<h3>In the richest village in Japan in Hokkaido</h3>
Last year, on a variety show, Hokkaido&#8217;s Sarabetsu Village was introduced as the richest village in Japan with an excessively high annual income.
In fact, FRIDAY Digital has also covered this village, with a population of about 3,100, whose core industry is agriculture. Of course, not as the richest village in Japan, but as a municipality that has received over 1 billion yen in &#8220;Digital Rural City National Concept Grants&#8221; (Digital Den&#8217;en Kokka Kousou Koufukin), aimed at supporting initiatives for solving challenges and promoting regional revitalization through digital technologies.
<figure id="attachment_410630" class="wp-caption alignnone" style="width: 4000px;" aria-describedby="caption-attachment-410630"><a href="#" data-ident_hash="113609ac"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2025/01/6af5a41cc94faca1f3cca9d1314b91ad.jpg" alt=""></a><figcaption id="caption-attachment-410630" class="wp-caption-text">Professor Taku Konno of Nihon University, an expert in local government audit practices and internal control, says, &#8220;Ishiba-san was the first minister in charge of regional revitalization and has been advocating for it over the past 10 years. No matter what is said, I believe he will continue to pursue it as his flagship policy.&#8221;</figcaption></figure>
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In an article published in November last year titled &#8220;Consultants Swarming to Regional Revitalization Grants &amp; Local Governments Being Exploited,&#8221; it touched on the &#8220;Super Village Concept&#8221; project of Sarabetsu Village, which is funded by the Digital Rural City Nation Concept Grants (Digital Den-en). The project is managed by a company called &#8220;Social Knowledge Bank LLC.&#8221;
Most of the project costs for the Super Village Concept are going to Knowledge Bank. The representative employee of this company is a construction consultant from Tokyo, Chojai Co., Ltd. (Chuo Ward, Tokyo), which has been leading the project since the planning stage. This consultant company is both the contractor of the project and also the client as the representative employee of Knowledge Bank.
A village council member criticized the project, saying, &#8220;There is a conflict of interest structure.&#8221; Since June last year, they have been asking for disclosure of the project costs and other details.
Two weeks after the article was published, Knowledge Bank finally released the business content and costs for fiscal year 2023 on their official website.
The list of project costs includes regional point issuance service / 45.79 million yen, no-wait medical services / 76.96 million yen, community-based transportation and logistics system / 96.35 million yen, and the operating costs list includes fun mahjong / 240,000 yen, fun karaoke / 900,000 yen, free smartphone lending / 4.65 million yen, etc.
The council member who had been asking for disclosure was furious, saying, &#8220;After the general account budget for fiscal year 2023 was passed in the September council meeting, it’s strange to release the breakdown of the project costs afterward, like a late disclosure.&#8221;
That being said, it is puzzling that projects funded by the Digital Den-en grants include mahjong and karaoke services. Other expenditures include the purchase of 800 used smartphones to be lent out for free, rental and experimental use of delivery robots that are unlikely to be used on snowy roads.
&#8220;Do the residents of Sarabetsu Village understand the grant projects and actually use the services to see their effects?
If not, for example, the unused delivery robots may end up as a waste of the grant funds. The used smartphones might eventually have to be sold to disposal companies or disposed of.&#8221;
This is pointed out by Professor Taku Konno of Nihon University, an expert in accounting, local government audit practices, and internal control.
&#8220;Based on what I’ve read from articles about Sarabetsu Village, including other media, the village mayor seems like a very positive and motivated person. The efforts of local government leaders are important, so being proactive is good. However, unlike the CEO of a company, there’s no need to take on the kind of risk involved. After all, it’s taxpayers’ money.
The consultant company, which is the contractor, is the one actually driving the Super Village Concept in Sarabetsu Village. However, the ultimate responsibility lies with the contracting party, Sarabetsu Village. It can’t be dismissed by saying, ‘We left it to the consultants.’
Prime Minister Shigeru Ishiba made a statement at a cabinet meeting on regional revitalization last year, saying, ‘It is very bad if every town relies on Tokyo consultants.’ The Prime Minister must be fully aware of this.&#8221; (Professor Taku Konno, hereafter the same)
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<h3>Unnecessary DX is not needed at all</h3>
Professor Konno strengthens his tone, stating, &#8220;The issue lies with the system of the Digital Rural City National Concept Promotion Subsidy itself.&#8221;
&#8220;First of all, I think the national policy is problematic.
For example, in this subsidy system, one of the target projects is initiatives involving the use of data infrastructure and the implementation of multiple services. Most models that meet this criterion are likely to be formulated under the leadership of DX vendors or consultants.
As I mentioned in a paper before, I think there is a significant possibility of collusion taking place. IT companies, DX vendors, and consulting firms view the series of DX policies promoted by the government as a business opportunity. Collusion is a possible scenario.
However, as long as the government has established such a system, local governments will inevitably raise their hands.&#8221;
There is also no lack of issues with the local governments applying for the subsidy.
Regional revitalization, which started in 2014, was later transformed into the Digital Rural City project, and 10 years have passed. During this period, there has been increasing criticism that local governments&#8217; dependence on the national government has grown stronger.
<figure id="attachment_410677" class="wp-caption alignnone" style="width: 1024px;" aria-describedby="caption-attachment-410677"><a href="#" data-ident_hash="14db14d8"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2025/01/82b86a7d0c6bfce8a82e414bd66f9ff2.jpg" alt=""></a><figcaption id="caption-attachment-410677" class="wp-caption-text">As part of the &#8220;Super Village Concept&#8221; project, Sarabetsu Village implemented a smartphone class for the elderly. However, according to the village council&#8217;s response in September last year, only about 80 out of the 800 smartphones provided for lending were being used.</figcaption></figure>
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&#8220;Government grants related to regional revitalization, including the Digital Rural City National Concept (Deji-den), are basically intended as initial-stage support for local governments to smoothly launch projects, with the premise that these projects will become self-sustaining in the future. It becomes very important to consider how local government leaders view the long-term potential of a project.
For example, the grant rate for Deji-den grants is typically between half to two-thirds of the total project cost indicated by the local government, so the grant does not cover the full cost. The remainder must be covered by the local government&#8217;s own funds.
The real issue arises after the grant period ends. For example, if a satellite office is created but not used, the local government will end up shouldering maintenance and management costs for what may turn out to be another wasteful empty building. This could not only fail to benefit the community but also leave a negative legacy for future generations. If a local government leader chooses to apply for these grants, they should be fully aware of these implications.&#8221;
It&#8217;s not just about wasteful infrastructure. Professor Konno emphasizes, &#8220;In this era of declining birth rates, an aging population, and population decrease, we absolutely do not need unnecessary digital transformation (DX).&#8221;
&#8220;While I do believe digitalization of administrative tasks is necessary, especially as the number of local government employees decreases, there is no need for unnecessary DX or wasted regional revitalization efforts. I want to strongly emphasize this.&#8221;
<h3>The problem lies in the government&#8217;s policy of continuously distributing money</h3>
A resident audit request was made in the case of the smart city project in Toyono Town, Osaka, which was selected for the Digital Rural City National Initiative Grant Program. The request sought approximately ¥135 million from the former mayor after the corporate donations expected to fund the project were not paid, causing financial damage to the town. This was reported by Asahi Shimbun Digital in January of last year.
&#8220;The issue in Toyono Town later developed into a resident lawsuit, where the former mayor was asked to pay about ¥39 million in damages, as recommended by the audit committee for creating a hole in the town&#8217;s finances. There are concerns that similar problems may occur across the country in the future,&#8221; said the source.
The resident audit request submitted by residents of Toyono Town is a system in which residents, if they believe there has been illegal or unjust financial or accounting behavior by the local government leaders or employees, can request the audit committee to take necessary actions. However, the question remains: how effective is this system?
&#8220;A resident audit request can be made by just one resident. Once the request is made, the audit committee must take action.
Even if the resident audit request is rejected, if the result is unsatisfactory, a resident lawsuit can be filed in court.
Even without reaching a resident lawsuit, I believe that the resident audit request is effective in making the mayor and local government staff aware of the eyes of the residents.&#8221;
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One method for investigating whether the leaders or employees of a local government are misusing public funds illegally or improperly is through the freedom of information request system.
&#8220;Although documents often come with excessive redactions, information obtained through a freedom of information request can provide useful details for a resident audit request. Based on this, residents can initiate an audit request, and if the audit committee conducts a proper audit and judges the residents&#8217; request to be reasonable, they will make recommendations for necessary actions.&#8221;
Professor Konno also mentions internal control, which was institutionalized as a result of improper accounting handling of national subsidy projects by local governments.
&#8220;Since 2020, the Local Autonomy Law has introduced an internal control system, requiring governors of prefectures and mayors of ordinance-designated cities to prepare internal control evaluation reports at least once a year. For other municipalities, it is a matter of good practice.
That said, the importance of internal control is universally recognized across all municipalities, meaning the responsibility ultimately lies with the mayor of each town or city.
Moreover, the Ministry of Internal Affairs and Communications&#8217; internal control guidelines clearly state that the responsibility for internal control in commissioned tasks lies with the client.
For instance, in the case of Sarabetsu Village, which has outsourced work to the Social Knowledge Bank LLC, the village, as the client, bears the responsibility, particularly from the standpoint of ensuring the effectiveness and efficiency of the commissioned tasks.&#8221;
<figure id="attachment_410966" class="wp-caption alignnone" style="width: 823px;" aria-describedby="caption-attachment-410966"><a href="#" data-ident_hash="755b524c"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2025/01/ba3b11a8544c7ace27ae1ede43800ce6.jpg" alt=""></a><figcaption id="caption-attachment-410966" class="wp-caption-text">This is part of the 2023 business expenses disclosed by the Knowledge Bank Corporation in November last year. From just this list, the contents of the services and how the funds are being used are unclear. (From the SARABETSU SUPER VILLAGE website of Social Knowledge Bank LLC).</figcaption></figure>
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<h3>Has low birthrate and population decline been stopped?</h3>
Between the start of local revitalization and last year, the government distributed approximately 1.3 trillion yen in grants to local areas.
The Fiscal System Council, in its 2024 budget recommendation, pointed out, &#8220;While about 5,000 cases have been supported by grants, there have been no exemplary or pioneering cases&#8221; and &#8220;Although the premise is for local governments to become self-reliant after the support period, about a quarter of the projects have extended the support period.&#8221;
&#8220;The real issue lies with the government, which continues to allocate money to projects in local governments that show no results. If no results are being seen, even policies that have already started should be reconsidered.&#8221;
Under the leadership of the Ishiba administration last year, the government established the &#8220;New Local Economy and Living Environment Creation Headquarters&#8221; to replace the &#8220;Digital Rural City National Strategy Promotion Meeting&#8221; and decided to double the grants. Prime Minister Ishiba has indicated that they will continue to examine the effectiveness of the policies, while reviewing the use of grants and regulatory reforms.
&#8220;Ishiba-san was the first Minister in charge of local revitalization, and despite the criticisms, he has been pushing for local revitalization for the past 10 years. No matter what is said, I believe he will continue this as a flagship policy.
In the future, the name of the digital grant will likely be changed. However, I believe that, in essence, very little will change, as it will only be a matter of replacing the nameplate.&#8221;
In December last year, the government released its &#8220;Basic Thinking on Local Revitalization,&#8221; promoting the creation of fun local areas that attract women and young people, as well as maintaining regional societies under population decline.
However, over the past 10 years, many local governments that received grants for projects aligned with the national agenda have not been able to curb the declining birthrate and population decrease. I hope that no more unnecessary grant projects in regions that are not needed by the residents will emerge.
▼ Taku Konno (Professor of Business Administration at Nihon University, Doctor of Law, University of Tsukuba) is a standing director of the Japan Governance Research Society, director of the Japan Auditing Research Society, auditor of the Independent Administrative Institution Economic and Industrial Research Institute, and a former committee member of the Certified Public Accountant Examination (Audit).

 Sayuri Saito

 Afro (first photo), Kyodo News (second photo)

 What are "Mahjong" and "Karaoke" the projects using the Digita grant? ...... Other uses include the purchase of 800 used smartphones that will be loaned out free of charge, and the rental and demonstration testing of delivery robots that cannot travel on snow-covered roads and are unlikely to be used.

Village of 3,000 Uses ¥1 Billion Digital Grant for New Projects

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