The guidebook issued by MLIT and the Cabinet Office in May 2026 says that when the municipality carries the cost of major repairs at the start of or during the project, the scale of financing the private operator has to raise and the risk of recovering that investment both fall, which is expected to make participation easier. The money question in a small concession does not start with a list of available subsidies. It starts with deciding how far the municipality will pay.
This article sets out, from the primary documents, what municipalities actually paid in the guidebook's case studies, how much the national programs will cover for study costs, and how far the interest on borrowing can be reduced. The list of subsidies and support programs is in Subsidies and Support Programs for Small Concessions, and the wider set of financing instruments for public assets is in Financing Public Asset Revitalization.
Cap per project under the Pioneering PPP Support Program
¥20 million
MLIT. Fully national funding as a fixed-sum subsidy; for prefectures and designated cities, except concession projects, the rate is one half and the cap ¥10 million
Cap per project under the Cabinet Office study-cost subsidy
¥10 million
The standard cap, fully national funding; for prefectures and designated cities, except public facility operation and wide-area projects, the rate is one half and the cap ¥5 million
Maximum interest subsidy rate under the Regional Revitalization Interest Subsidy
0.7%
Paid for five years, and the loan itself must run five years or longer. It requires a regional revitalization plan certified by the national government
What Municipalities Paid in the Case Studies
The cost burden and subsidies in the six case studies, what the operator put in, what comes back to the municipality, and the three cases where rent was waived
The guidebook puts the municipal cost burden and the subsidies used for six case studies in a single table. Hon to Biyoshitsu Hagiten (本と美容室 萩店, concession) shows conservation and improvement works of about ¥64 million with about ¥32 million from the Vacant House Comprehensive Support Project (空き家対策総合支援事業); Auberge Auf (オーベルジュ オーフ, designated manager) shows facility renovation of about ¥550 million and design consignment of about ¥31 million, with about ¥265 million from the same program; ETOWA KASAMA and atick, both leases, show none, borne by the private operator; サッポロ珈琲館 Rinboku (lease) shows facility renovation of about ¥79 million with about ¥39 million from the Regional Revitalization Base Development Grant (地方創生拠点整備交付金); and 高宮庭園茶寮 (designated manager and permission to install and manage) shows facility renovation and related costs of about ¥600 million plus a management fee of about ¥30 million a year, with about ¥230 million from the Social Capital Improvement Comprehensive Grant (社会資本整備総合交付金) for the garden area.
| Facility | Scheme | Municipal cost burden | Subsidy used |
|---|---|---|---|
| Hon to Biyoshitsu Hagiten (Hagi, Yamaguchi) | Concession | Conservation and improvement works, about ¥64 million | Vacant House Comprehensive Support Project, about ¥32 million |
| Auberge Auf (Komatsu, Ishikawa) | Designated manager | Facility renovation about ¥550 million; design consignment about ¥31 million | Vacant House Comprehensive Support Project, about ¥265 million |
| ETOWA KASAMA (Kasama, Ibaraki) | Lease | None, borne by the private operator | None |
| atick (Maizuru, Kyoto) | Lease | None, borne by the private operator | None |
| サッポロ珈琲館 Rinboku (Ebetsu, Hokkaido) | Lease | Facility renovation, about ¥79 million | Regional Revitalization Base Development Grant, about ¥39 million |
| 高宮庭園茶寮 (Fukuoka) | Designated manager and permission to install and manage | Facility renovation and related costs about ¥600 million; management fee about ¥30 million a year | Social Capital Improvement Comprehensive Grant for the garden area, about ¥230 million |
Four of the six carry a municipal cost; the two leases carry none. Choosing the scheme is also choosing who pays for the renovation.
What the Private Operator Puts In Instead
At ETOWA KASAMA in Kasama, Ibaraki, the municipality paid nothing, and the operator carried pre-opening renovation work, covering interior and exterior finishes, water supply and drainage, air conditioning, guest room fittings and network installation, of about ¥142 million. The project term is about ten years, from December 2019 to April 2030. A project with zero public cost still moves more than a hundred million yen. Deciding not to pay is also deciding that only operators able to put up that sum can bid.
At atick in Maizuru, Kyoto, part of the Akarenga Park public-private vibrancy hub project, the municipality also paid nothing, and the rent was set at ¥1,482 per square metre or more at the time of the call. The operator says that repair costs turned out to be a larger investment than expected, but that regional banks and others, looking to the aim of the project and its effect on the local economy, were willing to lend. That single comment is the only place the guidebook touches private borrowing; it is the only occurrence of the word for lending in the 40-page document. Neither the interest rate nor the loan term appears anywhere.
What Comes Back to the Municipality
Hon to Biyoshitsu Hagiten in Hagi, Yamaguchi runs for about 20 years, from September 2023 to March 2043, extendable with the city's approval to about 40 years, to March 2063. The operating right consideration is about ¥16 million: nothing was charged until the end of March 2024, and the operator pays the city over the rest of the project term. The city put about ¥64 million into the conservation works and takes about ¥16 million back. How to read the gap depends on what value you place on the building staying in use.
The guidebook notes that where profitability is low and the operator cannot carry rent, but keeping the building in use matters to the area, there are cases in which rent was waived. It lists サッポロ珈琲館 Rinboku in Ebetsu, Hokkaido, where maintenance and conservation costs fall on the operator in principle and rent was waived in exchange; 田浦月見台住宅 in Yokosuka, Kanagawa, where the site is in an exclusively low-rise residential district and hard to redevelop, so land and building rent were waived after proposal review; and THE 610 BASE in Fukuchiyama, Kyoto, where the city put in no initial investment and waived rent on the building and the land directly beneath it. Because a council resolution is needed to waive rent, the guidebook says the effect of the reuse has to be explained to the council carefully.
Where the Same Guidebook Gives Two Figures
For Auberge Auf in Komatsu, Ishikawa, the CASE 2 fact box gives the municipal cost as facility renovation works of about ¥560 million, of which about ¥12 million is construction supervision, plus design consignment of up to ¥31 million, with ¥265 million from the Vacant House Comprehensive Support Project. The table on page 18 gives facility renovation of about ¥550 million. The case page and the summary table of the same guidebook differ. When you quote the figure, record which of the two you took it from.
Instruments Differ for Municipalities and Private Operators
The financing methods listed for municipalities and private companies, the financing problems named for each, and the PFS and social impact bond counts
The draft promotion measures list the main financing methods open to municipalities: local government bonds, comprising fiscal loan funds, funds from the Japan Finance Organization for Municipalities, publicly offered market funds and funds underwritten by banks; social impact bonds under pay-for-success contracting; national subsidies and grants; government crowdfunding; hometown tax donations; and sale of fixed assets.
| Category | Method | Description |
|---|---|---|
| Debt (local bonds) | Fiscal loan funds | The state issues bonds under the fiscal investment and loan special account and lends the proceeds to municipalities |
| Debt (local bonds) | Japan Finance Organization for Municipalities | The organization, founded jointly by all municipalities, issues bonds and lends the proceeds |
| Debt (local bonds) | Publicly offered market funds | The municipality issues bonds on the market and raises funds through a public offering |
| Debt (local bonds) | Bank-underwritten funds | The municipality borrows from financial institutions or mutual aid associations |
| Equity | Social impact bonds under PFS | Operation of a public-interest service is entrusted to a private body, with operating funds raised from private investors |
| Other | National subsidies and grants | Use of national subsidy and grant programs |
| Other | Government crowdfunding | An online service municipalities use to gather small contributions |
| Other | Hometown tax | Corporate and individual hometown tax donations with a local-issue return |
| Other | Sale of fixed assets | Raising funds by selling public real estate |
The social impact bond in the equity row is the form of pay-for-success contracting (PFS) in which operating funds are raised from private investors. There were 379 PFS projects in Japan at the end of FY2025, 42 more than a year earlier, of which 19 were social impact bonds, about 5 percent of the total. The fields are the three priority areas of health and medicine with 131 projects, elderly care with 153 and reoffending prevention with 7, plus community development with 24, employment support with 15 and the environment with 2. There is no category for public facility reuse. How social impact bonds work is set out in Financing Public Asset Revitalization.
For private companies the draft lists loans from government-affiliated financial institutions, institutional loans in which the municipality covers part of the interest or the credit guarantee fee, loans from private financial institutions, corporate bonds, share issues, venture capital, schemes under the Real Estate Specified Joint Enterprise Act, factoring, sale of fixed assets, national subsidies and grants, and crowdfunding. The tables list nine methods for municipalities and eleven for private companies (counted for this article).
Where Financing Gets Stuck
The draft sets out three financing problems on the municipal side: a shortage of staff versed in finance, which leaves the authority unable to judge whether a project is feasible; an inability to see whether the project pays over the medium to long term; and no grasp of which subsidy programs are available. The remedies it names are acquiring financial knowledge and mapping the available subsidy programs. For private operators it names two: projects are small and the firms that enter are also relatively small, which makes raising funds difficult; and a single facility on its own generates too little business to recover the initial investment. The remedies it names are designing the scheme with financial institutions involved and securing viability by linking the project with others in the same area.
The Two Programs That Subsidize Study Costs
Caps, eligible costs and conditions of the MLIT and Cabinet Office programs compared, and the support that is not money
Two national programs cover the cost of commissioning a feasibility study. Both are limited to fees paid to consultants and similar experts, and the Cabinet Office program excludes your own staff costs in writing.
The Pioneering PPP Support Program (先導的官民連携支援事業) subsidizes the study consignment costs a municipality needs when examining whether to adopt a pioneering public-private partnership project. It has two support types, one for examining the project scheme and one for building the information base. Eligible costs are fees for commissioning studies or reviews to consultants and other experts. Within the budget, the subsidy is a fixed sum capped at ¥20 million per project; for prefectures and designated cities, except matters concerning concession projects, the rate is one half and the cap ¥10 million. The conditions include that the subject of the study falls under MLIT's jurisdiction and that the study report is published.
The Cabinet Office subsidy for studies on projects utilizing private finance (民間資金等活用事業調査費補助事業) covers the study consignment costs municipalities incur when considering public facility operation projects. Eligible studies are feasibility studies, due diligence, and other work needed to introduce such projects. Applications for the FY2026 initial budget ran from March 10 to noon on April 10, 2026. The guidelines limit eligible costs to fees for commissioning studies or reviews to consultants and other experts, and state that costs of the applicant body itself, such as personnel costs, and any study consignment contracted before the date of the notice of the subsidy amount are not eligible at all. The subsidy is fully national funding capped in principle at ¥10 million per project; for prefectures and designated cities, except matters concerning public facility operation projects and wide-area PPP/PFI projects, the rate is one half and the cap in principle ¥5 million. Only study consignments contracted after the date of the grant decision notice and completed within FY2026 qualify.
| Point of comparison | Pioneering PPP Support Program | Cabinet Office study-cost subsidy |
|---|---|---|
| Administering body | MLIT, Policy Bureau, Infrastructure Policy Division | Cabinet Office, Private Finance Initiative Promotion Office |
| Cap per project | ¥20 million, fixed-sum subsidy | ¥10 million in principle, fully national funding |
| Prefectures and designated cities | Except concession projects, rate one half and cap ¥10 million | Except public facility operation and wide-area projects, rate one half and cap ¥5 million in principle |
| Eligible costs | Study consignment fees to consultants and similar experts | Study consignment fees to consultants and similar experts |
| Costs not covered | Not stated on the page | Own personnel costs; consignments contracted before the notice of the grant decision |
| Main conditions | The subject falls under MLIT's jurisdiction; the study report is published | The summary of the study report is published on the Cabinet Office website |
Five projects were selected under the FY2026 initial budget: a feasibility study on public-private partnership for the municipal car parks of Nagaoka, Niigata; a local PFI feasibility study for the renewal of the Clair Hirata roadside station and integrated management of the surrounding park in Kaizu, Gifu; a PFI feasibility study for the management of the Kyoto Prefectural Seminar House and the adjoining land; a study of area-management-type public-private methods for the integrated development of the Mitsuya no Sato roadside station visitor centre and a planned municipal park in Akitakata, Hiroshima; and a study on forming a hub in the centre of Nishimera, Miyazaki using private investment. The five are municipal car parks, two roadside stations (one of them together with a park), a prefectural seminar house, and a village centre. Closed schools and historic private houses are not among them.
Some Support Is Not Money
The Small Concession Formation Promotion Project (スモールコンセッション形成推進事業) sends experts to municipalities that are putting closed schools, historic private houses and other idle public facilities to use, to help solve the problems of the early stage of a project. It is not a subsidy. Nine studies are under way in FY2026: four on historic private houses, in Kaminokawa (Tochigi), Iwata (Shizuoka), Kyoto City and Ikaruga (Nara); two on schools, in Iwata (Shizuoka) and in Yamaguchi Prefecture with Ube; and three on multiple facilities, in Hirosaki (Aomori), Mimasaka (Okayama) and Minami (Tokushima). The program itself is covered in Small Concession Expert Dispatch Program.
The Cabinet Office publishes an outline that gathers the PPP/PFI support programs of every ministry in one place. It runs through the Cabinet Office; MEXT, the Agency for Cultural Affairs and the Japan Sports Agency; the agriculture and industry ministries; and MLIT, the Japan Tourism Agency and the environment ministry, showing for each program which stages it covers: planning, feasibility study, advisory work, design, construction, maintenance and operation, or other. If the ministry with jurisdiction over your building is not MLIT, this outline is the faster place to start.
The Program That Lightens Loan Interest
The rate and term of the Regional Revitalization Interest Subsidy, its three conditions, the institutions eligible for designation, and the Manno case
Under the Regional Revitalization Act, the Regional Revitalization Interest Subsidy (地域再生支援利子補給制度) works as follows: when an operator carrying out a project that serves a certified regional revitalization plan borrows from a financial institution, the state designates the institution and, within the budget, pays an interest subsidy. The rate is up to 0.7 percent, paid for five years, and the loan itself has to run five years or longer. PFI projects qualify, and there is no restriction on the size of the operator.
Three conditions come first. The municipality has to draw up a regional revitalization plan and have it certified by the state; a financial institution has to take part in the regional revitalization council formed to prepare that plan; and the institution has to be designated by the state. The plan has to explain how the PFI project serves local problem-solving, state its targets as quantitative values or indicators in principle, and name the institutions expected to lend. Institutions eligible for designation are banks, shinkin banks and their federation, labour banks and their federation, credit cooperatives and their federation, agricultural cooperatives and their federations, fishery cooperatives and related bodies, the Norinchukin Bank, the Shoko Chukin Bank and the Development Bank of Japan. Operators apply through a designated institution during the concentrated intake periods, five times a year.
The PFI example given is a project in Manno, Kagawa that rebuilt the town's junior high school as a complex combining a town gymnasium and a town library, with an interest subsidy totalling ¥15,784,000. It lightens the interest; it does not reduce the principal. Because the certified plan and the council have to exist first, it is of no use to anyone who thinks of it after loan talks have started.
The guidebook calls it useful both to exchange views with private operators and regional financial institutions from the stage of shaping the project concept, and, as a way of encouraging private participation, to talk with regional financial institutions early so that operators can be found and their financing goes smoothly.
What Past Subsidies Leave Behind
Repayment obligations when the use changes, cases where no repayment is required, and asking the granting body first
The guidebook warns that a subsidy used in the past can create an obligation to repay when the use of the building changes or the building is decommissioned. It adds that in recent years there are cases where no repayment is required if the municipality earns no income from the reuse, such as the designated manager system or a concession that charges no operating right consideration, and advises asking the granting body first. If such a restriction comes to light after a private operator has proposed and been selected, the guidebook says, it becomes an unexpected burden for the operator and carries the risk of withdrawal.
Whether repayment is required turns on which subsidy it was and on whether the municipality earns income from the reuse. The choice between a concession that charges an operating right consideration and a designated manager arrangement therefore feeds straight back into how the old subsidy is treated. For school buildings built with national subsidies there is a separate MEXT procedure, set out in Property Disposal of Closed Schools, which covers when approval is needed, when a report is enough, and how the treasury payment is calculated.
Questions to Settle Before the Money Talk
Repair costs, past subsidies, the order of contract and grant decision, publication of the report, and the regional revitalization plan
| What to ask | Why it matters |
|---|---|
| Who carries major repairs at the start of and during the project, the municipality or the operator | The guidebook says a municipal contribution lowers both the scale of private financing and the risk of recovering the investment. Four of the six case studies carry a municipal cost; the two leases carry none |
| Which subsidies were used to build or renovate this building | Changing the use or decommissioning the building can trigger repayment. Ask the granting body |
| If national money will fund the study, when is the contract signed | The Cabinet Office subsidy covers only consignments contracted after the grant decision notice; anything contracted before the notice of the amount is ineligible |
| Can the study report be published | The Pioneering PPP Support Program requires publication of the report, and the Cabinet Office lists publication of the summary on its website among the things it asks for |
| If you want the interest subsidy, is there a regional revitalization plan | Certification of the plan, a financial institution in the council and designation of that institution all come first. It is too late just before the loan |
Subsidies and Support Programs for Small Concessions
National and municipal subsidies and support programs, and the order to apply in
Financing Public Asset Revitalization
Green bonds, social impact bonds and hometown tax: how public asset projects raise money
Property Disposal of Closed Schools: When No Procedure Is Needed, Disposals Settled by Report, Treasury Payments and Funds, and Documents and Filing Times
When no procedure is needed, disposals settled by report and those needing approval, how the treasury payment is calculated and when a fund replaces it, and the documents and filing times
What to do next
When considering financing, review existing grant conditions and future cost responsibilities.
| # | What to check or consider | Responsible team or contact |
|---|---|---|
| 1 | Identify the award year, name and awarding body of grants used for the building | Asset management and facilities teams |
| 2 | Present the grant records and proposed use to the awarding body and check disposal procedures and repayment requirements | Grant awarding body |
| 3 | Estimate the surveys and consultancy costs needed and check eligible costs and limits under relevant grant programs | Consultants and responsible ministry |
| 4 | Consult local financial institutions about prospective operators' financing and loan assessment requirements | Local financial institutions |
| 5 | Define public and private responsibility for renovation costs, rent and operating expenses before solicitation | Responsible department and budget team |
The handbook notes the risk of withdrawal if regulatory restrictions emerge after proposals or selection. Check existing grant conditions and disposal procedures with the awarding body before solicitation.
References
Recommending Small Concessions: A Guidebook for Utilizing Idle Public Facilities (in Japanese) — MLIT Policy Bureau Infrastructure Policy Division and Cabinet Office Private Finance Initiative Promotion Office (2026)
Draft Promotion Measures for Small Concessions (in Japanese) — MLIT Policy Bureau (2024)
Pioneering Public-Private Partnership Support Program (in Japanese) — Ministry of Land, Infrastructure, Transport and Tourism (2026)
Small Concession Formation Promotion Project (in Japanese) — Ministry of Land, Infrastructure, Transport and Tourism (2026)
Subsidy for Studies on Projects Utilizing Private Finance, FY2026 initial budget (in Japanese) — Cabinet Office Private Finance Initiative Promotion Office (2026)
FY2026 Subsidy for Studies on Projects Utilizing Private Finance (initial budget), Application Guidelines (in Japanese) — Cabinet Office Private Finance Initiative Promotion Office (2026)
FY2026 Subsidy for Studies on Projects Utilizing Private Finance (initial budget), Selected Projects (in Japanese) — Cabinet Office Private Finance Initiative Promotion Office (2026)
Guide to the Regional Revitalization Interest Subsidy (in Japanese) — Cabinet Office Regional Revitalization Bureau (2026)
Outline of National Support Programs, FY2026 (in Japanese) — Cabinet Office Private Finance Initiative Promotion Office (2026)
Status of PFS Projects in Japan (in Japanese) — Cabinet Office, Office for Outcome-Based Contracting (2026)
