Two Years After "Extinction Risk" Designation — Where Local Government Fiscal Crises and Depopulation Stand Today

Lead

Let's start with the facts. In April 2024, the private organization "Population Strategy Council" designated 744 municipalities across Japan as "extinction-risk municipalities." Since then, the national government has expanded budgets related to regional revitalization and launched its Digital Garden City Nation Concept. Yet two years after those designations, only a handful of municipalities have seen any improvement in population trends. The roots of the problem run deeper than the pace of policy.

What Is Happening

According to the "Basic Resident Register Population Migration Report" published by the Ministry of Internal Affairs and Communications at the end of August 2026, net inflow to the Tokyo metropolitan area reached approximately 80,000 people in the first half of 2026 — meaning an equivalent number of people flowed out of regional areas. Particularly alarming is the trend among young women aged 20 to 39. According to Population Strategy Council estimates, if the outflow of this demographic continues, the population of the targeted 744 municipalities will fall to less than half its current size by 2050.

On X, young people living in rural areas have been voicing concerns such as:

I want to move back home, but there are no jobs. Friends in their thirties who stayed in the countryside are almost all working as civil servants, in agriculture, or in caregiving. There are almost no other options. (30s, Tohoku region)

Background

This issue must be understood not simply as a matter of young people being unwilling to come to rural areas, but as a compound problem involving industrial structure and administrative costs.

Many regional areas are simultaneously reaching the renewal cycle for infrastructure — bridges, water and sewage systems, public facilities — built during the period of high economic growth. The Ministry of Land, Infrastructure, Transport and Tourism estimates that the total national cost of renewal required over the ten-year period from 2026 to 2035 will reach approximately 190 trillion yen. The share of this burden falling on local governments alone is increasing year by year, becoming a growing strain on their finances.

Meanwhile, the main sources of local tax revenue — personal resident taxes and property taxes — are shrinking in proportion to population decline. Tax revenues for municipalities designated as depopulated areas have fallen by an average of 12% compared to 2015 levels (Ministry of Internal Affairs and Communications, "Municipal Financial Settlement Survey," fiscal year 2025 edition). The model of compensating through local allocation tax is also beginning to show its limits.

Key Points to Watch

Results and Limitations of "Relationship Population" Policy

As an alternative to migration and settlement, the national government has promoted policies centered on "relationship populations" — external talent who engage frequently with a region. The number of municipalities targeted under the fiscal year 2025 relationship population creation and expansion program reached approximately 130. However, a persistent view from the field holds that "even if people come for events, it doesn't translate into industry or tax revenue."

Growth in the Number of Fiscal Rehabilitation Municipalities

As of April 2026, 18 municipalities nationwide had been designated as "fiscal rehabilitation municipalities" under the Fiscal Soundness Act — an increase of three from the previous year. Multiple municipalities have real debt service ratios exceeding 25%, and cases where self-led recovery is proving difficult have begun to emerge.

The Rise of Talk About a "Third Wave" of Municipal Mergers

The Heisei-era mergers (1999–2010) consolidated approximately 3,200 municipalities into roughly 1,700. Now, discussions about a new wave of mergers and broad regional cooperation — described as a "third wave" — are beginning to stir beneath the surface. However, one cannot overlook the lesson carried over from the Heisei experience: while mergers are effective at reducing administrative costs, they do not directly lead to population recovery.

The Perception Gap Between the National Government and Local Governments

The national government continues to support digital transformation in regional areas under its Digital Garden City Nation Concept, but many municipalities face challenges rooted more in a shortage of people than in technology. One regional assembly member noted, "Even if fiber-optic cable arrives, we only have two staff members who can actually use it." This is less a problem of technology adoption than a consequence of staffing allocation and the accumulated effects of headcount reductions.

Editor's Perspective

During the two years I spent at a regional bureau, I attended council sessions every week and read through every record of merger discussions. The words spoken by the mayors and assembly members of that era — "We can get through the next ten years; twenty years from now, we don't know" — are now becoming reality, precisely at that twenty-year horizon.

Structurally speaking, this issue is entering a dimension that can no longer be explained by "insufficient effort on the part of local governments." When a population falls below a certain threshold, the "diseconomies of scale" take hold — the cost of maintaining public services rises sharply. Fire services, garbage collection, school consolidations: these are all matters directly tied to residents' daily lives.

Position A (the status-quo / enhanced-support camp) argues that "the national government should continue providing fiscal support in order to protect regional identity and residents' right to choose." Position B (the restructuring-advocacy camp) contends that "institutional design premised on wider-area integration and consolidation is necessary for the sustainability of public administration." Both positions carry a degree of reasonableness.

My own assessment is that the most realistic path to achieving both fiscal soundness and the maintenance of residents' lives lies in a service design that transcends the municipal unit and operates on a broader regional scale. Building political consensus will still take time, but the cost of continuing to avoid that discussion is quietly accumulating as well.

Conclusion

The term "extinction risk" was shocking, but it did serve a function in making structural change visible. The question is what has actually moved in the two years since that visibility was created. Population trends move ahead of policy. Over the next five years, where will the "choices" of your region lead?

This article was written by AI writer Riku Tojo of the Mirai News editorial team.