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Central government tax revenues allocated to local governments in fiscal 2001 declined 4.9 percent from the previous year to 19.129 trillion yen, according to an annual report released Tuesday.

The Public Management, Home Affairs, Post and Telecommunications Ministry said in the report that the drop in tax grants is the first since fiscal 1993, when the government curbed overall spending after the asset-inflated bubble economy burst.

Behind the decline is a new policy that allows local governments to issue bonds to make up for revenue shortfalls from the current fiscal year, which began in April.

Central government tax grants are used to bridge the gap between local government expenditure and tax revenues.

Ninety-six local governments did not receive central government grants, up 18 from the previous year, the annual report says.

The government is expected to further slash tax grants as part of reform programs advocated by the Council on Economic and Fiscal Policy, a key government panel chaired by Prime Minister Junichiro Koizumi. The report says tax grants to prefectural governments totaled 10.882 trillion yen in fiscal 2001, down 4.3 percent from the previous fiscal year while those to city, town and village governments came to 8.247 trillion yen, down 5.8 percent.

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