In addition there are special grants. The amount of funds required to cover payments of interest and repayments of principal is included in the calculation of the amount of grants Relationship with the Central Government A resolution by a local government or authority to issue bonds must be approved by either the Minister of Home Affairs or the Governor. In practice, the volume of municipal bonds to be issued each year is finalized by agreement between the Ministry of Finance and The Ministry of Home Affairs. In principle, the federal government does not become involved. The extent of involvement by the State Government varies from state to state Although there have been no examples in the past, there is a system for the federal government to restrict issuance of bonds.
State governments determine the amount of bonds they plan to issue independently.
In principle state governments have a blanket approval to issue bonds but there is a possibility that this may change to an individual approval process. In accordance with the municipal bond authorization policy, municipal authorities and local agencies which meet the following conditions may have limits placed on the issuance of municipal bonds or may not receive approval to issue such bonds. The Municipal Bond Authorization System is designed to ensure the health of municipal finances and to protect payment of interest and repayment of principal on municipal bonds. Therefore, the restriction on the ratio of outstanding municipal bonds to authorized limit is not only to calculate the risk of default but also to impose some self-discipline on the issuing authorities to ensure that they can fulfil their obligations under municipal bond issues. A Zaisei Saiken Dantai is not permitted to issue further bonds and the national government takes a closer hands on role in the finances of the municipality.