Abstract
This paper is to estimate the changes in the SDI (Subsidy Dependence Index) of the Japanese Agricultural Policy Bank (the AFC) based on a theoretical re-examination of the concept of SDI. The SDI originally invented by Yaron has one weakness. The concept describes the degree of subsidy dependence by comparing the total subsidies with the lending interest revenues as a social benefit. Hence, the level of the indicator is much dependent on the changes in the lending interest rate. The idea of the paper is to use the average lending interest rate for the estimation of the SDI, and for the interpretation of the levels both the conventional SDI and the new indicator are used together. In addition, factors of the changes in SDI are broken down into negative spread, average lending cost, and costs of non-used funds.
The results show the downward trend of the SDI with the decline in negative spread and the increase in lending efficiency. The former reflects the general trend in interest rates in the financial market, and the latter until the 1980s indicates the progress. However in the 1990s the lending efficiency became worse, caused by the serious decrease in outstanding loans of the AFC.
