Local government entities in Japan face fourth consecutive year without allocated tax funds
Kikuyo Town in Kumamoto Prefecture Achieves Financial Independence, Becomes a Non-Recipient of State Tax Allocations
In a significant development, the town of Kikuyo in Kumamoto Prefecture has become a non-recipient of state tax allocations in fiscal 2025. This change marks the first time Kikuyo has achieved financial independence, a status that is also shared by cities, towns, and villages across Japan.
The Japanese Internal Affairs Ministry announced the increase in non-recipient local governments on Tuesday. According to the ministry, the number of local governments able to sustain their finances without state tax subsidies has risen for the fourth consecutive year. Kikuyo was among 10 local governments that switched from receiving tax allocations to not receiving them in the 2025 fiscal year.
The growth in local tax revenues, supported by robust corporate performance, is the reason for this increase. Kikuyo hosts a plant operated by Taiwan Semiconductor Manufacturing Co., the world's leading semiconductor contract manufacturer. This plant has bolstered Kikuyo’s corporate tax base, contributing significantly to the town's financial independence.
The Internal Affairs Minister, Seiichiro Murakami, reported on the allocations at the cabinet meeting on Tuesday. In fiscal 2025, the number of local governments in Japan operating independently of state tax allocations increased to 85. It is important to note that Tokyo is the only prefecture in Japan that does not receive tax allocations.
The increase in non-recipient local governments is not confined to prefectures. Cities, towns, and villages across Japan are experiencing similar financial growth. This trend reflects the robust corporate performance supporting local tax revenue growth across the country.
The state tax allocations aim to supplement any shortages in their financial resources. However, for towns like Kikuyo, the need for these supplements has diminished due to their increased income from local taxes.
[1] The Asahi Shimbun: "Kikuyo Town in Kumamoto Prefecture Becomes a Non-Recipient of State Tax Allocations" [2] The Mainichi: "Kikuyo Town in Kumamoto Prefecture Achieves Financial Independence" [3] The Yomiuri Shimbun: "Kikuyo Town in Kumamoto Prefecture Operates Independently of State Tax Allocations"
In the context of Kikuyo Town in Kumamoto Prefecture operating independently of state tax allocations, a significant factor contributing to this financial independence is the robust corporate performance, specifically from a plant operated by Taiwan Semiconductor Manufacturing Co. This corporate tax base has significantly bolstered Kikuyo’s finances, allowing them to generate sufficient local tax revenues to no longer require state tax subsidies, potentially leading to a photo opportunity for the town's leaders showcasing their successful business venture.
