FTP is used to manage the structure of the balance sheet and to measure risk-adjusted profitability. The allocated amounts are built into product pricing, business metrics, and new product approval. Funding costs are allocated at higher rates to assets held for longer.
Consider a hypothetical example in which a trade uses 1 billion yen of funds for 5 years and the term-based rate is 1.20% a year. The trade is allocated 60 million yen over the 5 years. At a flat 0.50% a year, the allocation is 25 million yen, which is 35 million yen less.
Transfer pricing in tax is the price set on transactions within a group across borders, and it is a different thing from FTP. FVA, which reflects the cost of funds in a derivative's value, is a valuation adjustment, and its purpose differs from that of FTP, which is an internal allocation to business lines.