Demolition Bonds Spell End for Japan’s Decaying Ghost Buildings

After educating Japanese children since 1956, Kiyokawa Elementary School lies abandoned, its walls and roof crumbling because there are no longer enough pupils to fill it and the town cant afford to demolish the building.

The school, in Shonai, Yamagata prefecture, 500 kilometers north of Tokyo, is one of thousands of derelict buildings in Japan known as haikyo, legacies of the boom years in the 1960s and 70s. As the populations of towns grow older or move to cities, indebted local governments have left the structures to rot, prompting Prime Minister Shinzo Abes administration to come up with a novel solution: demolition bonds.

This symbolizes the end of an era, the turnaround from a rising population to depopulation, said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. The shedding of old structures is necessary for the rebirth of regions and will test their creativity.

Kiyokawa Elementary is a reminder of the widening divide Abe faces as his efforts to revive Japans economy accelerate an exodus to the capital and industrial centers like Osaka. Almost half of the nations municipal districts -- 1,513 -- have vanished since March 1999 as towns and villages merged with neighbors amid shrinking populations and declining revenue.

Municipalities need to cut their losses by removing unused buildings to reduce maintenance costs, said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo.

A public housing project in central Japan built 45 years ago that consumes 18 million yen in annual maintenance fees for such things as basic repairs, cleaning and security, would cost 91.69 million yen to demolish, according to the Ministry of Internal Affairs and Communications.

The government plans to submit a bill in the parliament session starting this month to revise the current law so that regional government bonds can fund the demolition of surplus and unsightly structures. Currently, local governments can only sell debt for reconstruction projects that include new facilities or buildings.

Our inaction is due to the difficulty in procuring money given our very dire fiscal state, said Michinori Souma, a general affairs official at Shonai town hall, who said it would cost 20 million yen to remove the school.

Shonais annual budget is about 10 billion yen, much of which comes from grants and subsidies from the central government. The town owes about 13.7 billion yen, according to the local government.

The special bonds would encourage municipalities to manage infrastructure with a long-term vision, including dealing with decaying structures, said Takashi Murata, deputy director at the local administration bureau in the Internal Affairs Ministry. Demand for public facilities is changing as the population declines.

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Demolition Bonds Spell End for Japan’s Decaying Ghost Buildings