The forum opened with a keynote speech by Mr. Masaru Nishio, followed by a panel discussion. Panelists then responded to questions from the general audience.
 

Keynote Speech "How the Central and Local Government Should Be in the Year 2030" (Mr. Masaru Nishio)

• Municipal mergers are numerous in western parts of Japan, and less common in the East. A second act for mergers is necessary. A reduction of the total amount of Local Allocation Tax is inevitable; municipalities (cities, towns, and villages) that will have no choice but to merge due to their fiscal situation will appear. The number of municipalities that will result from this process should be adequate.
• However, small towns and villages will be left behind. The best way of dealing with these towns and villages will become an issue. (For example, municipal mergers have no effect on towns and villages located on isolated islands and in mountainous areas; it is these, among others, that will be left behind.) For such small towns and villages, functions assigned by the central government should be reduced and complemented by wide-area local governments such as prefectures.
• In prefectures that have multiple ordinance-designated cities and core cities, there is a hollowing out of functions that the prefectural government must perform, and from here arises the argument over what to do with such prefectures. To introduce a federal system (do-shu-sei) all at once is difficult, so beginning with wide-area tie-ups among municipalities would be a good idea. A federal system that promotes decentralization reform would serve well as a long-term objective. The federal system should be composed of wide-area local governments.
• The shift to a federal system should be based on consultation among prefectures. There is no need for the federal system to be adopted simultaneously across the nation; it can be introduced in areas where agreement is reached. Moreover, various forms of federations should be considered in accordance with the region.

(Furukawa)

• The society we envisage for the year 2030 is a society which finds itself in sufficiency.
• What we aim for is "bi-wa-ko." "Bi" stands for scenic beauty, "wa" stands for harmony including the environment and "ko" stands for the individual.
• The year 2030 will demonstrate the blossoming of both regions and individuals.

(Mori)

• A mechanism should be put in place so that in 2030, highly educated and highly skilled people can take an active part in local regions.
• The local government should support the power of its residents. To do so, local governments require personnel.
• If local-area collaboration is promoted, services demanded by residents-as well as taxes and so forth as the price for such services-will take form naturally. Rather than being based on demand, the residents themselves will gradually build communities.
• There is a need to value the virtue of small matters.

(Motani)

• An improvement of infrastructure that responds to the declining population is required in accordance with each region.
• It is necessary to make good use of the participation of both women and the elderly.
• Japanese society is aging at great speed in metropolitan areas, and the level of aging is high in regions.

(Doi)

• Even if decentralization is carried out, with increasing accumulation of debts, local governments have no choice but to cut down on public services or increase taxes.
• Inhabitant tax on a per capita basis, tax on fixed assets, and local consumption tax are appropriate for local governments that have been decentralized. Increased corporate taxes are not desirable from the viewpoint of international competitiveness.
• Measures to provide for local bonds with local allocation tax should be restrained.
• Conditions for issuing local bonds should vary according to the fiscal situation of the local government, and fiscal discipline should be provided.
• The central government should be responsible for the revenue source of social security, for which local governments currently play an excessive role.
• Rather than the central government providing the revenue source and having a say in policy measures, measures for which the state provides the entire revenue source and involves itself should be separated from measures for which the local government provides the revenue source and for which the state has no say.

(Nishio)

• When shifting to a federal system, the treatment of the cumulative deficit of state forests and of the prefectural police will become issues.

(Mori)

• In response to the declining population, more administrative services are being entrusted to external entities and the employment of elderly people and women is increasing in regions.
• Since welfare is labor-intensive, local employment increases and money is circulated.

(Motani)

• Japan has a drastic surplus of external balance, and it is necessary to circulate this money in regions.

(Doi)

• A characteristic of Japan's local finance, in comparison to other developed countries, is that the local government plays a greater role in the area of social security. When reconsidering the division of roles of the central and local governments, in the area of social security, it is suitable that the central government be responsible for the overall finance of insurance and that local governments work out the payments and services.
• Drastic reform of the local allocation tax system is indispensable.

(Furukawa)

• The entity in charge of implementation should set out the rules. A typical example is the drop in the collection rate of the premium for the National Pension Insurance, when the collection of premiums was shifted to the central government.
• It is desirable that the central government concentrate its efforts on jobs that are important as a state, such as international relations.
• Residents can monitor local governments better than they can monitor the central government.
• That local governments cannot issue local deficit bonds is, in a sense, a plus for fiscal discipline.

(Nishio)

• The scope of duties of Japan's local governments is greater than that of any developed country.
• However, the central government has the decision-making authority for the arrangement of the work. The financial resources are held by the central government. It is fundamental that this decision-making authority be transferred to local governments. Financial resources up to 8 trillion yen should be transferred.

[Question and Answer Session]

(Audience A)

• How should tie-ups among prefectures be promoted?

(Furukawa)

• What about cooperating in areas such as laboratories and research institutions and events?

(Nishio)

• The central government should not force tie-ups, but it could certainly present proposals.

(Audience B)

• What should be done about the repayment of local debts?

(Doi)

• Regarding the redemption of local bonds, for which there are existing measures of local allocation tax, the central government should bear the responsibility in return for canceling all measures thereafter. The local government should bear responsibility for borrowings after that.

(Nishio)

• Raising the national minimum readily goes against decentralization. Towns and villages in the regions will not be able to cope with an increase in the national minimum.

(Mori)

• The balance between benefits and burdens should be observed closely.

(Motani)

• We should think about the regions beneath our feet, rather than about foreign countries. Japan has the greatest capital reserves in the world; how we use this is the issue. The important thing is community business, especially welfare.

(Doi)

• As for local governments, it is desirable that they adhere to administration that is adequate to their own size.

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ESRI Economic Policy Forum