An external review panel for Hyogo Prefecture said on the 11th that former Governor Toshizo Ido probably directed the improper accounting treatment of ¥33.8 billion in prefectural bonds issued to buy public land, the Mainichi Shimbun reported.
The panel said the handling was carried out under careless assumptions and without sufficient deliberation. It came as the prefecture worked hard to keep its fiscal indicators from worsening and to hold up its fund balances.
Hyogo issued ¥49 billion in advance-purchase bonds in fiscal 2000 to acquire the land. It later earned ¥33.8 billion from selling the land and set the money aside in a bond management fund meant to prepare for future repayment.
When the repayment deadline arrived in fiscal 2020, the prefecture did not use the ¥33.8 billion for repayment. It refinanced the full ¥49 billion and pushed repayment back.
The Ministry of Internal Affairs and Communications has said the refinancing, despite available funds for repayment, may violate the Local Finance Law. The panel agreed that the accounting was improper in light of the law's purpose.
Ido served as governor for five terms, 20 years, from 2001 to 2021, a span that includes fiscal 2020, when the refinancing took place.
A policy set in a meeting with the governor
According to the report and other materials, the refinancing policy appears to have been settled around February 2019. In interviews, officials testified that Ido gave instructions on the refinancing policy at a meeting with the governor.
No objective material corroborating Ido's instruction was found. Weighing the testimony, the panel concluded it could be inferred that the governor at the time decided the policy at the meeting.
At the time, the prefecture was forced into tough fiscal management after the 1995 Great Hanshin Earthquake. Finance officials kept a close eye on indicators such as the real debt service ratio, which gauges a local government's fiscal health, and sought to maintain the bond management fund balance that affects them. Those fiscal circumstances appear to have lain behind the accounting.
Officials said they did not recall discussing any problem and had not known of limits on repayment methods, indicating no awareness that the law was at issue. No prior inquiry to the internal affairs ministry was confirmed. The report faulted the prefecture for not conducting sufficient organizational checks on proper financial handling and legal questions when issuing the bonds.
Asked for comment by the Mainichi Shimbun, Ido said he found the matter deeply distressing but would refrain from commenting.
The accounting came to light in June after the newspaper raised it with the prefecture.
The prefecture has decided to cut the full ¥49 billion tied to the land deal from the fund. With its real debt service ratio worsening, it could become an early fiscal rehabilitation body, one step short of bankruptcy, as soon as fiscal 2030.