In fiscal 2010, the revenues from national taxes accounted for 40% of total annual expenditures in the national budget, with government loans exceeding said revenues and thus marking an abnormal situation. A similar situation was seen in local finance in that its financial shortage reached a record high of 18.2 trillion yen, with the five national taxes amounting to 8.2 trillion yen, as opposed to 16.9 trillion yen in total local allocation taxes. Consequently, how to make their finances sound became an urgent challenge for both the state and regions, entailing proactive work on administrative reforms and other measures to make their administration sound. In response to the problem in Greece, greater attention was being paid on the efforts made by each country in rebuilding its finances.
Under these circumstances, the "Fiscal Management Strategy" was decided at the Cabinet meeting on June 22, 2010, stipulating that for the national and local governments primary balance the deficit ratio to GDP shall be halved from the ratio in FY 2010 by FY2015 at the latest, and the surplus shall be achieved by FY 2020 at the latest.
The "Fiscal Management Strategy" was designed so that, given the fact that regions are already working on administrative reforms and other measures, and since their primary balances are in the black and in terms of regional sovereignty reforms, the central government should consider the question of maintaining independent and stable fiscal management by local governments, and should not take any measures that would undermine their autonomy or shift burdens onto them, and shall keep the total amount of general resources available to local governments, which are required for stable fiscal management of local governments including those receiving grants, in substance, at least at the FY2010 level. In response, the total general resources of local taxes, local allocation taxes, and similar charges in fiscal 2011 exceeded the fiscal 2010 level.
To promote regional sovereignty reforms, the LPFB will work to secure an appropriate level of total general sources for the local governments.