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The central government’s fiscal 2010 financial program for local governments envisages total revenue declining for the second straight year to ¥82.12 trillion. Local governments may use ¥59.41 trillion, an increase of ¥331.7 billion, as they see fit. They must put the money to good use.

The program embodies the Hatoyama administration’s policy of boosting the power of local governments. It includes an increase of ¥1.07 trillion in grants for local governments, the largest increase in 11 years. Still, local governments will face real financial difficulty.

Revenue from local taxes, the main pillar of local financing, is expected to drop 10.2 percent to ¥32.5 trillion. To partly make up for a record shortage of ¥18.22 trillion, the central government will increase the issuance of bonds to provide local governments with ¥7.7 trillion, up by ¥2.55 trillion. Grants to local governments will increase by 6.8 percent, or ¥16.89 trillion. Grant totals are now roughly back to the level they were at before cuts by the Koizumi administration. Combined revenue total from bonds and grants will be a record ¥24.6 trillion, up 17.3 percent from fiscal 2009.

There is no guarantee that the central government can continue such generous allocations to local governments in fiscal 2011. Local governments will also feel the pinch from an 18.3 percent cut in public works spending — a measure that reflects the Hatoyama administration’s slogan “from concrete to humans.” Dam construction may not be affordable in some regions.

To reduce the impact of lower public works spending, the central government will set aside about ¥1 trillion for revitalizing local communities and stabilizing employment. It will also give some ¥2 trillion for social overhead capital improvement. The nation’s social welfare spending will increase 9.8 percent. Each local government should best utilize what money is available to respond to the particular needs of its community.

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