Monday, Sept. 22, 2003

By KIROKU HANAI

Some independent or reformist prefectural governors have come out with their own plans to revitalize local politics and economies. Their ultimate goal is to end the centralization of administrative power that dates back to the Meiji Restoration and establish real local autonomy. To achieve the goal, fiscal systems equivalent to the national fiscal system and financed by local taxes must be established, governors say.

Responding to these moves, Prime Minister Junichiro Koizumi's Cabinet has announced a trinity of reform programs, including an overhaul of the state subsidy system. But the central bureaucracy is strongly resisting the plan, favoring ministry interest over national interest. It is unclear to what extent the fiscal 2004 government budget will reflect the proposed reforms.

After the Pacific War ended, the General Headquarters of the Allied Forces introduced a public election system for prefectural governors to replace the previous system in which the central government designating them. The idea was to break the centralization of power. The central government and prefectural governments were designated as separate entities.

Interior Ministry bureaucrats accepted the public-election system for governors, but came up with a proposal -- which the GHQ approved -- to help retain centralized administrative power. Under this plan, prefectural governors, heads of municipalities, boards of education, agricultural committees and other local administrative committees were designated as part of the national government. Details of local administrative services involved were stipulated in ministry directives.

The government's Decentralization Promotion Committee, or DPC, established in 1995, recommended that the above-mentioned system be scrapped. When the recommendations were implemented, services were divided into those of local autonomies and those legally entrusted by the national government to local governments. In 1999, a package of decentralization-related legislation was enacted by the Diet, making the national government and local autonomies equal. Previously, the former had sat above the latter.

The Decentralization Reform Promotion Council, or DRPC, which succeeded the DPC, examined ways to reform the fiscal systems of the central government and local autonomies. As sources of total revenue, national taxes account for 60 percent and local taxes, 40 percent. However, in expenditures, local governments' portion exceeds that of the national government, 60 percent to 40 percent. This discrepancy has been filled by state subsidies and tax allocations to local governments.

The central government has financially intervened in local autonomies and affected their independent operations. For example, compulsory education-related expenditures are determined according to national standards for teacher staffing, thus preventing the formation of flexible, smaller classes of, say, 30 pupils. Furthermore, cost-cutting attempts to build forest roads narrower than stipulated by central government standards could make them ineligible for subsidies.

In a 2002 basic program for economic and fiscal management and structural reform, the government announced a "trinity" of plans to overhaul state subsidies, tax allocations to local governments and transfers of tax-revenue sources with a view toward drafting official reform plans in a year.

Last June the Cabinet adopted a 2003 basic policy regarding economic and fiscal reform based on DRPC recommendations and announced schedules for implementing the trinity of reforms. Under the plan, local governments will depend less on state subsidies, more on revenues from local taxes, and less on tax allocations from the central government as a result of tax-revenue source transfers. Local governments' power to levy taxes will expand.

As a specific target, the plan called for a 4 trillion yen cut in state subsidies by fiscal 2006. Reformist governors of six prefectures, including Iwate and Chiba, expressed dissatisfaction with that level. They said 8.92 trillion yen in subsidies to prefectural governments (based on the initial fiscal 2003 budget) -- 80 percent of the total -- should be abolished with most of the tax-revenue sources transferred to local governments. They also urged the government to do more than just cut state subsidies and to refrain from delaying transfers of tax-revenue sources. Gov. Yasuo Tanaka of Nagano Prefecture, acting alone, made a similar proposal in June.

Central government bureaucrats reportedly threatened retaliatory moves against the governors in compiling the fiscal 2004 government budget. This is highly regrettable.

The Economic and Fiscal Advisory Council, meeting in July, compiled guidelines for the fiscal 2004 budget. Initial guidelines called for a one-third reduction in the proposed cut of 4 trillion yen in three years. The removal of this target demonstrates strong resistance among central bureaucrats to the trinity of measures, worrying reformist governors.

The economic malaise that has affected Japan for the past decade since the bursting of the economic bubble shows that relations between the central government and local autonomies are no longer functioning effectively. Decentralization would reactivate local autonomies, improve the quality of life in outlying regions, encourage moves to protect the environment and help boost the national economy. This is a task that the GHQ failed to finish for democratizing Japan.

I hope the government will work hard to implement the trinity of reform programs, defying the resistance by central bureaucrats and politicians representing their own interests.

Kiroku Hanai, a former editorial writer for a Japanese newspaper, writes on a wide range of issues, including international relations.

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