On February 27, the Second Subgroup (subgroup leader: Professor Toshihiro Ihori, Graduate School of Economics of the University of Tokyo) of the Study Group on the Financial System (established by JBA and headed by Visiting Professor Keimei Kaizuka, Faculty of Economics of Kyoto Sangyo University) compiled and published a report on how local governments should raise funds from external sources.
The report proposes measures for local governments to enhance budgetary discipline conforming with decentralization in five recommendations as follows.
Recommendation 1: Establishing budgetary discipline of local governments
Establishing governmental rules in advance to help local governments in case of budgetary failure
Recommendation 2: Requirement of local governments
Recognizing public finance as a financial matter instead of budgetin
Recommendation 3: Requirement of the government
Monitoring the budgetary soundness of local governments
Recommendation 4: System design in line with the size of local governments
Consideration for fund-raising by small local governments
Recommendation 5: Budgeting for administrative work for the government performed by local governments
Financing them, in principle, with the governmental budget
The report says it would be advisable for financial institutions to support local governments more broadly in promoting their budgetary reforms. Specifically, it expects support in two areas. First is support of local government fund-raising (syndicated loans, interest risk management, brokering sale/purchase of loans, etc.). Second is support of management of local governments (utilization of project finance, drafting medium- and long-term fund-raising plans, utilization of trusts, etc.).