The document provides an overview of Japan's credit supplementation system, which supports high-risk borrowers through long-term loans, credit insurance, and other financial services offered by the Japan Finance Corporation. It describes the two-tier structure of credit guarantees and insurance, noting the system plays a large role in small-to-medium enterprise financing. Key measures to exercise safety net functions and support strategic growth areas like start-ups and business revitalization are also outlined.

1. Guide to
Credit Supplementation System
in Japan
October 17, 2014
Motohide Hashimoto
Executive Director

2. Japan Finance Corporation (1)
1. Demonstration of Policy-based Financing
• Based on important national policies, provide financial support to high-risk
borrowers that have trouble borrowing from private-sector financial
institutions.
2. Major Business Operations (Loans and Credit Insurance)
• Long-term business funds for SMEs
• Small loans for micro/small businesses
• Loans for agriculture, forestry, fisheries and food business
• Credit insurance
3. Fully Funded by the Government
• Credit insurance operations financed by annual government outlays
(FY 2013: 757 million EUR).
2
Features

3. Establishment October 1, 2008
(through the merger of 4 government-affiliated financial institutions)
(Credit insurance operation started in December 1950)
Branch Offices
152 branch offices in Japan
2 overseas representative offices (Bangkok, Shanghai)
Employees 7,364 (budgetary fixed number for FY 2014)
Outstanding Loans
(as of March 31, 2014)
Total of Outstanding Loans 152.5 billion EUR
Micro Business and Individual Unit: 51.9 billion EUR
Agriculture, Forestry, Fisheries and
Food Business Unit:
18.8 billion EUR
Small and Medium Enterprise (SME) Unit:
(Finance Operations)
45.9 billion EUR
Operations to Facilitate Crisis Responses: 35.9 billion EUR
Outstanding Amounts
of Insurance
(as of March 31, 2014)
Credit Insurance Operation: 217.6 billion EUR
Profile
3
Japan Finance Corporation (2)

4. Japan’s Credit Supplementation System
1. System Structure
• Two-tier structure
(Credit Guarantee System and Credit Insurance System)
2. Business Scale
• Guarantee utilization rate of 38%
• 6% nominal GDP
4

5. Credit Insurance System Credit Guarantee System
CGCs
(51)
JFC
SMEs
Financial
Institutions
Guarantee Contract
Insurance Contracts
National
Government
Budgetary Provision
(Loss Compensation)
Contribution
Supervision
Payment of
Recovered Funds
Insurance Premium
Recovery
Subrogated Payment
Loans
Local
Governments
Guarantee Fee
Insurance Money
Contribution
Supervision
System Structure
Credit Supplementation System (Overview)
5

6. 12%
Outstanding Guaranteed Liabilities: 215.4 billion EUR
Outstanding Loans to SMEs: 1,778 billion EUR
[Amount]
38%
Number of Guaranteed SMEs: 1.54 million
Total Number of SMEs: 3.85 million
[Number of SMEs]
Business Scale (1)
Guarantee Utilization Ratio (FY 2013)
Credit Supplementation System plays huge role in SME financing.
6

7. 0%
1%
2%
3%
4%
5%
6%
7%
Germany U.S.A. France Malaysia Italy Korea Japan
Business Scale (2)
7
Note: Results for FY 2012 (FY 2013 for US, Japan)
Outstanding guaranteed liabilities calculated as Bpifrance, Socama and SIAGI total for France,
KODIT, KOTEC and KOREG total for Korea.
Outstanding Guaranteed Liabilities vs. Nominal GDP

8. Recent Measures to Support SME Access to Finance
1. Exercising Safety Net Functions
1. Response to Economic Crisis
2. Response to Natural Disasters (Great East Japan Earthquake)
2. Supporting Strategic Areas of Growth
1. Support for Start-ups
2. Support for Business Revitalization
8

9. 0
50
100
150
200
250
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
(billion EUR)
(FY)
Amount of
Guarantee
Acceptance
Special Guarantee
Program for the
Financial Stabilization of
SMEs
Great East Japan
Earthquake Recovery
Emergency Guarantee
Program
Emergency
Guarantee
Program
Changes in Amount of Guarantee Acceptance
Exercising Safety Net Functions (1)
9
Lehman Shock
Great East Japan
EarthquakeJapan’s Banking Crisis

10. 0
50
100
150
200
250
300
350
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
(billion EUR)
(FY)
Outstanding
Guaranteed
Liabilities
Great East Japan
Earthquake
Recovery
Emergency
Guarantee
Program
Lehman Shock
Great East Japan
EarthquakeJapan’s Banking Crisis
Special Guarantee
Program for the
Financial Stabilization of
SMEs Emergency
Guarantee
Program
Changes in Outstanding Guaranteed Liabilities
Exercising Safety Net Functions (2)
10

11.  Emergency Guarantee Program and Great East Japan Earthquake Recovery Emergency
Guarantee Program were established in accordance with economic conditions.
 JFC provides special treatment of insurance in accordance with these programs.
Type of
Insurable
Funds
Max Amount of
Insurance
Insurance
Coverage
Ratio
Insurance
Premium
Rate
(p.a.)
Guarantee
Coverage
Ratio
Business Stability
Business
stabilization
funds
Additional ceiling of
2.02 million EUR is set
80% 0.41% 100%
Great East Japan
Earthquake
Recovery
Emergency
Guarantees
Fund for
reconstruction,
other business
stabilization
Additional ceiling of
2.89 million EUR is set
for Ordinary Insurance
90% 0.41% 100%
Ordinary Insurance Business funds 1.45 million EUR 70%
0.25% -
1.69%
80%
Special Treatment of
Insurance Related to
General Insurance
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Exercising Safety Net Functions (3)

12. 12
Supporting Strategic Areas of Growth
1. Support for Start-ups
• Promote establishment of SME, strive for conditions in which new
business opening rate is higher than business closing rate, and
implement guarantee and insurance systems in accordance with
the government’s economic policy.
• Provide comprehensive management services for SMEs from pre-
establishment financial advice to post-establishment management
advice.
2. Support for Business Revitalization
• For the purpose of protecting jobs, preventing chain-reaction
bankruptcies, preventing a decrease in the ability to attract
customers, and maintain consumption in local economies.
• Support rehabilitating SMEs for smooth reconstructing of their
businesses.

13. Contact Information
Mr. Motohide HASHIMOTO
Executive Director
cncredit-insurance@jfc.go.jp
Mr. Mitsuharu WADA
Deputy Group Chief
Credit Insurance Planning Department
cncredit-insurance@jfc.go.jp
wada-mit@jfc.go.jp
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