Consultation system for the issuance of LGB

  • JLGB system changed from approval system to consultation system in FY06 due to decentralization.
  1. Consultation
    LGs must consult with the Minister of Internal Affairs and Communications (in the case of prefectures and government designated cities) or the prefectural governor (in the case of municipalities) before debt issue.
  2. Allocation of public funds for LGB with consent
    Only LGB with consent by MIC Minister or the prefectural governor may borrow public funds [Government funds, JFM funds].
  3. Debt payment for bonds with consent included in Local Allocation Tax formula
    Debt payment for LGBs with consent by MIC Minister or governors are included in Local Allocation Tax formula by NG.
  4. LG must report issuance of the bond without consent to its assembly
    In order to issue the LGBs without the consent , the head of the local government must report it to the assembly.
  5. Standard for consent by NG
    MIC Minister releases the standard for consent every fiscal year. Issuers in high deficit, issuers with high real-debt-payment-ratio#, and public enterprises in high deficit, etc. must obtain the approval of issuance from the Minister or governors.

# the ratio of debt payment by general revenue to standard fiscal scale

#Only the bonds/loans which obtained the consent or approval of MIC,
LGs may borrow from the Government funds or JFM

  • In order to secure fiscal soundness, Local Governments with higher real-debt-payment-ratio or higher deficit than a set limit are required to get approval for bond issue instead of consultation.

Approval required if real debt paymentratio is 18% or more

  • Issuers with real-debt-payment-ratio between 18%`25% must first draft a debt management plan and obtain approval of the MIC minister, based upon general approval standard.
  • Issuers with the ratio of 25% or more are prohibited from debt issue for certain types of projects.