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Prefecture finances in dire straits, bankruptcy looms

Date Posted: 2004-10-01

Bankruptcy is on Okinawa Prefecture’s horizon unless officials begin making some drastic economic reforms.

That dire word comes from a prefecture official familiar with the prefecture’s finances. Speaking on terms of anonymity, he calls the situation a crisis, saying “we are faced with the fact that by 2008, prefecture finances are estimated to be ¥53.7 billion in the red. That is simply not possible,” he says.

He added the prefecture faces a deficit soaring to ¥32 billion within next couple of years, and says nothing other than a major shakeup in the system will fix the problem.

Okinawa has come to rely on state subsidies over the years, accounting for as much as 75% of its total budget. With Prime Minister Junchiro Koizumi’s cabinet significantly slashing the prefectural subsidies, Okinawa is having to scramble on its own. “Okinawa has enjoyed extra large subsidies ever since its reversion to Japan from the U.S. rule in 1972 as the Japanese Government tried to lift its living standards and economy to par with the rest of the country,” the official noted. But as the central government faces its own fiscal crisis, it’s telling prefectures they’ll have to make do on their own.

Okinawan municipalities have been urged to merge into larger and more effective entities, but local governments are reluctant to do so and are dragging their feet on the issue.

Even the mergers won’t produce enough savings, say those familiar with the issue. Drastic cuts in the Okinawa’s bloated government work force are needed, but the debate rages over which jobs to cut. Okinawa, already facing the worst unemployment rates in the country, hasn’t sorted out how to realign the work force.

Those who would retain their government jobs would also face pay cuts, something their unions say they’ll not agree to. There is also talk of increased taxes.

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