Structure(Millions of yen)

Appendix / JFM Data

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Financial
SectionFinancial Statements

13. Reserve for Interest Rate Volatility
Reserve for interest rate volatility as of 31 March 2012 consisted of the following:(Millions of yen)
Balanceas of
31 March
2012

Classiﬁcation of reserve

Balanceas of
1 April
2011

Reserve for interest rate volatility¥660,000¥220,000¥220,000¥-

Management account reserve forinterest rate volatility

3,136,532

221,024

221,024

220,000

220,000

3,137,557

Total¥3,796,532¥441,024¥441,024¥220,000¥220,000¥4,017,557

Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn¥880,000Reserve for interest rate volatility as of 31 March 2013 consisted of the following:(Millions of yen)
Balanceas of
31 March
2013

Classiﬁcation of reserve

Balanceas of
1 April2012

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

Management account reserve forinterest rate volatility

3,137,557

203,643

203,643

570,000

220,000

2,771,200

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

Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn¥1,100,000(Thousands of U.S. dollars)
Balanceas of
31 March
2013

Balanceas of
1 April2012

Increase during the year

Decrease during the year

Classiﬁcation of reserve

AmountprovidedAmountwithdrawn

Reserve for interest rate volatility$9,331,919$2,332,980$2,332,980$-

Management account reserve forinterest rate volatility

33,272,079

2,159,530

2,159,530

6,044,539

2,332,980

29,387,070

Total$42,603,998$4,492,510$4,492,510$6,044,539$2,332,980$41,051,969$11,664,899

Note: 1. The “decrease during the year” for the “management account reserve for interest rate volatility” in the amountof 570,000 million yen (6,044,539 thousand U.S. dollars) partly consists of 350,000 million yen (3,711,559
thousand U.S. dollars) of the payment to the national treasury in accordance with an ordinance pursuant
to Article 14 of the Supplementary Provisions to the Law for ﬁscal 2012 (Ordinance No. 2 of the Ministry ofInternal Affairs and Communication, and the Ministry of Finance, 2012).
Financial Section
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14. Fund for Lending Rate Reduction
Fund for lending rate reduction as of 31 March 2012 consisted of the following:

Classiﬁcation of fund

Basic fund for lending rate
reduction

Total

Balanceas of
31 March
2012

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn¥908,104¥3,830¥-¥-¥-¥911,935

7,719

-

216

-

-

7,936

¥915,823¥3,830

¥216

¥-

¥-

¥919,871

OthersOperations

Additional fund for lending rate
reduction

Balanceas of
1 April2011

Review and Plan

(Millions of yen)Fund for lending rate reduction as of 31 March 2013 consisted of the following:

Classiﬁcation of fund

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

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

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

7,936

-

-

1,066

-

6,869

¥919,871¥3,763¥-¥1,066¥-¥922,568

Balanceas of
1 April2012

OthersBalanceas of
31 March
2013

Classiﬁcation of fund

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

Balanceas of
1 April2012

Balanceas of
31 March
2013

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn$9,670,574$39,913

$-

$-

$-

$9,710,487

84,158--11,306-72,852$9,754,732$39,913$-$11,306$-$9,783,339

OthersFinancial Section

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

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

Appendix / JFM Data

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Financial
SectionFinancial Statements

15. Reserve for Employee Retirement Beneﬁts
As of and for the year ended 31 March 2012
(1) Outline of retirement beneﬁts system
JFM has a deﬁned beneﬁt plan that contributes to the Employees’ Pension Fund and offers lump-sum payments
upon retirement of employees.
(2) Projected beneﬁt obligation
Projected beneﬁt obligation 298 million yen
Plan assets 151 million yen
Reserve for employee retirement beneﬁts 146 million yen(3) Pension expenses
Pension expenses 9 million yen
Pension expenses related to lump-sum payments upon retirement 4 million yen
Pension expenses related to the Employees’ Pension Fund 5 million yen(4) Basis of calculation of projected beneﬁt obligation
Projected beneﬁt obligation is calculated by the simpliﬁed method.
As of and for the year ended 31 March 2013
(1) Outline of retirement beneﬁts system
JFM has a deﬁned beneﬁt plan that contributes to the Employees’ Pension Fund and offers lump-sum payments
upon retirement.
(2) Projected beneﬁt obligation
Projected beneﬁt obligation 318 million yen (3,373 thousand U.S. dollars)
Plan assets 176 million yen (1,868 thousand U.S. dollars)
Reserve for employee retirement beneﬁts 141 million yen (1,505 thousand U.S. dollars)(3) Pension expenses
Pension expenses 5 million yen (54 thousand U.S. dollars)
Pension expenses related to lump-sum payments upon retirement 4 million yen (45 thousand U.S. dollars)
Pension expenses related to the Employees’ Pension Fund 0 million yen (9 thousand U.S. dollars)(4) Basis of calculation of projected beneﬁt obligation
Projected beneﬁt obligation is calculated by the simpliﬁed method.

16. Net Income by Account(For the year ended 31 March 2012)
Net income of the general account was 15,532 million yen, while net income of management account was 6,100
million yen.
(For the year ended 31 March 2013)
Net income of the general account was 20,828 million yen (220,877 thousand U.S. dollars), while there was no net
income of management account.

Financial Section
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17. Information by Account (Balance sheets)
Balance sheets of general account and management account as of 31 March 2012 were as follows:

Item

Generalaccount

Management
account¥5,351,164¥17,036,246

OffsetTotal

Review and Plan

(Millions of yen)

(Assets)
Loans
Securities

762,987

Cash and bank deposits

172,250¥22,387,411
762,987
172,250

2,628

12,266

Tangible ﬁxed assets

2,563

2,563

Intangible ﬁxed assets

600

600

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

292,831¥(820,207)(292,831)

6,585,025

17,868,720

3,892,818

14,283,877(1,113,038)

23,340,707(Liabilities)
Bonds
Borrowed money

30,000

Other liabilities

1,872

18,176,696
30,00013,50015,37347

Reserve for directors’ bonuses

6

6

Reserve for retirement beneﬁts

146

146

Reserve for retirement beneﬁts for directors andcorporate auditors

23

23

919,871919,871

911,935

911,935

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

47

7,936

7,936

820,207(820,207)

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

292,831880,000

3,224,844

4,104,844

880,000

880,000

Management account reserve for interest rate
volatility
Reserve for interest rate reduction
Total liabilities(292,831)

6,544,995

3,137,557

3,137,557

87,28787,287

17,815,054(1,113,038)

JFM’s Role in Local Government FinanceReserve for bonuses

Management Structure

Total assets

820,207

14,894

Operations

Other assets

23,247,010(Net Assets)
16,602

16,602Retained earnings

29,39329,39329,39329,393General account surplus reserve
Valuation, translation adjustments and others(5,964)(5,964)

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

53,666

53,66640,03053,666

93,696¥6,585,025¥17,868,720¥(1,113,038)

Financial Section

Capital¥23,340,707

Appendix / JFM Data

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Financial
SectionFinancial Statements

Balance sheets of general account and management account as of 31 March 2013 were as follows:(Millions of yen)
Item

Generalaccount

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

OffsetTotal(Assets)
Loans
Securities

598,994

Cash and bank deposits

419,267

Other assets

3,251

Tangible ﬁxed assets

2,964

Intangible ﬁxed assets

883

Due from general account598,994419,267
10,922

Total assets

14,173
2,964
883

939,648

Due to management account for fund for lending
rate reduction¥22,668,634

242,831¥(939,648)
242,8318,443,866

16,443,532

5,389,185

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

23,704,919(Liabilities)
Bonds
Borrowed money

30,000

Other liabilities

2,388

Reserve for bonuses

18,676,401
30,00012,732

15,121

47

47

Reserve for directors’ bonuses

5

5

Reserve for retirement beneﬁts

141

141

Reserve for retirement beneﬁts for directors andcorporate auditors

27

27

922,568

922,568

915,698

915,698

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

6,869

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

(939,648)
242,831

1,100,000

Reserve for interest rate volatility(242,831)

2,847,086

3,947,086

1,100,000

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

6,869

939,648

8,384,012

1,100,000
2,771,200

2,771,200

75,88575,885

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

23,591,399(Net Assets)

Financial Section

Capital16,602

16,602Retained earnings

50,22150,22150,22150,221(6,970)(6,970)General account surplus reserve
Valuation, translation adjustments and others
Management account surplus reserve
Total net assets
Total liabilities and net assets

53,666

53,66659,85353,666

113,520¥8,443,866¥16,443,532¥(1,182,479)¥23,704,919

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(Thousands of U.S. dollars)
Generalaccount

Management
account$76,094,098$164,294,391

OffsetTotal(Assets)
Loans$240,388,489

Securities

6,352,012

6,352,012

Cash and bank deposits

4,446,104

4,446,104

34,476

Tangible ﬁxed assets

31,439Intangible ﬁxed assets

9,371

115,830

150,306
31,4399,371

Due from general account9,964,457

Due to management account for fund for lending
rate reduction

2,575,095

Total assets

89,542,595

174,374,678

57,149,371

140,903,662$(9,964,457)(2,575,095)(12,539,552)

Operations

Other assets

Review and Plan

Item

251,377,721(Liabilities)
Borrowed money

318,134

Other liabilities

25,326

198,053,033
318,134

135,026

160,352

Reserve for bonuses

498

Reserve for directors’ bonuses

57

57

Reserve for retirement beneﬁts

1,505

1,505

291

291

9,783,339

9,783,339

9,710,487

9,710,487

Reserve for retirement beneﬁts for directors andcorporate auditors
Fund for lending rate reduction
Basic fund for lending rate reduction
Additional fund for lending rate reduction

72,85272,852

9,964,457(9,964,457)

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

2,575,095
11,664,899

30,191,795

41,856,694

11,664,899

11,664,899

Management account reserve for interest rate
volatility
Reserve for interest rate reduction
Total liabilities(2,575,095)

88,907,877

29,387,070

29,387,070

804,725804,725

173,805,578(12,539,552)

250,173,903(Net Assets)
Capital176,056

176,056

Retained earnings

532,576

532,576

532,576

532,576

General account surplus reserve
Valuation, translation adjustments and others(73,914)(73,914)

Total liabilities and net assets

569,100

569,100

634,718

569,100

1,203,818$89,542,595$174,374,678$(12,539,552)$251,377,721

Appendix / JFM Data

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

Financial Section

Management account surplus reserve
Total net assets

JFM’s Role in Local Government FinanceDue to management account498

Management Structure

Bonds

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Financial
SectionFinancial Statements

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

18. Information by Account (Statements of income)Statements of income of general account and management account from 1 April 2011 through 31 March 2012 wereas follows:(Millions of yen)
Item

General account Management accountIncomeInterest income¥83,092¥456,669

70,563441,078

Fees and commissions

128

Other income

31

Administrative fee for management account930

Interest on fund for lending rate reduction

11,438Interest on due from general accountOffsetTotal¥(27,957)¥511,805
511,641
128

3

34
(930)
(11,438)

635

(635)

14,952(14,952)

67,560242,146(27,957)

46,922

227,397

Fees and commissions

43

231

275

Other operating expenses

2,503

2,035

4,539

General and administrative expenses

2,272

113

2,385

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

Other expenses

281,749
274,320229

229

Transfer to fund for lending rate reduction

216

216

Others12

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

12

635

(635)

14,952(14,952)

Administrative fee for management account

930

(930)

Interest on fund for lending rate reduction

11,438(11,438)

15,532

214,523-230,055

220,000

232,601(220,000)

232,601

Ordinary income
Special gains
Financial Section

Provision for management account

220,000(220,000)

Reversal of management account reserve forinterest rate volatility

220,000

220,000

Reversal of reserve for interest rate reduction

12,601

12,601

Special losses
Provision for reserve for interest rate volatility

220,000

441,024(220,000)

220,000

Provision for management account reservefor interest rate volatility

221,024

Transfer to general account

220,000(220,000)¥6,100¥-Net income¥15,532

441,024
220,000
221,024¥21,632

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Statements of income of general account and management account from 1 April 2012 through 31 March 2013 wereas follows:

Item
IncomeInterest income
Fees and commissions
Other income

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

91,436394,238

485,675

0

1,348

123
1,348

123

1,066
281

Administrative fee for management account965

Interest on fund for lending rate reduction

7,410

Interest on due from general account

1,066
0

281
(965)
(7,410)(622)

13,270(13,270)

80,455

215,889(22,268)

61,098204,548

265,647

61

219

280

Other operating expenses

2,914

2,604

5,519

General and administrative expenses

2,488

141

Expenses
Interest expenses
Fees and commissions

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

274,076

2,629

622

(622)

13,270(13,270)

Administrative fee for management account

965

(965)

Interest on fund for lending rate reduction

7,410(7,410)20,828

192,241-

213,070

Special gains

220,000

581,402(220,000)

581,402

Provision for management account

220,000(220,000)

Reversal of management account reserve forinterest rate volatility

570,000

570,000

Reversal of reserve for interest rate reduction

11,402

11,402

Special losses
Provision for reserve for interest rate volatility

220,000

773,643

Provision for management account reservefor interest rate volatility

203,643
220,000

Payment to national treasury

350,000¥20,828

773,643
220,000

Transfer to general accountNet income(220,000)

220,000¥-

203,643(220,000)

JFM’s Role in Local Government FinanceOrdinary income

Management Structure

622

Transfer from general account for fund for
lending rate reduction

Operations

Contributions from fund for lending rate
reduction

General account Management accountReview and Plan

(Millions of yen)

350,000¥-¥20,828
Financial Section
Appendix / JFM Data

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

General account Management accountIncomeInterest income$1,074,067$4,328,007

969,639

4,180,685

Fees and commissions

1,308

Other income

14,296

Contributions from fund for lending rate
reduction

OffsetTotal$(236,146)

5,150,324
1,308

0

14,296

11,306

Others2,990

Administrative fee for management account10,237

Interest on fund for lending rate reduction

78,587

Interest on due from general account$5,165,928

11,3060

2,990(10,237)(78,587)

6,600(6,600)140,722(140,722)

853,1902,289,389(236,146)

647,918

2,169,128

2,817,046

652

2,324

2,976

Other operating expenses

30,911

27,61658,527

General and administrative expenses

26,387

1,497Interest on due to management account

6,600(6,600)140,722(140,722)

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

Transfer to management account for fund for
lending rate reduction

27,884

Administrative fee for management account10,237(10,237)

Interest on fund for lending rate reduction

78,587(78,587)

Ordinary income
Special gains
Provision for management account220,877

2,038,618-

2,259,495

2,332,980

6,165,451(2,332,980)

6,165,451

2,332,980

Reversal of management account reserve forinterest rate volatility

Provision for reserve for interest rate volatility(2,332,980)
6,044,539

Reversal of reserve for interest rate reduction
Special losses

6,044,539

120,9122,332,980

8,204,069

120,912(2,332,980)

2,332,980

Provision for management account reservefor interest rate volatility

2,159,530
2,332,980

Payment to national treasury

3,711,559$220,877

8,204,069
2,332,980

Transfer to general accountNet income

2,906,433$-

2,159,530(2,332,980)
3,711,559$-$220,877

Financial Section
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19. Fair Value of Marketable Securities
Marketable held-to-maturity securities as of 31 March 2012 consisted of the following:Book value

Fair value

Difference

Unrealized gains Unrealized losses

Treasury discount bills¥96,987¥96,979

¥(8)

¥-

¥(8)

Negotiablecertiﬁcates of deposit

666,000

666,000

-

-

-

Total

¥762,987¥762,979

¥(8)

¥-

¥(8)

Review and Plan

(Millions of yen)

Operations

Marketable held-to-maturity securities as of 31 March 2013 consisted of the following:(Millions of yen)Book value

Fair value

Difference

Unrealized gains Unrealized losses¥44,994

44,995¥0¥0¥-

Negotiablecertiﬁcates of deposit

554,000

554,000

-

-

-

Total

¥598,994¥598,995

¥0

¥0

¥-

Management Structure

Treasury discount bills(Thousands of U.S. dollars)Book value

Fair value

Difference

Unrealized gains Unrealized losses$477,145$477,153

$8

$8

$-

Negotiablecertiﬁcates of deposit

5,874,867

5,874,867

-

-

-

Total

$6,352,012$6,352,020

$8

$8

$-

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

JFM’s Role in Local Government Finance

Treasury discount bills

Financial Section
Appendix / JFM Data

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Financial
SectionFinancial Statements

20. Information on Derivative Transactions

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

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Review and Plan

Operations

Management Structure

JFM’s Role in Local Government Finance

Financial Section

Appendix / JFM Data

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Financial
SectionJFM Annual Report 2013 | 93

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Appendix / JFM Data
Review and Plan
Operations
Management Structure
JFM’s Role in Local Government Finance96

Appendix

Redemption of Loans in Fiscal 2012
Outstanding Loans by Business (as of 31 March 2013)
Outstanding Loans by Borrower (as of 31 March 2013)
Bond Issuance in Fiscal 2012
Outstanding International Bonds

Organization History
Organization Structure
Directors and Corporate Auditors/Contact Information
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107
107
108
109

Appendix / JFM Data

JFM Data

96
96
97
98
102
105

Financial Section

Members of the Representative Board and theSupervisory Committee

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Appendix
JFM Data

Appendix

Members of the Representative Board and the Supervisory Committee
The Representative Board members of JFM as of 31 March 2013 are as follows:
Name

Title

Background

Yuichiro Ito

Chairman

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

Tamio Mori

Deputy Chairman

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

Tadahiko Fujiwara

Deputy Chairman

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

Junko Obata

MemberProfessor, Sophia University Law School

Isao Horiba

MemberProfessor, Aoyama Gakuin University

Tomijiro Morita

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

The Supervisory Committee members of JFM as of 31 March 2013 are as follows:
Name

Title

BackgroundYoshitsugu Hayashi

ChairmanProfessor, Kwansei Gakuin University

Yutaka Suzuki

Deputy Chairman

Professor, Aoyama Gakuin University Graduate School
Certiﬁed Public Accountant

Tetsuya Kayamori

MemberFormer Director, Jiji Press Co.

Yukiko Shinozaki

MemberRepresentative Director, Urban Life Research Institute

Tomoko Seiichi

MemberProfessor, Seinan Gakuin University

Yasuharu Yoneda

MemberProfessor, Shinshu University Law School

Redemption of Loans in Fiscal 2012
Principal
Classiﬁcation

Interest

Number ofloans

Amount(millions of USD)

Number ofloans

Amount(millions of USD)

400,882

15,934.2

468,574

5,098.2

880

168.3

894

25.3

Subtotal

401,762

16,102.5

469,468

5,123.5

General loans

1,908

880.1

971

0.2

Loans to local
government corporations

23

39.3

23

0.0

Subtotal

1,931

919.3

994

0.2

Total

403,693

17,021.8

470,462

5,123.7

Redemption of loans with pre-consent or approval

−

−

−

−

Redemption of short-term loans

−

−

−

−

General loans
Regular redemptionof loans

Prepayment of loans

Loans to local
government corporations

Appendix / JFM Data

Note: The totals of the individual amounts may not add up exactly due to rounding off.

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Outstanding Loans by Business

Number ofLoans Made

Business

Public Projects, etc.

Loan Amount (millions of USD)
% of total

4,962

2.1

Disaster Management and Mitigation

614

869

0.4

Educational Facilities Development

8

38

0.0

Social Welfare Facilities Development

305

364

0.2

General Projects

226

323

0.1

Regional Revitalization

371

298

0.1

Disaster Prevention

738

796

0.3

Local Road Development

3,007

3,777

1.6

Special Municipal Mergers

2,015

5,849

2.4

Three Types of Special Projects

32,61733,98414.2

45,31951,84821.6

Water Supply

51,44041,151

17.1

Industrial Water Supply

2,312

2,403

1.0

Transportation

947

13,976

5.9

Electricity and Gas Supply

983

927

0.4

Port Facilities

1,194

876

0.4

Hospitals and Elderly Care Services

2,857

7,319

3.0

557

900

0.3

123,128

90,969

37.8

531

806

0.3

183,949

159,327

66.3

Temporary Financial Countermeasures Funding

3,209

28,144

11.7

Local Government Road Corporation, Toll Roads

396

1,069

0.4

232,873240,388

100.0

General Account-related
Loans

Subtotal

Municipal Enterpriserelated Loans

Markets and Slaughterhouses
Sewerage
Tourism and Others
Subtotal

Total

Appendix / JFM Data

Notes: 1. JFM’s scope of lending does not include toll road projects, urban redevelopment projects or residential land development projects.
Moreover, JFM does not lend to local government road corporations.
2. The totals of the individual amounts may not add up exactly due to rounding off.

Financial Section

5,125

JFM’s Role in Local Government Finance

0.2

Management Structure

589

Operations

293

Public Housing

Review and Plan(as of 31 March 2013)

JFM Annual Report 2013 | 97

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Appendix
JFM Data

Appendix

Outstanding Loans by Borrower(as of 31 March 2013)
Cities and Special Wardsof TokyoPrefectures
Business

Towns and Villages

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

Hokkaido

274

3,269

4,965

7,989

7,783

2,267

Aomori

221

478

1,902

2,486

1,381

503

Iwate

232

696

2,710

2,814

797

353

Miyagi

404

1,451

4,702

4,138

2,641

633

Akita

224

358

4,472

2,410

1,144

169

Yamagata

252

771

2,620

2,061

1,901

421

Fukushima

353

787

3,503

2,870

3,047

660

Ibaraki

474

1,240

6,115

4,016

1,270

416

Tochigi

203

526

3,254

2,485

840

288

Gunma

283

684

3,571

2,238

1,767

436

Saitama

237

2,515

5,611

5,983

1,486

468

Chiba

441

1,425

4,440

5,608

718

200

Tokyo

141

2,184

1,791

2,665

199

58

Kanagawa

234

1,621

2,568

9,315

881

333

Niigata

260

514

8,119

5,264

864

220

Toyama

280

510

3,559

2,767

481

244

Ishikawa

188

314

2,721

2,461

1,152

467

Fukui

259

604

2,046

1,331

912

190

Yamanashi

149

513

3,062

1,314

1,067

197

Nagano

245

565

4,215

3,457

3,025

837

Gifu

189

1,349

4,286

2,560

1,156

389

Shizuoka

370

902

4,664

4,152

594

211

Aichi

300

2,049

5,106

7,751

824

263

Mie

410

1,408

3,806

2,848

1,007

307

Appendix / JFM Data
JFM Annual Report 2013 | 98

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Local Government Road
Corporations

Review and Plan

Local Government
Associations

Total

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

% of Total

13,313

13,793

5.7%

103

142

-

-

3,607

3,609

1.5%

74

45

-

-

3,813

3,908

1.6%

127

111

15

18

7,889

6,352

2.6%

3

0

-

-

5,843

2,937

1.2%

125

30

10

1

4,908

3,284

1.4%

191

252

3

3

7,097

4,571

1.9%

208

198

4

7

8,071

5,877

2.4%

7

38

10

7

4,314

3,345

1.4%

22

58

-

-

5,643

3,416

1.4%

222

185

16

16

7,572

9,167

3.8%

384

539

12

28

5,995

7,799

3.2%

25

176

-

-

2,156

5,082

2.1%

79

1,189

-

-

3,762

12,458

5.2%

135

144

-

-

9,378

6,142

2.6%

128

135

16

8

4,464

3,663

1.5%

15

21

-

-

4,076

3,263

1.4%

69

43

-

-

3,286

2,168

0.9%

148

66

2

2

4,428

2,092

0.9%

162

111

18

16

7,665

4,985

2.1%

3

2

-

-

5,634

4,300

1.8%

69

164

16

13

5,713

5,441

2.3%

117

72

54

403

6,401

10,539

4.4%

29

34

1

0

5,253

4,597

1.9%

Financial Section-

JFM’s Role in Local Government Finance-Management Structure

268

Operations

291

Appendix / JFM Data

JFM Annual Report 2013 | 99

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Appendix
JFM Data

Appendix

Cities and Special Wardsof TokyoPrefectures
Business

Towns and Villages

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

Shiga

224

740

4,078

2,521

538

150

Kyoto

215

558

3,217

4,822

943

278

Osaka

122

896

4,662

14,360

735

283

Hyogo

317

3,413

7,156

9,536

1,742

821

Nara

259

1,152

2,201

1,585

1,660

508

Wakayama

113

213

1,381

1,717

1,125

502

Tottori

237

431

1,269

1,025

1,795

514

Shimane

211

935

2,388

2,181

303

95

Okayama

304

1,352

4,588

4,087

1,266

355

Hiroshima

374

1,355

4,236

5,673

905

329

Yamaguchi

434

774

4,201

2,481

516

137

Tokushima

197

557

1,255

1,000

735

260

Kagawa

243

355

2,067

1,207

779

207

Ehime

133

256

2,299

2,102

580

230

Kochi

153

687

1,332

1,352

579

167

Fukuoka

111

1,094

4,228

9,247

1,695

907

Saga

50

343

1,491

1,510

564

312

Nagasaki

148

509

2,634

2,697

591

199

Kumamoto

181

475

2,742

2,370

1,448

459

Oita

128

332

2,168

1,570

134

46

Miyazaki

180

661

2,024

1,694

689

224

Kagoshima

173

1,256

2,315

1,858

743

197

Okinawa

231

870

1,318

1,135

802

203

11,36145,945

159,058

168,71357,804

17,912Total

Note: The totals of the individual amounts may not add up exactly due to rounding off.

Appendix / JFM Data
JFM Annual Report 2013 | 100

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Local Government
Associations

Local Government Road
Corporations

Total% of Total

4,915

3,457

1.4%

7

33

13

15

4,395

5,706

2.4%

243

802

55

149

5,817

16,489

6.9%

453

797

62

87

9,730

14,654

6.1%

11

3

4

18

4,135

3,266

1.4%

24

26

-

-

2,643

2,458

1.0%

18

8

-

-

3,319

1,977

0.8%

41

20

-

-

2,943

3,231

1.3%

107

276

-

-

6,265

6,069

2.5%

2

9

17

93

5,534

7,460

3.1%

104

99

-

-

5,255

3,490

1.5%

3

1

-

-

2,190

1,818

0.8%

7

7

-

-

3,096

1,776

0.7%

8

5

-

-

3,020

2,593

1.1%

6

127

4

1

2,074

2,334

1.0%

225

245

30

167

6,289

11,660

4.9%

103

147

1

0

2,209

2,312

1.0%

16

17

11

6

3,400

3,428

1.4%

25

24

10

2

4,406

3,331

1.4%

-

-

-

-

2,430

1,948

0.8%

5

2

-

-

2,898

2,581

1.1%

7

16

6

5

3,244

3,333

1.4%

34

18

-

-

2,385

2,227

0.9%

4,254

6,749

396

1,069

232,873240,388

100.0%

Financial Section

3

JFM’s Role in Local Government Finance

6

Management Structure

44

Operations

69

Review and Plan

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

Appendix / JFM Data

JFM Annual Report 2013 | 101

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Appendix
JFM Data

Appendix

Bond Issuance in Fiscal 2012
1. JFM bonds(1) International bonds
SeriesNumberFormatCurrency

Issue Amount(million)

CouponIssue Price(%)

Issue Date

Maturity Date

29

EURO

USD

327

3mL+65bp100

22 May 2012

22 May 2017

30

EURO

USD

130

3mL+70bp

100

6 Jun 2012

6 June 2019

31

EURO

USD

1,000

1.500%

100

12 Sep 201212 Sep 2017

32

EURO

USD

100

3mL+52bp100

7 Nov 2012

7 Nov 2017

33

EURO

USD

1,000

1.375%

99.544

5 Feb 2013

5 Feb 2018

34

EURO

AUD

100

3.65%

99.99025 Mar 2013

23 Mar 2018

(2) Domestic public offerings
Series Number

Issue Amount(billions of JPY)

(billions of USD)

Coupon (%)

Issue Price (%)

Issue Date

Maturity Date

35

45

0.5

1.006

100

19 Apr 201228 Apr 2022

36

40

0.4

0.892

100

24 May 2012

27 May 2022

37

40

0.4

0.852

100

28 Jun 201228 Jun 2022

38

40

0.4

0.835

100

23 Jul 201228 Jul 2022

39

40

0.4

0.815

100

20 Aug 2012

26 Aug 2022

40

40

0.4

0.825

100

24 Sep 201228 Sep 2022

41

40

0.4

0.801

100

22 Oct 2012

28 Oct 2022

42

40

0.4

0.801

100

19 Nov 2012

28 Nov 2022

43

40

0.4

0.720

100

20 Dec 201228 Dec 2022

44

40

0.4

0.791

100

28 Jan 201327 Jan 2023

45

40

0.4

0.791

100

25 Feb 201328 Feb 2023

46

40

0.4

0.678

100

25 Mar 2013

28 Mar 2023

21

25

0.3

1.812

100

19 Apr 201228 Apr 2032

22

20

0.2

1.687

100

12 Jun 201228 Jun 2032

23

20

0.2

1.680

100

23 Jul 201228 Jul 2032

24

20

0.2

1.702

100

18 Sep 201228 Sep 2032

25

20

0.2

1.701

100

23 Oct 2012

28 Oct 2032

26

20

0.2

1.724

100

20 Dec 201228 Dec 2032

27

20

0.2

1.785

100

28 Jan 201328 Jan 2033

9

20

0.2

0.340

100

19 Apr 201228 Apr 2017

Appendix / JFM Data

10

20

0.2

0.280

100

24 May 2012

26 May 2017

11

20

0.2

0.230

100

22 Oct 2012

27 Oct 2017

1

20

0.2

0.446

100

20 Aug 2012

28 Aug 2019

1

15

0.2

1.334

100

31 Jan 201328 Jan 2028

F110

3

0.0

0.562

100

26 Apr 201225 Apr 2019

F111

20

0.2

0.891

100

26 Apr 201218 Jun 2021

F112

4

0.0

1.486

100

26 Apr 201228 Apr 2027

JFM Annual Report 2013 | 102

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Series Number

Issue AmountIssue Price (%)

Issue Date

Maturity Date

0.0

0.449

100

26 Apr 201226 Apr 2018(billions of USD)

F113

4
3

0.0

0.557

100

26 Apr 2012

20 Mar 2019

6

0.1

1.186

100

26 Apr 201226 Apr 2024

F116

3

0.0

1.481

100

26 Apr 2012

23 Apr 2027

F117

3

0.0

1.698

100

26 Apr 201226 Apr 2030

F118

3

0.0

1.411

100

1 May 201219 Jun 2026

F119

4

0.0

1.533

100

1 May 2012

26 Oct 2027

F120

4

0.0

1.346

100

30 May 2012

28 Aug 2026

F121

4

0.0

1.414

100

31 May 2012

28 May 2027

F122

3

0.0

1.412

100

31 May 201218 Jun 2027

F123

3

0.0

1.600

100

31 May 2012

19 Mar 2030

0.1

1.418

100

4 Jun 2012

4 Jun 2027

3

0.0

1.620

100

4 Jun 2012

28 Nov 2029

F126

20

0.2

0.707

100

26 Jul 2012

21 Sep 2021

F127

3

0.0

0.917

100

30 Jul 201220 Dec 2023

F128

3.5

0.0

1.024

100

30 Jul 201220 Dec 2024

F129

3

0.0

1.070

100

31 Jul 201229 Jul 2025

F130

5

0.1

1.275

100

31 Jul 201228 Jul 2027

F131

4.5

0.0

1.546

100

30 Jul 201230 Jul 2031

F132

4

0.0

1.090

100

30 Jul 201230 Jul 2025

F133

5

0.1

1.231

100

30 Jul 201227 Nov 2026

0.0

1.348

100

30 Jul 201217 Mar 2028

3

0.0

0.525

100

31 Jul 201218 Sep 2020

F136

3

0.0

1.065

100

31 Jul 201231 Jul 2025

F137

4.5

0.0

1.222

100

31 Jul 2012

5 Mar 2027

F138

3

0.0

0.983

100

1 Aug 2012

20 Sep 2024

F139

4

0.0

1.082

100

1 Aug 201219 Sep 2025

F140

20

0.2

0.343

100

20 Sep 2012

20 Sep 2018

F141

20

0.2

0.746

100

30 Oct 201220 Dec 2021

F142

3

0.0

1.016

100

31 Oct 2012

28 Nov 2024

F143

5.5

0.1

1.351

100

30 Oct 2012

25 Aug 2027

F144

3

0.0

0.562

100

31 Oct 2012

28 Oct 2020

F145

3

0.0

1.059

100

31 Oct 2012

19 Mar 2025

F146

3

0.0

1.134

100

31 Oct 2012

28 Oct 2025

F147

4.5

0.0

1.291

100

31 Oct 2012

19 Mar 2027

F148

3.5

0.0

1.689

100

31 Oct 201230 Jan 2032

F149

6

0.1

1.145

100

1 Nov 201219 Dec 2025

F150

4

0.0

1.238

100

5 Nov 2012

5 Nov 2026

F151

3.5

0.0

1.348

100

5 Nov 2012

5 Nov 2027

F152

5

0.1

1.438

100

1 Nov 2012

1 Nov 2028

F153

20

0.2

0.689

100

31 Jan 201318 Mar 2022

Appendix / JFM Data

3

F135

Financial Section

F134

JFM’s Role in Local Government Finance

6

Management Structure

F124
F125

Operations

F114
F115

Review and Plan

Coupon (%)(billions of JPY)

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Appendix
JFM Data

Appendix

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

Issue Amount

Coupon (%)

Issue Price (%)

Issue Date

Maturity Date

0.3

1.02

100

19 Apr 201219 Apr 2022

20

0.2

0.93

100

24 May 2012

24 May 2022

30

0.3

0.87

100

28 Jun 201228 Jun 2022

A30

30

0.3

0.86

100

23 Jul 201222 Jul 2022

A31

30

0.3

0.87

100

20 Aug 201219 Aug 2022

A32

30

0.3

0.85

100

24 Sep 2012

22 Sep 2022

A33

20

0.2

0.82

100

22 Oct 2012

21 Oct 2022

A34

20

0.2

0.82

100

19 Nov 201218 Nov 2022

A35

20

0.2

0.76

100

20 Dec 201220 Dec 2022

A36

20

0.2

0.81

100

28 Jan 201327 Jan 2023

A37

30

0.3

0.81

100

25 Feb 201324 Feb 2023

A38

20

0.2

0.69

100

25 Mar 201324 Mar 2023

Coupon (%)

Issue Price (%)

Issue Date

Maturity Date(billions of JPY)

(billions of USD)

A27

30

A28
A29

3. Government-guaranteed domestic bonds
Series Number

Issue Amount(billions of JPY)

(billions of USD)

35

45

0.5

0.977

100

23 Apr 201222 Apr 2022

36

45

0.5

0.901

100

21 May 2012

20 May 2022

37

40

0.4

0.895

100

18 Jun 201217 Jun 2022

38

40

0.4

0.839

100

17 Jul 201215 Jul 2022

39

40

0.4

0.801

100

15 Aug 2012

15 Aug 2022

40

40

0.4

0.819

100

18 Sep 201216 Sep 2022

41

40

0.4

0.791

100

18 Oct 201218 Oct 2022

42

40

0.4

0.805

100

14 Nov 2012

14 Nov 2022

43

40

0.4

0.734

100

17 Dec 201216 Dec 2022

44

40

0.4

0.834

100

22 Jan 201320 Jan 2023

45

40

0.4

0.815

100

19 Feb 201317 Feb 2023

46

40

0.4

0.668

100

18 Mar 201317 Mar 2023

5

80

0.8

0.383

100

26 Apr 201226 Apr 2018

6

80

0.8

0.245

100

30 Jul 201230 Jul 2018

7

80

0.8

0.250

100

29 Oct 2012

29 Oct 2018

8

80

0.8

0.199

100

29 Jan 201329 Jan 2019

1

55

0.6

0.151

100

28 May 2012

27 May 2016

2

55

0.6

0.130

100

30 Aug 2012

30 Aug 2016

3

55

0.6

0.130

100

26 Nov 2012

25 Nov 2016

4

55

0.6

0.093

100

26 Feb 201324 Feb 2017

Appendix / JFM Data
JFM Annual Report 2013 | 104

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Outstanding International Bonds

FormatCurrency

Issue Amount(million)

CouponIssue Price(%)

Issue Date

Maturity Date

1

EURO

USD

105

3mL+73bp100

17 Jan 201217 Jan 2017

2

EURO

USD

40

2.04%

100

12 Jan 201212 Jan 2017

3

EURO

USD

57

2.00%

100

17 Jan 201217 Jan 2017

4

EURO

USD

35

3mL+75bp100

17 Jan 201217 Jan 2017

5

EURO

USD

30

3mL+75bp100

19 Jan 201219 Jan 2017

6

EURO

USD

51

3mL+70bp100

18 Jan 201218 Jan 2017

7

EURO

USD

20

2.00%

100

23 Jan 201223 Jan 2017

EURO

USD

20

3mL+73bp100

23 Jan 201223 Jan 2017

EURO

USD

20

3mL+70bp100

19 Jan 201219 Jan 2017

10

EURO

USD

20

3mL+75bp100

18 Jan 201218 Jan 2017

11

EURO

NZD

40

3mNZD-BBRFRA+113bp

100

24 Jan 201224 Jan 2017

USD

20

3mL+69bp100

26 Jan 201226 Jan 2017

USD

20

3mL+70bp100

24 Jan 201224 Jan 2017

14

EURO

USD

25

1.84%

100

1 Mar 2012

1 Mar 2017

15

EURO

USD

20

2.40%

100

1 Mar 2012

1 Mar 2019

16

EURO

USD

25

1.87%

100

1 Mar 2012

1 Mar 2017

17

EURO

USD

30

3mL+70bp100

1 Mar 2012

1 Mar 2017

18

EURO

USD

25

3mL+70bp100

1 Mar 2012

1 Mar 2017

19

EURO

USD

20

1.89%

100

1 Mar 2012

1 Mar 2017

20

EURO

USD

40

3mL+70bp

100

6 Mar 2012

6 Mar 2017

21

EURO

USD

30

3mL+70bp

100

6 Mar 2012

6 Mar 2017

22

EURO

USD

25

3mL+70bp

100

6 Mar 2012

6 Mar 2017

23

EURO

USD

30

3mL+70.5bp

100

6 Mar 2012

6 Mar 2017

24

EURO

USD

30

3mL+70bp

100

8 Mar 2012

8 Mar 2017

25

EURO

USD

30

3mL+70bp

100

6 Mar 2012

6 Mar 2017

26

EURO

AUD

20

3mBBSW+115bp

100

13 Mar 2012

13 Mar 2017

27

EURO

USD

30

3mL+70bp

100

8 Mar 2012

8 Mar 2017

28

EURO

USD

20

1.85%

100

13 Mar 2012

13 Mar 2017

Financial Section

EURO
EURO

JFM’s Role in Local Government Finance

12
13

Management Structure

89Operations

SeriesNumberReview and Plan

1. JFM bonds

Appendix / JFM Data

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Appendix
JFM Data

Appendix

2. Government-guaranteed bonds
SeriesNumberFormatCurrency

4

EURO

GBP

3

GLOBAL

1

Issue Amount(million)

CouponIssue Price(%)

Issue Date

Maturity Date

150

5.750

99.3379 Aug 1999

9 Aug 2019

JPY

130,000

1.350

99.86026 Nov 2003

26 Nov 2013

GLOBAL

EUR

900

4.500

99.85727 May 2004

27 May 2014

2

GLOBAL

USD

1,200

4.625

99.04521 Apr 2005

21 Apr 20154

GLOBALJPY

120,000

2.000

99.8389 May 2006

9 May 2016

3

GLOBAL

USD

1,000

5.000

99.27816 May 2007

16 May 2017

5

GLOBALJPY

75,0001.900

99.90025 Jun 2008

22 Jun 2018

1

GLOBAL

USD

1,000

4.000

99.17013 Jan 201113 Jan 2021

Appendix / JFM Data
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Appendix
JFM Data

JFM Data

Organization History

FY2008The Japan Finance Organization for Municipal Enterprises (the Predecessor of JFM) was establishedpursuant to the Japan Finance Organization for Municipal Enterprises Law on 1 August 2008.
Succeeded the assets and assumed the liabilities of the Predecessor and commenced operations on 1
October 2008.

2009

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

Review and Plan

History of JFM

Operations

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

1960

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

1966

Started a lending program that applied special lending rates.

1967

Started receiving subsidies from the national treasury.

1970

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

1972

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

1978

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

1983

Started issuing foreign currency–denominated bonds.

1998

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

2001

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

2002

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

2005

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

2006

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

2007

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

2008

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

Appendix / JFM Data

Started a lending program that applied extra special lending rates.

Financial Section

Established the Reserve for Losses on Reﬁnancing of Bonds.
JFM’s Role in Local Government Finance

1989
1990

Management Structure

FY1957

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Appendix
JFM Data

JFM Data

Organization Structure
As of 1 April 2013
Personnel and Secretariat … Secretariat, personnel, human resources
development

Corporate Planning…

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

Risk Management…

Integrated risk management, systems
management

Corporate Planning
Department

Local government Support … Support operations for local governments’fund-raising, ﬁnancial research

Representative
Board

President and CEO
Deputy President
Senior Executive
Directors

General Affairs…

General affairs including compensation andbeneﬁts and legal review

Accounting…

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

Finance…

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

Administration
Department

Corporate
Auditors
Supervisory Committee

Finance Department
Funding Administration … Funding administration and management offund investment

Loan Department

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

Local Government
Support Department

Loan Administration…

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

Research Planning…

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

Financial Activities Support … Financial advisory services to local governments

Appendix / JFM Data

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

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

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Directors and Corporate Auditors
Review and Plan

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

Operations

Name

Japan Finance Organization for Municipalities (JFM)

Establishment

1 August 2008 (Reorganized on 1 June 2009)

Governing Law

Japan Finance Organization for Municipalities Law(From left, H. Shimura, Senior Executive Director; Y. Watanabe, President and CEO;Y. Hyotani, Senior Executive Director; and K. Hikita, Senior Executive Director)(From left, Y. Ishikawa, Corporate Auditor,
and M. Hamakawa, Corporate Auditor)

Management Structure

Profile of JFM(Act No. 64 of 2007, as amended)
Shisei Kaikan, 1-3 Hibiya Koen, Chiyoda-ku, Tokyo

President and CEO

Yuji Watanabe

CapitalUSD 176 million

Number of Employees

90 (as of 1 April 2013)

Outstanding Loans
as of 31 March 2013

USD 240 billion

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

Outstanding Bonds and Bank Loans
USD 198 billion
as of 31 March 2013
Credit Ratings
as of 31 March 2013

S&P: AAMoody's : Aa3
R&I: AA+

Financial Section
Appendix / JFM DataDISCLAIMER
By reading these materials, you agree to be bound by the following limitations:
No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of theinformation, or opinions contained herein. Neither the company nor any of the company’s advisors or representatives shall have any responsibility or liability whatsoever(for negligence or otherwise) for any loss howsoever arising from any use of these materials or their contents or otherwise arising in connection with these materials. The
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Forward-looking statements, including the company’s plans in these materials, are based on information available to the company at the time they were prepared andinvolve potential risks and uncertainties. Actual results, therefore, may differ from those described in these materials due to changes in a variety of factors, such as market
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JFM’s Role in Local Government Finance

Address(Photo provided by The Tokyo Institute for Municipal Research)

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Japan Finance Organization for Municipalities Annual Repor t 2013

ANNUALREPORT

2013

JFM
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