On June 20, Mayor Kenji Goto of Yubari, Hokkaido, solemnly told the city assembly that his city would have to undergo compulsory financial reconstruction, the equivalent of recovering from the brink of bankruptcy. The city is the second local government to fall into this status in 14 years.
Yubari's situation has apparently prompted the Ministry of Internal Affairs and Communication to have its advisory committee consider legislation to prevent local governments from accumulating unsustainable debts to the extent that "financial reconstruction" becomes the only way out. The committee is expected to produce a report by the end of this month.
Despite the nationwide economic recovery, not all local economies are in good shape. Population decline in some areas has meant decreasing tax revenue for many local governments. And under the financial retrenchment pursued by Prime Minister Junichiro Koizumi's administration, budget allocations from the central government to local governments, aimed at making up for the latter's revenue shortages, have decreased by 5 trillion yen in the last three years.