Ministry of Public Management,
Home Affairs, Posts and Telecommunications,
The Japanese Government
FY 2001 Settlement
White Paper on Local
Public Finance, 2003
Tentative Translation
─ Illustrated ─
The Role of Local Public Finance
...................................................... 1
The State of Local Public Finance
(FY 2001 Settlement)
Revenue .......................................... 4
1. Revenue Breakdown .................. 4
2. Revenue Trends ........................ 5
3. Local Taxes................................. 6
4. Local Allocation Tax .................. 8
Expenditure ................................. 10
1. Expenses by Function ............... 10
2. Expenses by Character ............ 12
Flexibility of the Financial
Structure....................................... 14
1. Ordinary Balance Ratio ............ 14
2. Debt Service Payment Ratio Used for
Permission to Issue Local Bonds ... 15
Outstanding Local
Government Borrowing
(Ordinary Account)
................................................... 16
1. Trends in Outstanding Local
Government Borrowing ............ 16
2. Outstanding Borrowing of Local
Finance .................................... 17
Local Public Enterprises ......... 18
1. Ratio of Local Public Enterprises... 18
2. Number of Businesses Operated
by Local Public Enterprises ...... 19
3. Scale of Financial Settlement ... 19
4. Management Conditions ......... 20
Efforts Toward Sound Financial
Conditions
1. Number of Public Employees......... 21
2. Salary Level ................................. 23
3. Administrative Transparency ......... 24
4. Examples of Administrative Reform
Efforts .......................................... 25
Issues of Local Finance
1. Strengthening the Administrative
and Financial Base for Further
Decentralization ........................... 26
2. Efforts Toward Sound Financial
Conditions .................................... 33
3. Response to Regional Policy
Issues .......................................... 331Prefectures and municipalities (cities, towns, and villages) are central actors in
various administrative fields, including school education, welfare and public
health, police and fire services, and the construction of such public works as
roads and sewerage systems. They fulfill a major role in national life.
Regarding local public finance, which is the totality of the finances of local
governments, we introduce here the state of settlement for fiscal 2001, efforts
toward financial soundness of the local public entities, and so on, with the focus
on the ordinary account.
Classification of the Accounting of Local Governments
Applied in the Settlement Account Statistics
We have adopted a uniform method in the settlement account statistics and classify accounts as
an ordinary account, which covers the general administrative sector, and other accounts. This
enables us to make a statistical comparison of local governments even though the account
classification of local governments is not uniform.
Account of general administrative sector
Ordinary
account
Other
accounts
Accounts of Local Governments
Public enterprise account
Water supply business, Transport business,
Electricity business, Gas business, Hospital,
Sewerage business,
Residential land development projectEtc.National health
insurance
account
Elderly medical
care account
Nursing care
insurance
accountEtc.The Role of Local Public
FinanceTheRoleofLocal
Public
Finance2Gross Domestic Expenditure and Local Public Finance
Looking at the ratio of local public finance to gross domestic expenditure, we see that the ratio
of the local government sector is 13.5% , and it is about three times larger than the ratio of the
central government.
How large is local public finance compared with central
government finance?TheRoleofLocal
Public
Finance
Local government
67円.6049 trillion
(13.5%)
Government sector
121円.4243 trillion
(24.2%)
Central
government
23円.1480 trillion
(4.6%)
Ordinary account
58円.0662 trillion
(11.6%)
Social security fund
30円.6714 trillion
(6.1%)
Gross domestic
expenditure
(nominal)
502円.6023 trillion
Enterprise sector
73円.7557 trillion
(14.7%)
Household sector
303円.5530 trillion
(60.4%)
Private sector
377円.3087 trillion
(75.1%)
Net export of financial
goods and services
3円.8692 trillion
(0.8%)
Shares of National and Local Governments in Main Expenditures by
Function (final expenditure base)
In which fields are local expenditure ratios high?
Local expenditure ratios are higher in the areas that have a close relationship with daily life,
such as public health and sanitation, school education, social education, and police and fire
services.3Ratio of
expenditures
by function
Local ratio National ratio
Health and sanitary
expenses4.6%10.6%3.0%4.3%
14.9%4.9%2.7%
15.2%2.1%2.1%3.2%3.5%8.5%0.4%94%86%85%6%14%15%20%28%29%35%37%42%45%100%100%25%
School education
expenses
Social education
expenses, etc.
Judicial, police, fire
service expenses 80%
Land development
expenses 72%
Commercial and
industrial expenses 71%
Land preservation
expenses 65%
Public welfare
expenses
(except pension expenses)63%Housing expenses,etc.Disaster reconstruction
expenses, etc.
Agriculture, forestry
and fishery industry
expenses
Defense expenses
Pension expenses
(of public welfare expenses)
General administration
expenses, assembly
expenses, etc.58%58%55%75%42%The
StateofLocal
Public
Finance(FY2001Settlement)4
Revenue
1. Revenue Breakdown
Local taxes account for about one-third of the revenue of local governments, followed by the
local allocation tax, national treasury disbursements and local loans.
Local transfer tax Collected
as a national tax and transferred
to local governments. Includes
local road transfer tax, etc.
Special local grant A revenue
source with the character of a
substitute for local taxes, intro-
duced to supplement a part of
the decrease of local tax caused
by a tax cut since FY 1999.
Local allocation tax An
intrinsic revenue source shared
by local governments in order to
adjust imbalances in tax revenue
among local governments and to
guarantee revenue sources so
that local governments in what-
ever region can provide a certain
level of administrative services.
Calculated as a certain ratio of
five national taxes. (See pages 8
and 9 for details.)
National treasury disburse-
ments A general name for funds
disbursed from the central
government to local govern-
ments for specified uses.
Local loan Borrowing of local
governments not redeemed
within the fiscal year.
Where does the money for local government activities come
from?
Notes:
1. The figures here are mainly
for the ordinary account. (For
the accounts of public enter-
prises, such as water supply
and sewerage businesses,
transportation businesses, and
hospitals, see pages 18-20.)
2. The figures for each item are
rounded off under the given
unit. Therefore, they do not
necessarily add up exactly to
the total.
General Revenue
Resources
Local taxes, the local
allocation tax and so on are
called general revenue
sources since their uses are
not specified. It is extreme-
ly important for local
governments to secure
general revenue resources
in order to respond to
various administrative
needs properly.
Revenue Breakdown (FY 2001)
Prefectures
Total
53,962円.5
billion
Municipalities
Total
52,938円.1
billion
Local allocation tax
11,075円.3 billion
(20.5%)
Local taxes
17,406円.3 billion
(32.3%)
Local transfer tax
133円.0 billion
(0.2%)
Special local grants
235円.0 billion
(0.4%)
General revenue
resources
28,849円.6 billion
(53.5%)
National treasury
disbursements
9,563円.3 billion
(17.7%)
Local loans
6,517円.1 billion
(12.1%)
Other revenue
resources
9,032円.5 billion
(16.7%)
General revenue
resources
30,983円.2 billion
(58.5%)
Local transfer tax
491円.0 billion
(0.9%)
Special local grants
666円.8 billion
(1.3%)
Local taxes
18,142円.5 billion
(34.3%)
Local allocationtax9,274円.5 billion
(17.5%)
Other general
revenue resources
2,408円.4 billion (4.5%)
National treasury
disbursements
4,910円.2 billion
(9.3%)
Local loans
5,356円.3 billion
(10.1%)
Other revenue
resources
11,688円.4 billion
(22.1%)52. Revenue Trends
NationwideFY1991FY1996FY1997FY1998FY1999FY2000FY2001
Net Total 85円.7 trillion
101円.4 trillion
99円.9 trillion
102円.9 trillion
104円.0 trillion
100円.3 trillion
100円.0 trillion
General revenue resources 60.3% (51円.7 trillion)
53.3% (54円.0 trillion)
54.4% (54円.4 trillion)
53.0% (54円.6 trillion)
54.9% (57円.1 trillion)
58.7% (58円.9 trillion)
57.4% (57円.4 trillion)
Local taxes 40.9%
(35円.1 trillion)
34.6%
(35円.1 trillion)
36.2%
(36円.2 trillion)
34.9%
(35円.9 trillion)
33.7%
(35円.0 trillion)
35.4%
(35円.5 trillion)
35.5%
(35円.5 trillion)
Local transfer tax 2.0%
(1円.7 trillion)
2.0% (2円.0 trillion)
1.1% (1円.1 trillion)
0.6% (0円.6 trillion)
0.6% (0円.6 trillion)
0.6% (0円.6 trillion)
0.6% (0円.6 trillion)
Special local grants 0.6% (0円.6 trillion)
0.9% (0円.9 trillion)
0.9% (0円.9 trillion)
Local allocation tax 17.4%
(14円.9 trillion)
16.7%
(16円.9 trillion)
17.1%
(17円.1 trillion)
17.5%
(18円.0 trillion)
20.1%
(20円.9 trillion)
21.7%
(21円.8 trillion)
20.3%
(20円.3 trillion)
National treasury
disbursements
13.2% (11円.3 trillion)
14.6%
(14円.8 trillion)
15.4%
(15円.6 trillion)
16.7%
(17円.0 trillion)
14.4%
(14円.4 trillion)
14.1%
(14円.1 trillion)
17.1%
(17円.0 trillion)
15.3%
(15円.7 trillion)
14.7%
(15円.1 trillion)
17.0%
(17円.5 trillion)
16.0%
(16円.6 trillion)
12.6%
(13円.1 trillion)
16.5%
(17円.2 trillion)
14.4%
(14円.5 trillion)
15.8%
(15円.8 trillion)
11.1%
(11円.1 trillion)
14.5%
(14円.6 trillion)
16.3%
(16円.2 trillion)
Local loans 8.5%
(7円.3 trillion)
11.8%
(11円.8 trillion)
Other revenue
resources 18.0%
(15円.4 trillion)TheStateofLocal
Public
Finance(FY2001Settlement)6
Composition of Revenue from Prefectural Taxes (FY 2001 settlement)
Composition of Revenue from Municipal Taxes (FY 2001 settlement)
3. Local Taxes
Local taxes consist of prefectural taxes and municipal taxes. (In the case of the special wards of
Tokyo, the Tokyo Metropolitan Government collects some municipal taxes.)
Prefectural
residents tax
4,382円.4 billion
(28.2%)
Enterprise tax
4,328円.2 billion
(27.9%)
Total
15,530円.3
billion
On Interests
1,176円.4 billion (7.6%)
Individual
2,369円.3 billion
(15.3%)
Corporate
836円.7 billion
(5.4%)
Corporate
4,101円.8 billion
(26.4%)
Individual
226円.4 billion (1.5%)
Local consumption tax
2,474円.5 billion
(15.9%)
Automobile tax
1,771円.4 billion
(11.4%)
Light oil delivery tax
1,190円.5 billion
(7.7%)
Real property
acquisition tax
537円.5 billion (3.5%)
Automobile acquisition tax
449円.6 billion (2.9%)
Prefectural tobacco tax
276円.8 billion (1.8%)
Other taxes
119円.4 billion (0.7%)
Municipal
residents tax
8,184円.6 billion
(40.9%)
Total
20,018円.5
billion
Individual
5,996円.2 billion
(30.0%)
Corporate
2,188円.4 billion
(10.9%)
Other taxes
509円.6 billion (2.5%)
Fixed asset tax
9,153円.2 billion
(45.7%)
Municipal tobacco tax
850円.9 billion (4.3%)
City planning tax
1,320円.2 billion (6.6%)02468101214161816.9(32.8)
(41.7) (36.6) (34.1) (29.3) (27.0) (26.6) (27.9%)
(28.4) (28.2) (23.8) (24.8) (28.9) (28.2%)17.93.76.834.81.85.52.611.34.59.33.018.86.432.31.85.44.91.711.43.88.915.92.35.627.51.816.64.11.511.33.28.416.92.65.225.41.617.04.01.912.03.28.715.38.35.325.11.416.23.61.811.33.07.7
15.3%%%%%%%%%%%%7.65.426.41.515.93.51.811.42.97.710.15.840.01.73.72.38.33.95.4 14.5915
14.9478
15.3195
14.5863
15.5850 15.5303 trillion
16.18350.70.91.81.61.81.41.9\ trillion
FY1991 FY1996 FY1997 FY1998 FY1999 FY2000 FY2001
Other taxes
Light oil delivery tax
Automobile acquisition tax
Automobile tax
Prefectural tobacco tax
Real property acquisition tax
Local consumption tax
Individual
Corporate
Corporate
EnterprisetaxInterest
Individual
Prefectural
residentstax024681012141618202236.4
(53.4) (44.4) (45.8) (42.8) (40.9) (41.2) (40.9%)17.034.73.45.431.313.143.03.36.733.811.941.63.86.331.711.144.13.96.630.810.145.64.26.730.310.945.34.36.630.010.945.74.36.6
18.8892
20.5022
21.2077
20.6027 20.4399
19.9614 20.0185 trillion%%%%%%3.12.62.52.6 2.6
2.6 2.5
\ trillion
FY1991 FY1996 FY1997 FY1998 FY1999 FY2000 FY2001
Municipal
residentstaxCorporate
Fixed asset tax
Municipal tobacco tax
City planning tax
Other taxes
Individual7Among prefectural taxes, the ratios of the two corporate taxes (corporate business tax and
corporate prefectural residents tax) are high. Among municipal taxes, the ratios of the fixed asset
tax and individual municipal residents tax are high.
The two corporate taxes are impacted by the business cycle, so the tax revenue from prefectural
taxes is less stable.
On the other hand, municipal tax revenue has been relatively stable, although it has been on a
downward trend since fiscal 1998.
Figures in parentheses
are the component ratio
of the municipal residentstax.Figures in parentheses
are the component ratios
of the business tax and
prefectural residents tax.
Prefectural Taxes Trend
Municipal Taxes TrendTheStateofLocal
Public
Finance(FY2001Settlement)8
Regular allocation
tax amount
Standard financial
requirements
Unit cos×ばつ
Measured unit
number /amount
(national census, etc.)×ばつ
Adjustment coefficient
(scale modification, etc.)
Standard financial
revenues
Normal local tax revenue×ばつ
Computing rate
(80% for prefectures,
75% for municipalities)+ Local transfer tax, etc.
Notes:
1. Standard financial requirements are calculated as the financial requirements of each local government based on rational and appropriate
standards. It is a duty to include the local share of the national treasury projects, such as compulsory education, public assistance and
public works, in calculating the standard financial requirements. From fiscal 2001 to fiscal 2003, part of the standard financial
requirements is being transferred to special deficit-financing bonds (extraordinary financial countermeasures bonds) under Article 5 of the
Local Finance Law.
2. Normal local tax revenue neither includes non-statutory ordinary taxes and non-statutory special purpose taxes taxed independently by the
local government nor excess tax that exceeds the standard tax rate stipulated in the Local Tax Law. From fiscal 2003 the calculation rate
for both the prefectural portion and the municipal portion is 75%.
4. Local Allocation Tax
The local allocation tax is an intrinsic local revenue source aimed at adjusting imbalances in the
revenue sources of local governments and ensuring revenue so that local governments can
provide a standard level of administrative services and make basic public investment for people
in whatever region. In order to maintain the autonomy of local governments, the local
governments themselves are free to decide how the local allocation tax is used, in the same way
that they do on the use of the local taxes that they collect by themselves.
From the perspective of local autonomy, essentially it would be the ideal for each local
government itself to secure the revenue sources necessary for administrative activities through
local taxes collected from their residents. However, there are regional imbalances in tax revenue,
and many local governments are unable to secure the necessary tax revenue. Therefore, the
central government collects financial sources that should really be local tax revenue through
national taxation and reallocates them as the local allocation tax to local governments where
financial sources are insufficient.
Determination of total amount
The total amount of the local allocation tax is determined on the basis of certain ratios of five
national taxes (32% for income tax, corporate tax and liquor tax, 29.5% for consumption tax and
25% for tobacco tax [revised to 35.8% for the time being for corporate tax from fiscal 2000])
and on the basis of estimates of standard revenue and expenditure of local public finance as a
whole.
Method of calculation of ordinary local allocation tax for each local
government
The ordinary local allocation tax for each local government is calculated by the following
mechanism:219As a result of the financial adjustment, the ratio of general revenue resources to total revenue
does not differ greatly among municipalities regardless of population, etc.
Ratio of General Revenue Resources to Total Revenue for
Municipalities54.261.5 62.164.162.064.759.8(%)100806040200Ratio of general
revenue resources
to total revenue
General
revenue
resources
MajorcityCorecitySpecialcityMediumcitySmallcityTownorvillage
population
over 10,000Townor
village
population
under 10,0005.65.8 6.26.15.55.73.50.443.312.61.029.528.61.121.633.81.89.346.91.78.246.01.511.642.61.38.438.9Local
transfer
tax, etc.
Special
local
grant
Local
allocationtaxLocal
taxes
Note:
A "major city" is a city that has received designation under Article 252-19-1 of the Local Autonomy Law. A "core city" is a city that has received
designation under Article 252-22-1 of the Local Autonomy Law. A "special city" is a city that has received designation under Article 252-26-3-1 of
the Local Autonomy Law. A "medium city" is a city other than the major cities, core cities, and special cities that had a population in its
administrative area as of March 31, 2002, of 100,000 persons or over according to the national census report of 2000. A "small city" is a city with a
population of less than 100,000 persons under the same conditions.TheStateofLocal
Public
Finance(FY2001Settlement)10
Expenditure
Composition of Expenditure by Function (FY 2001)
1. Expenses by Function
When expenditure is classified by function, we see that a lot of revenue is expended for such
items as civil engineering expenses, education expenses, and public welfare expenses. In
prefectures it is expended for education expenses, civil engineering expenses, and debt servicing
in that order. In municipalities it is expended for public welfare expenses, civil engineering
expenses, and general affairs expenses in that order.
Civil engineering works expenses: Expenses for the construction and improvement of public facilities,
such as roads, housing and parks.
Education expenses: Expenses for school education, social education, etc.
Welfare expenses: Expenses for the construction and operation of welfare facilities for children, the
elderly, the mentally and physically disabled, etc. and for the implementation of public assistance, etc.
Public debt payment: Expenses for the payment of principal, interest, etc. on debts.
General administration expenses: Expenses for retirement allowances (excluding those covered by
police expenses and education expenses), fund reserves, taxation, etc.
What is revenue being expended for?
514,059
529,222
974,317
74,343
79,289
28,885
64,560
60,448
93,172
19,100
21,057
52,224
109,082
65,531
65,113
120,516
95,965
35,126
43,027
16,142
44,146
29,898
128,510 180,010
185,723
53,689
55,352
66,760
140,544
89,386
Municipalities
Prefectures
Net total
Share
(%) Share
(%) Share(%) 7.515.15.612.611.818.13.74.110.221.212.712.322.818.16.68.13.18.35.613.218.519.15.55.76.914.49.2
Unit: 100円 million
Other expenses
Public debt
payments
Education
expenses
Civil engineering
work expenses
Commerce and
industry expenses
Agriculture, forestry
and fishery expenses
Public hygiene and
sanitation expenses
Welfare expenses
General administration
expenses
Trends in Expenditures by Function (ordinary account net total)11Unit: Ratio with FY 1991 as 100.
Welfare expenses and public debt payments have been increasing in recent years.FY1991FY1999FY2001
General administration expenses
Welfare expenses
Of which, social welfare expenses
Of which, elderly welfare expenses
Of which, child welfare expenses
Public hygiene and sanitation expenses
Of which, sanitation expenses
Agriculture, forestry and fishery expenses
Commerce and industry expenses
Civil engineering work expenses
Education expenses
Public debt payments
Total expenditure
General administration expenses
Welfare expenses
Of which, social welfare expenses
Of which, elderly welfare expenses
Of which, child welfare expenses
Public hygiene and sanitation expenses
Of which, sanitation expenses
Agriculture, forestry and fishery expenses
Commerce and industry expenses
Civil engineering work expenses
Education expenses
Public debt payments
Total expenditure
General administration expenses
Welfare expenses
Of which, social welfare expenses
Of which, elderly welfare expenses
Of which, child welfare expenses
Public hygiene and sanitation expenses
Of which, sanitation expenses
Agriculture, forestry and fishery expenses
Commerce and industry expenses
Civil engineering work expenses
Education expenses
Public debt payments
Total expenditure
unit: 100円 millionTheStateofLocal
Public
Finance(FY2001Settlement)12
What are expenses for?
2. Expenses by Character
Classified by character, expenses can be divided into "obligatory expenses" (personnel expenses,
maintenance and relief expenses and public debt payments), which are obligatory and difficult to
cut down spontaneously; "investment expenses," including ordinary construction expenses, etc.;
and "other expenses."
Prefectures
Total
52,922円.2
billion
Municipalities
Total
51,405円.9
billion
Ordinary construction
expenses
12,724円.1 billion
(24.0%)
Personnel
expenses
15,797円.8 billion
(29.9%)
Maintenance and
relief expenses
1,444円.3 billion
(2.7%)
Public debt
payments
6,489円.8 billion
(12.3%)
Obligatory expenses
23,732円.0 billion
(44.8%)
Subsidized ordinary
construction expenses
6,526円.6 billion (12.3%)
Other expenses
16,185円.4 billion
(30.6%)
Investment expenses
13,004円.8 billion
(24.6%)
Unsubsidized ordinary
construction expenses
4,823円.9 billion (9.1%)
Ordinary
construction
expenses
11,048円.4 billion
(21.5%)
Personnel
expenses
11,040円.5 billion
(21.5%)
Maintenance and
relief expenses
5,030円.3 billion
(9.8%)
Public debt
payments
6,447円.2 billion
(12.5%)
Obligatory expenses
22,518円.0 billion
(43.8%)
Subsidized ordinary
construction expenses
3,921円.0 billion
(7.6%)
Other expenses
17,645円.0 billion
(34.3%)
Investment expenses
11,242円.9 billion (21.9%)
Unsubsidized ordinary
construction expenses
6,612円.9 billion (12.9%)
Expenditure by Character (FY 2001)13Trends in Expenditures by Character
Maintenance and
relief expenses
Expenses which in-
clude child welfare
expenses, public assis-
tance expenses, etc.,
aimed at assisting the
needy, children, the
elderly, mentally and
physically disabled,
etc., as a part of the
social security system.
Ordinary construc-
tion expenses
Expenses necessary
for the construction of
social capital, such as
roads, bridges, parks,
schools, etc.
NationwideFY1991FY1996FY1997FY1998FY1999FY2000FY2001
Net Total 83円.8 trillion
99円.0 trillion
Obligatory expenses 34円.6 trillion (41.2%)
41円.6 trillion (42.1%) 30円.7 trillion (31.0%)
Personnel expenses
23円.3 trillion (27.9%)
Maintenance and
relief expenses
4円.4 trillion (5.2%)
Public debt payments
6円.8 trillion (8.1%)
Ordinary construction expenses
24円.5 trillion (29.3%)
Subsidized ordinary
construction
expenses 8円.8 trillion
(10.5%)
Other expenses
23円.8 trillion (28.5%)
Investment expenses 25円.4 trillion (30.3%)
Unsubsidized ordinary construction
expenses 14円.7 trillion (17.5%)
26円.4 trillion
(26.7%)
5円.8 trillion (5.8%)
9円.4 trillion
(9.5%)
29円.9 trillion (30.2%)
11円.9 trillion
(12.0%)
16円.7 trillion
(16.9%) 26円.7 trillion
(26.9%)
97円.7 trillion
43円.4 trillion (44.4%) 28円.3 trillion (28.9%)
26円.9 trillion
(27.6%)
6円.2 trillion (6.3%)
10円.3 trillion
(10.5%)
27円.7 trillion (28.4%)
11円.1 trillion
(11.3%)
15円.5 trillion
(15.8%) 26円.0 trillion
(26.7%)
100円.2 trillion
44円.5 trillion (44.4%) 28円.9 trillion (28.8%)
27円.0 trillion
(27.0%)
6円.5 trillion (6.5%)
10円.9 trillion
(10.8%)
28円.3 trillion (28.2%)
11円.9 trillion
(11.9%)
14円.6 trillion
(14.6%) 26円.8 trillion
(26.8%)
101円.6 trillion
45円.7 trillion (45.0%) 26円.8 trillion (26.4%)
27円.0 trillion
(26.6%)
6円.9 trillion (6.8%)
11円.8 trillion
(11.6%)
26円.1 trillion (25.7%)
11円.7 trillion
(11.5%)
12円.9 trillion
(12.7%)
29円.1 trillion
(28.6%)
97円.6 trillion
45円.3 trillion (46.4%) 24円.4 trillion (25.0%)
26円.9 trillion
(27.5%)
6円.1 trillion (6.2%)
12円.3 trillion
(12.6%)
23円.9 trillion (24.5%)
10円.5 trillion
(10.8%)
11円.9 trillion
(12.1%)
27円.9 trillion
(28.6%)
97円.4 trillion
46円.1 trillion (47.3%) 23円.0 trillion (23.6%)
26円.8 trillion
(27.5%)
6円.5 trillion (6.6%)
12円.8 trillion
(13.2%)
22円.5 trillion (23.1%)
10円.0 trillion
(10.2%)
11円.1trillion
(11.3%)
28円.3 trillion
(29.1%)TheStateofLocal
Public
Finance(FY2001Settlement)14
Flexibility of the Financial
Structure
In addition to revenue sources allocated to obligatory expenses required every year, it is
necessary for local governments to secure revenue sources for measures to respond properly to
social and economic trends and changes in the demand of the residents. The extent to which
these revenue sources can be secured is called the flexibility of the financial structure.
1. Ordinary Balance Ratio
The ordinary balance ratio (the ratio of ordinary revenue allotted to expenses recurring every
fiscal year to the total of ordinary revenue recurring every fiscal year, centered on local taxes and
the local allocation tax, and tax-reduction supplementary bonds and extraordinary financial
countermeasures bonds [see note]) had been decreasing since fiscal 1999 because of such factors as
the decline in personnel expenses share, but it increased in fiscal 2001 because of such factors as
an increase in public debt payments.
How can local finance respond to the demand toward local
governments?0102030405060708090100(%) 71.374.879.484.1 84.7 84.887.489.4
87.5 87.520.312.3 12.513.614.7 15.1 16.017.318.7 19.036.886.419.637.035.937.339.241.1 40.8 40.040.540.638.584.690.585.383.591.783.081.581.276.272.371.071.677.483.087.4 88.1 86.794.291.783.989.383.6FY1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Public debt payments (%)
Personnel expenses (%)
Other expenses
Prefectures
Nationwide
Municipalities
Note:
Tax-reduction supple-
mentary bonds and
extraordinary financ-
ial countermeasures
bonds have been add-
ed since fiscal 2001.
2. Debt Service Payment Ratio Used for Permission to Issue Local Bonds
It is necessary to keep a close watch on trends in public debt payments at all times, since public
debt payments, payments of principal and interest on the debts of local governments, are
expenses especially lacking flexibility.
The debt service payment ratio used for restricting to issue local bonds, an index that takes into
consideration the local allocation tax calculated for debt payments and indicates the actual
degree of debt payment burden, has been increasing in recent years, and the flexibility of the
financial structure has become weaker.15Debt service payment
ratio used for permission
to issue local bonds
The debt service payment ratio
used for permission to issue
local bonds is an index show-
ing the ratio of local debt prin-
cipal and interest repayment
(excluding advanced redemp-
tion and the amount of general
revenue resources calculated
for this purpose that includes
the local allocation tax) to the
total of standard financial
amount (excluding the amount
of local allocation tax calculat-
ed for service payment) and
possible issue of extraordinary
financial countermeasures
bonds. This index is one of the
criteria to limit the issue of
local bonds. In principle, the
issue of local bonds relating to
general unsubsidized projects,
etc. is prohibited in the case of
local governments with a ratio
of 20% or over.
8.5 9.09.69.69.69.810.110.410.510.710.910.910.99.19.39.69.910.210.410.711.011.311.68.68.99.39.710.010.310.611.211.812.37.07.58.08.59.09.510.010.511.011.512.0(%) FY19911992199319941995199619971998199920002001
Prefectures
Nationwide
Municipalities
Trends in the Debt Service Payment Ratio Used
for Permission to Issue Local BondsTheStateofLocal
Public
Finance(FY2001Settlement)15.41.26.37.53.197.394.596.52.87.16.714.514.86.57.33.010.35.14.72.580.887.62.66.05.49.913.76.57.02.790.150.03.61.2120100806040200
\ trillion
128.1
125.6
120.1
111.5
103.354.9130.9
FY1991 1996 1997 1998 1999 2000 2001
Economic-
stimulus
measures
Extraordinary
financial
countermeasures
bonds
Tax-reduction
supplementary
bonds, etc.
Financial aid
bonds
Other local
bonds
Tax revenue
supplementary
bonds16Outstanding Local Government
Borrowing (Ordinary Account)
1. Trends in Outstanding Local Government Borrowing
Outstanding local government borrowing, the debts of local governments, amounted to
approximately 131円 trillion at the end of fiscal 2001. This figure has been increasing in recent
years because of such factors as the need to supplement tax revenue as a result of the decrease in
local tax revenue and tax cuts, the added public investment by economic-stimulus measures, and
the issue of extraordinary financial countermeasures bonds. The figure is 1.3 times larger than
total revenue and 2.3 times larger than general revenue resources, such as local taxes and local
allocation tax.
What is the state of debts in local public finance?
Trends in Outstanding Local
Government Borrowing
Notes:
1. Outstanding local government borrowing excludes special fund public works bonds and special fund public investment bonds.
2. Economic-stimulus figures are estimates.17Trends in Outstanding Borrowing That Should Be Shouldered by the
Ordinary Account and Ratio of Outstanding Borrowing to Gross
Domestic Product
2. Outstanding Borrowing of Local Finance
In addition to the current outstanding local government bonds, there are the outstanding
borrowing of local governments including the local burden of the borrowing of special account for
local allocation tax, and public enterprise bonds borne by the ordinary account. These
outstanding borrowings have been increasing sharply in recent years. The figure reached about
188円 trillion at the end of fiscal 2001 and is expected to reach 199円 trillion at the end of fiscal
2003.020406080100120140160180100203040\ trillion
54.864714.70.6733
14.4097
69.9477
103.331327.014.3529
21.4475
139.1317
111.497128.815.2137
23.1823
149.8931
120.063431.617.7872
24.9559
162.8065
125.598634.022.2192
25.9714
173.7892
128.085035.226.2633
27.0323
181.3806
130.878437.428.5303
28.3228
187.7315
% (%)
FY1991 1996 1997 1998 1999 2000 2001 (End of FY)
Ratio of outstanding
borrowing that should be
shouldered by the ordinary
account to GDP
Outstanding public enterprise bonds
(borne by the ordinary account)
Outstanding borrowing of special
account for local allocation tax
(borne by the local government)
Outstanding local government
bonds
(borne by the ordinary account)
Notes:
1. Outstanding local government borrowing excludes special fund public works bonds and special fund public investment bonds.
2. Outstanding public enterprise bonds (borne by the ordinary account) are estimates based on settlement statistics.TheStateofLocal
Public
Finance(FY2001Settlement)18
Local Public Enterprises
What is the state of local public enterprises?020406080100%99.226.290.257.014.5
Water-supply
business
(including small-scale
water supply business)
Sewerage
business
Transport
business
(subways)
Transport
business
(buses)
Hospitals
Water-supply
population
of 123.686
million persons
Sewage disposal
facility population
of 93.26
million persons
No. of passengers
a year
of 4.773
billion persons
No. of passengers
a year
of 4.894
billion persons
No. of hospitalbedsof 1,647,000 beds
122.703
million persons
84.13
million persons
2.720
billion persons
1.280
billion persons
238,000 beds
Local public enterprises are those that are managed directly by local governments for the
purpose of social and public benefit. They provide social infrastructure and services
indispensable for local residents and the development of the community, including water supply,
sewerage, transport and hospitals.
1. Ratio of Local Public Enterprises
Local public enterprises play a major role in improving the standard of living of residents.
The graph shows the
ratios of local public
enterprises to whole
business entities.
2. Number of Businesses Operated by Local Public Enterprises
The number of businesses is 12,611. By type of business, sewerage accounts for the largest ratio,
followed in order by water supply, small-scale water supply, care services, and hospitals.191,882
(14.9%)762(6.0%)602(4.8%)932(7.4%)
1,647
(13.1%)
1,989
(15.8%)
4,797
(38.0%)
12,611
FY2001
No. of businesses
Sewerage
business
Water-supply
business
Small-scale
water supply
Care services
Hospitals
Tourist
facilities
Others
212,856
14,871
(7.0%)
14,207
(6.7%)
14,212
(6.7%)
48,398
(22.7%)
47,094
(22.1%)
74,074
(34.8%)
FY2001
100円 million
Sewerage
business
Hospitals
Water-supply
business
including small-scale
water supply
Residential land
development
Transport
Others
3. Scale of Financial Settlement
The total financial settlement scale is 21円.2856 trillion. By type of business, sewerage accounts
for the largest ratio, followed in order by hospitals, water supply, residential land development,
and transport.TheStateofLocal
Public
Finance(FY2001Settlement)20
Trends in Management Conditions of Local Public Enterprises
4. Management Conditions
Local public enterprises moved into the black for the first time in four years since fiscal 1997,
with a surplus of 170円.2 billion. By type of business, water supply, industrial water supply,
electricity, and sewerage have registered a surplus, while transport and hospitals have continued
to show a deficit.
3,000
2,000
1,00001,000
2,000
3,000
4,000
5,000 781,984
1,702
△しろさんかく130
△しろさんかく423 △しろさんかく396
△しろさんかく492
100円 million
Total balance
Surplus
Deficit
Others
Sewerage business
HospitalsGasElectricity
Transport
Industrial water supply
Water supply (including small-scale water supply)
4,399
Total surplus
Others 2,174
Sewerage 406
Gas 65
Electricity 197
Industrial
water supply 103
Water supply
1,454
Transport
△しろさんかく1,696
Hospitals
△しろさんかく719
△しろさんかく2,415
Total deficit
FY1991 199619971998 1999 2000 2001
1,807
Total surplus
Others 15
Sewerage 141
Electricity 156
Industrial
water supply 104
Water supply
1,391
Transport
△しろさんかく1,690
Hospitals
△しろさんかく238
Gas △しろさんかく9
△しろさんかく1,937
Total deficit
2,392
Total surplus
Others 242
Sewerage 324
Electricity 177
Industrial
water supply 82
Water supply
1,567
Transport
△しろさんかく1,712
Hospitals
△しろさんかく578
Gas △しろさんかく24
△しろさんかく2,314
Total deficit
2,305
Total surplus
Others 17
Sewerage 318
Electricity 196
Industrial
water supply 116
Water supply
1,658
Transport
△しろさんかく1,676
Hospitals
△しろさんかく1,031
Gas △しろさんかく21
△しろさんかく2,728
Total deficit
2,388
Total surplus
Sewerage 556
Electricity 152
Industrial
water supply 147
Water supply
1,533
Transport
△しろさんかく1,677
Hospitals
△しろさんかく952
Gas △しろさんかく19
Others △しろさんかく136
△しろさんかく2,784
Total deficit
2,595
Total surplus
Sewerage 604
Electricity 196
Industrial
water supply 147
Water supply
1,648
Transport
△しろさんかく2,310
Hospitals
△しろさんかく644
Gas △しろさんかく20
Others △しろさんかく113
△しろさんかく3,087
Total deficit
3,927
Total surplus
Others 1,561
Sewerage 799
Gas 5
Electricity 123
Industrial
water supply 153
Water supply
1,286
Transport
△しろさんかく1,598
Hospitals
△しろさんかく627
△しろさんかく2,225
Total deficit21Efforts Toward Sound
Financial Conditions
Although local public finance is certainly in an extremely severe situation, the role of the local
government, which is clarified as the comprehensive administrative entity of the region, is
becoming increasingly important. For this reason, various administrative reform efforts are being
made with the aim of making administrative organizations simpler, more efficient and more
responsible to new administrative issues.
1. Number of Public Employees
The number of local public employees has declined for eight consecutive years since 1995. The
number of employees has fallen for seven consecutive years in the general administrative sector
and 11 consecutive years in the special administrative sector and also dropped in the public
enterprise sector.
The reason for these trends is that although the number of employees has increased in some
sectors because of such factors as the improvement of welfare and medical care and disaster-
prevention measures, efforts have been made to restrain the increase of the total number of
employees by numerical targeting measures and scrap-and-build measures.
What efforts are being made toward sound local finance?
3,219
3,228
3,242
3,254
3,271
3,282
3,278 3,274
3,267
3,249
3,232
3,204
3,172
3,144
1,133
1,139
1,146
1,156
1,167
1,175 1,175 1,175 1,172
1,166
1,161
1,152
1,114
1,100
3,200
3,220
3,240
3,160
3,180
3,140
3,260
3,280
1,100
1,120
1,140
1,160
1,180
(1,000 persons)
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
General administrative sector
Total number of local public employees
Number of Local Public Employees
Efforts
Toward
Sound
Financial
Conditions
Efforts
Toward
Sound
Financial
Conditions22Trends in the Number of Staff in Local Governments by Sector
(Unit: Ratio with April 1, 1992, as 100)
April 1,1992April 1,2000April 1,2002General administrative sector
Of which, general administration excluding welfare
Of which, welfare
Special administrative sector
Of which, education
Of which, police
Of which, fire
Accounting sector, including public enterprises
All local governments
General administrative sector
Of which, general administration excluding welfare
Of which, welfare
Special administrative sector
Of which, education
Of which, police
Of which, fire
Accounting sector, including public enterprises
All local governments
General administrative sector
Of which, general administration excluding welfare
Of which, welfare
Special administrative sector
Of which, education
Of which, police
Of which, fire
Accounting sector, including public enterprises
All local governments100101102103104105106107108109110111
107.3
105.5
105.9
110.6
103.4
102.4
101.3 101.2
100.5 100.6
100.7
1963 1974 1978 1983 1988 1993 1998 1999 2000 2001 2002232. Salary Level
When the salary level of local public employees is shown on the Laspeyres Index, the average
for all local governments is 100.6.
Trends in the Laspeyres Index
(Trends in the Average for All Local Governments)
Laspeyres Index
The Laspeyres Index is used to compare price levels, wage levels and so on. Here it is used to show the salary level of local public
employees when the salary level of national public employees is taken as 100.
The main cause of the increase in the Laspeyres Index in 2002 was that some of the local governments that carried out salary cuts in fiscal
2001 had completed these measures by the time of the survey on April 1, 2002.243. Administrative Transparency
Amid the increasing severity of local public finance, various efforts are being made to fulfill
accountability. In recent years, there has also been an increase in the number of local
governments formulating balance sheets in order to grasp the state of their assets and liabilities
in a comprehensive manner as a means of publicizing and analyzing their financial conditions.
Example of Balance Sheet (City A)
FY 2001 Ordinary Account Balance Sheet
Information relating to contract authorization
(1)Matters relating to the purchase of property, etc. (excluding items included in the main table) 4,443,824
(2)Matters relating to guarantee of obligation and loss compensation (excluding items included in the main table)
5,931,001
(3)Matters relating to compensation for paid interest, etc. 1,851,493
Credit
(As of March 31, 2002; unit: 1,000円)
Debit
Efforts
Toward
Sound
Financial
Conditions
(Assets)
1. Tangible fixed assets
(1) General administration expenses
7,849,963
(2) Welfare expenses
2,635,732
(3) Public hygiene and sanitation expenses
5,025,765
(4) Labor expenses
406,532
(5) Agriculture, forestry and fishery expenses
5,295,694
(6) Commerce and industry expenses
2,249,670
(7) Civil engineering work expenses
52,211,412
(8) Fire service expenses
561,124
(9) Education expenses
48,250,835
(10) Others
274,292
Total 124,761,019
(of which, land 42,664,316)
Total 124,761,019
2. Investment, etc.
(1)Investment and equity funds
4,055,425
(2)Loan
311,579
(3)Funds
〔1〕Special purpose funds
7,616,199
〔2〕Land development funds
2,044,674
〔3〕Fixed-in investment
44,000
Total 9,704,873
Total 14,071,877
3.Liquid assets
(1)Cash, deposits
〔1〕Adjustment fund for finance
2,040,545
〔2〕Sinking funds
1,726,458
〔3〕Cash in yearly account
1,151,958
Total 4,918,961
(2)Receivables
〔1〕Local taxes
1,844,860
〔2〕Others
728,614
Total 2,573,474
Total 7,492,435
Total assets 146,325,331
(Liabilities)
1. Fixed liabilities
(1)Local government bonds
53,400,519
(2)Contract authorization
〔1〕Purchase of property, etc.0〔2〕Guarantee of obligation or loss compensation0Total 0
(3)Retirement allowance reserve
6,234,735
Total 59,635,254
2.Liquid liabilities
(1)Scheduled redemption in next fiscal year
4,074,464
(2)Appropriation mode in advance0Total 4,074,464
Total liabilities 63,709,718
(Net assets)
1. National treasury disbursements
19,187,061
2. Prefectural disbursements
5,740,513
3. General revenue sources, etc.
57,688,039
Total net assets 82,615,613
Total of liabilities and net assets
146,325,331254. Examples of Administrative Reform Efforts
Local governments are making various administrative reform efforts with the aim of achieving
sound financial conditions. The following are some of them:
Examples of Specific Efforts
●くろまる Reduction of number of staff by about 20% (about 3,000 persons) in
the 10 years from fiscal 1999 to fiscal 2008. (In the four years from fiscal
1999 to fiscal 2002, the number of staff was reduced by 1,228 persons, or
about 8%.)
●くろまる Reduction of managerial allowance. (10% reduction in fiscal 2001 and
2002.)
●くろまる Implementation of revision of administrative tasks. (119 administrative
tasks were abolished or suspended in fiscal 2002.)
●くろまる Reduction of number of staff in prefecture-related organizations by
about 20% (about 600 persons) in the nine years from fiscal 2000 to
fiscal 2008 through a revision of prefecture-related organizations. (In
the three years from fiscal 2000 to fiscal 2002, the number of staff was
reduced by 320 persons.)
●くろまる Abolition, privatization, etc. of more than 26 public facilities (about
20%) in the seven years from fiscal 2002 to fiscal 2008 through a
revision of public facilities.
●くろまる Reduction of number of staff in departments and bureaus under the
governor by about 10% (about 1,400 persons) in the 10 years from
fiscal 1997 to fiscal 2006. (The prefecture brought forward the target year
by four years and more than achieved the goal with a reduction of 1,581
persons (11.7%) in the six years from fiscal 1997 to fiscal 2002. Efforts are
being continued toward further reductions.)
●くろまる Reduction of general staff salaries, etc. in the five years from fiscal
2000 to fiscal 2004. (4% reduction for staff receiving managerial allowance;
2% reduction for general staff.)
●くろまる Reduction of more than 10% in the number of main office bureaus,
departments, sections, and offices in the five years from fiscal 1997 to
fiscal 2001. (The target has already been more than achieved, with
reductions in the six years from fiscal 1997 to fiscal 2002 of 4 departments
or bureaus (28.6%) and 32 sections or offices (21.5%).)
●くろまる Curbing of the issue of new prefectural bonds to less than 10% of
independent financial sources, such as tax revenue, by fiscal 2006.
(The ratio was 23.1% in the final budget for fiscal 1996 and 14.7% in the
initial budget for fiscal 2003, a decline of 8.4 percentage points.)
●くろまる Revision of existing projects. (In fiscal 2003, 88 projects were abolished
or suspended and 1,009 projects were decreased or merged.)
●くろまる Reduction of number of staff by 1,000 persons (about 5.5%) in the five
years from fiscal 2001 to fiscal 2005. (Reduction of 736 persons in the
two years from fiscal 2001 to fiscal 2002.)
●くろまる Reduction of salaries for special posts. (15% reduction for mayor and
10% reduction for deputy mayor, etc. in fiscal 2002.)
●くろまる Reduction of salaries for general staff. (In fiscal 2002, 5% reduction for
bureau, department, and section chiefs; 4% reduction for assistant section
chiefs and subsection chiefs; 3% reduction for other staff.)
●くろまる Reorganization and merger of more than three auxiliary organizations
in the five years from fiscal 2001 to fiscal 2005.
●くろまる Raising the municipal tax collection rate from 94.1% in the settlement
of fiscal 1999 to the 96% level in the fiscal 2003 settlement.
●くろまる Implementation of revision of 142 administrative tasks in the five years
from fiscal 2001 to fiscal 2005. (Achieved the planned target of 80 tasks in
the two years from fiscal 2001 to fiscal 2002.)
Figures in parentheses show achievements so far.
PrefectureAPrefectureBCityC26
Issues of Local Finance
1. Strengthening the Administrative and Financial Base for Further
Decentralization
1 Strengthening the Financial Base of Local Governments
At a time when local government finance is suffering from a severe shortage of resources, in
order to promote further decentralization, it is necessary to make efforts toward the realization
of structural reform to increase the degree of freedom of local governments in terms of both
income and expenditure and to achieve local independence under the principle of "entrusting
to local governments what local governments can do."
Distribution of Financial Resources Between the National
and Local Governments
Taxation (total amount: 85円.5 trillion)
National taxes
(50円.0 trillion)
35円.6 trillion
58.4%
41.6%
37.4% 62.6%
49円.9 trillion
58.4%
41.6%
National : local
58 : 42
(≒3 : 2)
Local taxes
(35円.5 trillion)
Local allocation tax, etc.
National treasury expenditure
National : local
42 : 58
National
expenditure
(net budget)
57円.4 trillion
Local expenditure
(net budget)
95円.9 trillion
National : local
37 : 63
(≒2 : 3)
Return through services to the public
Total national and local expenditure (net budget)
= 153円.3 trillion
Further clarification of correspondence between benefit
and burden of administrative services
Promotion of administrative reform and fiscal structure
reform in the national and local governments
R eference
(FY 2001)
IssuesofLocal
Finance
●くろまる Realization of an income structure based mainly on local taxes
Gap between expenditure scale and tax revenue of local governments
Expenditure state : local = 2 : 3
Tax revenue state : local = 3 : 2
Reduce the gap as much as possible
●くろまる Revision of involvement of the central government through national
treasury subsidies, legislation, etc.27●くろまるThree-Pronged Reform
In order to promote structural reform toward local independence, it is necessary to
mutually connect financial resources, including national treasury subsidies, the local
allocation tax, and the transfer of financial resources, and to study them in a uniform
manner.
Part 4 Structural Reform in the Main Areas of Expenditure
3. National and local governments
(1) Regarding local administrative and fiscal reform, it is necessary to promote
such reform in a forceful and uniform manner. First of all, state involvement
should be reduced, and the powers and responsibilities of local governments
should be greatly expanded. Taking account also of studies and discussions
in the Committee for the Promotion of Decentralization, each minister, under
the guidance of the prime minister, with responsibility should study the
abolition or reduction of national treasury subsidy projects, including those
in the fields of welfare, education, and social capital, with the aim of
reaching a conclusion by the end of the year.
(2) In light of these considerations, a three-pronged study should be carried out
on the form of national treasury subsidies, the local allocation tax, and the
distribution of financial resources from taxes, including the transfer of
financial resources from taxes from the state to the regions, and a reform
draft including the desirable form of these elements and the specific reform
process to achieve this result should be compiled within the next year fromnow.This reform draft should aim for a reduction in the scale of national treasury
subsidies of several trillion yen during the period of "reform and outlook."
At the same time, there should be a reform of the local allocation tax. It is
necessary to drastically rectify the current situation in which more than 90%
of local governments receive the local allocation tax. For this purpose, the
reform should entail a revision of the local allocation tax’s financial resource
guarantee functions as a whole and a reduction during the period of "reform
and outlook."
On the other hand, it still remains necessary to rectify the differences in
financial strength among local governments. It should be discussed to what
extent and how they should be corrected and included in the above-
mentioned reform draft. Together with these reforms, with regard to those
subsidies among the national treasury subsidies to be abolished that are
deemed necessary to be continued independently by local governments, they
should be transferred to independent financial revenue sources of the local
governments after careful investigation of the necessary transfer amounts.
At present the shortage of financial resources in local governments amounts
to approximately 14円 trillion. This situation should be remedied as soon as
possible through such efforts as the reduction of expenditures and the
expansion of local taxes. After that, it should be aimed to break away from
the dependence on financial resource guarantees through the local allocation
tax and to realize the true financial independence of local governments.
Basic Policy on Economic and Fiscal Management and
Structural Reform, 2002 (Excerpt)
R eference (Decided by the cabinet on June 25, 2002.)
IssuesofLocal
Finance28・Local Taxes
In order for local governments to provide administrative services in response to local
needs with responsibility and at their own discretion, it is necessary to expand and
secure local taxes so as to build a local tax system in which the uneven distribution of
tax sources is limited and the stability of tax revenue is ensured.
Hokkaido
Aomori
Iwate
Miyagi
Akita
Yamagata
Fukushima
Ibaraki
Tochigi
Gunma
Saitama
Chiba
Tokyo
Kanagawa
Niigata
Toyama
Ishikawa
Fukui
Yamanashi
NaganoGifuShizuoka
AichiMieShiga
Kyoto
Osaka
HyogoNaraWakayama
Tottori
Shimane
Okayama
Hiroshima
Yamaguchi
Tokushima
Kagawa
Ehime
Kochi
FukuokaSagaNagasaki
KumamotoOitaMiyazaki
Kagoshima
Okinawa
Nationai Average
Index
Hokkaido
Aomori
Iwate
Miyagi
Akita
Yamagata
Fukushima
Ibaraki
Tochigi
Gunma
Saitama
Chiba
Tokyo
Kanagawa
Niigata
Toyama
Ishikawa
Fukui
Yamanashi
NaganoGifuShizuoka
AichiMieShiga
Kyoto
Osaka
HyogoNaraWakayama
Tottori
Shimane
Okayama
Hiroshima
Yamaguchi
Tokushima
Kagawa
Ehime
Kochi
FukuokaSagaNagasaki
KumamotoOitaMiyazaki
Kagoshima
Okinawa
Nationai Average
Index
Local taxes revenue total
Two corporate taxes Fixed asset tax
Local consumption
tax (after settlement)
Individual resident’s tax
0 50 100 150 200
0 50 100 150 200 250 300
0 50 100 150 200
0 50 100 150 0 50 100 150 200
FY 2001
settlement amount
35円.5
trillion
FY 2001
settlement amount
7円.1
trillion
FY 2001
settlement amount
2円.5
trillion
FY 2001
settlement amount
9円.2
trillion
FY 2001
settlement amount
8円.4
trillion8169709069758590979286921751108693961099493911041239398991139676767677889487838975698675646976666754100776264816067678685821101171701407289898883838898116899399104105107757271799278748467708163636759605364100614354885759778386616493787887117979074101851091041246845566270677678789170477569425462505939100148272871049197949710197919480868786927386999392939895939098969693939089718994100100105102101110102114106106100105109141746970897174949397939498959494948380799471968510415612011211010110394859083877766686765571008172106115117105
Notes:
1. The tax revenue from the individual resident’s tax is the total of the individual prefectural resident’s tax and the individual
municipal resident’s tax.
2. The tax revenue from the two corporate taxes is the total of the corporate prefectural resident’s tax, the corporate municipal
resident’s tax, and the corporate business tax.
3. The tax revenue from the fixed asset tax includes the prefectural part.
R eference
Uneven Distribution of Tax Revenue in Local Taxes
Index of per capita tax revenue from the local tax revenue total, individual resident’s
tax, two corporate taxes, local consumption tax, and fixed asset tax (with the
national average as 100; FY 2001)29・Regarding a large part of domestic political affairs, the state is required through
legislation, etc. to ensure a certain administrative level in the regions.
・There are large differences in economic strength and financial strength among the
regions.
For example, the following diagram shows per capital tax amount in fiscal 2001:
・Local Allocation Tax
The local allocation tax fulfills an extremely important role in view of the fact that
there are differences in economic strength and financial strength among the regions and
that in Japan, with regard to a large part of domestic administrative affairs, local
governments are required through legislation, etc. to ensure a certain administrative
level in the regions.
On the other hand, it is necessary to remedy the large financial shortage of local
governments as soon as possible through such efforts as the reduction of expenditures
and expansion of local taxes and, after that, to break away from dependence on
financial resource guarantees through the local allocation tax and to realize the true
financial independence of local governments.
Bearing these factors in mind, from now on also it is important to ensure the necessary
total local allocation tax amount.
Metropolitan
Tokyo
212,000円
Difference of
about three times
Okinawa
Prefecture
71,000円
0 1,000 2,000 3,000 4,000 5,000 6,000
PrefectureAPrefectureBPrefectureC627109564
2,123
3,126 2,028 356375555 859 743 1,546 563 197 451 323
123 106 44
1,173 436 1,261 459 301 255 324
110 122 80
2,303 470
171 518 22884354 178791711881,579 438 Local taxes Local allocation tax Other
100円 million
Ordinary financial
resources, etc.
(264円.4 billion)
Breakdown of ordinary
financial resources, etc.
earmarked for
specific-purpose expenditures
(total of 264円.4 billion)
Ordinary financial
resources, etc.
(489円.6 billion)
Breakdown of ordinary
financial resources, etc.
earmarked for
specific-purpose expenditures
(total of 489円.6 billion)
Ordinary financial
resources, etc.
(551円.0 billion)
Breakdown of ordinary
financial resources, etc.
earmarked for
specific-purpose expenditures
(total of 551円.0 billion)
Tax-related grants
to municipalities
Public debt payments Police expenses Education expenses Welfare expenses Hygiene expenses
Civil engineering expenses Other
General administration expenses
Agriculture, forestry,
and fishery expenses
Labor expenses, commerce
and industry expenses
The local allocation tax fulfills an extremely important role.
R eference
R eference
State of Financial Resource Guarantees (Micro) Through
the Local Allocation Tax (FY 2001)
IssuesofLocal
Finance30・National Treasury Subsidies
In order to increase the degree of freedom of local governments and to achieve local
independence, it is necessary to promote the reorganization and rationalization of
national treasury subsidy projects.
Methods of Reorganization and Rationalization
(1) Coverage by ordinary financial resources of items that have become assimilat-
ed, established, or regular features of local government work and personnel
expense subsidies
(2) Abolition and coverage by ordinary financial resources of small national
treasury subsidies (raising of small-sum subsidy standards and approval
standards)
(3) Setting of sunset dates and final periods (five years)
(4) Abolition and coverage by ordinary financial resources of subsidies with a low
subsidy rate (less than one-third) and subsidies that have passed a certain
period after their establishment
(5) Restraints on the establishment of new national treasury subsidies and thorough
penetration of the scrap-and-build principle
Clarification of the categories of national treasury
burden and national treasury subsidy
National
treasury
burden
National
treasury
subsidy
●くろまるThe recurring national treasury
burden is limited to items for which
the state really does have an
obligation to bear the burden and
is definitely paid by the state.
●くろまるThe national treasury burden
relating to construction projects
based on comprehensive plans is
limited to key projects.
Abolition or reduction in principle,
excluding the following:
●くろまるSubsidies with the character of
state indemnity in accordance
with national policy; subsidies
with the character of substitute
financial resources for local
taxes
●くろまるSubsidies for temporary large
financial burdens caused by
natural disasters
●くろまるSubsidies with the character of
local financial resources as
income incidental to local
government work
Local Finance Law
Articles
10, 10-2,10-3, 34
Local Finance Law
Article16R eference
Basic Thinking on the Reorganization and Rationalization
of National Treasury Subsidies
(From the Plan for the Promotion of Decentralization, decided by the cabinet on May 29, 1998)3120円.4 trillion11.110.4 2.93.20.60.10.1
0.3 3.5 1.6
3.4 2.3 1.5 1.5 0.8 2.81.05.1
(Unit:\trillion)0.9Social security
Education,
science
development
Public works
Other
Burden Burden Burden
Burden
Subsidies Subsidies Subsidies
Trust money
Subsidies
Elderly
medical
treatment
Health
insurance
Livelihood
protection
Long-term
nursing care
insurance
Child protection
expenses
Compulsory
education
burden
Trust money
Burden
Subsidies
Trust money16.83.30.2R eference
National Treasury Subsidies, Burdens, Etc. for Local
Governments
(General account and special account; FY 2003 budget base)
IssuesofLocal
Finance322 Promotion of Municipal Mergers
In order to promote autonomical municipal mergers by March 2005, which is the
expiration date of the Special Municipal Merger Law (Law No. 6, 1965), it is necessary
to strengthen further efforts toward merger.
●くろまるSupport by the municipal merger support plan through
ministerial cooperation
Support for various projects, etc. implemented in priority merger support regions
and municipalities that merge by March 2005 (Expansion of local financial
measures, priority selection and priority investment in public work projects,
elimination of various obstacles relating to merger, etc.)
The following effects are expected through municipal mergers:
●くろまる Improvement of convenience of residents, including an increase in the
number of accessible administrative counters, setting of elementary
and junior high school zones more comfortable for residents,
enhanced usability of the public facilities of the other municipalities,etc.●くろまる Administrative services will be upgraded and diversified, and it will
become possible for small-scale municipalities to implement special
services, which they have not been able to do properly so far.
●くろまる Priority investment will become possible, and it will be possible to
construct high-grade facilities to operate as the core of the community
and to implement projects that require large-scale investment.
●くろまる It will become possible to implement city planning from a wide-area
perspective in such fields as road and public facility construction, land
use and zoning.
●くろまる Administrative and financial affairs will be made more efficient,
because it will be possible to increase efficiency in the management
sector and distribute human resources and budget more appropriately
in the required sector.
Merger Council Balanced City Planning
Results of
consultations
After
merger
Municipal
Construction Plan
Post-merger city
planning plan332. Efforts Toward Sound Financial Conditions
In order to improve the state of local finance, which is in an extremely severe situation, it is
necessary to make efforts to increase revenue from local general revenue sources, such as local
taxes, and at the same time to make the income-expenditure gap narrower and to reduce
dependency on borrowing by making both national and local administration and finance more
streamlined and more efficient.
1 Promotion of administrative reform
Efforts toward administrative reform in local governments are making progress, as we have
seen, and it is necessary to continue to promote exhaustive administrative reform and to
restrain and prioritize expenditures through comprehensive revisions.
●くろまる Streamlining of personnel management and salaries
●くろまる Simplification and increased efficiency of organization and structure
●くろまる Revision of projects, promotion of private-sector consignment, public-
built private-management method, utilization of private finance initiative
(PFI), etc.
●くろまる Compilation and release of balance sheets and administrative cost
statements
●くろまる Further disclosure of administrative information, sharing of information
with residents
●くろまる Introduction of public comment system
●くろまる Regional activation
●くろまる Promotion of development and utilization of information technology
●くろまる Protection and creation of good environment
●くろまる Promotion of general and efficient local welfare measures
2 Improvement of transparency
In order to respond to the increased decision-making powers and self-responsibility of
local governments as a consequence of the advance of decentralization, local
governments are required to ensure fairness in administrative procedures, improve
transparency and fulfill accountability.
3. Response to Regional Policy Issues
It is necessary for local governments, which are general administrative entities in their
communities, to respond positively to regional policy issues and to improve the welfare of
residents.
Private finance initiative (PFI) is a method by which the private sector takes over the construction of social infrastructure and supply of
public services previously handled by the national or local governments, etc., from design to construction and operation, making use of
the funds and know-how of the private sector.
Financial Management Division, Local Public Finance Bureau,
Ministry of Public Management, Home Affairs, Posts and
Telecommunications, The Japanese Government
Address: 2-1-2 Kasumigaseki, Chiyoda-ku, Tokyo 100-8926, Japan
Tel.: +81-(0)3-5253-5111
http://www.soumu.go.jp
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All Rights Reserved
White PaperonLocal Public
Finance2003(FY 2001 Settlement)
Illustrated