Growing problems in the local public finance system of Japan

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)


The current system of local public finance evolved in the aftermath of World War II, and there is an increasingly prevalent view that the system is no longer functional. Under it, the central government has been responsible for monitoring local governments and assuring them of the finance for their shortage of revenue mainly through providing intergovernmental transfers. When the gap between local tax revenue and expenditure widened in the recessionary period of the 1990s, intergovernmental transfers expanded. These transfers have especially served local governments whose own resources were limited owing to geographically and economically unfavorable conditions. As it has become increasingly difficult to finance the growing gap solely by transfers, the central government has also allowed local governments to actively issue bonds and has supported such issues with guarantees, uniform issuing conditions, and secured finance from public funds. It is increasingly recognized that this system has induced local governments to spend excessively and unproductively, rather than encouraging them to voluntarily rationalize. This article identifies three types of dilemmas that stem from the present system and discusses recent reform efforts as well as the challenges presently faced by local governments.

Original languageEnglish
Pages (from-to)213-238
Number of pages26
JournalSocial Science Japan Journal
Issue number2
Publication statusPublished - 2005 Oct 1

ASJC Scopus subject areas

  • General Social Sciences


Dive into the research topics of 'Growing problems in the local public finance system of Japan'. Together they form a unique fingerprint.

Cite this