HYOGO - Hyogo Governor Motohiko Saito said on August 19 that the prefecture's shift to a status requiring central government permission to issue bonds would not immediately halt public projects, while stressing that years of high public investment, funding shortfalls and what he described as improper land-acquisition bond practices under former Governor Toshizo Ido had contributed to the deterioration of the prefecture's finances.
Hyogo became a bond-issuance permit entity after its real debt service ratio, a key indicator of the burden of repaying debt, exceeded the 18% threshold. Saito said the three-year average stood at about 19.2%.
"That does not mean that projects will immediately stop or that the prefecture will suddenly be unable to issue bonds," Saito said, explaining that the main change is that procedures that previously involved consultations with the Internal Affairs and Communications Ministry will now require formal permission.
Despite the deterioration in the fiscal indicator, Hyogo recorded a real-account surplus of about 20 billion yen for fiscal 2025, or about 6.3 billion yen excluding certain factors, helped by strong corporate performance and robust prefectural tax revenue.
Saito attributed the worsening debt ratio to several long-running factors, including public investment that had averaged about 1.2 times the level of comparable prefectures, a large funding shortfall in the prefecture's debt management fund and past use of local government bonds. He said the effects were compounded by the recent rapid rise in interest rates.
Hyogo plans to prepare a debt-service burden optimization plan and submit it to the Internal Affairs and Communications Ministry. Saito said the prefecture would aim first to keep the real debt service ratio securely below 25%, the threshold for designation as an early fiscal rehabilitation entity, and ultimately bring it back below 18%.
The plan calls for public investment to be reduced by at least 10%. Saito said details of which projects would be affected had yet to be decided, with decisions expected to be made through the fiscal 2027 budget process and a broader review of revenue and spending.
Saito said ongoing projects could not simply be stopped because doing so could sometimes increase costs, while new projects would have to be examined individually according to how far preparations had progressed.
He also acknowledged that Hyogo's past investment levels had been unusually high. From fiscal 2008 through fiscal 2022, investment-related spending accounted for about 22.9% of the prefecture's fiscal scale, compared with roughly 19% among comparable prefectures, making Hyogo's level about 1.21 times higher.
Saito said that since taking office the prefecture had already reduced that ratio to around 1.04 times the comparable-prefecture level in fiscal 2023 and 2024. Hyogo's fiscal officials said the fiscal 2026 budget was already being held to a level comparable with similar prefectures, meaning the planned additional 10% reduction would come on top of cuts already made.
While accepting the need to restrain public works, Saito said maintenance related to public safety, including roads, river improvements and underpasses, would remain important and would have to be protected as far as possible through adjustments elsewhere in the budget.
He also signaled that education and support for younger residents remained priorities. Saito said investment in young people was essential even while restoring fiscal health, citing the prefecture's policies to make education more affordable, including tuition-free measures at prefectural universities, as part of the administration's broader support package for younger generations.
Saito said the prefecture would first establish the broad framework of its fiscal reform program before undertaking a fundamental review of both revenue and expenditure. Possible measures discussed during the news conference included securing additional tax revenue through industrial and tourism promotion, increasing non-tax revenue through hometown tax donations and naming rights, selling unused prefectural land, rebuilding reserves and accelerating debt repayment.
He acknowledged that returning below the 18% threshold could take considerable time because Hyogo faces both future peaks in debt repayments and a shortfall of roughly 500 billion yen in its debt management fund.
Asked whether recovery could take 30 or 40 years, Saito declined to set a target date, saying the prefecture would work with the Internal Affairs and Communications Ministry to formulate an appropriate medium- to long-term plan while trying to accelerate improvement wherever possible.
A major point of contention at the news conference concerned bonds issued in connection with advance purchases of land under the administration of former Governor Ido.
Saito has repeatedly described what he considers improper use of such bonds as one of the factors behind Hyogo's fiscal problems. When questioned why the issue was not explicitly listed among the causes in the prefecture's published fiscal improvement plan, he said its effects were incorporated into the debt management fund shortfall.
Saito maintained that the practice remained a major factor because improper bond issuance had further increased the fund's shortfall.
The prefecture plans to establish a review panel as early as August or the beginning of September to examine the issue. Saito said the Internal Affairs and Communications Ministry had indicated that the practice may have conflicted with the Local Public Finance Act and that a thorough investigation and measures to prevent a recurrence were necessary.
He said interviews with people responsible for policy decisions at the time would be essential, including former Governor Ido and senior officials involved in financial decisions, although the review panel will determine specifically whom to question and how.
Saito said Hyogo had for years operated parts of its finances in ways that were difficult for outsiders to understand, describing fiscal management as something of a "black box." He said examining past practices required substantial administrative resources and could itself worsen fiscal indicators in the short term, but argued that unresolved problems should not be passed on to future generations.
The governor said discussions would continue with the prefectural assembly, including its speaker and deputy speaker, and with political groups ahead of the September assembly session. He said the fiscal issue was likely to become one of the session's central themes.
Saito canceled a planned trip to Western Australia so he could remain in Hyogo while the fiscal plan was finalized and consultations were held with local government leaders, the prefectural assembly and the Internal Affairs and Communications Ministry. He said he intended to take the plan to the ministry himself.
The news conference also addressed emergency preparedness following recent torrential rain in Chiba Prefecture. Saito said Hyogo had ordered emergency inspections of all 38 underpasses on prefecture-managed roads, including checks of drainage pumps, backup generators, drainage channels and electronic warning signs.
About 20 of the 38 locations use pumps to remove water, while others rely on natural drainage. Some defects had already been identified during regular inspections, Saito said, adding that the prefecture would ensure they were addressed.
Hyogo has also asked municipalities to inspect 116 underpasses under their management, excluding those in designated cities.
Saito also reported on Hyogo's support for areas affected by the Kumamoto earthquake. The prefecture began dispatching 22 building-damage assessment personnel on August 7 and another 20 on August 14, with 18 more scheduled to be sent from August 21. Around 20 personnel are expected to continue being dispatched on a rotating basis.
Hyogo and local governments have also provided toilet vehicles, laundry facilities, disaster medical personnel and school-support teams. Donations collected for the disaster had reached about 7.5 million yen as of August 18.
A new volunteer support program began accepting applications on August 19. Groups of five to 20 people can receive support for travel and other costs, while groups of at least 10 using chartered buses can qualify for a special Kumamoto earthquake recovery program providing up to 900,000 yen for transportation, accommodation and other expenses.
Additional subsidies are available for renting heatstroke-prevention equipment such as wearable air conditioners and spot coolers, and each group can receive assistance for up to two trips.
Saito also announced that the Hyogo Regional Revitalization Festival will be held on September 3 at the Design and Creative Center Kobe, featuring 59 booths, lectures, panel discussions and workshops.
The prefecture will also hold its second art auction featuring works by artists with disabilities from September 2 through September 8 at Kobe Marui in Sannomiya. A total of 34 works are expected to be offered through either an auction format or newly introduced fixed-price sales.
Source: KTV NEWS
