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Japan: Major Reform on Fund for Road Improvements

(May 4, 2009) The revision of the Special Law for Financing Road Improvement Works was promulgated on April 30, 2009 (Law No. 28 of 2009). Since 1954, the Law has limited the spending of revenue from gasoline tax and other road-related taxes to be used outside of road-related expenditures. At the time of the Law's enactment, roads in Japan were not well maintained, and special funds were needed to improve them. Nowadays, however, critics claim that national and local governments spend money for the unnecessary development and improvement of roads. The revision of the Law allows the government to use these tax revenues as part of the general account, for any purpose it deems fitting.

In the fiscal 2009 budget, the government's allocation of such revenue for other purposes is limited. The government established a subsidy to local governments for public works projects, mainly road-related, out of consideration for the lawmakers who have a vested interest in such projects and for the local governments concerned. (Bill OK'd to Transfer Road Tax Revenue to General Account, YOMIURI SHIMBUN, Apr. 23, 2009, available at