Local Government in Japan

This chapter sets out the third examination of international local government finance practice, focusing on Japan. Japanese local government finance is again an example of an adaptive system, one that has only recently been reformed in order to embed greater local autonomy and overall financial resilience. Transition to financial resilience, via the ‘Trinity Reform’ initiated in the early 2000s, provides a reference point for how a system heavily criticised for its centralised tendencies, and agency approach to local government, can reform relatively quickly. The underlying rationale of the ‘Trinity Reform’ was the belief that one of the central root causes of severe local government financial distress lay in the weak capacity of local government to generate and/or have discretion over its own tax revenue and income. There was an acceptance that decentralised decision making was a key feature of well-functioning and resilient local government finance systems. Creating distributed problem-solving capacity leads to resilience from disruptions because the system can adapt at the local level to unexpected changes and reduce the chance of system-wide failure.