Up-to-date Documents on Local Autonomy in Japan No.4

15 Years of Decentralization Reform in Japan

Hiroshi IKAWA
Professor
National Graduate Institute for Policy Studies (GRIPS)

Council of Local Authorities for International Relations (CLAIR)
Institute for Comparative Studies in Local Governance (COSLOG)
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or “quotation” purposes, no part of this booklet may be
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Foreword
The Council of Local Authorities for International Relations (CLAIR) and the National
Graduate Institute for Policy Studies (GRIPS) have been working since 2005 on a “Project on theoverseas dissemination of information on the local governance system of Japan and its operation”.
On the basis of the recognition that the dissemination to overseas countries of information on theJapanese local governance system and its operation was insufficient, the objective of this project was
defined as the pursuit of comparative studies on local governance by means of compiling in foreign
languages materials on the Japanese local governance system and its implementation as well as byaccumulating literature and reference materials on local governance in Japan and foreign countries.
In 2007, as a continuation of projects which were begun in 2005, we continued to compile“Statistics on Local Governance (Japanese/English)” and to conduct a search for literature andreference materials concerned with local governance in Japan and overseas to be stored in theInstitute for Comparative Studies in Local Governance (COSLOG).

We also compiled a “Glossary

on Local Governance Used in Japanese Official Gazettes (Japanese/English) (FY 2007 Edition)”.
In addition, continuing from the previous year, we finished compiling “Up-to-date Documents on
Local Autonomy in Japan” on two themes and “Papers on the Local Governance System and its
Implementation in Selected Fields in Japan”, for which we took up 6 themes.
This project is to be continued in 2008, and we aim to improve the materials so that they will
be of real use and benefit to those who are working in the field of local governance.
If you have any comments, suggestions or inquiries regarding our project, please feel free tocontact the Council of Local Authorities for International Relations (CLAIR) or the Institute forComparative Studies in Local Governance (COSLOG) of the National Graduate Institute for Policy
Studies (GRIPS).

March 2008
Michihiro Kayama
Chairman of the Board of Directors
Council of Local Authorities for International Relations (CLAIR)
Tatsuo Hatta
President
National Graduate Institute for Policy Studies

Preface
This booklet is one of the results of research activities conducted by the Institute forComparative Studies in Local Governance (COSLOG) in 2007 as one part of a 5-year project thatstarted in 2005 entitled “Project on the overseas dissemination of information on the local
governance system of Japan and its operation”, sponsored by the Council of Local Authorities forInternational Relations (CLAIR). For the purpose of implementing this project, a “Researchcommittee for the project on the overseas dissemination of information on the local governancesystem of Japan and its operation” has been set up, and a chief and deputy chiefs with responsibility
for the project have been designated from among the members concerned with each research subject.
“Up-to-date Documents on Local Autonomy in Japan” (2007, Volumes 3-4) were written
under the responsibility of the following two members:(Chief)Kiyotaka Yokomichi, Professor of the National Graduate Institute for Policy Studies(Deputy Chief)
Hiroshi Ikawa, Professor of the National Graduate Institute for Policy Studies
This booklet, the fourth volume in the series, was written on the subject of 15 years ofdecentralization reform in Japan.
Decentralization has been positively promoted in Japan since the early part of the 1990s.
This booklet introduces the decentralization reforms of the last 15 years, covering the background,content, results, and outstanding issues.
We will continue to take up new topics, and add to the series.
Finally, I would like to express my appreciation to the members of the research committee
for their expert opinions and advice.
March 2008
Hiroshi Ikawa
Chairperson
Research committee for the project on the overseas dissemination of informationon the local governance system of Japan and its operation
Professor
National Graduate Institute for Policy Studies

15 Years of Decentralization Reform in Japan
Hiroshi IKAWA
Professor, National Graduate Institute for Policy Studies

Introduction
Decentralization has been positively promoted in Japan since the earlypart of the 1990s. This paper will report and interpret 15 years ofdecentralization reform in Japan, covering the background, content, results, andoutstanding issues. The composition of the paper is as follows:
Chapter 1 will provide an overview of the respective roles of central
government and local governments in Japan and the relationship between them,and will comment on the main issues involved.
Chapter 2 will take up issues in the relationship between central
government and local governments, and will set out the background to and themain events in the “First Stage of Decentralization Reform” that took place fromthe 1990s onwards.
Chapter 3 will comment on aspects of the content of the First Stage ofDecentralization Reform, such as the abolition of the Agency Delegated Function
System and a review of the pattern of intervention by central government.
Chapter 4 will set out the results of the First Stage of Decentralization
Reform and comment on outstanding issues such as decentralization in thefinancial sphere.
Chapter 5 will look at the progress of the Trinity Reform in the years
since 2000, and will set out subsequent trends in decentralization.
1 The role of local governments in Japan and their relationship with central
government
1 – 1 The role of local governments (their function)
Japan has a two-tier system of local government, consisting of 47 prefectures
and approximately 1800 municipalities (cities, towns and villages). Bothmunicipalities, as the units of local government closest to the lives of residents,
and prefectures, as local government bodies that cover a wider area than that of1

municipalities, carry out a large number of different tasks.
Using figures from fiscal year 2005, the net aggregate expenditure figure forprefectures and municipalities combined was 89.4 trillion yen (excluding
duplications), approximately 1.5 times that of the central government figure of
61.2 trillion yen. In other words, about 60% of the total expenditure of theJapanese government is used for the many tasks undertaken by local
governments (Note 1).
If we look by item and objective at the expenditures of central government
and local governments, putting aside expenditure on defense and pensions, thegreater part of expenditure which is directly related to people’s lives is carried out
by local governments. The percentages for expenditure by local government invarious areas are 94% for sanitation（public health and hygiene）expenses, 85%
for school education expenses, and 79% for judicial, police and fire service
expenses. In other administrative areas too, the greater part of the expenses areborne by local governments (Note 2).
The scale of expenditures by prefectures and by municipalities is almost thesame. Table1 shows local government expenditures by objectives, withprefectures accounting for 48 trillion yen and municipalities for 49 trillion yen.
In addition to being responsible for establishing and managing senior highschools, prefectures are also responsible for the salaries of teachers at elementaryand junior high schools established by municipalities. This is the reason for thehigh level of expenditure on education by prefectures. Moreover, because
prefectures are responsible for fostering and developing commerce and industry
as well as agriculture, forestry and fisheries, and carry out a large number oftasks in these areas, expenditures in these areas are large compared to those ofmunicipalities.
On the other hand, municipalities carry out many tasks in such areas as thewelfare of the elderly, child welfare, and livelihood protection. As a result,municipal expenditures on social welfare are nearly 3 times those of prefectures.
Garbage collection and disposal is also basically carried out by municipalities, sothat municipal expenditures on sanitation are high.
Prefectures carry out public works such as the construction of prefecturalroads, the management of rivers, and large-scale city planning projects, and theexpenditures for all these works are charged to the public works subhead. On theother hand, while municipalities do carry out public works such as the roads
falling under their jurisdiction, the greater part of the public works budget is2taken up by city planning projects.

Table 1 Expenditures of Local Governments by Objective (Settlement)(Unit : Million yen , %)FY2005Prefectures
Assembly

Municipalities

Net total

83,1800.2

405,2500.8

488,413

0.5

General administration

2,972,947

6.2

6,377,067

13.0

8,737,150

9.6

Social welfare

4,410,039

9.2 12,813,515

26.1

15,692,705

17.3

Sanitation

1,484,798

3.1

4,355,185

8.9

5,706,683

6.3

Labor administration

170,0620.4

151,9930.3

316,9520.3

3,030,616

6.3

1,485,115

3.0

3,978,316

4.4

Commerce and industry

3,055,462

6.4

1,612,229

3.3

4,625,954

5.1

Public works

7,172,313

15.0

7,491,880

15.3

14,417,368

15.9

Fire service

215,933

0.5

1,678,117

3.4

1,824,304

2.0

Police3,317,750

6.9

-

-

3,317,578

3.7

Education

11,337,756

23.7

5,306,661

10.8

16,577,835

18.3

Disaster restoration

500,051

1.0

309,8500.6

708,067

0.8

Debt service

7,249,656

15.1

6,805,020

13.9

13,963,540

15.4

Others2,872,738

6.0

268,8150.5

342,476

0.4

Total expenditures

47,873,301 100.0 49,060,696 100.0

90,697,342

100.0

Agriculture, forestry andfisheries(Note)
Source: Minstry of Internal Affairs and Communications ed.: "White Paper on Local Public Finance,
FY2007 Edition", National Printing Bureau, April, 2007.

3

It should also be noted that police administration is carried out by prefectures,
while firefighting activities are carried out by municipalities.
As explained here, prefectures, as wide-area local government bodies, offer
administrative services which it is difficult for municipalities to offer. On theother hand, municipalities are able to carry out a very wide range of tasks,
centering on those services that are closely connected with people’s daily lives. In
international comparisons too, Japanese local governments carry out a wide
diversity and large number of tasks and occupy a major role in people’s lives.
1 – 2 The relationship between central government and local governments
A variety of configurations can be seen in the relationship between central
government and local governments in different countries, reflecting their
historical circumstances or geographical conditions. This relationship may take acentralized form, where the central government has a large amount of authority
and financial resources, or a decentralized form, where authority and financial
resources have been transferred in large measure to local governments.
As one factor in judging whether the relationship between central
government and local governments has a decentralized or a centralized form, it ispossible to cite the quantity of tasks or work implemented by local governments.
In other words, it is possible to take the view that the greater the number of tasks
that local governments undertake, the more decentralized the relationship is.
From this perspective, as already explained, local governments in Japan carryout an extremely large number of tasks or administrative duties, meaning thatthe local government system in Japan can be evaluated as being very
decentralized.
However, an evaluation from the perspective of how much independence from
centralgovernment

local

governments

have

when

implementing

theiradministrative duties is also important. Even if there are a large number of tasks,
if local governments cannot implement these in a way that is independent from
central government, then it is difficult to speak of the relationship being“decentralized”. From the perspective of the independence that local governments
have when implementing their tasks or duties, it is possible to differentiate
between a “separated pattern” and an “interfused pattern” of government.
The basis of a separated pattern of local government system is that central
government does not carry out administrative intervention vis-à-vis a local

4

government, which for its part, is able to implement its duties independently.
Central government is also able to carry out its duties by means of such devices
as establishing outreach organs, so that duties are carried out (administrative
services provided) at each level in a separated way.
On the other hand, a characteristic of a country with an interfused patternof government is that a preset amount of authority is devolved to local
government in a general fashion, so that it is still possible for the local
government to carry out a wide range of duties. However, in reality, what very
often happens is that central government retains a large amount of authority foritself, and duties are carried out by local governments as agents of central
government. And in such a country, central government retains a large measureof control and intervenes in local government administration in respect of theduties to be carried out. It is fair to say that the relationship between central
government and local governments in Japan, characterized for a long time by theexistence of the “Agency Delegated Function System” also belonged to thisinterfused pattern of government.
It is clear that it is necessary to judge the degree of decentralization by using
the dual criteria of the range (quantity) of the work to be implemented by local
governments and by the degree of independence that local governments havewhen implementing their duties (work).
1 – 3 Central-local governmental relationship in Japan
After the Meiji Restoration, the Japanese government put great efforts into
establishing a modern nation-state. It is in this context that Japan confirmed theestablishment of a system of local autonomy (local administration) through suchmeasures as establishing a system of cities and of towns and villages in 1888, anda system of prefectures in 1890. Under the Meiji Constitution, prefectures werelocal government bodies, and at the same time were local administrative organsof the central government; prefectural governors were appointed by central
government and served as central government officials. Moreover, under the
Agency Delegated Function System which existed at that time, the head of amunicipality (city, town or village) implemented the duties of local government as
an agent or organ of central government. In this kind of environment, extensive
supervision and control of prefectures and of municipalities was carried out by
the Minister of the Interior or by prefectural governors. Furthermore, whileassemblies were established both in prefectures and municipalities, their role5

was restricted. It follows that the system of local autonomy under the Meiji
Constitution can be evaluated as a centralized system of local autonomy and local
administration.
This kind of Japanese local autonomy system was greatly changed by areform after the end of World War II, aiming at a decentralized, democraticsystem of local autonomous bodies. The main points of the reform that took place
are as follows:
No. 1.

Chapter 8 of the Constitution of Japan, dealing with local

government, was newly added. Under the Meiji Constitution, there had been no
articles dealing with local government, so as a result of the establishment of the
new Constitution, Japanese local government was directly guaranteed by Articles
92 through 95.
No. 2.

Governors of prefectures were to be directly elected in a public

election instead of being appointed. Furthermore, under Article 93, the directpublic election of the chief executive officers of local government bodies is also
confirmed.
No. 3.

Prefectural employees, who had previously been classified asnational government officials, were reclassified as local government officials(exceptions were made for senior police officers and some others).
No. 4. As a result of these reforms (as listed in No. 2, No. 3 and elsewhere),prefectures changed from their prewar character of being local administrative
organizations (organs) of central government to “completely local autonomous
bodies” guaranteed under the new Constitution, and their independence was also
guaranteed.
No. 5. The system of election of heads of municipalities (cities, towns andvillages) was also changed from indirect election by assemblies to direct public
election. Supervisory authority by prefectural governors over such matters asbudgetary control, the dissolution of assemblies, and so on, was abolished or
reduced.
No. 6. The centralized police administration system was reviewed, and local
government (municipal) police authorities were created (subsequently, police
administration was made a prefectural matter). Moreover, the system offirefighting activities was rearranged, and reform of the education system aimed
at democratization and decentralization also took place.
Through these large-scale reforms, as set out here, the local government
system of Japan has achieved great changes in the direction of a decentralized6

system. However, the prewar centralized system is still partially maintained, and
it is still possible to discern areas of relationships between central government
and local governments that cannot necessarily be termed decentralized.
Specifically, the centralized character or characteristics that can be identified
in Japanese local governments are as listed below.
No.1. Use of the Agency Delegated Function System. The use of the Agency
Delegated Function System used in prewar days at municipal level, has come tobe widely used at prefectural level since the war, in a context in which prefectures
have become “completely local autonomous bodies”, and prefectural governors
have ceased to be central government officials.
No.2. Supervision and control by central government vis-à-vis local
governments is said to have decreased in comparison with prewar times, butwhen a lot of tasks (duties) are undertaken by local governments, controls andregulations are frequently exercised over these activities by means of individual
laws, and many kinds of control and intervention procedures are carried out bymeans of communications (notifications) from central government ministries andagencies,.
No.3. A large measure of control and intervention by central government
vis-à-vis the implementation by local governments of their duties is effected
through the medium of financial procedures involved in central government
disbursements, particularly national treasury subsidies and obligatory shares.
No.4.

In a context in which the Agency Delegated Function System andcontrol by central government continue to exist, the relationship between central
government and local governments has come to assume a hierarchical,
superior-subordinate form. Similarly, superior-subordinate characteristics canstill also be seen in the relationship between prefectures and municipalities.
No.5. The dependent attitude of local governments in respect of such matters
as directions, guidance, and financial help from central government, can also be
said to have contributed to the continuance of a superior-subordinate relationshipbetween central government and local governments.
2

Enactment of the Omnibus Decentralization Law – the background to
decentralization reform2 – 1 Issues in Japanese local government – the Agency Delegated Function
System and the National Treasury Subsidy and Obligatory Share System7

As shown above, in spite of the large-scale system reforms carried out after
the war, the character and characteristics of a centralized system could still befound to a significant extent in Japanese local government. In this context, when
the situation is viewed from the perspective of confirming local autonomy, anumber of major issues have emerged, specifically a) the transfer of authority
from central government to local governments, and b) the abolition orcurtailment of control or intervention by central government vis-à-vis the affairsof local governments.
With regard to such issues, I would like to say a little more at this point
about 2 problems which have attracted particularly strong criticism, namely the
Agency Delegated Function System and the National Treasury Subsidy andObligatory Share System.
On the Agency Delegated Function System, a) a central government ministeror prefectural governor had comprehensive supervisory authority over thegovernor of a prefecture or the mayor of a municipality respectively, and b) the
authority of local government was limited in that, for example, local governments
were unable to establish their own bylaws, and local government assemblies had
insufficient investigative authority. Furthermore, it was also pointed out thatbetween 70% and 80% of the tasks carried out by prefectures, and between 30%
and 40% of the tasks carried out by municipalities, fell within the purview of the
Agency Delegated Function System (Note 3).
Within the above context, criticism of the Agency Delegated Function System
was levied particularly in respect of the following points: a) because of it,
relationships between central government and local governments were arranged
in a hierarchical form; b) because of the detailed directions issued by central
government, even if local residents had specific wishes, it was impossible torespond to these in a flexible manner; c) because each central government
ministry and agency issued guidance and directions in its own special field, it was
impossible to implement policy comprehensively; and d) policy could not be
implemented on the basis of the actual situation of regions and localities.
On the other hand, in the financial sphere, the National Treasury Subsidy
and Obligatory Share System also came in for a great deal of criticism because of
the way in which it limited the freedom of local governments to formulate andimplement policy.
Specifically, this system had merits in that it served to safeguard policies
which were deemed necessary from a national perspective, but it had a number of8

problems in that a) the uniformity of the subsidy conditions hindered the effective
implementation of projects, b) projects with a relatively low priority for the local
area were implemented, c) the procedures involved in delivering the subsidy werecomplicated, resulting in many associated costs being generated, and d) it
hindered autonomous administrative and financial management that aimed toutilize local creativity. Given these criticisms, it was considered necessary for thesystem to be adjusted and rationalized.
Furthermore, as already mentioned, in a context in which local governments
account for 60% of government expenditure, strengthening local finances is amajor issue. Local taxes account for about one-third of gross local government
expenditure and income, so advocates of decentralization emphasize that in order
to secure a guarantee of autonomous financial management, it is necessary forcentral government to transfer tax revenue sources to local governments, andincrease local tax revenue.
2 – 2 Enactment of the Decentralization Promotion Law
Since the Report of the Shoup Mission in 1949, many kinds of investigative
commissions have produced reports, right up to the present day, pointing out thenecessity of reforms to deal with the problems referred to above. For example, therecommendations of the Shoup Report includes ones recommending that local
revenue sources be strengthened and the national treasury subsidy andobligatory share system be abolished or rationalized. In addition, in the 1980s,
both the Second Provisional Commission for Administrative Reform and the
Local Government System Research Council reported that the Agency DelegatedFunction System should be revised and rationalized.
In line with these proposals, a law concerned with revision andrationalization of the Agency Delegated Function System was enacted in 1986,
and the system of a law suit that made it possible to remove from office thegovernor of a prefecture or the mayor of a municipality who did not implement
the Agency Delegated Function was abolished in 1991. On the other hand, in thearea of local finances too, various reforms were carried out, such as a) cutting
national treasury subsidies and obligatory shares, and transferring the amountto general revenue sources such as local tax and local allocation tax, b) measures
aimed at simplifying subsidy conditions, subsidy payment procedures and thelike.
However, when looked at from the perspective of local government systems

9

as a whole, it is not necessarily possible to claim that these reforms haveproduced sufficient results. Since the end of World War II, the demands of thoseconnected with local autonomy have been consistent in respect of the promotionof decentralization, but the road to the realization of the decentralization ofadministrative systems in ways such as the abolition of the Agency DelegatedFunction System has not been an easy one.
But that said, with the advent of the 1990s, the promotion of decentralization
was taken up as a major policy issue in Japan. Against the background of slogans
proclaiming “From government to private sector” and “From central government
to local governments”, a broad consensus developed concerning the need fordecentralization to go hand in hand with deregulation as an integral part ofpolitical and administrative reform. Within this kind of contextual environment,
the promotion of decentralization began to gather support not simply from thepeople who were traditionally connected with local autonomy, but from a very
wide range of people, including politicians, representatives of the economic world,
and the mass media, so that it is fair to say that this movement was linked to therealization of large-scale decentralization reform.
In June 1993, resolutions about the promotion of decentralization were madein the National Diet. As the first resolutions on the promotion of decentralization
to be passed by both Houses of the Diet, this can be seen as having greatsignificance for the subsequent First Stage of Decentralization Reform. In
October 1993, the government council on administrative reform (the Provisional
Council for the Promotion of Administrative Reform (the Third PCPAR)) reportedwith suggestions concerning the promotion of decentralization. In December 1994,
on the basis of this report, a cabinet decision endorsed the “Fundamental
Principle for Promoting Decentralization”, setting the stage for the enactment ofa law on the promotion of decentralization.
On the basis of this cabinet decision, the “Decentralization Promotion Law”,
setting out the basic concepts of decentralization, came into force in July 1995. Bymeans of this law, the basic ideas and directions of decentralization were laid
down, and at the same time, provisions were established for the promotion of“Decentralization Promotion Plan” and the formation of “Decentralization
Promotion Committee” (for details of the progress of decentralization, see Table
2).

10

Table 2 Process of Decentralization Reform
June, 1993
October
December, 1994
July, 1995
March, 1996

Resolutions about the promotion of decentralization were made (in both the House ofRepresentatives and House of Councilors).
Report of the "Provisional Council for the Promotion of Administrative Reform (Third
PCPAR)".
"Fundamental Principle for Promoting Decentralization" was adopted at the Cabinet
meeting.
Decentralization Promotion Law was executed and the Decentralization Promotion
Committee was inaugurated.
Interim report from the Decentralization Promotion Committee was published.

December, 1996
～October, 1997
May, 1998

Decentralization Promoting Committee submitted the First-Fourth Recommendations.

March, 1999

Omnibus Decentralization Law was brought to the Diet.

"Decentralization Promotion Plan" was endorsed by a Cabinet decision.

July

Omnibus Decentralization Law was enacted.

April, 2000

Omnibus Decentralization Law came into force.

June, 2001

Final report from the Decentralization Promotion Committee was published.
"Basic policies for economic and fiscal management and structural reform of economic
society (Basic policies for 2001)" was endorsed by a Cabinet decision.
Council for Decentralization Reform was inaugurated.

July
May, 2002

September“Structural reform of local public finance and transfer of tax revenue sources”(Katayama draft policy) was published.
"Basic policies for economic and fiscal management and structural reform 2002 (Basic
policies for 2002" was endorsed by a Cabinet decision (Reform promoted by the trinity
method was decided for the first time.).
“Opinions about the ideal state of clerical works and projects” was reported by Council for
Decentralization Reform.
"Basic policies for 2003“ was endorsed by a Cabinet decision (4 trillion yen of subsidy
and obligatory share reform was decided.).
"Basic policies for 2004" was endorsed by a Cabinet decision (Local governments wererequested to prepare specific reform plans aiming to achieve a 3 trillion yen transfer of tax
revenue sources.).
A reform plan by the six associations of local governments was proposed to thegovernment.
Conference of central and local government on trinity reform was inaugurated.

November

The government and ruling parties came to an agreement over “Trinity reform.”

June
OctoberJune, 2003
June, 2004
AugustJune, 2005
NovemberJuly, 2006
December"Basic policies for 2005" was endorsed by a Cabinet decision (decisions were taken on
activities to ensure a steady implementation of the trinity reform by fiscal year of 2006.).
The government and ruling parties came to an agreement on “Trinity reform.”"Basic policies for 2006" was endorsed by a Cabinet decision.
Promotion of Decentralization Reform Law was enacted.

April, 2007

Promotion of Decentralization Reform Law came into force.

June

Local Financial Reconstruction Law was enacted.
"Basic policies for 2007" was endorsed by a Cabinet decision.

11

2 – 3 Enactment of the Omnibus Decentralization Law
On the basis of the Decentralization Promotion Law, the Decentralization
Promotion Committee, composed of 7 members, was established in July 1995.
The committee carried out its investigations and deliberations energetically, andissued an interim report on the promotion of decentralization in March 1996.
Following this, from December 1996 to October 1997, the committee submitted 4
recommendations to the Prime Minister, suggesting such measures as theabolition of the Agency Delegated Function System.
Why was decentralization considered necessary in Japan? As reasons toanswer this question, the following points are made in the interim report of the
Decentralization Promotion Committee.
1) A centralized administrative system, which put weight on uniformity andefficiency, was effective when the country was in a catch-up mode, but was
suffering from system fatigue, and was not appropriate for the circumstances andissues of a new age.
2) In order to respond to a dynamic international society, it is necessary to
promote decentralization and to clarify the role of central government.
3) Decentralization is also indispensable to correct the excessive concentration
on Tokyo and in order to apportion national land in a multi-polar, distributedmanner.
4)The promotion of decentralization and the strengthening of decision-making
powers on the part of local society are things that need to be carried out in orderto form a local society that is rich in individuality.
5) Putting emphasis on the creativity of municipalities (cities, towns andvillages), promoting decentralization, and encouraging a comprehensive approachto administration and cooperation between the public and private sectors arenecessary in order to respond to the demands of a society characterized by anaging population and a falling birthrate.
This same interim report, on the basis of the reasons listed above, indicatedthe necessity of a change from a centralized to a decentralized system ofadministration. And in order for local governments to be able to manage theiraffairs efficiently and effectively, and to respond to the issues of local societies, it
was necessary, while promoting decentralization, for the relationship between
central government and local governments to change from a “superior /subordinate relationship of dependency” to a “relationship based on equality andcooperation”.
12On the basis of the report issued by the Decentralization Promotion
Committee, the government took a cabinet decision in May 1998 to formulate theDecentralization Promotion Plan, and in March 1999, submitted to the National
Diet “Law on the Amendments of Related Laws to Promote Decentralization” (theOmnibus Decentralization Law).
The Omnibus Decentralization Law was enacted in July 1999, and was
implemented on April 1, 2000. The major issues addressed by this law were as
follows: a) abolition of the Agency Delegated Function System, b) a review ofcontrol and intervention by central government in the affairs of local
governments, c) clarification of the roles that should be adopted by central
government and local governments respectively, d) transfer of authority to local
governments, and e) a review of obligatory regulations on organizations of local
governments. In ways such as these, the law signaled a large-scale reform aimed
at the expansion of local autonomy.
3 The content of the First Stage of Decentralization Reform
The Omnibus Decentralization Law was an extremely large-scale law whichrevised more than 450 separate laws. The main points of the revisions are listed
below.
3 – 1 Abolition of the Agency Delegated Function System
Firstly, the Agency Delegated Function System, which had been the target ofmuch criticism, was abolished. As explained above, strong criticism was levied at
the way in which this system muddied the division of roles between central
government and local governments, and as a result of the control andintervention carried out by means of communications from central government,
acted as a major restriction on the autonomy of the policy formulation andimplementation process of local governments.
Through the abolition of the Agency Delegated Function System, more than
350 separate laws were revised, with the revisions being divided into 3 categories,
namely the disappearance of the task concerned, a change to direct
implementation by central government, and implementation of the tasks
concerned by local governments as they had done in the past. The greater part of
the functions that fell under the previous Agency Delegated Functions Systemwere to be carried out by local governments, and they were differentiated into
self-governing functions and statutorily entrusted functions. A slight difference13could be perceived in the system of intervention (control) by central government,such as the execution system by central government in respect of statutorily
entrusted functions. However, as seen, for example, in the way in which both
functions were located within the purview of local governments (categorized as
the work of local governments) and were made the object of bylaws, or in the factthat the system of comprehensive supervision that existed under the Agency
Delegated Function System was abolished, the autonomy and independence of
local governments was greatly enhanced.
3 – 2 A review of control and intervention by central government
Secondly, the system of intervention (control) by central government in theaffairs of local governments was reviewed. Most importantly, the comprehensive
supervisory authority of central government that had accompanied the Agency
Delegated Function System was abolished.
Furthermore, the provisions concerned with the principles (rules) andprocedures of intervention were established afresh in the Local Autonomy Law.
Specifically, the following points were established: a) the fundamental principle ofintervention by central government was that it should be reduced to the absolutenecessary minimum, and b) in order to guarantee fairness and transparency inthe matter of intervention, provisions concerning intervention criteria, such as
the establishment of criteria for the delivery of documents or for requesting
permission or giving approval, and the establishment of standard periods of time
for dealing with matters were specified afresh in the Local Autonomy Law.
Furthermore, a committee for the settlement of disputes between central
government and local governments concerning intervention was stipulated in the
Local Autonomy Law and was newly established.
In accordance with these principles and rules stipulated in the Local
Autonomy Law, more than 100 laws were revised with the aim of abolishing of
curtailing intervention (control). For example, the system of having to seek theapproval of the Minister of Education for the appointment of the superintendentof a board of education was abolished. And with regard to the system of seeking
approval for the issuing of local bonds, the system of requiring permission by the
Minister of Home Affairs in order to make it possible for local bonds to be issued
was revised to the effect that such permission was not necessarily required. In
addition, the required mechanism at the time of the creation of non-statutory
ordinary taxes by local governments was revised from the existing system of

14

granting permission to one of consultation requiring mutual agreement.
3 – 3 Clarification of respective roles
Thirdly, provisions concerned with the respective roles of central government
and local government and with the consideration taken by central government
have been stipulated (Article 1-2), and the roles to be carried out by central
government and local governments respectively have been clarified. Specifically,
it is stipulated that local governments “will undertake a wide role, implementing
in an autonomous and comprehensive way the administration of local areas”,
while central government “will share an appropriate role with local governments”
and at the same time, “must ensure that the autonomy and independence of local
governments can be sufficiently displayed”. Furthermore, the “principles oflegislation” and the “principles of interpretation and operation”, which state thatthe framing as well as the interpretation of laws and government ordinances(cabinet orders) must be based on an appropriate division of responsibilities
between central government and local governments, are also set out in the Local
Autonomy Law (Article 2). It is anticipated that the existence of provisions of thiskind in the Local Autonomy Law will be linked to an expansion of the degree of
freedom in establishing bylaws by means of new legislation oriented toward
decentralization or by the interpretation of existing legislation and government
ordinances concerned with decentralization.
3 – 4 Transfer of authority to local governments
In the fourth place, the transfer of authority to prefectures and tomunicipalities has been taken forward. It is fair to say that the focal point of theFirst Stage of Decentralization Reform can be found in the way in which, bymeans of such measures as the abolition of the Agency Delegated Function
System and the review of intervention (control) by central government, therelationship between central government and local governments was changed
from a superior / subordinate relationship to one of equality and cooperation.
However, when we adopt the perspective of decentralization, we see that thetransfer of authority to local governments is also a very important issue; in the
Omnibus Decentralization Law, 35 laws, including the Forestry Law, the City
Planning Law, and the Child Rearing Allowance Law, were revised, and thetransfer of authority was implemented. For example, through the revision of theForestry Law, authority to designate as protected forests or to remove that15

designation in respect of forests in private ownership was transferred from
central government to prefectures, and through the revision of the Child Rearing
Allowance Law, the authority to approve the right to receive child support
allowances was transferred from prefectures to municipalities. As shown here,
there are cases where authority was transferred from central government toprefectures, but the number of cases where authority was transferred fromprefectures to municipalities is by no means small.
3 – 5 A review of obligatory regulations
In the fifth place, regulations that made it obligatory to establish posts ororganizations were also looked at afresh. There is merit in establishing suchobligatory laws in terms of maintaining the level of administration, but there is aproblem in that this inhibits the autonomous right of local governments toestablish organizations freely. A further problem is that it has a detrimental
influenceonefficientandcomprehensive

administration.

Againstthisbackground, 38 laws were revised in the Omnibus Decentralization Law,
including a law concerned with agricultural committees and a law concerned withlibraries, and regulations which attached obligations to the establishment oforganizations or posts, or to titles and qualifications were either abolished orattenuated. For example, through the revision of the law concerned with
agricultural committees, the regulation which entailed the obligatory attachmentof an agricultural manager to an agricultural committee was abolished.
3 – 6 Provision and confirmation of other administrative systems
In addition to the above, legal reforms were also implemented from the pointof view of putting in place and confirming local government administrative
systems.

Most

importantly,

withintheframeworkof

theOmnibus

Decentralization Law, with a view to promoting the autonomous mergers ofmunicipalities, revisions were made to the special provisions of The Law for
Exceptional Measures on Municipal Mergers (Municipal Merger Law) in such
ways as strengthening the system of motions from local residents, andstrengthening the system of financial support. And with regard to local
assemblies, through revisions to the Local Autonomy Law, aimed at making
assemblies more lively and vigorous places, the conditions for introducing bills
and for proposing revisions were relaxed. At the same time, the system of a set
number of assembly members, which took the form of deciding the number of16

members through bylaws established, within the limits of the law, in each local
government, was looked at afresh. Also, in addition to the existing system of large
cities (ordinance-designated cities) and core cities, a system of speciallydesignated cities was created. Cities with a population exceeding 200,000 were so
designated, and were given more authority than general cities.
With regard also to the relationship between prefectures and municipalities,
their respective roles were clarified in line with their characteristics, with theaim of trying to construct relationships based on equality and cooperation. For
example, the system of categorization of duties known as “unified functions”,
which were applied to every prefecture, was abolished, and the provision
concerned with bylaws of prefectures imposing regulated duties on municipalities
was also abolished. Furthermore, with the aim of strengthening the duties andthe authority of municipalities, a new system was created whereby under
prefectural bylaws, municipalities were left to dispose of part of the duties ofprefectures.
4 Results of the First Stage of Decentralization Reform and outstanding
issues
4 – 1 Evaluation and results of reforms
4 – 1 – 1 Evaluation of the reforms
Looking as a whole at the First Stage of Decentralization Reform as outlined
above, given the aim of realizing equality between central government and local
governments, decentralization did make considerable progress and was highly
evaluated.
The first reason for the positive evaluation can be found in the abolition of
the Agency Delegated Function System. Against the background of a lack ofprogress in radical reform, despite many criticisms being levied against thissystem, when it was abolished by means of the First Stage of Decentralization
Reform, the greater part of the functions that fell under this system were madethe responsibility of local governments. There was also positive evaluation of theway in which the authority of local governments had expanded in such ways as
the ability to establish bylaws in respect of these functions.
The second reason can be found in the clarification of the division of roles
between central government and local governments, in the course of which theadministration of matters close to the everyday lives of residents was entrusted

17

as far as possible to local governments. In addition, a welcome was given to thefact that regulations concerned with the central government “principles oflegislation” as well as with the “principles of interpretation and operation”, both
based on an appropriate division of roles between central government and local
governments, have been newly established in the Local Autonomy Law, and to
the restrictions placed on the “density of regulations” resulting from laws andgovernment ordinances, and the expansion of the freedom of local governments toenact bylaws.
For the third reason, we can look to the establishment in the Local Autonomy
Law of the principles (rules) relating to intervention (control); a positive
evaluation was made of the restrictions placed on the pattern of intervention by
central government and of the expansion of the discretionary powers of local
governments. In particular, the way in which the fairness and transparency ofintervention was guaranteed by setting procedural regulations in place was
highly evaluated.
4 – 1 – 2 The results of reform
Within the context of decentralization reform being promoted as described
here, changes can be discerned in the administrative management and policy
formulation carried out by local governments.
For example, if we take the expansion of the scope of bylaws established by
local governments, efforts were made in many local governments to strengthen
their legal capacity, and at the same time, a system such as providing legal
assistance through organizational alliances between municipalities was taken
forward. In addition, in the context of severe financial circumstances, financial
and administrative reforms of local governments aimed at more efficientadministrative and financial operations were taken forward, and measures toreview and formulate policies based on the actual conditions of each locality were
undertaken in a very positive spirit. Against the above background, policy
implementation that utilized the autonomous taxation powers of local
governments, such as newly established non-statutory special purpose taxes,
attracted much attention.
In the same way as in the past, even after the First Stage of Decentralization
Reform, examples of an attitude of dependency on central government on the sideof local governments, remained discernible. Furthermore, on the side of central
government too, responses that were rooted in the former superior / subordinate

18

culture could still be identified. But that said, it can be fairly assumed thatchanges that were clearly oriented in the direction of a more equal relationshipbetween both sides did come about through the implementation of the First Stageof Decentralization Reform.
Furthermore, it was not just a question of changes in individual local
governments; the entire system of local government was energetically reviewed.
Even after the enactment of the Omnibus Decentralization Law in 1999,
revisions of the Local Autonomy Law were undertaken almost every year.
Through these revisions, specifically by such measures as the revision of a system
to enable law suits by residents, or the abolition of posts such as the chief
accountant or the treasurer, the number of items that had a great impact on theadministrative and financial operations of local governments was by no means
insignificant. Moreover, as mergers of municipalities progressed, the introductionof a regional government system became an issue to be examined and debated.
It is fair to say that with decentralization as a trigger, the whole system of
local government in Japan, after passing through a period of 50 years after the
postwar reforms, once again entered a period of change and review.
4 – 2 Outstanding issues
4 – 2 – 1 Strengthening the autonomy of residents
The First Stage of Decentralization Reform was highly evaluated in terms ofstrengthening local autonomy (organizational autonomy) in the framework of therelationship between central government and local governments. However, theevaluation of citizen autonomy, which is another important aspect of local
autonomy, was not necessarily high. Municipalities in Japan expanded in size
through the Great Meiji Consolidation and the Great Showa Consolidation.
Furthermore, in the context of severe financial circumstances, it has become very
important to carry out local management with the cooperation of residents.
In this situation, guaranteeing and securing the participation of citizens inlocal government and local administration has become a major issue. However, in
the First Stage of Decentralization Reform, apart from strengthening, through arevision of the Municipal Merger Law, the system whereby residents can makeproposals, it is not possible to find much material concerned with an expansion of
the autonomy of residents.
Furthermore, from the latter half of the 1990s, the Great Heisei
Consolidation was being taken forward, with the result that the number of19municipalities greatly decreased, from about 3,230 in 1995 to about 1,800 in 2007.
Looking at the size of municipalities, these figures mean that each unit (=each
city, town or village) accounted on average for about 70,000 people, a large figureeven within international comparisons, and it is fair to say that the demand for astrengthening of citizen autonomy has become stronger.
In this kind of context, as a result of the revision in 2004 of the Local
Autonomy Law and the enactment in the same year of the new Municipal Merger
Law, a system of “community autonomy wards” and “special wards of mergedmunicipalities”, as autonomous organizations much closer to the daily lives ofcitizens, was newly created, but strengthening local management by means ofcitizen participation, in other words, strengthening the autonomy of residents,
remains a major issue in local government in Japan.
4 – 2 – 2 The financial aspect of decentralization
Also rather difficult to evaluate is the financial aspect of decentralization. In
the First Stage of Decentralization Reform, too, as well as taking a fresh look at
the system of granting permission for local bonds to be issued, various reforms
were implemented, such as the creation of non-statutory special purpose taxes
and relaxation of the system of granting permission for non-statutory ordinary
taxes, and these various measures did have a certain effect (result). However,there were many who felt that the national treasury subsidy and obligatory sharesystem, which constituted the biggest issue in local financial system reform, wasinsufficiently reformed.
This national treasury subsidy and obligatory share system was strongly
criticized as hindering the autonomy and independence of local policies, and as
obstructing efficient and effective local management, and it was reviewed to acertain extent in the First Stage of Decentralization Reform. However, there wasstrong criticism to the effect that the review was not sufficient to guarantee theindependence of local government, and reform did not go as far as achieving aradical solution to the problem.
Moreover, there is also a big debate about strengthening local taxes. In thelight of the large expenditures by local governments, local tax revenue isinadequate. In this situation, in which there is a large gap separating the twosides, it is emphasized that it is necessary, in order to guarantee independent
financial management in local government, to implement the transfer of tax
revenue from central government to local governments and to increase the size of20

local tax revenue.
The issues related to the national treasury subsidy and obligatory sharesystem can be said to be a barrier that has been formed because the First Stage ofDecentralization Reform was carried out within a framework that did not makeradical changes in the political system. Furthermore, given the rule that cabinet
decisions must be made with unanimous agreement, a limitation is imposed by
the need to obtain the approval of all government ministries and agencies(consensus). Against this background, the First Stage of Decentralization Reform,
implemented within the context of an awareness of what was realisticallypossible, can be evaluated as constituting an important base for further
decentralization reforms in the future, but at the same time it is true to say thatthe results of these reforms were limited in their size and scope.
5 Decentralization after the first stage
5 – 1 Radical local financial reform (the Trinity Reform)
5 – 1 – 1 The progress of the reform
Radical local financial reform, which can be identified as an “outstanding
issue” in the context of the promotion of decentralization, was implemented in the
shape of the Trinity Reform.
In June 2001, shortly after its formation in April 2001, the Koizumi Cabinet
announced its “Basic policies for future economic and financial management andstructural reform of economic society”, and within this context decided that “thenational treasury subsidy and obligatory share system shall be rationalized andthe local allocation tax shall be reexamined, and at the same time, the allocationof tax sources between central government and local governments, including thetransfer of tax sources, shall be reexamined from the standpoint of basic
principles”. (See Table 2).
In

May

2002,

Mr.

Katayama,

MinisterofInternal

AffairsandCommunications at that time, prioritized the rationalization of 550 billion yen of
national treasury disbursements and its transfer to local tax revenue, and further
proposed that by means of a transfer of local allocation tax to local taxes on thebasis of a reform of local financial revenue and expenditure, a ration of 1 to 1
between national and local taxes should be achieved (the Trinity Reform).
Furthermore, in June 2002, a cabinet decision endorsed “Basic policies for
economic and fiscal management and structural reform 2002”, in which the21

government’s aim was stated as being “to examine national treasury subsidies
and obligatory shares, local allocation tax, and the tax revenue allocation
including the transfer of tax revenue sources by the trinity method(simultaneously),and to prepare a reform proposal, including the most desirable
outcome and a specific reform schedule for achieving this, within the space of one
year”.
Subsequently too, in the context of “Basic policies for economic and fiscal
management and structural reform”, endorsed every year as a cabinet decision,
the direction of “Trinity Reform” was set out as being to undertake a unified
reform of national treasury subsidies and obligatory shares, local allocation tax
and tax revenue transfer. Furthermore, with regard to the major problem that
arose in the form of opposing opinions by government ministries and agencies tosuch matters as the abolition of the national treasury obligatory share ofcompulsory education expenses, a process of adjustment was undertaken in theform of discussions with the government ruling parties. The result of this wasthat in November 2004 and November 2005, an agreement on “Trinity Reform”
was realized between the government and the ruling parties.
It was in this context that in every fiscal year from 2003 to 2006, Trinity
Reform and annual central government budget compilations were decided andimplemented by reference to these basic policies and to the agreement between
the government and the ruling parties.
5 – 1 – 2 The results of reform
The results of local fiscal reform (Trinity Reform) up to fiscal year 2006 canbe listed as follows.
Firstly, with regard to national treasury subsidies and obligatory shares, thesum of 4.7 trillion yen was abolished or converted to grants (simplifying thecondition) between fiscal 2004 and 2006. If we include the reform implemented in
the budget for fiscal 2003, the total sum for national treasury subsidy reform
amounts to 5.2 trillion yen. This is in excess of 40% of the national treasury
subsidies and obligatory shares at the time of fiscal 2003 (the local publicfinance program base) （Note 4）.
The tax revenue transfer from central government to local governments
amounted to about 3 trillion yen.
With regard to local allocation tax, the total amount of substantial local
allocation tax, including the extraordinary financial measures loan, showed a22

large decrease from 23.9 trillion yen in the fiscal 2003 budget, at the start of the
Trinity Reform, to 18.8 trillion yen in the fiscal 2006 budget, i.e. a reduction of 5.1
trillion yen (21.3%). This figure shows the influence of an increase in tax
revenues during the period in question, but it is reasonable to think that there
was a very significant influence from the greatly reduced scale of revenue andexpenditure in the local public finance program, which aimed at reducing local
government expenditure in order to achieve sound fiscal administration. (Thescale of the local public finance program in fiscal 2006, which at 83.2 trillion yen
showed a reduction of 3 trillion yen from the figure of 86.2 trillion yen in fiscal
2003, showed an overall reduction of 6.1 trillion yen compared to the figure of
89.3 trillion yen for fiscal 2001)(Note 5).
Further points with regard to local allocation tax are that the method of
calculating this tax, criticized as being overly complicated, has been simplified,the number of local governments to which no local allocation tax is granted(non-granted bodies) has increased, and the calculation method has been revisedwith the aim of providing an incentive for administrative and financial reform.
5 – 1 – 3 Evaluation of the reform
The local financial reform (Trinity Reform) was positively evaluated forachieving the transfer of 3 trillion yen of tax revenue sources to local
governments, and for establishing a forum for cooperation between central
government and local governments.
However, there was strong criticism of the fact that the reform plan of the 6
associations of local governments formulated on the basis of a request from
central government was not respected, and that the reform of national treasury
subsidies and obligatory shares did not contribute enough to an expansion of theautonomy and independence of local governments.

As can be seen in the

reduction of national treasury subsidy (share) levels such as a reduction brought
about by a revision of the national treasury obligatory share of compulsory school
education expenses, there was no increase in the level of autonomy in theformulation and implementation of local government policies. On the contrary,
there is a fear that general revenue source obligations incurred by local
governments in the course of the implementation of subsidy-aided projects has
increased, and that the autonomy and independence of local government
administrative management has decreased.
Furthermore, in the context of implementation of the Trinity Reform, the23scale of the local public finance program decreased for 5 successive years from apeak in fiscal 2001. Accompanying this trend, in a context in which the total
amount of substantial local allocation tax was greatly compressed, strong
criticism was raised as to a) the difficulties that had arisen for local governments
in implementing administrative and financial management and policies, and b)
the possibility that fiscal reconstruction had been given priority overdecentralization. For these reasons, it cannot be said that the evaluation of the
Trinity Reform by those connected with local government was necessarily high.
(For further details of the process, content and evaluation of the Trinity Reform,
please refer to “Recent Local Financial System Reform (Trinity Reform)” byHiroshi Ikawa.)
5 – 2 Subsequent decentralization reforms
5 – 2 – 1 Enactment of the Decentralization Reform Promotion Law
In July 2006, the round-table conference established by former Minister ofInternal Affairs and Communications Takenaka proposed to submit to the Diet
within 3 years the draft of a “New Omnibus Decentralization Law”. Moreover, the6 associations of local governments also requested the enactment of a “New
Decentralization

Promotion

Law”

aimed

at

still

furtherpromotionofdecentralization. Against this background, the “Decentralization Reform
Promotion Law”, which contained stipulations relating to such matters as thebasic ideas of decentralization reform, the establishment of committees, and so on,
was presented to the Diet in October 2006, and adopted in December of the sameyear.
In this law, the basic direction of decentralization is set out in terms of thefollowing points: a) the transfer of authority to local governments; b)
rationalization of the imposition of duties on local governments and ofintervention by central government; c) examination of matters related to thefinancial system, such as the national treasury subsidy and obligatory sharesystem, local allocation tax, and the distribution of tax revenue sources between
central government and local governments; and d) establishing and consolidating
local government administrative systems such as designing them to strengthen
citizen autonomy.
These various points can be thought of as points that were still outstanding
after the reforms to date, including the First Stage of Decentralization Reform.
Decentralization was certainly promoted in the reforms, but as a result of large

24

numbers of laws and government ordinances, many obligations were imposed on
local governments and implementation methods were controlled, so that a barrier
to local government autonomy was created. In this kind of context, there was aneed to bring order and rationalization to the controls on local government
resulting from the laws and ordinances referred to here.
In addition, as already pointed out, in a context in which it cannot be said
that decentralization in the financial sphere has necessarily been sufficiently
realized, it is vitally important, with a view to constructing a local financial
system in which autonomy can be made sufficiently visible and explicit, topromote examination of the future pattern of local finances. On that occasion,
against the background of the severe evaluation of the Trinity Reform that has
already been noted, a major issue will be that of how to realize national treasury
subsidy and obligatory share reform in a way that will make a real contribution
to decentralization. Moreover, with regard to local allocation tax, given the large
disparities in financial power among local governments, it is necessary not only toconsider “competition” among local governments, but also to discuss and pay
sufficient attention to the need for “equality” and “fairness” in local government
policies.
Furthermore, with regard to the strengthening of citizen autonomy, this has
not been promoted particularly strongly in reforms to date. In this situation,
making positive efforts to take decentralization forward by such means as
breathing new life into local communities, encouraging citizen participation andimplementing collaboration with local citizens, is essential in the context ofstrengthening local autonomy in Japan and promoting decentralization.
It is necessary to give sufficient consideration, in the context of theenactment of the Decentralization Reform Promotion Law, to the questions of
how from now on decentralization can be taken forward and how the expansion ofautonomy and independence in local governments can be achieved.
5 – 2 – 2 The promotion of decentralization and disparities between local areas.
Given the present critical financial situation, the restoration of a healthyfinancial state is a vitally important issue for both central government and local
governments. It is within this context that emphasis has been put on the vitally
important issue of financial reconstruction, and that on the other hand, criticisms
have been made to the effect that financial reconstruction has been given ahigher priority than decentralization in the context of the Trinity Reform.

25However, in order to carry out effectively the policies that are reallynecessary for local citizens on the basis of the actual situation of local
communities, autonomy and independence in local government administrativeand financial management are indispensable. If we also consider the perspectiveof ensuring citizen participation and promoting efficient local government
management, it is important to take decentralization forward in terms both of thelocal government administrative system and of the local government financial
system.
In this situation, it is necessary to implement an examination of the kind ofissues taken up in the basic directions of the Decentralization Reform Promotion
Law, and to aim at the promotion of decentralization.
It will be important on that occasion to raise the level of autonomy in local
governments, and at the same time as doing this, to clarify the responsibility that
local governments must take for themselves. From this perspective, it isimportant that positive efforts are made by local governments to provide financial
information to citizens, and in this respect, the new Local Financial
Reconstruction Law (enacted in June 2007) can be highly evaluated in terms ofrequiring consolidation of financial indicators and disclosure of financial
information.
But that said, large disparities can be seen in terms of financial and economic
power among local governments, and problems can be identified in terms of the
responsibility and efforts that local governments take and make for themselves.
In a situation in which a difference of about 3 times can be found in the per capita
tax yield among prefectures, guaranteeing fiscal revenue for local governmentsthat are financially weak is a major issue.
In this situation, the form that local allocation tax should take is one
important issue. Opinions have been expressed by the Ministry of Finance andother sources to the effect that there is a need a) to reduce the overall amount of
the local allocation tax, and b) to re-examine the function of the local allocation
tax in terms of providing a guarantee of a revenue source. In rebuttal, thoseconnected with local governments have argued strongly thata) localgovernments have already made very severe reductions in expenditures, andthere is no further room for maneuvers in local finances, and b) in a context inwhich there are large financial disparities, necessary revenue sources must be
guaranteed. In this situation, in which large financial disparities exist among
local governments, a major issue is how to take decentralization forward within a26

framework in which each local government body is guaranteed the financial
revenue that it requires.
Conclusion
From now on, local governments must take decentralization forward while
implementing administrative and financial management that pays due attention
to the points below.
Firstly, it is important that local governments utilize to the full the results ofdecentralization reforms. With this point in mind, the training of humanresources is particularly important. In a severe financial situation, even when theimportance of training human resources is pointed out, there are more than justa few cases in which in practice the importance of human resource training istreated lightly, as when the training budget is squeezed. When we think of theadministrative and financial management of local government from a long-term
perspective, it is necessary to put more effort into training human resources.
Secondly, it is necessary to obtain the understanding of local citizens inpromoting decentralization. With this point in mind, it is essential that local
governments present the results of decentralization to local people in an easily
understandable way, and obtain their support. In order to establish confidence inlocal governments, it is important to make positive efforts to provide to residents
and make public administrative and financial information on such matters as thestate of implementation of local government policies and the government’s
financial situation. In addition, it is important to promote cooperation with local
residents by increasing opportunities to listen to their views and encourage their
participation. This can be thought of as making efforts to strengthen citizen
autonomy.
The relationships between central government and local governments take avariety of different forms in different countries, depending on the historical,
social, economic and geographical conditions of those countries. It follows thatthe promotion of decentralization is not necessarily a good thing to do in all
circumstances. There is a problem in that by expanding the authority of local
governments or their financial resources to an excessive degree, the unity of thenation-state may be obstructed and the disparity between different regions may
be widened.
But that said, in the case of Japan, in the context of a tradition of centralized27

governance that has been handed down ever since the Meiji era, it is reasonable
to take the view that efforts should continue to be made to take decentralization alittle further along the road.
As a result of the First Stage of Decentralization Reform, the independence of
local governments has been enhanced vis-à-vis central government, but from theperspective of strengthening the autonomy of local residents, efforts are still far
from satisfactory. Problems also continue to exist in terms of such matters as
control of local government administrative and financial management by meansof laws and government ordinances. Furthermore, in the area of local financial
reform, it cannot be claimed that autonomy and independence in the local
government financial sphere have been satisfactorily achieved. In this kind of
situation in Japan, it is fair to say that there is a need to put still more effort into
constructing a decentralized local government system.

(Notes)1 Ministry of Internal Affairs and Communications（ed.）. (2007) Heisei 19 nendo ban chihou
zaisei hakusho [White paper on local public finance, FY2007 edition], National Printing
Bureau, p.1
2 Ministry of Internal Affairs and Communications（ed.）.ibid.,p.2.
3 Narita, Yoriaki (editorial supervisor). (1999) Chihou jichi hou kaisei no pointo [The main
points of the revision of the Local Autonomy Law], Dai ichi houki, pp.14-16.
Ikawa, Hiroshi. (2001) Shin chihou jichi hou to jichitai no jiritsu [The New Local
Autonomy Law and the autonomy of local governments],Koujin no tomosya, pp.11-13.
4 Ikawa, Hiroshi. (2007) Recent Local Financial System Reform (Trinity Reform), COSLOG
Up-to-date Documents on Local Autonomy in Japan No.2 , Council of Local Authorities forInternational Relations（CLAIR）＆The Institute for Comparative Studies in Local
Governance (COSLOG), p.21, Table 4.
5 Ikawa, Hiroshi.(2007) Ibid., p.22, Table 5.

References
References other than those shown above:
1 Nishio, Masaru. (2001) Gyousei gaku (Shinban) [Administration (New edition)], Yuhikaku
Publishing Co., Ltd.
2

Matsumoto, Hideaki. (2000) Shin chihou jichi seido shoukai [Detail of New Local
Autonomy System], Gyosei Publishing Co..

28

3

Council of Local Authorities for International Relations （ CLAIR ） .(2007) Local
Government in Japan 2006, CLAIR.

4 Ministry of Internal Affairs and Communications. (2007) White Paper on Local Public
Finance,2007 －Illustrated－ , Ministry of Internal Affairs and Communications.
5 Study group on local allocation tax system. (2007) Heisei 19 nendo ban Chihou koufuzei
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