A panel of the internal affairs ministry has submitted a recommendation to Prime Minister Taro Aso that the mergers of municipalities carried out at the initiative of the government in the past decade end by March 31, 2010. The mergers were aimed at using financial resources efficiently and streamlining municipal administration.

Local residents' opinions appear split over the mergers. While some people praise the mergers for having helped improve local administrative and social services, others complain that they feel less secure about their daily lives because the psychological distance between them and municipal governments has widened. The government needs to closely examine the merits and demerits of the mergers.

The number of municipalities nationwide — 3,232 at the end of March 1999 — will decrease to 1,760 at the end of March 2010. The government promoted mergers by allowing municipalities to issue special bonds if they agreed to merge. The government transferred tax revenue sources of ¥2.7 trillion to local governments, but reduced grants in aid from tax money to them by ¥5.1 trillion in the fiscal 2004-2006 period. As a whole, the financial footing of municipalities has not improved much.