Tottori Gov. Yoshihiro Katayama is hoping that Prime Minister Junichiro Koizumi’s plans to reform local finances will be the first step for local governments to stand on their own feet.

“If local governments can effectively use the proposed reforms, it would be a good chance for them to change greatly,” Katayama said Thursday during an interview with The Japan Times. “Subsidies have bound us, and we have lost independence. But we can be a lot more independent.”

He said that the proposals unveiled by Koizumi last week largely correlated with what he and the reform-minded governors of Miyagi, Iwate, Wakayama prefectures had requested.

Koizumi proposed that the central government cut subsidies to local authorities by about 4 trillion yen by 2006. In return, local governments would be allowed to collect taxes equivalent to between 80 percent and 100 percent of the total revenue lost via the subsidy cuts.

These measures are part of the government’s efforts to promote decentralization and reduce public debt.

If local governments themselves can decide how to raise tax revenue, they will spend it wisely, Katayama said.

“Any local government takes great care of what it raises,” he said, “but it tends to waste what it gets for free. “Residents will also scrutinize how their local government uses their money.”

The current subsidy allocation system is behind wasteful spending of taxpayers’ money, Katayama said.

For example, municipal governments tend to scrap existing school facilities and build new ones even if they only needed partial repairs. This is because the central government only subsidizes new buildings, he said.

Regarding Koizumi’s reform plan, Katayama pointed out that it falls short of reforming the central government’s tax grants to localities — a supposed part of the so-called Trinity Reform package that Koizumi had earlier promised to implement.

The three-part reform plan features a cut in subsidies, the transfer of taxation powers as well as a review of governmental tax grants to local governments.

Katayama said the current usage of the tax grant system should be drastically reviewed in view of the system’s original purpose.

He said the system was originally created to rescue municipalities that do not have enough revenue to carry out their work, with this role continuing to be important for local governments such as Tottori.

Despite its original remit, the tax grant system has recently been used by some municipalities in a similar way to that of government subsidies — to finance public works projects. According to Katayama, this is partly because the central government in the 1990s began encouraging localities to use tax grants for public works projects to stimulate the economy.

This prompted unnecessary public works projects and an expansion of public debt.

“If there is anything in Kasumigaseki (Tokyo’s bureaucratic center where government ministries are located) that stands in the way of good administration in Tottori Prefecture, I’ll keep on making requests and advising it in the future,” he said.

Katayama grabbed the spotlight when he suggested earlier this month that the prefecture would review its relations with electronics maker Toshiba Corp., suggesting a possible boycott of its products.

This provoked an avalanche of criticism — and a little bit of support. Katayama was protesting against “the undemocratic way” in which Toshiba Chairman Taizo Nishimuro, head of the Council for Decentralization Reform, is running the body.

But Katayama later retracted the boycott threat.

His criticism mainly stemmed from the process via which the council filed a report proposing a cut in subsidies for local governments but failed to stress the importance of transferring taxation powers to localities.

Four members opposed the report and one even refused to sign.

The Tottori governor charged that the council planned to take financial resources away from local governments, making them unable to carry out their duties.

Asked why he retracted his comments, Katayama said his remarks were not reported correctly and that he had not actually decided to boycott Toshiba products.

He is satisfied, however, that his remarks in the end helped draw public attention to how the important issue of decentralization has been discussed at the council, a government advisory panel.

But Katayama said Kasumigaseki and Nagatacho, the nation’s political center, are showing signs of slowly opening up to voices in local administration.

“Kasumigaseki can’t continue without changing,” said Katayama. “If it didn’t change, it would become a coelacanth.”

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