On October 1, 2008, the International Financial Operations (IFOs) of Japan Bank for International Cooperation (JBIC), National Life Finance Corporation (NLFC), Agriculture, Forestry and Fisheries Finance Corporation (AFC) and Japan Finance Corporation for Small and Medium Enterprise (JASME) merged to become a new policy-based financing institution, Japan Finance Corporation (JFC). Of the two types of operations conducted by JBIC, JFC has taken over IFOs in its international wing. However, to maintain international trust and confidence gained by JBIC, the international wing of JFC continues to use the name of JBIC as it conducts international finance operations (JBIC Operations).

Pursuant to Articles 50 and 55 of the Japan Finance Corporation Act (JFC Act) and Article 2, Paragraph 2 of the Act Concerning Special Measures with Respect to Acceptance of Foreign Capital from the International Bank for Reconstruction and Development, etc. (Act No. 51 of 1953) , JFC may issue international bonds explicitly guaranteed by the Japanese government denominated in foreign currencies to fund JBIC Operations.

JFC (and its predecessors: JBIC and the Export-Import Bank of Japan) has issued government-guaranteed foreign currency bonds in international capital markets over the years since 1983 and enjoyed high reputation as a leading Japanese public bond issuer in these markets. In September 2005, its predecessor JBIC issued the first government-guaranteed Thai baht bonds to support the Asian Bond Markets Initiative (ABMI) being promoted by the Japanese government in the framework of the ASEAN+3 (Japan, China and Korea). JFC will continue to support vigorously the development of domestic bond markets in ASEAN member countries through local currency bond issuance, while responding to its increasingly diverse funding needs.

JFC continues to issue international bonds explicitly guaranteed by the Japanese government in order to use their proceeds for JBIC Operations.

• List of Government-Guaranteed Bond Issues in International Capital Markets

To sell government-guaranteed bonds in the United States market, JBIC has continuously filed with the U.S. Securities and Exchange Commission (SEC) a registration statement for foreign governments and political subdivisions, pursuant to the Securities Exchange Act, and registered for multiple issues of its securities. As part of the disclosure procedures for issuers in the US securities markets, JBIC has filed its annual report on Form 18-K and made disclosure on the online database of SEC.

• USA SEC Filings Form 18-K

Issuance Plan and Policy

• The maximum total funding volume of international bonds explicitly guaranteed by the Japanese government will be determined through discussions with the Japanese government in the budgetary process during which JFC prepares its operational and funding plans for JBIC Operations. In FY2010, the funding of ¥560 billion equivalent is planned. As a policy-based financing institution with a mission to contribute to the sound development of Japan and the international economy and society and to the improvement of the quality of national life, JFC recognizes that international bonds explicitly guaranteed by the Japanese government are important instrument for funding foreign currencies for JBIC Operations.
• The proceeds of issues will be used for providing foreign currency-denominated loans in JBIC Operations. As foreign currency financing has been growing in recent years, funding operations in international capital markets have become increasingly important. JFC and JBIC will thus seek to ensure continuous and stable fund-raising operations by expanding the investor base through our greater name recognition.
• Previously issued government-guaranteed bonds had 5-years or longer maturities, but shorter-maturity notes falling due in two or three years can be also considered.

Characteristics

• All debt securities issued in international capital markets by JFC, a financial institution wholly owned by the Japanese Government are backed by unconditional and irrevocable guarantee of the Japanese Government for principal and interest payments.
• Government-guaranteed bonds carry zero BIS risk weight when depository institutions calculate the capital adequacy ratio.
• Pursuant to Article 50 of the JFC Act, the basic issuance policy for its debt securities, including government-guaranteed bonds is prepared and obtains approval from the Minister of Finance every fiscal year.
• The credit ratings for government-guaranteed bonds are as follows.

  Moody's	Standard & Poor's
  Aa2	AA

  • *As of May 7, 2010

Treatment of Outstanding Government-Guaranteed Foreign Currency Bonds Issued until September 2008 (Excerpts from the Japan Finance Corporation Act, promulgated on May 25, 2007)

JFC has succeeded all obligations of the outstanding issues of its predecessor organizations.

• Article 18 of Supplementary Provisions: Dissolution, etc. of the Japan Bank for International Cooperation
  • 1.The Japan Bank for International Cooperation shall be dissolved at the time of the establishment of JFC, and all the rights and obligations of the Japan Bank for International Cooperation shall be succeeded by JFC at that time, except for the assets succeeded by the Government pursuant to the provisions of the following Paragraph.
  • 2.Among the rights which the Japan Bank for International Cooperation actually has upon the establishment of JFC, the assets recognized as unnecessary for JFC to smoothly perform operations in the future shall be succeeded by the Government upon the establishment of JFC.

Joint and several obligation with the new JICA on outstanding debt securities issued by the predecessor organizations.

• Article 24 of Supplementary Provisions: Transitional Measures Necessary in Connection with Succession of Rights and Obligations
  • 1.If the obligations of the Japan Bank for International Cooperation are succeeded to JFC pursuant to the provisions of Article 18, Paragraph 1 of the Supplementary Provisions hereof, JFC and the Incorporated Administrative Agency - Japan International Cooperation Agency, shall jointly and severally be liable for repayment of the liabilities related to (x) the Japan Bank for International Cooperation Bonds set forth in Article 45, Paragraph 1 of the Japan Bank for International Cooperation Law Prior to Revision and (y) (i) the foreign currency bonds, etc. set forth in Article 39-2, Paragraph 1 of the Former Export-Import Bank Law and (ii) the Overseas Economic Cooperation Fund Bonds set forth in Article 29-2, Paragraph 1 of the Overseas Economic Cooperation Fund Law prior to the revision (Law No. 173 of 1960) made pursuant to the provisions of Article 15 of the Supplementary Provisions of the Japan Bank for International Cooperation Law Prior to Revision, all of which bonds have been issued at the time of such succession.
  • 2.A holder of the Japan Bank for International Cooperation bonds, the foreign currency bonds, etc. or the Overseas Economic Cooperation Fund bonds, all of which bonds are set forth in the preceding Paragraph, shall, with respect to the properties of JFC or the Incorporated Administrative Agency - Japan International Cooperation Agency, have the right to have his/her receivables satisfied in preference to other creditors.
  • 3.The order of the statutory lien set forth in the preceding Paragraph shall be next to the general liens prescribed by the provisions of the Civil Code.

JFC has succeeded all the guarantee contracts with the government with respect to the outstanding government-guaranteed bond issues of its predecessor organizations with the same conditions as before.

• Article 23 of Supplementary Provisions: Transitional Measures Necessary in Connection with Succession of Rights and Obligations
  • 1.The guarantee contracts prescribed in each of the following Items and executed by the Government with respect to the liabilities related to the bonds listed in each of such Items and succeeded by JFC pursuant to the provisions of Article 15, Paragraph 1 of the Supplementary Provisions hereof, Article 16, Paragraph 1 thereof, Article 17, Paragraph 1 thereof or Article 18, Paragraph 1 thereof shall survive such succession with the conditions in force before such succession with respect to such liabilities related to such bonds. With respect to public dues, such as taxes, on the interest and redemption gain on the bonds listed below and related to the guarantee contracts executed pursuant to the provisions of Article 2 of the Foreign Capital Acceptance Law among such guarantee contracts, the provisions in force before such succession shall remain applicable. (omitted)
    • (4) The Japan Bank for International Cooperation Bonds set forth in Article 45, Paragraph 1 of the Former Japan Bank for International Cooperation Law:
      Guarantee contracts executed pursuant to the provisions of Article 47 of the Former Japan Bank for International Cooperation Law or Article 2 of the Foreign Capital Acceptance Law
    • (5) Foreign currency bonds, etc. set forth in Article 39-2, Paragraph 1 of the Export-Import Bank of Japan Law prior to the abolishment made pursuant to the provisions of Article 15 of the Supplementary Provisions of the Former Japan Bank for International Cooperation Law (Law No. 268 of 1950; hereinafter referred to as the “Former Export-Import Bank Law):
      Guarantee contracts executed pursuant to the provisions of Article 39-3 of the Former Export-Import Bank Law or Article 2 of the Foreign Capital Acceptance Law prior to the revision made pursuant to the provisions of Article 23 of the Supplementary Provisions of the Former Japan Bank for International Cooperation Law

Statutory lien

• Article 52: Statutory lien
  • 1.A holder of JFC's corporate bonds shall, with respect to the property of JFC, have the right to have his/her receivables satisfied in preference to other creditors.
  • 2.The order of the statutory lien set forth in the preceding Paragraph shall be next to the general liens prescribed by the provisions of the Civil Code (Law No. 89 of 1896).

Dissolution and others

• Article 62: Merger, Company Split, Share Exchange, Assignment and Acquisition by Assignment of Business and Dissolution
  • Notwithstanding the provisions of Part II, Chapters VII and VIII and Part V, Chapters II, III and IV, Section I of The Companies Act, the merger, company split, share exchange, assignment and acquisition by assignment of all or part of business, to which JFC becomes a party, and dissolution of JFC shall be separately provided by law.

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