17th Plenary Session of the Congress

      Strasbourg, 13 October 2009

      Speech by Yasuo Nozaka, Mayor of Yonago (Japan) on Challenges for local democracy in the world

      Good afternoon, Ladies and Gentlemen!

      Introduction

      As introduced, my name is Yasuo Nozaka and I am the Mayor of Yonago City in Japan. I feel very honoured to be given this opportunity to speak in the Plenary Session of the Congress of Local and Regional Authorities of Europe on the “challenges of local democracy in Japan”, representing the local authorities in Japan.

      At first, I would like to depict very briefly what my city, Yonago, looks like. Yonago is situated in the western part of Japan and has a population of 150,000. This puts it in the 160th position in terms of population among the 1,800 municipalities in Japan. The main industries are: commerce, agriculture, tourism and manufacturing. My city is a typical medium-sized city in Japan.

      In Japan, there are two levels of local governments. The first is the prefectural level and there are 47 prefectures. Under the prefectures there are about 1,800 municipalities or local authorities. Prefectures deal with education, police and public work and undertakings suitable for wider areas. Local authorities deal with the matters closer to the people, for example health insurance, nursing-care insurance for the elderly, child-care, welfare of the handicapped, minor public work and the promotion of local community activities.

      Two challenges of local authorities in Japan

      Each municipality naturally has its own challenges, but the most critical challenges that many local authorities in Japan are facing now are,I think, two:

      · one is how to establish a sound financial basis

      and

      · the other is how to deal with the aging population.

      1. Establishing a sound financial basis

      Many people wonder why municipalities in Japan have to make an effort to establish a sound financial basis. The answer is that quite a few of them are actually in a critical financial situation, even in danger of bankruptcy.

      Japan used to be, and still is, to a certain extent, a centralized country. The central government gives orders, directions and guidances to prefectures and local authorities and regulates every aspect of Japanese life. Under the strong influence of the central government, prefectural and municipal governments try to attain development in its area and promote the welfare of its people.

      Why has the influence of the central government been so strong?

      The answer is very simple:

      Because the central government controls the finances. It collects a disproportionally large share of the taxes and then allocates grants and subsidies to the local governments. In Japan we say that the degree of autonomy of the local governments is 30% as the revenue which they raise by themselves is only 30% of their total expenditure. The remaining 70% comes from the central government in the form of grants and subsidies. In the last five years, however, the central government has drastically reduced the total amount of grants and subsidies to the local governments.

      The main reason for this reduction is a huge financial deficit which the central government has accumulated in the past 15 years. The ratio of total outstanding government bonds to the GDP in Japan was more than 170% in 2008, which is the highest of the industrialized countries. In France, for example, it is 70%. This is the main reason why the central government of Japan has been reducing the grants and subsidies to the local governments.

      In addition to reduction of support from the central government, the Japanese economy, like many others, is now in recession so the revenue from local taxes and other forms of income which local governments raise by themselves are also drastically decreasing. In order to avoid bankruptcy and in order not to increase the financial burden of future generations, local governments of Japan have to go to great lengths to cut expenditure and increase its revenue.

      One way to cut expenditure in local government is to reduce the number of employees. In my city, for example, there were 920 officials five years ago, but currently we have 860, and we will have only 780 in another five years. That means we will have reduced the number of employees by 15% in ten years. To cope with this, we have placed some of the services and undertakings under private management and streamlined many of the government’s functions. We have also cut back on public work and services.

      In order to increase revenue, most local governments have raised fees and charges for services rendered by them. In most municipalities in Japan, garbage disposal is charged for. In my city, the disposal of 40 litres of burnable garbage costs about half a Euro. In addition to introducing or increasing fees, we have also been collecting tax and fee arrears more strictly. We have even been selling land and property which isn’t urgently needed to increase our revenue.

      In the last five years, many local authorities have adopted mergers and annexations of themselves under incentives of the central government. The total expenses of an area can be reduced under one instead of several governments. My city, for example, merged with another town 4 and half years ago. Before the merger, my city and the other town had a garbage incinerator each. After the union, only one remained while the other was abolished, which has reduced the running cost of garbage disposal considerably. In 2004, there were more than 3,200 municipalities in Japan, but now there are less than 1,800 and the number is still decreasing.

      2. Dealing with the aging population

      The other major challenge for local authorities in Japan is how to deal with the aging population. In Japan, the population aged 65 years and older have been increasing very rapidly. In 1995, the population aged 65 years and older made up less than 15% of the total population whereas today this percentage has gone up to 22% and the population aged 75 and older now makes up more than 10%. Projections for 2015 suggest that it will increase to over 25%. In addition, the life expectancy in Japan is among the highest in the world. At the same time, the total fertility rate, meaning the average number of children one woman gives birth to in her life, is currently only 1.3. In 2007, the population of Japan actually began to decrease.

      The effects of this aging population and declining birth rate are serious for local authorities as they cover the national health insurance system and the nursing care insurance system for the elderly. This is an enormous financial burden, because a large amount of these insurance costs have to be born by the local authorities. The aging population means that the expenditures for medical and nursing care provided by the local authorities will inevitably increase. In order to minimize these expenditures, they must make every effort to promote the health of elderly people. We are therefore promoting physical exercise and regular medical check ups including dementia. This way, we can administer early medical treatment often reducing the severity of illnesses.

      Another effect of this aging population is the loss of workforce in the community and gradual deterioration of the vitality within the local economy. In order to alleviate these effects many local authorities have set up so called “silver centres”, where elderly people are registered with their skills and talents. From there they can be offered to businesses and companies at low cost. We also help invite nurses and trainees from foreign countries for local industries.

      Conclusion

      I have highlighted two of the challenges which many local authorities in Japan face:

      · how to establish a sound financial basis and

      · how to deal with the aging population

      and outlined some measures that local authorities have adopted to cope with them. These measures however only have a limited effect and there are no quick solutions for either of the challenges.

      As I mentioned before, local authorities can no longer rely on the central government as it has its own severe financial troubles. Local governments now have to rely on their own efforts and determine a course for their own future development.

      Thank you very much for your attention!



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