Japan Moves to Address Tax Revenue Imbalance Favoring Tokyo in Bid to Reduce Regional Disparities

Tokyo, The Gulf Observer: Japan’s government and ruling parties have initiated discussions aimed at correcting what they describe as a significant imbalance in tax revenues that heavily favors Tokyo, resulting in widening gaps in administrative services between the capital and regional prefectures, it emerged Thursday.

As part of the proposed reforms, officials are considering reallocating a portion of local corporate and fixed-asset taxes collected in Tokyo to other local governments across the country.

The ruling coalition of the Liberal Democratic Party (LDP) and the Japan Innovation Party (Nippon Ishin no Kai) plans to incorporate the policy into its fiscal 2026 tax system reform outline. Discussions on the detailed framework of the scheme are expected to continue into the fiscal year beginning next April.

According to data from the Ministry of Internal Affairs and Communications, the Tokyo metropolitan government currently has discretionary financial resources amounting to 281,000 yen per resident—approximately 3.6 times higher than the average of 78,000 yen per capita across Japan’s remaining 46 prefectures.

Leveraging this surplus, Tokyo has in recent years introduced generous benefits, including a 5,000 yen monthly allowance for children up to 18 years old and free basic water charges during summer months.

The planned tax redistribution aims to reduce these disparities by ensuring more equitable financial capacity among local governments nationwide.