The Changes of the Local Finance of Municipalities in Japan Before and After the “Trinity Reform”

From the Viewpoint of Local Expenditure

Abstract

In this article, I focus on the changes of the local finance, particularly, local expenditure in Japan before and after the “Trinity Reform” which the Koizumi Cabinet carried out from 2004 financial year to 2006 financial year. It includes subsidy reduction, transfer of tax revenue resource, and reform on local allocation tax grant. Generally speaking, its reforms are evaluated negatively.

I compare the local finance, that is to say, local expenditure such as welfare, local debt, and public investment before and after the “Trinity Reform”. Through micro-analyses as a unit of municipalities, in short, my findings are as follows: first, in municipalities where tax revenue, subsidy, and grants declined, expenditure for welfare and local debt increased. Second, however, in municipalities where tax revenue, subsidy, and grants declined, expenditure for public investment is reduced with declining grants from the central government.