Q: What are the key principles of public finance (fiscal democracy, rule of tax law) and local autonomy under the Japanese Constitution?

Beyond the central pillars of legislative, executive, and judicial power, the Constitution of Japan establishes crucial principles for two other domains vital to the nation's democratic functioning and the well-being of its citizens: public finance and local autonomy. While distinct, these areas share a common thread of ensuring democratic accountability and empowering citizens, whether through control over national resources or through self-governance in their local communities. This article provides an overview of the key constitutional principles governing these essential aspects of Japanese public law.

Part I: Key Principles of Public Finance (Zaisei - 財政) in Japan

The administration of public finances is a power that profoundly impacts every citizen and the national economy. Historically, the struggle for control over taxation and public expenditure was a driving force in the development of constitutionalism and parliamentary democracy. The Japanese Constitution reflects this legacy by embedding principles of democratic control and legality in the management of national finances.

1. The Principle of Fiscal Democracy (Zaisei Minshu Shugi - 財政民主主義)

The cornerstone of Japan's public finance system is the principle of fiscal democracy, enshrined in Article 83: "The power to administer national finances shall be exercised as the Diet shall determine."

• Meaning and Scope: This provision signifies that the ultimate authority over all aspects of national finances—including raising revenue, determining expenditures, and managing public assets and debt—rests with the National Diet, the directly elected representative body of the people. It ensures that decisions concerning public money are made through a democratic process and are subject to parliamentary scrutiny and approval. This contrasts sharply with systems where the executive or monarch historically held more unfettered control over state finances.
• Fiscal Constitutionalism (Zaisei Rikken Shugi - 財政立憲主義): While "fiscal democracy" emphasizes Diet control, the term "fiscal constitutionalism" is sometimes used to refer to broader constitutional constraints on fiscal policy itself, such as implicit or explicit rules regarding budgetary balance, debt accumulation, or specific spending prohibitions. These are not always distinct, as democratic control via the Diet is itself a constitutional constraint.

2. The Rule of Tax Law / Principle of Taxation by Law (Sozei Hōritsu Shugi - 租税法律主義)

A fundamental tenet of fiscal democracy is that taxation must have a clear legal basis. Article 84 mandates: "No new taxes shall be imposed or existing ones modified except by law or under such conditions as law may prescribe."

• Core Requirements: This principle demands that:
  • Legality of Taxation (Kazei Yōken Hōtei Shugi - 課税要件法定主義): All essential elements of any tax—including who is liable to pay (the taxpayer), what is being taxed (the tax object or base), and how much is to be paid (the tax rate)—must be clearly stipulated by statutes enacted by the Diet. This prevents arbitrary or discretionary taxation by the executive branch.
  • Clarity of Tax Laws (Kazei Yōken Meikaku Shugi - 課税要件明確主義): Tax laws must be formulated with sufficient clarity and precision so that taxpayers can understand their obligations and predict their tax liabilities. Vague or ambiguous tax laws are constitutionally suspect as they can lead to arbitrary application and violate principles of legal certainty.
• Scope of "Taxes": The term "taxes" in Article 84 refers to compulsory pecuniary levies imposed by the state or local public entities to fund general public expenditures, not as a direct payment for a specific service received (which would be a fee or charge). The Supreme Court, in cases like the Asahikawa City National Health Insurance Premium Case (Grand Bench judgment, March 1, 2006 [Heisei 18]), has addressed the status of compulsory social insurance premiums, generally finding them distinct from "taxes" under Article 84 in the strict sense, but acknowledging that due to their compulsory nature and impact on citizens, the spirit or underlying principles of Article 84 (requiring clear legal basis and fairness) should apply to their imposition.
• Prohibition on Retroactive Taxation: While Article 84 does not explicitly forbid retroactive tax legislation, principles of legal stability, predictability, and protection of property rights generally disfavor laws that retroactively impose new tax burdens or increase existing ones, particularly if detrimental to the taxpayer. The Supreme Court (e.g., judgment of September 22, 2011 [Heisei 23]) has indicated that such retroactive changes require strong justification and must be assessed for their overall reasonableness.

3. Dietary Control over State Expenditures and Debt

Democratic control extends to how public money is spent and how national debt is incurred. Article 85 states: "No money shall be expended, nor shall the State obligate itself, except as authorized by resolution of the Diet."

• The Budget System (Yosan - 予算):
  • Under Article 86, "The Cabinet shall prepare and submit to the Diet for its consideration and decision a budget for each fiscal year." All anticipated state revenues and proposed expenditures must be included in this annual budget.
  • The Diet deliberates upon and must approve the budget for it to become effective. The House of Representatives has precedence in budgetary deliberations (Article 60). The Diet has the power to amend the budget, reflecting its ultimate control over fiscal policy. No state funds can be expended without proper budgetary authorization.
• Incurring National Debt: The state cannot incur debt (e.g., through issuing government bonds) without Diet authorization. The Public Finance Act (Zaisei Hō - 財政法) generally prohibits the issuance of bonds to cover current operating deficits (deficit-financing bonds - akaji kōsai - 赤字国債) under its Article 4. However, it permits "construction bonds" (kensetsu kōsai - 建設国債) to finance public works and capital investments. In practice, special "deficit-financing laws" have frequently been enacted as exceptions to Article 4, allowing the government to issue bonds to cover revenue shortfalls, a practice that has contributed to Japan's significant national debt.

4. Restrictions on the Use of Public Money for Certain Enterprises

Article 89 imposes specific restrictions on public expenditure: "No public money or other property shall be expended or appropriated for the use, benefit or maintenance of any religious institution or association, or for any charitable, educational or benevolent enterprises not under the control of public authority."

• Separation of Religion and State: The first part of this article reinforces the constitutional principle of separation of religion and state (Article 20) by prohibiting the use of public funds to support religious organizations.
• "Control of Public Authority" (Ōyake no Shihai - 公の支配): The second part, concerning charitable, educational, or benevolent enterprises, has been particularly relevant in debates over state subsidies to private educational institutions. The key interpretive issue is the meaning of "not under the control of public authority." A strict interpretation would require direct governmental control over personnel and budget, making most private school subsidies unconstitutional. However, a more relaxed and generally accepted interpretation holds that sufficient public oversight to ensure financial propriety, accountability, and adherence to public educational standards is adequate to satisfy the "control" requirement, thus permitting such subsidies. A Tokyo High Court decision in the Infant Classroom Public Funding Case (judgment of February 9, 1989 [Heisei 1]) adopted such a relaxed view, focusing on preventing the misuse of public funds.

5. Accountability and Transparency

To ensure fiscal accountability, the Constitution provides for auditing and reporting:

• Board of Audit (Kaikei Kensa-in - 会計検査院): Article 90 establishes the Board of Audit, an independent body responsible for annually auditing all final accounts of state revenue and expenditure.
• Diet Review of Accounts: The Cabinet must submit these audited accounts, along with the Board of Audit's report, to the Diet (Article 90).
• Public Reporting: Article 91 mandates that "At regular intervals and at least annually the Cabinet shall report to the Diet and the people on the state of national finances." This promotes transparency and allows both the Diet and the public to scrutinize the government's fiscal management.

Part II: Key Principles of Local Autonomy (Chihō Jichi - 地方自治) in Japan

The Japanese Constitution, in Chapter VIII (Articles 92-95), guarantees the principle of local autonomy, recognizing that democratic governance also requires self-government at the local level.

1. The Constitutional Guarantee and the "Principle of Local Autonomy"

Article 92 is the cornerstone: "Regulations concerning organization and operations of local public entities shall be fixed by law in accordance with the principle of local autonomy."

• "Principle of Local Autonomy" (Chihō Jichi no Honshi - 地方自治の本旨): This fundamental concept is generally understood to comprise two core elements:
  • Institutional Autonomy / Group Self-Government (Dantai Jichi - 団体自治): This means that local public entities (prefectures and municipalities) are recognized as autonomous bodies, distinct from the central government, with the authority to manage their own affairs and administration using their own judgment and responsibility.
  • Citizen Autonomy / Resident Self-Government (Jūmin Jichi - 住民自治): This emphasizes that local governance should be based on the will and participation of the local residents. It is often said that "local autonomy is the school of democracy."

2. Organization and Operation of Local Public Entities

While the principle of local autonomy is constitutionally guaranteed, Article 92 also states that the specific "regulations concerning organization and operations" are to be "fixed by law." The primary law governing this is the Local Autonomy Act (Chihō Jichi Hō - 地方自治法).

• Local Public Entities: The main "ordinary" local public entities are the 47 prefectures (todōfuken - 都道府県) and the numerous municipalities (cities, towns, and villages - shichōson - 市町村).
• Dual Representation (Nigen Daihyōsei - 二元代表制): Article 93 mandates that local public entities shall have assemblies (gikai - 議会) as their deliberative organs, and chief executive officers (governors of prefectures, mayors of municipalities - chō - 長), both of whom are directly elected by the residents of the local community concerned. This creates a system of "dual representation" at the local level, where both the legislative and executive heads derive their mandates directly from the local populace, distinct from the parliamentary cabinet system at the national level where the executive head (Prime Minister) is chosen by the legislature.

3. Powers of Local Public Entities

Local public entities are endowed with significant powers to manage their affairs:

• General Competence: Article 94 states that "Local public entities shall have the right to manage their property, affairs and administration..." This grants them a broad competence to deal with local matters not specifically reserved for the national government.
• Ordinance-Making Power (Jōrei Seiteiken - 条例制定権): Article 94 also grants them the power to "enact their own ordinances within law."
  • These local ordinances (jōrei - 条例) are the primary form of local legislation. They can cover a wide range of local matters and can, within limits prescribed by national law (Local Autonomy Act, Art. 14, para. 3), include penal provisions (e.g., minor fines or imprisonment). The Supreme Court upheld the general power to enact penal ordinances in the Osaka City Prostitution Regulation Ordinance Case (Grand Bench judgment, May 30, 1962 [Shōwa 37]).
  • Relationship with National Law: Ordinances must be "within law," meaning they cannot conflict with national statutes or cabinet orders. The Supreme Court in the Tokushima City Public Safety Ordinance Case (Grand Bench judgment, September 10, 1975 [Shōwa 50]) established criteria for determining such conflicts, looking at the purposes, objects, and effects of both the national law and the local ordinance. If a national law intends to establish uniform national standards or to occupy a field exclusively, local ordinances on the same subject may be preempted. However, if a national law merely sets minimum standards, local ordinances may impose stricter regulations ("add-on ordinances" - uwanose jōrei - 上乗せ条例) or regulate aspects not covered by national law ("lateral ordinances" - yokodashi jōrei - 横出し条例), provided they do not frustrate the objectives of the national law.
• Fiscal Autonomy (Jishu Zaiseiken - 自主財政権): This includes the right to manage local finances and, crucially, the power to levy local taxes (jishu kazeiken - 自主課税権) within the framework set by national legislation like the Local Tax Act. Despite this principle, the actual fiscal autonomy of local governments in Japan has often been constrained by their reliance on financial transfers and grants from the central government, leading to the common critique of "30% autonomy" (sanwari jichi - 三割自治), referring to the proportion of local revenues derived from local taxes. The Supreme Court, in cases like the Kanagawa Prefecture Ad Hoc Special Enterprise Tax Case (First Petty Bench judgment, March 21, 2013 [Heisei 25]), has affirmed local taxing power while also underscoring its subordination to the framework established by national law.

4. Direct Democratic Participation at the Local Level

The principle of resident self-government finds expression in various mechanisms for direct citizen participation:

• Referendum for Special Local Laws (Article 95): A unique constitutional provision. Any law enacted by the National Diet that applies only to a single local public entity cannot take effect unless it is approved by a majority of the voters in that local entity through a special referendum. This ensures local consent for national legislation that singles out a particular community.
• Statutory Mechanisms (Local Autonomy Act): The Local Autonomy Act provides for several forms of direct democracy, including:
  • Initiatives: Residents can, by collecting a sufficient number of signatures, demand the enactment, amendment, or repeal of local ordinances.
  • Demands for Audit: Residents can demand an audit of the local government's financial affairs.
  • Demands for Dissolution/Recall: Residents can demand the dissolution of the local assembly or the recall of individual assembly members or the chief executive officer.
  • Taxpayer Lawsuits (Jūmin Soshō - 住民訴訟): Residents can file lawsuits in court to challenge allegedly illegal financial acts or omissions by local officials, seeking remedies such as the recovery of improperly spent funds.

5. Central-Local Government Relations and Decentralization

Historically, Japan had a highly centralized system of government. However, significant "Decentralization Reforms" (chihō bunken kaikaku - 地方分権改革) initiated in the late 1990s and continuing since have aimed to enhance local autonomy. This involved, among other things, abolishing the system of "agency-delegated functions" (kikan inin jimu - 機関委任事務), whereby local government heads acted as agents of the central government for many tasks, and reclassifying local government functions to give them greater discretion over "self-governing affairs" (jichi jimu - 自治事務). While central government involvement (kuni no kan'yo - 国の関与) in local affairs is still permitted, it is now more strictly regulated by law, emphasizing principles of necessity, proportionality, and respect for local self-determination. Mechanisms for resolving disputes between national and local governments, such as the Council for Settling National-Local Disputes (Kuni Chihō Keisō Shori Iinkai - 国地方係争処理委員会), have also been established.

Conclusion: Pillars of Democratic and Accountable Governance

The constitutional principles governing public finance and local autonomy in Japan are integral to its democratic structure. Fiscal democracy, centered on the Diet's control over national finances and the rule of tax law, aims to ensure that public money is raised and spent accountably and in accordance with the will of the people. Simultaneously, the guarantee of local autonomy empowers communities to manage their own affairs, fostering grassroots democracy and responsive local governance. While the precise balance between central authority and local self-determination, and the ongoing quest for genuine fiscal decentralization, remain dynamic areas of legal and political development, these constitutional tenets provide the essential framework for a state that is both democratically accountable at the national level and vibrant in its local self-governance.