Reducing the number of municipalities in Japan to a third or even a fifth would save almost 5 trillion yen a year in total expenditures by municipalities, according to government sources.
According to calculations by the Public Management, Home Affairs, Posts and Telecommunications Ministry, if mergers were used to reduce the number of municipalities to 1,140 or 622 from the roughly 3,200 now, local governments could save between 4 trillion yen and 5 trillion yen — approximately 10 percent of the total expenditure of all municipalities in the combined fiscal 1999 spending of about 54 trillion yen.
The potential savings are equivalent to the shortage of about 4.5 trillion yen in local allocation taxes in fiscal 2001, the sources said, adding that the shortage is being covered by private-sector borrowing.
The calculations also show that such large-scale municipality mergers would significantly contribute to shoring up central and local government finances.
The Economic and Fiscal Policy Council also urges prompt reorganization of local governments in its basic policy.
However, many municipalities are against such accelerated mergers under the central government's initiative, preferring instead to merge voluntarily. It is also not yet clear how such a radical reduction of municipalities would be conducted.
The ministry sources said the most significant savings would be reaped in personnel expenses, as a decrease of number of municipalities means fewer local governments heads, assembly members and civil servants.
The figures, however, are only rough estimates, and were calculated without taking into account specific local conditions, meaning savings would vary from one region to another.