The central government's strong support and further self-help efforts by local governments are needed to deal with an infectious disease and heavy rain disasters.
The spread of the novel coronavirus has forced prefectural governments to sharply increase their expenditures. The amount of money used to provide financial assistance in the form of cooperation money to businesses that complied with requests to suspend operations has increased. It is hoped that prefectural governments will prepare for a second wave of infections in a planned manner.
In dealing with the first wave of infections, there was a big difference between the Tokyo metropolitan government, which is financially strong, and other prefectural governments.
The metropolitan government quickly decided to provide up to 1 million yen in financial assistance in the form of cooperation funds, which won the understanding of business operators. In neighboring Kanagawa Prefecture, the provision of cooperation funds stood at up to 300,000 yen. Some prefectural governments did not provide the cooperation funds because they prioritized improving the medical system. The Osaka prefectural government evenly split the cost with municipalities.
Prefectural governments must not hesitate to take necessary measures, such as asking businesses to suspend operations, on the grounds of fiscal difficulty. In the supplementary budgets, the central government secured 3 trillion yen in special subsidies to local governments for regional revitalization. Each local government will have a responsibility to appropriately use the subsidies, taking into account local conditions, such as the level of infections.
Many municipalities provide cash benefits to their residents. There is a fear that the virus epidemic could become further prolonged. Hopefully, measures will be implemented in serious consideration of their purposes and effects, rather than ending up as careless lavish spending.
Not a few prefectures have reached into their fiscal adjustment funds, which are equivalent to local governments' savings accounts. The Tokyo metropolitan government used 90% of its 934.5 billion yen fund. Many prefectures have been unable to use the funds for measures against the coronavirus, as their funds had already been depleted due to frequent disasters.
Concerning fiscal adjustment funds that have increased, there has been criticism that the central government runs up debts, while local governments boost their savings. Although it is a problem that funds are lopsidedly concentrated in the Tokyo metropolitan government, it can be said that the significance of ensuring extra financial resources for times of emergency has been demonstrated in this situation.
The central government plays a major role in disaster recovery. It will provide more than 400 billion yen in assistance to victims of heavy rainfall in Kyushu and other parts of the country by using reserve funds from this fiscal year's budget. It is important to deliver the assistance funds quickly to these victims.
Both the central and local governments will inevitably see their tax revenues drop due to the economic downturn caused by the coronavirus disaster. Local governments must review their policies without preconceptions to identify nonessential and nonurgent expenditures. It is important to continue independent efforts, rather than depending on the central government.
The central government should strengthen its support for local governments so that their fiscal management will not be hampered, such as by allowing them to flexibly issue local government bonds, which are debts owed by local governments.
While the population is rapidly declining, the fiscal future of local governments seems tough as they face growing demand for medical and nursing care services for the elderly. They also must deal with aging infrastructure. They must constantly improve their fiscal structure and prepare for crises.
-- The original Japanese article appeared in The Yomiuri Shimbun on July 22, 2020.
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