논문

This study examines why the local fiscal crisis occurs and what it's institutional preparations are. The fiscal system of local government has the structural gap between elastic tax incomes and unelastic expenditures in Japan. However the system has no adjustment between fiscal years. The central Government which guarantees the standard level of local services alleviates fiscal shocks caused by economic fluctuations. The Government controls local governments which waste their budget through permission system of issuing local bonds and "the Special Law for Promoting Fiscal Balances". The Government does not allow to issue the necessary local bonds needed to management, when the local governments do not obey the real deficit ratio decided by the Government. According to the "Special Law", local bonds are allowed to the selected local governments which must be fiscally restructured, and then their fiscal management should be controlled by the Ministry of Home-Affairs. Recovering fiscal soundness can be achieved by mainly reducing the current expenditures of the local governments. The characteristics in the fiscal restriction process of local governments in Japan are classified into two. First, the Government plays an important role of protecting local residents. Second, the decision-makers, such as mayors, council men and high level local government officials, are not responsible directly for the bankruptcy of local government.