Welcome to the Rotary Club of Tokyo.

¡ÈLocal Autonomy¡É

August 26, 2009

Mr. Hideaki Matsumoto
President, Pension Fund Association for Local Government Officials

1.Perspective on Local Autonomy
¡¡A prominent economic analyst wrote an article after the Rheman Shock in 2008 about a survey on ¡Èwhether Japan can attract major foreign investment funds¡É conducted in the fragile recovery phase 10 years after the collapse of the ¡Èbubble¡É economy. The survey results showed that Japan fails to attract investment funds, because ¡ÈJapan¡Çs local governments are not prepared to function as independent communities. They have depended firmly on the central government, and this has continued in the present decade. The most alarming factor is that they do not feel the necessity to take countermeasures for overthrowing the current situation. As for governance, it is clear that Japan has a fundamental defect.¡É

¡¡As I read this article, I recalled the passage in Yukichi Fukuzawa¡Çs Decentralization (1877) which compared the formation of the national structure to a large tree: Firmly-rooted trees with many small roots stretched under the ground can survive in windstorms (referring to decentralization), while trees with thick trunks absorbing all the nutrients from the soil (referring to governmental centralization) are likely to fall easily. I believe that decentralization must be argued in a wider context of how the political, administrative and social structure of this country should be.

2.What is Decentralization?
¡¡Decentralization aims at enabling ¡Èlocal¡É governments to formulate policies independently and autonomously that are appropriate for the prefecture, identify strategic measures as well as manage and implement them in an effective and efficient manner. The significance of decentralization can be classified into two contexts:
A)¡¡Fundamental and traditional context:
­¡ local autonomy is a basis of democracy
­¢ management at prefecture level is most appropriate, speedy and efficient
­£ local governments are capable of handling various administrative matters comprehensively and in an integrated manner.
­¤ local governments can take a lead in trying various measures

B)¡¡Contemporary context:
­¡ Centralized values (uniformity, homogeneity, equal results) since the Meiji Era are being replaced by decentralized values (originality, creativity, equal opportunity) in this maturing society. Responding positively to changes in the political and administrative system should be beneficial to society.
­¢ Identifying the principal priorities of the nation helps to reinforce them.
­£ Decentralized mechanism will enable timely and speedy response to changes, hopefully reducing waste and minimizing redundancy.
­¤ More effective communication between the traditional ¡Èpublic entities,¡É individuals, private organizations and companies will be established and this should be beneficial.

3.What is Decentralization Reform?
Decentralization reform aims to improve the political and administrative system of local government by changing the three principal constituent resources - ¡Èpower¡É ¡Èfunds¡É and ¡Èmanpower.¡É It is essential to clarify the separate roles of central and local governments. Let me summarize the reform of the three resources.

A)¡¡Power resources :
¡¡Duties and functions will be devolved from the central government to the local governments or from prefectures to municipalities, based on the Principle of Subsidiarity (give consideration to the lower constituent of society) and the Principle of Proximity (delegate public duties to administrative entities closest to the general public). Central government must encourage local municipalities to take greater responsibility within their areas and not rely upon central government.

B)¡¡Financial resources:
¡¡The current tax revenue allocation between the central and local governments must be reviewed. Local municipalities must be able to raise local taxes and set their own spending priorities. However, it is also necessary to redress financial disparities among regions.

C)¡¡Human resources and organization:
¡¡Central government must abolish or downsize regional offices, review secondment of government officials to local governments, and transfer authority to municipalities.

4.Requests from Local Municipalities on Decentralization Reforms
¡¡Local governments have already been making strong requests for decentralization, and their expectations are rising with the upcoming general election. Governors and mayors have requested a manifesto commitment to decentralization from each political party.

5.Introducing a ¡ÈState and County System¡É
¡¡The concept of State and County System existed before the War. Arguments up to the mid-1950s were based on the centralized regional system which enabled central government to oversee the administration of local governments.

¡¡Since the mid-1970s, the State and County System came to be discussed as ¡Èthe ultimate model for decentralization¡É or ¡Èhow to implement the regional system based on sound regional sovereignty.¡É The concept of decentralized State and County System aims to devolve authority from the central government and prefectures to the municipalities, which are reconstituted into blocks. The leaders of both the State the Counties will be elected by popular vote.

¡¡Before closing my speech, let me summarize the main points of this State and County System:
a)Establishing a system at the municipality level to advance decentralization through autonomy and independence for the local residents.
b)Promoting regional management strategies to enhance regional development, based on the blocks, to survive in the future the forces of international competition.

¡¡Making drastic reforms to improve the financial situation, by dissolving and simplifying the current inefficient mechanism of national and local governments.