Taxes and Transfers in Japan’s Local Finances

Abstract

Abstract Japanese local public finances account for roughly 70 per cent of general public expenditure and 80 per cent of public capital formation. This suggests that, in implementation terms at least, local governments play an important role in the provision of public services. The efficiency and equity characteristics of the Japanese local government system are, therefore, likely to have an important effect on regional and national development. The purpose of this chapter is to examine Japan’s intergovernmental relations from a fiscal view point. It is divided into four sections. The first section provides an outline of the basic framework of the system. The second provides an analysis of the local tax system. The third provides data on the regional equalization effect of intergovernmental transfers. The fourth and concluding section discusses some lessons of experience to date for other countries as well as for Japan.