This chapter examines the current state and challenges related to inclusive growth and fiscal decentralisation in Japan. After reviewing the literature, it discusses the Japanese system of local public finance, with a description of recent reforms that have contributed to its fiscal decentralisation. The discussion highlights the integral role of local governments in the Japanese system of social protection, and it considers how and to what extent fiscal decentralisation could play a role in inclusive growth in the Japanese context. The rapid pace of ageing and population decrease in the country indeed poses serious challenges for inclusive growth and local public finances, which make it important to consider the roles of agglomeration and intergovernmental transfers.