Local Government Bond and Fiscal Discipline of Local Governments -Country Experience and lessons-(in Japanese)

Outstanding of local government bonds in Japan has increased rapidly after the 1990s, and now reached the highest level. It is important to reduce and manage not only the outstanding amount of national government bonds but also local government bonds. We observe that the management system of local government bonds in advanced countries have recently changed due to decentralization and accumulated government debt. This paper compares the fiscal disciplines of local governments in various countries, and discusses the characteristics of local government bond systems in the United States, France, Canada, and Sweden studied through local survey. As the suggestion in Japan, some points are clarified from the international comparison. In many countries except Japan, local governments face discipline through market mechanism in the market of local government bond. Various actors such as investors and banks in the market support the fiscal discipline. Furthermore, some fiscal rules also play an important role for reduction of local government debt.