(Purpose of this Law)
Article 1. The purpose of this Law shall be to strengthen the independence of local bodies by providing them with adequate financial funds so that they may raise the level of local services by equalizing their funds and by guaranteeing them the possibility of planning through standardization of the basis of the grants without impairing their right to manage their property, affairs and administration independently.
(Definition of terms)
Article 2. In this Law, the meaning of term as referred to in each of the following items shall be in accordance with what is provided for in the respective items:
(1) Local finance equalization grant: A grant-in-aid from the State to the local bodies designed to equalize the ability of such local bodies to provide all necessary services at reasonably good level of performance (hereinafter referred to as "the grant" );
(2) Local bodies: To, Do, Fu and prefectures, special cities, and cities, towns and villages;
(3) Local services: Administrative services rendered by the local bodies (including the administrative services rendered by those organs of local bodies whose expenditures are borne by the respective local bodies);
(4) Basic financial need: The amount computed in accordance with the provisions of Article 11 in regard to each local body for the rational measurement of its financial need;
(5) Basic financial revenue: The amount computed in accordance with the provisions of Article 15 in regard to each local body for the rational measurement of its financial ability;
(6) Unit of service: The unit of quantity which is to be established separately for each classification of service and is to be used in measuring the quantity of the classifications of services in establishing and distributing the equalization grant for each year;
(7) Unit cost: The cost per unit of service which is to be multiplied by the number of units of service in determining the total cost of each service for equalization grant purposes.
(Basic principles of operation)
Article 3. The National Government shall, each fiscal year, in accordance with what is provided for by this Law, measure the financial need and the financial revenue of all of the local bodies on the basis of the data submitted by each local body, and shall include in the compilation of the national budget the amount necessary and sufficient to cover the excess, if any, of the financial need over the financial revenue as the grant.
2 If, following the passage of the national budget, it is desirable to increase the number of units of services or the unit cost to be used in measuring financial need of the local bodies, the National Government shall make disposition so as to increase the total amount of the grant appropriated in the national budget for the year concerned except the cases where new financial sources are afforded to the local bodies by means of amending the Local Tax Law and other systems.
3 The Local Finance Commission (hereinafter to be referred to as "the Commission" ) shall always endeavor to gain accurate knowledge of the financial status of each local body, and in accordance with the provisions of this Law, distribute the total amount of the grant appropriated in the national budget to the local bodies the financial need of which exceeds the financial revenue in order to cover the said excess.
4 In delivering the grant, the National Government shall respect the principle of local autonomy and shall not attach any condition nor shall it specify how any portion of the grant is to be used.
(Powers and responsibilities of the Commission)
Article 4. In order to enforce this Law, the Commission shall have the following powers and responsibilities:
(1) To compute the total amount of the grant to be delivered for each fiscal year;
(2) To determine the amount of the grant to be delivered to each local body and deliver it;
(3) To alter or reduce the amount of the grant to each local body or to have it returned in the cases under the provisions of Article 10 or Article 19;
(4) To receive the request for examination from local bodies under the provisions of Article 18 and give the decision on it;
(5) To receive the filing of objection under the provisions of Article 19 paragraph 4 and give the decision on it;
(6) To hold the hearing under the provisions of Article 20;
(7) To collect and organize well such data as may be necessary for the estimate of the total amount of the grant and for the computation of the amount of the grant to be delivered to each local body;
(8) To be constantly informed of the status of local finance on the basis of the data collected and improve the operation of the grant system;
(9) To establish the Regulations of the Commission (hereinafter to be referred to as "the Regulations" ) necessary for the enforcement of this Law;
(10) Other matters as provided for by this Law.
(Data for the computation of the grant)
Article 5. The governors of To, Do, Fu and prefectures and the mayors of the special cities must submit to the Commission, in accordance with what is provided for by the Regulations, data relating to the basic financial need and the basic financial revenue of the respective To, Do, Fu and prefectures, or special city and other necessary data.
2 The mayors of the municipalities must submit to the governors of To, Do, Fu and prefectures, in accordance with what is provided for by the Regulations, data relating to the basic financial need and the basic financial revenue of the respective municipality and other necessary data.
3 The governors of To, Do, Fu and prefectures shall examine the data submitted in accordance with provisions of the preceding paragraph and forward them to the Commission with the opinions thereupon.
4 In the case of the preceding paragraph, the governors of To, Do, Fu and prefectures shall, when they have offered their opinions that the data submitted by the mayors of municipalities be amended, communicate the fact to the mayors of municipalities concerned. In this case, the mayors of municipalities who are dissatisfied with that opinion may offer the opinion to the Commission.
5 Those national administrative organs (meaning the national administrative organs as mentioned in Article 3 paragraph 2 and Article 24 of the National Government Organization Law (Law No.120 of 1948);hereinafter the same) which are concerned with local services relating to such expenditures as are included in the basic financial need must, in cases of request by the Commission, forward to the Commission, in regard to administrative functions under their respective jurisdiction, necessary data concerning the computing or delivery of total amount of the grant relating to request of the Commission.
(Computation of the total amount of the grant)
Article 6. The total amount of the grant to be delivered for each fiscal year shall be determined on the basis of the total of the estimated excesses of the basic financial needs over the basic financial revenues in those local bodies where the former is deemed to exceed the latter in that fiscal year.
2 The Commission must compute the total amount of the grant for the forthcoming year by giving consideration to the data submitted or forwarded in accordance with the provisions of Article 5 and recommend to the Cabinet that the same total amount be appropriated in the national budget. In this case, the Commission must send the documents on which the matters prescribed in Article 7 are prescribed and the necessary documents to the Cabinet.
3 When the Cabinet intends to alter the total amount of the grant recommended by the Commission and appopriate it in the national budget, it shall obtain in advance the opinion of the Commission.
4 In case the Cabinet has altered the total amount of the grant recommended by the Commission, it shall attach the details of the foundation of computation of the total amount of the grant recommended by the Commission and the foundation of the appropriation budget relating to the total amount of the grant decided by the Cabinet and the comparison between those foundations to the Budget of Revenues and Expenditures. In this case, the opinions submitted by the Commission in accordance with the provisions of Article 13 of the Local Finance Commission Establishment Law (Law No.210 of 1950) shall include the recommendations of the Commission regarding the necessary adjustment of the national budget to account for the difference between the total amount of the grant recommended by the Commission and the total amount of the grant decided by the Cabinet.
(Obligation to submit and make public the estimation of total amount of revenue and expenditure)
Article 7. The Commission shall prepare in each fiscal year the documents concerning the estimation of the total amount of revenues and expenditures of local bodies for the forthcoming year entering the following matters and submit them to the Cabinet and to the Diet through the Cabinet, and at the same time shall make them public generally:
(1) The estimation of total amount of revenues of local bodies and their details prescribed as follows:
(a) Taxable base, tax rate, anticipated assessed amount and anticipated collectible amount for each tax item;
(c) Amount of loans to be incurred;
(d) National subsidies and similar amounts;
(e) Miscellaneous sources.
(2) The estimation of total amount of expenditures of the local bodies and their details prescribed as follows:
(a) Expense for each item of expenditure;
(b) Total amount required to be expended because of the national subsidies;
(c) The amount necessary to pay the interest on all indebtedness and the amount necessary for debt retirement.
(3) The estimation of total amount of the grant and its details prescribed as follows:
(a) The amount financed by non-promotional subsidies (meaning subsidies other than those prescribed in Article 16 of the Local Finance Law (Law No.109 of 1948)), the amount required to match such non-promotional subsidies and the total amount required to be expended because of such non-promotional subsidies;
(b) Total amount of number of units of services per classification of services (meaning the amount adjusted under the provisions of Article 13), unit costs, basic financial need, basic financial revenues and the total amount of the grant to be required.
(Date for the computation of the amount of the grant)
Article 8. The amount of the grant to be allocated to each local body shall be computed each fiscal year as of April 1.
(Measurement of the amount of the Grant in case of abolition, establishment, division, amalgamation, or alteration of boundaries)
Article 9. In cases where the abolition, establishment, division, amalgamation, or an alteration of the boundaries of local body has been effected after the date under the preceding Article, the grant to that local body shall be disposed in accordance with what is provided for under the following items:
(1) In cases where the whole area of a local body has become an area of another local body on account of abolition, establishment, division or amalgamation, the amount of the grant which ought to have been allocated to that local body before the abolition, establishment, division or amalgamation shall, after the date of the said abolition, establishment, division or amalgamation, be allocated to another local body to which the area of that local body has newly come to belong;
(2) In cases where the area of a local body has been divided on account of abolition, establishment, division or amalgamation, and in cases where its boundaries have been altered, the amount of the grant which ought to have been allocated to that local body before the said abolition, establishment, division, amalgamation, or the alteration of boundaries shall, after the date of the said abolition, establishment, division, amalgamation, or the alteration of boundaries, be divided in accordance with what is provided for by the Regulations, in proportion to those amounts of grants which would have been allocated to such independent local bodies as could have hypothetically existed as of April 1 of the relevant fiscal year over the areas affected by the abolition, establishment, division, or the alteration of boundaries, or over the area of that local body excluding the area lost by the alteration of its boundaries, and the amount so divided shall be allocated to the local body or bodies to which the areas affected by the abolition, establishment, division, or the alteration of boundaries have come to belong, or to the local body to which the area lost by the alteration of its boundaries originally belonged.
(Computation of the amount of the grant)
Article 10. The grant shall be allocated each fiscal year to the local bodies whose basic financial needs exceed basic financial revenues.
2 The amount of the grant to be allocated to those local bodies mentioned in the preceding paragraph shall be computed by dividing the total amount of the grant in proportion to the figure by which the basic financial need exceeds the basic financial revenue.
3 The Commission must determine the amount of the grant to be allocated in accordance with the provisions of the preceding two paragraphs not later than August 31 every year;provided that the amount of the grant may be determined or its amount already determined may be increased on and after August 31 if there are special causes and others such as the alteration of the total amount of the grant.
4 When the Commission has determined or altered the amount of the grant in accordance with the provisions of the preceding paragraph, it must notify that effect to the local body concerned.
(Method of computation of the basic financial need)
Article 11. The basic financial needs shall be computed by taking the figure of the unit of service, adjusting that figure in accordance with the provisions of Article 13, multiplying the figure so adjusted by the unit cost of the respective unit of service, and totalling the sums so multiplied in regard to the local body concerned.
(Unit of service)
Article 12. The unit of service for expenses required for services of local bodies shall be as prescribed in the right column below for the respective expenses listed in the middle column according to the kinds of local bodies:
Kind of local body |
Kind of expense |
Unit of service |
Do, Fu and Prefectures: |
1. Civil Engineering Expense:(1)Road expense Area of roads(2)Bridge expense Area of bridges(3)River expense Length of rivers(4)Harbor expense Total tonnage of vessels calling at port and harbors(5)Other civil engineering expense Population, area 2.Education Expense: (1)Primary school expense Number of pupils and classes of primary schools, number of primary schools(2)Middle school expense Number of pupils and classes of middle schools, number of middle schools(3)High school expense Number of students of high schools(4)Other education expense Population3.Welfare&Labor Expense:(1)Special welfare expense Population, number of persons to be admitted in childrens welfare facilities(2)Sanitation expense Population, number of proprietaries related to the provisions(3)Labor expense Number of factories and working places, number of workers at factories and working places 4.Industry and Economic Expense:(1)Agricultural administration expense (including the expenses relating to stockbreeding) Area of cultivated lands, number of people engaged in agriculture (including stockbreeding)(2)Forestry administration expense Area of privately-owned forests and fields, number of people engaged in forestry(3)Fishery administration expense Number of people engaged in fishery(4)Commerce and industry administration expense Number of people engaged in commerce and industry 5.Expense for Rehabilitation of War-Damage:Area of districts damaged by the war 6.Expenses for Other Services:(1)Tax-collection expense Amount of the Do, Fu and prefectural taxes, number of taxpayers(2)Other sundry expenses Population 7.Public Loan Expense:Amount of retirement of the principal and interest of local loans used for the expenses of the rehabilitation of natural disasters and expenses of civilian air defense measure |
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Municipalities: |
1. Police and Fire Defense Expense:(1)Police expense Number of police personnel(2)Fire defense expense Floor-space of house 2.Civil Engineering Expense:(1)Road expense Area of roads(2)Bridge expense Area of bridges(3)Harbor expense Total tonnage of vessels calling at ports and harbors(4)City-planning expense Population within area subject to city planning(5)Other civil engineering expense Population, area 3.Education Expense:(1)Primary school expense Number of pupils and classes of primary schools, number of primary schools(2)Middle school expense Number of pupils and classes of middle schools, number of middle schools(3)High school expense Number of students of high schools(4)Other education expense Population 4.Welfare&Labor Expense:(1)Social welfare expense Population, number of inmates of child welfare facilities(2)Sanitation expense Population, number of business operators dealing in foodstuffs(3)Labor expense Number of factories and working places, number of workers at factories and working places 5.Industry and Economic Expense:Population 6.Expense for Rehabilitation of War-Damage:Area of districts damaged by the war 7.Expenses for Other Services:(1)Tax-collection expense Amount of the municipalities taxes, number of taxpayers(2)Census registration expense Population having permanent domicile(3)Other sundry expenses Population 8.Public Loan Expenses:Amount of retirement of the principal and interest of local loans used for the expenses of the rehabilitation of natural disasters and expenses of civilian air defense measures |
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2 The method of computing the figures of the unit of service prescribed in the preceding paragraph shall be determined by the regulations.
(Adjustment of figures of unit of service)
Article 13. The figures of the unit of service as prescribed in the preceding Article shall be adjusted by multiplying them by such adjustment coefficients as shall be fixed by the Regulations in regard to the respective unit of service on the basis of the matters listed in the following items according to such categories as Do, Fu and prefectures or municipalities:
(1) Grading according to the figures of the units of services, such as population, number of pupils of primary schools, and others;
(2) Density of population;
(3) Scale of municipalities to which the number of unit of service belongs;
(4) Degree of coldness and amount of snowfall;
(5) Kinds of the bases for the units of services, such as area, length of river and others.
(Unit cost)
Article 14. The unit cost as prescribed in Article 11 shall be fixed by this Law according to such categories as Do, Fu and prefectures or municipalities on the basis of such cost per unit of each unit of service as may be needed in cases where a local body under standard conditions renders local services at a reasonable and acceptable level.
2 The cost per unit mentioned in the preceding paragraph shall be computed by excluding such parts of local services as shall be financed by subsidies, charges, fees, rents, shares of costs local loans and other similar revenues and by the local tax revenue minus the portion comprising the basic financial revenue.
(Method of computing the basic financial revenue)
Article 15. The basic financial revenue shall be the estimated amount of revenue of the ordinary taxes (excluding extra-legal ordinary taxes) of the local body concerned computed in terms of the basic tax rates by the method provided for by the Regulations.
2 The basic tax rates mentioned in the preceding paragraph shall be equivalent to seventy per cent of the standard rates as mentioned in Article 1 paragraph 1 item (5) of the Local Tax Law (Law No.2 of 1950)(or the rates fixed by the Local Tax Law in the case of those local taxes for which no standard rates have been fixed).
(Time of Allocation)
Article 16. The grant shall be allocated every fiscal year at the time prescribed in the middle column of the table below for each category of local bodies in the amount prescribed respectively in the right column:
Category of local bodies |
Time of allocation |
Amount to be allocated each time |
Do, Fu and prefectures: |
May and July |
One-fourth of the amount of the grant to the respective Do, Fu and prefectures for the preceding fiscal year multiplied by the ratio of the total of the grant for the current fiscal year to such total for the preceding fiscal year |
November and January |
One-half of the amount of the grant to be allocated to the respective Do, Fu and prefectures in the current fiscal year minus the amount of the grant allocated in May and July |
Municipalities: |
May and August |
One fourth of the amount of the grant to the respective cities, towns and villages for the preceding fiscal year multiplied by the ratio of the total of the grant for the current fiscal year to such total for the preceding fiscal year |
December and February |
One-half of the amount of the grant to be allocated to the respective cities, towns and villages in the current fiscal year minus the amount of the grant allocated in May and August |
2 In regard to the time of allocation of the grant and the amount to be allocated each time in those cases where the provisions of the preceding paragraph cannot be complied with on account of such cases as the non-enactment of the national budget for the current fiscal year the alteration of the total of the grant following an addition to or a revision of the national budget, etc., exceptions may be made as provided for by regulation in consideration of the amount of the provisional national budget and circumstances of its enactment, the extent of the alteration of the total of the grant, the amount of the grant for the preceding fiscal year, etc.
3 In cases where the amount of the grant allocated to any of Do, Fu and prefectures, or municipalities at the time of allocation in accordance with the provisions of the preceding two paragraphs exceeds the amount of the grant to be duly allocated for the current fiscal year, such Do, Fu, or prefecture, or municipality must repay the excess to the National Government without delay.
4 In regard to paragraph 1, in cases where the abolition, establishment, division or amalgamation of a local body or the alteration of its boundaries has been effected within one year before April 1, the method of computing the amount of the grant allocated to the local bodies concerned for the preceding fiscal year shall be prescribed by the regulations in conformity with the provisions of Article 9.
(Obligation of Governors of To, Do, Fu and prefectures relating to the computation and allocation of the grant to municipalities)
Article 17. The governors of To, Do, Fu and prefectures shall, in accordance with the provisions of the Regulations, administer affairs concerning the computation and allocation of the grant to be allocated to municipalities within the area of To, Do, Fu or prefectures concerned.
2 The governors of To, Do, Fu and prefectures shall endeavor to gain accurate knowledge of the financial status of the municipalities concerned for the administration of the affairs under the preceding paragraph.
(Request for examination concerning the amount of the grant)
Article 18. In cases where a local body has received the communication of the determination or alteration of the amount of the grant in accordance with the provisions of Article 10 paragraph 4, if it has objection in respect to the basis of the computation of the amount of the grant allocated to it, it may request the Commission for examination within thirty days from the day of the receipt of the communication.
2 The Commission must, upon receipt of the request for examination mentioned in the preceding paragraph, make such examination within thirty days from the day of the receipt of that request and communicate the result thereof to the local body concerned.
(Error, etc. in the figures to be used for the computation of the amount of the grant)
Article 19. The Commission may, when it has discovered that there has been an error in the figures used as the basis for the computation of the amount of the grant after the communication of the amount of the grant in accordance with the provisions of Article 10 paragraph 4 or upon receipt of a request for examination as provided for in paragraph 1 of the preceding Article, allocate the amount of deficit to the amount of the grant is should have received or reduce or make it repay the amount of excess to such amount; provided that, in cases of the repay the Commission shall obtain in advance the opinion of the local body concerned in regard to way of repay.
2 When a local body is considered as having received or attempted to receive an improper allocation of the grant by making very arbitrary alterations in regard to the data which it has submitted to be used for the computation of the amount of the grant to be allocated or by making false reports, the part which exceeds the amount of the grant which the local body concerned should have received shall be reduced or shall be made to repay by the Commission.
3 In cases where the steps mentioned in the preceding paragraph are to be taken, the Commission must state the reasons, amount and other necessary matters in writing to that local body. In this case, the local body coming under the provision of the preceding paragraph shall publish to the inhabitants the matters entered in the statement prepared by the Commission.
4 In the case of paragraph 1 and paragraph 2, the local body may file objection with the Commission within thirty days from the day of the receipt of the statement mentioned in the preceding paragraph.
5 The Commission must, within thirty days from the day of the receipt of an objection filed as provided for in the preceding paragraph, render a decision thereon and communicate it to the local body.
(Hearing concerning the deduction of the amount of the grant)
Article 20. In cases where the Commission deems it necessary to take a step in accordance with the provisions of Article 10 paragraph 3 and paragraph 4 of the same Article and the preceding two Articles, it may hold a hearing to listen to the local public bodies concerned.
2 The Commission shall, when the local body concerned has offered the fact that the decision or disposition under the provisions of Article 10 paragraph 3, Article 18 paragraph 2, and paragraph 1 and paragraph 4 of the preceding Article are unequal or unfair with the sufficient reason therefor, hold a public hearings.
3 The Commission shall, when it deems that there exists a justifiable reason in the offer mentioned in the preceding paragraph as a result of the hearings mentioned in the same paragraph, cancel or alter the decision or disposition concerned.
4 Except those provided for in the preceding three paragraphs, the procedures of hearings and other matters necessary for the hearings shall be provided for by the Regulations.
(Special provisions for To, etc.)
Article 21. The whole area of To shall be considered as Do, Fu or prefecture in regard to the allocation of the grant to Do, Fu and prefectures, and its area comprising the special wards shall be considered as a municipality in regard to the allocation of the grant to municipality.
2 A special city shall be considered as Do, Fu or prefecture in regard to the allocation of the grant to Do, Fu and prefectures, and shall be considered as a municipality in regard to the allocation of the grant to municipality.
3 In applying this Law, the all-affairs associations of towns and villages shall be considered as towns and villages.