The Abe administration in its fiscal 2013 budget has reduced the amount of grants from the central government to local governments by ¥390 billion from the amount given in the initial fiscal 2012 budget. The reduction is the first in six years and is coupled with the central government's call for local governments to lower wages for local public servants to the level of national public servants.
The new government led by the Liberal Democratic Party and Komeito is clearly making an effort to differentiate its policies from those of the preceding Democratic Party of Japan government, which had increased such grants for three consecutive years in the name of pushing devolution.
The move shows the Abe administration's readiness to decrease the grants, which constitute a large portion of the budget along with social welfare spending, in its attempt to restore the health of state finances. But it should not forget that the grants are funds set aside for local governments and play the role of equalizing the imbalance among financially strong and weak local governments.