Five major political parties have agreed on a bill that would open the way for Osaka Mayor Toru Hashimoto to realize his long-cherished plan to reorganize the city into special wards headed by popularly elected mayors. The five parties -- the ruling Democratic Party of Japan (DPJ), the largest opposition Liberal Democratic Party (LDP), New Komeito, Your Party and People's New Party (PNP) -- are set to jointly submit the bill to the Diet shortly.

The move represents a major step toward allowing local bodies in urban areas to choose what form their administrations will take. Moreover, the bill will require local bodies to gain approval for such reforms from residents in referenda. If enacted, the bill will lead to a major change in Japan's local administrative system.

Still, the Diet must thoroughly examine numerous challenges posed by reform of local governments in urban areas, such as how to divide a city's finances when it is split up into special wards.

Under Mayor Hashimoto's plan, the city of Osaka would be divided into special wards and the Osaka Prefectural Government would be solely responsible for administrative services covering the present city of Osaka, thereby eliminating function overlaps. Ward mayors to be elected by popular vote would be responsible for the administration of the respective wards. As new legislation needs to be enacted by the Diet for such a reform, Mayor Hashimoto has sought cooperation from both ruling and opposition parties.

The bill would specifically allow prefectural governments other than Tokyo to abolish cities, towns and villages and set up special wards to be headed by popularly elected mayors, like Tokyo's 23 wards. A prefectural government can work out a plan with government ordinance-designated cities -- cities granted greater powers than normal -- and neighboring municipalities to reorganize them into special wards on condition that they have a combined population of at least 2 million.

The point of contention in the five-party consultations was how the national government should be involved in reform of local bodies. The parties agreed to demand that local bodies involved hold prior consultations with the Internal Affairs and Communications Ministry over the allocation of tax revenue sources as well as division of the budget and administrative work, while stopping short of requiring them to gain the national government's permission for such restructuring.

Unlike the Tokyo Metropolitan Government, adjusting financial resources between the prefectural government and special wards in Osaka -- whose financial base is relatively weak -- would pose various challenges. Relevant laws need to be revised in addition to enacting the agreed-upon bill in order to put Hashimoto's plan into practice. Unless Osaka designs new systems while closely consulting with the national government, the restructuring could cause confusion.

It is natural that the abolition of local bodies as part of such reform would need to be approved by not only their assemblies but by local residents in referenda. The bill's enactment could be an opportunity to ensure that the principle of self-determination by local residents will take root.

If the bill is passed into law and relevant laws are revised, the Osaka prefectural and municipal governments' abilities to reorganize the city into local bodies that can effectively govern their respective areas will be tested. Mayor Hashimoto has expressed dissatisfaction with the fact that the bill would not allow the Osaka Prefectural Government to change its name to the Osaka Metropolitan Government as he demands.

However, the more important thing is to ensure special wards be given powers equal to legally designated core cities and thereby realize the autonomy of local residents. The city of Osaka is unlikely transform itself into special wards by 2015 -- as planned by the Osaka Restoration Association led by Hashimoto -- unless the city and prefecture quickly decide on the demarcation of new wards, the extent of power to be given to them and how to divide financial resources among themselves. Efforts to win the understanding of residents and gain approval through a referendum will certainly pose serious challenges.

The bill agreed on between the five political parties would also cover urban areas other than Osaka. However, splitting a big city into special wards headed by popularly elected mayors may not be suitable for some regions.

The five-party consultations progressed under pressure from Hashimoto, who is popular not only in Osaka but across the country. Still, the national government and opposition parties should have broad and in-depth discussions on a future vision of the administration of urban areas.