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

No representation or warranty, express or implied, is made as to, and no reliance should be placed on, thefairness, accuracy, completeness or correctness of the information, or opinions contained herein. Neither thecompany 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 information set out herein may besubject to updating, completion, revision, verification and amendment and such information may changematerially.

These materials are based on the economic, regulatory, market and other conditions as in effect on thedate hereof. It should be understood that subsequent developments may affect the information contained inthese materials, which neither the company nor its advisors or representatives are under an obligation to
update, revise or affirm.

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 and involve 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 theirown 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 orsubscription 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 “SecuritiesAct”), may not be offered, sold or delivered within the United States or to U.S. persons absent registration
under or an applicable exemption from the registration requirements of the United States securities laws.

These materials and the information contained herein are being furnished to you solely for your informationand may not be reproduced or redistributed to any other person, in whole or in part. In particular, neither the
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prohibits the same except in compliance with applicable securities laws. Any failure to comply with thisrestriction 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.

Note to Financial Statements

The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience ofreaders outside Japan, using the prevailing exchange rate as of 31 March 2021, the final day of the fiscal year,

which was JPY 110.70 to USD 1. This translation should not be construed as a representation that all amounts
shown could be converted into U.S. dollars at such rate.

ANNUAL REPORT 2021 JFM

Review and Plan

CONTENTS
02
03
06
08
09

Management StructureManagement Philosophy

42

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

12
14
16
18
18
19

47

Review of Operations for Fiscal 2020
1. Lending Operations

22
26
26
29
32
32
33
34
35
36
38

55

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

JFM’s Role in Local Government Finance

3. Financial Review

56

Management Plan for Fiscal 2021
1. Lending Operations
2. Funding Operations
3. Scheduled Payment to the National Treasury

57
58
58
58
59

Lending Operations
1. Outline
2. Loan Interest Rates
3. Credit Check System
4. Trends in Lending Operations
5. Lending Operations by Business
Funding Operations
1. Issue Type
2. Basic Funding Policy
3. Features of JFM Bonds
4. Trends in Funding Operations
Local Government Support Operations
JFM and Sustainable Development Goals

60

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

Financial Section
62
102

Financial Statements

JFM’s Role in Local
Government Finance2454

2. Internal Control over Financial Reporting

2. Funding Operations

Operations
22

44

1. Corporate GovernanceManagement
Structure

18

44
45

Review and Plan
1242

Corporate GovernanceOperations

04

Profile of JFM

Independent Auditor’s Report

Appendix / JFM Data
105
117
117
118
119
119

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

JFM ANNUAL REPORT 2021

Appendix / JFM Data

Traditional Japanese patterns were devised in ancient times and are still widely used in Japanesesociety today. Each pattern expresses a certain wish, such as happiness, healthy growth for children,
or longevity. Various patterns continue to be used on daily items, in product designs, and in rituals, asa plea for good luck in all endeavors. JFM has incorporated several of these auspicious patterns in thedesign of its Annual Report 2021 as we wish for community growth, successful development, andvaluable communications and connections toward the future.
Each of the seasons, beginning with spring, is represented in a traditional Japanese pattern, so as
you read through this report you can feel the passing of the seasons.

Financial Section

Wishes in Japanese traditional seasonal patterns

01Profile of JFM
Name

Japan Finance Organization for Municipalities (JFM)

Establishment

1 August 2008 (Reorganized on 1 June 2009)

Governing Law

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

Address

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

President and CEO

SATO Fumitoshi

CapitalUSD 150.0 million

Number of Employees

91 (As of April 2021)

Outstanding Loans

USD 209.1 billion

as of 31 March 2021
Outstanding Bonds and

USD 187.1 billion

Bank Loans
as of 31 March 2021
Credit Ratings

S&P: A+as of 31 March 2021

Moody’s: A1
R&I: AA+

02

JFM ANNUAL REPORT 2021

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

1

Being Responsive to Local Government Needs

2

Strengthening Confidence from the Capital Markets

3

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

JFM aims to strengthen its market confidence and secure low-costfunding through appropriate disclosure as required in capital markets,
as well as its sound financial standing maintained through prudent
risk management. Furthermore, JFM, as a leading public-sector bondissuer, is committed to contributing to the sound development of
capital markets.

Ensuring Responsible Corporate Governance as a
Joint Organization of Local Governments
JFM ensures responsible corporate governance through prudent risk
management, monitoring and recommendations by the Supervisory
Committee, as well as audits by external accounting auditors anddeepen communication with local governments as a responsible
joint organization of local governments.

JFM ANNUAL REPORT 2021

03

Japan Finance
Organization

Message2021
Message fromthe President and CEO

SATO Fumitoshi

President and CEO
2021

04

JFM ANNUAL REPORT 2021

for Municipalities

The JFM is a joint funding organization established under the law of Japan, which is wholly owned by all theJapanese local governments, with the objective to provide long-term and low-interest funds for local
governments.
Fiscal 2020 was a year in which COVID-19 had a major impact on the global politics, economy and society.
Even in Japan, to secure the people’s lives and livelihood, the government decided “Emergency Economic
Measures to Cope with COVID-19” and “Comprehensive Economic Measures to Secure People’s Lives andLivelihoods towards Relief and Hope”, thereby a succession of the supplementary budget and the initial budgetof fiscal 2021 were formulated.
The JFM has also budgeted 2.51 trillion yen in its lending plan of fiscal 2021 in order to meet the local
governments’ expectations for public funding in case of emergency. The amount has increased by 0.85 trillion
yen compared to that of fiscal 2020, which is mainly due to the response to loans covering decrease in local
tax revenues of fiscal 2020 and loans for temporary financial countermeasures funding which is increasing
drastically in fiscal 2021.
In addition, regarding the digital transformation, which has become an urgent issue in terms of the transitionof the economic structure towards post COVID-19, the JFM is planning to provide its management accountreserve for interest rate volatility with an amount of 200 billion yen for fiscal 2021 and 2022 respectively.
Thus, the total amount of the local allocation tax will be secured while promoting digitalization of local
communities intensively.
Also, the JFM will strive to improve the funding condition and support local governments’ funding demands
timely and appropriately, in line with the trends of ESG investment such as green bond issuances.
In our local government support operations, we newly conduct “Project to Strengthen Administration and
Finance Management of Local Governments” from fiscal 2021, in which we send advisers to local governments.
Additionally, we will enhance our existing business by utilizing online format more.
The JFM, under the management philosophy and motto “Supporting local economies through finance tocreate a future for regions”, will continue to make more effort to fulfill its required role as a joint fundingorganization and contribute to the sound financial management of local governments, which directly relates tothe credibility of the JFM itself, fully considering a wide range of opinions, issues and needs of local governments,
while the environment surrounding the JFM and local governments is changing significantly. We appreciatecooperation and support from all related persons.

JFM ANNUAL REPORT 2021

05

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

LGBP—Funding Sources for Local Governments■ High credit quasi-sovereign issuer, wholly owned by Japanese

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

Publicly Offered Bonds
National Government(USD bn)

180

15.8

160

16.1

16.1

Other Private Sectors
JFM
JFM Ratio
15.6

15.3

15.3

15.5

(％)

16.0 18
16

140

14

120

12

100

10

80

8

60

6

40

Japanese Local Governments0■ Japanese local governments include 47 prefectures and a totalof 1,741*1 cities and special wards of Tokyo, government-designated cities, as well as towns and villages.
■ Revenue sources for the local governments are secured by
the national government.
• The national government allocates a part of national tax
revenue to the local governments, in order to adjust revenue
disparities among the local governments (Local Allocation
Tax system).
• The national government also prepares the Local Government
Borrowing Programme (LGBP) each fiscal year, which
specifies the amount of local government borrowing as well
as funding sources.
• In the case of each local government funding, consent orapproval must, in principle, be obtained from the relevant
authorities.
■ The national government also establishes a legal framework tomonitor fiscal indices for each local government and implement
early correction measures if the local governments with theindices exceeding the early warning limits or reconstruction
limits shall restore their financial soundness.
■ Thus, none of the local governments has defaulted.
■ BIS 0% risk weight for Japanese local governments*3

4

20

18.5

17.8

since fiscal 2014.

2022 are amounted to USD 22.7 bn.
■ Maximum term to maturity of JFM loans is 40 years.

Note: Figures in USD are converted at USD 1 = JPY 110.70 as of 31 March 2021, unlessotherwise noted.

06

JFM ANNUAL REPORT 2021

16.1

16.6

16.5

19.7

2
0

Annual Lending Volume(USD bn)

25
20
15
10
5
0

FY 2014 2015 2016 2017 2018 2019 2020 2021

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

Outstanding Loans by Business*1

Total
USD
209.1bn

Sewerage USD 63.8 bn 30.5%
Temporary Financial Countermeasures
Funding USD 52.4 bn 25.1%
Loans Covering Decrese in Local Tax
Revenues USD 0.6 bn 0.3%
Water Supply USD 28.3 bn 13.5%
Three Special Projects
USD 5.0 bn 2.4%
Transportation USD 6.9 bn 3.3%
Special Municipal Mergers
USD 9.9 bn 4.7%
Hospitals USD 10.2 bn 4.9%
Disaster Management and
Mitigation USD 7.4 bn 3.6%
Public Projects USD 4.6 bn 2.2%
Industrial Water Supply
USD 1.5 bn 0.7%
Local Road Development
USD 4.5 bn 2.1%
Others USD 14.0 bn 6.7%

Outstanding Loans by Borrower *1
Prefectures USD 43.6 bn 20.8%■ JFM provides loans to almost all local governments.

■ Loans planned to be made in fiscal 2021 ending 31 March

16.4

FY 2014 2015 2016 2017 2018 2019 2020 2021

Lending■ JFM funds have accounted for around 15%-16% of the LGBP

16.4

Government-designated Cities

Total
USD
209.1bn

USD 29.7 bn 14.2%

Cities, Special Wards of Tokyo,
Towns and Villages
USD 130.2 bn 62.3%
Local Government Corporations
and Associations
USD 5.6 bn 2.7%

Funding■ Leading issuer in the Japanese bond market with an average

Funding Planannual funding volume of USD 17-20 bn■ Aiming to diversify its funding sources and expand its investor

base – continues to access the international market throughbenchmark transactions as well as private placements, making
use of its MTN Programme■ In the international market, only non-government guaranteedbonds will be issued.
■ I n fiscal 2020, JFM issued a total of USD 5.4 bn worth ofinternational bonds through 4 benchmark transactions,private placements and Uridashi Bonds.

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

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

Solid Risk Management■ J FM maintained USD 25.8 bn of reserves for interest rate

volatility for the purpose of dealing with interest rate risk
resulting from a duration gap between lending (7.94 years)
and funding (7.54 years).
■ The duration gap of 0.40 years*1 in the general account qualifies
JFM’s management target of the duration gap below 2 years.

Credit Ratings■ A1 (Moody’s), A+ (S&P)■ The ratings of JFM are the same as those of the Japanesesovereign.
■ B IS risk weight *3 : 10% for JFM bonds (non-guaranteed)
denominated in JPY
Note: A rating is not a recommendation to buy, sell or hold securities and may be subject
to suspension, reduction or withdrawal at any time by the assigning rating
agencies.
*1: As of 31 March 2021.
*2: Local governments comprise all of the prefectures, cities and special wards ofTokyo, government-designated cities, towns and villages, as well as some local government associations.
*3: Value for investors in Japan. For overseas bonds, the value is determined byrespective authorities in each country (as of 31 March 2021).

Type of
Funding Instruments

FY2021(plan)(1)

FY2020(achieved)

USD 17.4 bn USD 21.8 bn

Non-Guaranteed Bonds
Domestic Public Offerings

USD 7.0 bn

USD 11.4 bn

Domestic Private Placements

USD 4.8 bn

USD 5.0 bn
USD 5.4 bn (2)Overseas Offerings - GMTN
Benchmark

USD 3.2 bn

Uriadshi Bonds

USD 4.8 bn (2)USD 60 mm (2)USD 892 mm (2)Private Placements
Open Issuance (3)USD 2.5 bn-

Guaranteed Bonds (4)USD 2.2 bn

USD 0.5 bn

Long-Term Bank Loans

USD 0.7 bn

USD 0.8 bn(1) Planned amount; subject to change depending on lending status,
market conditions and other factors.
(2) Includes USD, EUR and AUD denominated bonds, each converted
at the exchange rate at the time of pricing.
(3) Details of issuance such as tenor, issue size and issue market will be
determined as necessary based on the lending status, market
conditions and other factors.
(4) Denominated in JPY only and issued in the domestic market forrefinancing our predecessor’s government guaranteed bonds.
(5) Totals may not add up due to rounding.

Bond Issuance
Bonds without government guarantee
Bonds with government guarantee(USD bn)

25
20
15
10
5
0

FY 2014 2015 2016 2017 2018 2019 2020 2021** Planned amount; subject to change depending on lending
status, market conditions and other factors.

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

Currency

Tenor

USD

Issue
AmountCoupon(%)

10-Feb-21

1,250 mm

1.375

10y

2-Feb-21

EUR

500 mm0.010

7y2-Sep-20

USD

1,500 mm

0.625

5y

21-May-20

USD1,500 mm

1.000

5y

12-Feb-20

EUR

500 mm0.050

7y5-Sep-19

USD

1,000 mm

1.750

5y

12-Mar-19

USD

1,000 mm

3.000

5y

27-Sep-18

USD

1,000 mm

3.375

5y

24-Apr-18

USD

1,000 mm

3.250

5y

20-Apr-17

USD

1,000 mm

2.625

5y

25-Oct-16

USD

1,000 mm

2.125

7y

13-Apr-16

USD

1,500 mm

2.125

5y

21-Apr-15

USD

1,000 mm

2.000

7y

13-Feb-15

USD

1,000 mm

2.375

10y

22-Sep-14

EUR1,000 mm

0.875

7y

JFM ANNUAL REPORT 2021

07

Outline of JFM Operations

Outstanding
Bonds
JPY 20.4 tn(USD 184.4 bn)

Outstanding
Long-term BankLoans
JPY 0.2 tn(USD 2.7 bn)

Proceeds from
Public Races*

Japan Finance
Organization for
Municipalities(JFM)

Reserve forInterest Rate
Volatility, etc.
JPY 2.8 tn(USD 25.8 bn)

Lending(Long-term/lowinterest rates)
Outstanding
Loans
JPY 23.1 tn(USD 209.1 bn)

Reduction ofLending Rates

Local Governments

Financial Markets

Funding(JFM Bonds)

Fund forLending Rate
Reduction
JPY 0.9 tn(USD 8.3 bn)* A portion of the earnings from municipally operated racing(horse, bicycle, motorcycle and boat race).

As of 31 March 2021

08

Public Institution Wholly Owned by
Japanese Local Governments

Joint Funding Organization for All Local
Governments

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

JFM contributes to the sound financial operation of
local governments and improves the welfare of local
residents with the aim of efficiently and effectively
complementing local government fund-raising by
providing long-term funding at low-interest rates to local
governments.
For social infrastructure improvements to be implemented by local governments, long-term funding is
usually desirable given that it takes a long time to recoup
such capital expenditures, and also the cost burden
should be shared across generations. However, local
governments generally raise funds in capital markets for

JFM ANNUAL REPORT 2021

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

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

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

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

Capital
As of 31 March 2021, JFM's capital was USD
150.0 million contributed by 1,789 Japanese
local governments, i.e., all of the prefectures,cities, special wards of Tokyo, government-designated cities, towns and villages, as well assome local government associations.
The amount of capital contribution fromeach local government is decided basedon 1) outstanding JFM loans to each local
government, and 2) the amount of revenue ofeach local government (mainly comprisedof local taxes, local allocation taxes andtemporary financial countermeasures funding).

Capital Contribution by
Local Government Group
Towns, villages andlocal government associations
USD 9.3 mm

6.2%

Prefectures
USD 57.5 mm

38.4%
USD
150.0 mm

Governmentdesignated cities(2)USD 26.0 mm

17.3%(As of 31 March 2021)

Cities(1) and special wards of Tokyo
USD 57.1 mm

38.1%Notes: 1. Excludes government-designated cities.
2. Government-designated cities:
Cities with populations of 500,000 or more designated in accordance with Paragraph 1, Article 252-19 of the Local Autonomy Act. Suchgovernment-designated cities are allowed to administer certain matters such as social welfare, food safety, urban planning and so on, for which
prefectures are responsible in principle.

JFM ANNUAL REPORT 2021

09

10

JFM ANNUAL REPORT 2021

Review and Plan

Operations

Management
Structure

JFM’s Role in Local
Government Finance

Financial Section

Appendix / JFM Data

11

JFM ANNUAL REPORT 2021

Review and Plan
Review of Operations for Fiscal 2020

1 Lending Operations
In fiscal 2020, JFM provided loans totaling USD 14.1
billion.
General account-related loans totaled USD 4.8 billion(34%) of the total lending volume, mainly represented
by disaster management and mitigation and special
municipal mergers. Loans for temporary financial
countermeasures funding*1 were USD 2.4billion (17%),loans covering decrease in local tax revenues*2 were
0.6bn (4%) and loans for municipal enterprise-relatedloans were USD 6.2billion (44%), of which sewerage andwater supply businesses were the main contributors.

Notes:
1. Represents local government funding to cover shortfalls in local government revenue sources pursuant to
the provisions of the Local Government Finance Law(Act No. 109 of 1948, as amended).
2. Represents local government funding to cover shortfalls in local tax revenues pursuant to the provisions of
the Local Government Finance Law (Act No. 109 of1948, as amended).

Lending Operations by Business Type in Fiscal 2020
Business

Loan Amount (USD Millions)

Number ofLoans Made

% of total

General Account-related Loans
Public Projects, etc.

496

342

2.4%

Public Housing

117

137

1.0%

Educational Facilities Development

247

121

0.9%

Social Welfare Facilities Development

207

75

0.5%

General Waste Dispoal

75

90

0.6%

General Service Facilities Development

9

13

0.1%

General Projects

69

54

0.4%

Regional Revitalization

214

103

0.7%

Disaster Prevention

404

101

0.7%

Local Road Development

353

239

1.7%

Special Municipal Mergers

455

818

5.8%

1,600

1,215

8.6%

Proper Management of Public Facilities and Infrastructures

Disaster Management and Mitigation

727

791

5.6%

National Disaster Prevention

728

550

3.9%

Anti-depopulation Measure Project

771

192

1.4%

6,472

4,842

34.4%

1,328

1,684

12.0%

Industrial Water Supply

87

65

0.5%

Transportation

33

203

1.4%

Electricity and Gas Supply

27

38

0.3%

Subtotal
Municipal Enterprise–related Loans
Water Supply

Port Facilities

19

20

0.1%

Hospitals and Elderly Care Services

595

1,047

7.4%

Markets and Slaughterhouses

53

150

1.1%

2,461

3,021

21.5%

12

2

0.0%

4,615

6,230

44.2%

-

-

0.0%

Temporary Financial Countermeasures Funding

587

2,385

16.9%

Loans Covering Decrease in Local Tax Revenues

5

628

4.5%

11,67914,085100.0%

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

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

12

JFM ANNUAL REPORT 2021

Review and Plan

FY2020 Loans Extended by Business Type
OthersDisaster Management
and Mitigation

2% (USD 0.3 bn)

9% (USD 1.2 bn)

1% (USD 0.2 bn)

Special Municipal
Mergers

Hospitals and Elderly
Care Services

6% (USD 0.8 bn)

Water Supply

2% (USD 0.3 bn)

Sewerage

Others7% (USD 1.1 bn)

Public Projects, etc.

12% (USD 1.7 bn)

Municipal Enterprise –related Loans

44%(USD 6.2 bn)

Loans Covering Decreasein Local Tax Revenues

4%(USD 0.6 bn)

Temporary Financial
Countermeasures Funding

17%(USD 2.4 bn)

General Account-related
Loans

34%

(USD 4.8 bn)

Local Government
Corporations andAssociations

Prefectures

15% (USD 2.1 bn)

3% (USD 0.5 bn)

Towns and Villages

11% (USD 1.6 bn)

5% (USD 0.7 bn)

Cities and Special
Wards of Tokyo

65% (USD 9.2 bn)

Financial Section

Government-designated
Cities

JFM’s Role in Local
Government Finance

FY2020 Loans Extended by Borrower TypeManagement
Structure

18% (USD 2.5 bn)

21% (USD 3.0 bn)

Operations

Transportation

Appendix / JFM Data

Total

14.1 bn

USD

Note: Totals may not add up due to rounding.

JFM ANNUAL REPORT 2021

13

Review and Plan
Review of Operations for Fiscal 2020

2 Funding Operations
1. Overview*1
In fiscal 2020, JFM raised a total of USD 23.1 billion
including USD 21.8billion in JFM bonds (non-government
guaranteed), and USD 0.5 billion in government-guaranteed bonds for the repayment of existing bonds issued
by Japan Finance Corporation for Municipal Enterprises(the “Predecessor”). In addition, JFM raised USD 0.8
billion through long-term bank loans.
With regard to JFM bonds, a total of USD 16.8 billion
was raised by the regular issuance of 5-year, 10-year,
20-year and 30-year domestic bonds, as well as opportunistic issuances through JFM’s Flexible Issuance
Programme (“FLIP”) and the MTN Programme.
As for domestic public offerings, a total of USD 11.4
billion was issued in the fiscal year. In order to cope withhighly volatile market condition through the period, JFM
increased 5-year, 10-year, 20-year and 30-year of theregular issuance and FLIP from the initial plan by utilizing
the budget of Open Issuance scheme.
In overseas offerings, JFM issued USD denominatedbenchmark bonds in 5-year tenor (USD 1.5 billion) in
May and September 2020 respectively. In February
2021, JFM also issued its second EUR denominatedgreen bond in 7-year tenor (EUR 0.5 billion) and USD
denominated benchmark bonds in 10-year (USD
1.25billion) respectively. In addition to these successful
public offerings, JFM issued a total of USD 60 million*2
equivalent Uridashi Bonds and USD 892 million*2 equivalent private placements in three tranches. Throughthese activities, the total volume of international bonds
issued for fiscal 2020 amounted to USD 5.4 billion*2.
Private placements with pension funds for local
government officials were totaled USD 5.0 billion.
As a result, JFM’s outstanding bonds were USD 184.4
billion, including the Predecessor’s bonds to which JFM
succeeded. Outstanding long-term bank loans totaled
USD 2.7 billion as of 31 March 2021.
Notes:
1. Issued amounts are calculated based on issue prices.
2. Includes an offering of USD, AUD and EUR denominated bonds, converted
at the exchange rate at the time of pricing.
3. Totals may not add up due to rounding.
Flexible Issuance Programme (“FLIP”)
FLIP is JFM’s unique framework for domestic bond issuance which is similar
to the MTN programme in some ways. JFM issues domestic bonds under theFLIP, in order to meet both the needs of investors in the domestic market andthe borrowing needs of local governments in a timely and flexible manner.
FLIP permits minimum and maximum issue sizes of JPY 3 billion (USD 27.1
million) and JPY 20 billion (USD 180.7 million), respectively.

Funding in Fiscal 2020

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

14

Type of Bonds

Plan (Initial)

Achieved

Domestic Public Offerings

USD 6.7 bn

USD 11.4 bn

10-year

USD 2.3 bn

USD 3.5 bn

20-year

USD 1.0 bn

USD 1.7 bn

5-year

USD 0.2 bn

USD 0.3 bn

30-year

USD 0.2 bn

USD 0.4 bn

Opportunistic Issuance

USD 3.0 bn

USD 5.5 bn

Overseas Offerings - MTN

USD 2.7 bn

USD 5.4 bn

Open Issuance *1

USD 1.8 bn

-

Total

USD 11.2 bn

USD 16.8 bn

JFM ANNUAL REPORT 2021

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

Plan

Achieved

10-year

USD 2.3 bn

USD 2.4 bn

20-year

USD 2.5 bn

USD 2.5 bn

Total

USD 4.8bn

USD 5.0 bn

3. Long-term Bank Loans

Type of Bonds

Plan

Achieved

4-year

USD 0.5 bn

USD 0.5 bn

Total

USD 0.5 bn

USD 0.5 bn

Long-term Bank Loans

Plan

Achieved

USD 0.7 bn

USD 0.8 bn

In the domestic market, JFM bonds had been priced
under the low-interest-rate environment on the back of
the introduction of BOJ’s QQE with yield curve control.
Due to the strong investors’ demands in the relatively
stable environment of Japanese government’s bond(“JGB”) yield, the premium of JFM 10-year domestic
bonds over respective JGB yield curve tightened by 1.0
bp in July, August, September, December and February,
resulting in 8.0 bps in February. During the period from

(bps)

20.0
18.0
16.0

(%)

0.50

Spread over major local government bonds (bps, LHS)
Spread over JGB yield curve (bps, LHS) *ー Yield on JFM bonds (%, RHS)
16.0

16.0

0.45

16.0

0.40

15.0
14.0

14.0

14.0
13.0

13.0

13.0

0.35

13.0
12.0

12.0

0.30

11.0
10.0

10.0
9.0

8.0

8.0
6.0 0.125

0.151
0.115

0.155

0.135

0.155

0.150

0.145

0.145

8.0

0.150

0.145
0.125

0.125

0.095
0.049
1.0

1.0

1.0

Apr May Jun

0.065 0.060

0.050

0.20
0.15
0.10

0.050

0.050

0.25

0.05

0.5

Jul

Aug Sep

Oct

Nov DecJan

Feb MarF Y 2019

Apr May Jun

Jul

Aug Sep

Oct

Nov DecJan

Feb Mar

0.00

F Y 2020

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

JFM ANNUAL REPORT 2021

Appendix / JFM Data

0.0

0.155

0.160

0.115

4.0
2.0

0.224

9.0

Financial Section

10.0

10.0

JFM’s Role in Local
Government Finance

Issue Conditions of JFM 10-Year Domestic Bonds

Management
Structure

July 2020 to March 2021, the yield of JFM 10-year bonds
had been hovering around 0.125% to 0.225%.
There were strong demands from the investor for
5-year, 20-year and 30-year JFM bonds. 5 year bonds
attracted investors as substitutes for JGB, while 20-yearand 30-year bonds had been supported by investors
looking for higher yields.
JFM’s international bonds have been issued based oninvestor demands and market conditions by referring tocredit spreads observed in the international primary andsecondary markets at the time of pricing.

Issue Spreads

Operations

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

Review and Plan

2. Government-guaranteed Domestic Bonds

15

Review and Plan
Review of Operations for Fiscal 2020

3 Financial Review
1. Income Statement

2. Balance Sheet

In fiscal 2020, JFM’s income was USD 2.3 billion, adecrease of USD 0.3 billion from the previous year. Thisdecrease was mainly due to a decrease in interest income
caused by a decrease in the average interest rate onloans as a result of redemptions of loans made in thepast with relatively high interest rates. Expenses also
decreased by USD 0.2 billion from the previous fiscal
year resulting in USD 1.3 billion. As a result, ordinary
income has decreased by USD 0.1billion from previous
year, resulting in USD 1.1 billion.
Pursuant to the relevant laws, a portion of the revenue
generated by the refinancing of bonds and borrowed
money of JFM*is to be directed into the reserves forinterest rate volatility. As a result of such provisions aswell as other factors, net income remains similar level tothe previous year at USD 0.2 billion.

As of 31 March 2021, JFM’s total assets amounted to
USD 224.5 billion, an increase of USD 4.6 billion fromthe previous year. This mainly resulted from an increasein cash and bank deposits by USD 5.0 billion.
Total liabilities increased by USD 4.5 billion resulting in
USD 221.5 billion. This increase primarily reflected anincrease of USD 3.6 billion in bonds.
Total net assets were USD 3.1 billion, up USD 0.2
billion. This mainly reflected net income of USD 0.2
billion in the general account being recorded as thegeneral account surplus reserve.
Financial highlights since fiscal 2018 are on the next
page.

*This revenue is calculated based on the difference between JFM’s funding
rates at the time the loans were made and the current refinancing rates.

16

JFM ANNUAL REPORT 2021

1. Income Statement(USD Millions)

FY2018

2019

2020

YoY

Income

2,880

2,617

2,348

-269

Expenses

1,621

1,451

1,280

-172

Ordinary Income

1,260

1,166

1,068

-98

209

233

247

15

Net Income

Operations(USD mm)
6,000

Review and Plan

Financial Highlights

4,000

2,000

0

FY20182019

2020

2. Balance Sheet(USD Millions)

End of FY2018

End of FY2019

End of FY2020

YoY

222,125

219,934

224,549

4,615

Loans

212,313

211,379

209,073-2,306

Others

9,811

8,555

15,476

6,921

Total Liabilities

219,458

217,008

221,472

4,464

Bonds

184,211

180,790

184,379

3,589

525

302

-222

8,313

8,313

8,313

-

Reserves under special laws

25,47025,49925,778279

Reserve for interest rate volatility

19,874

19,874

19,874-

Management account reserve for interest rate
volatility

5,394

5,471

5,790

319

203

155

115

-40

1,214

1,881

2,699

819

2,667

2,926

3,077

151

Reserve for interest rate reduction
OthersTotal Net assets(USD mm)250,000

Appendix / JFM Data

240,000
230,000
220,000
210,000
200,000

FY20182019

Financial Section

250

Fund for lending rate reduction

JFM’s Role in Local
Government FinanceTotal Assets

Cash collateral received for financial instruments

Management
Structure

Note:Totals may not add up due to rounding.

2020

Note: Totals may not add up due to rounding.

JFM ANNUAL REPORT 2021

17

Review and Plan
Management Plan for Fiscal 2021

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

Borrowing Programme (the “LGBP”).
Based on the LGBP, JFM plans to extend loans in theamount of USD 22.7 billion in fiscal 2021, USD 7.7 billion
or 51.2% increase from fiscal 2020.

Lending Plan
Planned AmountFY2021

FY2020YoY

USD 22.7 bn

USD 15.0 bn

51.2%

JFM Funds in Local Government Borrowing Programme
FY2021

FY2020

YoY

USD 19.7 bn

USD 16.5 bn

19.8%

General Account-related Loans

USD 5.9 bn

USD 5.7 bn

3.0%Municipal Enterprise-related Loans

USD 6.8 bn

USD 7.0 bn-2.5%

Temporary Financial Countermeasures Funding

USD 7.0 bn

USD 3.7 bn

86.9%

JFM Funds

Notes: 1. The amount of JFM funds in the LGBP does not match JFM’s lending plan due to the timing for consent or approval (booked amount in the LGBP)
being different from JFM's plan for disbursements during the corresponding period.
2. JFM’s lending plan for FY2021 includes USD 5.4 billion as Loans Covering Decrease in Local Tax Revenues.
3. See page 60 for more information on JFM funds in the LGBP.
4. Totals may not add up due to rounding.

2 Funding Operations
In order to raise funds for lending operations, JFM
primarily issues non-government guaranteed bonds
through domestic public offerings and overseas offerings.
For fiscal 2021, JFM plans to issue USD 12.6 billion of
JFM bonds through these methods.
Moreover, private placements with pension funds for18

JFM ANNUAL REPORT 2021

local government officials are projected to amount to
USD 4.8 billion in fiscal 2021. In addition to issuing JFM
bonds, JFM plans to raise USD 0.7 billion through longterm bank loans.
As for government-guaranteed bonds, JFM plans to
issue USD 2.2 billion during fiscal 2021.

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

FY2020 (Achieved)

USD 7.0 bn

USD 11.4 bn

10-year

USD 2.5 bn

USD 3.5 bn

20-year

USD 1.0 bn

USD 1.7 bn

5-year

USD 0.2 bn

USD 0.3 bn

30-year

USD 0.2 bn

USD 0.4 bn

Opportunistic Issuance

USD 3.1 bn

USD 5.5 bn

USD 3.2 bn

USD 5.4 bn

Domestic Public Offerings

Overseas Offerings - MTN
Open Issuance
Total

USD 2.5 bn-

USD 12.6 bn

USD 16.8 bn

Operations

FY2021 (Plan)

Review and Plan

Funding Plan for Fiscal 2021

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

Type of Bonds

FY2020 (Achieved)

10-year

USD 2.3 bn

USD 2.4 bn

20-year

USD 2.4 bn

USD 2.5 bn

USD 4.8 bn

USD 5.0 bn

FY2021 (Plan)

FY2020 (Achieved)

USD 2.2 bn

USD 0.5 bn

USD 2.2 bn

USD 0.5 bn

FY2021 (Plan)

FY2020 (Achieved)

USD 0.7 bn

USD 0.8 bn

Total

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

3. Long-term Bank Loans

JFM’s Role in Local
Government Finance

FY2021 (Plan)

Management
Structure(2) Private Placements with Pension Funds for Local Government Officials

3 Scheduled Payment to the National Treasury

Financial Section

In accordance with the Supplementary Provisions of
the Law, a portion of JFM’s management account reservefor interest rate volatility is being attributed to theJapanese national government in fiscal 2021 and fiscal
2022, with the aim of transferring up to USD 3.6 billion in
2 years. In fiscal year 2021, USD 1.8 billion is scheduled to
be transferred to the national treasury to secure financial
resources of the local allocation tax. In addition, anamount of up to USD 2.1 billion is being attributed to
the government over a period of 5 years from fiscal 2020

Appendix / JFM Data

Long-term Bank Loansthrough 2024 for the purpose of forest environmenttransfer tax increase, and USD 0.4 billion shall betransferred in fiscal 2021.
Furthermore, an amount of up to USD 13.6 million
from fiscal 2018 through fiscal 2023 shall be attributed
to the government for exemptions of early redemption
charges in relation to concessions of water supply andsewerage businesses, and the relevant amount shall betransferred to the government in fiscal 2021.

JFM ANNUAL REPORT 2021

19

20

JFM ANNUAL REPORT 2021

Review and Plan

Operations

Management
Structure

JFM’s Role in Local
Government Finance

Financial Section

Appendix / JFM Data

21

JFM ANNUAL REPORT 2021

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

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

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

1. Eligible Borrowers

2. Types of Loans

JFM provides loans exclusively to local governments.

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

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

22

JFM ANNUAL REPORT 2021

JFM lends mainly to the following local government businesses with respective loan maturities.
Loans for FY 2021
Business Type

Within (Years)
25

Within (Years)
5

25

5

25

5

Educational Facilities Development

25

3

25

3

Social Welfare Facilities Development

25

3

25

3

General Waste Disposal

20

3

20

3

General Projects*2

30

5

30

5

Regional Revitalization

30

5

30

5

Disaster Prevention

30

5

30

5

Local Road Development

20

5

20

5

Special Municipal Mergers

30

5

30

5

Disaster Management and Mitigation

30

5

30

5

Public Facilities Optimization

30

5

30

5

Emergency Natural Disaster Prevention

30

5

30

5

30

5

40

5

Water Supply

30

5

40

5

Industrial Water Supply

30

5

40

5

Transportation*2

30

5

40

5

Electricity Supply*2

30

5

30

5

Gas Supply

25

5

25

5

Port Facilities*2

30

5

40

5

Hospitals*2

30

5

30

5

Markets

30

5

40

5

Slaughterhouses

30

5

30

5

Sewerage

30

5

40

5

Prefectures and GovernmentDesignated Cities

－

－

30

3

Cities, Towns and Villages

－

－

20

3

Prefectures and GovernmentDesignated Cities

30

3

30

3

Cities, Towns and Villages

20

3

20

3

General Account-related Loans

Anti-depopulation Measure Project*2

Municipal
Enterprise-related
Loans

Temporary Financial
C o u n t e r m e a s u re s
Funding
Loans Covering
Decrease in Local
Tax Revenues

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

JFM ANNUAL REPORT 2021

Appendix / JFM Data

Within (Years)
5

Financial Section

Within (Years)
25

JFM’s Role in Local
Government Finance

Grace Period
for Principal
Repayment

Management
Structure

Maturity

Operations

Grace Period
for Principal
Repayment

Public Housing

Unsubsidized
Projects

Adjustable Lending Rate*1

Maturity
Public Projects, etc.*2

Educational andSocial Welfare
Facilities
Projects

Fixed Lending Rate

Review and Plan

3. Lending Scopes and Maturities of Loans

23

Operations
Lending Operations

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

1. Loan Interest Rates
JFM offers two types of loan interest rates: 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 thediscounted present value of the cash flows of the funds
raised to make the loans equals the discounted present
value of the cash flows to be generated by those loans
with their respective terms to maturity, grace period forprincipal repayment and repayment methods. The

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

special lending rate is set at 0.35% per annum below
the standard rate.
The trends of JFM loan interest rates since April 2019are shown below. The special lending rate has been at
the same level as the national government’s lending
rates that are applicable to loans for specific publicprojects (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 whichhave identical terms on redemptions to those of JFM
loans.

Trends of Lending Rates
0.80%
Standard Lending Rate
Special Lending Rate = Fiscal Loan Fund Interest Rate

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

Apr

Jun

Aug
2019

Oct

Dec

Feb

Apr

Jun

2020

Aug

Oct

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

24

JFM ANNUAL REPORT 2021

Dec

Feb Mar2021

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

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

0.15%

Reduction using investment gains

0.20%

0.20%

Reduction using JFM’s own funds

0.15%Standard
Lending Rate(funding costs)

SpecialLending Rate

General Account-related Loans(excluding public housing)Temporary Financial
Countermeasures Funding
Loans Covering Decrease in Local
Tax Revenues
Municipal Enterprise-related Loans• Water supply • Transportation• Hospitals • Sewerage• Electricity supply

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

Management
Structure

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

Operations

Reduction
0.35%

Review and Plan

2. Lending Rate Reduction

JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

25

Operations
Lending Operations

3 Credit Check System
JFM conducts the following credit check process for
all loans on the assumption that the details and legalityof each project as well as assurance of loan repayment
have been confirmed during the consultation andchecking process to obtain the consent or approval forloans.
1) JFM checks the financial and operational status of
local governments and municipal enterprises towhich it plans to lend, in light of the fiscal indicators
as stipulated in the Law Relating to the Financial
Soundness of Local Governments of Japan (Act No.
94 of 2007). This credit check process may include

an interview of the staff of prefectures, cities, towns,
and villages.
2) JFM reviews loan applications submitted by local
governments to determine if conditions are met.
The conditions include the consent or approval, any
required resolution by the local government assemblyand budget appropriation for loans.
3) After a loan is disbursed, JFM conducts an onsite
review to verify the use of funds and to check theoperational status of the project and the financial
and operational status of the borrower.

2 Verification at the time

1 Check of local

3 Subsequent review

of lending
Check of the loan
application documents

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

Onsite credit review

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

4 Trends in Lending Operations
1. Overview
JFM’s annual lending volume has dropped since fiscal
2014 due mainly to decrease in the budget of disastermanagement and mitigation and temporary financial

countermeasures funding.
In fiscal 2020, the lending volume amounted to USD
14.1 billion. At fiscal year-end, outstanding loans were
USD 209.1 billion.

Annual Lending Volume

Outstanding Loans(USD bn)(USD bn)

25

240

20

230
17.4

16.8

15

15.6

15.6

220
14.9

15.0

14.1

210

211.7

213.8

214.3

2015

2016

214.7

212.3

211.4

2018

2019

209.1

200

10

190
5

0

26

180
FY 20142015

JFM ANNUAL REPORT 2021

2016

2017

2018

2019

2020

170

FY 2014

2017

2020

In fiscal 2020, sewerage business was USD 3.0 billion,
accounting for the largest share of lending, at 21.5%of the total. Ranked next were USD 2.4 billion in loans
for temporary financial countermeasures funding,representing 16.9% of the total, and USD 1.7 billion in
the water supply, for 12.0% of the total.

Review and Plan

2. Annual Lending Volume by Businessand Borrower

Long-Term Loans Extended by BusinessSewerage

2015

17.1

18

2016

15.9

18

9

2017

15.9

18

9

2018

15.2

2019 15.3
2020 14.1

General Account-related Loans

Water Supply
8

6

2

Others
35

28

21

7

2
9

9

24.3

Transportation
1

12.0

28

34

1
6.0
7.4

2

31

29
1.4

2
1.7

27.6

28.0
1.4

3

33

29

8
11.0

21.5

2

Temporary Financial Countermeasures Funding

Hospitals

Loans Covering Decrese in Local Tax Revenues
34.4

16.9

1.9
4.5

Management
Structure

Notes: Totals may not add up due to rounding.

FY2020 Loans Extended by Borrower
Local Government Corporations
and Associations

USD

14.1 bnTowns and villages

11% (USD 1.6 bn)

Cities andSpecial Wards of Tokyo

65% (USD 9.2 bn)

Prefectures

15% (USD 2.1 bn)
Government-designated
Cities5% (USD 0.7 bn)

Note: Totals may not add up due to rounding.

JFM’s Role in Local
Government Finance

Total

3% (USD 0.5 bn)

Operations

Total
FY (USD bn)

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

27

Operations
Lending Operations
3. Outstanding Loans by Business andBorrower
At the end of fiscal 2020, the outstanding loans were
USD 209.1 billion, of which the sewerage businessaccounted for the largest share at 30.5%, followed bytemporary financial countermeasures funding at 25.1%
and water supply at 13.5%.

There was a total of 2,180 local governments, local
government associations and corporations with outstanding JFM loans, including all prefectures. Cities,
special wards of Tokyo, towns and villages accounted
for the largest portion at 62.3% of the total, followedby prefectures at 20.8% and government-designatedcities at 14.2%. Local government associations andcorporations represented the remaining 2.7%

Outstanding Loans by Business (as of 31 March 2021)

5.6

30.5%

Others%(USD 11.6 bn)

Local Road
Development(USD 4.5 bn)

Sewerage(USD 63.8 bn)

2.1%

Public Projects(USD 4.6 bn)

Water Supply(USD 28.3 bn)

2.2%

4.9

Hospitals%(USD 10.2 bn)

Disaster Management
and Mitigation%(USD 7.4 bn)

3.6

Special Municipal
Mergers%(USD 9.9 bn)

13.5%

Transportation(USD 6.9 bn)

3.3%

Industrial Water
Supply%(USD 1.5 bn)

0.7

4.7

Three Special Projects*1(USD 5.0 bn)

2.4%

1.1

Others%(USD 2.2 bn)

General Accountrelated Loans

Toll Road
Public Loans

Temporary Financial
Countermeasures Funding

Loans Covering Decreasein Local Tax Revenues

Municipal Enterprisse
related Loans(USD 43.0 bn)(USD 0.1 bn)(USD 52.4 bn)(USD 0.6 bn)(USD 113.0 bn)

20.5%

0.1 %

25.1%

0.3%

54.0%

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

Outstanding Loans by Borrower (as of 31 March 2021)
Local Government Corporations
and Associations%(USD 5.6 bn)

2.7

20.8%

Prefectures(USD 43.6 bn)

Cities, Special Wardsof Tokyo, Towns
and Villages%(USD 130.2 bn)

Government-designated
Cities%(USD 29.7 bn)

14.2

62.3

209.1 bn
Total

USD

Note: Totals may not add up due to rounding.

28

JFM ANNUAL REPORT 2021

Water Supply BusinessTransportation BusinessAt the end of fiscal 2019, the water supply coverage
was 97.4% of the population. The water supply business(including small-scale water supply) operated by local
governments totaled 1,856 projects and provided about
13.4 billion cubic meters of water annually for approximately 123.84 million people.
In fiscal 2020, loans extended to the water supply
business amounted to USD 1.7 billion.

At the end of fiscal 2019, the transportation projects
managed by local governments totaled 85 projects andpublic transportation is used by approximately 3.5 billion
people annually (9.48 million people on an average daily
basis).
In fiscal 2020, loans extended to the transportation
business amounted to USD 0.2 billion.

Kaneda Raw Water Reservoir (Kisarazu City, Chiba Prefecture)

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

Management
Structure

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

Operations

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

Review and Plan

5 Lending Operations by Business

2.0(Number of Loans)
Loan Amount(USD bn)

0.4

0.3
1.0

1,000

0.5

500

19

20

0

Number of Loans

60

0.2

40

0.1

20

0

FY2016 17

18

19

20

0

JFM ANNUAL REPORT 2021

Appendix / JFM Data

18

80

Loan AmountFinancial Section

1,500

FY2016 17

100

2,000

Number of
Loans

1.5

0

(Number of loans)

0.5

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

Operations
Lending Operations
Hospitals BusinessSewerage BusinessAt the end of fiscal 2019, hospital projects managed
by local governments totaled 684 with 859 hospitals,
which included 819 general hospitals and 40 mental
hospitals.
In fiscal 2020, loans extended to the hospitals business(including those run by local independent administrative
institutions) totaled USD 1.0 billion.

At the end of fiscal 2019, the sewerage system covered
91.7% of the nation’s total population. There were 3,617
projects involved, with a total annual sewerage processing
capacity (combined storm water and sewerage treatment,
excluding river basin sewerage) of around 15.2 billion
cubic meters serving areas with a population of nearly
105.22 million people.
In fiscal 2020, loans extended to the sewerage businesstotaled USD 3.0 billion.

Atsugi City Hospital (Atsugi City, Kanagawa Prefecture)

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

1.4
1.2

Loan
Amount(Number of loans)

600

Number of
Loans(USD bn)

4.0

Loan
Amount500(Number of loans)

3,000

Number of
Loans

3.0

1.0

2,000

400

0.8
300

2.0

0.6
1.0
100

0.2
0

30

1,000

200

0.4

FY2016 17

JFM ANNUAL REPORT 2021

18

19

20

0

0

FY2016 17

18

19

20

0

Disaster management and mitigation represents
projects to support and build strong disaster-resistantcities and towns by extending loans to facilities that cangather information promptly in case of emergent situations
and other projects that can increase disaster prevention
capability.
In fiscal 2020, loans extended for Disaster Management
and Mitigation amounted to USD 1.2 billion.

Temporary Financial Countermeasures
Funding

Operations

Temporary financial countermeasures funding represents
the funding for local governments in order to cover general
resource shortfalls pursuant to the provisions of the Local
Government Finance Law.
In order to secure the payments of the principal andinterest of funds borrowed by local governments under
temporary financial countermeasures funding, thenational government includes the entire amount of suchpayments in the total amount of local allocation tax
grants, which are to be allocated to local governments insubsequent years.
In fiscal 2020, loans extended for temporary financial
countermeasures funding amounted to USD 2.4 billion.

Review and Plan

Disaster Management and Mitigation

Management
Structure(USD bn)(Number of loans)

1.8

1.4

(USD bn)

8.0(Number of loans)

800

Number of
Loans

2,500

Loan Amount

6.0

1.2

600

2,000

1.0

1,500

0.8
0.6

Loan Amount

4.0

400

2.0

200

1,000

0.4

500

FY2016 17

18

19

20

0

0

FY2016 17

18

19

20

0

Financial Section

0.2
0

3,000

JFM’s Role in Local
Government Finance

1.6

Number of
Loans

Appendix / JFM Data
JFM ANNUAL REPORT 2021

31

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

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

JFM Bonds

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

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

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

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

International
Bonds

Bonds issued in international markets through the MTN Programme

Government-Guaranteed Bonds

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

Long-term Bank Loans

32

JFM ANNUAL REPORT 2021

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

Review and Plan

2 Basic Funding Policy

1. Diversification of Funding Methods

JFM proactively discloses information on its operations,financial conditions and risk management status in orderto support investment decisions by investors. In thiscontext, JFM announces its annual funding plan prior to
the start of the new fiscal year and its second half-year
funding plan in August.
In addition, JFM performs investor relations activities,
including presentation meetings and/or one-on-one
meetings with investors in both domestic and international
markets. JFM thereby helps investors correctly understandJFM’s management and bonds as well as strengthensmarket confidence toward JFM.
In fiscal 2019 and fiscal 2020, JFM issued green
bonds financing sewerage projects managed by local
governments.

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

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

Management
Structure

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

2. Proactive Disclosure and Investor Relations
Operations

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

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

33

Operations
Funding Operations

3 Features of JFM Bonds
JFM bonds are generally recognized as having high credit standing with the following features.
• JFM’s assets can be deemed to be highly stable based on the fact that JFM lends exclusively to local
governments, and no local governments have ever defaulted.
• JFM has a solid financial foundation, backed by its reserve for interest rate volatility and the Fund forLending Rate Reduction prescribed in the JFM Law.
• JFM is a joint funding organization established with a capital contribution from Japanese local governments
encompassing all prefectures, cities, special wards of Tokyo, government-designated cities, towns
and villages, as well as some local government associations.
• Under the JFM Law, local governments have an obligation to bear the costs necessary to satisfy all JFM
obligations in the event JFM is to be dissolved and its obligations remain unpaid.

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

terest received by foreign investors (non-residents, foreign corporations, etc.) on JFM’s domestic bonds inbook-entry form as well as JFM’s international bonds(both of which include government-guaranteed bonds)
shall be exempted from Japanese income tax, subject tocertain procedural requirements.
(As of 31 March 2021)

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

JFM bonds :For reference :10%

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

Preferential Rights
for JFM Bonds

All holders of JFM bonds (as well as JFM ’ s government-guaranteed bonds) have a preferential rightto be paid prior to other unsecured indebtedness, and such preferential right shall rank immediately
after the general preferential rights as provided for in the Civil Code of Japan (Law No. 89 of 1896, as
amended). (Article 40, Paragraph 2 and Paragraph 3 of the JFM Law)

Note : The risk weights are values for investors in Japan. For international bonds, the values are determined by respective authorities in each country (as of 31
March 2021).

34

JFM ANNUAL REPORT 2021

In fiscal 2020, JFM raised a total of USD 23.1 billion,
increased from the previous year. This was mainly the
result of an increase in the amount of long-term bankloans, non-government guaranteed JFM bonds andprivate placements with pension funds issued during fiscal

2020 while the issuance volume of government-guaranteed bonds decreased.
As of 31 March 2021, outstanding bonds were USD
184.4 billion. Outstanding long-term bank loans totaled
USD 2.7 billion. The total amount of outstanding bonds
and long-term bank loans was USD 187.1 billion, which
was comprised of USD 135.5 billion in the general account and USD 51.5 billion in the management account. Since the end of fiscal 2016, the volume of outstanding debt in the general account exceeds that of the
management account as a result of the trend that the
management account has been decreasing while thegeneral account has been increasing.

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

30

200

25
20

18.5

19.1

5.4

6.9
0.5

10

3.8
2.6

5
0

0.1
4.5

16.1
0.4

4.4

4.3

3.2

1.6

0.9
0.8

5.4

5.5

FY2016

2017

7.3

2018

84.0

182.7

69.6

60.2

115.8

122.5

2018

2019

187.1

51.5

106.5

97.8

135.5

11.4

8.5

2019

78.3

185.4

100

50

2.1

6.3

150

5.0

17.7
2.3

0.5
0.8

184.7

2020

0

FY2016

2017

Management AccountLong-term Bank Loans

General AccountFinancial Section

Government-guaranteed Domestic Bonds

2020

JFM’s Role in Local
Government Finance

15

23.1

181.9

Management
Structure

Funding Volume

Operations

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

Review and Plan

4 Trends in Funding Operations

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

Appendix / JFM Data
JFM ANNUAL REPORT 2021

35

Operations

Support for Local Governments

1

Researchand Studies

Conduct research on financial management oflocal governments, local government finance inother countries, regional finance and financial
analysis, and provide results and necessary
support to local governments which can beused for human resource development, practicalsupport and information dissemination.

2

Personnel Training
SupportInitiatives

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

Research and studies
on regional financing
Conduct research on borrowing
environment of local governmentsfrom local financial institutions.

Research and studies
on local government
finance in other countries

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

Project to strengthen
administration andfinance managementof local governments

Hold JFM local government
finance seminars, JFM
municipal enterpriseseminar and more

Send advisors to cities and towns
depending on individual situations andrequests as a joint project with the Ministry of Internal Affairs and Communications, regarding topics such as municipal enterprise accounting applications
and local public accounting development, in order to improve quality of local
governments’ financial management.

Hold seminars on timely issues
related to local finance and local
public enterprises that are of greatinterest to local governments suchas joint seminars for chiefs and executives of local public organizations with local administrative andfinancial research committee.

3

Information
Dissemination

Initiatives

Studies to understandthe needs and issues of
local governments

JFM offers support for issues related
to the overall financial management oflocal governments, which includes ensuring financial health and fund-raising.

Gathering advanced
casesCollect and accumulate advanced
cases of how to respond to policy
issues which are of high interest to
local governments.

36

JFM ANNUAL REPORT 2021

Operation of the“New Octagon”
financial analysis chart

Operation of advanced
case search system

Operation of local governments’ financial analysis chart“New Octagon” which is a tool toanalyze the financial status andchanges in local governments.

Operation of database searchsystem with keyword researchwhich has more than 1,000 advanced cases to help in solving
issues in local governments.

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

Review and Plan

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

Operations

Hold on-site lectures

Practical support for
financial management
and funding

Hold introductory seminar on
funding and investment, and joint
accommodation type training withJapan Academy of Municipal Personnel and Japan Intercultural
Academy of Municipalities.

Utilize e-learning to develop andprovide training contents related
to local government finance while
delivering lectures held at JFM
seminars.

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

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

Strengthen information dissemination by effectively
using the website.

JFM’s Role in Local
Government FinanceConduct e-learning

Management
Structure

Hold local government
seminarFinancial Section
Appendix / JFM Data

Provide learning materials and relevant economic
and financial data/knowledge

JFM ANNUAL REPORT 2021

37

Operations

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

Sewerage

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

Nagano Prefecture, Iida City, Matsuo Purification CenterTransportation

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

Kumamoto Prefecture, Kumamoto City, 0800 Series Low Floor Tram

Hospitals and Elderly Care Services

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

Hyogo Prefecture, Kobe City, Kobe Proton Center38

JFM ANNUAL REPORT 2021

Review and Plan

Disaster Management and Mitigation
Operations

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

Social Welfare and Educational Facilities Development

Aomori Prefecture, Hirosaki City, Susono Elementary School

JFM’s Role in Local
Government Finance

Maintaining educational facilities such as schools managed by
local governments.

Management
Structure

Kochi Prefecture, Kuroshio Town, Tsunami Evacuation Tower

Financial Section

Supporting local governments through local
government support operations
JFM offers various support for sound financial management oflocal governments by providing services such as research andstudies, personnel training and information dissemination, as per
local government needs.

JFM issued its second green bond in February 2021 with anamount of EUR 500 million for the purpose of allocating the net proceeds to sewerage business as well as the previous
year. JFM is planning to publish its second impact report summarizing the description of projects and environment
impacts and support the SDG activities managed by local governments in Japan continuously. JFM green bondframework obtained the highest level of assurance from Vigeo Eiris, a second party opinion provider.
(Link to JFM green bond homepage : https: //www.jfm.go.jp/en/investors/greenbond.html)

JFM ANNUAL REPORT 2021

Appendix / JFM Data

Issued second green bond in February 2021

39

40

JFM ANNUAL REPORT 2021

Review and Plan

Operations

Management
Structure

JFM’s Role in Local
Government Finance

Financial Section

Appendix / JFM Data

41

JFM ANNUAL REPORT 2021

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

1 Corporate GovernanceCorporate Governance System

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

Appointmentof members

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

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

Decisions on importantmatters, including budgets
and accounts

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

AuditsPresident and CEO,
Deputy President, etc.

Budgetsubmissions

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

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

42

JFM ANNUAL REPORT 2021

Appointment of
Accounting Auditors
and Corporate
Auditors

Accounting
Auditors(Certified public
accountants or an
audit corporation)

Corporate Auditors

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

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

JFM’s Role in Local
Government Finance

JFM has focused on establishing highly transparent
management that incorporates unbiased opinions ofexternal parties, and responsible corporate governance.
To ensure such a governing structure, JFM has theSupervisory Committee as a deliberative committee
comprising external experts.
The Representative Board appoints the members of
the Supervisory Committee from among experts in local
administration, economics, finance, law or accounting,

3. Audits by Corporate Auditors

Management
Structure

2. Supervisory Committee

Operations

As an organization autonomously managed by local
governments, JFM has the Representative Board as its
supreme decision-making body.
To ensure independence and transparency, theRepresentative Board consists of one prefectural governor,
one city mayor, one town/village mayor and three members
from among experts in local administration, economics,
finance, law or accounting.
The Representative Board has the authority to makedecisions on important matters related to the overallmanagement of JFM, including budgets, settlement ofaccounts and business plans and to appoint and dismiss
the President and CEO as well as Corporate Auditors.
As its supervisory function, the Board is also authorized
to obtain from the President and CEO information relating
to JFM’s operations and financial condition, and to orderthe President and CEO to take corrective actions withrespect to any illegal or other inappropriate activities.

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

Review and Plan

1. Representative Board

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

43

Management Structure
Corporate Governance

2 Internal Control over Financial Reporting
Pursuant to the Ministerial Ordinance on Finance andAccounting of Japan Finance Organization for Municipalities, JFM has set up a system which is similar to theinternal control reporting system under the Financial
Instruments and Exchange Law in Japan. In accordancewith the system, JFM prepares the Internal Control Reportto evaluate the effectiveness of internal control overfinancial reporting to ensure the reliability of its financial
statements, the base date of which is the end of the
fiscal year (March 31), and it is audited by the accounting
auditors and released together with the financial

statements.
As for the Internal Control Report in which JFM viewed
its internal controls on financial reporting as effective asof the end of fiscal 2020, the accounting auditors gave
their opinion (unqualified audit opinion pursuant toMinisterial Ordinance Article 32, Paragraph 2, Clause 1)
that, in all material respects, evaluation results of JFM’s
internal controls over financial reporting were in conformity
with the standards of evaluation for internal controls
over financial reporting generally accepted in Japan.

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

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

Internal Audit System
President and CEO
Deputy President

SeniorExecutive
Directors
Departments
Divisions44

JFM ANNUAL REPORT 2021

Internal Audit

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

Operations

Established on
1 August 2008

Under the JFM Law, JFM requires managing loans
and bonds issued since JFM began its operations in thegeneral account of JFM, whereas loans and operations
carried over from the Predecessor are administered in
the separate account known as the management accountof JFM.
With regard to the management account, JFM issues
government-guaranteed bonds solely for the purposeof refinancing government-guaranteed bonds of thePredecessor.
Reorganized on
1 June 2009

Japan Finance
Organization for
Municipal Enterprises

Japan Finance
Organization for
Municipalities (JFM)

Established by capital
contributions only from Japanese local
governments

The lending scope was expanded tooverall general account-related loans

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

Succeeded to assets
and liabilities

Management
Structure

Established on
1 June 1957

Abolished(and its capital returned to
the national government)

Special governmental institution(wholly owned by the national government)

Predecessor

Japan Finance Organization for Municipalities (JFM)
General Account

JPY 0.2 tn (USD 1.8 bn)
Management AccountJPY 3.2 tn (USD 28.9 bn)

FY2009-2017
JPY 220 bn (USD 2.0 bn)
transferred each year

Management Account Reservefor Interest Rate Volatility

JPY 0.6 tn(USD 5.8 bn)

Appendix / JFM Data

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

JPY 2.2 tn
Reserve for(USD 19.9 bn)
Interest Rate Volatility

Financial Section

Reserve for Losseson the Refinancingof Bonds
JPY 3.4 tn(USD 30.7 bn)

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

JFM’s Role in Local
Government Finance

When JFM was founded, it succeeded to the Reservefor Losses on the Refinancing of Bonds in the amount ofapproximately JPY 3.4 trillion (USD 30.7 billion) to ensure
its future stable management from the Predecessor.
Of this amount which was recorded in the management
account, the JPY 2.2 trillion (USD 19.9 billion) needed toensure the future continuity of JFM’s operations was

Review and Plan

Japan Finance Organization for Municipal Enterprises
was established on 1 August 2008, with capital contributedby all prefectures, cities, special wards of Tokyo, government-designated cities, towns and villages, as well assome local government associations, to provide funds tolocal governments. JFM commenced its operations
after succeeding to the assets and liabilities of thePredecessor on 1 October 2008.
As a result of the reorganization on 1 June 2009, JFM’slending scope was extended to overall general account-related loans.

JFM ANNUAL REPORT 2021

45

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

JFM ANNUAL REPORT 2021

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

Management Structure
Risk Management

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

the Integrated Risk Management Committee, which
supervises JFM’s overall risk management, and the Risk
Management Office to ensure comprehensive risk
management. Risk management can then be appropriatelyreflected in management decisions.

Operations

Risk Management System

Integrated Risk
Management
Committee

President and CEO

Senior Executive
Director in Charge

ALM Committee

Loan
Department

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

Administration
Department

Interest Rate Volatility) and has set up the ALM Committee
to comprehensively analyze and manage JFM’s assets andliabilities in a timely and appropriate manner.
The ALM Committee conducts medium-term andlong-term management and risk analysis through scenario
analysis, VaR analysis, duration analysis, and otheranalyses. JFM reflects the findings in its bond issuanceplans and other aspects of management and endeavors
to lower interest rate risk.

JFM’s Role in Local
Government Finance

2. Characteristics of JFM’s Risks

Management
Structure

Risk Management OfficeFinance
Department

Review and Plan

1 Overall Risk Management

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

47

Management Structure
Risk Management

2 Management of Specific Risks
1. Credit Risk
Credit risk is the risk of loss arising from deteriorationin the financial condition of a borrower and other situations, which could cause an asset to lose value or become worthless. Loans and financial transactions 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 2021). For the reasons outlined
below, JFM believes it is unlikely that any of its borrowers will default those loans. In fact, JFM and its Predecessor have never experienced any loan losses.

• Financial sources for the payment of the principal and interest of local government bonds and loans are
secured through the following mechanisms. First, local governments can obtain local tax revenues pursuant
to their right to impose tax. Second, in addition to such local tax revenues, Local Allocation Tax grants areallocated as follows: (i) the national government includes certain local government debt servicing costs, i.e.,
expenditures for the payment of the principal and interest of certain local government bonds and loans
including those issued or borrowed with consents or approvals, in the amount of “expenditures” in the Local
Government Finance Programme formulated by the national government; and (ii) the total amount of Local
Allocation Tax grants is calculated so that the total amount of local government expenditures, including suchdebt servicing costs, is equivalent to the total amount of the local government revenues, in the Local
Government Finance Programme. Thus, the national government effectively secures revenue sources forthe payment of principal and interest of such local governments bonds and loans in terms of the total
amount. When calculating the amount of Local Allocation Tax grants to be allocated to an individual local
government, a part of the “expenditures” for the payment of the principal and interest of such local
government bonds and loans are included.
• Before issuing a loan, JFM checks the financial and operational status of the local government, including its
debt servicing costs, tax revenues and necessary funds. In addition, when reviewing the ability of a local
government to repay the loan, where such local government’s expenditures exceed the revenue generated
by local taxes, JFM takes into account the Local Allocation Tax grants from the national government
described above.
• The Early Correction Measure requires certain local governments, such as those whose debt servicing costs
or financial deficits exceed specified levels, to obtain approval from the Minister for Internal Affairs andCommunications or their respective prefectural governors in cases where they issue additional bonds orborrow additional loans. In addition, local governments whose fiscal indicators exceed certain early warning
limits must make their own efforts toward achieving fiscal soundness, and local governments whose fiscal
indicators exceed certain “reconstruction limits” must take necessary actions to restore fiscal soundness
under the oversight of the national government with regard to redemption of local government bonds andloans, and other operations. This system facilitates the maintenance of the credit standing of local government
bonds and loans.

48

JFM ANNUAL REPORT 2021

JFM is, however, exposed to the risk of loss arisingfrom credit events, such as deterioration in the financial
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

Operations

2) Credit risk associated with market transactions

counterparties’ financial standings and taking measures
including suspension of new deals and cancellation oftransactions with counterparties that have come to poor
credit standings. Moreover, JFM limits counterparties tofinancial institutions that meet the credit rating and othercriteria, and conducts transactions within the credit lines
for each counterparty in order to diversify risks.
In addition, JFM entered into the ISDA (International
Swaps and Derivatives Association) Master Agreement
and the CSA (Credit Support Annex) with its derivatives
counterparties to reduce the credit risk resulting fromfluctuations in the value of derivative transactions.

Review and Plan

As of 31 March 2021, JFM’s total outstanding loans
stood at USD 209.1 billion. The amount of loans outstanding made to local governments whose fiscal indicators
exceeded the early warning limits or the reconstruction
limits accounted for less than 0.03% in aggregate of
total loans outstanding as of 31 March 2021.

Management
Structure

JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

49

Management Structure
Risk Management
2. Market Risk
Market risk is the risk of losses resulting from changes
in the value of assets and liabilities due to fluctuations inrisk factors such as interest rates, securities prices andforeign exchange rates, or the risk of loss resulting fromchanges in earnings generated from assets and liabilities.
Market risk includes interest rate risk, foreign exchangerisk, and price fluctuation risk.

1) Interest rate risk

• Interest rate risk associated with bond refinancing
JFM is exposed to the interest rate risk resultingfrom a duration gap between lending and funding. To

50

JFM ANNUAL REPORT 2021

address such risk, JFM takes measures describedon page 51.
• Interest rate risk associated with a gap in lending andfunding schedules
JFM generally raises funds required to finance a loan
by issuing bonds prior to the loan disbursements.
Proceeds from bond issuances may not be earmarked
for a particular loan. Thus, fluctuations in interest
rates in the period where lending and funding
schedules differ affect the profitability of loans(“pipeline” risk). In order to hedge against pipelinerisk, JFM utilizes interest rate swaps.

• JFM maintains reserves to prepare for interest rate risk associated with bond refinancing. At the end of fiscal
2020, the total amount of the reserves stood at USD 25.7 billion, which consisted of USD 19.9 billion in thegeneral account and USD 5.8 billion in the management account.

• In the management account, which manages assets transferred from the Predecessor, JFM maintains USD
5.8 billion of the management account reserve for interest rate volatility as described above. As no newlending from the management account has been made since October 2008, JFM expects that the interest
rate risk in the management account will decline overall as the size of the account declines over time.

JFM’s Role in Local
Government Finance
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 is being attributed to the Japanese national government in fiscal
2021 and fiscal 2022, with the aim of transferring up to USD 3.6 billion in 2 years to secure financial resources of the local allocation tax. In addition, an amount of up to USD 2.1 billion is being attributed to thegovernment over a period of 5 years from fiscal 2020 through 2024 for the purpose of forest environmenttransfer tax increase. Furthermore, it has been also determined that an additional amount of up to USD 13.6
million from fiscal 2018 through fiscal 2023 shall be attributed to the government for exemptions of early
redemption charges in relation to concessions of water supply and sewerage businesses. The amount oftransfer is to be within the amount which the Minister for Internal Affairs and Communications and theMinister of Finance deem as an amount exceeding the requisite amount of reserve necessary for the smooth
operation of JFM’s management account at the time of transfer and in the future, in light of JFM’s financial
condition. Even after these transfers, JFM does not expect the transfers to have a material effect on JFM’sbusiness, results of operations or financial condition, due primarily to sufficient amount of the reserve for thisaccount.

Management
Structure• At the end of fiscal 2020, the duration gap in the general account was 0.40 years, staying within the
management target.

Operations• As assets and liabilities in the general account are expected to expand as a result of an increase in loans andfund-raising, JFM carries out an ALM analysis of this account in order to further enhance the effectiveness of
its interest rate risk management. Furthermore, JFM has established a medium-term management target of
5 years from fiscal 2018, in which the duration gap is maintained below 2 years. In order to implement the
management target, JFM takes the following measures:(1) Controlling lending duration – Lending rates for loans for temporary financial countermeasures funding,which account for approximately one third of JFM’s outstanding loans in the general account, are revised
every 5 years or 10 years depending on loans. In addition, JFM will revise its lending rate by the 30th year
at the latest for its loans with maturities longer than 30 years.
(2) Extending funding duration – Utilizing its FLIP and Open Issuance scheme, JFM aims to extend the funding
duration by carefully choosing maturities of bonds to be issued e.g., continuously issuing long-dated
bonds with maturities over 10 years.

Review and Plan

Managing interest rate risk associated with bond refinancing

Appendix / JFM Data
JFM ANNUAL REPORT 2021

51

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

USD mmGeneral Account(As of 31 March 2021)

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

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

F Y 2021 22 23 24 25 26 27 28 29 30

31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

Lending duration 7.94 years • Funding duration 7.54 years • Duration gap 0.40 years ( YoY change: -0.28 years)•

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

USD mm

16,00014,00012,00010,000
8,000
6,000
4,000
2,000
0
-2,000-4,000-6,000-8,000-10,000-12,000-14,000-16,000(As of 31 March 2021)

FY 2021

•

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

Lending duration 4.70 years • Funding duration 3.78 years • Duration gap 0.92 years (YoY change: 0.06 years)

JFM as a whole• Lending duration 7.09 years • Funding duration 6.50 years • Duration gap 0.59 years (YoY change: -0.24 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 and interest rate risk related
to floating rate bonds. JFM’s investments of surplus
funds are exposed to the risk of losses on the sale of52

JFM ANNUAL REPORT 2021

securities resulting from price declines and the risk ofrealized losses on foreign currency denominated deposits
resulting from fluctuations in foreign exchange rates.
Accordingly, in principle, JFM reduces the price fluctuation
risk by holding investments until maturity and hedges
foreign exchange risk by using forward foreign exchange
contracts.

1) Administrative risk

Administrative risk is the risk of loss resulting from theneglect or inadequacy of attention by management and5. Contingency Measures
JFM has prepared the Contingency Plan to minimize
the scope of losses and the impact on operations andrestore normal operations promptly and efficiently inthe event that computer systems break down or cannot
be used due to unexpected incidents, disasters or
malfunctions. In addition, in order to prepare for acontingency, JFM has a backup server outside JFM so thatits business operations can be continued. Furthermore,
JFM has taken necessary countermeasures against
COVID-19 e.g., deciding its business structure interms of business continuity and the management
and employees’ health while considering the spreadof COVID-19.

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

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

Management
Structure

4. Operational Risk

2) Systems risk

Operations

Liquidity risk is the risk that JFM would incur losses
because of difficulty in funding, or because of funding 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 toliquidity risk is low because loans are made based on apre-set schedule, and the daily cash and liquidity
management is carried out. Moreover, JFM has enteredinto 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.
In addition, JFM has implemented a policy to maintaina certain amount of liquid assets so that, in the event ofmarket disruption, JFM may continue to timely make its
payments of interest and principal on the bonds andother debt securities.

employees to properly conduct administrative work, orfrom accidents and/or violation of laws caused by themin the course of the administrative work process. JFM
endeavors to mitigate its exposure to administrative riskby preparing operational manuals, holding educationalseminars and training sessions, and reducing operational
workload through systematization.

Review and Plan

3. Liquidity Risk

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

53

Management Structure
Compliance

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

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

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

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

Compliance System
President and CEO
Appointment

Compliance Committee
Instruction

ReportCompliance Division (Administration Department)
Instruction and training

ReportDirectors and Employees

54

JFM ANNUAL REPORT 2021

Management Structure
Disclosure

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

Review and Plan

1 Basic Stance on Information Disclosure

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

2. Other Documents for Disclosure

Operations

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

JFM’s Role in Local
Government Finance

Annual Report

Financial Section

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

Appendix / JFM Data
JFM ANNUAL REPORT 2021

55

JFM’s Role in Local Government Finance

1 Japanese Local Government System
Local governments are responsible for extensive
areas of public administration for the welfare of citizens.
While the national government focuses on administrative
affairs for the state as a member of the international
community, local governments engage in administrationthat relates to the daily lives of citizens. Local governments
are responsible for social welfare, education, fire defense,

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

National Government
Prefectures
Local Government

Cities, Special Wards of Tokyo,
Towns and Villages

Number of Japanese Local Governments
Prefectures

47

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

20

Cities772

Special wards of Tokyo

23

Towns

743

Villages

183
Total

(As of 1 April 2021)

56

1,741

JFM ANNUAL REPORT 2021

1,788

Local Government Finance Program(Initial Plan for FY2021)
Annual Expenditure(USD 815.2 bn)

Annual Revenue(USD 815.2 bn)

Local TaxUSD 363.1 bn

Local Allocation Tax
USD 158.7 bn
Local Government
Bonds and Loans
USD 101.5 bn

Management
Structure- Social Welfare- Education- Fire Defense- Infrastructure, etc.

Operations

OthersUSD 191.9 bn

Note: The above programme includes Great East Japan
Earthquake related budgets.

JFM’s Role in Local
Government Finance

Each local government is unique in terms of its naturaland historic situations, industrial structures, population
sizes, and other attributes. As a result, each local
government handles diverse administration. The term
“local government finance” collectively refers tofunding for individual local governments engaging insuch administration. Just as with national finance, local
government finance plays a major role in the nation’s
economy and the lives of citizens. In fiscal 2021, local
government finance will total JPY 90.2 trillion (USD
815.2 billion) (based on the Local Government Finance
Programme (the “LGFP”).
Because local governments engage in numerous
activities that closely relate to residents, they need toprovide stable public services regardless of regional
differences stemming from varying populations, industry
densities, and/or tax revenue fluctuations over years.
Accordingly, the national government formulates the
LGFP each fiscal year based on assessments of thescales of local government finance and forecasts ofoverall revenues and expenditures. In response to annual
national budget plans, the national government balances
the total amount of local government revenues andexpenditures in the LGFP. Under this Programme, revenue
sources for all local governments, including Local Allocation Tax grants as well as bonds and loans to be issued
or borrowed, are secured so that local governments canensure uniform public service standards.

Review and Plan

2 Local Government Finance Programme

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

57

JFM’s Role in Local Government Finance3 Local Allocation Tax
Local governments would ideally cover the expenditures
necessary to provide public services with their local tax
revenues. In reality, however, tax revenues are distributed
unevenly. In order to adjust disparities and secure funds
for local governments that have low tax revenues, thenational government distributes Local Allocation Tax,

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

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

ShortageStandard
Local
Tax revenue*2

Local Allocation Tax
for City A

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

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

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

5 Security of Local Government Borrowings
The following framework secures principal and interest
payments of local government borrowings. On the back ofthis framework, the BIS risk weighting for local government
borrowings is 0%, based on the standardized approach(as of 31 March 2021).

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

( i ) Local tax revenues are secured by taxation rights
of local governments.

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

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

58

JFM ANNUAL REPORT 2021

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.

3) Supervision of financial soundness

6 Local Government Borrowing Programme1) Consent (approval) based on LGBPThe national government balances the amount of local
government funding needs and the amount of funding
sources, and specifies funding sources for each businessunder the LGBP.

3) Guideline for local government borrowings

The LGBP is published as well as local financial plan
which specifies the guideline for each business on local
government borrowings.

JFM’s Role in Local
Government Finance

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

2) Secured funding sources for local government
borrowings

Management
Structure

The LGBP is an annual plan that the national government
prepares for local government funding. The LGBP isclosely linked to the national government budget-making.
The LGBP plays the following crucial roles in terms of
local government finance.

Operations

The Law Relating to the Financial Soundness of Local
Governments of Japan, which was promulgated in June
2007, requires local governments to fulfill the following
measures in order to securely manage their fiscal
soundness:(i)S pecified fiscal indicators to be disclosed(ii) 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 thenational government or the respective prefectural
governments, in order to restore their fiscal
soundness

Review and Plan

2) Issuance restriction

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

59

JFM’s Role in Local Government Finance

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

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

Local Government Borrowing Programme

Private Funds

Public Funds

FY2020

FY2021

Publicly Offered Bonds

USD 35 bn

USD 40 bn

33%

Other Private Sectors

USD 28 bn

USD 30 bn

24%

JFM

USD 16 bn

USD 20 bn

16%

National Government

USD 27 bn

USD 33 bn

27%

Total

USD 106 bn

USD 123 bn

100%

Share

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

Since fiscal 2017, JFM funds have accounted foraround 15-16% of the LGBP. JFM plays a major role inJapanese local government finance, making a substantial

contribution to project implementation and financial
management of local governments.

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

(%)

180
160

15.6

15.3

15.3

15.5

16.0

140
120
100
80
60

123.2
105.2

105.3

108.5

106.1

34.5

34.5

35.6

34.8

28.4

29.3

29.6

28.3

25.9

25.4

26.7

26.5

16.4

16.1

16.6

16.5

19.7

FY2017

2018

2019

2020

2021

40
20
0

40.4

29.8

33.3

18
16
14
12
10

Publicly Offered Bonds

8

Other Private Sectors

6

JFM

4
2
0

Source: The Ministry of Internal Affairs and Communications

60

JFM ANNUAL REPORT 2021

National Government
JFM Ratio

Review and Plan

62

Balance Sheets

63

Statements of Income

64Statements of Appropriation of Profit [General account]

65

Statements of Appropriation of Profit [Management account]

66

Statements of Changes in Net Assets

68

Statements of Cash Flows69

Notes to Financial Statements

102

Independent Auditor’s Report

JFM’s Role in Local
Government Finance

Financial Statements
Management
Structure62

Operations

Financial Section

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

61

Financial Section
Financial Statements

Balance Sheets(As of 31 March 2020 and 2021)

Item

Fiscal 2019(31 March
2020)(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2020
(31 March 2021)

Item

Fiscal 2019(31 March
2020)

AmountAmountAssetsLoans (Note 4)

Fiscal 2020
(31 March 2021)

Liabilities¥23,399,615 ¥23,144,389 $209,073,077

Bonds (Notes 8 and 9)¥20,013,462 ¥20,410,767 $184,379,107

Securities(Note 18)

365,500

593,000

5,356,820

Borrowed money(Note 10)203,000

294,000

2,655,827

Cash and bankdeposits

557,437

1,106,432

9,994,870

Cash collateral received
for financial instruments

58,07333,480302,439

Cash collateral
paid for financial
instruments

12,391

3,282

29,648Other liabilities

5,040

4,670

42,194

Other assets

7,881

6,914

62,466

Reserve forbonuses (Note 11)

58

59

534

10

10

92

Tangible fixed
assets (Note 7)

2,777

2,654

23,980Reserve for bonuses for
directors andcorporate auditors(Note 11)

Intangible fixed
assets (Note 7)

1,097

933

8,432

Reserve for retirement
benefits (Notes 11 and 14)

62

52

475

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

32

21

191

Fund for lending rate
reduction

920,287920,287

8,313,347

Basic fund for lending
rate reduction (Note 13)

920,287920,287

8,313,347

Reserves under special
laws

2,822,777

2,853,636

25,778,109

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

2,200,000

19,873,532

Management accountreserve for interest rate
volatility (Note 12)605,607

640,921

5,789,719

Reserve for interest rate
Reduction

17,16912,714

114,858

24,022,803

24,516,985

221,472,315

Capital16,602

16,602

149,974Retained earnings

238,383

265,772

2,400,836

General account surplus
reserve

238,383

265,772

2,400,836

Valuation, translation
adjustments and others

11,101437

3,955Management accountsurplus reserve

57,80857,808522,213

Total net assets

323,896

340,621

3,076,978Total liabilities
Net Assets

Total assets¥24,346,700 ¥24,857,606 $224,549,293 Total liabilities and net assets ¥24,346,700 ¥24,857,606 $224,549,293

See notes to financial statements.

62

JFM ANNUAL REPORT 2021

(For the years ended 31 March 2020 and 2021)

Item

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

Fiscal 2019
(1 April 2019 to
31 March 2020)

Fiscal 2020
(1 April 2020 to 31 March 2021)

AmountAmount250,780

2,265,407

Fees and commissions

87

83

750

Other operating income

8

7

68

7,008

9,052

81,773

6,996

9,041

81,672Others

12

11

101

Expenses

160,663

141,675

1,279,814

154,271

134,580

1,215,725

Fees and commissions

299

292

2,641

Other operating expenses

2,926

3,713

33,546

General and administrative expenses

3,166

3,088

27,901-00Ordinary income

129,063

118,247

1,068,184

Special gains

105,259

64,454582,247

100,000

60,000542,005

5,259

4,454

40,242

208,555

155,314

1,403,017

23

-

-

Provision for management account reserve for interest rate
volatility (Note 12)108,531

95,314

861,012

Payment to national treasury (Notes 5 and 12)

100,000

60,000542,005¥25,767¥27,388$247,414

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

Other expenses

Reversal of management account reserve for interest rate
volatility (Note 12)
Reversal of reserve for interest rate reduction
Special losses
Loss on disposal of fixed assets

Net income
See notes to financial statements.

Financial Section

282,623

Interest income

JFM’s Role in Local
Government Finance$2,347,998

Management
Structure¥259,923

Operations¥289,727

Review and Plan

Statements of Income

Appendix / JFM Data
JFM ANNUAL REPORT 2021

63

Financial Section
Financial Statements

Statements of Appropriation of Profit[General account](For the year ended 31 March 2020)(Millions of yen)

1 Profit available for appropriation¥25,767

Net income
Accumulated deficit brought forward¥25,767-

2 Profit appropriatedSurplus reserve

25,76725,767

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

1 Profit available for appropriation¥27,388

Net income
Accumulated deficit brought forward¥27,388-

2 Profit appropriatedSurplus reserve

27,38827,388(Thousands of U.S. dollars)

1 Profit available for appropriation$247,414

Net income
Accumulated deficit brought forward$247,414-

2 Profit appropriatedSurplus reserve

247,414

247,414

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

64

JFM ANNUAL REPORT 2021

(For the year ended 31 March 2020)(Millions of yen)

1 Profit available for appropriation¥-

Net income
Accumulated deficit brought forward¥-

Surplus reserve--

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

1 Profit available for appropriation¥-

Net income¥-

2 Profit appropriatedSurplus reserve

-

-

$-

Net income
Accumulated deficit brought forward$-

2 Profit appropriatedSurplus reserve--

See notes to financial statements.

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

1 Profit available for appropriation

Management
Structure(For the year ended 31 March 2021)

Operations

2 Profit appropriatedAccumulated deficit brought forward

Review and Plan

Statements of Appropriation of Profit[Management account]

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

65

Financial Section
Financial Statements

Statements of Changes in Net Assets(For the year ended 31 March 2020)(Millions of yen)

Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Total
net
assetsTotal
stockholders’equityUnrealized
gain/(loss)
from hedging
instruments¥212,616¥229,218¥8,163¥57,808¥295,191

25,76725,76725,767--25,767

-

-

-

-

2,937

-

2,937

-

25,76725,76725,7672,937-

28,704¥16,602¥238,383¥238,383¥254,985¥11,101¥57,808¥323,896

Generalaccount
surplusreserve

Total
retainedearnings¥16,602¥212,616

Net income-

Net changes duringaccounting period in
items other thanstockholders’ equity
Net changes duringaccounting period

CapitalBalance as of 1 April 2019

Management
account
surplusreserve

Changes duringaccounting period

Balance as of 31 March 2020

66

JFM ANNUAL REPORT 2021

(Millions of yen)

Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Total
net
assets¥238,383¥254,985¥11,101¥57,808¥323,896

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

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

16,725¥16,602¥265,772¥265,772¥282,374¥437¥57,808¥340,621¥16,602¥238,383

Net income-

Net changes duringaccounting period in
items other thanstockholders’ equity
Net changes duringaccounting period

CapitalChanges duringaccounting period

Balance as of 31 March 2021

(Thousands of U.S. dollars)

Valuation,translation
adjustments
and others

Stockholders’ equity
Retained earnings

Total
net
assets$2,153,422$2,303,396$100,283$522,213$2,925,892

247,414

247,414

247,414--

247,414

-

-

-

-

(96,328)-(96,328)-

247,414

247,414

247,414(96,328)-

151,086$149,974$2,400,836$2,400,836$2,550,810$3,955$522,213$3,076,978$149,974$2,153,422

Net income-

Net changes duringaccounting period in
items other thanstockholders’ equity
Net changes duringaccounting period

Changes duringaccounting period

Balance as of 31 March 2021
See notes to financial statements.

JFM ANNUAL REPORT 2021

Appendix / JFM Data

Unrealized
gain/(loss)
from hedging
instruments

Total
retainedearnings

Financial Section

Totalstockholders’equityGeneralaccount
surplusreserve

CapitalBalance as of 1 April 2020

Management
account
surplusreserve

JFM’s Role in Local
Government Finance(For the year ended 31 March 2021)

Management
Structure

Unrealized
gain/(loss)
from hedging
instruments

Total
retainedearnings

Operations

Total
stockholders’equityGeneralaccount
surplusreserve

Balance as of 1 April 2020

Management
account
surplusreserve

Review and Plan

(For the year ended 31 March 2021)

67Financial Section
Financial Statements

Statements of Cash Flows(For the years ended 31 March 2020 and 2021)

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

Fiscal 2019
(1 April 2019 to
31 March 2020)

Fiscal 2020
(1 April 2020 to 31 March 2021)

AmountAmountⅠ Cash flows from operating activities
Net income¥25,767¥27,388$247,414

606

512

4,626

Interest income(282,623)(250,780)(2,265,407)

Interest expenses

154,271

134,580

1,215,725

Increase in reserve for bonuses

0

0

8

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

0

(0)

(1)

Increase/(decrease) in reserve for retirement benefits

9

(9)

(86)

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

7

(10)

(99)

Decrease in fund for lending rate reduction(6,996)(9,041)(81,672)

Increase in management account reserve for interest rate volatility

108,531

95,314

861,012

Decrease in reserve for interest rate reduction(5,259)(4,454)(40,242)

Net (increase)/decrease in loans

103,477

255,2252,305,562

Net increase/(decrease) in bonds(380,219)

396,027

3,577,487

Net increase/(decrease) in borrowed money

75,00091,000822,042Interest received

283,600

251,747

2,274,140

Interest paid

(153,475)(133,682)(1,207,609)

43,807(26,153)(236,254)(33,493)

827,664

7,476,646

934,200

1,858,500

16,788,618(1,119,700)(2,086,000)(18,843,722)

Purchases of tangible fixed assets

(411)

(6)

(63)

Purchases of intangible fixed assets

(634)

(203)

(1,841)(186,546)(227,710)(2,057,008)(100,000)(60,000)(542,005)

6,996

9,041

81,671(93,003)(50,958)(460,334)---

Ⅴ Net increase/(decrease) in cash and cash equivalents(313,043)

548,994

4,959,304

Ⅵ Cash and cash equivalents at beginning of year

870,480

557,437

5,035,566

Ⅶ Cash and cash equivalents at end of year

¥557,437¥1,106,432$9,994,870

Depreciation and amortization

OthersNet cash provided by/(used in) operating activities
Ⅱ Cash flows from investing activities
Proceeds from redemption of securities
Purchases of securities

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

See notes to financial statements.

68

JFM ANNUAL REPORT 2021

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

JFM ANNUAL REPORT 2021

Management
Structure

2. Summary of Significant Accounting Policies(1) Securities
Held-to-maturity securities are carried at amortizedcost (straight-line method).
(2) Derivative transactions
Derivative transactions are carried at fair value withchanges in unrealized gain or loss charged or credited
to income, except for those which meet the criteria
for hedge accounting.
(3) Depreciation and amortization(a) Tangible fixed assets
Depreciation of tangible fixed assets is calculatedby the straight-line method based on the estimateduseful lives and the residual value determined bymanagement. The estimated useful lives of major
items are as follows:
Buildings: 23 to 47 years
Others: 2 to 19 years(b) Intangible fixed assets
Amortization of intangible fixed assets is calculated by the straight-line method based on the estimated useful lives and the residual value determined by management. Software for internal use
owned by the JFM is amortized over 5 years.
(4) Deferred assets
Bond issuance costs are expensed in full whenincurred.
(5) T ranslation of assets and liabilities denominated inforeign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign
currencies, for which foreign currency swaps or
foreign exchange forward contracts are used tohedge the risk of foreign currency fluctuation, aretranslated at the contracted rate as these swap
contracts or the forward contracts qualify for deferral
hedge accounting.
(6) Reserves(a) Reserve for possible loan losses
The JFM has never experienced any loan losses.
Accordingly, no reserve for possible loan losses
has been maintained.
(b) Reserve for bonuses
The reserve for bonuses is provided for payment ofbonuses to employees, in the amount of estimatedbonuses, which are attributable to the fiscal year.
(c) R eserve for bonuses for directors and corporate
auditors The reserve for bonuses for directors andcorporate auditors is provided for payment ofbonuses to directors and corporate auditors, in theamount of estimated bonuses, which are attributable
to the fiscal year.
(d) Reserve for retirement benefits
The reserve for retirement benefits is provided for
payment of retirement benefits to employees, inthe amount deemed accrued at the fiscal year-end,
based on the projected retirement benefit obligationand fair value of plan assets at the fiscal year-end.
The reserve for retirement benefits and pension
expenses are calculated using the simplified
method, which assumes the JFM’s retirement
benefit obligation to be equal to the benefits
payable if all eligible employees voluntarily terminatedtheir employment at the fiscal year-end.
(e) R eserve for retirement benefits for directors andcorporate auditors The reserve for retirement
benefits for directors and corporate auditors isprovided for payment of retirement benefits todirectors and corporate auditors, in the amountdeemed accrued at the fiscal year-end based on
the internal policies.
(7) Hedge accounting(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest
rate fluctuations that qualify for hedge accounting
and meet specific matching criteria are not measured
at fair value, but the differential paid or received
under the swap agreements is recognized andincluded in interest expense or income. If swap

Operations

1. Basis of Presentation
Japan Finance Organization for Municipalities (hereinafter, the “JFM”) has prepared financial statements inaccordance with the Japan Finance Organization for
Municipalities Law (Law No. 64, 2007; hereinafter the“Law”), the ordinances based on the Law and otherregulations applicable to the JFM and accounting
principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.
Since the JFM does not have any subsidiaries or affiliates, it does not prepare consolidated financial statements.
Amounts less than 1 million yen have been omitted.
As a result, the totals in Japanese yen shown in thefinancial statements do not necessarily agree with thesum of the individual amounts.
The translation of the Japanese yen amounts into U.S.
dollars is included solely for the convenience of readers
outside Japan, using the prevailing exchange rate asof 31 March 2021, the final day of the fiscal year, whichwas ¥110.70 to U.S. $1. This translation should not be
construed as a representation that all amounts shown
could be converted into U.S. dollars at such rate.

Review and Plan

Notes to Financial Statements

69

Financial Section
Financial Statements
contracts or forward contracts used to hedge therisk of foreign currency fluctuation qualify for deferral
hedge accounting, the foreign currency-denominatedassets and liabilities are translated at the contracted
rate.
(b) Hedging instruments and hedged items( i ) Hedging instruments···Interest rate swaps
Hedged items···Bonds and long-term borrowed
money(ii) Hedging instruments···Currency swaps
Hedged items···Foreign currency-denominatedbonds(iii) Hedging instruments···Foreign exchange forward
contracts
Hedged items···Foreign currency-denominatedbank deposits(c) Hedging policy
The JFM uses hedging instruments as a means ofhedging exposure to interest rate risk and foreignexchange risk.
Hedged items are identified by each individual
contract.
As a means of hedging foreign exchange fluctuation
risks associated with the receipt of interest andprincipal of foreign currency-denominated bankdeposits, a foreign exchange forward contract isentered into at the time of each deposit by the JFM.
(d) Assessment of hedge effectiveness
The JFM ensures hedging instruments and hedged
items have the same major terms when entering
into hedge transactions to offset market fluctuation
risks associated with bonds and long-term borrowed
money. Accordingly, the JFM deems these to behighly effective and thus does not assess effectiveness. Moreover, a periodic assessment of hedge
effectiveness for interest rate swaps and currency
swaps and forward contracts that qualify for deferral
hedge accounting is omitted when the exceptional
accrual method is applied.
(8) Cash and cash equivalents
Cash and cash equivalents in the statements ofcash 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, the JFM has established thefund for lending rate reduction to reserve contributions as stipulated in Article 32-2 of the Local
Government Finance Law (Law No. 109, 1948).
Also, pursuant to the provisions of Article 46, Section
5 of the Law, income arising from the investment of
the fund (hereinafter, “investment income”) is used
to reduce interest rates of the loans to municipalities,
and if there is any surplus in the investment income
after this interest rate reduction process, the surplus

70

JFM ANNUAL REPORT 2021

amount is added to the fund. Further, pursuant to
the provisions of Article 46, Section 6 of the Law, if
there is any shortfall after the interest rate reduction
process, the shortfall is covered by withdrawal of
the fund within the limits of the total of the additional
portion to the fund made up to the previous fiscal
year and the contributions made in the most current
fiscal year.
(10) Reserve for interest rate volatility and management
account reserve for interest rate volatility
The reserve for interest rate volatility is set aside toprepare for interest rate risk associated with refinancing of the JFM bonds (excluding the bonds
issued by the former Japan Finance Corporation
for Municipal Enterprises; hereinafter, the “Predecessor”) pursuant to the provisions of Article 38,
Sections 1 and 3 of the Law, and Article 9, Sections
8 and 10 of the Supplementary Provisions of theLaw, and is calculated and accounted for based on
the provisions of Article 34 of the Ministerial Ordinance on Finance and Accounting of Japan Finance
Organization for Municipalities (Ordinance No. 87
of the Ministry of Internal Affairs and Communications, 2008) and Articles 22 and 23 of the Government
Ordinance on preparation of relevant government
ordinances and provisional measures for theabolishment of the Japan Finance Corporation for
Municipal Enterprises Law (Government OrdinanceNo. 226, 2008; hereinafter, “Preparation Ordinance”).
The management account reserve for interest
rate volatility is set aside to manage interest rate risk
associated with refinancing of bonds issued by thePredecessor pursuant to the provisions of Article 9,Sections 9 and 10, and Article 13, Sections 5 and 7of the Supplementary Provisions of the Law, and is
calculated and accounted for based on the provisionsof Articles 1 through 3 of the Ministerial Ordinance on
the operations of the Management Account at Japan
Finance Organization for Municipal Enterprises(Ordinance No. 2 of the Ministry of Internal Affairs
and Communications, and the Ministry of Finance,
2008; hereinafter, “Management Account Operations
Ordinance”) and Articles 3 and 5 of the Supplementary Provisions of the above ordinance.
(11) Reserve for interest rate reduction
Reserve for interest rate reduction is set aside to
reduce interest rates on the loans made by thePredecessor to local governments pursuant to theprovisions of Article 9, Section 13, and Article 13,
Section 8 of the Supplementary Provisions of theLaw, and Article 26, Sections 1, 3 and 4 of the
Preparation Ordinance, and is calculated andaccounted for based on the provisions of Article 5 of
the Management Account Operations Ordinance.
(12) Management account surplus reserve

Financial Section
Appendix / JFM Data

JFM ANNUAL REPORT 2021

JFM’s Role in Local
Government Finance

4. Loans
There are no bankrupt loans, non-accrual loans, past dueloans (three months or more), or restructured loans. Since
the JFM has never experienced loan losses in the past, it
does not record a reserve for possible loan losses.
Bankrupt loans represent loans to borrowers as definedin Article 96, Section 1, Clause 3 (a) through (e) and
Clause 4 of the Enforcement Ordinance of the Corporate
Income Tax Law (Government Ordinance No. 97,
1965), and on which accrued interest is not accounted
in revenue as there is no expectation of collection ofeither principal or interest because they are past due
for a considerable period of time or for other reasons(excluding loans on which bad debts are written off;hereinafter, “Non-accrual loans”).
Non-accrual loans represent loans on which accrued
interest is not accounted in revenue, excluding loans

Management
Structure

Changes presentation(Application of “Accounting Standard for Disclosure of
Accounting Estimates”)“Accounting Standard for Disclosure of Accounting Estimates” (Accounting Standards Board of Japan Statement
No. 31, 31 March 2020) is applied by the JFM from fiscal
2020 in preparing its financial statements. See Note 3“Significant accounting estimates”.

5. P ayment to the National Treasury of a Portion of
the JFM’s Management Account Reserve for Interest
Rate Volatility
In accordance with the Supplementary Provisions of
the Law, a portion of the JFM’s management accountreserve for interest rate volatility is being attributed to
the Japanese national government over a period of
two years from fiscal 2021 through fiscal 2022, withthe aim of transferring up to 400 billion yen over thisperiod for securing Local Allocation Tax.
In addition, for the purpose of securing the increase in
the concession amount charged for Forest Environment
Concession Tax, in accordance with the Supplementary
Provisions of the Law, a portion of the JFM’s management account reserve for interest rate volatility is
being attributed to the Japanese national government
over a period of five years from fiscal 2020 throughfiscal 2024, with the aim of transferring up to 230 billion
yen over this period.
Lastly, for the purpose of securing the Trust Fund Bureau
Fund for exemptions of early redemption charges inrelation to concessions of water supply and seweragebusinesses in accordance with the Supplementary
Provisions of the Law, a portion of the JFM’s management account reserve for interest rate volatility is being
attributed to the Japanese national government over a
period of five years from fiscal 2018 through fiscal
2023, with the aim of transferring up to 1.5 billion yen
over this period.
In fiscal 2019, 100 billion yen was reversed from theManagement account reserve for interest rate volatility
and the same amount was transferred to the nationaltreasury by the JFM, pursuant to “Ministerial OrdinanceSpecifying the Amount to be Attributed to the National
Government pursuant to the Provision of Article 14 of
the Supplementary Provision of the Law for fiscal 2019
(Ordinance No. 4 of the Ministry of Internal Affairs andCommunications, and the Ministry of Finance, 2019).”
In fiscal 2020, 60 billion yen (542,005 thousand U.S.

Operations

3. Significant Accounting Estimates(1) Reserve for possible loan losses(a) Amount of reserve for possible loan losses recorded
in fiscal 2020:N/A(b) Information on significant accounting estimates for
identified items
The JFM has not recorded reserves for possible loan
losses due to the following reasons:• Currently, there are no bankrupt loans and theJFM has never experienced any loan losses, as
stated in Note 4 “Loans”.
• The JFM provides loans exclusively to local
governments and there is a system to prevent local
governments from default, as stated in Note 6“Financial Instruments (c) (i) Credit risk on loans”.
The above situation is expected to remain the samefor the next fiscal year and will not materially impact
the financial statements for the next fiscal year.

to bankrupt borrowers and loans with grace periods
for interest payments to assist in corporate reorganization or to support business.
Past due loans (three months or more) represent loans
on which payment of principal or interest is in arrears
for more than three months, calculated from the day
following the contractual due date, excluding bankrupt
loans and non-accrual loans.
Restructured loans represent loans, given certain
favorable terms and conditions, such as reduction or
exemption of interest, grace periods for interest or
principal payments, and debt waivers, to assist
borrowers in corporate rehabilitation or to support
business, excluding bankrupt loans, non-accrualloans and past due loans (three months or more).

Review and Plan

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

71

Financial Section
Financial Statements
dollars) was reversed from the Management accountreserve for interest rate volatility and the same amount
was transferred to the national treasury by the JFM,
pursuant to “Ministerial Ordinance Specifying theAmount to be Attributed to the National Government
pursuant to the Provision of Article 14 of the Supplementary Provision of the Law for fiscal 2020 (Ordinance
No. 1 of the Ministry of Internal Affairs and Communications, and the Ministry of Finance, 2020; hereinafter
the “Ministerial ordinance for attribution to the national
government”).”
Additional information
In accordance with the Supplementary Provisions of theLaw, a portion of the JFM’s management account reservefor interest rate volatility is being attributed to the Japanesenational government over a period of four years from fiscal
2021 through fiscal 2024, with the aim of transferring up
to 570 billion yen over this period.
In fiscal 2021, the JFM will reverse 240 billion yen fromthe management account reserve for interest rate volatility
and transfer the same amount to the national treasury, in
accordance with the “Ministerial Ordinance Specifying
the Amount to be Attributed to the National Government
pursuant to the Provision of Article 14 of the Supplementary Provisions of the Law for the period from fiscal
2021 through fiscal 2024 (Ordinance No.1 of the Ministryof Internal Affairs and Communications, and the Ministryof Finance, 2020).” The ministerial ordinance wasamended by the “Ministerial Ordinance for Partial Revisionof the Ministerial Ordinance for Specifying the Amountto be Attributed to the National Government pursuant to
the Provision of Article 14 of the Supplementary Provisionsof the Law for the period from fiscal 2020 through fiscal
2024 (Ordinance No.1 of the Ministry of Internal Affairs andCommunications, and the Ministry of Finance, 2021).”
6. Financial Instruments(1) Status of financial instruments(a) Policy for financial instruments
In order to maintain a sound and good financial
standing as well as the solid confidence of capital
markets, which are experiencing increasing volatility
and face various risks, such as geopolitical risk,
the JFM needs to appropriately manage theserisks including interest rate risk.
The JFM adopts an integrated risk management
approach to appropriately respond to risks while
endeavoring to further advance its risk analysis
and management.
Accordingly, the JFM has developed a system forappropriate risk management, including the establishment of the Integrated Risk Management Committee, which supervises the JFM’s overall risk
management, and the Risk Management Office,72

JFM ANNUAL REPORT 2021

which monitors the risks in each department. The
content of risk management can then be appropriately reflected in management decisions.
(b) Details and risks of financial instruments
The JFM makes loans to local governments. The
maximum term to maturity is 40 years, but the
majority of the funds for these loans are raised
mainly through issuance of 10-year bonds. Therefore,a large duration gap is created between lending
and funding, and the JFM is exposed to the interest rate risk associated with bond and long-termborrowed money refinancing.
The JFM has set aside reserves for interest rate
fluctuations (the reserve for interest rate volatility),and has set up the ALM Committee separatelyfrom the Integrated Risk Management Committee
to comprehensively analyze and manage the JFM’s
assets and liabilities in a timely and appropriatemanner. At the meeting, medium- and long-term
management analysis as well as risk analysis andevaluation are conducted through scenario analysis,
VaR analysis, and duration analysis, among othermethods. In addition, the JFM reflects the findings in
its bond issuance plans and other aspects 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 conditionof a borrower, which causes an asset to lose value
or become worthless. In addition to credit risk
associated with loans, market transactions also
involve credit risk.
A. Credit risk on loans
The JFM extends loans exclusively to local governments. Local governments have a zero BaselCommittee on Banking Supervision risk weighting
and the JFM does not expect any default on loans
made to local governments for the reasons outlined
below. The JFM and the Predecessor have neverexperienced any loan losses.
• The Japanese national government includes principal and interest payments of local government
bonds and loans in the expenditure of the Local
Government Finance Program, and secures thetotal amount of local allocation tax which balances
local governments’ total expenditures including
principal and interest payments, and total revenue.
Thus, the national government effectively securesrevenue sources for principal and interest payments by local governments. The national government also secures revenue sources for principal
and interest payments by individual local governments by including a portion of such principal andManagement
Structure

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

JFM ANNUAL REPORT 2021

Operations

foreign exchange risk and price change risk.
A. Interest rate risk
Interest rate risk is the risk of losses incurred or adecrease in profits due to fluctuations in interest
rates when there is an interest rate or duration gap
between assets and liabilities. The interest rate risk
at the JFM includes the interest rate risk associatedwith bond and borrowed money refinancing andpipeline risk.
- Interest rate risk associated with bond andborrowed money refinancing
The JFM makes loans to local governments. The
maximum term to maturity is 40 years, but the majority of the funds for these loans are raised mainly
through issuance of 10-year bonds, which createsinterest rate risk associated with bond refinancing.
The JFM takes the following measures to address
the interest rate risk resulting from a duration gap
between lending and funding.
• The JFM maintains necessary reserves to copewith the interest rate risk resulting from a duration
gap between lending and funding.
• As assets and liabilities in the JFM’s generalaccount will expand as a result of lending to local
governments and funding, the JFM carries out an
ALM analysis of this account in a timely andappropriate manner to further enhance the effectiveness of its management of interest rate risk. In
order to reduce exposure to interest rate risk, theJFM has established a medium-term managementtarget for five years from fiscal 2018, in which theduration gap is to be maintained below approximately two years.
• To achieve its objective, from the viewpoint ofcontrolling the duration on assets (lending), theinterest rates for temporary financial countermeasures funding which accounts for approximately
1/3 of the overall outstanding loans in the generalaccount, are revised every 5 or 10 years. In addition,
the JFM will revise its lending rate by the 30th year
at the latest for its loans with maturities longer than
30 years. And, in terms of funding, the JFM has
taken measures to manage the duration on liabilities (bonds and loans) by issuing bonds withmaturities longer than 10 years continuously under
the ultra-low interest rate circumstances andcarefully choosing maturities of bonds to be issued
by utilizing its FLIP and Open Issuance scheme.
• The management account, which manages assets
related to loans extended by the Predecessor, is
exposed to interest rate risk. To address suchrisk, the JFM contributes to the required reserves
for interest rate volatility as described above. In
accordance with Article 14 of the Supplementary
Provisions of the Law, a portion of the JFM’s

Review and Planinterest in the Standard Financial Needs whencalculating local allocation tax.
• Under the consultation system for local government bonds and loans, credit reviews must include
checks on the repayment status of local governments, and tax revenue and necessary revenue
sources to be secured. Additionally, under the
Early Warning System, the local governments
whose principal and interest payments or financial
deficits exceed a certain level must apply for
approval to issue bonds or obtain loans, so thatthe credit standing of local government bonds andloans is maintained.
• Under the Law Relating to the Financial Soundnessof Local Governments, which was promulgated inJune 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 musttake necessary actions to restore their finances
under the supervision of the national governmentor the respective prefectural governments withregard to redemption of local government bonds
and loans, and other operations.
• The 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 inaccordance with the JFM's internal rules in order tomanage risks appropriately.
B. Credit risk on transactions
The JFM is exposed to the risk of loss arising fromcredit events, such as deterioration in the financial
condition of a counterparty, which causes an asset
to lose value or become worthless. However, theJFM appropriately manages credit risk of this typeby constantly monitoring counterparties’ financial
standing, taking measures including suspension of
new deals and cancellation of transactions in caseof a deterioration of their credit standings.
Moreover, the JFM limits counterparties to financial
institutions that achieve a certain credit rating andother criteria, and conducts transactions within thecredit lines for each counterparty in order to diversify
risks. In addition, the JFM enters into ISDA (International Swaps and Derivatives Association) Master
Agreements and CSA (Credit Support Annex) withall derivatives counterparties to reduce credit risk.
(ii) Market risk
Market risk is the risk of loss resulting from changes inthe value of assets and liabilities due to fluctuations inrisk factors such as interest rates, securities prices
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,

73

Financial Section
Financial Statements
management account reserve for interest rate
volatility is to be transferred to the Japanesenational government. The following transfers arescheduled:• Up to 400 billion yen for securing funds for local
allocation tax over a period of two years from fiscal
2021 through 2022;• Up to 230 billion yen due to the increase inconcession amount charged for Forest Environment
Concession Tax, which promotes forest maintenance over a period of five years from fiscal 2020
through fiscal 2024; and•U p to 1.5 billion yen for securing funds of the TrustFund Bureau for exemptions of early redemption
charges in relation to concessions of water supply
and sewerage business over a period of six years
from fiscal 2018 through 2023.
The amount of transfer is to be within the amountwhich the Japanese national government deems
as an amount exceeding the requisite amount ofreserve necessary for the smooth operation of the
JFM’s management account at the time of transfer
and in the future, in light of the JFM’s financial
condition.
- Pipeline risk
The JFM is also exposed to pipeline risk, whereby
losses would be incurred or profits decreased asa result of interest rate fluctuations during thetime from when the JFM raises money until the
point at which the money is loaned to local governments. The JFM, in principle, uses swap
transactions to hedge against pipeline risk.
B. Foreign exchange and other risks
Various risks associated with bond principal andinterest payments are hedged by swap transactions. These risks include foreign exchange risk
related to foreign currency-denominated bonds andinterest rate risk related to floating rate bonds.
The JFM’s investments of surplus funds are exposedto the risk of losses on the sale of securities resulting
from price declines and the risk of realized losses on
the cancellation of foreign currency-denominateddeposits resulting from fluctuations in foreignexchange rates. Accordingly, in principle, the JFM
minimizes the risk of price fluctuation by holding
investments until maturity, and hedges foreignexchange risk by using foreign exchange contracts.
C. Quantitative information on market risk
Loans, bonds and long-term borrowed money are
primarily affected by interest rate risk, which is amajor risk variable among the market risks.
With respect to loans, bonds and long-term borrowed
money in the general account, the JFM establishesa management target for the duration gap in orderto manage interest rate risk appropriately. With74

JFM ANNUAL REPORT 2021

regard to the quantitative analysis of interest raterisk, while the JFM does not have a managementtarget for the quantitative figures, it reports theresults of calculating the quantitative information
to the ALM Committee and tracks the status of theinterest rate risk.
With respect to these financial instruments in thegeneral account, based on an assumption that therisk variables, except for interest rate risk, holdsteady, for an indicative interest rate that is 10 basis
points higher than the actual rate, it is assumed
that the fair value of the net amount (assets side),
after offsetting such financial instruments with thefinancial liabilities, would decline by 36,671 million
yen and 26,577 million yen (240,087 thousand U.S.
dollars) as of 31 March 2020 and 2021, respectively.
On the contrary, for an indicative interest rate thatis 10 basis points lower than the actual rate, it isassumed that the fair value of the net amount (assetsside), after offsetting such financial instrumentswith the financial liabilities, would increase by
37,215 million yen and 26,936 million yen (243,329
thousand U.S. dollars) as of 31 March 2020 and
2021, respectively.
With respect to loans and bonds in the management
account, the JFM raises funds by the issuance ofbonds as necessary in order to manage existingloans until their redemption. For this reason, while theJFM reports the calculation results of the quantitative
information regarding the interest rate risk to the ALM
Committee and confirms the status of interest raterisk as is the case in the general account, the JFM
does not establish amanagement target or use thequantitative analysis for the management account.
With respect to these financial instruments in the
management account, based on an assumptionthat the risk variables, except for interest rate risk,
hold steady, for an indicative interest rate that is 10
basis points higher than the actual rate, it is assumed
that the fair value of the net amount (assets side),
after offsetting such financial instruments with thefinancial liabilities, would decline by 8,642 million
yen and 7,601 million yen (68,665 thousand U.S.
dollars) as of 31 March 2020 and 2021, respectively.
On the contrary, for an indicative interest rate thatis 10 basis points lower than the actual rate, it isassumed that the fair value of the net amount (assetsside), after offsetting such financial instrumentswith the financial liabilities, would increase by
8,742 million yen and 7,683 million yen (69,404
thousand U.S. dollars) as of 31 March 2020 and
2021, respectively.
(iii) Liquidity risk
Liquidity risk is the risk that the JFM would incur
losses due to difficulties in securing the necessary

Operations

several financial institutions to prepare for theunexpected events, and invests surplus funds onlyin short-term financial products.
In addition, the JFM has implemented a plan tosecure liquidity support assets in advance in orderto prepare for potential market disruption which may
prevent the JFM from securing the necessary funds
for scheduled bond principal and interest payments.
(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 fair value, the value may differ in theevent that the assumptions change.

Review and Plan

funds or the necessity of obtaining funds at far higher interest rates than under normal conditions as aresult of a mismatch between the maturities of assets and liabilities or an unexpected outflow of funds(funding liquidity risk). It also includes the risk that
the JFM would incur losses because it is unable toconduct market transactions or is forced to conducttransactions at far more unfavorable prices thanunder normal conditions due to market disruption orother difficult situations (market liquidity risk).
The JFM’s exposure to liquidity risk is extremely
low because loans are made to local governments
according to a pre-set schedule, and the daily cash
and liquidity management is carried out based on amonthly plan for fund management. Moreover, theJFM has entered into overdraft agreements with(2) Items related to fair value of financial instruments
The book value, fair value and difference between them as of 31 March 2020 are as follows:Book value

Fair value

Difference¥23,399,615¥24,901,200¥1,501,584

365,500
557,437
12,391

365,500
557,437
12,391-

Total assets

24,334,943

25,836,528

1,501,584(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments

20,013,462
203,000
58,073

20,690,092
204,988
58,073

676,629
1,988-

Total liabilities

20,274,535

20,953,153

678,617

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

(Millions of yen)Book value

Fair value

Difference¥23,144,389¥24,261,858¥1,117,468

593,000
1,106,432
3,282

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

Total assets

24,847,103

25,964,572

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

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

Total liabilities

20,738,247

21,250,771

512,524

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

JFM ANNUAL REPORT 2021

Appendix / JFM Data

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

Financial Section

The book value, fair value and difference between them as of 31 March 2021 are as follows:

JFM’s Role in Local
Government Finance(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments

Management
Structure(Millions of yen)75

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

Difference(1) Loans(2) Securities
Held-to-maturity securities(3) Cash and bank deposits(4) Cash collateral paid for financial instruments$209,073,077$219,167,642$10,094,566

5,356,820
9,994,870
29,6485,356,820
9,994,870
29,648-

Total assets

224,454,415

234,548,980

10,094,566(1) Bonds(2) Borrowed money(3) Cash collateral received for financial instruments

184,379,107
2,655,827
302,439

188,994,887
2,669,899
302,439

4,615,780
14,072-

Total liabilities

187,337,373

191,967,225

4,629,852

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

Note 1. Method for calculating fair value of financial
instruments and items related to marketablesecurities and derivative transactions
Assets(1) Loans
The fair value of loans is calculated by discounting
future cash flows assuming prepayment at the discountrate calculated using the Japanese government bondrates as of 31 March 2020 and 2021.
(2) Securities
All bonds are held until maturity, and the fair value oftreasury discount bills is the market price.
Since all negotiable certificates of deposit are shortterm, the fair value approximates the book value.

76

Fair value

JFM ANNUAL REPORT 2021

As a result, the book value is deemed to be the fairvalue.
(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 bookvalue. As a result, the book value is deemed to be thefair value.
(4) Cash collateral paid for financial instruments
Cash collateral is associated with derivative transactions. The book value is used as the fair value of cash
collateral paid for financial instruments since both
values are approximately equal as a result of eachdeposit period being short term.

(3) Cash collateral received for financial instruments
Cash collateral is associated with derivative transactions. The book value is used as the fair value of cash
collateral received for financial instruments since both
values are approximately equal as a result of eachdeposit period being short term.

Operations(2) Borrowed money
The fair value of long-term borrowed money is calculated by discounting the future cash flows using theinterest rate that would presumably be applied whenissuing bonds with the same total principal and interest
and payment term.
On the other hand, the book value is used as the fairvalue of short-term borrowed money since both values
are approximately equal as a result of each loan period
being short term.

Review and Plan
Management
Structure

Liabilities(1) Bonds
The fair value of bonds issued by the JFM that havea market price is based on the market price. The fairvalue of bonds without a market price is calculatedby discounting the future cash flows using the interest
rate that would be applied when issuing similarbonds with the same total principal and interest andpayment term.
Deferral hedge accounting is used for currency swaps,
and the fair value of foreign currency-denominatedbonds is thus calculated using the total of the fair valueof 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 by determining the present value using the totalof the corresponding interest rate swap accounted fortogether with the principal and interest and discounting
the future cash flows using the interest rate that would
be applied when issuing a similar bond.

JFM’s Role in Local
Government Finance
Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

77

Financial Section
Financial Statements
Derivative transactions
Transactions for which hedge accounting is applied
For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent to
the principal in the contract under each hedge accounting method as of 31 March 2020 is as follows:(Millions of yen)Contract amount

Hedge accounting
methodType of derivativetransactions

Primary hedged items

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

Bonds
Long-term borrowed
money

Hedge
accounting forinterest rate swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreignexchange
contracts

Of which
1 year or more

Fair
value

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

-

-

-

¥20,000¥20,000(*1)

Foreigncurrency-denominatedbonds

1,612,376

1,335,110(*2)

Foreigncurrency-denominateddeposits

-

-

(*2)

¥1,632,376¥1,355,110

Total

For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent to
the principal in the contract under each hedge accounting method as of 31 March 2021 is as follows:(Millions of yen)Type of derivativetransactions

Primary hedged items

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

Bonds
Long-term borrowed
money

Hedge
accounting forinterest rate swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreignexchange
contracts
Total

78

Contract amount

Hedge accounting
methodJFM ANNUAL REPORT 2021

Of which
1 year or more

Fair
value

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

-

-

-

¥20,000¥20,000(*1)

Foreigncurrency-denominatedbonds

1,938,045

1,619,503(*2)

Foreigncurrency-denominateddeposits

4,000

-

(*2)

¥1,962,045¥1,639,503

Contract amountType of derivativetransactions

Primary hedged items

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

Bonds
Long-term borrowed
money

Hedge
accounting forinterest rate swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreignexchange
contracts

Of which
1 year or more

Fair
value

Method for
calculating fairvalue
Based on prices
provided by thecounterparty
financial institution--$180,668$180,668(*1)

Foreigncurrency-denominatedbonds

17,507,190

14,629,662(*2)

Foreigncurrency-denominateddeposits

36,134-(*2)$17,723,992$14,810,330

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

Management
Structure-

Operations

Hedge accounting
methodReview and Plan(Thousands of U.S. dollars)Note 2. The repayment schedule for monetary claims and securities with maturities is as follows:(Millions of yen)After
20 years
through
30 years

After
30 years
through
40 years¥1,803,890 ¥1,806,270 ¥1,770,897 ¥1,681,255 ¥1,567,759 ¥6,503,382 ¥6,555,776 ¥1,663,603¥46,779

Within1 yearLoans

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

365,500

-

-

-

-

-

-

-

-

Deposits

557,437

-

-

-

-

-

-

-

-

Financial Section

Securities
Held-tomaturity
securities

JFM’s Role in Local
Government Finance

As of 31 March 2020

Appendix / JFM Data
JFM ANNUAL REPORT 2021

79

Financial Section
Financial Statements
As of 31 March 2021
After
1 yearthrough
2 yearsAfter
20 years
through
30 years

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

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

After
10 years
through
20 years

Securities
Held-tomaturity
securities

593,000

-

-

-

-

-

-

-

-

Deposits

1,106,432

-

-

-

-

-

-

-

-

(Thousands of U.S. dollars)After
1 yearthrough
2 yearsAfter
20 years
through
30 years

After
30 years
through
40 years

Loans$16,505,070 $16,327,433 $15,708,250 $14,806,219 $14,006,935 $58,485,538 $58,125,630 $14,623,870$484,132

Securities
Held-tomaturity
securities

5,356,820

-

-

-

-

-

-

-

-

Deposits

9,994,870

-

-

-

-

-

-

-

-

Within1 yearAfter
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

Note 3. The repayment schedule for bonds and borrowed money is as follows:
As of 31 March 2020
After
1 yearthrough
2 yearsAfter
10 years
through
20 years

After
20 years
through
30 years

After
30 years
through
40 years¥2,072,865 ¥2,345,072 ¥2,124,677 ¥2,332,910 ¥1,827,159 ¥5,897,181 ¥3,117,760¥206,000¥94,000--

Within1 year
Bonds(Millions of yen)

Borrowed
money

-

After
2 years
through
3 years

1,000

After
3 years
through
4 years-

86,200After
4 years
through
5 years

83,400After
5 years
through
10 years

30,8001,600

As of 31 March 2021
After
10 years
through
20 years

After
20 years
through
30 years

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

Within1 year
Bonds(Millions of yen)

Borrowed
money

After
1 yearthrough
2 years

1,000

After
2 years
through
3 years-

86,200After
3 years
through
4 years

83,400After
4 years
through
5 years

88,000After
5 years
through
10 years

31,8003,600(Thousands of U.S. dollars)After
10 years
through
20 years

After
20 years
through
30 years

After
30 years
through
40 years$21,184,032 $19,355,717 $21,101,265 $17,408,848 $16,757,337 $52,748,349 $32,354,081$2,380,307$1,129,178--

Within1 year
Bonds
Borrowedmoney

80

JFM ANNUAL REPORT 2021

9,033

After
1 yearthrough
2 yearsAfter
2 years
through
3 years-

778,681After
3 years
through
4 years

753,389After
4 years
through
5 years

794,941After
5 years
through
10 years

287,263

32,520(Millions of yen)

Balanceas of
1 April2019(Acquisition
costs)

Increaseduringthe year

Decreaseduringthe year

Buildings¥1,185¥2¥-¥1,187

¥508

¥32

¥679

Land

1,659

-

-

1,659

-

-

1,659

893

45

332

606

168

123

438

3,738

48

332

3,454

677

155

2,777

3,266

658

2,079

1,844

748

451

1,096

123

1

123

1

-

-

1

¥3,389¥660¥2,203¥1,846¥748¥451¥1,097

Type of assets

BalanceAccumulated
Depreciation
as ofdepreciation
and
31 Marchandamortization
2020
amortization
during(Acquisition
as of 31
the yearcosts)March 2020

Balanceas of
31 March
2020(Net bookvalue)

Review and Plan

7. Tangible and Intangible Fixed Assets
Tangible and intangible fixed assets as of 31 March 2020 consisted of the following:

Tangible fixed assets

Total tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed assets
Total intangible fixed assets(Millions of yen)

Increaseduringthe year

Decreaseduringthe year

Buildings¥1,187¥-¥-¥1,187

¥538

¥30

¥649

Land

1,659

-

-

1,659

-

-

1,659

606

18

-

625

279

110

345

3,454

18

-

3,472

818

140

2,654

1,844

205

359

1,691

760

371

930

1

2

1

2

-

-

2

¥1,846¥208¥360¥1,694

¥760

¥371

¥933

Type of assets

BalanceAccumulated
Balance as
Depreciation
as ofdepreciation
of 31
and
31 MarchandMarchamortization
2021
amortization
2021
during(Acquisition
as of(Net bookthe yearcosts)
31 March 2021
value)

Tangible fixed assets

Other 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

Balanceas of
1 April2020(Acquisition
costs)

Management
Structure

Tangible and intangible fixed assets as of 31 March 2021 consisted of the following:

Operations

Other tangible fixed assets

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

81

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

Balanceas of
1 April2020(Acquisition
costs)

Increaseduringthe year

Decreaseduringthe year

Buildings$10,729$-$-$10,729$4,865$272$5,864Land

14,993--

14,993--

14,993

Type of assets

BalanceAccumulated
Balance as
Depreciation
as ofdepreciation
of 31
and
31 MarchandMarchamortization
2021
amortization
2021
during(Acquisition
as of(Net bookthe yearcosts)
31 March 2021
value)

Tangible fixed assets

Other tangible fixed assets
Total tangible fixed assets

5,482

166

-

5,648

2,525

1,001

3,123

31,204

166-

31,370

7,390

1,273

23,98016,664

1,858

3,246

15,276

6,871

3,353

8,405

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

15

26

14

27

-

-

27

$16,679$1,884$3,260$15,303$6,871$3,353$8,432

8. Assets Pledged as Collateral
Pursuant to the provisions of Article 40, Section 2 of the Law, the JFM’s total assets are pledged as general collateral
for the JFM bonds in the amount of 20,013,462 million yen and 20,410,767 million yen (184,379,107 thousand U.S.
dollars) as of 31 March 2020 and 2021, respectively.

82

JFM ANNUAL REPORT 2021

(Millions of yen)Type of bondDate of
issue

Balance as of
1 April 2019

Balance as of
31 March 2020

Couponrate (%)

Maturity

810,455

520,3150.001(200,000) to 0.385

6Y

6/30/20162/26/2018

200,223

200,111(40,000)

0.001

4Y

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

1/13/2011

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

4.0

10Y

Non-guaranteed bonds issued by the JFM(domestic) 5-year bonds (Series 15-26)

4/17/201411/22/2019

135,000

125,000
0.001(20,000) to 0.230

5Y

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

8/20/2012

20,000

-

0.446

7Y

Non-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 1-130)

6/18/20093/23/2020

3,250,000

3,360,000
0.049(360,000) to 1.648

10Y

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

1/31/20131/22/2014

50,00050,0001.161
to 1.334

15Y

Non-guaranteed bonds issued by the JFM(domestic) 20-year bonds (Series 1-81)

6/25/20093/23/2020

1,425,000

1,575,000

0.180
to 2.266

20Y

Non-guaranteed bonds issued by the JFM(domestic) 30-year bonds (Series 1-9)

6/26/201410/18/2019

75,000105,000

0.446
to 1.864

30Y

Non-guaranteed bonds issued by the JFM(domestic) 40-year bonds (Series 1-2)

2/26/20191/28/2020

15,00030,0000.646
to 0.882

40Y

Non-guaranteed bonds issued by the JFM(domestic) FLIP bonds (Series F2-F6, F8-F14, F16-F17,
F24-F25, F27-29, F31, F35-F37, F41-F43, F45-F52,
F54-F69, F71-F73, F75-F85, F87-F90, F92-F93, F95-F98,
F100-F112, F115-F139, F141-F153, F155-F164,F166-F169,
F171-F210, F212-F243, F245-F276, F278-F513)

7/23/20092/28/2020

2,380,659

2,600,288
0.001(81,000) to 2.334

2Y
to 40Y

Non-guaranteed bonds issued by the JFM(domestic) FLIP bonds (Floater, Series F53, F211, F244)

2/1/20117/25/2014

35,000Floatingrate

9Y
to 30Y

1,517,247[USD 11,260 million][AUD 654 million]
0.050
1,340,300[NZD 58 million] to 5.092[EUR 1,580 million](184,232)

3Y
to 11Y

9/26/20132/24/2017

420,073

420,059

Government-guaranteed bonds issued by the JFM(domestic) 6-year bonds (Series 9-20)

4/25/201310/28/2016

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

5/1/20142/12/2020

Non-guaranteed bonds issued by the JFM(international) (Floater, Series 30, 39)

6/6/20127/22/2013

20,230Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series A1-A122)

7/31/20093/25/2020

2,630,000

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series B1-B53)

11/24/20153/25/2020

229,500

Non-guaranteed bonds issued by the JFM(domestic) Private placements with pension funds for
local government officials (Series C1-C53)

11/24/20153/25/2020

365,500

9,863[USD 100 million](9,863)

Floating
rate

7Y

2,510,000
0.069(400,000) to 1.530

10Y

311,500

0.069
to 0.511

10Y

462,500

0.190
to 1.154

20Y

JFM ANNUAL REPORT 2021

Appendix / JFM Data

Non-guaranteed bonds issued by the JFM(international) (Series 43-45, 47-72)

20,000Financial Section

8Y

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

JFM’s Role in Local
Government Finance0.001
to 0.576¥5,053,012

Management
Structure

10Y

6/15/20091/21/2020

Operations¥4,469,844
0.001(652,530) to 1.500

Government-guaranteed bonds issued by the JFM(domestic) 10-year bonds (Series 1-123)

Review and Plan

9. Bonds
Bonds as of 31 March 2020 consisted of the following:83

Financial Section
Financial Statements
Non-guaranteed bonds issued by the JFM(domestic)Private placements with pension funds for
local government officials (Series D1-D48)
Bonds issued by the JFM - Sub-total

4/21/20163/25/2020-

450,000

590,000

18,988,125

18,959,899(2,030,795)

0.190
to 0.778

20Y

-

-

Government-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 10-year bonds (Series 7-8)

4/15/20095/25/2009

140,000-

1.4
to 1.5

10Y

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 10-year bonds (Series 3-4)

4/28/20095/28/2009

60,000-1.593
to 1.65

10Y

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

1/26/20094/30/2009

84,97084,9732.07
to 2.29

20Y

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) Private placements with pension funds for
local government officials (Series A1-A2)

4/30/20095/26/2009

120,000-

1.69
to 1.7310Y-

404,970

84,973--Government-guaranteed bonds issued by the Predecessor(domestic) 15-year bonds (Series 1-5)

6/22/20057/18/2007

184,838

184,860(39,900)

1.6
to 2.2

15Y

Government-guaranteed bonds issued by the Predecessor(international) Euro-sterling bonds (Series 4)

8/9/1999

28,376

-

5.75

20Y

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

7/30/20026/16/2008

569,834

569,858

1.03
to 2.58

20Y

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

1/29/20049/20/2006

189,903

189,9092.39
to 2.95

30Y

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

2/14/20036/9/2004

26,13023,960(2,170)1.39
to 2.01

28Y

Bonds issued by the Predecessor - Sub-total-

999,082

968,589(42,070)

-

-

Total

-

¥20,392,179¥20,013,462(2,072,865)--

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

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, the JFM’s total assets are pledged as general collateral for the JFM bonds in the amountof 20,013,462 million yen as of 31 March 2020.
2. Amounts in square brackets under “Balance as of 31 March 2020” for “Government-guaranteed bonds issued by the JFM (international)—Global U.S.
dollar bonds (Series 1),” “Non-guaranteed bonds issued by the JFM (international)— (Series43-45, 47-72),” “Non-guaranteed bonds issued by the JFM(international)— (Floater, Series 30, 39)” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2020” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:84

JFM ANNUAL REPORT 2021

(Millions of yen)Type of bondDate of
issue

Balance as of
1 April 2020

Balance as of
31 March 2021

Couponrate (%)

Maturity
10Y

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

9/26/20132/24/2017

420,059

420,046
0.001(200,000) to 0.576

8Y

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

4/24/201410/28/2016

520,315

320,175
0.001(120,000) to 0.202

6Y

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

6/30/20168/28/2020

200,111220,112(160,000)

0.001

4Y

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

1/13/2011

83,170

-

4.0

10Y

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

4/20/201511/20/2020

125,000

135,000(35,000)

0.001
to 0.15

5Y

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

4/22/20103/18/2021

3,360,000

3,385,000
0.049(400,000) to 1.465

10Y

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

1/31/20131/22/2014

50,00050,0001.161
to 1.334

15Y

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

6/25/20093/18/2021

1,575,000

1,765,000

0.180
to 2.266

20Y

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

6/26/201411/20/2020

105,000

150,000

0.446
to 1.864

30Y

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

2/26/20199/24/2020

30,00040,0000.646
to 0.882

40Y

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

7/23/20093/24/2021

2,600,288

3,117,917
0.001(216,500) to 2.334

2Y
to 40Y

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

2/26/20147/25/2014

20,000Floatingrate

20Y
to 30Y

1,935,253[USD 14,057 million]
0.010
1,517,247 [AUD 1,662 million]
to 5.092[EUR 2,080 million](318,542)

3Y
to 15Y

5/1/20142/10/2021

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

7/22/2013

9,863

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

4/27/20103/24/2021

2,510,000

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

11/24/20153/24/2021

311,500

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

11/24/20153/24/2021

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

4/21/20163/24/2021

Bonds issued by the JFM - Sub-total-

Floating
rate

7Y

2,260,000
0.069(300,000) to 1.480

10Y

429,000

0.069
to 0.511

10Y

462,500

594,000

0.190
to 1.154

20Y

590,000

740,000

0.190
to 0.778

20Y

18,959,899

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

-

-

-

JFM ANNUAL REPORT 2021

Appendix / JFM Data

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

20,000Financial Section¥3,817,710
0.001(512,860) to 1.400

JFM’s Role in Local
Government Finance¥4,469,844

Management
Structure

4/19/20101/21/2020

Operations

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

Review and Plan

Bonds as of 31 March 2021 consisted of the following:85

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

86

1/26/20094/30/2009

84,973

84,9762.07
to 2.29

20Y

Bonds issued by Japan Finance Organization for MunicipalEnterprises - Sub-total-

84,973

84,976--

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

6/22/20057/18/2007

184,860

144,985(80,000)

1.6
to 2.2

15Y

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

7/30/20026/16/2008

569,858

569,883

1.03
to 2.58

20Y

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

1/29/20049/20/2006

189,909

189,915

2.39
to 2.95

30Y

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

2/14/20036/9/2004

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

28Y

Bonds issued by the Predecessor - Sub-total-

968,589926,574(82,170)

-

-

Total

-

¥20,013,462¥20,410,767(2,345,072)--

JFM ANNUAL REPORT 2021

4/19/20101/21/2020$40,377,996$34,486,996
0.001(4,632,882) to 1.400

10Y

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

9/26/20132/24/2017

3,794,577

3,794,455
0.001(1,806,685) to 0.576

8Y

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

4/24/201410/28/2016

4,700,231

2,892,284
0.001(1,084,011) to 0.202

6Y

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

6/30/20168/28/2020

1,807,690

1,988,366(1,445,348)

0.001

4Y

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

1/13/2011

751,309

-

4.0

10Y

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

4/20/201511/20/2020

1,129,178

1,219,512(316,170)

0.001
to 0.15

5Y

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

4/22/20103/18/2021

30,352,304

30,578,139
0.049(3,613,369) to 1.465

10Y

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

1/31/20131/22/2014

451,671451,671

1.161
to 1.334

15Y

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

6/25/20093/18/2021

14,227,642

15,943,993

0.180
to 2.266

20Y

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

6/26/201411/20/2020

948,509

1,355,014

0.446
to 1.864

30Y

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

2/26/20199/24/2020

271,003361,3370.646
to 0.882

40Y

Non-guaranteed bonds issued by the JFM(domestic) FLIP bonds (Series F2-F6, F8-F14, F16-F17,
F24, F28-F29, F37, F42-F43, F45-F47, F49, F51-F52,
F54-69, F71-F73, F75-F80, F82-F85, F87-F90, F92-F93,
F95-F98, F100-F109, F111-F112, F115-F139, F141- F153,
F155-F164, F166-F169, F171-F210, F212-F243, F245-F276,
F278-F310, F312-F400, and F402-F607)

7/23/20093/24/2021

23,489,509

28,165,470
0.001(1,955,736) to 2.334

2Y
to 40Y

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

2/26/20147/25/2014

180,668

Floatingrate

20Y
to 30Y

17,481,964[USD 14,057 million]
0.010
13,705,944 [AUD 1,662 million]
to 5.092[EUR 2,080 million](2,877,528)

3Y
to 15Y

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

7/22/2013

89,097

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

4/27/20103/24/2021

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

180,668

Maturity

7Y

22,673,893

20,415,537
0.069(2,710,027) to 1.480

10Y

11/24/20153/24/2021

2,813,911

3,875,339

0.069
to 0.511

10Y

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

11/24/20153/24/2021

4,177,958

5,365,854

0.190
to 1.154

20Y

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

4/21/20163/24/2021

5,329,720

6,684,734

0.190
to 0.778

20Y-

171,272,810

175,241,333(20,441,756)--

Bonds issued by the JFM - Sub-total

JFM ANNUAL REPORT 2021

Appendix / JFM Data

Floating
rate-

Financial Section

5/1/20142/10/2021

Couponrate (%)

JFM’s Role in Local
Government Finance

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

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

Balance as of
31 March 2021

Management
Structure

Balance as of
1 April 2020

Operations

Date ofissue

Type of bond

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

87

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

1/26/20094/30/2009

767,604

767,631

2.07
to 2.29

20Y

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

767,604

767,631--

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

6/22/20057/18/2007

1,669,924

1,309,716(722,674)

1.6
to 2.2

15Y

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

7/30/20026/16/2008

5,147,777

5,148,001

1.03
to 2.58

20Y

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

1/29/20049/20/2006

1,715,534

1,715,589

2.39
to 2.95

30Y

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

2/14/20036/9/2004

216,441

196,838(19,603)

1.39
to 2.01

28Y

Bonds issued by the Predecessor - Sub-total-

8,749,676

8,370,144(742,277)

-

-

Total

-

$180,790,090$184,379,107(21,184,033)--

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, the JFM’s total assets are pledged as general collateral for JFM bonds in the amount of
20,410,767 million yen (184,379,107 thousand U.S. dollars) as of 31 March 2021.
2. Amounts in square brackets under “Balance as of 31 March 2021” for “Non-guaranteed bonds issued by the JFM (international)— (Series 43-45, 4787)” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2021” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:

88

JFM ANNUAL REPORT 2021

(Millions of yen)

Within 1 year
Bonds

¥2,072,865

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥2,345,072¥2,124,677¥2,332,910¥1,827,159

As of 31 March 2021

(Millions of yen)

Within 1 year
Bonds

¥2,345,072

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

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

Within 1 year
Bonds

$21,184,032

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years$19,355,717$21,101,265$17,408,848$16,757,337

Classification of borrowed money

Balance as of
1 April 2019

(Millions of yen)

Balance as of
31 March 2020

Average interest rate(%)

Repayment date

-

-

-

-

Long-term borrowed money(repayment within 1 year)¥10,000---

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

118,000¥203,000

0.324

9/27/20213/16/2040¥128,000¥203,000

-

-

Total

Borrowed money as of 31 March 2021 consisted of the following:(Millions of yen)Classification of borrowed money

Balance as of
1 April 2020

Balance as of
31 March 2021

Average interest rate(%)

Repayment date

-

-

-

-

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

9/27/2021¥203,000¥293,000

0.259

5/29/20233/16/2040¥203,000¥294,000--

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

Classification of borrowed money

Balance as of
1 April 2020

Balance as of
31 March 2021

Average interest rate(%)

Repayment date

-

-

-

-

Long-term borrowed money(repayment within 1 year)-$9,0330.080

9/27/2021$1,833,785

2,646,793

0.259

5/29/20233/16/2040$1,833,785$2,655,827

-

-

Total

JFM ANNUAL REPORT 2021

Appendix / JFM Data

Short-term borrowed money

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

Financial Section

Short-term borrowed money

JFM’s Role in Local
Government Finance

Short-term borrowed money

Management
Structure

10. Borrowed Money
Borrowed money as of 31 March 2020 consisted of the following:

Operations(Thousands of U.S. dollars)

Review and Plan

As of 31 March 202089

Financial Section
Financial Statements
Notes: 1. Average interest rates are calculated by dividing the total amount of interest paid by the total amount of principal
multiplied by repayment years.
2. Annual schedule of repayments within five years after the fiscal year-end:
As of 31 March 2020

(Millions of yen)

Within 1 year
Borrowed money¥-

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥ 1,000¥-¥ 86,200¥83,400

As of 31 March 2021

(Millions of yen)

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

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥-¥86,200¥ 83,400¥88,000(Thousands of U.S. dollars)Within 1 year
Borrowed money$9,033After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years$-$778,681$753,388$794,941

11. Reserves
Reserves as of 31 March 2020 consisted of the following:(Millions of yen)

Balanceas of
31 March
2020

Decrease during the year

Balanceas of
1 April 2019

Increaseduring theyear

Reserve for bonuses

¥57

¥58

¥57

¥-

¥58

Reserve for bonuses for directors andcorporate auditors

10

10

10

-

10

Reserve for retirement benefits

52

17

0

7

62

Reserve for retirement benefits for directors
and corporate auditors

24

8

-

1

32

Classification of reserve

Intended
purposeOther

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

90

Balanceas of
31 March2021

Decrease during the year

Balanceas of
1 April 2020

Increaseduring theyear

Reserve for bonuses

¥58

¥59

¥58

¥-

¥59

Reserve for bonuses for directors andcorporate auditors

10

10

10

-

10

Reserve for retirement benefits

62

6

2

13

52

Reserve for retirement benefits for directors
and corporate auditors

32

6

15

1

21

Classification of reserve

JFM ANNUAL REPORT 2021

Intended
purposeOtherClassification of reserve

Balanceas of
1 April 2020

Increaseduring theyear

Reserve for bonuses

Balanceas of
31 March2021

Decrease during the year
Intended
purpose

Other

$526

$534

$526

$-

$534

Reserve for bonuses for directors andcorporate auditors

94

92

94

-

92

Reserve for retirement benefits

561

57

24

119

475

Reserve for retirement benefits for directors
and corporate auditors

290

57

140

16

191

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

Operations

12. Reserve for Interest Rate Volatility
Reserve for interest rate volatility as of 31 March 2020 consisted of the following:(Millions of yen)

Decrease during the year

AmountprovidedAmountwithdrawn

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

Management account reserve forinterest rate volatility

597,076108,531¥2,797,076¥108,531

Total

¥-

¥-

¥-

Balanceas of
31 March
2020¥2,200,000

100,000¥-

605,607¥100,000¥-¥2,805,607

Management
Structure

Increase during the year

Balanceas of
1 April 2019

Reserve for interest rate volatility as of 31 March 2021 consisted of the following:
Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn

Classification of reserve

Balanceas of
1 April 2020

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

Management account reserve forinterest rate volatility

605,607

95,314¥2,805,607¥95,314

Total

¥-

¥-

¥-

Balanceas of
31 March
2021¥2,200,000

60,000¥-640,921¥60,000¥-¥2,840,921

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

Decrease during the year

AmountprovidedAmountwithdrawn

Balanceas of
1 April 2020

Reserve for interest rate volatility$19,873,532$-

Management account reserve forinterest rate volatility

5,470,713

861,012$25,344,245$861,012

Total

$-

$-

$-

Balanceas of
31 March
2021$19,873,532

542,005$-

5,789,719$542,005$-$25,663,251

Financial Section

Increase during the year

Classification of reserve

Appendix / JFM Data
JFM ANNUAL REPORT 2021

91

Financial Section
Financial Statements
Note: The “decrease during the year” for the “Management account reserve for interest rate volatility” in the amount of
60,000 million yen (542,005 thousand U.S. dollars) consists of the payment to the national treasury in accordancewith the ministerial ordinance for attribution to the national government.

13. Fund for Lending Rate Reduction
Fund for lending rate reduction as of 31 March 2020 consisted of the following:(Millions of yen)Classification of fund

Balanceas of
1 April 2019

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn

OthersBalanceas of
31 March
2020

Basic fund for lending rate
reduction¥920,287¥6,996¥-¥6,996¥-¥920,287

Total¥920,287¥6,996¥-¥6,996¥-¥920,287

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

Balanceas of
1 April 2020

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn

OthersBalanceas of
31 March
2021

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

Total¥920,287¥9,041¥-¥9,041¥-¥920,287(Thousands of U.S. dollars)

Classification of fund

Balanceas of
1 April 2020

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn

OthersBalanceas of
31 March
2021

Basic fund for lending rate
reduction$8,313,347$81,672$-$81,672$-$8,313,347

Total$8,313,347$81,672$-$81,672$-$8,313,347

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

92

JFM ANNUAL REPORT 2021

As of and for the year ended 31 March 2020
(1) Outline of retirement benefits system
The JFM has a defined benefit plan that contributes
to the Corporate Pension Fund and offers lump-sum
payments upon retirement of employees and adefined contribution plan. The reserve for retirement
benefits and pension expenses are calculated using
the simplified method.

(2) Defined benefit plan(a) Reconciliation of outstanding amounts of reserve
for retirement benefits:

JFM ANNUAL REPORT 2021

Appendix / JFM Data

(For the year ended 31 March 2021)
Net income of the general account was 27,388 million
yen (247,414 thousand U.S. dollars), while there wasno net income of management account.

Financial Section

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

15. Net Income by Account(For the year ended 31 March 2020)
Net income of the general account was 25,767 million
yen, while there was no net income of management
account.

JFM’s Role in Local
Government Finance(c) Profit and loss associated with employee retirement
benefits
Pension expenses calculated based on the simplified
method: 17million yen(c) Profit and loss associated with employee retirement
benefits
Pension expenses calculated based on the simplified method: 0 million yen (5 thousand U.S. dollars)Management
Structure(b) Retirement benefit obligation, plan assets, andreconciliation of retirement benefit asset and liability
Funded retirement benefit obligation: 
184 million yen
Plan assets: (168) million yen
Balance: 
15 million yen
Unfunded retirement benefit obligation:46 million yen
Net liability for retirement benefits in the balance
sheet: 
62 million yen
Reserve for retirement benefits at the end of the
fiscal year: 
62 million yen
Net liability for retirement benefits in the balance
sheet: 
62 million yen(b) Retirement benefit obligation, plan assets, andreconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:

184 million yen (1,663 thousand U.S. dollars)
Plan assets:(181) million yen (1,638 thousand U.S. dollars)
Balance:
2 million yen (25 thousand U.S. dollars)
Unfunded retirement benefit obligation:
49 million yen (450 thousand U.S. dollars)
Net liability for retirement benefits in the balance
sheet:
52 million yen (475 thousand U.S. dollars)
Reserve for retirement benefits at the end of the
fiscal year:
52 million yen (475 thousand U.S. dollars)
Net liability for retirement benefits in the balance
sheet:
52 million yen (475 thousand U.S. dollars)

Operations(2) Defined benefit plan(a) Reconciliation of outstanding amounts of reserve
for retirement benefits:
Reserve for retirement benefits at the beginning of
the fiscal year: 
52 million yen
Pension expenses: 
17 million yen
Employee retirement benefits paid:  0 million yen
Contributions to the defined benefit plan:
7 million yen
Reserve for retirement benefits at the end of the
fiscal year: 
62 million yen

Reserve for retirement benefits at the beginning of
the fiscal year:
62 million yen (561 thousand U.S. dollars)
Pension expenses:

0 million yen (5 thousand U.S. dollars)
Employee retirement benefits paid:
2 million yen (24 thousand U.S. dollars)
Contributions to the defined benefit plan:
7 million yen (67 thousand U.S. dollars)
Reserve for retirement benefits at the end of the
fiscal year:
52 million yen (475 thousand U.S. dollars)

Review and Plan

14. Reserve for Retirement Benefits

93

Financial Section
Financial Statements
16. Information by Account (Balance sheets)
Balance sheets of general account and management account as of 31 March 2020 were as follows:(Millions of yen)

Item

Generalaccount

Management
account¥16,640,828¥6,758,787

OffsetTotal(Assets)
Loans¥23,399,615

Securities

365,500

365,500

Cash and bank deposits

557,437

557,437

Cash collateral paid for financial instruments

12,391

12,391Other assets

3,682

Tangible fixed assets

2,777

2,777

Intangible fixed assets

1,097

1,097

Due from general accountTotal assets

4,199

7,881

582,840¥(582,840)

17,583,713

7,345,827(582,840)

13,351,373

6,662,089

24,346,700(Liabilities)
Bonds

20,013,462

Borrowed money

203,000

203,000

Cash collateral received for financial instruments

58,07358,073

Other liabilities

1,889

3,150

5,040

Reserve for bonuses

58

58

Reserve for bonuses for directors and corporate auditors

10

10

Reserve for retirement benefits

62

62

Reserve for retirement benefits for directors and corporate
auditors

32

32

920,287920,287920,287920,287

Fund for lending rate reduction
Basic fund for lending rate reduction
Due to management account582,840

Reserves under special laws

2,200,000

Reserve for interest rate volatility

622,777

2,822,777

2,200,000

Management account reserve for interest rate volatility
Reserve for interest rate reduction
Total liabilities(582,840)

17,317,625

2,200,000
605,607605,607

17,16917,1697,288,018(582,840)

24,022,803(Net Assets)
Capital16,602

16,602Retained earnings

238,383

238,383

238,383

238,383

11,101

11,101

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

94

JFM ANNUAL REPORT 2021

57,80857,808266,087

57,808323,896¥17,583,713¥7,345,827¥(582,840)¥24,346,700

(Millions of yen)

Item

Generalaccount

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

OffsetTotal(Assets)
Loans
Securities¥23,144,389
593,000

1,106,432

1,106,432

Cash collateral paid for financial instruments

3,282

3,282

Other assets

3,381

Tangible fixed assets

2,654

2,654

Intangible fixed assets

933

933

Due from general accountTotal assets

3,533

6,914

¥(600,823)

19,039,474

6,418,956(600,823)

14,706,147

5,704,619

24,857,606(Liabilities)
Bonds

20,410,767

Borrowed money

294,000

294,000

Cash collateral received for financial instruments

33,48033,480

Other liabilities

1,779

2,891

4,670

59

59

Reserve for bonuses for directors and corporate auditors

10

10

Reserve for retirement benefits

52

52

Reserve for retirement benefits for directors and corporate
auditors

21

21

920,287920,287920,287920,287

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

600,823

Reserves under special laws

2,200,000

653,636

2,853,636

2,200,000

2,200,000

Management account reserve for interest rate volatility

640,921640,921

Reserve for interest rate reduction

12,714

12,714

Total liabilities

18,756,661

6,361,147(600,823)

24,516,985(Net Assets)
16,602

16,602Retained earnings

265,772

265,772

265,772

265,772

437

437

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

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

JFM ANNUAL REPORT 2021

Appendix / JFM Data

CapitalFinancial Section

Reserve for interest rate volatility(600,823)

JFM’s Role in Local
Government FinanceReserve for bonuses

Management
Structure

600,823

Operations

593,000

Cash and bank deposits

Review and Plan

Balance sheets of general account and management account as of 31 March 2021 were as follows:95

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

Item

Generalaccount

Management
account$156,547,337$52,525,740

OffsetTotal(Assets)
Loans$209,073,077

Securities

5,356,820

5,356,820

Cash and bank deposits

9,994,870

9,994,870

Cash collateral paid for financial instruments

29,64829,648Other assets

30,549Tangible fixed assets

23,98023,980Intangible fixed assets

8,432

8,432

Due from general accountTotal assets

31,91762,466

5,427,495$(5,427,495)

171,991,636

57,985,152(5,427,495)

132,846,863

51,532,244

224,549,293(Liabilities)
Bonds
Borrowed money

184,379,107

2,655,827

2,655,827

Cash collateral received for financial instruments

302,439

302,439

Other liabilities

16,076

26,11842,194

Reserve for bonuses

534

534

Reserve for bonuses for directors and corporate auditors

92

92

Reserve for retirement benefits

475

475

Reserve for retirement benefits for directors and corporate
auditors

191

191

8,313,347

8,313,347

8,313,347

8,313,347

Fund for lending rate reduction
Basic fund for lending rate reduction
Due to management account5,427,495

Reserves under special laws

19,873,532

Reserve for interest rate volatility

5,904,577

25,778,109

19,873,532

Management account reserve for interest rate volatility
Reserve for interest rate reduction
Total liabilities(5,427,495)

169,436,871

19,873,532
5,789,719

5,789,719

114,858

114,858

57,462,939(5,427,495)

221,472,315(Net Assets)
CapitalRetained earnings
General account surplus reserve
Valuation, translation adjustments and others

149,974

149,974

2,400,836

2,400,836

2,400,836

2,400,836

3,955

3,955

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

96

JFM ANNUAL REPORT 2021

522,213522,2132,554,765

522,213

3,076,978$171,991,636$57,985,152$(5,427,495) $224,549,293

Operations

17. Information by Account (Statements of income)Statements of income of general account and management account from 1 April 2019 through 31 March 2020 wereas follows:

Review and Plan

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

(Millions of yen)

Generalaccount

Management
account

Income¥133,662¥162,962

Interest income

126,123

156,499

OffsetTotal¥(6,897)¥289,727
282,623

Fees and commissions

87

87

Other operating income

8

8

7,008

7,008

Contributions from fund for lending rate reduction

6,996

6,996

Others12Administrative fee for management account434

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

12
(434)
8

(8)

6,454

(6,454)(6,897)

107,871

59,690Interest expenses

95,472

58,798154,271

Fees and commissions

179

119

299

Other operating expenses

2,627

299

2,926

General and administrative expenses

3,128

38

3,166

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

8

(8)

6,454

(6,454)

Administrative fee for management accountOrdinary income
Special gains

160,663

434

(434)

25,791

103,272-

129,063-

105,259-

105,259

Reversal of reserve for interest rate reduction
Special losses

23

Loss on disposal of fixed assets

23

100,000

100,000

5,259

5,259

208,531-

208,555
23

Provision for management account reserve for interest rate
volatility

108,531

108,531

Payment to national treasury

100,000

100,000

Net income¥25,767¥-¥-¥25,767

JFM ANNUAL REPORT 2021

Appendix / JFM Data

Reversal of management account reserve for interest rate
volatility

Financial Section

Expenses

JFM’s Role in Local
Government Finance

Other income

Management
Structure

Item

97

Financial Section
Financial Statements
Statements of income of general account and management account from 1 April 2020 through 31 March 2021 wereas follows:(Millions of yen)

Item

Generalaccount

Management
account

Income¥127,026¥138,908Interest income

117,492

133,288

OffsetTotal¥(6,011)¥259,923
250,780

Fees and commissions

83

83

Other operating income

7

7

9,052

9,052

9,041

9,041

11

11

Other income
Contributions from fund for lending rate reduction
OthersAdministrative fee for management account391

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

(391)
5

(5)

5,615

(5,615)(6,011)

Expenses

99,63748,049Interest expenses

141,675

87,13547,445

134,580

Fees and commissions

189

102

292

Other operating expenses

3,622

91

3,713

General and administrative expenses

3,069

19

3,088

Other expenses

0Interest on due to management account

5

(5)

5,615

(5,615)

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

0

391

(391)

27,38890,859-118,247-

64,454-64,454

Reversal of management account reserve for interest rate
volatility

60,00060,000

Reversal of reserve for interest rate reduction

4,454

4,454

Special losses-

155,314-

155,314

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

95,314

95,314

Payment to national treasury

60,00060,000Net income

98

JFM ANNUAL REPORT 2021

¥27,388¥-¥-¥27,388

Generalaccount

Management
account

Income$1,147,483$1,254,817

Interest income

1,061,360

1,204,047

Item

OffsetTotal$(54,302)$2,347,998
2,265,407

750

750

Other operating income

68

68

81,773

81,77381,672

81,672

101

101

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

3,532

Interest on due from general accountTransfer from general account for fund for lending rate
reduction(3,532)45(45)50,725(50,725)(54,302)

Expenses

900,069

434,047

Interest expenses

1,279,814

428,592

1,215,725

1,716

925

2,641

Other operating expenses

32,724823

33,547

General and administrative expenses

27,726

175

27,901Other expenses
Transfer to management account for fund for lending rate
reduction

45

(45)

50,725(50,725)

Ordinary income
Special gains

3,532(3,532)

247,414820,770-

1,068,184-

582,247-

582,247

Reversal of management account reserve for interest rate
volatility

542,005

542,005

Reversal of reserve for interest rate reduction

40,24240,242

Special losses-

1,403,017-

1,403,017

Loss on disposal of fixed assets
861,012

861,012

Payment to national treasury

542,005

542,005

Net income$247,414$-$-$247,414

Financial Section

Provision for management account reserve for interest rate
volatility

JFM’s Role in Local
Government Finance

Administrative fee for general accountManagement
Structure

787,133

Fees and commissions

Interest on due to management accountOperations

Fees and commissions

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

Appendix / JFM Data
JFM ANNUAL REPORT 2021

99

Financial Section
Financial Statements
18. Fair Value of Marketable Securities
Marketable held-to-maturity securities as of 31 March 2020 consisted of the following:Type
Securities with fair values
exceeding the balance
sheet amountBook value-

Fair value

Difference

-

-

-

-

-

-

Negotiable certificates ofdeposit¥365,500¥365,500-

Sub total

365,500

365,500-¥365,500¥365,500-

Sub total

Securities with fair values
that do not exceed the balance
sheet amount(Millions of yen)

Total

Marketable held-to-maturity securities as of 31 March 2021 consisted of the following:Type
Securities with fair values
exceeding the balance
sheet amountBook value-

Fair value

Difference

-

-

-

-

-

-

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

Sub total

593,000

593,000-¥593,000¥593,000-

Sub total

Securities with fair values
that do not exceed the balance
sheet amount(Millions of yen)

Total

(Thousands of U.S. dollars)

Type
Securities with fair values
exceeding the balance
sheet amount

-

Total

JFM ANNUAL REPORT 2021

Fair value

Difference

-

-

-

-

-

-

Negotiable certificates ofdeposit$5,356,820$5,356,820-

Sub total

5,356,820

5,356,820-$5,356,820$5,356,820-

Sub total

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

100

Book value

Operations
Management
Structure

JFM’s Role in Local
Government Finance
Financial Section

deposits, a foreign exchange forward contract isentered into at the time of each deposit to hedge
the risks.
(d) Assessment of hedge effectiveness
The JFM ensures hedging instruments andhedged items have the same major terms whenentering into hedge transactions to offset market
fluctuation risks associated with bonds and longterm borrowed money.
Accordingly, The JFM deems these to be highly
effective and thus does not assess effectiveness.
Moreover, a periodic assessment of hedge effectiveness for interest rate swaps and currency
swaps and forward contracts that qualify for deferral
hedge accounting is omitted when the exceptional accrual method is applied.
(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 in the underlying hedged items.
The JFM enters into ISDA Master Agreements
and CSA with financial institutions, which are its derivative transactions counterparties, to reduce
credit risk. Moreover, The JFM constantly monitors
restructuring costs of the transactions and thecounterparties’ credit profiles, and deals with multiple counterparties.
(4) Risk management system for derivative transactions
Execution and management of derivative transactions are conducted by the Finance Departmentof The JFM with the approval of persons in chargein accordance with the operational guidelines
which specify transaction authority and limits on
the transaction amount.
Additionally, the total amount of 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.

Review and Plan
Appendix / JFM Data

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

JFM ANNUAL REPORT 2021

101

Financial Section
Independent Auditor’s Report

102

JFM ANNUAL REPORT 2021

Review and Plan

Operations

Management
Structure

JFM’s Role in Local
Government Finance

Financial Section

Appendix / JFM Data103

JFM ANNUAL REPORT 2021

Appendix / JFM Data

104

105

Appendix

105

Members of the Representative Board and the Supervisory Committee

105

Redemption of Loans in Fiscal 2020

106

Outstanding Loans by Business

107

Additional data regarding liquidity risk

108

Outstanding Loans by Borrower

112

Bond Issuance in Fiscal 2020

116

Outstanding International Bonds117

JFM Data

117

Organization History

118

Organization Chart

119

Directors and Corporate Auditors

119

Contact Information

JFM ANNUAL REPORT 2021

Appendix / JFM Data
Appendix

The Representative Board members of JFM as of 1 August 2021 are as follows:
Title

Background

KOUNO Shunji

Chairman

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

USHIKOSHI Toru

Deputy Chairman

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

ARAKI Yasuomi

Deputy Chairman

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

OBATA Junko

MemberProfessor, Sophia University Law School

JINNO NaohikoMemberProfessor Emeritus, The University of Tokyo

SUMIHIRO Isao

MemberSpecial Advisor of The Hiroshima Bank, Ltd.

Operations

Name

Title

Management
Structure

The Supervisory Committee members of JFM as of 1 August 2021 are as follows:
Name

Background

Chairman

Chairman, Tanshi Association

SUZUKI Yutaka

Deputy Chairman

Professor Emeritus, Aoyama Gakuin University

SEIICHI Tomoko

MemberProfessor, Seinan Gakuin University

YONEDA Yasuharu

MemberProfessor Emeritus, Shinshu University

TAMAOKI Hitomi

MemberChief Executive Officer of Tsumugi Co., Ltd.

KAMIZAKI Masanori

MemberDirector, Jiji Press, Ltd.

JFM’s Role in Local
Government Finance

MITANI Takahiro

Redemption of Loans in Fiscal 2020
Principal
Classification

Interest
Number of loans

Amount(USD millions)460,394

16,204

518,901

2,263

214

54

214

3

460,608

16,258519,115

2,266

General loans

256

132

241

0

Loans to local
government corportions

5

1

5

0

Subtotal

261

133

246

0

Redemption of loans with pre-consent or pre-approval

-

-

-

-

Redemption of short-term loans

-

-

-

-

460,869

16,391

519,361

2,266

Loans to local government
corporations

Regular redemption of
long-term loans

Subtotal

Prepayment of long-term
loans

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

JFM ANNUAL REPORT 2021

Appendix / JFM Data

Amount(USD millions)

Financial Section

Number of loans
General loans

Review and Plan

Members of the Representative Board and theSupervisory Committee

105

Appendix / JFM Data
Appendix

Outstanding Loans by Business(As of 31 March 2021)
Number ofLoans Made

Business

Loan Amount (USD millions)% of Total

Public Projects, etc.

4,877

4,630

2.2%

Public Housing

3,500

2,106

1.0%

National Disaster Prevention

1,268

1,125

0.5%

Educational Facilities Development

1,630

767

0.4%

Social Welfare Facilities Development

1,730

1,013

0.5%

General Waste Disposal

490

479

0.2%

General Projects

933

756

0.4%

Regional Revitalization

1,770

754

0.4%

Disaster Management and Mitigation

11,987

7,359

3.6%

Local Road Development

6,088

4,480

2.1%

Special Municipal Mergers

5,964

9,864

4.7%

Disaster Prevention

2,823

1,547

0.7%

Others15,956

8,069

3.8%

59,01642,95020.5%

Water Supply

54,39828,313

13.5%

Transportation

850

6,889

3.3%

4,850

10,3585.0%

121,877

63,842

30.5%

2,159

1,476

0.7%

Electricity and Gas

736

658

0.3%

Port Facilities

788

347

0.2%

Markets and Slaughterhouses

720

951

0.4%

Tourism and Others

184

117

0.1%

186,562

112,951

54.0%

Temporary Financial Countermeasures Funding

8,648

52,40325.1%

Loans Covering Decrease in Local Tax Revenues

5

628

0.3%

254,231208,931

99.9%

83

142

0.1%

254,314

209,073

100.0%

General
Account-related
Loanssubtotal

Hospitals and Elderly Care Services
Sewerage
Municipal
Enterprise-related
Loans

Industrial Water Supply

subtotal

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

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

106

JFM ANNUAL REPORT 2021

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

(As of 31 March 2021)(USD millions)

Item

31 March 2020

31 March 2021

Total of liquid assets *1

678

903

Outflows related to unsecured funding(excluding debt securities)

After applying
cash outflow/inflow
rate

Before applying
cash outflow/inflow
rate

After applying
cash outflow/inflow
rate

0

0

0

2,322

2,322

3,125

3,125

-

2,322

-

3,125

2,304

1,741

3,397

2,344

Cash inflows from collection of loans

0

0

0

0

Other cash inflows *3

0

0

0

0

2,304

1,741

3,397

2,344

High quality liquid assets

-

678

-

903

Net cash outflows

-

580

-

781

Liquidity coverage ratio

-

117%

-

116%

Debt securities
Total cash outflows
Cash inflows from investment *2

Total cash inflows *4

Total of semi liquid assets *5

-

2,353
522%

-

8,559

-

1,211%

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

Financial Section

Semi Liquidity coverage ratio*6

JFM’s Role in Local
Government Finance0Management
Structure

Before applying
cash outflow/inflow
rate

Operations

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

Review and Plan

Additional data regarding liquidity risk

Appendix / JFM Data
JFM ANNUAL REPORT 2021

107

Appendix / JFM Data
Appendix

Outstanding Loans by Borrower(As of 31 March 2021)
Cities and Special Wards ofTokyo

Prefectures
Borrower

108

Number ofLoans Made

Towns and Villages

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Hokkaido

292

4,131

5,461

5,981

8,606

1,890

Aomori

187

309

2,127

2,450

1,441

415

Iwate

248

471

2,737

2,275

869

283

Miyagi

323

1,033

4,629

3,581

2,663

482

Akita

208

254

4,616

2,383

1,049

85

Yamagata

217

693

2,835

1,509

1,940

321

Fukushima

427

843

3,669

2,171

3,085

497

Ibaraki

479

1,217

7,041

4,264

1,434

366

Tochigi

268

705

3,233

2,075

883

256

Gunma

208

259

3,414

1,834

1,784

294

Saitama

245

2,513

6,739

6,313

1,878

530

Chiba

383

1,257

5,362

6,515

938

244

Tokyo

96

913

2,239

2,781

172

43

Kanagawa

202

1,851

3,340

7,329

1,300

448

Niigata

263

488

7,992

3,784

970

155

Toyama

251

248

3,612

2,568

564

194

Ishikawa

137

262

2,849

1,596

1,292

408

Fukui

204

271

2,205

1,436

780

94

Yamanashi

144

268

2,782

965

976

144

Nagano

269

338

4,192

2,274

3,186

500

Gifu

221

1,392

4,372

1,891

1,373

376

Shizuoka

297

408

5,121

3,308

826

246

Aichi

214

1,964

5,369

5,714

905

223

Mie

402

1,323

4,065

2,849

1,103

261

Shiga

192

687

4,087

2,135

606

124

Kyoto

192

403

3,713

4,251

1,163

275

Osaka

86

1,621

6,075

11,407

966

343

Hyogo

311

3,728

8,352

8,780

2,225

796

Nara

267

959

2,474

1,776

2,101

623

Wakayama

113

442

1,812

2,040

1,625

539

Tottori

355

889

1,293

997

1,899

391

JFM ANNUAL REPORT 2021

Number ofLoans Made

Loan Amount(USD millions)

Local Government Road
Corporations
Number ofLoans Made

Loan Amount(USD millions)

Total
Number ofLoans Made

Loan Amount(USD millions)% of Total

12,232

5.9

106

143

-

-

3,861

3,317

1.6

215

170

-

-

4,069

3,198

1.5

128

71

-

-

7,743

5,167

2.5

12

14

-

-

5,885

2,735

1.3

174

86

-

-

5,166

2,609

1.2

180

156

-

-

7,361

3,666

1.8

269

246

1

0

9,224

6,094

2.9

19

26

-

-

4,403

3,061

1.5

252

248

-

-

5,658

2,635

1.3

325

169

1

0

9,188

9,524

4.6

589

409

3

6

7,275

8,431

4.0

31

136

-

-

2,538

3,872

1.9

57

320

-

-

4,899

9,949

4.8

244

153

-

-

9,469

4,580

2.2

149

120

-

-

4,576

3,131

1.5

36

27

-

-

4,314

2,292

1.1

66

26

-

-

3,255

1,828

0.9

147

41

-

-

4,049

1,417

0.7

186

114

2

0

7,835

3,225

1.5

12

9

-

-

5,978

3,668

1.8

77

82

7

1

6,328

4,045

1.9

76

23

27

82

6,591

8,005

3.8

31

41

-

-

5,601

4,474

2.1

157

68

-

-

5,042

3,014

1.4

32

59

3

1

5,103

4,989

2.4

440

647

-

-

7,567

14,018

6.7

413

414

8

3

11,30913,722

6.6

53

44

-

-

4,895

3,402

1.6

98

70

-

-

3,648

3,091

1.5

34

18

-

-

3,581

2,296

1.1

JFM ANNUAL REPORT 2021

Appendix / JFM Data

14,654

Financial Section-

JFM’s Role in Local
Government Finance-Management
Structure

230

Operations

295

Review and Plan

Local Government Associations

109

Appendix / JFM Data
Appendix
Cities and Special Wards ofTokyo

Prefectures
Borrower

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Number ofLoans Made

Loan Amount(USD millions)

Shimane

288

848

2,706

1,763

319

71

Okayama

214

721

4,604

2,878

1,274

234

Hiroshima

471

1,705

4,253

3,899

950

264

Yamaguchi

414

496

4,205

2,381

621

100

Tokushima

191

363

1,516

1,123

880

264

Kagawa

164

245

1,775

991

734

196

Ehime

81

264

2,289

1,773

710

235

Kochi

166

850

1,792

1,225

905

245

Fukuoka

93

1,479

5,375

7,611

2,290

927

Saga

68

321

1,606

1,388

657

262

Nagasaki

138

503

2,763

2,357

739

167

Kumamoto

150

707

2,724

1,742

1,781

491

Oita

80

267

2,305

1,225

204

64

Miyazaki

140

613

2,038

1,331

737

182

Kagoshima

175

1,192

2,332

1,481

901

250

Okinawa

223

854

1,630

1,471

911

235

10,757

43,570171,720

143,871

65,21516,033

Total

110

Number ofLoans Made

Towns and Villages

JFM ANNUAL REPORT 2021

Number ofLoans Made

Loan Amount(USD millions)

Local Government Road
Corporations
Number ofLoans Made

Loan Amount(USD millions)

Total
Number ofLoans Made

Loan Amount(USD millions)% of Total

-

-

3,391

2,721

1.3

99

104

-

-

6,191

3,937

1.9

18

23

13

25

5,705

5,916

2.8

106

48

-

-

5,346

3,026

1.4

3

1

-

-

2,590

1,752

0.8

597

213

-

-

3,270

1,645

0.8

19

7

-

-

3,099

2,278

1.1

10

68

-

-

2,873

2,388

1.1

384

225

17

23

8,159

10,265

4.9

159

92

-

-

2,490

2,063

1.0

15

24

-

-

3,655

3,052

1.5

66

195

1

0

4,722

3,135

1.5

0

0

-

-

2,589

1,556

0.7

16

6

-

-

2,931

2,132

1.0

17

14

-

-

3,425

2,937

1.4

49

19

-

-

2,813

2,579

1.2

6,539

5,458

83

142

254,314

209,073

100.0Management
Structure38

Operations

78

Review and Plan

Local Government Associations

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

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

111

Appendix / JFM Data
Appendix

Bond Issuance in Fiscal 2020
1. JFM bonds(1) International bonds
SeriesNumberTenor(yr)FormatCurrency

Issue Size(in millions)

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date73

5

Global

USD

1,500

1.000

99.88821 May 2020

21 May 2025

74

10

Euro

AUD

210

1.866

100.000

11 Jun 2020

11 Jun 2030

75

10

Euro

AUD

120

1.831

100.000

12 Jun 2020

12 Jun 2030

76

10

Euro

USD

60

1.290

100.000

22 Jul 2020

22 Jul 2030

77

5Global

USD

1,500

0.625

99.432

2 Sep 2020

2 Sep 2025

78

15

Euro

AUD

40

1.878

100.000

15 Oct 2020

15 Oct 2035

79

5

Euro

AUD

43

0.400

99.99028 Oct 2020

28 Oct 2025

80

10

Euro

AUD

70

1.436

100.000

28 Oct 2020

28 Oct 2030

81

15

Euro

AUD

250

2.004

100.000

27 Nov 2020

27 Nov 2035

82

10

Euro

AUD

200

1.490

100.000

27 Nov 2020

27 Nov 2030

83

10

Euro

AUD

30

1.453

100.000

27 Nov 2020

27 Nov 2030

84

10

Euro

AUD

100

1.485

100.000

9 Dec 2020

9 Dec 2030

85

5

Euro

AUD

40

0.470

99.99017 Dec 202017 Dec 2025

86

7

Euro

EUR

500

0.010

101.070

2 Feb 2021

2 Feb 2028

87

10

Global

USD

1,250

1.375

99.06410 Feb 2021

10 Feb 2031

(2) Domestic public offerings

112

SeriesNumber

Tenor
(yr)

131
132

Issue Size

Coupon(%)

Issue Price
(%)

271

0.155

100

20 Apr 2020

26 Apr 2030

271

0.135

100

26 May 2020

28 May 2030

30

271

0.155

100

26 Jun 2020

28 Jun 2030

30

271

0.150

100

20 Jul 2020

26 Jul 2030

10

35

316

0.160

100

21 Aug 2020

28 Aug 2030

10

35

316

0.145

100

17 Sep 2020

27 Sep 2030

137

10

30

271

0.145

100

19 Oct 2020

28 Oct 2030

138

10

35

316

0.145

100

20 Nov 2020

28 Nov 2030

139

10

30

271

0.125

100

17 Dec 2020

27 Dec 2030

140

10

30

271

0.125

100

22 Jan 2021

28 Jan 2031

141

10

35

316

0.150

100

19 Feb 2021

28 Feb 2031

142

10

35

316

0.224

100

18 Mar 2021

28 Mar 2031

82

20

20

181

0.369

100

20 Apr 2020

27 Apr 2040

83

20

25

226

0.440

100

26 Jun 2020

28 Jun 2040

(JPY inbillions)(USD inmillions)

10

30

10

30

133

10

134

10

135
136

Issue Date

Maturity Date

84

20

25

226

0.450

100

20 Jul 2020

27 Jul 2040

85

20

25

226

0.459

100

17 Sep 2020

28 Sep 2040

86

20

25

226

0.454

100

19 Oct 2020

26 Oct 2040

87

20

25

226

0.430

100

17 Dec 2020

28 Dec 2040

88

20

20

181

0.454

100

22 Jan 2021

28 Jan 2041

89

20

25

226

0.554

100

18 Mar 2021

28 Mar 2041

27

5

10

90

0.020

100

26 May 2020

28 May 2025

28

5

20

181

0.020

100

20 Nov 2020

28 Nov 2025

10

30

20

181

0.517

100

20 Apr 2020

28 Apr 2050

11

30

10

90

0.633

100

19 Aug 2020

26 Aug 2050

JFM ANNUAL REPORT 2021

Tenor(yr)

12Issue Size

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

136

0.716

100

20 Nov 2020

28 Nov 2050
28 Sep 2060

(JPY inbillions)(USD inmillions)

30

15

40

10

90

0.754

100

24 Sep 2020

11

6

54

0.180

100

24 Apr 2020

28 Apr 2031

F515

12

3

27

0.233

100

24 Apr 2020

24 Mar 2032

F516

13

3

27

0.248

100

24 Apr 2020

26 Nov 2032

F517

24

6

54

0.457

100

24 Apr 2020

28 Apr 2044

F518

35

6

54

0.577

100

24 Apr 2020

26 Mar 2055

F519

40

3

27

0.630

100

24 Apr 2020

23 Apr 2060

F520

9

20

181

0.128

100

28 Apr 2020

27 Apr 2029

F521

15

6

54

0.335

100

28 Apr 2020

27 Apr 2035

F522

25

5

45

0.487

100

28 Apr 2020

28 Apr 2045

F523

28

4

36

0.536

100

28 Apr 2020

28 Apr 2048
28 Apr 2049

27

0.526

100

28 Apr 2020

3

27

0.626

100

28 Apr 2020

28 Apr 2060

F526

15

3

27

0.340

100

30 Apr 2020

28 Sep 2035

F527

21

3

27

0.401

100

30 Apr 2020

29 Mar 2041

F528

27

5

45

0.517

100

30 Apr 2020

30 Apr 2047

F529

40

3

27

0.631

100

30 Apr 2020

28 Apr 2060

F530

40

3

27

0.629

100

30 Apr 2020

30 Apr 2060

F531

2

3

27

0.005

100

7 May 2020

27 May 2022

F532

6

6

54

0.020

100

28 May 2020

26 Dec 2025

F533

6

4

36

0.020

100

28 May 2020

28 May 2026

F534

7

4

36

0.020

100

28 May 2020

28 May 2027

F535

13

3

27

0.222

100

28 May 2020

28 Dec 2032

F536

15

3

27

0.292

100

28 May 2020

28 May 2035

F537

18

3

27

0.369

100

28 May 2020

28 Sep 2038

F538

6

6

54

0.020

100

29 May 2020

25 Dec 2025

F539

6

20

181

0.020

100

29 May 2020

26 Dec 2025
29 May 2029

9

6

54

0.086

100

29 May 2020

F541

12

3

27

0.196

100

29 May 2020

22 Mar 2032

F542

15

3

27

0.291

100

29 May 2020

29 May 2035

F543

31

3

27

0.503

100

29 May 2020

29 May 2051

F544

4

20

181

0.010

100

30 Jun 2020

27 Jun 2024

F545

4

20

181

0.010

100

30 Jun 2020

28 Jun 2024

F546

5

6

54

0.025

100

30 Jun 2020

29 Aug 2025

F547

6

12

108

0.020

100

30 Jun 2020

30 Jan 2026

F548

8

10

90

0.050

100

30 Jun 2020

30 Jun 2028

F549

12

20

181

0.205

100

30 Jun 2020

30 Mar 2032

F550

13

3

27

0.247

100

30 Jun 2020

30 Jun 2033

F551

15

10

90

0.331

100

30 Jun 2020

29 Jun 2035

F552

15

8

72

0.332

100

1 Jul 2020

27 Jun 2035

F553

15

5

45

0.331

100

1 Jul 2020

28 Jun 2035

F554

6

12

108

0.020

100

28 Jul 2020

26 Feb 2026

F555

6

3

27

0.020

100

28 Jul 2020

27 Feb 2026

F556

6

5

45

0.020

100

28 Jul 2020

28 Apr 2026

F557

6

5

45

0.020

100

28 Jul 2020

26 Jun 2026

F558

9

6

54

0.083

100

28 Jul 2020

27 Jul 2029

F559

15

6

54

0.320

100

28 Jul 2020

25 Jul 2035

F560

3

3

27

0.001

100

30 Jul 2020

31 Jul 2023

F561

9

20

181

0.101

100

30 Jul 2020

30 Jul 2029

F562

15

3

27

0.334

100

30 Jul 2020

26 Jul 2035

F563

15

4

36

0.336

100

30 Jul 2020

27 Jul 2035

F564

17

6

54

0.386

100

30 Jul 2020

27 Mar 2037

JFM ANNUAL REPORT 2021

113

Financial Section

F540

Appendix / JFM Data

3

40

JFM’s Role in Local
Government Finance

29

F525

Management
Structure

F524

Operations

3
F514

Review and Plan

SeriesNumberAppendix / JFM Data
AppendixSeriesNumber

Tenor
(yr)

F565

3

Issue Size

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

136

0.001

100

31 Jul 2020

28 Feb 2023

(JPY inbillions)(USD inmillions)

15

F566

6

9

81

0.020

100

31 Jul 2020

29 May 2026

F567

14

3.5

32

0.297

100

31 Jul 2020

31 Jan 2035

F568

15

3

27

0.326

100

31 Jul 2020

30 Jul 2035

F569

15

10

90

0.327

100

31 Jul 2020

31 Jul 2035

F570

5

6

54

0.024

100

25 Sep 2020

25 Nov 2025

F571

8

6

54

0.038

100

25 Sep 2020

28 Sep 2028

F572

8

10

90

0.059

100

25 Sep 2020

26 Mar 2029

F573

8

10

90

0.059

100

25 Sep 2020

27 Mar 2029

F574

11

3

27

0.180

100

25 Sep 2020

25 Dec 2031

F575

18

4

36

0.410

100

25 Sep 2020

28 Sep 2038

F576

21

6

54

0.457

100

25 Sep 2020

25 Mar 2042

F577

6

3

27

0.020

100

23 Oct 2020

23 Oct 2026

F578

8

20

181

0.061

100

23 Oct 2020

23 Oct 2028

F579

9

3

27

0.100

100

23 Oct 2020

22 Mar 2030

F580

11

7

63

0.182

100

23 Oct 2020

26 Mar 2032

F581

15

3

27

0.314

100

23 Oct 2020

23 Oct 2035

F582

18

6

54

0.421

100

23 Oct 2020

22 Apr 2039

F583

6

3

27

0.020

100

27 Oct 2020

27 Oct 2026

F584

9

3

27

0.099

100

27 Oct 2020

19 Apr 2030

F585

12

3

27

0.214

100

27 Oct 2020

28 Mar 2033

F586

13

3

27

0.231

100

27 Oct 2020

28 Oct 2033

F587

15

3

27

0.301

100

27 Oct 2020

26 Oct 2035

F588

6

4

36

0.020

100

28 Oct 2020

28 Oct 2026

F589

9

5

45

0.074

100

30 Oct 2020

30 Oct 2029

F590

9

3

27

0.106

100

28 Oct 2020

26 Apr 2030

F591

15

6

54

0.315

100

28 Oct 2020

26 Oct 2035

F592

18

3.5

32

0.406

100

28 Oct 2020

28 Mar 2039

F593

5

6

54

0.024

100

27 Nov 2020

27 Jan 2026

F594

9

5

45

0.065

100

30 Nov 2020

30 Nov 2029

F595

12

3

27

0.180

100

27 Nov 2020

26 Nov 2032

F596

14

6

54

0.262

100

27 Nov 2020

27 Nov 2034

F597

9

10

90

0.083

100

23 Dec 2020

21 Jun 2030

F598

13

6

54

0.209

100

23 Dec 202023 Dec 2033

F599

22

3

27

0.462

100

23 Dec 202023 Dec 2042

F600

23

3

27

0.483

100

23 Dec 202023 Dec 2043

F601

24

3

27

0.506

100

23 Dec 202023 Dec 2044

F602

9

20

181

0.096

100

28 Jan 2021

28 Jan 2030

F603

15

5

45

0.314

100

29 Jan 2021

29 Jan 2036

F604

5

7

63

0.015

100

26 Feb 2021

24 Apr 2026

F605

8

10

90

0.094

100

26 Feb 2021

26 Feb 2029

F606

15

5

45

0.370

100

26 Feb 2021

26 Feb 2036

F607

6

3.5

32

0.010

100

24 Mar 2021

28 Oct 2026

2. Private placements with pension funds and mutual aids for local government officials

114

SeriesNumber

Tenor
(yr)

A123

Issue Size

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

181

0.185

100

20 Apr 2020

19 Apr 2030

10

90

0.165

100

26 May 2020

24 May 2030

10

90

0.185

100

26 Jun 2020

26 Jun 2030

10

90

0.180

100

20 Jul 2020

19 Jul 2030

(JPY inbillions)(USD inmillions)

10

20

A124

10

A125

10

A126

10

JFM ANNUAL REPORT 2021

Tenor(yr)

A127

Issue Size

Issue Date

Maturity Date

181

0.190

100

21 Aug 2020

21 Aug 2030

10

90

0.175

100

17 Sep 2020

17 Sep 2030

10

90

0.175

100

19 Oct 2020

18 Oct 2030

10

10

90

0.175

100

20 Nov 2020

20 Nov 2030

A131

10

20

181

0.155

100

17 Dec 202017 Dec 2030

A132

10

10

90

0.155

100

22 Jan 2021

22 Jan 2031

A133

10

10

90

0.180

100

19 Feb 2021

19 Feb 2031

A134

10

10

90

0.254

100

24 Mar 2021

24 Mar 2031

B54

10

6.5

59

0.185

100

20 Apr 2020

19 Apr 2030

B55

10

6

54

0.165

100

26 May 2020

24 May 2030

B56

10

8.5

77

0.185

100

26 Jun 2020

26 Jun 2030

B57

10

17

154

0.180

100

20 Jul 2020

19 Jul 2030

B58

10

10

90

0.190

100

21 Aug 2020

21 Aug 2030

B59

10

7

63

0.175

100

17 Sep 2020

17 Sep 2030

B60

10

6.5

59

0.175

100

19 Oct 2020

18 Oct 2030

B61

10

8.5

77

0.175

100

20 Nov 2020

20 Nov 2030

B62

10

9.5

86

0.155

100

17 Dec 202017 Dec 2030

B63

10

17

154

0.155

100

22 Jan 2021

22 Jan 2031

B64

10

12

108

0.180

100

19 Feb 2021

19 Feb 2031
24 Mar 2031

10

20

A128

10

A129

10

A130

10

9

81

0.254

100

24 Mar 2021

20

7.5

68

0.389

100

20 Apr 2020

20 Apr 2040

C55

20

7

63

0.397

100

26 May 2020

25 May 2040

C56

20

9.5

86

0.460

100

26 Jun 2020

26 Jun 2040

C57

20

17.5

158

0.470

100

20 Jul 2020

20 Jul 2040

C58

20

12

108

0.460

100

21 Aug 2020

21 Aug 2040
14 Sep 2040

8

72

0.479

100

17 Sep 2020

20

7.5

68

0.474

100

19 Oct 2020

19 Oct 2040

C61

20

9.5

86

0.469

100

20 Nov 2020

20 Nov 2040

C62

20

10

90

0.450

100

17 Dec 202017 Dec 2040

C63

20

20

181

0.474

100

22 Jan 2021

22 Jan 2041

C64

20

13

117

0.516

100

19 Feb 2021

19 Feb 2041

C65

20

10

90

0.574

100

24 Mar 2021

22 Mar 2041

D49

20

20

181

0.389

100

20 Apr 2020

20 Apr 2040

D50

20

10

90

0.397

100

26 May 2020

25 May 2040

D51

20

10

90

0.460

100

26 Jun 2020

26 Jun 2040

D52

20

10

90

0.470

100

20 Jul 2020

20 Jul 2040

D53

20

20

181

0.460

100

21 Aug 2020

21 Aug 2040

D54

20

10

90

0.479

100

17 Sep 2020

14 Sep 2040

D55

20

10

90

0.474

100

19 Oct 2020

19 Oct 2040

D56

20

10

90

0.469

100

20 Nov 2020

20 Nov 2040

D57

20

20

181

0.450

100

17 Dec 202017 Dec 2040

D58

20

10

90

0.474

100

22 Jan 2021

22 Jan 2041

D59

20

10

90

0.516

100

19 Feb 2021

19 Feb 2041

D60

20

10

90

0.574

100

24 Mar 2021

22 Mar 2041

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

0.001

100.16

28 Aug 2020

28 Aug 2024

3. Government-guaranteed domestic bonds
SeriesNumber

Tenor
(yr)

11

4

Issue Size
(JPY inbillions)(USD inmillions)

60

542

JFM ANNUAL REPORT 2021

Appendix / JFM Data

20

C60

Financial Section

C59

JFM’s Role in Local
Government Finance

B65
C54

Management
Structure

Issue Price(%)(USD inmillions)

Operations

Coupon(%)(JPY inbillions)

Review and Plan

SeriesNumber115

Appendix / JFM Data
Appendix

Outstanding International Bonds
1. JFM bonds(As of 31 March 2021)

116

SeriesNumberTenor(yr)FormatCurrency

Issue Size(in millions)

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

43

10

Euro

AUD

85

5.092

100

1 May 2014

1 May 2024

44

10

Euro

USD

90

3.250

99.055

1 May 2014

2 May 2024

45

7

Euro

EUR

1,000

0.875

99.29322 Sep 2014

22 Sep 2021

47

10

Global

USD

1,000

2.375

99.611

13 Feb 2015

13 Feb 2025

48

10

Euro

AUD

70

3.600

100

18 Mar 201518 Mar 2025

49

7

Global

USD

1,000

2.000

99.39121 Apr 2015

21 Apr 2022

53

5

Global

USD

1,500

2.125

99.78013 Apr 201613 Apr 2021

54

7

Global

USD

1,000

2.125

99.29725 Oct 2016

25 Oct 2023

55

5

Euro

USD

53

2.390

99.99030 Jan 201728 Jan 2022

56

5

Euro

AUD

106

3.040

99.99030 Jan 201728 Jan 2022

57

5

Global

USD

1,000

2.625

99.82320 Apr 201720 Apr 2022

58

10

Euro

AUD

22

3.418

100

26 Jun 201721 Jun 2027

61

5

Euro

USD

44

2.570

99.99030 Jan 201830 Jan 2023

62

5

Euro

AUD

28

2.760

99.99030 Jan 201830 Jan 2023

63

5

Global

USD

1,000

3.250

99.98224 Apr 201824 Apr 2023

64

10

Euro

AUD

73

3.370

100

26 Jun 2018

21 Jun 2028

65

4

Euro

AUD

125

2.400

99.99026 Sep 2018

26 Sep 2022

66

5

Global

USD

1,000

3.375

99.49927 Sep 2018

27 Sep 2023

67

11

Euro

EUR

80

1.106

100

24 Jan 201924 Jan 2030

68

5Global

USD

1,000

3.000

99.68212 Mar 201912 Mar 2024

69

5

Global

USD

1,000

1.750

99.8905 Sep 2019

5 Sep 2024

70

5

Euro

USD

60

1.650

99.99028 Jan 2020

28 Jan 2025

71

5

Euro

AUD

50

1.160

99.99028 Jan 2020

28 Jan 2025

72

7

Euro

EUR

500

0.050

99.867

12 Feb 2020

12 Feb 2027

73

5

Global

USD

1,500

1.000

99.88821 May 2020

21 May 2025

74

10

Euro

AUD

210

1.866

100

11 Jun 2020

11 Jun 2030

75

10

Euro

AUD

120

1.831

100

12 Jun 2020

12 Jun 2030

76

10

Euro

USD

60

1.290

100

22 Jul 2020

22 Jul 2030

77

5Global

USD

1,500

0.625

99.432

2 Sep 2020

2 Sep 2025

78

15

Euro

AUD

40

1.878

100

15 Oct 2020

15 Oct 2035

79

5

Euro

AUD

43

0.400

99.99028 Oct 2020

28 Oct 2025

80

10

Euro

AUD

70

1.436

100

28 Oct 2020

28 Oct 2030

81

15

Euro

AUD

250

2.004

100

27 Nov 2020

27 Nov 2035

82

10

Euro

AUD

200

1.490

100

27 Nov 2020

27 Nov 2030

83

10

Euro

AUD

30

1.453

100

27 Nov 2020

27 Nov 2030

84

10

Euro

AUD

100

1.485

100

9 Dec 2020

9 Dec 2030

85

5

Euro

AUD

40

0.470

99.99017 Dec 202017 Dec 2025

86

7

Euro

EUR

500

0.010

101.07

2 Feb 2021

2 Feb 2028

87

10

Global

USD

1,250

1.375

99.06410 Feb 2021

10 Feb 2031

JFM ANNUAL REPORT 2021

Appendix / JFM Data
JFM Data

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

2009

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

2011

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

2015

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

2017

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

Operations

FY2008

Review and Plan

Organization History

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

1960

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

1966

Started a lending programme that applied special lending rates.

1967

Started receiving subsidies from the national treasury.

1970

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

1972

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

1989

Established the Reserve for Losses on Refinancing of Bonds.

1990

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

1998

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

2001

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

2002

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

2005

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

2006

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

2007

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

2008

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

JFM ANNUAL REPORT 2021

Appendix / JFM Data

Started issuing foreign currency-denominated bonds.

Financial Section

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

1983

JFM’s Role in Local
Government Finance

1978

Management
Structure

FY1957117

Appendix / JFM Data
JFM Data

Organization Chart
As of 1 April 2021

Lending operations (excluding municipal enterprises
with the exception of public housing andanti-depopulation measure projects) ,management of loan receivables, collection of loan
principal and interest, entrusted loan operations,investigations of regional financial conditions

118

JFM ANNUAL REPORT 2021

As of 1 October 2021

President and CEO
Deputy President
Senior Executive Directors
Corporate Auditors

SATO Fumitoshi
KATO Junichi
MATOI Hiroki, TSUKADA Yuji, OKAMOTO Noboru
MURATA Yu, OMORI Masaaki(part-time)

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

Operations

Contact Information

Review and Plan

Directors and Corporate Auditors

Management
Structure

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

Financial Section
Appendix / JFM Data
JFM ANNUAL REPORT 2021

119