This study looks at how changes in the public finance system resulting from changes in rural development policy since 1965 have had an impact on local developments in Yamagata Village, Iwate Prefecture.
By noting major changes in the fiscal resources of Yamagata Village, and in particular the ratio between external subsidies, borrowing, and local taxes, the study can be divided into three distinct periods. In the first period, from 1945 to 1964, depopulation in Yamagata Village caused a steady lowering of the local tax base. Essential services and other expenditures could only be met by local allocation tax (Chiho Kofuzei), a fiscal equalization system like Rate Support Grant. In the second period, from 1965 to 1982, programmes initiated under, for example, the Law for the Promotion of Mountain Districts, and the Emergency Measures Law for Areas of Severe Rural Depopulation, brought in substantial sums of direct subsidy from central government to help implement rural development policies. There was strong investment in particular in road construction projects. In the third period, from 1983 to the present, national government cut the amount of grants and subsidies to local governments. Instead, earlier restriction on the purpose of borrowing were eased, and joint projects with private investors encouraged under what is known as the 'muraokoshi' campaign. Yamagata Village invested in a new ski-resort in this period, and also in improvements to agricultural facilities. In the latter case a consumer group in Tokyo (known as Daichi-wo Mamoru Kai) joined in partnership with the Village.
In summary, two important impacts of these changes in fiscal policy on the development of Yamagata Village can be identified. First, the increases in fiscal expenditure led to a sharp increase in the number of employees in the public services and construction sectors. These are now the leading occupational groupings in the Village. Second, many of the new public facilities financed under these programmes for rural development have been located in the central setlement of Yamagata Village, called Kawai. The overall economic impact of this has been to maintain the population of Kawai at a relatively stable level.
