can take place within one municipality or between multiple municipalities and are required to be based upon consensus. History There have been waves of merger activity between Japanese municipalities. The first merger, known as , had happened in the period from 1888 to 1889, when the modern municipal system was established. Before the mergers, existing municipalities were the direct successors of spontaneous hamlets called , or villages under the han system. The rump han system is still reflected in the postal system for rural areas as postal units called . The mergers slashed ‘natural settlements’ (shizen sh¯uraku) that existed at the time from 71,314 to 15,859 cities, towns and villages, justified at the time by the increased scale and relevance of the resulting respective autonomous governing bodies. The second peak, called , took place over the period from 1953 to 1956. It reduced the number of cities, towns and villages by over half, from 9,868 to 3,472 with purposes of the establishment of a National Treasury Subsidy System. 5,000 villages were disappeared, but the number of cities were doubled. In 1965, the Special Law for Municipal Mergers (SLMM) enacted but it failed to motivate municipalities to voluntarily merge with others. Causes Declining birthrate of Japan and very bad fiscal led the Japanese central government to promote national consolidation reform. As of January 2006, many municipalities in Japan contained fewer than 200 residents. Japanese municipalities require skilled workers. 40% of Japan's GDP consisted of debts from local governments. Japan merges local governments to expand residential area per municipal government, create different school attendance boundaries for elementary school and junior high school students, and to allow more widespread use of public facilities. Merger After the Decentralisation movement started, based on the Omnibus Decentralization Law and an amendment to the Special Law for Municipal Mergers (SLMM) in 1999, which provided strong financial and economic incentives for municipal consolidation, the central government forced municipal mergers by using incentive schemes according to special financial measures. Grace period to keep an original grant after municipal mergers, instead of combining two municipalities. If city A received 0, city B received 100, a combine would keep 100, guaranteeing the same amount of grants. After mergers, the issue of special local bonds would be paid through central government grants. There special bonds provided very strong incentive for the implementation of public works to support the new merged municipalities. Although