Ex. Expense of facilities for · 2018-12-10 · Ex. Expense of facilities for compulsory education 50 30 15 5 0 10 203040 50607080 90 100 % ... Minimizing burden Maximizing profitsMinimizing

Copyright © Takero Doi. 172005/9/14

Ex. Expense of facilities for compulsory education

50 30 15 5

0 10 20 30 40 50 60 70 80 90 100

%

Nat'l Gov't Disbursement

Local bonds & debt service expenditure covered by LAT grants

Local bonds without coverage of LAT grants

General Revenue


Public Works in Local Net Total

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30

35

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1962 1967 1972 1977 1982 1987 1992 1997 (Fiscal Year)

(trillion yen)

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50(%)General Revenue

Nat'l Gov't DisbersementLocal BondAppropriation percentage of local bonds


Net Burden of Prefectural Bonds on the taxpayer of Kyoto prefecture

Total outstanding of prefectural bonds (1,218.7 billion yen) 636.1 Coverage by LAT grant

Outstanding per residents of a prefecture: 227 thousand yen(Outstanding of the national debts per capita: 3,530 thousand yen) 582.6Total

Explanationamount

Source) Kyoto Prefecture

Kyoto Prefectural government recognizes that prefectural bonds covered by (future) LAT grants are not its own debts (or excluded from "true" total debts)!


Very Simple Model for Comparative Institutional Analysis on Local Bonds

J local governmentsImplement public investment with issuing local bondsThe existence of the possibility of default of local governments if the central government does not relieve the local government


Characteristics of the US system

Non-involvement of the federal government in the debt obligations of the local governmentsThe existence of the possibility of default of local governmentsRating agencies effectively play a role by reflecting the disparity in credibility existing between local governmentsDiffering ratings are assigned to local governments reflecting their credibility


Two EquilibriaAn equilibrium in the US systemA separating equilibrium with rating agencyAn equilibrium in the Japanese systemA pooling equilibrium with LAT grantsUnder some conditions, social welfare in the US system is better than one in the Japanese system.


Market-oriented Local Bond SystemMinimizing burden Maximizing profitsMinimizing burden Maximizing profits

Local Gov'tsLocal Gov'ts BanksBanks

"Implied gov't guarantee"

The risk is shared among the participants in the financial market

The risk is shared among the participants in the financial market

Financial Market

Accept interest differences arising from the fiscal situations among municipalities with varying financial capacities.

Borrowingand

repayment


Implications for reform of the Japanese local bond system

The origin of local fiscal discipline under decentralization is the existence of interest rate differences by market mechanismsA rigorous study of the repayment capacity of various actors in the market creates fiscal disciplineThe existence of various rules that support market mechanisms


Implications for reform of the Japanese local bond system (cont'd)

Autonomous fiscal administration based on a mid-term capital commitment planEstablishing rules for debt liquidation through bankruptcy lawsAn adequate burdening of risk concerned with local bonds via market

Documents

Ex. Expense of facilities for · 2018-12-10 · Ex. Expense of facilities for compulsory education 50 30 15 5 0 10 203040 50607080 90 100 % ... Minimizing burden Maximizing profitsMinimizing