The purpose of this study is to examine the effects of decentralization reform on local democracy and good local governance in Japan in terms of local governance competitiveness. Even though Japan has established a high level of mature economy, it has been heard that an authoritarian and hierarchical model of Japan has exerted a considerable power over the society and citizens by comparatively regulating the society (Shunichi, 2003). This study is supposed to investigate whether or not decentralization reform efforts in Japan have made a contribution to reinforce democracy and better governance characterized by a high level of citizen participation and with an increased level of partnership with the private sector by reducing a level of central control and supervision.