Admittedly, public finance is a complex issue, the wide discrepancies between urban and
rural fiscal capacities further complicating the issue. Small local governments with fewer
resources are often overloaded, so devolving fiscal resources will not be a solution for these
authorities, but a reform plan that will satisfy the needs of all is not easily formulated.
The local-central rift again appeared when, after Prime Minister Koizumi Jun’ichiro took
office in April 2001, it was proposed that local public spending be cut. Most local
governments complained that Koizumi was neglecting the ailing local economies.
The reform of intergovernmental fiscal relations comes under the purview of publicsector
reform. At the central government level, rather than on reorganization, interest
currently centers on management: efficient and effective performance-oriented administration.
Local government reform is what the central government is seeking, because most domestic
government functions are administered at the local level. In light of impending decreases in
fiscal support by the central government, no small number of local governments have
voluntarily taken reform initiatives. The centralized nature of local administrations has made
such reform feasible.
CONCLUSION
After a half century of existence, local autonomy has accomplished much more than was
expected at the time of democratization in the late 1940s, when the new constitution was
enacted. The pioneering policies and practices of regional development, welfare, the
environmental movement, and public-sector management, including government information
disclosure, have influenced national public policy and governance. Local authorities have
begun to claim independent positions, departing from their former roles as mere agents of the
national government. Decentralization in the 1990s took this postwar transformation of
central-local relations a step further and reestablished the legal framework.
Paradoxically, the central government is a decentralized unit, composed of compartmentalized
ministries, that often stalls when developing meaningful policy. The institutional
setting of Japan is such that when the decentralized ministry system leads the central
government to a policy deadlock, local governments are able to step in and get the job done.
Coalition government can be expected to be a regular feature of Japanese politics through
the first decade of the twenty-first century and, depending on the configuration of the parties
and actors, the degree of decentralization will vary. Missing in the most recent
decentralization scheme is an agenda for public finance reform that addresses questions
regarding the allocation of functions and resources, and the implementation of a system of
accountability.
A leadership model based on local government would stimulate central decision making.
The old model of central-local relations—where the central government has a monopoly on
power and money, and local governments merely engage in policy implementation—has lost
its relevance and can no longer be sustained. Given these new circumstances, the horizontal
political competition model, which involves local governments requesting grants-in-aid and
designation as special cities, is transformed into more dynamic intergovernmental relations.
The resulting model can be termed a vertical political and administrative competition model,
even as the overlapping authority model continues to exist.