The internal affairs ministry has introduced four indicators to gauge the financial health of local governments based on a law enacted in June to prevent bankruptcy of local governments. In view of financial problems at local governments, like the bankruptcy of the city of Yubari in Hokkaido, the new system is inevitable. Prefectural and municipal governments should realize that fiscal laxity will eventually hit the lives of residents hard through deterioration of public services.
The indicators will show the ratio of deficit to standard revenues, the deficit on a consolidated basis (including the financial conditions of third-sector entities and publicly run enterprises), the ratio of debt amounts to be repaid in the year to revenues, and the ratio of the total amount of outstanding debts to revenues on a consolidated basis.
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