Japan’s local finance approach: can be applicable in Greece?
Despite there are many studies on local government efficiency, Japan’s local government efficiency is a particular case due to the following reasons. One of the crucial feature of Japan’s local finance is that there are considerable regional discrepancies in tax capacities, inflexible local tax system and significant vertical fiscal gap between the central and local governments, that requires the transmission of funds from central to local governments. Current study seeks to answer the following research questions. How central government in Japan supports local government in terms of the long-lasting high public debt? Is there a threat of financial shock in Japan in the long term? Finally, we are particularly interested in figuring out whether features of local finance system model in Japan can be applied in the EU countries, which experience long term financial instability and high values of public debt. In particular, we focused on Greece case. There is an evidence that the reasons behind the considerable public debt in Japan and Greece are very different. The background of the factors that caused high public debt in both countries is different, and overall macroeconomic conditions indicate that Japan’s approach in not a proper way to solve debt issues in Greece. We also emphasize that public debt by itself cannot be the indicator of the fiscal wellbeing of a public unit.
Copyright (c) 2019 Journal of Modern Economic Research
This work is licensed under a Creative Commons Attribution 4.0 International License.