The plans intended to transfer prefecture government system into Do-shu, a wider regional one, have been discussed formally and informally in recent Japan. The idea of Do-shu stems from such correlated situations that; public opinion on decentralization from the central government to the local ones has grown up; prefecture governments have been weakening their roles while cities and towns have been strengthening their power as a result of the merger; fiscal constraints both of central and local governments have become seriously with reduction and aging of population.
But fiscal difficulties of Do-shu have not been reviewed so much. This paper examines how the balance of benefits and payments between Do-shu will be, if the fiscal adjustment among Do-shu will be possible, and if public finance of Do-shu will be sustainable. We can get some implication towards introducing Do-shu system through this examination.