While COVID-19 measures had not been incorporated at all into the Local Finance Plan decided by the central government nor the Local Allocation Tax for individual local governments for FY2020, intergovernmental transfers were allocated to local governments through three supplementary budgets drawn up by the central government, and a sum amounting to 20.8 trillion yen in additional national treasury disbursements was granted toward local policy measures for the response to COVID-19 measures. The majority of that was used to cope with an increase in expenditures, including special lump-sum benefits of 100,000 yen per inhabitant paid by municipalities and fully subsidized by the central government. The expansion of “Financing System Loans” for individuals and small- and medium-sized enterprises also increased revenues and expenditures of the general accounts; the total revenue for all local governments increased by more than 26.8 trillion yen year-on-year and total expenditure increased by more than 25.7 trillion yen year-on-year, resulting in a slight improvement in the General Account balance.

　Much of the additional National Treasury Disbursements could be described as being neutral against the revenue and expenditure, but it is possible for the aggregated balance to either improve or worsen depending on how the “COVID-19 Temporary Grant for Regional Revitalization” was used and the operation was implemented toward local fiscal policy, which functioned as both categorical matching and non-matching grants. Accordingly, by grouping prefectures, municipalities that received the Local Allocation Taxes and those that did not, based on their population size, then analyzing the FY2020 settlement accounts of individual local governments, we found that the “Modified Real Single Fiscal Year Balance”, an indicator modified from the published “Real Single Fiscal Year Balance”, measuring substantial changes both in a cash balance of General Account and the Fiscal Stability Funds, had improved for more than 80% of the prefectures and about two-thirds of the municipalities. However, when this indicator is broken down into a “Single Fiscal Year Balance”, as an indicator of substantial changes in cash balance, and “Net Increase in the Fiscal Stability Funds”, we found that the breakdown of the indicator was not uniform— 40% of the local governments saw improvements in both aspects, 20% saw only in the “Single Fiscal Year Balance” surplus, 30% saw only in the Net Increase in the Fiscal Stability Funds, and 10% saw both worsen. The impact of the COVID-19 pandemic has lingered on in both FY2021 and FY2022, and there is a need to continue conducting such analyses.

　We examine the quantitative impact of natural disasters, including earthquakes, on the cash flow as well as debt and other financial conditions of municipalities, using data from the Administrative Cash Flow Statements prepared by the Ministry of Finance to clarify the debt repayment capacity and cash flow status of local governments.

　We found that municipalities affected by natural disasters, except for the Great East Japan Earthquake, faced a temporary deterioration in net cash flow per capita, cash flow from administrative activities, and primary balance immediately after the occurrence of the disaster. The reason for the deterioration in net cash flow was that the cash flow from extraordinary administrative activities could not be compensated for by the cash flow from ordinary administrative activities and cash flow from financing activities. This was reflected in the increase in the balance of local bonds and the decrease in the balance of the public finance adjustment fund, which has been declining since the first year of the disaster. Although there is a national financial assistance program for disaster-affected municipalities, municipalities have been withdrawing from the public finance adjustment fund and using it to finance emergency and restoration activities. The cash flow from administrative activities began to improve six years after the disaster, but this was due to an increase in local allocation tax grants for the principal and interest repayment of local bonds issued for disaster recovery projects, rather than an increase in tax revenues due to reconstruction.

　In the municipalities affected by the Great East Japan Earthquake, net cash flow per capita increased after the disaster struck, and cash flow from administrative activities also continued to maintain an increasing trend almost consistently. This indicates that the cash flow situation is rather comfortable compared to those municipalities affected by natural disasters other than the Great East Japan Earthquake. The huge surplus generated by the cash flow from administrative activities is accumulated in special purpose funds and used as a source of funds for reconstruction-related projects to be implemented in subsequent fiscal years. This abundance of balances in the reserve funds greatly reduced the real debt, but as the reconstruction projects progress, the balances in the reserve funds are decreasing. At the current pace, the balance of the reserve funds is expected to drop to the same level as those of other municipalities affected by the Great East Japan Earthquake in the not-too-distant future.

　Local public accounting reform has been promoting for the purpose of reforming assets and liabilities, among other purposes, but studies in Japan that have quantitatively analyzed the effects of this reform has focused only on whether financial statements are prepared or not. This study conducts a quantitative analysis on the effects of local public accounting reform initiated in 2006 by the Ministry of Internal Affairs and Communications (MIC), focusing not only on whether financial statements are prepared, but also on how the financial statements are utilized and the status of preparation for fixed asset ledgers. The results of the analysis using panel data of municipalities from FY2010 to FY2014 or from FY2011 to FY2015, revealed that the use of financial statements by local governments to set fiscal management targets is effective in controlling the increase in primary expenditures in such local governments, and that the preparation of fixed asset ledgers by local governments as a part of the process of preparing financial statements is effective in controlling the rise in expenditures on ordinary construction works.

　Although many discussions have been held through previous research on the relationship between the length of a politician’s tenure and fiscal management, there is controversy about whether the impact is positive or negative. As much of the previous research analyzing fiscal management by Japan’s local governments involved verification based on data up till the early 2000s, it is also difficult to say if discussions have been conducted with due consideration for the changes surrounding the environment of local finances that occurred around 2000. The purpose of this research is to empirically clarify the relationship between a governor’s tenure and local expenditures by using panel data on prefectural governments from 1975 to 2017. To do so, we conducted an empirical analysis that focused on the possibility of differences in the relationship between local expenditures and a governor’s tenure before and after 2000, or on the possibility of differences in this relationship arising from the governor’s attributes and the timing when they assumed office. We drew the following three conclusions from the empirical analysis. Firstly, while the overall data (1975-2017) did not show that a longer tenure for the governor is related to greater restraint on local expenditures, this trend of restraint was identified for 2000 and after. It is inferred that this relationship was more strongly impacted by the enforcement of the Comprehensive Decentralization Law in 2000. This study also confirmed that the impact of the length of a governor’s tenure on local expenditures, observed for 2000 and after, gives rise to different effects depending on the attributes related to the governor’s background. Furthermore, it showed that the effects caused by differences in the governor’s background varied depending on whether a new governor assumed office after 2000. The conclusions drawn include several points that have not been elucidated in previous research to date or points that differ from the views presented in previous research, as well as several suggestions. Based on these results, there is a need to conduct more in-depth research in the future about the effects of the length of a governor’s tenure and how the related systems work.

　Corruption is a mechanism for individuals with budgetary authority to gain profits on an individual basis, instead of directing or allocating profits (funds) to a specific organization. It is incompatible with public interest and distorts the efficient allocation of resources across society as a whole. Especially, there are two cases of emerging wasteful expenditure. First, total expenditures increase when allocating new funds. Second, when funds for specific fields increase, fund allocation may become inefficient. This paper uses statistical data to examine the relationship between the presence of corruption and increase in expenditures, while paying attention to the fact that the presence of corruption is not known until it comes to light.

　Much of the previous research uses cross-country data, which has limitations in that it fails to account for the differences in fiscal systems between countries. In view of that, the novelty of this paper lies in its use of Japan’s domestic data. For the first time, this paper uses data on prefectures in Japan to test the impact that revelations of corruption have on expenditures (total expenditures, civil engineering budget, and successful bid rate).

　The estimated results show that there is a possibility that expenditures are restrained after revelations of corruption. In addition, the analysis on the impact of revelations of corruption from the political situation suggested that the effect of expenditure reduction from revelations of corruption tends to be more restrained among local governments with governors who received a high percentage of votes in the elections (low percentage of votes for other competing candidates). These results imply that, depending on the political structure, revelations of corruption do not necessarily lead to immediate cuts in expenditure, and that attention should also be given to the actions of governors.

　This paper aims to quantitatively verify the outcomes of the “self-support settlement region framework” concept, which is a wide-area collaboration initiative between municipalities in Japan. Intermunicipal cooperation (IMC) has two effects. The first is that improvements in the efficiency of resource allocation for the supply of public services (internalization of economic externalities) are expected to contribute to an increase in the number of residents, or halt the decline in the number of residents, through improved daily life functions across the whole area. The second effect is an anticipated decline in the average cost of public services through economies of scale. In view of this, this paper uses the rates of population change and social change as performance indicators for the former, and real expenditure per capita as the performance indicator for the latter, to estimate the impact (causal effect) that the formation of the “self-support settlement region framework” has on such performance indicators. However, as the formation of the “self-support settlement region framework” is based on voluntary decision-making by the municipalities, areas that are experiencing a serious population decline may be more likely to select the formation of such areas in order to strengthen the sustainability of their community through area-wide initiatives. To avoid this selection bias, we combined the use of propensity score matching (PSM) and difference-in-difference (DID) analysis to eliminate municipality-specific effects that do not change over time. The analysis showed that the formation of the “self-support settlement region framework,” compared to the non-formation of such areas, did not contribute to increasing or maintaining population numbers. Moreover, real expenditure per capita did not decrease after the formation of the “self-support settlement region framework,” but rather, demonstrated an upward trend. While a core city in the “self-support settlement region framework” should have facilitated consensus building and adjustment of interests with surrounding municipalities, in reality, the cooperation remained along the lines of conventional cooperation without extending beyond easily collaborative fields, such as industrial policy, tourism promotion, and disaster measures. Consequently, improvements to the daily life functions and economies of scale across the whole of the area were not realized, and the “self-support settlement region framework” did not ultimately contribute to maintaining or increasing population numbers, nor to reducing expenditures.

　The purpose of this paper is to empirically clarify how the aging of water pipelines and the declining population are reflected in household water charges, and also whether differences in the charge system such as water charges based on caliber of water pipelines or water charges based on purpose of water use, are a factor in generating disparities in water charges. The following facts are obtained from the verification using panel data.

　Firstly, household water charges are significantly higher for water utilities with a higher percentage of aging water pipelines, but the parameter is very small, close to zero. This suggests that the setting and revision of water charges with an eye toward aging pipelines are not functioning. Secondly, household water charges are higher among water utilities that adopt water charges based on caliber of water pipelines as compared to those that follow water charges based on purpose of water use. Furthermore, it is confirmed that the higher the proportion of aged pipelines, the higher the water charges in caliber-based water utilities. In other words, due to the presence of a clearly distinct “household charges” category, water utilities that follow water charges based on purpose of water use may find it difficult to make decisions for fear of opposition to setting or revising household water charges to a high level. Thirdly, water utilities that adopt water charges based on caliber of water pipelines are found to have high profitability, while usage-based water utilities have low profitability.

　As local public enterprises, water utilities, follow self-supporting accounting systems in principle, and are required to set or revise water charges to match the cost. By adopting a usage-based charge system, a situation in which water charges differ depending on what the water is used for implies that the setting of charges to match the cost is not functioning. A usage-based charge system is considered to be an institutional factor that hinders the setting and revision of water charges to an appropriate level in view of the aging of facilities and business earnings. Hence, from the perspective of sustainability, it is desirable to introduce a caliber-based charge system.