The Limits of the 'Reliance on Foreign Workers' Policy as Revealed by Kyoto City's Fiscal Crisis
For the past few years, the debate over whether Kyoto City might face fiscal collapse has been repeated.
At one point, the prospect of falling into the status of a fiscal rehabilitation organization even became a reality, drawing nationwide attention.
Why has Kyoto, a 'world-class tourist city,' been driven to such a fiscal crisis?
And can the 'acceptance of foreign workers' promoted by the national government truly be a solution?
The Background of Kyoto City's Fiscal Crisis
The fact that Kyoto City has come to face the risk of fiscal collapse is not a result of temporary bad luck, but rather the consequence of long-term structural problems.
1. The Vulnerability of a Tourism-Dependent Economy
Kyoto City has relied heavily on tourism resources.
As a result, it is easily swayed by economic fluctuations and external factors, making it difficult to maintain a stable tax revenue base.
In fact, around 2020, forecasts were already indicating that it could fall into the status of a fiscal rehabilitation organization, and the COVID-19 pandemic did not 'create' the crisis, but merely 'accelerated' it.
2. Excessive Administrative Services and Public Investment
The city has continued to provide generous spending on cultural property protection, maintenance of urban infrastructure, education, and welfare.
While this is difficult to avoid given its character as a 'cultural city' on a national level, the result has been a rigid fiscal structure that has led to a deficit-prone nature.
3. Changes in Population Structure
The younger generation tends to flow out to neighboring cities, while the population continues to age.
The city is trapped in a vicious cycle where the tax revenue base weakens while medical and welfare costs increase.
The Discrepancy with the National Government's 'Reliance on Foreign Workers' Policy
In response to this local fiscal crisis, one of the prescriptions put forward by the national government is the 'acceptance of foreign workers.'
The logic is that if labor is secured, the economy will be revitalized and tax revenue will increase.
However, looking at the reality of Kyoto City, this premise hardly functions at all.
There is a lack of industrial base other than tourism, and the accepted labor force is easily absorbed into unstable employment.
There is a high possibility that the burden of administrative costs, such as education, housing, and public safety maintenance, will actually increase.
It does not lead to a stable increase in core tax revenues (such as municipal taxes and fixed asset taxes).
In other words, the national government's explanation that 'accepting foreigners equals fiscal improvement' is completely off the mark in the case of Kyoto City.
The Connection to JICA's 'Hometown Initiative'
What is interesting is that this line of thinking is also strongly reflected in JICA's 'Hometown Initiative.'
The idea of sustainably supplying foreign workers and international students to local cities to compensate for population decline and labor shortages is based on the same logic as the prescription for Kyoto City.
However, as the case of Kyoto City demonstrates, for local governments with weak industrial structures and fiscal foundations, this policy does not guarantee a 'stable local society or fiscal health,' but rather carries a high risk of introducing new factors of instability.
Conclusion: Institutionalizing a Flawed Premise
Kyoto City's fiscal crisis is not merely a 'failure of one city.'
It is a practical example showing that the national policy logic that 'local governments will be saved if they accept foreign workers' is not working in reality.
Nevertheless, the national government and JICA are attempting to spread this logic nationwide.
In other words, they are trying to 'institutionalize a flawed premise.'
If the foundation of the policy is wrong, it risks not only failing to protect local autonomy and the lives of residents but actually spreading fiscal crises nationwide.
Shouldn't Kyoto's crisis be taken seriously as a warning?
Efforts Toward Fiscal Reconstruction in Kyoto City
To address these issues, Kyoto City formulated the 'Kyoto City Administrative and Fiscal Reform Plan' in fiscal year 2021, aiming to restore fiscal health. (In other words, it shows that the national government's approach does not work well.)
Revenue and Expenditure Improvement Targets: A plan was established aiming for an improvement in the balance of payments of approximately 160 billion yen by fiscal year 2025.
Review of Projects: A wide range of reforms are underway, including increasing the burden for the senior citizen pass, raising admission fees for municipal facilities such as the zoo, and considering the relaxation of building height restrictions.
Breaking Away from Tapping into Funds: In the past, deficits were covered by tapping into funds for debt repayment, but it has been reported that a balanced budget was achieved in the fiscal year 2023 budget proposal, avoiding the need to tap into funds.
What about your city?
Kyoto's problem is not a unique case; it is common to many local cities facing population decline and industrial imbalance.
Does your city rely on tourism or specific industries?
Is the acceptance of foreign workers being touted as a 'universal solution'?
Will you treat Kyoto's experience as 'someone else's problem,' or will you accept it as a 'mirror reflecting the future of your own region'?
That choice will surely greatly influence the future of local autonomy.
Substack article here (English):
https://1234594100.substack.com/p/kyotos-fiscal-crisis-and-the-limits