The announcement last June by Yubari, Hokkaido, a former coal-mining town now known for the Yubari brand of melon, that it had effectively gone bankrupt sent shock waves throughout the nation because many cities, towns and villages face a similar financial crisis. The city has adopted, and the government has accepted, a financial reconstruction plan to pay off accumulated debts of 35.3 billion yen over 18 years starting in fiscal 2007.

As Yubari becomes a ¡°municipality under rehabilitation¡± with its budget monitored by the internal affairs ministry, its citizens will carry a heavy financial burden even as they see the quality of their public services decline to nearly the lowest level among the nation¡¯s municipalities. The city¡¯s 13,000 residents, 40 percent of whom are at least 65 years old, face a long period of perseverance. Reviving the city will tax the ingenuity and efforts of city officials and citizens alike.

The 35.3 billion yen debt to be repaid is eight times the city¡¯s 4.4 billion yen budget for fiscal 2005. The actual amount of debt is 63 billion yen. After the coal industry died, the city tried to revive itself by building amusement parks and ski resorts and sponsoring an international film festival, but without success. Fortunately, some groups and enterprises are ready to help organize or operate festivals as well as entertainment and tourist facilities.

Under the reconstruction plan, the number of city-office workers will shrink from some 270 as of April 2007 to some 100 in fiscal 2010. And the salaries of those remaining will be cut by about 30 percent. Residential and fixed property taxes will be raised. The mini-car tax will rise by 50 percent. Various fees for public services will increase. The city¡¯s four middle schools will be integrated into one. What to do with the city¡¯s seven primary schools will be decided during fiscal 2007. The city-run hospital will be privatized and downsized to a clinic.

While Yubari¡¯s story is sad, it can at least provide a useful lesson for other municipalities. The central and Hokkaido prefectural governments should be flexible and realistic in dealing with the city¡¯s rehabilitation efforts.