A new organization met an unprecedented global financial crisis head-on with special emergency measures

Problems in the U.S. housing market triggered a global recession

There was a sharp rise during the early 2000s in the U.S. in approvals for subprime mortgages, those given to borrowers with the lowest credit ratings. The subprime mortgage sector was also plagued with issues such as lax risk assessment.

These problems came to the fore in the latter half of 2006 as mortgage defaults increased and subprime lenders collapsed one after another. Subprime problems took Bear Stearns to the brink in 2008, followed by Lehman Brothers’ bankruptcy in September that year.

Being the largest corporate failure in U.S. history, this sent shockwaves through global markets. Real GDP (adjusted for inflation) in the U.S. contracted 2.5 percent in 2009, with a 0.1 percent fall globally, and a drop of 5.4 percent in Japan. The financial crisis, on the heels of a prolonged recession, and the subsequent appreciation of the yen, which led to a decline in exports and the selling of Japanese stocks by foreign investors, dealt further blows to the domestic economy. Europe was also hit hard, with Greece’s debt crisis spreading to Spain and other countries, causing a crisis in the eurozone.

Around that time, in October 2008, the Japan Finance Corporation (JFC) was established through the merger of JBIC and three domestic public finance corporations. “JBIC" remained the name of the corporation’s international operations arm, and the new organization launched its emergency response to the global financial crisis, known as the “Lehman shock” in Japan.

Special measure fully utilized for both developed and developing countries

To address the crisis, in December 2008, the Government of Japan decided on Immediate Policy Package to Safeguard People's Daily Lives at the Ministerial Meeting on Economic Measures. Based on this policy and the public notice by the Ministry of Finance, JBIC provided credit for exporting companies and loans through Japanese companies for their operations in developing countries, as an exceptional temporary measure.

In addition, the Cabinet approved the "Order for Amendment of Part of the Enforcement Order of the Japan Finance Corporation Act." This allowed general overseas investment loans to be made for a limited period of time to Japanese companies and their overseas subsidiaries and affiliates operating in developed countries, mainly in the U.S. and Europe, in industries where the fallout from the financial crisis could significantly impact Japan’s international competitiveness.

Furthermore, JBIC implemented the Leading Investment to Future Environment (LIFE) Initiative to consider supporting environmental investments by the governments and private sectors of developing countries, centered on Asia, to the tune of USD5 billion over two years. JBIC also agreed to provide financial support by guaranteeing Samurai bonds (yen-denominated foreign bonds) issued by the Indonesian government.

Through such contributions to the expansion of investment opportunities both within and outside Japan, and revitalization of markets, JBIC devoted its efforts to responding to disruptions in the international financial order.