Outline of Funding Operations

Regarding deficits arising from the execution of operations, the DICJ is authorized to raise funds for each account (except for the Enterprise Turnaround Initiative Corporation Account) in the form of borrowings and/or DICJ bond issues up to the amount separately stipulated by a relevant Cabinet Order (in the case of the Jusen Account and the Damage Recovery Distribution Account, only borrowings are allowed).
Government guarantee can be provided for funding for accounts other than the Jusen Account and the Damage Recovery Distribution Account under the ordinances concerning borrowings or DICJ bond issues (the upper limit on the total amount of government guarantee as stipulated in the general provisions of the budget was set at ¥51 trillion).

The outstanding balance of funds raised by the DICJ at the end of the fiscal year peaked in FY2002, and stood at around ¥4.1 trillion at the end of FY2010.

The DICJ has been raising funds in an efficient manner by combining borrowings (up to one year, in principle) and issuance of DICJ bonds (with maturities of two, four and seven years) in accordance with the length of periods during which funds are needed in light of the market environment. Consequently, funds raised through the issuance of DICJ bonds account for around 89% of the outstanding balance of funds raised, which totaled some ¥4.1 trillion as of March 31, 2011.

Outstanding balance of funds raised by the DICJ

(Unit: billion yen; the figures in parentheses represent percentage shares)
  End of FY2008 End of FY2009 End of FY2010
General Account 1,143.2 438.9 92.3
  Borrowing 63.2 438.9 92.3
  DICJ bonds 1,080.0 - -
Crisis Management Account 1,841.3 1,796.3 1,371.4
  Borrowing 1,041.3 496.3 71.4
  DICJ bonds 800.0 1,300.0 1,300.0
Jusen Account - - -
  Borrowing - - -
Financial Revitalization Account 1,920.5 1,900.8 1,879.4
Borrowing 250. 250.8 229.4
 

DICJ bonds

 1,670.0 1,650.0 1,650.0
Early Strengthening Account 1,000.0 1,000.0 400.0
  Borrowing - - -
  DICJ bonds 1,000.0 1,000.0 400.0
Financial Function Strengthening Account 167.2 348.7 349.0
  Borrowing 167.2 348.7 69.0
  DICJ bonds - - 280.0
Damage Recovery Distribution Account 0.2 0.2 0.2
  Borrowing 0.2 0.2 0.2
Total 6,072.4<100.0%> 5,484.9<100.0%> 4,092.3<100.0%>
  Borrowing 1,522.4<25.1%> 1,534.9<28.0%> 462.3<11.3%>
  DICJ bonds 4,550.0<74.9%> 3,950.0<72.0%> 3,630.0<88.7%>

Notes:

1. Issuance of DICJ bonds for the Early Strengthening Account started in October 1999.

2. Issuance of DICJ bonds for the General and Financial Revitalization Accounts started in April 2003.

3. Issuance of DICJ bonds for the Crisis Management Account started in April 2004.

4. The assets and liabilities of the Management Base Strengthening Account were transferred to the Financial Functions Strengthening Account on April 1, 2005.

5. Issuance of DICJ bonds for the Financial Functions Strengthening Account started in May 2010.


Changes in the outstanding balance of funds raised by the DICJ

Changes in the annual issuance of DICJ bonds

The amount of DICJ bonds issued in FY2010 decreased from FY2009 to ¥780 billion. While the DICJ replaced the borrowings in the Financial Functions Strengthening Account with DICJ bonds (2-year bonds), planned issuance of DICJ bonds (¥300 billion) in the Crisis Management Account was canceled following the repayment of public funds.

The balance of outstanding borrowings decreased substantially to ¥462.3 billion at the end of FY2010 from ¥1,534.9 billion at the end of FY2009, because of such factors as (i) insurance premium revenues in the General Account, (ii) the repayment of public funds in the Crisis Management Account, and (iii) the replacement of borrowings by DICJ bonds in the Financial Functions Strengthening Act. Under these circumstances, the DICJ endeavored to raise funds in a more efficient manner by, for example, making the borrowing periods more flexible within the basic borrowing period of one year, in order to reflect the actual funding conditions of each DICJ account more precisely. In the resolution of the failure of the Incubator Bank, meanwhile, in order to respond to the first-ever case of reimbursement of insured deposits under the limited coverage, the DICJ provided the failed bank with loans in several rounds under the provisions of Article 127 of the Deposit Insurance Act. The DICJ raised funds for these loans in an expeditious and flexible manner, borrowing funds from the Bank of Japan urgently and temporarily (for the first time since FY2001), and then sequentially shifting to borrowings of unsecured call money and borrowings from financial institutions.

In addition, the DICJ strove to continue stable and efficient funding by holding meetings with financial institutions that participate in fund-borrowing auctions to brief them on the status of the DICJ’s borrowings, thereby sharing information on the status of the DICJ’s borrowings and borrowing plans, etc.

Outline of DICJ accounts

1999 Oct.
  • Commenced the issuance of bonds for the Early Strengthening Account (four-year bonds).
2001 June
  • Commenced the issuance of two-year bonds for the Early Strengthening Account (from four-year bonds to two- or four-year bonds).
2002 Mar.
  • The Bank of Japan accepted the governmental guaranteed claim on deeds to the DICJ as eligible security (assessment rate of eligible security: 80% of the outstanding principal).
Dec.
  • The Bank of Japan raised the assessment rate of the eligible security on deeds of which the initial claim period is less than one year (from 80% to 96% of the outstanding principal, and to 97% in September 2005).
2003 Apr.
  • Commenced the issuance of seven-year bonds for the Early Strengthening Account (from two- to four-year bonds to two-, four- or seven-year bonds).
  • Commenced the issuance of two- or four-year bonds for the General Account and the Financial Revitalization Account.
2004 Mar.
  • Commenced the borrowing of unsecured call money.
Apr.
  • Commenced the issuance of four- or seven-year bonds for the Crisis Management Account.
  • Changed the method of bond auction (from the total amount method to the Yield-Dutch Style auction)(Note)

    Note: The Yield-Dutch Style auction refers to accepting bids of lower yield in ascending order until reaching the expected issuance volume (the highest accepted bid yielding), and issuing bonds are subject to the terms of the highest accepted bid yielding.
2008 Sep.
  • Commenced the borrowings without government guarantee for the Damage Recovery Distribution Account
2009 May
  • Commenced the issuance of two-year bonds for the Crisis Management Account
2010 May
  • Commenced the issuance of two-year bonds for the Financial Functions Strengthening Account

Funding methods (as of the end of March 2011)

Classification Borrowing DICJ bonds<
Auction method Competitive bidding Competitive bidding
Auction style Convention style
(multi-yield style)		 Yield-Dutch style
(single-price style)
Funding period Up to one year in principle Two, four, seven years
Number of eligible auction participants 67 companies 17 companies

Interest rate on funding (for funds raised in FY2010)

(Unit: %)
  Borrowing rate
(guaranteed by the government)		 DICJ Bond subscriber’s yield
(guaranteed by the government) 		Unsecured call money Borrowing rate
(without government guarantee)
(Damage Recovery Distribution Account)
2-yearbond 4-yearbond 7-yearbond
Average
(Note)		 0.139 0.145 0.306 - 0.127 0.516
  Peak 0.158 0.159 0.397 - 0.135 0.596
Bottom 0.128 0.135 0.205 - 0.118 0.489

Note: Weight-averaged by the amount of funds raised.

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