Paper short abstract:

This paper addresses how the central government has been changing the nature as well as the amount of financial assistance to local governments to develop local economies from the Second Abe administration through the Kishida administration.

Paper long abstract:

　　There is abundant literature on the relationship between central government and local governments (Muramatsu, 2021). In patricular, various scholras have examined the transfer of financial resources from the cetnral government to local government (Kameda, Lu and Fukui, 2022). Yet, there is much room to explore how the nature of tranfer have changed in recent years after the LDP made a come back to power in 2012. Thus, this paper addresses how the central government has been changing the nature as well as the amount of financial assistance to local governments to develop local economies from the Second Abe administration through the Kishida administration.

As widely known, the central government provide financial resources to the local governments through Local Allocation Taxes (chiho kofu zei).

This paper first examines effects on population aging on the transfer from central governments to local governments in recent years. The size of the elderly population affects the transfer and as the size of elderly population has been growing more rapidly in urban area than in local area, there may be more transfer to local governments in urban area than to those in local areas. In other words the distribution of Local Allocation Taxes might have shifted from local areas to urban areas.

Then this paper examines how policies by the three administrations targeted to promote economies of local areas have affected the size of transfer. Here are some major policies pursued by the three adminsitrations.

From 2014, the Abe administration began to formulate local revitalization policies and in FY 2016, introduced Local Revitalization Subsidies to promote growth of local economies. In FY 2020, the Suga administration created "Expenditures for Community Revitalization Projects" to assist local governments who face decline in population. Furthermore, the Kishida administration launched "Digital Rural City Initiative from its outset and aims to promote digital transformation of local areas. It also has made explicit that the government will consider the amount of My Number Card issuances when it calculates the amount of financial resources which the central government will transfer to the local governments.