¥300 billion in Tokyo tax yield set for rural rescue

Tokyo Gov. Shintaro Ishihara agreed Tuesday to a request from Prime Minister Yasuo Fukuda to hand over ¥300 billion in tax revenues to fiscally distressed municipalities as a provisional step to help reduce the financial gap between urban and rural areas.

Tokyo Gov. Shintaro Ishihara speaks to reporters at the Prime Minister's Official Residence after meeting Tuesday with Prime Minister Yasuo Fukuda. KYODO PHOTO

After meeting with Fukuda at the Prime Minister's Official Residence, Ishihara said he was asked to sympathize with the financial difficulties faced by regional governments.

"The demand is really outrageous," Ishihara told reporters. "But the governments of Tokyo, Aichi and Osaka would not be able to brush it aside, however hard we may try."

Fukuda separately told reporters that he asked for cooperation from Ishihara as a temporary measure while the central government completes its tax system reforms.

As part of its planned tax system reform for fiscal 2008, the central government is seeking to transfer a combined ¥400 billion in revenues from better-off prefectures in densely populated areas, including Tokyo, Osaka and Aichi, to troubled local governments elsewhere. Tokyo has been urged to provide ¥300 billion.

With Tokyo's acceptance, the central government is expected to boost pressure on other prefectures to accept the proposed tax transfer.

Ishihara said Tokyo's contribution will likely be a provisional step lasting about two years.

He said Fukuda proposed that the central government and Tokyo set up a consultative body where both sides would discuss the long-standing metropolitan request for fiscal support for planned large public works projects, including a network of loop roads in the metropolis and increased international air traffic using Haneda airport.

Ishihara said Fukuda told him the central government will provide "utmost cooperation" in connection with the projects.

He earlier expressed his objection to the proposed tax reallocation, which would lead to a metropolitan government tax revenue fall.

Tokyo had been balking at the central government's demand to hand over part of its tax revenues to fiscally distressed municipalities on grounds that it has long satisfied demand for administrative services for more than 3 million people who stream into the metropolis to work every day.