Rural exodus leaves local economies down

[Maciamo]

Getting it Together

Japan is forcing small-town mergers in an unusually bold attack on the debts that paralyze its economy

Like much of small-town Japan, Hamamasu’s finances are in ruin. Its single biggest budget expenditure, “administration fees,” provides upkeep for public buildings and pays salaries for 87 civil servants. The next largest outlay: service on the town’s $27 million debt. The local tax roll grows shorter every year even as health-care costs soar. Once a point of local pride, a fortress like city hall built in the 1990s is now the subject of much grousing. “That building is something you’d find in a town of 10,000 or 15,000,” says a local merchant. “It’s embarrassing how they’ve mismanaged money.”

More than 2,000 municipalities now face pressure to join forces with neighboring communities, or else. Under a 2001 federal statute, towns that agree to mergers by March 2005 will receive tax and cash incentives. Those that refuse could see their funding slashed. Tokyo’s aims: cut the subsidy of small-town services that are no longer necessary—like schools that remain open to serve only one child—shrink the flow of tax revenue from cities to towns and make local officials more accountable for egregious waste. The agenda amounts to the downsizing of rural Japan’s postwar welfare state, and has the clear support of Prime Minister Junichiro Koizumi.

For decades, Japan sustained low tax rates modeled on the U.S. system with high public expenditures like those in European welfare states by “raiding the FILP piggy bank,” says Stephen Church, head of Analytica Financial Research in Tokyo. “It’s been a disaster.” Even now, FILP accounts for two thirds of local government borrowing. According to Church, bad loans and other losses from FILP borrowers total $1.3 trillion, or about 25 percent of Japan’s GDP. (That’s about the same size as Japan’s mountain of bad bank debt.) “And that’s conservative,” he warns. “Some say FILP’s bad debt is twice that size.”

Rural depopulation seems inevitable in such a gregarious society as Japan. Who among the young wants to stay in a tiny remote village where there is no fun, no job and no people of their age, when they can move to Tokyo or other metropolis that have everything to attract. This is a modern phenomenon that knows no going back. If young people want to buy the latest mobile phone or CD's, have ADSL access, meet friends, get an "arubaito", do their shopping in department stores and eat in all kinds of restaurants, all this whithout needing a car, there is only the city.

For some reasons I understand that it isn't so difficult for some Europeans to stay in the country (15min by car from the nearest town), but that it is a problem for Japanese. Social life is very different and contrarily to the common belief, Japan isn't so densely populated. The greater Tokyo accounts for 1/4 of the total and the country is so long and parcelled that living in regions like Tohoku or Shikoku is already like being in a semi-deserted area at the other end of the world, for there are no big cities. Apart from Spain, Scandinavia and the remotest parts of central France, it's hard to live far from a major center in Europe.