The government and the ruling coalition approved a framework Friday for transferring a combined 2.42 trillion yen in national tax revenue sources to local governments for the three years through fiscal 2006.
In exchange for the greater taxation authority, the central government would be allowed to cut 2.84 trillion yen worth of subsidies and tax grants it traditionally bestows on the local governments.
"In view of the traditional relationship between the state and local governments, we have done something tremendously bold," Finance Minister Sadakazu Tanigaki told reporters.