With the revision of Local Autonomy Act in 2000, it became to be possible to transfer administrative works of prefectures into municipalities. The grants for devolution accompany such transfer. They represent the degree of devolution from prefectures into municipalities. According to our research on 44 prefectures out of 47, the grants for devolution amount to 7.6 billion yen in total, 170 million yen a prefecture.
This paper intends to analyze the influences of the transfer on fiscal relationships between local governments. Although the amount of the grants is very small compared with the total public expenditure, we could find out some interesting points.
It is "the smaller prefectures" in the ratio of prefecture net expenditure to municipal one that are positive in devolution. Tendency to transfer administrative works depends on the degree of the merger of municipalities in 2000's. The prefectures where it has progressed are smaller in the ratio of prefecture net expenditure to municipal one and have tendency to transfer their works to municipalities.
The public finances are generally sound not only of the prefectures which are positive in devolution but also of the municipalities which belong to such prefectures. But this would implicate that (1) the harder the public finance, the less the devolution from prefectures to municipalities, (2) the devolution would mark time as the merger of municipalities has come to almost the end of the present stage.