Can Decentralization Offer a Way Forward in the Era of Regional Decline? — An Interview with Professor Nobuo Akai, Osaka University —

Hello, this is Jiro.

I hope you’ve all been doing well.

Lately, both Japan and Korea have been hearing the term “regional decline” more and more often.

As young people leave for cities in search of jobs and education, many local communities are slowly losing their energy and momentum.

How should we make sense of this reality, and what direction should regions take in the years ahead?

To explore these questions, we sat down with Professor Nobuo Akai, a leading scholar who has spent many years researching local public finance and decentralization in Japan.

Professor Nobuo Akai (Osaka University)

Name: Nobuo Akai

Affiliation: Osaka University

Areas of Expertise: Public Economics, Decentralization

From Budget Distribution to Local Autonomy

As a professor at the Graduate School of Economics at Osaka University,

he has spent many years researching Japan’s local public finance and public policy.

He is widely recognized for his rigorous analyses of decentralization, fiscal autonomy,

and the financial relationship between central and local governments.

Today, his work focuses on cooperative governance between the Ministry of Finance and local authorities,

as well as the management of local public finance in an aging society.

Alongside his academic research, he is also actively engaged in providing policy advice.

Q1. Could you tell us about your research field and your current areas of focus?

A: My academic background lies in public finance and public economics,

with a particular focus on the fiscal systems of local governments.

Japan has more than 1,800 local governments, each with different conditions and challenges.

To ensure that all of them can provide basic public services,

the central government distributes fiscal resources across regions.

A key part of my research examines how these funds are allocated and how allocation systems function.

These financial mechanisms play a crucial role in sustaining local communities

and in preventing further regional decline.

Q2. As population concentration in major cities like Tokyo and Osaka continues, regional areas are facing ongoing demographic and economic decline. How do you see the future relationship between Japan’s urban and regional economies evolving?

A: The government has been attempting to encourage population flows from urban centers to regional areas.

However, movement from regional areas to cities is largely driven by where jobs are located, and this trend cannot realistically be stopped—nor is it necessarily desirable to do so.

As a result, the population gap between urban and regional areas is likely to widen further.

What truly matters, then, is building regional systems that enable communities to remain sustainable and resilient, even in the face of population decline.

Q3. What types of government policies or institutional reforms do you believe are needed to restore this balance?

A: One of the most important elements in preventing regional decline—despite population loss—is regional collaboration.

By working together with neighboring municipalities on fiscal management, local governments can build systems that remain sustainable even with fewer residents.

Looking ahead, such inter-municipal cooperation will be essential for maintaining stable governance and public services in regions facing demographic shrinkage.

Q4. Korea is facing challenges similar to Japan’s, including low birth rates, rapid aging, and heavy concentration in the capital region. Drawing on Japan’s experience, what lessons do you believe Korea and other advanced economies should take away—particularly when it comes to balancing population decline with economic sustainability?

A: I am not deeply familiar with Korea’s situation, but demographic data clearly show a strong concentration of population in Seoul.

As long as attractive employment opportunities remain concentrated there, this trend is unlikely to reverse.

When it comes to nationwide population decline, it is essential to create environments—especially in major cities—where people can realistically have children and raise families.

At the same time, in regional areas, it is crucial to build sustainable systems that can function even with fewer residents.

As I mentioned earlier, regional collaboration plays a vital role in this process, helping local communities remain economically and administratively viable despite ongoing demographic change.

Q5. How would you assess the current state of fiscal decentralization for regional revitalization in Japan, and what direction should it take in the future—particularly in terms of local fiscal autonomy and efficient resource allocation?

A: Roughly 60 percent of Japan’s public spending now takes place at the local level, indicating that fiscal decentralization has already made considerable progress.

That said, rapid aging in regional areas has placed increasing strain on local finances, leaving local governments with limited discretionary resources.

Within these constraints, local governments are seeking innovative ways to revitalize their communities by leveraging targeted regional revitalization grants and revenues from Japan’s hometown tax donation program.

How effectively these resources are used will be critical to strengthening local autonomy and ensuring sustainable regional development.

Q6. To respond effectively to regional decline, how should the roles of the central and local governments be redefined? We would also appreciate your views on securing tax revenues and fostering self-sustaining local economic structures.

A: The central government bears a fundamental responsibility to ensure that all local governments have sufficient financial resources to deliver essential public services.

To fulfill this role, funds are redistributed from the central government to local authorities.

At the same time, to make local fiscal management sustainable over the long term, the national government must actively promote policies that improve efficiency at the local level.

Encouraging measures such as inter-municipal cooperation is particularly important in helping local governments manage their finances more effectively and adapt to demographic decline.

Q7. How do you assess the overall direction of public policy in Japan today? Are current policies effectively addressing the intertwined challenges of regional decline, population aging, and economic restructuring? If not, where do you see the most urgent need for improvement?

A: Population decline is expected to continue, and both the central and local governments must respond with a heightened sense of urgency.

While strengthening local autonomy is essential, autonomy alone is not sufficient.

The central government must play a proactive role in encouraging regional collaboration among local governments, ensuring that they can sustain sound fiscal management even as populations shrink.

Such coordinated efforts will be critical to navigating demographic change and maintaining the long-term viability of local governance.

In Closing

Through this interview, we were reminded once again of how vital decentralization—and the balance between central and local governments—is to the long-term sustainability of regional communities.

The steady movement of people toward capital regions and major cities may, in many ways, be a natural outcome.

Cities concentrate jobs, infrastructure, and opportunities, making them powerful magnets for people seeking stability and growth.

Yet, as Professor Akai emphasized, a different future is also possible.

If decentralization becomes the foundation for more diverse ways of working and living—tailored to the character of each region—and if environments where people can work locally continue to take shape, then regional areas can become places where individuals build meaningful, authentic lives rooted in local strengths.

In this process, major cities themselves may also be reimagined—not as black holes that endlessly draw in population, but as one region among many, each defined by its own unique appeal and role.

Today, we shared just a portion of our conversation with Professor Nobuo Akai.

How do you think about decentralization and the future of regions?

At Jiro, we are eager to hear your thoughts.

What does it mean to live in a regional community?

And what does it take for regions to endure and evolve over time?

We invite you to reflect on these questions with us—and to join the conversation.

Thank you for reading to the end.

We wish you a wonderful day and many days filled with happiness.

Learn more about Jiro’s work:

Official Website: www.en.localnow.kr

Instagram: www.instagram.com/localnow.kr

YouTube: www.youtube.com/@localnow_kr