LOCAL FINANCE IN JAPAN 
 
 IN RELATION TO 
 
 IMPERIAL FINANCE 
 
 BY 
 BUNSHIRO ]p[ATTORI, Ph.D. 
 
The original of tliis bool< is in 
 tlie Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924023533080 
 
LOCAL FINANCE IN JAPAN 
 
 IN RELATION TO 
 
 IMPERIAL FINANCE 
 
 BY 
 
 BuNSHiRO Hattoei, Ph.D. 
 
 Sometime University Fellow in Social Science in 
 Princeton University. 
 
 Prinoton Fxxss. 
 
A^ ^-ofco-ji 
 
 CoPYKiGHT, igo6, 
 
 BY 
 
 BUNSHIRO HATTORI 
 
TABLE OF CONTENTS 
 
 PAGE. 
 
 Introduction i 
 
 CHAPTER I. 
 
 Administrative Organization i 
 
 Section I. The Central Government i 
 
 Section II. The Local Government 3 
 
 (I). Prefectures 5 
 
 (II). Counties 9 
 
 (III). Cities, towns, and villages 11 
 
 CHAPTER 11. 
 
 Local Finance 18 
 
 Section I. The revenue of local government 19 
 
 (I). The revenue of prefectures 19 
 
 A. The ordinary public revenue 19 
 
 1. The subsidy from the national treasury 19 
 
 2. Pref ectural taxes 19 
 
 a. The land tax 21 
 
 b. The house tax 22 
 
 c. The surtax on the national business tax. . . 23 
 
 d. The surtax on the income tax 24 
 
 e. The prefectural business tax 25 
 
 f . The miscellaneous taxes 26 
 
 g. The special apportioned tax on cities, towns, 
 
 and villages 27 
 
 h. Labour and commodities : 27 
 
 3. Fees 28 
 
 4. Fines 28 
 
 5. The quasi-private revenue 29 
 
 B. Extraordinary revenue 30 
 
 (II). The revenue of counties 32 
 
 (III). The revenue of cities, towns, and villages 33 
 
 A. The ordinary public revenue 34 
 
 1. Subsidies and grants 34 
 
 2. The taxes of cities, towns, and villages 34 
 
 a. The surtax on the national land tax 35 
 
 b. The surtax on the national income tax 35 
 
 c. The surtax on the national business tax. . . 35 
 
 d. The surtax on the indirect national taxes. . 36 
 
 3 
 
e. The surtax on the prefectural house tax. . . 36 
 
 f. The surtax on the prefectural business tax, 36 
 
 g. The special tax 36 
 
 (i) The Janbetsu wari 37 
 
 (2) The Buichi tax 37 
 
 (3) The surtax on the national and pre- 
 
 fectural taxes 37 
 
 (4) The tax on Sake 38 
 
 h. Labour and commodities 38 
 
 3- Fees 39 
 
 4. Fines 39 
 
 5. The quasi-private income 39 
 
 a. The income from the productive capital. . . 39 
 
 b. Donations 41 
 
 6. Miscellaneous income 41 
 
 B. Extraordinary revenue 41 
 
 Section II. The expenditure of local government 45 
 
 (I). The expenditure of prefectures 45 
 
 (II). The expenditure of counties 47 
 
 (III). The expenditure of cities, towns, and villages 47 
 
 Section III. Budgetary legislation and administration of local 
 
 government 48 
 
 (I). Prefectures 48 
 
 A. The budget 48 
 
 B. The legislative audit 50 
 
 (II). Cities, towns, and villages 50 
 
 A. The budget 50 
 
 B. The legislative audit 51 
 
 CHAPTER III. 
 
 The Problems of Local Finance in Japan and their Discussion 52 
 
 Section I. The causes of the increase in expenditure 55 
 
 (I). The increase in public functions 55 
 
 (II). Self-government 56 
 
 (III). Influence of political parties 56 
 
 (IV) . Corruption 58 
 
 (V). Inefficient administration 58 
 
 (VI). IndustriaUsm 5g 
 
 Section II. How the increased expenditure is met '. 60 
 
 Section III. Reform of local finance 60 
 
 (I). Expenditure for prisons 61 
 
 (II) . Expenditure for education 63 
 
 (III). The relief fund 65 
 
 4 
 
(IV). Expenditure for the construction of dykes and har- 
 bours 67 
 
 (V). The land tax 69 
 
 (VI). The special tax 73 
 
 (VII). Public property (domains) 74 
 
 (VIII). The ownership of natural Monopolies ^^ 
 
 (IX). Public debts (local governments) 78 
 
 (X). The abolition of counties 81 
 
 (XI). The combination of rural communities 82 
 
 (XII). Strict administrative supervision from above 83 
 
 CHAPTER IV. 
 
 Conclusion 84 
 
 Appendix 86 
 
 Bibliography 89 
 
PREFACE 
 
 This monograph has been prepared in partial fulfilment of the 
 requirements for the degree of Doctor of Philosophy in Prince- 
 ton University. It might seem that the study of local finance 
 is not so important as that of national finance, and that the 
 special difficulties involved might render its investigation un- 
 fruitful. For the common welfare of the people, however, 
 the study of local finance is more important than might at 
 first sight appear, especially when the magnitude of local ex- 
 penditure and revenue in the aggregate is considered, and when 
 the indirect effects of local finance upon the economic and 
 social life of the people are taken into consideration. This is 
 especially true of Japan, where public finance so greatly affects 
 private finance. This monograph is far from exhaustive, for 
 I could not wholly escape from the difficulties connected with 
 the gathering of satisfactory statistical material, which in the 
 case of local finance is often meagre. I shall be content, how- 
 ever, if I have shed any light upon the essentials of the matter. 
 I am bound to record my obligations to the many persons 
 who have cordially assisted me with material, information, and 
 criticism ; especially are my thanks due to Professor Winthrop 
 M. Daniels, under whose untiring encouragement and guid- 
 ance the thesis was undertaken and completed. I have also 
 to acknowledge my particular obligation to Mr. K. Nakajima, 
 my former classmate in Waseda University in Tokio, for 
 furnishing me with materials. 
 
 BUNSHIRO HaTTORI. 
 
 Princeton^ N. J., 
 
 March 5, igo6. 
 
LOCAL FINANCE IN JAPAN IN RELATION TO 
 IMPERIAL FINANCE. 
 
 Introduction. 
 
 Since the Meiji restoration in 1867, Japan has progressed 
 wonderfully along all lines of civilized life. It will be needless 
 to say that financiering both public and private has had a most 
 important bearing on this progress. In the following chapters 
 I propose to study, though it may be imperfectly, one of the 
 branches of Japanese public finance — ^local finance — ^in relation 
 to central finance. 
 
 Being far away from my fatherland, I found it naturally 
 very hard to get sufficient information and to collect materials, 
 which are specially scarce and incomplete, for local finance. It 
 seems to me, however, that the study of local finance is of prime 
 importance, and it is very desirable to put it on a sound basis, 
 for the tendency ^ of all modern countries is to increase the 
 expenditure of local governments. This may, unless carefully 
 administered, lead to financial trouble. This study in Japan 
 has not received much attention from scholars or men of affairs 
 until recently. This paper may be the first of the sort. 
 
 CHAPTER I. 
 
 Administrative Organization. 
 
 Section I. The Central Government. 
 
 It is difficult, though it may not be impossible, to understand 
 any financial system, its organization, and its activity, without 
 knowing the administrative organization which is different in 
 each different country, and on which the financial conditions 
 
 ' Leroy-Beaulieu, Science des Finance, Vol. I., p. 746. 
 
largely depend.^ It is necessary, therefore, to give the outlines 
 of administrative organization to begin with, in order to facili- 
 tate the understanding of the subject. But this paper being 
 limited to the study of finance can not be enlarged more than 
 to give the necessary outlines. 
 
 Japan is a monarchy. The sovereignty rests entirely with 
 the Emperor.' If it be looked on from the point of view as to 
 how this sovereignty is used, that is, from the point of view of 
 the form of government, Japan has constitutional government.* 
 The three domains of the legislative, the judicial, and the ex- 
 ecutive have their limited functions, and are each carried on 
 through different organs of the state. If the government, for 
 instance, wants to impose taxes on people, it can not determine 
 them itself as it pleases. According to the Constitution, the 
 bill must be first passed by the Imperial Diet, and get the Im- 
 perial sanction; and when, after laws are carried into eflfect, 
 the people think that officials have misunderstood or misapplied 
 tax laws, they can appeal to the administrative courts, and the 
 wrong will be remedied. 
 
 Under the Emperor, who holds the sovereign power, there 
 are the different state organs, such as the Cabinet, composed 
 of a Prime Minister and nine Ministers of State, who are at 
 the same time in charge of administrative departments; the 
 Privy Council, other high advisory bodies to the Emperor, the 
 Imperial Diet and the courts. 
 
 These are the organs through which the sovereign power is 
 exercised, none of them having absolute, independent, and in- 
 herent power. They are independent only in the sense that 
 they can act freely by the right given them by the constitution, 
 which guarantees them not to be interfered with by any other 
 organ of the state. It is a peculiar characteristic in the Japa- 
 
 ' Adams's Public Debts, p. 375 and Seligman, Am. Statistical Associa- 
 tion, Vol. I., p. 350, concerning the relation of law to taxes. 
 ' The constitutional law of Japan, Article I. 
 *Hozumi, Imperial Constitution, p. 18. 
 
nese constitution that the Imperial Diet has no share of sov- 
 ereignty." 
 
 The Central government stands first in the order of the ex- 
 ecutive departments. The Minister of State is at the same time 
 the head of the Department of State. Among nine departments 
 of state, the Home and Finance Departments have chief rela- 
 tion to this paper. 
 
 Section II. The Local Government. 
 
 In very ancient times, Japan was divided into twelve parts, 
 each of which included several provinces which in turn em- 
 braced several counties. This is the beginning at least of the 
 local administrative system more than twenty-five hundred 
 years ago. History tells us that the first emperor Zimmu had 
 appointed his meritorious vassals the governors of the prov- 
 inces.® At the time of the emperor Saga,^ the provinces were 
 sixty-eight in number. The-local officials who were appointed 
 by the central government were governors changing every four 
 years, and sheriffs holding the office by heredity. The num- 
 ber of counties depended on the number of houses, so many 
 houses being in each county. Consequently where population 
 was dense there the counties were more numerous and covered 
 smaller areas than in other places. 
 
 In the Kamakura era,' the country was divided into many 
 districts which were governed by the feudal system. Since 
 then until the Meiji restoration, local communities were gov- 
 erned on the military basis and by the feudal system more or 
 less combined. 
 
 In the rural communities, in ancient times, there was no self- 
 governing system at all. We can find, in the thirteenth century. 
 
 " Hozumi, Imperial Constitution, p. 87. 
 
 ' Ogino, History of Japan, and The History of the Empire of Japan, 
 by Japanese commissioners to the Chicago Fair. Zimmu was the first 
 Emperor, B. C. seventh century. 
 
 ' Ninth century. 
 
 'Thirteenth century. 
 
some trace of it, but to a very limited extent. Before the resto- 
 ration, under the Tokugawa Shogunate government, cities and 
 counties were regulated fairly well, enjoying to some extent 
 self-government. Cities and counties had their chief magis- 
 trates. The chief magistrate of Tokio was appointed by the 
 Shogunate and had the right of administration all over Tokio 
 and also judicial power." Several officials under him were 
 elected from among the people. All business of each street was 
 administered by landholders who collected taxes. Villages 
 were governed by the president of the village who held the 
 office usually by heredity, or sometimes by rotation, or by pub- 
 lic election. Representatives of the farmers had also shared 
 the adipinistration. On the whole the system was based on 
 self-government by city people and by farmers in each case." 
 
 After the restoration, the government adopted a centralizing 
 system, and divided the provinces into two kinds of districts — 
 large and small. The latter is a combination of from five to 
 ten villages and the former compromises several small districts. 
 Soon after that, the system of one chief magistrate for one 
 village was introduced. 
 
 After many changes and reforms, the first pref ectural organi- 
 zation and the city, town, and village organization were estab- 
 lished in 1878 and 1880 respectively. The pref ectural law 
 simply regulated how to arrange the budget of expenditure to 
 be paid out of local taxes, and also their collection. The pre- 
 sent city, town, and village Civic Corporation Acts date from 
 1888 and the prefectural and county laws from 1899. These 
 laws were the long-desired idea of the Constitutional party, and 
 were introduced oftentimes in the House of Representatives, 
 and were finally passed in the thirteenth session of the Diet 
 (1898). 
 
 They made many improvements in the local regulations. 
 
 " Shimada, The Outline of Self-government, p. 49. 
 
 "This explanation is based on the system adopted in the direct 
 domain of the Shogunate; the domain of the feudal lords follows the 
 example generally. 
 
The payment of certain direct national taxes was made the 
 principal condition of the electoral franchise. 
 
 The boundaries of the present rural communities were mostly 
 established artificially as the consequence of laws paying little 
 attention to different local circumstances.^^ 
 
 All local governments in Japan have two aspects; in one 
 aspect they are the administrative agents of state, and in the 
 other they are self-governing bodies. All enjoy the rights of 
 juristic persons. There are three classes: Fu and Ken (Pre- 
 fecture), Gun (county), and Shi, Cho, Son (city, town, and 
 village) . 
 
 The extent and limit of the power of self-government of 
 each class are defined in detail in legal regulation. Fu and 
 Ken are the same, and the difference is in name only, except 
 that Fu includes each of the three largest cities. There are in 
 Japan three Fu; namely, Tokio, Kioto, and Osaka. The coun- 
 ties are much the same in nature as the prefecture, being more 
 an administrative area, like prefectures, than self-governing 
 bodies. The last class relating to municipal and rural com- 
 munities represents the self-governing organism in its most 
 striking form. 
 
 I will review, first, prefectures, next counties. Counties 
 being very much the same as prefectures, I need not go further 
 than to describe the difference. .As to cities, towns and vil- 
 lages, they all have the most characteristic points of civic cor- 
 porations, and are the lowest administrative divisions. The 
 cities have special concern with the modern problems of the 
 municipality. These I will take up last. 
 
 (I). Prefectures. 
 
 Prefectures includes counties, cities, and islands. Those 
 who live in a definite place in a prefecture with the intention 
 of residing there are called citizens. Citizens in city, 
 town, or vilage are at the same time citizens of the prefecture ; 
 
 " Shimada, The Outline of Self-government, p. SO-i. 
 
for. the latter includes the former. This will be made clear when 
 we come to the regulations concerning the citizens of the 
 village. 
 
 The Prefectural Assembly is a representative body elected by 
 the people, the number of representatives being thirty where 
 the prefecture has less than 70x5,000 population. Where the 
 population is from 700,000, to 1,000,000, one member is added 
 for every 50,000 in excess of 700,000; and where over 1,000,000 
 one member for every additional 70,000. The franchise is 
 limited, and direct. Only those citizens can vote who pay more 
 than three yen" a year in direct national taxes.^^ Only those 
 can be elected who pay more than ten yen. Officials, civil or 
 police magistrates, priests, and teachers of elementary schools 
 may not be elected. The Prefectural Assembly sits once a year 
 for thirty days, but, when it is necessary, it can have an extra 
 session, the term of which is limited to seven days. The prin- 
 cipal work of the Assembly is to deliberate and vote the budget 
 of the prefecture. It has no right to assemble itself, being 
 always summoned by the Governor. 
 
 It only declares its will, and has no right to execute its en- 
 actments. Even its legislative power is not unlimited as will 
 be shown below. It may legislate as follows : ( i ) to determine 
 the prefectural expenditure and revenue, to impose taxes, to 
 dispose of public properties,, to incur financial responsibility or 
 to waive claims to prefectural property, although these are 
 matters lying outside the budget, to determine the way to ad- 
 minister the public property and public establishments,^* to 
 elect its own committees, to determine the number of members 
 of the Assembly to be elected by the election districts, and to 
 fix the necessary amounts to be paid to men holding official 
 positions; (2) to sanction the financial report of the year be- 
 
 " Yen = so cents in American money. 
 
 "The three taxes of land, income, and business are called by that 
 name. 
 
 "The distinction between the property and establishment will be 
 treated under the head of property. 
 
fore; (3) to elect its president, vice-president, and the lay 
 inembers of the Prefectural Council — a standing committee, 
 which will be explained just below; (4) to present its opinion 
 concerning prefectural administration to the Governor or the 
 Home Minister, and (5) to arrange the business of the Assem- 
 bly itself." 
 
 Next comes the Prefectural Council, which is composed of 
 the Governor, two high officials, and six (in the case of Ken) 
 or eight (in the case of Fu) honorary councillors elected by 
 the Prefectural Assembly from its members for the term of 
 four years. The Council stands in contrast to the City Coun- 
 cils which are executive bodies. It is not an executive body, 
 but auxiliary to the Assembly, and simply makes decisions on 
 administrative matters when the Assembly can not be called 
 together with convenience, or the decision be delayed. Its 
 functions are : ( i ) to decide administrative matters which pri- 
 marily belong to the Assembly, but are entrusted by the latter 
 to the Council, or brought before the Council by the require- 
 ment of speedy decision before the Assembly meets, to decide 
 on administrative details of public properties and public estab- 
 . lishments, to decide on regulations to carry on the public works 
 to be paid for out of prefectural revenue, and to decide on 
 judicial matters concerning the prefecture; (2) to present its 
 opinion about prefectural administration to the Governor and 
 the other administrative offices ; (3) to examine the actual out- 
 lay and income of the prefecture; (4) to render decisions on 
 appeals and petitions brought by the people aggrieved, and (5) 
 to superintend the administration of counties, cities, towns, and 
 villages." 
 
 The Governor of the prefecture is an official of state and at 
 the same time the head of the executive office of the prefecture. 
 He has the right : ( i ) to govern the prefecture and represent 
 it; (2) to formulate bills to be introduced in the Prefectural 
 Assembly and Council; (3) to summon, open, close, and ad- 
 
 " Prefectural law, articles 41, 44, 47, 64. 
 " Prefectural law, articles 68, 69. 
 
journ the Assembly; (4) to veto the decisions or choice of 
 officers by the Assembly and the Council, when they violate 
 laws, or go beyond what they have a right to do; (5) when he 
 thinks the decision contrary to public interests, or the decision 
 of financial matters is improper, he can send the measures back 
 again to them for further consideration, or stop said measures 
 from going into effect; (6) when, under certain circumstances, 
 the Assembly or Council does not give the decision, he can 
 appeal to the Minister of the Home department, and ask of him 
 direction; (7) when the business legally belonging to the 
 Council should be disposed of without delay, he can give a de- 
 cision and dispose of it himself; (8) when entrusted by the 
 Council with any business legally belonging to the Council, he 
 may dispose of it himself; (9) if there is any public affair to be 
 disposed of in a hurry while the Assembly or Council does not 
 exist legally, he can also dispose of it himself; (10) to look 
 after the pref ectural officials ; (11) to guide and direct commit- 
 tees, and (12) to make rules to manage the pref ectural busi- 
 ness.^' 
 
 Though the nature of the business of a self-governing body 
 is the same as that of state, the extent of it is determined and 
 limited by the state, and it can not go further than that. Local 
 self-governing bodies are always concerned chiefly with 
 finance," and have nothing to do with foreign, military, naval, 
 and legislative affairs of the state. 
 
 There are two kinds of public affairs respectively called 
 " original " and " delegated," which give rise to much discus- 
 sion and explanation. The former is the public business orig- 
 inally entrusted by the state to local government at the time 
 when each class of local self-government was established and 
 incorporated. The latter comprises additional functions en- 
 trusted at later times by the state to various local govern- 
 ments.^* 
 
 " Prefectural law, articles 78, 81, 82, 83, 84, 85, 86, 87. 
 ''Bastable, Public Finance, p. 126. Nitti, Principes de Science des 
 Finances, p. 704. 
 "Minobe, Prefectural and County law, p. 253. 
 
The prefectures sometimes go beyond the limit of their 
 sphere and want to do what they have no right to do, or do not 
 do what they ought to do, so it is necessary that the higher 
 administrative office, central in this case, shall superintend them. 
 This is called the right of supervision, and is used more ex- 
 tensively in the case of prefectures than in the case of any 
 other grade of local government ; for the welfare of the state is 
 most closely related with the prefecture! administration. This 
 is the distinguishing mark between the sovereign state and the 
 subordinate self-governing bodies, for at no time does the sov- 
 ereign state receive supervision from outside. The Ministers 
 of the Home and Finance departments have this right of super- 
 vision and also the Emperor exercises a similar power of super- 
 vision. The ministers can by virtue of the right of supervision 
 force prefectural officials to make reports about administrative 
 business, or to send to them necessary documents. They can 
 examine the management of business and financial transactions, 
 issue the necessary orders to superintend them and give de- 
 cisions. They can also annul the decision of Prefectural As- 
 semblies or Councils, when it goes beyond their rights, or 
 violates other regulations, or they may determine themselves 
 certain administrative business for prefectures, give permission 
 for the exercise of certain administrative powers, interfere with 
 the organization of prefectural administrative organs and dis- 
 solve the Assemblies.^" Beside this, the administrative courts 
 may take cognizance of prefectural matters involving questions 
 of the interpretation of law. 
 
 (II). Counties. 
 
 Counties, like prefectures, are self-governing bodies and at 
 the same time administrative divisions of the state. They 
 stand between the prefecture on one hand and town and village 
 on the other. They first became self-governing bodies, when 
 the County law was established; while before that time pre- 
 fectures and rural communities only were juristic persons. 
 
 ' Prefectural law, articles 127, 129, 130, 131, 133, 134. 
 
counties having remained simply as administrative divisions. 
 In 1890, the county law was first formulated and recognized 
 counties as juristic persons giving them the right of self-gov- 
 ernment, though it was of a very limited nature. Since then, 
 there have been proposals to reconvert them into simple ad- 
 ministrative divisions, depriving them of self-government, but 
 the new law of 1900 not only did not change this, but estab- 
 lished it more securely.^^ 
 
 The system of local self-government depends largely on the 
 history of each country. Some countries have four classes of 
 local administration, only two exercising self-government, 
 e. g., France and Italy f"^ while other countries have three 
 classes of local administration and have two classes of self- 
 governing bodies, e. g., Switzerland.^^ In Japan all three 
 local administrative divisions are self-governing bodies, and the 
 reason is that there are many public affairs which can not be 
 managed advantageously by prefectures. These prefectures 
 cover too large areas to have proper concern for the common 
 interests of all the people; and the government by individual 
 towns or villages is too narrow to have proper concern for what 
 involves several towns or villages. For such cases, the inter- 
 mediate class of local government is necessary between the pre- 
 fecture and the rural community. Cities have direct relation 
 with prefectures. Counties have nothing to do with cities, so 
 there is here only a two-class system. 
 
 The County Assembly has exactly the same position as the 
 Prefectural Assembly. Before the new law was formulated, 
 it was organized by members who partly were indirectly elected 
 by Town or Village Assemblies, and partly by those who were 
 directly elected by large land-holders, who had thus a direct 
 influence over elections, simply because they were owners of 
 
 ""Minobe, Prefectural and County law, p. 330. 
 
 "" Lowell, Governments and Parties in Continental Europe, Vol. I., p. 
 36-40, 168. 
 
 ''Lowell, Vol. II., p. 236. Bastable, p. 115 and Nitti, p. 706-10. 
 
 Minobe, Prefectural and County law, p. 330. 
 
a large area of lands. It is now changed, and the members of 
 the Assembly are elected by the direct vote of the people and 
 the land-holders have no more right than others.^* It seems to 
 me that the new law properly abrogated this privilege of the 
 land-owners which was borrowed from the constitution of" 
 Prussia. Japan has had a different social development and 
 has no need to imitate this plan which simply gave power to an 
 oligarchy. 
 
 The election district is the rural community. The members 
 of the Assembly usually number from fifteen to thirty. They 
 can be increased until they reach forty. The electoral fran- 
 chise is limited to the people who pay more than three yen in 
 national direct taxes, five yen being the amount which is re- 
 quired for those who are eligible. 
 
 The County Council is composed of the Sheriff and five lay 
 members. Other regulations are the same as in the case of the 
 Prefectural Council with certain necessary changes. 
 
 The Sheriff stands also in the county in the same position as 
 the Governor in the Prefecture. He is one of the administra- 
 tive officials of the state as well as the chief executive of the 
 county. First the Governor, and secondly the Minister of the 
 Home department have the right of supervision. 
 
 ( III ) . Cities, Towns and Villages. 
 
 If any society advance in civilization, the division of labour 
 necessarily goes on to minute details. City and country life 
 naturally show a great differentiation, and we see in contrast 
 the busy life of cities where every kind of good is exchanged 
 and transported ; while on the other hand we have the tranquil 
 life of the country with the farm houses scattered around. 
 These two different ways of living are nevertheless indispen- 
 sable to modern life. It seems to me that it is quite foolish to 
 disregard one for the sake of the other; for their respective 
 interests are both of sufficient importance to be encouraged. 
 
 "County law, article VI. 
 
12 
 
 City and country have their peculiar characteristics, and 
 ought to be governed by somewhat diflferent rules. But the 
 fact that city, town, and village are all in the lowest adminis- 
 trative class of communities has given rise to regulations almost 
 the same for the government of them all. I will take up the 
 three together and give special notice whenever I come to the 
 different rules for the cities. 
 
 These three are the lowest classes of local self-governments, 
 and have the corporate character in its fullest extent. By cor- 
 porate character or juristic personality, I understand the power 
 of compelling people to obey its ordinances, and the capacity of 
 bringing suits under the administrative law. It can also dis- 
 pose of its business as it jileases within the limits of law and 
 Imperial ordinance; and makes regulations in order to exer- 
 cise its right of decree over the people. 
 
 The basis of the lowest self-governing bodies are land and 
 people. As already remarked, these communities represent, in 
 the most striking form, the self-governing mechanism. They 
 will be presented more carefully than others. 
 
 People of these communities are divided into two classes: 
 those who do not have the electoral franchise and those who 
 have and who participate in the political affairs of the commu- 
 nity. The former comprises the people who are simply resi- 
 dents, while the latter, the voter, must meet the conditions 
 following: (a) he must be a citizen of the Empire; (b) must 
 have attained his majority; (c) must have lived for more than 
 two years in the same community and bear a share of the tax 
 burden; (d) he must have paid the land tax or other direct 
 taxes more than two years; (e) he must ndt have received, 
 for more than two years, any relief from the public funds. 
 Naturally those who have been elected mayor, or chief officials 
 of the town or village, or assistants to the chief officials, or 
 treasurers, come to belong to the latter class during their ten- 
 ure of office, even though they originally belonged to the 
 former.^" 
 
 "■ Civic corporation law, article 56. 
 
'3 
 
 It would not be out of place to notice here a difference of 
 administrative organization betvveen cities on the one hand and 
 towns and villages on the other. Any community which has 
 more than 20,000 population can be incorporated as a city. 
 Cities are entirely independent of the county. 
 
 The election of members of the City Assembly is effected by 
 the three-class system^* of voters, each class paying one-third 
 of the city taxes, while that of the town and village is effected 
 by two classes of voters similarly divided. The executive 
 organs of the cities are boards, while the executive organ of 
 the town and village is a single official. City Assemblies nomi- 
 nate three candidates for mayor and the Emperor designates 
 one of the three to the office. 
 
 When cities, towns, and villages covering a large area and 
 having a large population find it inconvenient to manage their 
 business, they can divide themselves into more narrow districts 
 and elect their chief officials. If they have their own proper- 
 ties, they can have their special administrative organs enjoying, 
 to a certain limited extent, the right of self-government. We 
 call them self-governing districts within the city, town, or vil- 
 lage as the case may be. They are not, ih principle, indepen- 
 dent corporations, but belong to one of the three larger com- 
 munities. If, on the other hand, towns or villages can not 
 alone afford to bear the expense of certain public affairs, or if 
 there is any necessity for joint action to secure the public wel- 
 fare, they are allowed, or sometimes compelled to join with 
 other towns or villages to manage all their common affairs, or 
 some definite parts thereof such as schools, drainage, or some 
 other public works.^' 
 
 Tokio, Kioto, and Osaka were, for political reasons, once 
 governed by special regulations different from other cities, 
 like Paris in France and London in England. The system has 
 been abolished now. 
 
 "Loiyell, Vol, I., p. 304. 
 
 " Civic corporation law, article 116. 
 
14 
 
 The Assembly of cities, towns, and villages is the most im- 
 portant organ of these self-governing bodies. The number of 
 its members is from thirty to sixty in the case of cities ; from 
 eight to thirty in the case of towns and villages ; in the case of 
 small villages sometimes the mass meeting of the people is 
 recognized.^' Only those who have the electoral franchise are 
 eligible to the Assembly. Some administrative officials, public, 
 procurators, police magistrates, priests, and teachers of ele- 
 mentary schools are not eligible. The term of office is six 
 years, and half of them elected anew every three years. 
 
 The Assemblies simply deliberate and decide upon their pub- 
 lic affairs, but they have no legal right to represent their com- 
 munities in communications to the Imperial government and 
 others, or even to execute what they decide upon. Business 
 which ought to be disposed of by them is as follows : first, to 
 decide on all communal affairs according to the Civic Corpora- 
 tion Acts. These acts provide a wide sphere of activity and 
 within limits complete self-government. Their proper business 
 is second, to exercise those powers delegated to communities 
 before the Civic Corporation Acts were formulated; third, to 
 exercise those powers to be delegated later on by laws, or Im- 
 perial ordinances; fourth, the election of officials of communi- 
 ties ; fifth, the supervision of administration ; sixth, to give their 
 opinions when consulted by other public officers; seventh, to 
 give the decision upon petitions. Besides these items mentioned 
 above, they can make for themselves their own rules of pro- 
 cedure, and examine the credentials of their members.^* 
 
 The executive department of cities is an organized body of 
 councillors, but that of towns or villages is only one chief 
 official. It might be said that, from its purpose, the executive 
 department of towns or villages should be also a deliberative 
 body. It might be argued that there is no reason why cities 
 
 " See Bryce.The American Commonwealth, Vol. I., p. 6li, concern- 
 ing the town meeting of the people in New England. 
 
 "City law. Chap. II., Sect. II., Town and village law. Chap. II., 
 Sect. II. 
 
IS 
 
 should have a different system; for all are the lowest form of 
 local community. There are, however, practical reasons for 
 this ; towns and villages do not generally have so complicated 
 an administration as cities, and can not usually get enough men 
 of administrative ability to perform public services without pay. 
 
 City Councils and the chief officials of towns and villages are 
 not primarily administrative agents of the state, but only of the 
 local communities. Cities, towns, and villages elect these coun- 
 cillors and officials themselves in spite of the fact that they are 
 at the same time administrative divisions of the nation and 
 manage the public business of the state. The state has, there- 
 fore, the right of supervision over these officials to watch its 
 own interests. 
 
 The City Council is composed of the mayor, assistant mayors, 
 and associate councillors usually six in number. The chief 
 officials and assistants of towns and villages are elected by 
 their Assemblies. These executive officers are in charge of the 
 administrative affairs of the self-governing bodies and are in 
 charge of the general state administration also. I will treat 
 first of the former class, i. e., of the affairs of the local govern- 
 ments. It is very hard to define its extent ; because these local 
 councils and officials represent the communities and perform 
 the general administrative business of the communities. The 
 Civic Corporation Act simply defines their powers in general 
 terms, the principal items of which are as follows : 
 
 (a) To prepare measures to be discussed in the Assemblies 
 and to execute what the Assemblies decide upon. They, i. e., 
 the local officials and councils, are not compelled to give effect 
 to whatever measure the Assemblies decide upon. If the As- 
 semblies decide on anything which does not properly belong to 
 them, or violate laws, or go contrary to the public welfare, the 
 officials and councils can send the decision back to the Assem- 
 bly for further consideration giving the reason therefor. 
 
 (b) The administration of public property. 
 
 (c) The supervision over income and outlay. 
 
 (d) Protection of the rights of communities, for instance, to 
 bring suits before the courts. 
 
(e) The administration of the tax system. 
 
 (f) The supervision and discipline of officials and em- 
 ployees.'" The Mayor is the president of the Gty Council and 
 represents it. 
 
 The general administration is delegated by laws, imperial 
 ordinances, and orders of high officials to these local officials 
 and councils. In practice, however, the most of it is delegated 
 to the mayors and chief officials. It should be noticed here that 
 in cities, the executive is the Council, though we must be care- 
 ful to distinguish whether administration is delegated to the 
 mayor or Council. The general administrative business is : (a) 
 the judicial police power (Imperial), and the local administra- 
 tive police power, (b) the sea-coast office business which takes 
 .care of shipwrecks, (c) the administration of general home 
 affairs, so far as they are carried on in that administrative 
 division, such as the census, education, industry and sanitation 
 which primarily ought to be dealt with by the Imperial and 
 higher local governments. Theoretically, the police power be- 
 longs entirely to the Imperial government; and local self-gov- 
 erning bodies exercise police powers, not of their own right, 
 but simply because it is delegated by laws passed by the Diet 
 and by Imperial ordinances.'^. 
 
 Treasurers, clerks, employees, and permanent and temporary 
 commissions are also employed in local governments. They 
 have various commissions for the purpose that people may ac- 
 quire the ability of self-government. Some might say perhaps 
 that they might learn this in Assemblies and Councils in which 
 they are directly concerned. Yet the number of positions is 
 limited. The system is to give a fairly good chance to the 
 people at large to learn the art of self-government gratui- 
 tously.. 
 
 There are two kinds of officials : those who receive salaries 
 and those who do not. Those who perform their services 
 gratuitously are called honorary officials. Though in principle 
 
 " City law, article 64, 65. Town and village law, article 68. 
 "City law, 74. Town and village law, 69. 
 
'7 
 
 the lowest local self-governments are to be carried on by the 
 honorary officials, their actual necessary expenses incurred in 
 doing the public business are paid, and sometimes they receive 
 extra pay. The responsibility for the performance of duty is 
 the same in the case of both kinds of officials with slight nat- 
 ural differences. 
 
 The supervision over the local administration is exercised by 
 the higher administrative offices. The Governor and the Min- 
 ister of the Home department have the right over cities ; and the 
 Sheriff, Governors, and the Minister of the Home department 
 over towns and villages. But in special cases, such as the dis- 
 cipline of officials, the City Councils and Governors have the 
 right of superintendence ; and Sheriffs and Governors over the 
 chief officials of towns and villages. Only the Minister of the 
 Home department can dissolve their Assemblies. County and 
 Prefectural Councils, and administrative courts have also a 
 right of supervision in some specific cases. 
 
 In Hokkukaido, and Okinawa, the system of self-government 
 is somewhat different, but the difference is not worth, special 
 notice here. 
 
 Modern public affairs are so wonderfully wide and complex 
 that the state can not rely on itself to do all business, and thus 
 delegates some of it which is not directly concerned with the 
 national welfare to the local self-governing bodies. And yet, 
 not satisfied to entrust them with full power, it establishes other 
 special administrative organs or boards for special purposes. 
 These organs or boards enjoying the right of control over cer- 
 tain limited public affairs, and enjoying the rights of juristic 
 persons are called public corporations in the administrative law. 
 They are, in this respect, the same as the local self-governing 
 bodies, but differ from the latter in being charged with limited 
 functions rather than having a certain fixed territorial jurisdic- 
 tion. Membership in such boards is limited to the organiza- 
 tions from which they are drawn. Though in Japan at the 
 present time the system has not yet been developed fully, and 
 though sometimes these boards are simply recognized as ad- 
 
l8 
 
 visory bodies, the plan was devised in feudal times, and has 
 an interesting history. 
 
 Service on some of the boards is conipulsory ; such as the cor- 
 poration for protection against flood; service sometimes is- 
 optional, such as the corporation for common drainage or the 
 chamber of commerce. They are given as examples existing 
 at the present time, and deal with the business indicated by 
 their names. They are in some respects auxiliary organs to 
 the local governments. 
 
 CHAPTER II. 
 Local Finance. 
 
 It cannot be denied that the most striking financial tendency 
 of our day is that public affairs become more and more compli- 
 cated and increase the amount of revenue and expenditure 
 required. The natioiial government can not undertake tck 
 manage all local affairs itself, and leaves some of them which, 
 are not directly concerned with national affairs to local deter- 
 mination. Local governments should pay the expenses for all 
 works they have to carry on. Thus finance becomes a most 
 important part of self-government ; its success depends largely 
 on the financial management. 
 
 Before taking up the problems and discussions about local 
 finance, it seems to me the natural process that the regulations- 
 concerning public properties, revenues, and expenditures of 
 local governing bodies should be first presented. We should 
 first see how they are defined and carried on in practice. 
 
 In the preceding chapters I described the functions of local 
 governments. They must pay all necessary local expenses, and 
 for this purpose must have their own properties and get the 
 additional revenue they need by means of taxation. 
 
19 
 
 Section I. The Revenue of Local Governments. 
 
 (I). The Revenue of Prefectures. 
 
 A. The Ordinary Public Revenue. 
 
 I. The Subsidy from the National Treasury. 
 
 Theoretically it is supposed that the prefectures shall pay all 
 necessary expenditures out of their own revenues, but, if this 
 principle be strictly followed, the state finds itself sometimes 
 handicapped owing to the disability on the part of prefectures 
 to deal with public affairs properly on account of the lack of 
 money.^ The prefectures are an integral part of the nation, 
 and have closer relation to the welfare of the whole country 
 than any other class of local governments. The state, there- 
 fore, in the case of necessity grants to them for the promotion 
 of public interests a subsidy, and lets them expend it for what 
 is needed. 
 
 The subsidy may be given as a certain percentage of the 
 amount they spend, or in lump sums. In 1902 it reached 
 3,553,566 yen. It was given mostly for public works. 
 
 2. Prefectural Taxes. 
 
 The relation of prefectural taxes to prefectures is quite dif- 
 ferent from the relation of city, town, and village taxes to their 
 respective communities. These latter local self-governing 
 bodies have to accumulate capital, the interest of which is sup- 
 posed to be used first to pay their current expenditures; and 
 only when the interest is not enough to defray current expenses 
 do they collect taxes. The prefectures, on the contrary, are 
 not required to accumulate capital. AH their necessary ex- 
 penditures are supposed to be paid first out of the taxes which 
 occupy the most important place among their receipts. In 
 1902, the prefectural taxes yielded 46,596,332 yen, while other 
 revenues, exclusive of debts contracted, amounted to 8,390,338 
 yen. 
 
 ' Nitti, p. 716. 
 
The prefectures being divided simply by imaginary lines, 
 there arise complicated inter-prefectural relations about the 
 collection of taxes. A railroad may traverse two prefectures 
 and be taxed by both, for emample. 
 
 By tax-payer is meant here not the man who pays the taxes 
 ultimately after the shifting of taxation, but the man who is 
 responsible for taxes to the public office. The tax-payer may 
 be an individual, or private corporation, and is liable to pay 
 taxes under the following conditions : first, if he has his domi- 
 cile in the prefecture with the intention to stay there perma- 
 nently, or if he has remained more than three months in any 
 part of it. Or, secondly, if he owns or uses lands or buildings 
 or other properties in the prefecture ; or has a place of business 
 in a definite place therein, or carries on certain specific kinds 
 of business in any part of it. This does not mean that all peo- 
 ple are liable who do meet these conditions, but rather that pre- 
 fectures can not impose taxes on any person who does not fall 
 in any of these classes. We see, however, that this includes 
 every possible case which they can avail themselves of in levy- 
 ing taxes. For example, the man who does not live in the 
 prefectures, but only holds some property there must pay taxes. 
 On the other hand, any prefecture can not tax the income 
 derived from lands, buildings and other properties owned by 
 its own people, but situated in another prefecture. So, also, 
 the income of its people derived from the business which has 
 its office in another prefecture can not be taxed. 
 
 If any prefecture wants to tax the income of people who live 
 and stay in more than one prefecture, it can not collect the tax 
 from the entire income, but only from a part of the income. 
 Suppose, for instance, that a man living in a prefecture stays 
 in another prefecture more than three months, neither one of 
 them can, tax more than one part of his income, even though the 
 other does not tax at all. This is simply for administrative 
 convenience.* 
 
 ' Prefectural law, article 107. 
 
21 
 
 When the national business tax is imposed upon a business 
 which is carried on over several prefectures and has business 
 ofiSces in them, the business is considered as a unit, and can not 
 be divided among its different offices. Prefectures can add 
 the additional tax to it, but the principle above mentioned can 
 not be applied in this case ; for there is no standard available to 
 divide the taxable proportion among the prefectures concerned. 
 The Governors meet together in order to decide among them 
 the shares, and impose the tax in the proportions agreed on, 
 after the sanction of the Minister of the Home and Finance 
 departments. If they can not agree, the two ministers divide 
 it among the prefectures, a decision ^ from which there is no 
 appeal. The most striking exaniple of this case is the business 
 tax on railway companies, and it would not be too much to say 
 that this regulation has been made specially with them in view. 
 Banking, insurance, manufacturing, and warehouse businesses 
 come sometimes under this rule also. 
 
 The tax rate must be the same in all cases. When a tax is 
 .collected to pay expenses which are specially beneficial to some 
 part of the prefecture, the rate can be increased in that pro- 
 .portion only. Or, when the prefecture which includes the city 
 wants to raise a tax to pay the expenses of a court building and 
 of maintaining county offices, it can not tax the city for this 
 purpose. These are the only two exceptions to the require- 
 ment of an identical tax rate in prefectural taxes. 
 
 Cities, towns, and villages collect the prefectural taxes for the 
 prefectures which in turn give them four per cent, of the 
 amount collected as the expense of collection, except in the -case 
 of the land tax. 
 
 a. The land tax. This is the additional rate on the national 
 land tax, which additional rate is imposed by local governments, 
 and occupies the most important place among the prefectural 
 taxes. In 1902, it yielded 25,554,209 yen against 21,042,125 
 yen, the sum of all other prefectural taxes put together. The 
 
 'Prefectural law, article 108. 
 
local rate can not exceed one-third of the national tax rate. I 
 will give its details in the third chapter.* 
 
 b. The house tax? There are two ways of collecting this 
 tax. One is to impose it on the house taking into consideration 
 the area occupied by the building, the situation of the building 
 site, the materials used, and the rental value. The other way is 
 to divide the tax-payers into fewer than thirty grades according 
 to their economic status. This economic status is a very am- 
 biguous term. In practice, it means that consideration is taken 
 of every possible indication of an individual's means." There is 
 a great difference between the highest and lowest grades. In 
 the prefecture from which I received the information, the high- 
 est pays 98.28 yen annually, while the lowest pays .04 yen only. 
 The average is a little more than one yen a year.' 
 
 The first is really a house tax. The second seems like the 
 general property tax, but there is here one condition probably 
 peculiar to Japan, which will explain why it is called the house 
 tax. The man who pays the tax lives in a house owned or 
 rented. The family or household is still the unit of society, and 
 every independent man with his family lives in a separate 
 house, so that it is a sort of family income tax collected from 
 each household. This second way of collecting the tax is to 
 impose it on the house in the sense of family or household. 
 Where the first is used, there the second can not be applied. In 
 reality, there are three prefectures which use the first, and they 
 apply it only to cities : Tokio, Kioto, and Osaka. The rest of 
 them use the second. 
 
 If the first method is applied, the object of taxation is defin- 
 ite, and the immediate burden of the tax falls on the owner of 
 the house, while the second method is uncertain in its valuation, 
 and discriminates unfairly often between the rich and poor. 
 
 * See Chap. Ill, Sect. III., V. 
 
 ° Goschen, Local Taxation, p. 205, concerning English house tax. 
 "The Reports of Shiga Prefecture. 
 
 ' Blunden, Local Taxation and Finance, p. 24, concerning the valua- 
 tion in England. 
 
23 
 
 The whole sum raised by the house tax was 9,318,595 yen in 
 1902. 
 
 c. The surtax on the national business tax. Until 1896, 
 there was in Japan no national business tax at all, and pre- 
 fectures were quite free to tax business as they pleased. Soon 
 after the war with China, the Imperial government, confronted 
 by an enormous increase of expenditure, began to collect the 
 business tax.* Besides the increase in expenditure, there were 
 three more reasons for doing so. First, to effect a fair distri- 
 bution of the burden of taxation among the people of different 
 prefectures by allowing the prefectures to impose additions to 
 the national business tax; secondly, to arrange the system of 
 taxation by subjecting some business to the national tax ex- 
 clusively, and giving prefectures the right to tax the rest when 
 the expenses of collection are proportionally large; thirdly, to 
 extend to business men the electoral franchise more widely and 
 to secure their participation in political affairs by making the 
 payment of the business tax (now a national direct tax) a 
 qualification for voting. Hitherto only land and income taxes 
 were legally called direct national taxes. The electoral fran- 
 chise was given to people who paid more than ten yen a year 
 in these two taxes. Naturally the agricultural interests were 
 represented in the Diet more largely than others ; for the land 
 tax was the most important one. Now the business tax is in- 
 cluded in the national direct taxes, the result of which is to 
 increase the representation of commercial and manufacturing 
 interests in the House of Representatives.* 
 
 Twenty-four of the most important businesses, such as 
 wholesale trading, retail trading, banking, insurance, lending 
 of money, manufacturing, transporting, warehousing, contract- 
 ing, printing, hotel keeping, restaurant keeping, and others, 
 mostly commercial or manufacturing or transporting are 
 selected as the objects of taxation. The base and rate of the 
 
 ' History of Finance in Japan, Vol. VI., Chap. I., Sect. V., published 
 , by the association of the same name. 
 
 •History of Finance in Japan, Vol. VI., p. 45. 
 
24 
 
 tax are not the same with all of them. The base of wholesale 
 and retail trading is taken from the amount sold, the rental 
 value of the house used, and the number of employees, and the 
 rate is five ten-thousandths of the amount sold at wholesale 
 fifteen ten-thousandths at retail, forty thousandths of the rental 
 value of the house, and one yen for each employee. For bank- 
 ing, insurance, and private lending, the amount of capital is 
 taken; the rate being two thousandths. For manufactures, 
 the base is the capital eniployed, and the rate is one and one- 
 half thousandths. For warehouses, the rate on rental value of 
 houses is twenty thousandths. For restaurants and hotels* 
 only the rental value of house and the number of employees are 
 considered. The rate is sijrty thousandths and forty thous- 
 andths respectively and one yen for each employee in both 
 cases. For contractors, only the amount contracted for, and 
 the number of employees are considered. The rate on the 
 amount contracted for is two thousandths.^" 
 
 Not even on all of these businesses is the tax imposed. Some 
 of them are left to prefectures as a source of revenue. Th^ 
 are as follows : wholesale and retail trading fdlling below one 
 thousand yen 'in the amount sold a year ; loaning, below five 
 hundred yen of capital; manufacturing, below five hundred yen 
 of capital and less than two employees ; transporting and bank- 
 ing employing less than two eniployees, contractors contractir^ 
 for less than a thousand yen a year; hotels and restaurants 
 employing less than three employees each. 
 
 Local governments can not impose the business tax on those 
 businesses which are taxed by the national government. Pre- 
 fectures can collect additional taxes on these, but to an amount 
 not to exceed one-fifth of the national tax. From this source, 
 prefectures received 1,021,608 yen in 1902, while the national 
 tax amounted to 6,777,047 yen. 
 
 d. The surtax on the income tax. The national income tax^^ 
 
 "The business tax law, article 12. 
 
 " Dowell, History of Taxation and Taxes in England, Vol. III., Bk. 
 II., Chap. I., Sect. IV., concerning the income tax in England. 
 Bk. II., Chap. I., Sect. IV., concerning income tax in England. 
 
2S 
 
 was first imposed in 1887 and revised in 1899. All incomes ol 
 people, and foreigners who live more than one year in the 
 Empire are liable to pay the tax. The rate is progressive and 
 as follows : ^^ 
 
 The income of corporations 25 yen per 1,000 yen 
 
 The interest of public debts and bonds. .25 " " " " 
 All other incomes: 
 
 Over 100,000 yen 55 " " " " 
 
 50,000 " 50 " " " " 
 
 30,000 " 45 " " " 
 
 " 20,000 " 40 " " " " 
 
 15,000 " 35 " " " 
 
 10,000 " 30 " " " " 
 
 S,ooo " 25 " " " 
 
 3,000 " 20 " " " 
 
 2,000 " 17 " " " 
 
 1,000 " 15 " " " " 
 
 " 500 " 13 " 
 
 300 " 10 " " " 
 
 Until 1895 the prefectures did not augment by prefectural 
 rates the percentage of the income tax, though they could have 
 done so legally. In 1902, 32,922 yen was collected for prefect- 
 ural purposes ; while 7,460,693 yen was the whole Imperial tax. 
 The prefectural requirements do not amount to much, but are 
 increasing every year. They may not make an additional levy 
 of more than one-fifth of the national income tax. 
 
 e. The prefectural business tax. Prefectures can impose the 
 business tax on any business which is not taxed by the national 
 business tax. The present usage is to impose it on commerce 
 and manufactures. The process of collecting the same is quite 
 different from that of the national tax. The prefectures do 
 not take the amount sold, or the capital invested as the base of 
 taxation, but they divide the places in which the stores or work- 
 shops are located into certain grades according to their pros- 
 perity, by which the amount sold or business transacted is 
 
 ' History of Finance in Japan, Vol. VI., p. 13. 
 
26 
 
 guessed at; and then impose the same amount of tax for all 
 business enterprises of the same grade in the place, without 
 paying any attention to the capital invested or other elements. 
 In the prefecture from which I received the information, for 
 example, the business tax on commerce is divided into five 
 grades, according to the location, and exacts 2.40 yen a year for 
 the first grade ; 1.90 for the second ; 1.50 for the third ; 1.20 for 
 the fourth; i.oo for the fifth. The tax on manufactures is 
 divided also into five classes and exacts 1.60 yen a year for the 
 first ; 1.30 for the second ; i.oo for the third ; .80 for the fourth ; 
 .60 for the fifth.^^ 
 
 Prefectures received in 1902 from this source 2,673,899 yen. 
 
 f. The miscellaneous prefectural taxes. I use here the term 
 " miscellaneous " tax according to the actual practice. There 
 are taxes on restaurants, tea-houses, baths, hair-dressers, wrest- 
 lers, actors, geisha girls, markets, theaters, shows, boats, car- 
 riages, riding horses, fishermen, bicycles, and some others.^* 
 Prefectures can tax anything they want under the name of 
 miscellaneous taxes. The objects of taxation are, therefore, 
 different among them. 
 
 The rate of taxation varies according to the situation exactly 
 as in the case of the business tax. Some of the taxes are 
 divided into five, some four, and some three classes. Some of 
 them take into consideration the age of those taxed; for in- 
 stance, geisha girls of more than thirteen years of age in the 
 first grade-place pay 4.50 yen a month, while those of less than 
 thirteen years of age pay 2.25 yen in the same place. Sometimes 
 the use is considered, for example, those jinrickshaws for one 
 man's accommodation for the owner's private use pay 2.50 yen 
 a year, while public jinrickshaws pay 1.80 yen. The tax on 
 bicycles is also 3.00 yen and 2.00 yen respectively. The rev- 
 enue from these taxes reached 6,225,909 yen in 1902. 
 
 "The Budget of Shiga Prelecture of 1905. The Report of Kana- 
 gawa Prefecture of 1903. 
 
 " The Budget of Shiga Prefecture of 1905. 
 
27 
 
 Though the tax on commerce and manufacture only is called 
 the business tax of prefectures, there is, as can be seen in the 
 above statement, no difference at all between the business tax 
 and some of the miscellaneous taxes. They are business taxes 
 even if they have a strong resemblance to a license tax ; because 
 they are not the condition precedent, but result subsequent" 
 to carrying on the business. Some of the miscellaneous taxes, 
 however, such as taxes on carriages, geisha girls, and bicycles, 
 are license taxes pure and simple. Some of them come be- 
 tween the two and are very hard to define exactly. 
 
 g. The special apportioned tax on cities, towns, and villages 
 (Prefectural tax.) The taxes of prefectures are based pri- 
 marily on the principle that they shall be collected directly fron^ 
 the people. In the old law, it was strictly prohibited to leyy 
 any tax upon rural communities, and pth^r public corpor^tign? 
 as a unit. When, however, they want to defray small expendir 
 tures for certain purposes, it is very troublesome to impose the 
 tax on all people throughout the prefeqture directly and 
 equally. The new law changed this requirement and permit? 
 the prefectures to gather revenues from rural communities a? 
 a unit. Cities, towns, and villages are responsible to fulfil the 
 requirement, but they are free to determine themselves how the 
 tax is, tQ be distributed among their people. They might be 
 able to pay it out of the interest of public funds, or in some 
 other way. In 1902 1,554,023 yen was the sum thus collected, 
 way. In 1902 1,554,023 yen was the sum thus collected. 
 
 h. Labour and Commodities (Taxes in kind). This is one of 
 the ways to levy the prefectural taxes. They might be imposed 
 directly on the people, or on cities, towns, and villages as a 
 unit. They can also be collected from other quasi-public cor- 
 porations. The prefecture may impose on the drainage board, 
 for instance, covering a certain area special taxes for drain- 
 age purposes, and even require the drainage board to furnish a 
 supply of labour and commodities. 
 
 Any prefectural tax must be imposed generally, but the 
 exaction of labour and commodities may be imposed on some 
 
 " Seligman, Essays in Taxation, p. 280. 
 
28 
 
 specified portions of the prefecture for the public works which 
 benefit these portions in particular. 
 
 Practically, however, this prefectural tax (in kind) is hardly 
 ever applied to individuals directly and not frequently to cities, 
 towns, and villages. The amount levied and calculated when 
 put in money terms does not amount to much, and is included 
 in the figures of the apportioned tax. 
 
 It is more frequently exacted of towns and villages ; so it is 
 more convenient to explain it later when I shall come to towns, 
 and villages.^" 
 
 3. Fees. 
 
 In the law, fees are divided into two classes : one is paid for 
 the use of public establishments, for example, for the privilege 
 of passing over a bridge, and the other is the fee paid for the 
 use of public establishments where the chief element fixing the 
 fee is the service of officials.^'' The distinction is unscientific, 
 for any public establishment involves both kinds of service 
 which can not distinctly be separated. This division is made 
 according to an old custom, and perhaps for administrative 
 convenience. School tuition is a fee of the latter kind. 
 
 Some of the public establishments, such as highways, some 
 bridges, and parks are open free to all the people. 
 
 Fees do not amount to much and no separate statistics are 
 made of them. They are included in the miscellaneous rev- 
 enue. 
 
 4. Fines. 
 
 Fines are also a part of the public income, and the result of 
 the exercise of the public power. They are generally im- 
 posed on people and sometimes on officials.^* When the pre- 
 fectural officials neglect their duty, they must pay fines. Both 
 are collected by the administrative office of the prefecture. 
 The amount is too insignificant to make a separate statement 
 of, and is included in the miscellaneous revenue. 
 
 " See page infra 38. 
 
 " Prefectural Law, article 99. 
 
 " Prefectural Law, article 81. 
 
29 
 
 5- The quasi-private revenue. 
 
 The most striking difference between the public and quasi- 
 private revenues can be seen in the process of enforcing the 
 collection of each of them, when the people neglect their pay- 
 ment. The former is collected by distraint and forced sale; 
 while the latter, such as donations promised by private persons, 
 can only be collected by suit brought in the ordinary civil 
 courts. The treasury stands in the latter instance on the same 
 footing with private suitors.^' 
 
 The Income from Public Property. According to the pre- 
 fectural law, such properties are divided first into those whose 
 earnings are to be used to defray certain prefectural expendi- 
 tures (e. g., public lands rented to private persons), and 
 second, those which are provided for the general use of 
 the public such as parks (usually called the public estab- 
 lishments). The former is again divided: the earnings of a 
 part going to defray ordinary expenditures, and of the other to 
 defray the extraordinary expenditures.^" 
 
 In the old prefectural law, it was not allowed to set apart any 
 income from public property for undefined extraordinary ex- 
 penditures, but only for some specific purposes predetermined 
 by the law, such as relief funds in case of bad harvests. It 
 goes without saying that it is a very desirable thing to lay by 
 in prosperous times some resources not only for definite ex- 
 penditures, but also for general losses arising through emer- 
 gencies disturbing local finance. In the new law, therefore, a 
 clause was inserted to let prefectures provide some reserve 
 funds largely made up of annual surpluses. These may exist 
 in kind, or in the form of immovable property. The prefect- 
 ures can even impose prefectural taxes on the people to make 
 up these reserves."^ These reserve funds resemble the pro- 
 ductive capital of cities, towns, and villages.^^ They differ. 
 
 " Minobe, Prefectural and County Law, p. 295. 
 " Prefectural Law, article 98. 
 " Minobe, p. 262. 
 "See infra page 39. 
 
30 
 
 however, in this, that not only the income but, if necessary, 
 the principal can be freely used, while the productive capital of 
 cities, towns, and villages can be employed only by taking the 
 income for use. 
 
 The new law having been passed only six years ago, some 
 prefectures have not yet started this method of accumulating 
 reserve funds, artd no statistics of such properties are as yet 
 available. Prefectures, from the time of the old law, have con- 
 trol of the educational funds and the poor relief funds, the 
 amount of which are, according to the latest estimate of 1902, 
 1,370,198 yfen and 27,2^2,6)60 yen respectively. 
 
 The income from these properties, artd properties sold, with 
 Some father minor revenues in 1902 reached 4,433,827 yen 
 under the name of the miscellaneous income. In 1902 donations 
 amounted to 402,945 yen. 
 
 B. EXtRAORDINARY ReVENUE. 
 
 The Public Debt. 
 Prefectures, like individuals, meet with unexpected demands, 
 and are placed at times in urgent need of unusually large sums 
 of money. Even if the prefectures are not permanent entities 
 like the state^ they certainly enjoy a more permanent existence 
 than individuals, and are more fully justified than they in 
 undertaking a permanent scheme for the future benefit of 
 their people. These expenditures amount to so much that the 
 ordinary revenue can not afford the needed supply. For these 
 purposes, it is not only unobjectionable, but rather beneficial 
 that prefectures distribute their burden over the future by 
 means of public loans. In spite of these undoubted advantages, 
 however, the resort to public credit is the easiest way to shift 
 present burdens on to posterity, and may easily cause, unless 
 carefully guarded, financial trouble in the future.^* The pre^- 
 fectural debt is, therefore, under careful supervision and rigid 
 limitation.^* 
 
 " Adams, Public Debt, p. 25. 
 
 "Bastable, p. 721, concerning the supervision of local debts in Eng- 
 land. 
 
31 
 
 Its purpose must be to redeem the old debts, or to pay the 
 cost of permanent improvements, or to provide for natural 
 calamities, or emergencies. Prefectures are not allowed to 
 resort to borrowing, unless the expenditure can not be met by 
 an increase of the ordinary revenues. The bill to authorize 
 the debt must have the approval of the Prefectural Assembly 
 which determines at the time the details of the loan subscrip- 
 tion, the rate of interest, and the time of redemption. The 
 project must get the sanction of the superintending adminis- 
 trative office ^° which will give the final decision. 
 
 Prefectural debt stands as follows: 
 
 1898 7,885,202 yen 1899 8,672,639 yen 
 
 1900 9,719,983 " 1901 10,379,664 " 
 1902 10,712,864 " 1903 12,076,497''° " 
 
 The yearly amount of new debt contracted is : 
 
 1897 3,512,067 yen 1898 2,589,723 yen 
 
 1899 2,899,145 " 1900 3,078,281 " 
 
 1901 1,448,753 " 1902 2,652,711 " 
 
 The redemption, the payment of interest and other expendi- 
 tures connected with the debt each year, aggregate the follow- 
 ing amounts: 
 
 1897 952,433 yen 1898 1,466,267 yen 
 
 1899 1,629,005 " 1900 2,786,748 " 
 
 1901 3,243,771 " 1902 3,726,142 " 
 
 The average rate of interest is necessarily higher than that 
 of the national debt and ranges somewhere about six per cent 
 The duration of the debt can hardly be given; for it differs 
 widely in different cases. Formerly debt had to be redeemed 
 in thirty years. No such limit is now set, but perpetual debt 
 is not allowed. 
 
 Temporary loans (e. g., for anticipating taxes) are repaid 
 out of ordinary revenues within the fiscal year. 
 
 "Imperial government. 
 
 "The figures do not include temporary loans. 
 
32 
 
 (II). The Revenue of Counties. 
 
 Counties, like other local governments, get their revenues in 
 part from public property and in part from taxes. It seems 
 rather surprising to find that there are no statistics of county 
 finance. When we consider, however, that counties have no 
 right to impose taxes directly on the people, and that their 
 public revenues come chiefly from the apportioned tax " on 
 towns and villages, the absence of statistics is not surprising, 
 because the apportioned tax is one item of the expenditure of 
 towns and villages which would be duplicated, if independent 
 statistics of county finance were made. 
 
 As ordinary public income, the counties get subsidies from 
 the national and prefectural treasuries. The counties impose 
 the apportioned tax as a unit on towns and villages which in 
 turn distribute it among their people as they please, or pay it out 
 of the interest of their capital. The rate of tax is determined 
 by the total amount of the direct national and the prefectural 
 taxes which were collected in the towns and villages in the 
 previous fiscal year. The counties can require labour and com- 
 modities exactly as in the case of prefectures. They impose 
 fees and fines which amount practically to very little. 
 
 As quasi-private income, the counties get the income from 
 public property. What I have said about the prefectural prop- 
 erties applies here with but slight modification. 
 
 There are in Japan six hundred and thirty-eight counties in 
 all. It is quite out of question to collect the materials from 
 them, and make up any trustworthy statistics. The whole 
 revenue can only be guessed at by the whole expenditure which 
 I can fortunately give later on. 
 
 The statistics of local finance are very meagre in every 
 country in the world.^* It is surely disappointing to see no 
 
 " County law, article 89. 
 
 "Seligman, Finance Statistics of the American Commonwealths. 
 American Statistical Association, Vol. I., p. 455, concerning imperfect 
 local statistics in America. 
 
33 
 
 statistics of county finance. It is advisable to compile such 
 statistics if the counties are to continue' as self-governing 
 bodies. 
 
 I give here one example of county revenue from the budget 
 for 1905 which I received from one of the counties of my 
 native prefecture.^' 
 
 The subsidy for education from the national treasury, 500 yen 
 The subsidy for education from the prefectural 
 
 treasury 500 " 
 
 The apportioned tax. , 2,034 " 
 
 Tuition (fees collected from pupils) 123 " 
 
 Income from county property 342 " 
 
 Property sold 199 " 
 
 Extraordinary income will include any public debt contracted 
 by the counties. I will not repeat here again what I have said 
 about the prefectural debt, for the same thing applies here with 
 only the necessary change of County Assembly in the place of 
 the Prefectural Assembly. The amount of all debts of coun- 
 ties stands as follows: 
 
 1898 45,729 yen 1899 62,646 yen 
 
 1900 135,613 " 1901 339,348 " , 
 
 1902 509,588 " 1903 890,045 " 
 
 The rate of interest is almost the same as that of the prefect- 
 ures. 
 
 (III). The Revenue of Cities, Towns, and Villages. 
 
 All people of the country belong to either one of these lowest 
 communities, and all financial burdens of the country fall in 
 the last resort on them. The national, prefectural, and county 
 revenues all come from them. They at last pay the expendi- 
 ture of their own administration both original and delegated, 
 and their burden is increasing year after year. 
 
 ' The Budget of Ika County of Shiga Prefecture, 1905. 
 
34 
 
 A. The Ordinary Public Revenue. 
 I. Subsidies, and Grants. 
 
 These are given by the national, prefectural, and county 
 treasuries. In the case of cities, there is no county subsidy, 
 because they are independent of the county and have no rela- 
 tion to it at all. The subsidies and grants are given for educa- 
 tional, and industrial purposes, and for public works. The 
 statistics of the national and prefectural subsidies include the 
 grants given to the cities, towns, and villages to repay them for 
 the expense of collection of the national and prefectural taxes, 
 except in the case of the national land tax and the prefectural 
 addition to the ra;te thereof. Four per cent, of the amount 
 collected is repaid to the local .governments. 
 
 The figures in 1901 stand as follows : 
 
 I. Cities: 
 
 From the national treasury . ., > , 546,526 y&t 
 
 Prcau the prefectural treasuri^. 3iOi698 " 
 
 II. Towns and villages: 
 
 Ffom the national treasury 286,490 " 
 
 From the prefectural treasuries 3,901,534 " 
 
 From the county treasuries 324,150 " 
 
 2. The Taxes of Cities, Towns, and Villages. 
 
 Whatever the actual situation may be, cities, towns, and 
 villages are debarred from collecting any tax at all, unless the 
 interest of their capital, their fees, fines, and toliier income are 
 insufficient to pay their expenditures. This precaution was 
 made so as not to disturb the common financial resources of aiH 
 grades of governments. As I have said, just before, all national 
 and prefectural burdens lall on the people of these communi- 
 ties. If the cities, towns, and villages in addition to the 
 national and prefectural governments impose as heavy taxes 
 on their people as they please, much suffering of the people will 
 be caused and much disturbance as regards the national and 
 prefectural revenues. 
 
35 
 
 The taxes are imposed on residents of the taxing communi- 
 ties, or on those who stay there more than three months, or 
 who own lands or buildings situated therein, or on those who 
 have a business office situated within such communities. The 
 most important of these local taxes is the additional rate which 
 they add to the national or prefectural taxes. The rate must 
 be uniform, and an addition to the direct national or prefectUral 
 taxes, but, when sanctioned, in the case of necessity, by the 
 superentending administrative office,'" cities, towns, and vil^ 
 lages may also levy additional rates on the indirect taxes in 
 force. Unless by special permission of the Ministers of the 
 Home and Finance departments, the maximum rate of one- 
 seventh of the national land tax, and one-half of other direct 
 taxes can not be exceeded. 
 
 a. The surtax on the national land tax.^^ This is one of the 
 most important reventies of cities, towns, and villages. The 
 maximum rate is one-seventh of the national land tax. In 
 I901 cities, towns and villages received from this surtax 441,'- 
 985 yen and 13,252,550 yen respectively. For further consider* 
 ations, see the third chapter .^^ 
 
 b. The surtax on the national income tax,^^ In setting the 
 rate, care is taken to avoid double taxation. Incomes derived 
 ffom lands, buildings, and business enterprises which are out- 
 side cities, towns, and villages in which taxpayers live must be 
 deducted ; and incomes coming from other sources than lands, 
 buildings and business enterprises of taxpayers who live or 
 stay in more than one community must be equally divided 
 among fh6 communities concerned. From this source in 1901 
 cities received 1,271,651 yen and towns and Villages 647,856 
 yen. 
 
 c The surtax on the national business tax.^* The rat6 of the 
 
 "Imperial government. 
 
 ** Lefby-BeaulieU, Vol. I., p. 32S. 33*. Nitti, p. J?i8, coftCerning the 
 strong resemblance of the lax to " les centimes additlohels." 
 "* See page itiira. '69. 
 " See page supra 24. 
 " See page supra 23. 
 
36 
 
 tax is set just as in prefectures. The maximum local rate is 
 one-half of the national rate of the tax; much more than the 
 maximum prefectural rate which is only one-fifth of the 
 national rate of the tax. The cities in 1901 got 2,020,738 yen 
 and the towns and villages 857,580 yen from this source. 
 
 d. The surtax on the indirect national taxes. Though the 
 local rate on the national or prefectural taxes may generally 
 result in a fairer burden on the people than the special taxes, 
 the local rate added to the indirect national taxes is apt to 
 throw an unfair burden especially on the poor. This local 
 surcharge on national indirect taxes is considered as excep- 
 tional and is carefully guarded, and can not be collected unless 
 the Ministers of the Home and Finance departments allow it. 
 
 The objects of the tax are generally liquor, Shoyu (a kind of 
 sauce) and sugar. Practically few of the local communities 
 collect the tax. It does not amount to much and reached in 
 1898 only 274 yen for cities and 932 yen for towns and villages. 
 The figures of the latest statistics of 1901 are 2,711 yen and 
 6,282 yen respectively. 
 
 e. The surtax on the prefectural house tax. Cities, towns, 
 and villages impose the additional rate on the prefectural taxes 
 just as they do on the national taxes. The maximum rate is 
 one-half of the prefectural rate. The revenue derived from it 
 in 1901 is as follows : 
 
 Cities (a)«= 1,336,151 yen 
 
 (b) 1,160,247 " 
 
 Towns and villages (b) 25,520,535 " 
 
 f. The surtax on the prefectural business tax.^^ In 1901 it 
 produced 555,985 yen for cities and 2,367,221 for towns and 
 villages. 
 
 g. The special tax. The tax revenues of cities, towns and 
 
 "In explaining the pfefectural house tax, I said that there are two 
 ways of levying the tax, and the first method is applied only in the 
 three largest cities. The (a) supra corresponds to the first and the 
 (b) supra to the second. See page supra 22. 
 
 " See page supra 25. 
 
37 
 
 villages come mostly from the surcharges made to national 
 and prefectural taxes but a small part from the special tax.*' 
 
 Under the name of the special tax, there are many varieties 
 of an independent character. Any of the cities, towns, and 
 villages, as they think necessary, may select any object and im- 
 pose any rate of taxation on it within the community. It must 
 be approved by the Ministers of Home and Finance depart- 
 ments. This precaution was made not only to prevent an 
 unfair burden on the people, but to protect the national policy 
 of taxation. For instance, the national tax on manufactured 
 goods will be greatly obstructed by having a special tax on 
 the raw materials of manufacture imposed by local gov- 
 ernments. 
 
 In Japan there are 60 cities, 1,121 towns, and 12,351 villages. 
 Many of them do not impose any special tax at all, and the 
 rest of them have their own special taxes differing from each 
 other according to the circumstances of their locality. Of 
 these, there are no statistics. It is an immense task and hardly 
 possible to systematize scientifically all these taxes, especially 
 cvhen we consider the lack of materials. The following are 
 the common special taxes : 
 
 (i) "Tanbetsuwari" (rate per tan). It is imposed on the 
 owner of lands, the base being the "tan" (about f of an acre). 
 When the registered value of forests is comparatively low, it 
 is imposed on them and called by the same name. 
 
 (2) The Buichi tax (percentage tax). It is collected when 
 the ownership of lands or buildings is transferred. If by sale, 
 some percentage of the actual price is collected from the buyer. 
 In other cases, cities, towns, and villages themselves value the 
 property and collect the tax from the new owners. In some 
 villages, it ranges as high as two per cent. 
 
 (3) The surtax on the national and prefectural taxes. This 
 is a most perplexing special tax ; for although based on a per- 
 centage of the national and prefectural taxes, it is called a 
 special tax. The rate, as I said before, has its maximum. 
 
 " See page infra 43-44- 
 
38 
 
 Now instead of exceeding it nominally, there is collected some 
 percentage of the land tax, the national and prefectural busi- 
 ness tax, and the house tax under the name of a special tax. 
 Though legally the maximum may not be exceeded, this is 
 practically done under the name of a special tax. 
 
 (4) The tax on Sake (liquor). This resembles the octrois.^^ 
 The local governments impose the tax both on sake when 
 brought within the city, and when made and sold there. If 
 re-exported out of the city, the tax is paid back. In Tokio the 
 duty is fifty cen per koku (39.70 imp. gal.) . In the metropolis, 
 this special tax on sake and the special tax of the (3) supra are 
 collected for the expenses of the street improvements.^* 
 
 Other special taxes are special assessments to meet the cost 
 of improving private property ; taxes on dogs and some others. 
 
 In 1901, cities received 4,135,321 yen and towns and villages 
 1,177,204 yen from all these special taxes. 
 
 h. Labor and commodities. Taxes in every modern society 
 are generally raised in the form of money ; nevertheless in some 
 parts of rural communities even at the present day, their econ^ 
 omic conditions are still backwards, and better fitted to allow 
 taxes to be collected in the form of labour and commodities; 
 for the people might think such forms of taxation less heavy 
 than money payments. For this reason, the law provided that 
 local governments may impose taxes in the form of labour and 
 commodities in case of necessity.*" The payment in labour 
 may seem the same in appearance as military service and the 
 service rendered by the local government officials who hold 
 honorary positions, but it has an essentially different character. 
 It may be paid by any individual providing an acceptable sub- 
 stitute and need not be paid in propria persona. Service re- 
 quiring special training such as professional service can not be 
 demanded, and people who are required to contribute labour 
 may send another person as a substitute. The contribution in 
 
 "^ Leroy-BeauHeu, Vol. I., p. 736. Basta,iile, p. 543- 
 
 " Hosono, The Past and Future of City of Tokio, p. 78. 
 
 "Civic Corporation Act. article loi. 
 
39 
 
 kind and labour should be, unless in the time of pressing needs, 
 calculated in money terms, and people can pay it in money, if 
 they so choose. The purposes for which this kind of tax may 
 he required are more clearly defined than in the case of the 
 prefectural labour and commodity tax. The labour and com- 
 modity tax of the lowest local governments must be to construct 
 public works, such as roads, parks, banks, schools, hospitals, 
 and drainage works, or to protect the public welfare against 
 fire, flood, earthquake, and other calamities. It is different, 
 also, from the case of the prefectural labour and commodity 
 tax, imposed directly on individuals. Its amount must be de- 
 termined in proportion to the sum total of all direct taxes 
 which each person pays. When labour is valued in money 
 terms, the day's wage prevailing in the locality is to be taken 
 as the standard. 
 
 The amount in 1901 required by towns and villages were : 
 Labour 412,897 yen, commodities 4,006 yen. Cities do not 
 resort to this sort of revenue. 
 
 3. Fees. 
 
 For explanation, I refer to the fees of prefectures.*^ In 1901 
 cities received 745,305 yen and towns and villages 337,077 yen. 
 
 4. Fines. 
 
 They are a source of revenues, but amount to little aud are 
 <iassed under the miscellaneous revenues. 
 
 5. The Quasi-Private Income.*" 
 
 a. The income from productive capital. Certain prop- 
 erties are set apart whose income only may be used'. Here the 
 term capital is used to denote the source of income in the ab- 
 sence of a better term. The principal of capital can not in 
 theory be expended. These communities by virtue of their 
 
 ' See page supra 28. 
 ' See page supra 29. 
 
40 
 
 being public corporations can collect taxes to pay their expendi- 
 tures, but if they rely entirely on taxes, too much pressure 
 would be felt by the people. To set apart certain properties as 
 the financial resource of these communities and use only the 
 interest is to put local finance on a sound basis. It may seem 
 contrary to the idea of democracy that the local governments 
 possess productive capital and depend on it, because the people 
 lose their financial control to that extent. In Japan, however, 
 the paternal nature of the government dominates the democ- 
 racy. The people, especially in rural parts of the country, are 
 not yet advanced enough to guide the officials; and the gov- 
 ernment can control public property more wisely than the 
 people. 
 
 Cities, towns, and villages are supposed to pay their ex- 
 penditure first out of the interest of their productive capital 
 and then, if these are not sufficient, from taxes.** The capital 
 is regarded as a most important resource. Cities, towns, and 
 villages are, therefore, responsible for keeping the capital, 
 though they are not compelled to provide and increase it, when 
 they think this would impose too heavy a burden on the peo- 
 ple. Their own circumstances will determine the proper 
 amount of the capital. 
 
 The capital may consist of any kind of property; (a) real 
 estate, (b) money, (c) chattels, and (d) securities. The 
 minor incidental revenues such as private donations and the 
 sale of government property are added to the capital. If donors 
 indicate the use for their donations, these instructions must be 
 strictly followed. 
 
 Communities can not escape the unwelcome visits of con- 
 flagration, earthquakes, storm, flood, and other natural calami- 
 ties, and stand occasionally in great need of money. Only in 
 such cases, may they use the principal of the capital by the per- 
 mission of the superintending office. The administration of 
 the capital is managed by the city councils, and chief officials 
 of towns and villages as the case may be. In administering 
 
 'Civic Corporation Act, article 8i, 88. 
 
41 
 
 the capital, they have to obey the rules set by the local Assem- 
 blies. 
 
 The statistics in 1903 give us the amounts of capital as fol- 
 lows: 
 
 Cities. Towns and villages. 
 
 Lands .. '. 3,052,346 yen 12,171,197 yen 
 
 Buildings 2,392,707 " 17,138,961 " 
 
 Securities 338,384 " 3>2S6,876 " 
 
 Cash and in kind 4,274,626 " 6,787,495 " 
 
 Total 10,658,063 " 39.354,532 " 
 
 The towns and villages which have such capital are 11,073 *° 
 number.** All cities have it. In 1901 cities received 861,273 
 yen and towns and villages 1,604,811 yen from the interest of 
 this capital. 
 
 b. Donations. In 1901, donations or gifts yielded 142,094 
 yen for cities and 3,428,966 yen for towns and villages. The 
 donations are received mostly for the purposes of education, 
 charity, and some public works. 
 
 6. Miscellaneous Income. 
 
 Under this head, the grants from the Emperor, and Empress, 
 incomes from properties sold, and some other minor incomes 
 are included. Cities received 7,512,199 yen and towns and 
 villages 5,639,135 yen in 1901 from these sources. 
 
 B. Extraordinary Revenue. 
 
 The Public Debt. 
 
 Until the Civic Corporation Act was passed, cities, towns, 
 and villages could not resort to the use of public credit. They 
 can now do so, and are bound by the rights and duties of 
 debtors. But if they are left entirely free to go on borrowing, 
 there is much reason to fear that they may disorder local 
 finances. They must, therefore, observe the limitations set 
 
 "See page supra 37, concerning the total number of cities, towns 
 and villages. 
 
42 
 
 before them; first to redeem the old debts, and secondly to 
 issue bonds to pay for unavoidable expenditures caused by 
 natural calamities or emergencies, and thirdly to pay for 
 works of permanent advantage. The improvement of lands 
 and forests, and the construction of canals, wharves, and other 
 means of transportation might increase the temporary burden 
 on the people, but they will increase their productive power and 
 strengthen the permanent economic power of the country. 
 The immediate increase they would cause in taxes would be 
 unsupportable by the peoule.*' The bill to authorize the loan 
 must be made by the decision of the local Assembly which de- 
 termines at the time the details of subscription, the time of 
 redemption, and the rate of interest. The redemption of the 
 debt must be begun within three years from its issue, and com- 
 pleted entirely within thirty years.*' If the local governments 
 can not follow these rules, they must get the permission of the 
 Ministers of the Home and Finance departments. The rate of 
 interest is almost the same as on the prefectural debts,*' and 
 sometimes higher. They can borrow temporarily to pay for 
 the expenditure included already in their budgets independently 
 of the above provisions. Temporary loans are redeemable 
 within £t period not exceeding three years. 
 The outstanding debts are as follows : 
 
 Towns. Villages: 
 
 147,904 yen 235,481 yen 
 
 176,776 " 315.173 " 
 
 266,624 " 562,872 " 
 
 400.514 " 1,116,940 " 
 521,221 " 1,463,028 " 
 
 791.515 " i,8o8,237«" 
 " Civic Corporation Act, article 106. 
 
 "Concerning repayment of local loans in England, see Blunckn, 
 Local Taxation and Finance, p. 20. 
 
 "See page supra 31. If it is issued below par, say 93 yen with face 
 value of 100 yen, the interest is usually six per cent. If it is issued 
 at par, the interest reaches as high as seven per cent. 
 
 "The figures do not include temporary loans. 
 
 1898 
 
 Cities. 
 11,501,480 yen 
 
 1899, 
 
 18,276,755 " 
 
 1900 
 
 25,849,033 " 
 
 I90I 
 
 29,796,663 " 
 
 1902 
 
 35,130,242 " 
 
 1903 
 
 38,463.137 " 
 
43 
 
 The yearly amount of debt contracted was : 
 
 Cities. Towns and villages^ 
 
 1897 1,103,152 yen 2,288,869 J^^ 
 
 1898 1,007,720 " 2,945,575 " 
 
 1899 2,653,695 " 3.867,647 " 
 
 1900 2,781,873 " 5,002,696 " 
 
 1901 3,878,226 " 6,223,692 " 
 
 The redemption, payment of interest, and other expenditures 
 on account of the debt amounted yearly as follows : 
 
 Cities. Towns and villages. 
 
 1897 2,480,128 yen 1,693,851 yeil 
 
 1898 1,481,642 " 2,3^3,787 " 
 
 1899 1,656,745 " 2,609,806 " 
 
 1900 2,190,588 " 3,576,112 " 
 
 1901 2,880,288 " 4,876,784 " 
 
 The tables sUmmaHsing the revenue of local governments: 
 
 I. Prefectures. 189I 1901 ^fSS^. 
 
 Local surtax on land tax 7,222,759 23,620,662 226 
 
 Local surtax on business tax . . . 946.635 
 
 Other prefectural taxes*» 7,189,327 18,541,134 157 
 
 Public debts contracted 1,448,753 
 
 Subsidies 7,937-294 2,671,030 *65 
 
 Donations 123,204 569-542 362 
 
 Miscellaneous 2,318,256 3-987-541 72 
 
 Money carried forward from 
 
 previous year 1,427,085 6,918,224 384 
 
 * decrease. 26,217,933 58,721,522 123 
 
 In 1891, there was no national business tax, therefore, no 
 local rate additional oti it, and the receipts from public debt 
 contracted were included in the miscellaneous item. The in- 
 crease of local public debts is treated in another place. 
 
 "See page sttpra 22-27. 
 
44 
 
 II. Cities. 1891 
 
 Local surtax on land tax 104,530 
 
 Local surtax on other national 
 
 taxes 125,510 
 
 Local surtax on prefectural 
 
 taxes 1,161,657 
 
 Special taxes 4S.I9I 
 
 Revenue from public properties, 456,566 
 
 Public debts contracted 140,649 
 
 Fees 30,286 
 
 Subsidies 746,632 
 
 Donations 21,010 
 
 Miscellaneous 31265,391 
 
 Money carried forward from 
 
 previous year 216,050 
 
 5,460,472 
 
 III. Towns and villages. 1891 
 
 Local surtax on land tax 5,913,107 
 
 Local surtax on other national 
 
 taxes 3o>356 
 
 Local surtax on prefectural 
 
 taxes 7,601,199 
 
 Special taxes 387,971 
 
 Labour and commodities 288,986 
 
 Revenue from public properties, 626,609 
 
 Public debts contracted 352,790 
 
 Fees 29,467 
 
 Subsidies 2,540,401 
 
 Donations 855,761 
 
 Miscellaneous 2,160,351 
 
 Money carried forward from 
 
 previous year 1,067,580 
 
 21,827,578 
 
 1901 
 
 441,985 
 
 Percentage 
 of Increase. 
 
 322 
 
 3,295,100 2,546 
 
 3,052,383 
 
 4.135,321 
 
 861,273 
 
 3,878,226 
 
 '745,305 
 857,224 
 142,094 
 
 7,512,199 
 
 162 
 950 
 
 88 
 
 2,657 
 2,360 
 
 14 
 576 
 130 
 
 3,411,334 1,478 
 
 28,332,444 
 
 400 
 
 »9oi o^Yr^ 
 
 13,252,550 
 
 124 
 
 1,511,718 
 
 4,879 
 
 27,887,756 
 
 266 
 
 1,177,204 
 
 203 
 
 416,903 
 
 44 
 
 1,604,811 
 
 156 
 
 6,223,692 
 
 1,810 
 
 337,077 
 
 1,043 
 
 4,512,174 
 
 T7 
 
 3,428,966 
 
 300 
 
 5,639,135 
 
 161 
 
 4,324,624 
 
 305 
 
 70,316,610 222 
 
45 
 
 Section II. The Expenditure of Local Governments. 
 
 Some public affairs, such as military and diplomatic admin- 
 istration, are exclusively taken into, the charge of the Imperial 
 government, but the character of public business becomes 
 more complicated every year, and the expenditures of all' local 
 governments increase accordingly. 
 
 Usually the expenditures of local governments are divided 
 into the self-determined and the obligatory.^" The former is 
 to defray the expense of the original and the other of the dele- 
 gated administrative functions. The distinction is specially 
 clear in the case of cities, towns, and villages. For prefectures, 
 it is of no practical importance at all, because the superintend- 
 ing administrative officers have such extensive power that they 
 can fix even the size of the self-determined expenditure so- 
 called, when they think it necessary. 
 
 (i). The Expenditure of Prefectures. 
 
 Prefectures are required to pay for both self-determined and 
 obligatory expenditures. They are fixed in part by Imperial 
 laws, and Imperial ordinances, and in part by customs and old 
 usages. 
 
 Their administrative business has a certain limit, and it fol- 
 lows naturally that their expenditures are correspondingly 
 limited. Prefectures may not spend any revenue, except for 
 strictly prefectural purposes. By a special regulation, however, 
 they are allowed to make contributions to the state for Im- 
 perial purposes (e. g., the sea-coast defence), and to give sub- 
 sidies to individuals or other public corporations, which have 
 benefited the prefecture, as by establishing an agricultural 
 society within the prefecture." The following is the prefect- 
 ural expenditure for 1902 : 
 
 "' Minobe, p. 299. 
 
 "Prefectural Law, article loi. The subsidy to an agricultural 
 society was declared contrary to the law by an administrative court, 
 but the decision seems by no means well grounded. 
 
46 
 
 Prefectural Assemblies 4^1,154 yen 
 
 Prefectur^l Assembly buildings , 266,8pi 
 
 County office expenses 2,948,987 
 
 County pffice buildings 202,946 
 
 Police 8,997.219 
 
 Police office buildings 793,719 
 
 Public works 15,574,204 
 
 Subsidies to above. ,,..,,....,. 3,010,547 
 
 industry , : 3,464,172 
 
 Education ......,,,.... .....^ , . ^0,830,961 
 
 Subsidies to above. ,.......,..., ,,,.... 33,917 
 
 Poor Relief. ,.,.,,,, ,..,,..., 106,624 
 
 Sanitation ..,,.,.., : , . r - , 1,823,584 
 
 Subsidies to above. ■■■■■•, r 1,222,610 
 
 Election expenses of members of Die^. , 90,664 
 
 Expense of handling prefectural money 827,280 
 
 Notices and advertisements 63,010 
 
 Salaries 948,603 
 
 Public debts (interest and re4eraption) 3,726,142 
 
 Miscellaneous . .' 1,185,646 
 
 56,578,790 « 
 
 The expenditure for the county offices and buildings are 
 paid from the prefectural treasury."^ The salaries of Govern 
 nors and other higb prefectural officials are not included under 
 the head of salaries, for they are paid from the national treasr 
 ury.°' The miscellaneous item includes expenses for the elec- 
 tion of members of the Prefectural Assembly, prefectural star 
 tistics, mmor subsidies, grants to school teachers, and some 
 other minor expenses, 
 
 "Prefectural Law, article 114. 
 
 °^ See page supra 7 and also appendix page 88 about tlieir amount. 
 
47 
 
 (II). The Expenditure of Counties. 
 
 As I have said before, there are no statistics of county 
 finance, for their revenues come partly from the prefectures 
 and partly from towns and villages. The following statistics 
 of 1904 were specially made for reference purposes, when the 
 abolition of the county was discussed in the Imperial Diet in 
 1905: 
 
 County Assembly and County Council 329,199 yen 
 
 Public works 3,015,847 " 
 
 Other expenses 627,668 " 
 
 3,972,714 
 
 "Other expenses" includes salaries of oificials and employees, 
 notices and advertisements, subsidies, education, election ex- 
 penses, and some minor expenses. The average for a county 
 is 6,163 y^"> ^^^ highest being 21,359 yen and the lowest 1,978' 
 yen. 
 
 (III). The Expenditures of Cities, Towns, and Villages. 
 
 They are for the original and delegated administrative pur- 
 poses. The most of the latter are defined by Imperial laws and 
 Imperial ordinances, and the former are regulated by the Civic 
 Corporation Acts which allow the local governments discretion 
 to make expenditures according to their own circumstances for 
 the benefit of their people. When the obligatory expenditures 
 are not provided for in their budget, the authority of the 
 superintending administrative offices can force them to include 
 such items. The election of members of the House of Repre- 
 sentatives, census, judicial police, the higher branches of educa- 
 tion, the collection of taxes, and conscription belong to the 
 delegated functions, while public works, industry, sanitation, 
 poor relief, general education and others belong to their orig- 
 inal jurisdiction. They differ widely from each other in the 
 amount of business and expenditure. 
 
48 
 
 The expenditure in 1901 is as follows : 
 
 Cities. Towns and villages. 
 
 Assembly 90,426 yen 599.0I2 yen 
 
 Public buildings and sal- 
 aries i,787>oi4 " 13,108,601 
 
 Public works 3.477.541 " 7.3S2,5i2 
 
 Education 4,692,144 " 25,449,643 
 
 Sanitation I.355.03S " 3.901,605 
 
 Poor relief 57,876 " 39,679 
 
 Police 148.274 " 439.940 
 
 Industry 78.898 " 951.128 
 
 Public debts 2,880,288 " 4,876,784 
 
 Control of property 413.819 " ' 543,385 
 
 Taxes and other burdens, 1,397,792 " 4,858,117 
 
 Miscellaneous 5,732,972 " 3,180,324 
 
 22,112,079 " 65,300,730 " 
 
 The miscellaneous item includes the light in parks, small 
 charitable contribution, grants and some minor expenditures. 
 
 Section III. The Budgetary Legislation and Adminis- 
 tration OF Local Governments. 
 (I). Prefectures. 
 
 The financial administration and control of prefectures like 
 those of the state comprise the budget and the audit of accounts. 
 
 A. The budget. The nature of the budget has been much 
 discussed, and it is finally settled that in Japan the budget refers 
 not to the actual law authorizing expenditure and collection of 
 revenue, but simply to an approximate estimate of revenue and 
 expenditure. The prefectural budget is prepared by the Gov- 
 ernor before the fiscal year and introduced into the Prefectural 
 Assembly after a previous examination by the Prefectural 
 Council. It must be made according to the model set forth by 
 the Minister of the Home Department. The fiscal year begins 
 April first and ends March thirty-first. The budget must be 
 ratified by the Assembly, but the decision is not at all final, be- 
 
49 
 
 cause if the Governor thinks it is improper, he can send it back 
 again for further consideration. Again the Minister of the 
 Home Department may change it, when the Governor without 
 sending the budget back to the Assembly asks the Minister's 
 instructions. The exclusive right of proposal rests entirely 
 with the Governor, and the Assembly have only the right to 
 amend it, but can not introduce any new proposal at all. 
 
 So far as the revenue is concerned, it may not come exactly 
 to the amount estimated. On the other hand, the expenditures 
 voted must be strictly observed by the administrative officials 
 who are charged not to spend more than definite amounts 
 allotted to definite purposes. However carefully the expendi- 
 ture may be estimated, it must be admitted that the actual con- 
 dition of things does not allow every thing to be foreseen which 
 might happen within a year. Thus to a certain extent, regu- 
 lated by the Home Minister, the transfer of appropriations 
 within certain limits is allowed. If there arises any need for 
 expenditure unanticipated in the budget, or for more expendi- 
 ture than anticipated, such expenditure must be met out of the 
 reserve which is necessarily provided for in the budget, or by 
 amendment to the budget by the approval of the Assembly. 
 The reserve can in no case be used for expenditure which the 
 Assembly has not approved.'* 
 
 If there be any necessity to spend money continually for a 
 number of years, the prefecture can, by the permission of the 
 superintending administrative office, settle the amount of ex- 
 penditure for certain purposes in the first year for the rest of 
 the series of years. It need not henceforth be voted annually. 
 Such necessity arises in building public works which take years 
 to finish. 
 
 Governors, by the approval of the local Assembly and the 
 permission of the Minister of the Home Department can make 
 a separate account for certain purposes such as for schools and 
 hospitals. It is officially called the special account." Its 
 
 'Prefectural Law, article 121. 
 'Prefectural Law, article 123. 
 
5P 
 
 budget snd the audit of the account are prepared for the con?' 
 venience of the prefectural administration. 
 
 Some of the prefectural officials are appointed by the Gov^ 
 ernor to manage the treasury. They are in a position entirely 
 subordinate tp him and have no right to refuse any order signed 
 by him which is presented to them for payment. On the othw 
 hand, treasurers of cities, towns, and idllages have independert 
 power °* in paying out pubhc money. If there is any surplus, 
 it must be included in next year's budget. It can never be used 
 gt the discretion of the treasury. Governors nominate the 
 banks to handle the prefectural money. 
 
 B. The Legislative Audit. The completed accounts 
 are introduced into the Prefectural Assembly for ex- 
 amination and audit two years after the budget was 
 passed. It is important for the supervision of finance to 
 have information how far the budget as enacted has been fol- 
 lowed in practical administration. The completed accounts are 
 prepared by the Governor and, after investigation by the Pre- 
 fectural council, introduced into the Assembly. If the Assem- 
 bly find any illegitimate expenditure made, it expresses its 
 opinion thereupon tp the administrative officials responsible for 
 such expenditure. This is really only the "power to scold" — 
 an insufficient degree of legislative control. Practically all 
 that has been said about the prefectures applies to the counties 
 with the necessary changes in nomenclature. 
 
 (II). Cities, Towns, and Villages. 
 
 A. The budget. The City Councils and the chief official* 
 of towns, and villages have to make their budgets two months 
 before the beginning of the fiscal year, and obtain the approval 
 of their respective Assemblies. After the decision of 
 the Assembly they must send a copy to the superin-- 
 
 ' See page infra Si. 
 
SJ 
 
 tending offices, and at the same time advertise its essen- 
 tial parts to the public according to the different local custppis 
 of advertising. The City Councils and the chief officials of 
 towns, and villages may not neglect to make the budget. When 
 they neglect it, the superintending offices force them to act, or 
 make it themselves. This power to force the local officials tp 
 make the budget is exercised with great freedom to compel the 
 making of provision for expenditure involved in the adminis- 
 tration delegated to local governments. The payment of exr 
 penditures unanticipated and those in excess of the budget: 
 estimate, and the transfer of appropriations from one purpose 
 to another are not allowed, unless approval is given by the Asr 
 sembly. Reserve funds may be provided for in the budget, 
 if the Assembly so chgoses, and will be used for unexpected 
 outlay. 
 
 All the business of the treasury is managed by the Treasurer 
 who is elected by the Assembly. Only in a small town or vil- 
 lage where its financial transactions do not amount to much, 
 its chief official, or assistant may dp the work of treasurer, 
 The treasurer is corrlmonly elected, because of the impprtancg 
 of having a particular official responsible for ^11 financial acts. 
 Orders for payment are drawn on the treasurer by the City 
 Council, the chief officials of towns and village?, and somcr 
 times by the superintending administrative offices. He cap in 
 no case pay out money unless he receives such an order, The 
 law also makes him responsible for examining the legitimacy 
 of the order and thus he may refuse to honor it. 
 
 B. The Lepslative audit. The treasurer has to render a 
 completed account within three months after the fiscal year ig 
 over and send it together with the necessary documents includ- 
 ing receipts and vouchers to the City Council, or chief officials 
 pf towns and villages as the case may be. They in turn rtiyst 
 introduce it together with their opinion therepn fpr the ?ipprpval 
 of the Assemblies, and must report the action of the Assemblies 
 to the superintending administrative office. 
 
52 
 
 CHAPTER III. 
 
 The Problems of Local Finance in Japan and their 
 Discussion. 
 
 The increase in the expenditures and revenues of local self- 
 governing bodies has not until recently attracted the attention 
 of politicians, economists, and men of affairs. This tendency 
 towards increase is not however confined to Japan only, but is 
 discernible in almost all civilized countries where the self- 
 governing system is adopted. There seems to exist a close rela- 
 tion between this increase and the system of self-government. 
 Their expenditures and revenues, if taken separately, amount 
 to but little and look like unimportant matters. This is the 
 reason why the important question of local public finance has 
 been neglected for a long time, though it is now being carefully 
 investigated. , All local expenditures and revenues taken to- 
 gether involve a vast sum, and such sums have a weighty bear- 
 ing upon the common welfare of the people. It need not be 
 said that local self-governing bodies are an integral part of the 
 state, and that their sound financiering is essential to the 
 development and prosperity of the country. To give a con- 
 crete idea of the rapid increase and importance of local finance, 
 the statistics below are cited. 
 
 The relative amounts of the central and local expenditures 
 and revenues in Japan in 1901 are as follows : 
 
 Local 
 Percentage 
 of ImperiaL 
 
 Imperial. Local.* 
 
 Expenditures 266,856,824 139,981,258 52 
 
 Revenues 274,359,049 159,370,576 57 
 
 'The statistics are quoted from the seventeenth and twenty-third 
 reports of the statistical bureau. Here local includes all classes of 
 local governments. 
 
S3 
 
 The increase in local expenditures and revenues in ten years 
 is as follows; 
 
 Percentage 
 189I I9OI ,^oi^^^_ 
 
 Expenditures 44,734,473 139,981,258 212 
 
 Revenues 53.685,973 159.370,576 196 
 
 The following tables show the relative increase in the de- 
 tailed expenditure of local self-governing bodies : 
 
 3,083,390 
 
 73 
 
 8,883,938 
 
 92 
 
 17,653,216 
 
 134 
 
 10,768,714 
 
 921 
 
 2,787,220 
 
 574 
 
 69.999 
 
 8 
 
 Percentage 
 
 I. Prefectures. 1891 1901 in„^„ 
 
 Pref ectural Assembly and build- 
 ings 401,641 762,302 89 
 
 County office expenses and 
 
 buildings 1,776,421 
 
 Police 4,610,644 
 
 Public works and subsidies. . . . 7,541,833 
 
 Education and subsidies 1,054,501 
 
 Sanitation and subsidies 413,454 
 
 Poor relief 64,565 
 
 Election expenses of members 
 
 of Diet 8,418 8,461 
 
 Expenses of handling prefect- 
 
 ural money 296,712 
 
 Notices and advertisements .... 48,275 
 
 Salaries 
 
 Public debts 
 
 Industry 168,204 
 
 Miscellaneous 1,667,838 
 
 21,245,672 
 ' Decrease. 
 
 772,016 
 
 160 
 
 61,459 
 
 28 
 
 904,233 
 
 
 3,243,771 
 
 
 2,599.76s 
 
 144 
 
 879.965 
 
 47== 
 
 52,478,449 
 
 147 
 
54 
 
 The salaries and the expenditure for public debts in 1891 
 were included in the miscellaneous. If we take l89;7 instead 
 of 1891, the increase is as follows : 
 
 Percentage 
 1897 I9OI i„°Le. 
 
 Salaries 254,402 904.233 255 
 
 Public debts 952,433 3-243.71 1 240 
 
 The decrease in the miscellaneous is the result of separate 
 itemizations at the later date. 
 
 Percentage 
 
 II. Cities. 1891 1901 i„,°J^, 
 
 Assemblies 35,838 90,426 152 
 
 Public buildings and salaries. 537,905 1,787,014 232 
 
 Public works 444,712 3,477,541 682 
 
 Education 865,083 4,692,144 447 
 
 Sanitation 99>9i5 i,3SS,03S 1.256 
 
 Poor relief 20,467 57,876 182 
 
 Police 44,749 148,274 231 
 
 Industry 5,757 78,898 1,270 
 
 Public debts 207,475 2,880,288' 1,288 
 
 Control of property 57,968 414,819 615 
 
 Taxes and other burdens 3,265 1,397,792 42,711 
 
 Miscellaneous 634,193 5,732,972 803 
 
 2,957,327 22,112,079 647 
 
 Percentage 
 
 III. Towns and villages. 1891 Igoi i^alase 
 
 Assemblies 315,457 599,oi2 89 
 
 Public buildings and salaries . 6,554,564 13,108,601 99 
 
 Public works 5,447,S84 7,352,5^2 34 
 
 Education 6,738,465 25,449,643 277 
 
 Sanitation 318,794 3,901,605 1,123 
 
 Pdor relief 21,672 39,679 83 
 
 Police 151,648 439,940 190 
 
 Industry 86,569 951,128 99 
 
 Public debts 242,204 4,876,784 1,938 
 
 Control of property 8,757 543,385 6,100 
 
 Taxes and other burdens 263,386 4,858,117 1,744 
 
 Miscellaneous 382,374 3,180,324 731 
 
 20,531.474 65,300,730 218 
 
^■5 
 
 Iii the interval of these ten years, the increase in the expendi- 
 ture of the Imperial government was 219 per cent., almost the 
 same as that in the local governin^nts which was 212 per cent- 
 After the war with China (1895-1896) all attention was drawn 
 to the enormous increase in the central expenditure which was 
 lliought exceptional. The equally steady increase in local ex- 
 penditure was neglected. The fact remains the same, how- 
 ever, as indicated above, and shows the rapid increase and "he 
 great importance of local finance. 
 
 Section I. The Causes of tAe Increase in Expenditure. 
 
 So far as the practical discussions of public finance are con- 
 cerned, they must be confined to a particular country, be- 
 cause no country has to confront exactly the same conditions 
 as another. The administrative organization and regulations 
 of finance depend in each country on the circumstances of that 
 particular state. Let us now inquire how and why local Jap- 
 anese budgets swell rapidly and steadily. 
 
 (I). The Increase in Public Functions. 
 As was already said in the previous chapter, the local gov- 
 ernments have both original and delegated administrative func- 
 tions. As in every civilized country, these functions increase 
 with the growth and the development of the country.^ They 
 may grow because of the increase of population, wealth, the 
 progress of science, and the activity of the various depart- 
 ments of human life altogether. These causes are almost 
 irresistible. The national government can not of course take 
 on all these increasing new functions and delegates some of 
 them to the local governments. The local governments have, 
 on the other hand, their own increasing mass of concerns to be 
 taken care of. They manage, moreover, the delegated business 
 of the Imperial and prefectural governments at their own ex- 
 pense. We should remember that there are as yet untouched 
 many local public affairs to be profitably managed, if the local 
 
 ' Leroy-Beaulieu, Vol. I., p. 8. 
 
S6 
 
 financial resources suffice. Schools are crowded with children, 
 the banks of rivers are too weak to protect lives and property 
 against flood, and drainage works are far from satisfactory. 
 Practically local governments in Japan now manage only such 
 of their own affairs as are indispensably necessary. The in- 
 crease * in the expenditure of Assemblies, buildings, and salar- 
 ies shows the increase in the volume of public affairs. 
 
 ( II ) . Self-government. 
 
 If we consider self-government by itself — its own necessary 
 tasks — ^there seems hardly any other alternative than to in- 
 crease local expenditure. Local self-governing communities 
 know and feel their own needs more keenly than those gov- 
 erned from above. They control their own purse, but the in- 
 centive is always strong at least over those men who are 
 directly concerned with the administration to plan improve- 
 ments of various kinds and to please the people of the district. 
 This is the natural cause of the increase of expenditure. The 
 system of self-government safeguards only the exorbitant ex- 
 penditure of public money, but does not check the steady in- 
 crease. This is another way of saying that expenditure is 
 increased by the feeling of local pride.'' The local communi- 
 ties think much of their independent position and try to take 
 care of their welfare and are anxious not to be inferior in this 
 respect to other communities. The wonderful increase in sani- 
 tary and educational expenses reminds us how they augment 
 their expenditure in order to facilitate the convenience of their 
 own people. 
 
 (III). Influence of Political Parties. 
 
 Political parties appear necessarily, when the representative 
 system is adopted, because there are, in every state of things, 
 interests opposed to each other. If a government takes any 
 
 * See the statistical tables quoted in page 5314. 
 " Adams, Public Finance, p. 43-4. 
 
57 
 
 step in administration, those who think it promotes their own 
 interests approve and those who think their interests are dis- 
 regarded constitute the opposition.* 
 
 Some say that the system of self-government may be man- 
 aged independent of political parties and is able to get a fair 
 non-partisan adrhinistrationJ There is no warrant for this 
 assertion, but on the contrary, in Japan at least, the evil of 
 political parties is more felt in local communities than in the 
 national administration.^ The evil can not be remedied simply 
 by administrative organization, unless general education and 
 the idea of civic responsibility on the part of people generally 
 are better advanced. 
 
 In the local communities of Japan, the government, as well 
 as the people, always try to minimize the influence of political 
 parties and to manage their public aflfairs in a fair manner with^ 
 out giving place to partisanship. At the time of the first ses- 
 sion of the Imperial Diet, Marquis Yamagata, then the premier, 
 gave instruction ® to all local government officials to the effect 
 that they should refrain from taking part in the work of political 
 parties, because if they mingled with parties, all local communi- 
 ties would become entangled in partisan agitation, a situation 
 which would check the wholesome growth of ^the country. One 
 of the important issues in the fourth session of the Diet, how- 
 ever, was an appeal ^^ to the Emperor with reference to the 
 interference of local officials at elections. They are said 16 
 have much favored the candidates of the government party. 
 
 As is naturally the case with all political parties, they claim 
 to economize expenditures and when not in power attack the 
 policy of their opponents as wasteful and extravagant; but 
 once in power, a party does not adhere to its program and 
 
 ' Ariga, The Principle of Public Law, Vol. I., p. 346. 
 ' Shimada, The Outline of Self-government, p. 24. 
 ' Bastable, p. 392-3. How party spirit in a small area operates. 
 ' Kudo, The History of Imperial Diet, Vol. I., p. 19. 
 "Kudo, Vol. I., p. 240. 
 
S8 
 
 Spends public money to please certain portions of the people 
 for whose benefit the expenditure is made. Party influence in 
 Japan is always exerted through the representative assemblies 
 in behalf of public works and education. The constructions 
 of dykes, drainage, and other public works are generally 
 closely associated with political corruption.^^ The estabUsh- 
 ment of schools is the football of political parties. The final 
 outcome is usually a compromise causing unnecessary expendi- 
 ture. Reference to statistics given before will prove this 
 assertion. 
 
 ( IV) . Corruption. 
 
 Closely related to party influence is the corruption of local 
 governments. Fortunately in Japan we do not hear so much 
 about administrative corruption as in other countries. It may 
 not necessarily be that Japanese politicians have a higher moral 
 standard than those of other countries, but it seems to me that 
 in Japan the influence of political parties is as yet compara- 
 tively not strong enough in local governments to entirely cor- 
 rupt them, and the memory of feudal times still lingers in the 
 minds of people who were educated for centuries in the pure 
 spirit ^^ of feudal service to condemn political corruption. But 
 in cities and prefectures where parties are becoming an influ- 
 ence, we often see dishonest practices which must be carefully 
 guarded against. 
 
 (v.). Inefficient Administration. 
 
 In rural communities it is naturally very hard to get efficient 
 officials to manage public business. The important officials of 
 cities, towns, and villages are elected from among the people, 
 and the assemblies and councils are also elected bodies, though 
 the prefectural officials and sheriffs are administrative officers 
 properly appointed by the Imperial government. Locally 
 
 ' Infra, page 78. 
 
 ' See " Bushido," the famous work of Nitobe. 
 
59 
 
 elected officials are generally inferior in their administrative 
 abilities to those of the Imperial administration. This might 
 account for the comparatively loose management of local ex- 
 penditures. The easy custom of putting together all minor 
 expenditures and revenues under "miscellaneous" seems to 
 come from this source. It is greatly to be desired that more 
 comprehensive and exact statistical details of local finances 
 should be collected. 
 
 ( VI ) . Industrialism. 
 
 One of the most important influences in increasing local ex- 
 penditures is undoubtedly industrialism. Since japan has 
 opened her doors to foreign countries, modern industrialism 
 has invaded the country. Schools have been established not 
 only for general education, but for commercial and technical 
 training, even in most of the rural communities. Highways 
 have been improved and street railways and wharves have been 
 constructed for the convenience of transportation. Subsidies 
 have been granted by local communities to private railway 
 companies to build stations. Experiment stations for seri- 
 culture and agriculture have been founded. Waterways, gas 
 and electric light plants and many other public works have all 
 added to the aggregate of public expenditures by localities. 
 
 After the war between Japan and China was over, the central 
 government proclaimed a so-called "post-bellum programme" ^^ 
 which gave an impetus to activity in every department of life. 
 The example having been set by the central government, the 
 local governments felt the impulse to a further extension of 
 activities. 
 
 The expenditures for education, public works and industry, 
 and the increase of the public debts clearly indicate the trend. 
 
 A few words will be added here to explain by far the greater 
 increase of taxes specially in cities. Those of cities are largely 
 the apportioned tax of prefectures which is used for various 
 
 ' Kobayashi, Past and Present of Finance, Chap. IV., Sect. II. 
 
60 
 
 city improvements under the care of the prefectural adminis- 
 tration. It might therefore be included under this head. The 
 taxes aiid burdens of towns and villages are larg'ely the ap- 
 portioned tax of the counties whose statistics also iridicate the 
 increase in this line of expendittire. City firlarice haS nothing 
 to do with that of the counties. All thesfe causes stated above 
 combined result in the increased expenditures. 
 
 Section II. How the Increased Expenditure is Met. 
 
 We next inquire, with what revenues the increased expendi- 
 tures caused by these several influences just considered are met? 
 They are met mostly by the revenues from the additional rates 
 forming the surcharge on national and prefectural taxes, and 
 by resort to public credit. The local additions to the national 
 and prefectural taxes have their maximum limits, but the prac- 
 tice to exceed these limits is so common that the Ministers of 
 the Home and Finance departments regard it as the usual 
 thing in the petitions from the local governments, and so sanc- 
 tion this excess required to meet extra expenditure. The Im- 
 perial revenue from the land tax in 1901 was 46,666,494 yen,^* 
 and the additional tax levied by adding local rates thereto was 
 altogether 37,315,970 yen. Thus the local rate amounts to 79 
 per cent, of the Imperial tax, while the maximum limit contettl- 
 plated by law is 47 per cent. Resort to public credit is the 
 common practice used extensively by local governments. The 
 special taxes are not much used except in cities. The tables ^° 
 already given present the situation, and I will omit further 
 comment on them in order to proceed to consider each topic in 
 detail. 
 
 Section III. Reform of Local Finance. 
 It is my intention to treat in this section each topic of local 
 finance and express an opinion on each seriatim. Let me then 
 examine in detail the problems which have been distussed and 
 are still being discussed in this field. 
 
 "Japan in the beginning of the twentieth century, p. 498. 
 " See page supra 4314. 
 
(I). Expenditure for Prisons. 
 
 It is contemplated that there shall be a sharp distinction be- 
 tween central and local finance.i^ Certain duties being, how- 
 ever, the province of either much complicates this division of 
 function, and there often arises the question whether certain 
 public business shall be managed by the Imperial government 
 or by the local government. It would seem that any public 
 function which is directly concerned' with the welfare of the 
 whole country should be managed by the national govern- 
 ment,^' and that thus a separation of local finance from the 
 Imperial finance could be maintained. The question of ex- 
 penditure on prisons was one of the most warmly debated issues 
 for quite a long time in Japan. Though it may seem to have 
 been a political question, yet it shows the difficulty of sharply 
 drawing a distinction between the expenditures of the national 
 and local governments. 
 
 An appropriation bill providing for national expenditure 
 upon prisons was first introduced into the House of Represen- 
 tatives in the second session of the Diet by Count Matsukata, 
 the Minister of the Finance department. He said, when it 
 was introduced, that the revenues of local communities should 
 in general be used so as to develop their productive efficiency, 
 and that the expenditure upon prisons had formerly been paid 
 from the central treasury and had been transferred in 1880 so 
 as to burden local governments (prefectures) under the stress 
 of financial necessity, but that now as Imperial finances had 
 been put upon a sound basis; therefore it was to be regarded 
 as a matter of course that this expenditure should be trans- 
 ferred back to the Imperial government.^^ 
 
 The government tried at this session (1891) every possible 
 means to have the bill passed. The reasons given for it were : 
 (a) by the very nature of the expenditure itself, it should fall 
 
 ■ " Row-fugo, I^oqal Taxation in England, p. 283-5. 
 "Row-Fugo, p. 30s. Adam Smith, Wealth of Nations, Vol. II., 
 Bk. I., Oiap. I., p. 402-3. BastaMe, p. 120. 
 "Kudo, Vol. I., p. 102, 122. 
 
62 
 
 on the national treasury ; (b) it was necessary in order to man- 
 age the criminal administration impartially; and (c) to improve 
 the prison management. It was, however, rejected by the 
 House for the following reasons: first, that it would increase 
 the total expenditure on prisons if paid by the central govern- 
 ment; second, that there were more important public affairs 
 to be taken in charge by the Imperial government, and because 
 the time would again come soon when this item of expense 
 would be transferred to local governments, even if it were 
 paid for a time out of national treasury. The rejection of 
 the bill was one of the causes of the dissolution of the Diet that 
 year. It was rejected with an overwhelming majority in spite 
 of the fact that the House did not deny the principle that the 
 expenditure should be paid out of the national treasury. It 
 would seem that this expenditure should fall naturally on the 
 central government. As was remarked in the second chapter, 
 the local government has no authority in connection with the 
 judicial and police administration except to act as the auxiliary 
 officials of the central government. Its administration further- 
 more must be uniform throughout the country which can only 
 be done by the central administration. It was not logical to 
 oppose the assumption of this expenditure by the Imperial 
 government. In principle this was recognized, but the natural 
 inference was denied. Only the fact that it was used as a 
 partisan issue will explain this financial anomaly. 
 
 The bill was again introduced in the third session (1892) 
 through the House of Peers which passed it with a great ma- 
 jority, but it was rejected as before by the House of Repre- 
 sentatives. In the fourth session (1892), it was introduced 
 through the members of the government party in the lower 
 house, but was once more rejected for the reason that the 
 financial supply for it could not be found. 
 
 When, in the thirteenth session (1898), the bill to increase 
 the land tax from two and one-half per cent, of the land's value 
 to four per cent, was introduced, the bill to transfer the prison 
 expenditure from the local to the central government was 
 brought in at the same time in order to decrease somewhat 
 
63 
 
 local financial burdens. The land tax bill was amended so as 
 to increase the rate to three and one-third per cent, and the 
 government again could not find adequate financial supply for 
 the prisons. The situation was entirely the outcome of polit- 
 ical struggles. Constitutionalists who favored the increase of 
 the land tax were very sensitive as to their own local political 
 popularity, and tried to compensate for the increase of the tax 
 by removing part of the burden of local governments. It is 
 interesting to notice that the situation was so radically changed 
 that Minister Matsukata, the original proposer of the measure, 
 was now in opposition to it. After much discussion, the bill 
 was sent to the House of Peers where it was this time rejected. 
 In the next session (1899) it passed both Houses at last and 
 was carried into effect October i, 1900.^° About four millions 
 and a half yen is the sum total of the expenditure required and 
 about one million of the sum is secured from the productive 
 labour of the prisoners. 
 
 However confused government functions in Japan originally 
 were, after the recent treaties with foreign countries guaran- 
 teeing to improve Japanese prisons through national action, it 
 clearly indicates that after long controversy, there is now a 
 clear distinction between national and local governmental 
 functions.^* 
 
 (II). Expenditure for Education. 
 
 Colleges and universities, except private institutions, must 
 be maintained by the central government, and so far there is 
 no special difiiculty about them. When we come to general 
 education, which we consider as one of the most important 
 requirements for the citizen of constitutional governments, the 
 question arises whether or not the expenditure shall be entirely 
 paid by the local communities. It is equally important for 
 every part of the country, and it seems almost self-evident that 
 
 "Kudo, Vol. II., p. 238. 
 
 '"Bastable, p. iii and 86. In England also, the prisons were trans- 
 ferred from local to central management. 
 
64 
 
 it ought to be paid by them. If, however, we adhere to the 
 principle strictly, and do not help them at all, this important 
 matter would be frequently neglected by reason of insvifificient 
 ■local expenditure. It is so important that the country at large 
 can not overlook it. Since the fifth session ( 1893) of the Diet, 
 a bill was constantly introduced to give educational subsidies 
 to cities, towns, and villages. It was not intended to give these 
 subsidies for general educational purposes, but to give rewards 
 to teachers who served more than a definite number of years. 
 It did not of course satisfy the local needs and in the thirteenth 
 session (1898), a system of compulsory and gratuitous in- 
 struction giving larger subsidies to the local governments was 
 contemplated.^^ The original measure, however, did not grant 
 any definite sum nor indicate any available source of revenue 
 to defray this charge, but the bill was finally changed so as to 
 give local governments subsidies to the amount of one-tenth of 
 the teachers' salaries, viz., 800,000 yen. It was anticipated 
 that this would increase until the subsidy amounts to 4,000,000 
 yen yearly. 
 
 An educational fund of 10,000,000 yen for general education 
 was set apart from the Chinese indemnity, the interest of 
 which, about 500,000 yen, is to be used for school expenses. 
 The subsidy for elementary education was passed in the four- 
 teenth session (1899), the estimate being 1,000,000 yen an- 
 nually. A subsidy for technical schools was also advocated, 
 and such bills have been passed several times. The annual sub- 
 sidies for technical schools amount now to more than 250,000 
 yen. 
 
 So far as local governments are unable to afford sufficient 
 expenditure, the necessity for a subsidy from the central treas- 
 ury for expenses which are of vital concern to the welfare of 
 the country at large is not disputed.^^ The subsidy for tedir 
 nical education is not so vital as that for elementary education, 
 and is given chiefly through the influence of modern industriaL- 
 
 'Kudo, Vol. II., p. 124-5. 
 ' Nitti, p. 716. 
 
6s 
 
 ism which recently swept over Japan. The grant of a subsidy 
 has to be extremely guarded, for lavish grants have bad 
 effects 2^ on local communities and make them dependent on 
 the central government. 
 
 (III). The Relief Fund.^'' 
 
 The country is sometimes visited by extensive floods, earth- 
 quakes, tidal waves, and other unexpected calamities. The 
 Imperial government is ready to help people who have suffered 
 by these calamities where their revenues from taxation have 
 for the same cause diminished. At the time of Takugawa 
 Shogunate, the local governors saved rice in normal years for 
 the expected time of calamities, and the land tax was made to 
 vary in rate according to the harvest. The law was revised 
 in 1873 and the tax was fixed at a definite rate. This was diffi- 
 cult to enforce, for people could not pay the whole tax in a 
 bad year. In 1877, the regulation was made to allow people 
 to pay the tax by installments when they suffered from calami- 
 ties, but it could not produce satisfactory results ; because they 
 were often driven to a worse condition by the increase of debt 
 on the lands, and the lowered value of the lands. 
 
 The first relief fund regulation was made in 1880 at the 
 suggestion of Count Okuma. Prefectures must now save 
 three per cent, of the land tax, that is to say, 1,200,000 yen an- 
 nually, and the central government must give the annual sum 
 of 1,200,000 yen, out of which 900,000 yen is distributed among 
 prefectures and the rest kept in the central treasury. Annual 
 prefectural incomes for the fund amounted to 2,100,000 yen, 
 and annual payments therefrom were, supposed to be 700,000 
 yen, thus giving 1,400,000 yen as the net annual increase. The 
 pne-half of the fund must be in kind and the other half in 
 securities, These reserve funds can be used either to make 
 good the diminished revenues, or to help the poor and the 
 
 'Row-Fogo, p. 283. 
 
 ' History of Finance in Japan, Vol. X., Chap. III. 
 
66 
 
 needy by giving them food, seedcorn, agricultural implements, 
 and shelter. If a prefecture spends more than two-thirds of 
 its reserve funds, it may draw the rest from the central fund. 
 
 The practice was to have been continued for twenty years, 
 but the fund so increased after ten years that the annual in- 
 crease was suspended. Unfortunately soon after the revision 
 of the law, there was a succession of calamities which almost 
 depleted the fund. 
 
 A new law was again passed in 1899, by which the central 
 fund was transferred to the general account, and only pre- 
 fectures were required to raise annual sums for this purpose, 
 whose minimum amount was 500,000 yen by means of a rate 
 not to exceed three per cent, of the direct national taxes. The 
 central treasury must distribute among the prefectures 300,000 
 yen annually for ten years. If prefectures spend more than 
 five per cent, of their funds, the central treasury must give one- 
 third of excess amount. 
 
 In 1887, there was a great earthquake in two prefectures, 
 and the Imperial government drew 2,250,000 yen from the 
 surplus of the general account to save the woe-stricken people. 
 This action proved to be of importance from a constitutional 
 standpoint and served as one cause for the eventual dissolution 
 of the Diet. 
 
 In 1899, 10,000,000 yen were set apart from the Chinese 
 indemnity as the relief fund whose interest only can be used. 
 Though the action ^° in 1887 was once looked upon as a seri- 
 ous question, it seems to me that it was so rather in its con- 
 stitutional or political aspect. There is no special difficulty or 
 weighty objection against the fund itself. It is to be earnestly 
 desired that every prefecture shall manage its affairs independ- 
 ent of the central government. Nevertheless, the suffering of 
 any part of the country is of direct concern to the country as 
 a whole. To give the subsidy is one beneficient method of 
 
 ''"The action strictly was unconstitutional. The Constitutional Law 
 of Japan, article 64. 
 
67 
 
 mutual insurance among the component parts of the nation, for 
 the subsidy is, it can be said, subscribed from all parts of the 
 country through the central treasury. 
 
 The attempt to fix the land tax at a uniform annual rate, no 
 matter what the condition of the harvest may be, is somewhat 
 instructive ; because it put upon the people the responsibility of 
 being prudent in the time of good harvests. People who have 
 little foresight suffer always, and in this respect markedly. 
 
 To give relief in kind is a good practice and avoids extrava- 
 gant demands for aid. The physical situation of Japan has 
 always much to do with floods and earthquakes ; and granting 
 the subsidy is unavoidable. The law providing for relief in 
 calamity has in view only the agricultural class, but it seems 
 to me that there is no reason to single out this class from others 
 for aid of this kind. We admit that they form the largest part 
 of the population, yet the rest are no less entitled to ask the 
 same assistance in time of similar need. 
 
 {IV) . Expenditure for the Construction of Dykes and Harbors. 
 
 At the second session (1891) of the Diet, Count Matsukata, 
 then premier, said: protection from flood is very important, 
 for it concerns the lives and property of the people. If it be 
 delayed one year, it would inflict ten years' damage. There- 
 fore the government increased this expenditure and investi- 
 gated the proper amount uniformly required throughout the 
 country to complete the works of constructing dykes. The 
 bill as introduced gave subsidies to four prefectures. The 
 House of Representatives approved it after cutting the appro- 
 priation down, but the Diet was dissolved before the House 
 of Peers had approved the measure. The government then 
 issued an Imperial ordinance authorizing the expenditure on 
 the chance of getting legislative sanction in the following ses- 
 ;;ion. This again gave rise to much discussion as to its con- 
 stitutionality. In the next session, the Diet approved this 
 action. Since then the central government has given the sr^b- 
 sidy every year. 
 
68 
 
 Owing to the peculiar physical situation of Japan, the pi^viks 
 of rivers often overflow and destroy lives and property. It is 
 not only in the interest of the local communities, but of the 
 country at large to construct strong dykes or banks to prevent 
 this annual loss. At every session of the Diet, we hear much 
 about it, and pomplaints of dishonest dealings of officials con- 
 cerned. It is not a good plan at all to construct cheap tem- 
 porary works. It is far more economical and important to 
 invest once for all a sufficient sum of money to make under 
 careful supervision strong and permanent works. 
 
 The construction of harbors is more strictly a national pur- 
 pose than any other public work. It is undertaken by a local 
 government or a municipality; because the harbor happens to 
 be situated in a locality which can draw great advantage from 
 it, and can administer it carefully.^" K we consider the future 
 development in trade specially in the trans-oceanic trade, we 
 can not deny the justification for this subsidy. Yokohama, 
 Nagasaki, and Osaka were given subsidies of 300,000 ; 800,000, 
 and 4,600,000 yen respectively.^'' 
 
 The mere accident that any work is situated in any particular 
 part of the country is no weighty reason to impose the expendi- 
 ture on the local government. There may not be the same 
 economy as regards the whole amount of the expenditure, but 
 this plan can prevent undue hardship which might fall other- 
 wise on any particular locality. This plan divides the burden 
 more fairly by distributing it over the whole country. 
 
 The government has given Kobe and Hakodate subsidies for 
 water supply works. This is entirely a local purpose having 
 no direct concern with the state as a whole. It was a misuse 
 of the subsidy for which no good reason whatever can be given. 
 
 " Concerning the minute supervision of local govertjments see Bastable, 
 p. 120. 
 " These subsidies are here expressed in sum total given, 1897-1901. 
 
eg 
 
 (V). The Land Tax. 
 
 It may seem to go beyond the subject of local finance to dis- 
 cuss the national land tax, for this study is intended primarily 
 to investigate the public finance of local governments. The 
 national land tax is so closely related, however, to the local tax 
 that it is necessary to give here a short outline of the nature 
 of the national land tax and an opinion about it in connection 
 with local finance. 
 
 At present, it is pne of the most important national and local 
 sources of revenues.^* Being so important a source of revenue 
 to the central treasury, it is almost out of question at least in 
 our generation to think of turning it over entirely into the hands 
 of local governments,^" however desirable it may be. 
 
 From ancient times down to the present day, the tax on lands 
 has always been the most important tax and especially so dur- 
 ing the feudal regime (i 185-1867). All the time during the 
 Tokugawa Shogunate, this land tax furnished the greater part 
 of tne revenue. Since the Meiji restoration (1867), owing to 
 the increase of expenditure, many other direct and indirect 
 taxes were introduced, but it is still the dominant one, even 
 though its yield has decreased proportionally compared with 
 other taxes which have increased rapidly. An Imperial regu- 
 lation was made in 1873 to set the rate of the tax at three per 
 cent, of the capital value of lands estimated at the market price, 
 and f)ayment was required in money instead of in kind. In 
 1875, the national and local taxes were separated, the latter 
 levied entirely for local purposes. The national land tax rate 
 was reduced in 1877 to two and one-half per cent., and the local 
 rate was not to exceed one-fifth of the national rate. 
 
 After the war between Japan and China, expenditure in- 
 creased with leaps and bounds, and in consequence the tax rate 
 was again raised to three and three-tenths per cent. City lots 
 
 " See pagfe silpra 43i4- 
 
 ^ Cdnderriihg PrtiSsiaH tax rfefdtffl in tHe pointy see Wagtierj Fihanz- 
 wessenschaft. Vol. IV., 91-97- 
 
70 
 
 were at this time first separated from other lands and taxed at 
 the rate of five per cent.*" The new rates were to be in force 
 for only five years beginning in 1899. 
 
 The distinction between the national rate of the tax and the 
 local rate was not clear until 1873. In 1872, three per cent, of 
 the amount collected by local governments was given to the local 
 governments for their expenses of collecting the national tax. 
 There followed several changes; sometimes it was left free to 
 local communities to add such additional rates to the tax as they 
 pleased ; sometimes the additional local rate was limited so as 
 not to exceed one-third or one-fifth of the national tax rate. 
 The local land taxes are now used to pay the general expenses 
 of local governments ; and in 1888, the prefectural rate of one- 
 third of the national rate, and the city, town, and village rate 
 of one-seventh of the national rate were fixed. The maximum 
 limit, however, is constantly exceeded by local governments. 
 
 The value of lands is even now based on their supposed 
 market price in 1872. At first it was intended to adjust the 
 value as nearly as possible to the market price and to appraise 
 the land every five years, or at least every ten years.'^ If it 
 had been done, the tax would have been fairer. During more 
 than twenty years, however, the actual market value of lands 
 has changed remarkably, some lands rising five or ten times 
 their original value, while other lands have declined by virtue 
 of different circumstances of social evolution. The public 
 demand for revaluation became so loud that the government was 
 oftentimes obliged to heed it partially. An amendment was 
 made, however, not basing valuation on the new market price 
 of land, but raising some valuations, lowering others and keep- 
 ing most valuations as they were originally. A great difference 
 between the assessed value of lands and their actual value still 
 persists. The former assessed valuation is now nothing more 
 than a mere nominal standard for assessment. 
 
 ™ History of Finance in Japan, Vol. V., Chap. I., Sect. III. 
 " Concerning valuation of land in France, see Leroy-Beaulieu, Vol. I., 
 p. 344- 
 
71 
 
 Let us pause here to inquire into the nature of the tax on 
 the assessed value at present. The first registered value was 
 intended to be based on the actual market price, but in reality 
 there was a definite rule to determine this price. The orig- 
 inal formula to compute for tax purposes the capital value of 
 lands cultivated by their owners was as follows : 
 
 < value of gross pro- _ / ^j^^ „f ^^^^^ _^ fertilizer per \ ) capital 
 
 i duce per unit of land \ unit of land / ) value of 
 
 Rate of national , prevailing rate of in- land per 
 
 and local tax terest assumed at 6% unit, 
 
 or, to put it concretely in figtires, 
 
 (4-80- .72) X 100^ ^ 
 
 (3 + I) + 6 
 The formula was a close estimate, when it was in use, 
 of the value of average land. An average harvest of rice 
 raised on one Tan ^^ will be one Koku ^^ and six To,^^ and the 
 usual price of one Koku ranged about three yen. Thus one 
 Tan would raise rice worth 4.80 yen. Fifteen per cent, of the 
 value of the gross produce, that is, .72 yen, is always deducted 
 as the expense for seeds and fertilizer. In the denominator 
 of the formula 3 represents the Imperial land tax rate, i the 
 local land tax rate and 6 the assumed prevailing rate of inter- 
 est. This formula would make rice land have a capital value 
 per Tan of 40.80 yen, and this is the basis for assessment. The 
 local rate is one-third of the national rate. Four per cent, tax 
 on 40.80 gives 1.63.2 yen, the total tax of which 1.22,4 goes to 
 the national treasury. If the tax and the expense for seeds 
 and fertilizer be deducted from the value of the gross produce, 
 there remains 2.44,8 yen per Tan as income to the cultivator. 
 This is capitalized at 6 per cent, and consequently 40.80 yen is 
 the capital value of the land per Tan. The formula is far from 
 accurate to-day. Anybody can see that the expense of produc- 
 tion ought to include more than seeds and fertilizer. The 
 government intended obviously to impose the tax on the net 
 
 " Tan = about i of an acre. 
 "Koku = 5-13 Bushels. 
 " To = The tenth of Koku. 
 
72 
 
 income of the land. The faet that the expense of production 
 is always fixed at fifteen per cent, of the value of the gross 
 produce defeated this purpose, and the tax unmistakably fell 
 on a percentage of the value of the gross produce. The reform 
 of this tax is one of the most important political and financial 
 issues that must be solved ere long. 
 
 A well-known economist^" attacks the tax on the ground 
 that it is unfair when compared with the income tax. It seems 
 to me that the tax system is so complex that it can not be 
 easily compared with any one tax like an income tax. It is 
 rigorously attacked by a promising young newspaper econo- 
 mist ^° from three points of view: (i) its injustice; (2) its 
 being a tax on capital rather than income, and (3) on account 
 of its lack of elasticity. His proposal is to remove the national 
 land tax entirely and to give the tax to the local governments as 
 one of their financial resources. I dare say we can not expect 
 that all taxes shall be in exact accordance with justice, to say 
 nothing about the ambiguity of the term justice itself ; for there 
 are other circumstances to take into consideration, even if 
 justice in taxation is very desirable indeed. The tax on capital 
 is not a bad thing, if it be paid out of income. Elasticity is 
 desirable, but certainty in securing revenue is also desirable. If 
 the tax can be transferred to the local governments, the great 
 question of local finance would be solved smoothly. We are 
 not at liberty, however, to entertain dreams, or ideal projects. 
 It is inconceivable that so important a source of national rev- 
 enue as the land tax can be surrendered by the central govern- 
 ment without embarrassment. 
 
 The only solution I know of is to revalue the land, reduce 
 the rate of the national land tax, and allow an increase in the 
 rate on it for the local governments.'^ All desirable conditions 
 
 "^ The Oriental Economist, No. 92* p. 3. An article on the increase 
 of tax rate by Prof. Amano. 
 
 "Mr. Enjoji, The Abolition of Land Tax, pp. 4-15. 
 
 " The Oriental Economist, No. 57, p. 8 and Discussion of Land Tax^ 
 by Viscount Tani and Dr. Taguchi, Vol. L, p. 27^ 57. 
 
73 
 
 will be fulfilled only in this way. The revaluation will make 
 the tax fair. The earnest desire of the people to reduce its 
 rate will be realized. Other national taxes, especially indirect 
 taxes, will increase the national revenues every year and make 
 up the deficit resulting from a decreased land tax. Thus the 
 national government will depend more on indirect taxes and 
 the local governments on direct taxes.^^ Finally the local gov- 
 ernments can thus get sufficient financial resources. 
 
 (VI). The Special Taxes. 
 
 In a previous chapter, I explained the nature of local taxes ; 
 and pointed out that the local tax revenues in Japan came 
 mostly from the surtax added to taxes originally imposed by 
 the state and sometimes by the prefectures. 
 
 Some say the local and central taxes must be separated.^' It 
 seems to me that this is almost impossible, at least in local 
 finance in Japan. Having great difficulty in imposing local 
 indirect taxes, the important objects of local taxation must still 
 be lands, buildings, incomes and business, all of which are the 
 bases of national taxes. It is, therefore, easy and safe to im- 
 pose the local additional tax on these four bases for the reason 
 that the expenses of collection of the local tax are less than 
 those of special local taxes ; for there is no trouble in selecting 
 and appraising the objects of taxation. It will also generally 
 assure a fairer and juster burden of taxation than special local 
 taxes ; for the national and sometimes the pref ectural taxes on 
 which the local additional rate is imposed are usually collected 
 after the most careful consideration.*" 
 
 In spite of these disadvantages, the special local taxes have 
 certain advantages of their own in that they can impose the 
 tax burden on objects which escape national or sometimes the 
 
 "See Leroy-Beaulieu, Vol. I., p. 710. Nitti, p. 705, concerning the 
 same tendency in France. 
 ■" The Oriental Economist, No. 57, p. 7- 
 " See Bastable, p. 407, for a discussion of this point. 
 
74 
 
 pfefectural taxes, and thus remedy the unfair distribution of 
 taxation, without overburdening the same financial resources 
 employed by other higher grades of government. 
 
 On the other hand, the additional local rate upon national and 
 prefectural taxes has its disadvantages. If it is superimposed 
 on the national or sometimes on the prefectural taxes v/hich 
 are already imposing on the people an undue pressure of taxa- 
 tion, it will make the pressure *^ intolerable. It falls now 
 mostly on the agricultural class, therefore, those communities 
 whose people live from fishing and hunting have great diffi- 
 culty in obtaining their revenues, thus imposing an undue tax 
 burden on this small section of the people. In such cases, the 
 special local taxes are preferable to the local additional rate on 
 national or prefectural taxes. 
 
 According to the Civic Corporation Acts, local governments 
 in Japan may resort to both kinds of taxes, but, as has been 
 shown, the special taxes amount to very little comparatively.*" 
 There may be many circumstances which give rise to dififerent 
 varieties of special taxes on account of the different economic 
 conditions of various localities ; and there is still plenty of room 
 for special local taxes to be opened up. 
 
 (VII). Public Property (Dbmains). 
 
 In the second chapter, it was said that the local governments, 
 especially of towns and villages, are supposed to pay their ex- 
 penditure first out of the income of their public properties. In 
 practice, they depend, however, chiefly on the revenues coming 
 from their different taxes and from the resort to public credit 
 This is because they do not own properties which give them 
 sufficient incomes. Though it is a little encouraging to see 
 that the revenues from public properties in cities, and in towns 
 and villages increased 88 per cent, and 156 per cent, respect- 
 
 " Leroy-Beaulieu, Vol. I., p. 710. 
 
 "See page supra 44. The English rate has a resemblance to our 
 :special taxes. See Row-Fogo, Part I., Chap. II., The Poor Rate. 
 
75 
 
 ively during the ten years from 1891 to 1901, these receipts 
 reach only three and two per cent, respectively of their total 
 revenues, while the revenues from the prefectural property 
 comprise only a part of the miscellaneous receipts. We must 
 remember, too, that the expenditures for managing these pub- 
 lic properties are increasing rapidly. 
 
 Tl;e reasons why the local governments do not have large 
 public properties can be found in an analysis of events at the 
 time of the restoration (1867). At that time, all domains of 
 the feudal lords were vested in the Emperor and all titles to 
 lands, mountains, forests, and swamps together with other 
 property were vested in the new Meiji government. The spirit 
 of local self-government was then not strong, and the minds of 
 men of public affairs were absorbed in the matter of central 
 administration. The ownership of lands except those in pri- 
 vate possession became the state's. Proclamation No. 120 in 
 1874 (concerning the vesting of titles to lands) included all 
 lands which were not private lands in the public domain of the 
 state. It recognized to a certain extent the local communal 
 ownership of lands occupied by schools, hospitals, public store- 
 houses, shrines and temples, and of pastures used in common 
 by private individuals, or by one or several communities. The 
 area occupied by schools, hospitals, and other similar institu- 
 tions is not at all large. Only the profitable pastures were 
 owned by the people of the villages for their common use. 
 When the system of local self-government was first introduced, 
 the local communities thereupon had no public property of their 
 own, except the common pastures which had been held by their 
 people.*^ Not all of the villages have these common pastures, 
 and some of the villages have pastures common to only a part 
 of the villagers, and such partly common pastures could not be 
 transferred to the villages as public property. If the local gov- 
 ernments want to obtain public properties, there is no other way 
 than to get them donated from the Imperial domain, or to buy 
 them from private people out of the proceeds of local taxes. 
 
 'Oda, Administrative Law, p. 8S9- 
 
76 
 
 The local governments of Japan have a different history 
 from European countries where the local governments gener- 
 ally possess property and resources. Thus it is not surprising 
 at all to find that our local governments depend mostly on taxes. 
 
 It is desirable, indeed, that the local governments have their 
 own properties and put their finance on a sound basis. The 
 Civic Corporation Acts recognized the importance of such 
 public properties and made their management subject to care- 
 ful supervision from above. For the purpose of permanent 
 revenues, lands are far preferable to any other form of public 
 property. Securities are easily transferable and may be sold 
 by local governments to the disadvantage of the community, 
 and their price and income are not steady as are the price and 
 income of lands. 
 
 The only way left open to local governments to augment this 
 public property is to secure a transfer of the government for- 
 ests to them.** The central government owns the extensive 
 area of 13,078,505 cho *" of forests and fields whose revenues, 
 owing to the inefficient management, are only 2,744,249 yen. 
 If some parts of them be transferred to the local governments, 
 the local governments will secure good financial resources, and 
 will probably control these tracts efficiently through careful 
 administration. These domains would not give a large profit 
 in the near future, but will prove a lucrative source of revenue 
 after the lapse of a certain period of time. The local govern- 
 ments can reasonably undertake to manage them, for govern- 
 ments live considerably longer than individuals, even though 
 they may not enjoy perpetual existence. Forestry is not a 
 speculative venture, and the forest properties can not easily be 
 transferred from public ownership. 
 
 It may be objected to the plan that the forests can only profit- 
 ably be controlled by the state which has a permanent policy." 
 Here the geographical features of the country should be con- 
 
 " The Oriental Economist, No. 57, p. 10. 
 
 " One cho = Ten Tan and one Tan to i of an acre. 
 
 " Bastable, p. 190. 
 
77 
 
 sidered. A country like Japan whose forests extend far and 
 wide can safely transfer the comparatively unimportant forests 
 to the local governments. 
 
 For those communities not contiguous to tracts of public 
 forests, there is another way to increase their public properties. 
 It may be through the construction of profitable public works, 
 or through the increase of securities held, but it is impossible 
 here to give a definite plan for each one of them. 
 
 (VIII.). The Ownership of Natural Monopolies. 
 
 There is scarcely a question which has recently been dis- 
 cussed so much as the ownership of natural monopolies. It 
 falls within the scope of local finance, only when it specially 
 concerns municipal monopolies, though it is not by itself so 
 much a question of local finance as a question of economics 
 and the technical management of public industries. It is not 
 my intention to discuss this question in its entirety, but simply 
 to consider its financial side. 
 
 Cities, towns, or sometimes villages must be very careful in 
 undertaking such public works ;" because if they fail, they will 
 greatly hamper their finances. But there are many monopolies 
 which are very profitable indeed. If they are certain to give 
 fair profits, public authorities had better undertake their man- 
 agement; because, by the public management, the unearned 
 increment which is yielded by monopolies and which increases 
 the income of comparatively few private people can be absorbed 
 to the government and used for the general interest of the peo- 
 ple. Furthermore, the actual condition in Japan favours the 
 government work. The nature of the government is paternal, 
 and people depend on the government, which itself always 
 tries to guide the people. There is, therefore, scarcely any 
 difference between government and private business in the effec- 
 tiveness of management. It might be said that when they are 
 managed by public authorities, they will not give the same 
 profits as if they were in private hands ; for public authorities 
 
 *' Whinery, Municipal Public Works, Chap. XIV. 
 
78 
 
 are very slow to adopt new inventions and slow to improve the 
 management so as to reduce operating expenses.** The ex- 
 perience of the central government in Japan with railways and 
 the postal service however bids fair to be successful, and there 
 would seem to be not much fear that local authorities would not 
 be equally successful. 
 
 The rapid increase of city population will undoubtedly neces- 
 sitate the building of different public works.** Cities must not 
 hesitate to undertake them themselves, when the profits are 
 certain. They will thus get increasing revenues every year. 
 Such public works in Japan are not yet constructed extensively 
 except in a few cities. The street cars are operated by private 
 companies on condition that the cities may purchase them after 
 a certain number of years.^". 
 
 Japan will get in this respect information from the experi- 
 ence of other countries, for Japan is just on the way to make a 
 beginning here. 
 
 (IX). Public Debts (Local Governments) . 
 
 One of the most important topics of local finance is the in- 
 crease of local public debts.^^ Their rapid increase is due 
 mostly to constructing roads, dykes, wharves, waterways, and 
 other public works.°^ Generally speaking, local public debts 
 are raised chiefly for industrial purposes in contrast to the 
 national debts which are largely raised for the national defence. 
 
 "Daniels, Public Finance, p. 271-272. 
 "Daniels, Public Finance, p. 267. 
 "^ Thirty years in Tokio. 
 " See page supra 31, 33, 42-3. 
 
 ""The same thing holds true in England. See S. H. Blunden, Local 
 Taxation and Finance, p. 19. 
 
79 
 
 These local public debts are also due to the increase of the city 
 population.'^ The distribution of urban and rural population 
 of Japan in 1886, 1893,1897, and 1903 is as follows: " 
 
 Year. Urban Pop. 
 
 Ratio. 
 
 Rural Pop. 
 
 Ratio 
 
 1886 4,990,960 
 
 12.5 
 
 34,168,731 
 
 87-5 
 
 1893 6,522,994 
 
 157 
 
 34,865,319 
 
 84.3 
 
 1897 7.384,160 
 
 17.0 
 
 35,844,703 
 
 83.0 
 
 1903 9.348,616 
 
 20.0 
 
 37,384,225 
 
 80.0 
 
 increase 4,448,656 
 
 7-5 
 
 3,215,494 
 
 *7.5 
 
 * decrease. 
 
 
 
 
 Cities must undertake various improvements to accommodate 
 this increase. But the increasing population is largely made 
 up of labourers who can not pay direct taxes,'*' and thus the 
 burden of increasing expenditure falls on the well-to-do popu- 
 lation who are also unable to bear an unlimited increase of 
 taxes. Inventions, the progress of science, and the develop- 
 ment of self-governing communities are other causes which 
 combine to augment local public debts. As often remarked, 
 the contracting of public debts ought to be carefully guarded ; 
 because they may easily be misused and leave the burden to 
 future generations which have their own affairs to care for. 
 There are several methods to check the debt increase: (i) 
 limiting the total amount of debts by law ;°' (2) limiting the debt 
 to a percentage of the local property; " (3) limiting the pur- 
 poses for which local debts may be contracted; (4) by requir- 
 ing popular approval;'' (5) by providing supervision by the 
 higher administrative offices. The third and last methods are 
 employed in 'Japan. Formerly the term of prefectural debts 
 
 " Adams, Public Debts, p. 348. 
 " Daily Consular Report, No. 2239. 
 '" Adams, Public Debts, p. 353. 
 '" Adams, Public Debts, p. 378-9. 
 " Bryce, Vol. I., p. 688-9. 
 " Adams, p. 379- 
 
8o 
 
 was limited to thirty years, but now the superintending offices 
 consider the different circumstances and give the final sanction 
 to all necessary details with better results. 
 
 The most desirable reform concerning local public debts in 
 Japan would be to require the Imperial government to act as in- 
 termediate agent"" in contracting the loan. Local governments 
 are naturally situated in a disadvantageous position in borrow- 
 ing; because their credit is comparatively low and the amount 
 of the money needed is usually small, so that the interest on 
 small blocks of local bonds is higher and the price realized lower 
 than if the loan were contracted by the Impedial government 
 and charged to the various localities. 
 
 Local public debts can not be used as security for private 
 loans; because banks prefer securities like Imperial bonds 
 which are more readily saleable; but local bonds are bought 
 only for the purpose of investment or saving ; for there is no 
 fear of repudiation and the rate of interest is high, sometimes 
 2 per cent, higher than on Imperial bonds. If local bonds are 
 to serve as security for loans, their interest should be payable 
 everywhere throughout the country. The most important 
 thing, however, is the lower rate of interest obtainable through 
 central loans. The national government therefore ought, in 
 its own name, to borrow the money required by local govern- 
 ments. Thus the rate of interest will be lowered,"" and the 
 debts will become universally negotiable, because they would 
 be practically identical with national bonds. 
 
 Some might advance the opinion that the central government 
 instead of taking such measures had better prescribe for the 
 local governments a uniform type of bond to be sold for local 
 purposes.*^ This uniformity would make such bonds more 
 widely negotiable. Thus when we had about 150 national 
 banks in Japan, they issued a uniform paper currency and the 
 
 'This is English system. See Blunden, p. 19. Bastable, p. 717-8. 
 
 ° See page supra 42. 
 
 'Taguchi, Public Finance and Money Market, 7th Ed., p. 152. 
 
8i 
 
 result was good. For the local debts, however, this uniform- 
 ity would not insure as favorable terms of interest as if the 
 central government itself undertook to place the loan. 
 
 (X). The Abolition of Counties. 
 
 The reason given for creating the counties that some public 
 affairs which are too extensive for towns and villages, and too 
 narrow for the prefecture to manage ought to be conducted 
 by an intermediate grade of government would appear well 
 grounded. To-day, however, we have an elaborate system of 
 transportation and distances consequently are reduced so re- 
 markably that there is no need to have two grades of govern- 
 ment below the prefecture.*^ The latter together with cities, 
 towns, and villages can manage all local public business di- 
 rectly. Even under the present system, cities have no admin- 
 istrative relation to counties and the chief officials of towns 
 and villages usually go more often to the prefectural office than 
 to the country office and conduct administrative business with 
 the former. 
 
 If any public business is too extensive for a single town or 
 village, the Civic Corporation Acts allow the town or village 
 to combine with others in order to conduct the business jointly. 
 
 A promising young statesman recently proposed to make 
 prefectures larger and to reduce their number.®* It will prob- 
 ably be done eventually, if it becomes practicable. Generally 
 people are always inclined to preserve their own prefecture and 
 oppose the agitation for the change as likely to create much 
 trouble and expenditure. It seems to me that it is far easier 
 and more economical to abolish counties first than to reduce the 
 number of prefectures. There is no public business, whether 
 it be education, industry, or public works which can not be con- 
 veniently administered either by prefectures, or by towns or 
 
 "Rathbone Local Government and Taxation, p. loo-ioi. See in- 
 teresting condition existed in England and author's idea to have only 
 two classes of local administration. 
 
 "Mr. Enjoji, The Reform in Finance, p. 51. 
 
8z 
 
 villages. This change would save the greater part of the 
 annual expenditure ^* of counties, whose revenue could be used 
 more effectively than now. 
 
 If counties can not be abolished entirely, the right of self- 
 government ought to be taken away from them, because their 
 public affairs are not so important as to require a separate unit 
 of self-government. The county expenditure will thus be 
 saved and county offices will remain simply as administrative 
 intermediaries between the prefecture and the rural communi- 
 ties. 
 
 (XI). The Combination of Rural Communities. 
 
 The boundaries of rural communities were, as has been seen 
 in the first chapter, fixed soitnewhat artificially to a certain 
 extent as a consequence of the laws (1888-1889).^° Rural ad- 
 ministrative divisions in Japan are in this respect somewhat 
 different from those in European counitries where local self- 
 government was the natural outgrowth of a local community 
 of interests. 
 
 The Civic Corporation Act (1888), therefore, provides that 
 they may combine to manage certain public affairs jointly 
 whenever they think it convenient.*® But it seems to me that 
 this is not satisfactory, for each of these combining communi- 
 tieis still keeps its own official establishment and does not lose 
 its corporate character, with the result that the total expenditure 
 can not thus be reduced much. 
 
 There seems to be a consensus of opinion that there is not a 
 small number of local communities which are too small and 
 weak to keep up their corporate financial character."' These 
 communities ought to join other communities, or be combined 
 together to all intents and purposes. As communities become 
 larger, the number of local self-governments will become 
 
 " See page supra 47. 
 
 " See page supra 5. 
 
 '" See page supra 13. 
 
 "Shimada, Outline of Local Self-government, p. 119. 
 
83 
 
 smaller, and thus economy in their expenditure can be secured. 
 By so doing, schools can be established more easily, better pub- 
 lic works can be constructed, the means of transportation will 
 be more systematically administered, and the spread of con- 
 tagious diseases can be more effectually checked. 
 
 People are generally conservative about the change of the 
 local division, and often object to it. There is, however, no 
 special legal difficulty about it, for the law authorizes the Pre- 
 fectural Councils to effect the combination of rural communi- 
 ties even in spite of local objection."^ 
 
 (XII). Strict Administrative Supervision from Above. 
 
 The last financial device to be specially recommended is 
 strict administrative supervision °* over the local governments. 
 Some might say that it is contrary to the idea of self-govern- 
 ment that other higher authorities should have power over 
 local communities. It seems to me that it is rather desirable 
 when we keep in mind two facts. First, the higher administra- 
 tive offices have, generally speaking, more intelligent and en- 
 lightened officials than the lowest self-governing bodies. Sec- 
 ondly, the local self-governing bodies are parts of state and 
 their welfare has an important relation to the country as a 
 whole. We may assume that they can get sound advice from 
 the higher authorities who look at local affairs from the stand- 
 point of the general interest. There is, threfore, no special 
 fear of their not getting wise direction. In this respect, there 
 is no unsurmountable objection, so far as the law is concerned, 
 inasmuch as the right of supervision over local affairs vests in 
 the officials of the higher grades of government.'"' 
 
 " See page supra 13. 
 
 ™ Concerning control in local finance in different countries, see 
 Bastable, p. 763-4. 
 '" See page supra 9, 11, 17. 
 
84 
 
 CHAPTER IV. 
 Conclusion. 
 
 It seems generally the case that in Japan laws and regula- 
 tions are made first in anticipation of circumstances to be met 
 with subsequently. This is often for the reason that when- 
 ever laws and regulations are going to be made, the officials 
 first study the systems of advanced countries and adopt the 
 best part of them in spite of the different conditions prevailing 
 in Japan. Consequently such laws prove impracticable and are 
 often amended or repealed. Laws and regulations concerning 
 the local governments are no exception. Japan has now out- 
 grown this imitative stage, and the practice would seem now to 
 belong to the past. She must consider her circumstances her- 
 self and make from the beginning laws and regulations which 
 are best suitable to her conditions. 
 
 The difficulty in local finance seems to be the increasing ex- 
 penditures and the insufficient revenues. The tendency is 
 universal and almost unavoidable. The increase of expendi- 
 tures is not by itself a bad thing, if the money is used properly. 
 Therefore, this thesis, keeping in view the need of checking the 
 increase of unnecessary expenditures, has paid much more 
 careful attention to the question how to promote eflfectively 
 wisdom in local public outlay. 
 
 A few reforms I have suggested in this paper will do some 
 good in local finance, if they are faithfully followed. It is very 
 satisfactory to me to learn of the strong public opinion for the 
 abolition of counties recently expressed at home. 
 
 This thesis so far has avoided a discussion of the effects of 
 the Japanese-Russian war on public finance, because war is 
 an abnormal condition and its eventual effects can not yet be 
 predicted. But one noticeable effect of the war is the decrease 
 in incurring local public debts and a lessened expenditure by 
 the local governments. Local public debts at the end of 1904 
 had decreased by 2,209,239 yen since the end of 1903. This 
 is due to economy of expenditure and the suspension of public 
 works. Now, after the conclusion of the war, they will again 
 
8s 
 
 increase their expenditure perhaps more rapidly than ever. It 
 is a time when care in this respect is specially needed. The 
 best possible policy of local finance is the wisest possible use of 
 public revenues, affording the largest possible utility to the 
 communities concerned. 
 
86 
 
 APPENDIX. 
 
 Extracts from the " Fifth Financial and Economical Annual 
 of Japan," which has just been received, are as follows : 
 
 I. Prefectures. 
 
 
 Revenue. 
 
 
 Fiscal year. 
 
 Taxes. 
 
 Receipts from 
 other sources. 
 
 Total. 
 
 Expenditure. 
 
 igoo-oi 
 
 1901-02 
 
 1902-03 . ... 
 
 ig03-04 
 
 1904-05 ..... 
 
 Yen. 
 
 39.854.281 
 43.155.568 
 
 46.596.334 
 39.72g.2g4 
 32.382 021 
 
 Yen. 
 
 1g.01g.408 
 
 15.565.954 
 
 17.605.705 
 
 g.322.4gg 
 
 8.439.984 
 
 Yen. 
 
 58.873-689 
 58.721.522 
 64.202.039 
 49.051-793 
 40.822,005 
 
 Yen. 
 52.022.567 
 52.478.449 
 56.578.790 
 49.073.420 
 40.797.153 
 
 II. Cities. 
 
 
 Revenue. 
 
 
 Fiscal Year. 
 
 Taxes. 
 
 Receipts from 
 other sources. 
 
 Total. 
 
 Exprnditure. 
 
 igoo-oi 
 
 1901-02 
 
 1902-03 
 
 Yen. 
 
 9.629.522 
 10.924. 78g 
 II. 371-884 
 
 Yen. 
 
 14.744.134 
 17.407.655 
 20.457.691 
 
 Yen. 
 
 24.373.656 
 28.332.444 
 31.82g.575 
 
 Yen. 
 
 19.043,701 
 22.112.079 
 25.986.669 
 
 III. Towns and Villages. 
 
 
 Revenue. 
 
 
 Fiscal Year. 
 
 Taxes. 
 
 Receipts from 
 other sources. 
 
 Total. 
 
 Expenditure. 
 
 igoo-oi 
 
 1901-02 
 
 1902-03 
 
 Yen. 
 
 37.845.856 
 
 44.246.131 
 47.230.631 
 
 Yen. ' 
 
 24.423.936 
 26.070.47g 
 26.585-533 
 
 Yen. 
 
 62.26g.792 
 70.316.610 
 73-816.164 
 
 Yen. 
 
 58,000.025 
 65.300.730 
 68.413.024 
 
 The figures for the fiscal years 1903-1904 and 1904-1905 
 represent the estimates in the budget, and those for all other 
 fiscal years settled accounts. 
 
87 
 
 IV. Amount of Local Loans. 
 
 At the end of 
 
 1900 . . 
 
 1901 . 
 
 
 
 1902 . 
 
 
 
 1903 . 
 
 . 
 
 
 1904 . 
 
 - 
 
 
 Prefectures. 
 
 Counties. 
 
 Gities. 
 
 Towns. 
 
 Villages. 
 
 Yen. 
 
 9.719-983 
 10.379.664 
 10.712.864 
 12.076.497 
 11.318.655 
 
 Yen. 
 
 135 613 
 339-548 
 509.588 
 890.045 
 854.914 
 
 Yen. 
 
 25.849.033 
 29.796.663 
 35-122 817 
 37 934-437 
 39318.446 
 
 Yen. 
 
 266.624 
 400.514 
 521.221 
 
 791.515 
 881.999 
 
 Yen. 
 
 562.872 
 1.116.940 
 1.463.028 
 1.808.237 
 1. 811. 077 
 
 V. Local Loans Classified According to the Objects 
 
 FOR which they WERE RAISED. 
 
 At the 
 •end of 
 
 1900 . 
 
 1901 . 
 
 1902 . 
 
 1903 . 
 
 1904 . 
 
 Education 
 
 Sanitation. 
 
 Industry. 
 
 Public 
 Works. 
 
 Redemption 
 of Old 1-oans. 
 
 Others 
 
 Yen. 
 
 336.456 
 1.624.656 
 1.757.688 
 2.396,234 
 2.078.801 
 
 Yen. 
 
 80.740 
 
 18.144 
 
 56.585 
 
 9.787-416 
 
 10.662.220 
 
 Yen. 
 
 285.942 
 
 477-797 
 
 303.464 
 
 2.577.126 
 
 3.596.046 
 
 Yen. 
 36.811.443 
 41.365164 
 47-946-674 
 
 31-847-757 
 38,430.082 
 
 Yen. 
 
 208.892 
 
 235-045 
 
 331-447 
 
 1-973-307 
 
 2.516.735 
 
 Yen. 
 
 
 
 7. 964. 41 1 
 107.214 
 
 VI. Loans of Cities Issued Abroad. 
 
 Cities. 
 
 Name of Loans. 
 
 Amount Authorized. 
 
 Amount Issued. 
 
 Amount not 
 
 yet issued. 
 
 Osaka Harbour-Works Loan. 
 Yokohama Water- Works Loan 
 Kob^ Do. 
 
 Total 
 
 Yen. 
 
 17.038.000 
 
 2.055.600 
 Additions! issue 
 
 x.940.000 
 
 21.033.600 
 
 Yen. 
 
 ( Internal Loan 13. 538. 000 
 
 ( Foreign Loan 3.5.0.000 
 
 \ Do. I-ISS.600 
 
 r 900.000 
 
 J Do 1.690.000 
 
 t 250.000 
 
 \ Do. 16-383.600 
 
 I 4 650.000 
 
 VII. Loans of Cities Issued Abroad (Continued). 
 
 
 Internal Loans. Foreign Loans. 
 
 Cities. 
 
 Rate of 
 Interest 
 
 Average price 
 offered. 
 
 (Per 100 Yen of face 
 value.) 
 
 Rate of 
 Interest 
 
 Price at which the 
 bonds were taken up 
 by underwriters. 
 
 (Per 100 Yen of face 
 value.) 
 
 Price at which the 
 bonds were sold in 
 the Foreign market. 
 
 (Per 100 Yen of face 
 value.) 
 
 Yokohama 
 Kobi 
 Total 
 
 6 per ct. 
 6 per ct. 
 6 per ct. 
 6 per ct. 
 
 Yen. 
 
 9!»-3" 
 93.70 
 90.00 
 92.20 
 
 6 per ct. 
 6 per ct. 
 6 per ct. 
 6 per ct. 
 
 Yen 
 
 96.50 
 
 90.00 
 
 92.00 
 
 (average) 92-80 
 
 Yen. 
 
 99.00 
 98.00 
 Unknown 
 (average) 98 50 
 
88 
 
 VIII. Loans of Local Associations. 
 
 At the end of 
 
 Yen. 
 
 At the end 
 of 
 
 Yen. 
 
 At the end 
 of 
 
 Yen. 
 
 igoo .... 
 1903 .... 
 
 I.I95-345 
 2.S16.820 
 
 1901 . . 
 1904 . . 
 
 1.687.674 
 2.677-307 
 
 1902 . . 
 
 2.058.913 
 
 Imperial expenditures for prefectures and Okinawa and 
 Hokkukaido were as follows: 
 
 1897 13,456,727 
 
 1898 12,524,969 
 
 1899 15-505.513 
 
 1900 12,114,407 
 
 1901 11,880,243 
 
 1902 • . . .14,079.395 
 
 These figures include the salaries and travelling expenses of 
 the officials of Prefectures, who are appointed by the Imperial 
 government, and also the expenses for buildings, police, and 
 others. 
 
89 
 
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 Bastable, C. F. Public Finance. London. 1903. 
 
 Blunden, G. H. Local Taxation and Finance. London. 1895. 
 
 Bryce, J. The American Commonwealth. New York. 1895. 
 
 Budget of Shiga Prefecture in 1905. 
 
 Budget of Ika County of Shiga Prefecture in 1905. 
 
 DowELL, S. History of Taxation and Taxes in England. London. 1884. 
 
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 Daily Consular Report. No. 2239. 1905. 
 
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 Imperial University. 
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 Lowell, A. L. Governments and Parties in Continental Europe. 
 
 Boston. 1896. 
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 Rathbone, W. Local Government and Taxation. London. 1892. 
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so 
 
 ShimadAj T. The Outline of Self-Government. Tokio. 1901. 
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 Tokio. 1903. • 
 
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HJ 9570.H36 " """"""^ '""'"'>' 
 """lllllilliffiiiiiliSI, ifSSIl./" relation to 
 
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