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National Aid and Local Autonomy in Japan

The Impact of Central Financing on Prefectural Expenditures

Florida State University

Hae Shik Kim

Florida State University

It has long been believed that local autonomy is virtually nonexistent in Japan, but few empirical studies have tested for the impact of central controls over local financing on local spending priorities. In an analysis of budgetary data for Japan's 46 prefectures it is found that national aid has a weaker direct stimulation effect in Japan than in the United States, and that national aid has been used by local Japanese governments to release revenues, derived from internal sources, from ongoing programs in favor of new local priorities. Moreover, the high-income/low-dependency prefectures are shown to have shifted their spending priorities to innovative new programs in advance of national policy directives, particularly during periods of high economic growth. In addition, the overall strength of the progressive parties in a prefecture is associated with a shift in local priorities from public works to welfare spending. Both income and party have independent effects and in the late 1960s and early 1970s furnished several urban, high-income, progressive prefectures with the capacity and motivation to implement innovative, welfare-oriented policies. These findings suggest a need to revise our model of the central/local linkages in the Japanese policy-making process from a unitary, highly centralized depiction to a more two-way interaction.

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