Tokyo Gov. Shintaro Ishihara told Prime Minister Yasuo Fukuda on Dec. 11 that he will accept a request from the central government to hand over a ¥300 billion portion of Tokyo's tax revenues to fiscally distressed municipalities as a provisional step to help reduce revenue gaps between urban and rural districts.

Shintaro Ishihara KYODO PHOTO

After meeting with Fukuda at the Prime Minister's Official Residence, Ishihara said the prime minister asked him to understand the financial difficulties faced by local governments.

"The demand is really outrageous," Ishihara told media after the meeting. "But the governments of Tokyo, Aichi and Osaka would not be able to brush it aside, however hard we may try to reject it."

As part of its planned tax system reform for fiscal 2008, the national government is seeking to transfer a combined ¥400 billion in tax revenues from better-off prefectures in densely populated areas, including Tokyo, Osaka and Aichi, to fiscally troubled local governments. Tokyo has been urged to provide ¥300 billion under the tax reallocation plan.

With Tokyo's acceptance, the central government is expected to boost pressure on other prefectures to accept the proposed tax transfer.

Ishihara said such a tax revenue transfer from Tokyo will likely be implemented as a provisional step for about two years.

He said Fukuda proposed that the national and Tokyo metropolitan governments set up a consultative body where both sides would discuss Tokyo's long-standing request for the central government's fiscal support for large public works projects Tokyo is planning to implement.