Although “repayment of earthquake debt is almost finished”…a dark cloud hangs over the prefectural government of Motohiko Saito! Behind Hyogo Prefecture’s “6 Billion Yen Balance Shortfall

Don’t Blame the Great Hanshin Earthquake

The Hyogo Prefectural Government’s initial budget for fiscal 2025 was greeted with shock when it announced that the prefecture will have a budget shortfall of 6 billion yen in fiscal 2026 and that it will become an “authorized organization” that needs permission from the central government to issue prefectural bonds.

The reason given was that “redemption of prefectural bonds related to the Great Hanshin-Awaji Earthquake will continue and long-term interest rates are expected to rise,” but Nobuzo Nakagawa, 69, policy advisor to the Hyogo Research Institute, denies this , saying, “Most of the debt repayment for restoration and reconstruction projects has already been completed. However, Nobuzo Nakagawa, 69, policy advisor to the Hyogo Research Institute, denies this.

The Hyogo Prefectural Government is simply putting off administrative and fiscal reform by blaming it for the earthquake. Hyogo Prefecture did not receive financial support from the central government for earthquake reconstruction and borrowed 1.3 trillion yen through the issuance of prefectural bonds to pay for the projects, but the latest remaining debt has been reduced to just over 180 billion yen.

However, While various new facilities were developed in the name of creative reconstruction, scrap and build of old facilities did not proceed. A large amount of money still goes out every year to operate and maintain the newly developed facilities.

What are the facilities developed in the name of creative reconstruction?

They include the Hyogo Performing Arts Center in front of Hankyu Nishinomiya-Kitaguchi Station, the Disaster Reduction and Human Renovation Institution (DRI) in Nadahama, the Hyogo Prefectural Museum of Art, the Miki Disaster Prevention Park, and the Shin-Nagata Station South Area Redevelopment Project. The shopping area in front of Shin-Nagata Station created by the redevelopment is burdened with rent and management costs, and many of these stores are vacant.

It would be understandable if those tenant spaces were used by government offices (Kobe City and Hyogo Prefecture), but the prefectural and municipal governments have built new joint government buildings. They have built new hardware for earthquake reconstruction, and put in place a system that will cost money later on, such as continuing to operate and maintain those buildings, as well as disaster prevention events every five years.”

Originally, there were many old buildings in the center of Kobe (Sannomiya and Motomachi). The economic ground has sunk in Sannomiya and Motomachi as a result of the construction of many new buildings in the name of reconstruction without redevelopment of these areas. Nakagawa calls the construction of the International Health Development Center building at HAT Kobe as a symbol of reconstruction and the invitation to the WHO Kobe Center to join the project “absurd.

Hyogo Prefecture has been paying 300 million yen a year for the project and Kobe City 150 million yen a year for 30 years, and I think the prefectural assembly bears a great deal of responsibility for approving a foolish project that will cost 13.5 billion yen in follow-on money (taxes),” Nakagawa said.

A heaven for the descendants of the “33 external organizations.”

Why have successive governors adopted such foolish policies? Mr. Nakagawa believes that the problem is “descent from the government.

Hyogo Prefecture has 33 affiliated organizations, and a large number of former prefectural government employees have taken refuge in these organizations. They are ‘money-grubbing organizations’ created by successive governors, and they used to serve as support units for the governor during elections.

In Hyogo Prefecture, Motohiko Kanai (deceased), who took office in November 1962, Toshitami Kaihara (former governor), Toshizo Ido (79), and the current governor, Motohiko Saito (47), all came from the Ministry of Internal Affairs and Communications (former Ministry of Home Affairs).

The 63-year history of having governors from the MIC has resulted in a fixed dependence on the national government and the MIC in a variety of areas, including finances, human resources, and information. In my opinion, the spirit of self-government, the idea that “the people of the prefecture should manage the prefectural government based on their own ideas about the future of their hometown,” has been eroded. A governor who knows nothing about the private-sector economy and only thinks in terms of spending taxpayers’ money can only manage the prefectural government by following precedents and fine-tuning the budget compared to the previous year.

In Hyogo Prefecture, approximately 4.6 trillion yen is spent annually for prefectural services in the general, special, and public enterprise accounts. If we could hypothetically increase the productivity of operations by 5%, for example by speeding up decision-making, we could generate a new budget line of 230 billion yen per year.

However, there are no people from the Ministry of Internal Affairs and Communications or other national government careers who can tackle prefectural government reform with such a concept in mind. They are simply transferred to each prefecture, ordinance-designated city, or major municipality for one or two years on a temporary basis and repeatedly transferred without much success. I have debated Mr. Saito in public debates in the past two Hyogo gubernatorial elections, but unfortunately, I could not sense his political philosophy, vision, specific policies, or even his passion.

Nakagawa is focusing on the “key man” who is driving Mr. Saito’s campaign. That person is Osaka Governor Hirofumi Yoshimura (49).

The reason Hyogo Prefecture is spending a hefty 1.76 billion yen of its prefectural budget on the Osaka-Kansai Expo, Nakagawa says, is that ” the Restoration Movement is being led by Yoshimura, who is Governor Saito’s creator and who received support from him in the election.

The Hyogo-Osaka Coordination Council was established in 2009, when Saito became governor, and held its first meeting in December of the same year, having pledged full cooperation with the Osaka-Kansai Expo.

“We’ve just lost our edge.”

Although Governor Saito has achieved some successes, such as making former prefectural government employees of affiliated organizations strictly observe the mandatory retirement age of 65, and eliminating the debt of 68.2 billion yen worth of divested forestry projects, Nakagawa is critical of his “loose approach to administrative and fiscal reform.

Nakagawa said, “The prefectural tax revenue of 920 billion yen in the last fiscal year was not due to the efforts of the governor or prefectural government, but rather to the good performance of the private sector. Simply cutting the budget in areas where cuts can be made, citing financial difficulties as the reason, is merely balancing the budget. Eventually, when there is no more room to cut, there will be a shortfall in revenue and expenditures. Priority should be given to areas that will lead to increased employment, tax revenue, population growth, and growth strategies in the future. “

We asked the Hyogo Prefectural Government’s Public Relations Division for their view.

(Regarding the deficit in the earthquake restoration and reconstruction projects) (Regarding the deficit in earthquake restoration and reconstruction projects) As we approach the 30th anniversary of the Great Hanshin-Awaji Earthquake, I would like to express my heartfelt respect and gratitude to all those who have contributed to the restoration and reconstruction efforts. The reconstruction and urban redevelopment project in the Shin-Nagata Station South District is a Kobe City project, but it has played a major role in the reconstruction of the disaster area and the creation of a disaster-resistant city, and the prefecture has cooperated with the city to properly proceed with the project.”

Last October, Governor Saito and then Vice Governor Yasutaka Katayama (64) were criminally prosecuted for breach of trust for causing a loss of approximately 300 million yen to the prefecture by improperly injecting taxes to raise funds for the Hanshin-Orix victory parade held in the cities of Osaka and Kobe.

The cost of the parade was initially supposed to be covered by donations, but the former director of the Prefectural Citizens Bureau blew the whistle on the matter, saying, “In reality, subsidies from Hyogo Prefecture to financial institutions in the prefecture were increased from 100 million yen to 400 million yen in total and kickbacks were received from credit unions in the form of donations. The former director of the Hyogo Prefectural Citizens’ Bureau had made a whistle-blowing accusation.

Saito has yet to give a detailed explanation of his various allegations in his own words. Will this leader be able to lead Hyogo Prefecture through its current difficulties?