Japan's tax system is highly centralized and inter-regionally redistributive. It is also in need of thoroughgoing reform. Recent work in fact shows that the structure of the Japanese tax state fosters a clientelist fiscal politics and fiscal culture that is increasingly counterproductive. Centralization helped fuel the quote;construction statequote; and mounting levels of local public debt, to name two salient and closely related problems. There is thus clear evidence that centralization in Japan restricts the system's capacity to make equitable and sustainable adjustments to the pressures of aging and other challenges.
Driven by Japan's worsening fiscal and economic crisis, fiscal decentralization is thus steadily moving onto the agenda of reform. It has particularly strong support from urban political and economic interests. Examples include the Tokyo Metropolitan Tax Commission as well as numerous Japanese academics, business groups, political parties, and so forth. Some of these actors advance quite harsh proposals that reflect our anti-redistributive age. This presentation therefore provides a critical overview of the Japanese intergovernmental fiscal system, the current debates on how and why it needs fixing, and the political interests that stand for and against the system's reform. Between the extremes of the neoliberals and the advocates of the status quo, I outline a 3rd Way approach to intergovernmental fiscal reform.
Andrew DeWit is Associate Professor of Economic Policymaking at Shimonoseki City University. He is currently editing a book, with Frank Robaschik (Duisburg University, Economics) and Yoshino Naoyuki (Keio University, Economics) on the political economy of Japan's intergovernmental fiscal relations.