Japanese fiscal system places a high premium on tax and expenditure harmonization and on the control by higher level governments. Over the past decades, Japan has developed a robust system of decentralized fiscal system. The fiscal system has both positive and negative experiences and lessons for the rest of the world.
This report focuses on the cooperative manner in which revenue decentralization has occurred and the way in which intergovernmental transfers have been structured. It also addresses issues such as dealing with soft budget constraints and establishing true accountability of local government to their constituency. Against these background, recent reform initiatives, trinity reform and mass amalgamation, try to address the negative side of Japan’s intergovernmental fiscal relations.
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