A Town Losing Grants, A Town Gaining Factories: Understanding the Path Away from ‘Base Money’ in Iwakuni and Kaki through Numbers

Located at the eastern edge of Yamaguchi Prefecture, bordering Hiroshima Prefecture, Kaki Town is home to approximately 5,800 residents and is currently experiencing quiet turmoil. A policy has been indicated to exclude it from the areas eligible for reorganization grants that have been provided in connection with the operation of the U.S. military base in Iwakuni. Meanwhile, on the Iwakuni City side of the base, Mazda is advancing the construction of a battery factory for electric vehicles, aiming to start operations in March 2028.

A town losing grants and a town gaining factories—these two movements are occurring simultaneously within the same region. The question is not about “which is better.” Who benefits, and how does this change the structure of people’s lives? We will explore this through numbers.

—

The Structure of Reorganization Grants: What Has Been Received in Exchange for ‘Noise’

First, let’s clarify the structure of the grants.

The grant system associated with the U.S. military reorganization was established under the Special Measures Law for the Smooth Implementation of the Reorganization of the Stationed Forces, enacted in 2007. It is a mechanism whereby the national government provides financial support to municipalities that accept the reorganization of military bases. In the case of Iwakuni Base, the relocation of carrier-based aircraft units was completed in 2018, and the corresponding grants have been distributed to Iwakuni City and surrounding municipalities.

According to reports, Kaki Town has been receiving reorganization grants amounting to approximately 200 million yen annually. Considering that the town’s general budget is around 4 billion yen, this represents about 5% of total revenues. While 5% may not seem “fatal” at first glance, the fact that this 5% has supported the maintenance of public facilities and some resident services is significant.

The mayor of Kaki Town stated in an interview, “The noise from jet aircraft is so loud that it can be impossible to have a conversation.” This statement indicates that the grants are not merely financial figures, but rather compensation received in exchange for the everyday burden of noise. While the noise remains, the compensation disappears. Residents voicing their doubts about the sudden exclusion is not just an emotional response; it is a structural issue.

The background to the exclusion from the grant-eligible areas is said to involve the overall redistribution of the national defense budget and an administrative cutoff marking the “completion” of the reorganization project. However, it is crucial to note that the reorganization grants are not a permanent system; they were originally designed to be time-limited. By design, the grant period is capped at 10 years, depending on the progress of the reorganization, and counting from the completion of relocation in 2018, around 2028 serves as a significant cutoff. Thus, the termination is not “sudden” but rather “as planned” according to the system design.

The issue is how well the town’s financial structure has prepared for this “planned” outcome. There is a gap between the mechanism and reality.

—

Mazda’s EV Battery Factory: The Numbers Indicate the Possibilities and Limitations of ‘Replacement’

At the same time that grants are set to shrink, a new economic pillar is emerging in Iwakuni City. This is the EV battery factory that Mazda is constructing within the city.

When we organize the publicly available information, we can see the following scale:

• Scheduled Operation: March 2028
• Expected Employment Size: Approximately 1,500 people based on reports
• Investment Scale: Several billion yen (part of Mazda’s mid-term management plan for electrification)
• Location: Within Iwakuni City (at a certain distance from the base)

The creation of 1,500 jobs means that, simply put, the total annual salary will amount to several billion yen. Assuming an average annual income of 4 million yen, that would be 6 billion yen for 1,500 people. If this income circulates in the local economy, it will have a ripple effect on the food, retail, and service industries. Furthermore, the factory’s property tax and corporate resident tax will directly boost Iwakuni City’s tax revenues.

But what about Kaki Town?

The factory is located in Iwakuni City, so the direct benefits of property tax and corporate tax will not flow to Kaki Town. However, if employees commute from Kaki Town to the factory, a portion of their resident tax will go to Kaki Town. Additionally, there is a possibility that some of the supply chain associated with the factory may extend to businesses within Kaki Town.

However, it is necessary to calmly lay out the numbers. Kaki Town will lose approximately 200 million yen in grants. For the indirect tax revenue effects from the Mazda factory to compensate for this 200 million yen, considerable conditions must be met. The assumption that the gap left by the grants will be “automatically” filled by the ripple effects of a private factory is somewhat overly optimistic.

Rather, what should be noted is the potential for this factory to fundamentally change the region’s economic structure. Grants are something received, while factory tax revenues are something generated. The nature of the funding sources is fundamentally different. Grants can fluctuate based on national policy, but as long as the factory operates, employment and tax revenues will circulate within the region. From dependence to circulation—this structural transformation is the essential change that lies behind the numbers.

However, it is also true that the EV market itself carries uncertainties. Globally, the pace of the EV shift varies, and Mazda itself has indicated a stance of not being solely focused on EVs, promoting a “multi-solution strategy.” Whether the factory will continue to operate at the planned scale is subject to the global market environment. Entrusting the region’s future to a single factory could lead to a different form of “dependence.”

—

Iwakuni City Council Election: The Significance of 35 Candidates

In April 2025, the Iwakuni City Council election will take place. Thirty-five candidates are running for the available seats, including several newcomers.

Looking at the structure of this election, it becomes clear that the issues of grant dependency and the Mazda factory intersect within the candidates’ pledges. Regional revitalization, job creation, and coexistence with the base—while the words may be similar, the substance varies among candidates.

What is noteworthy is how many candidates clearly advocate for fiscal management that does not rely on base-related grants. The reduction of grants is not solely an issue for Kaki Town. Iwakuni City itself has also benefited from reorganization grants, and their reduction will impact the city’s finances as well.

The presence of 35 candidates indicates that there is a prevailing sentiment in the region that “the current situation cannot continue.” However, sentiment alone will not change the structure. After the election, the question will be how concretely can a fiscal design be drawn between the reality of reduced grants and the expectations of a factory coming in?—that is the resolution we need.

—

Understanding the Structure: The Question of ‘Who Benefits’

Finally, I would like to organize the structure that emerges when viewing these two events together.

What this table indicates is that the region will not stabilize based on one or the other. Grants and factories are two pillars of different natures, and when one collapses, it cannot be supported by the other.

What Kaki Town truly needs is not to seek alternative sources of funding for the grants, but rather to design a dual structure for its revenue sources. Attracting businesses, regional collaboration, strategic use of hometown tax donations, and reducing expenditures through the consolidation of public facilities—there are multiple options.

Moreover, for Iwakuni City, the Mazda factory should not be viewed as a “savior” but rather as the beginning of a “new relationship.” The question will be whether a layered relationship can be built between the factory and the region, encompassing not just employment but also education, living environment, and transportation infrastructure. This will mark the distinction between mere success in attracting the factory and a true structural transformation of the region.

—

The termination of grants, in a sense, is an event where “the system ends as planned.” The construction of the factory is an event where “a new system begins.” The end and the beginning overlap at the same time in the same region.

There are people living within this overlap. They pause conversations under the sound of jet aircraft, browse job listings for the factory, and head to polling places.

Numbers reveal the structure. Yet, it is always people who breathe within that structure.