The government is implementing policies to promote municipal digital transformation (DX) by guiding local governments toward the formation of a digital society through the digitization of public service provision and the sharing of public-private information. This paper analyzes the current status and challenges of municipal DX by exploring survey data from an original questionnaire, showing that progress in DX has so far remained at a low level, with small municipalities in particular lagging behind. While some progress has been made in digitization of operations, automation of information processing and overall optimization that will allow for enhanced review of organizations and workflows have not been well implemented. There are many obstacles to DX, such as lack of know-how, difficulty of internal human resource development, and the large number of existing written procedures. Smaller municipalities also face hardware limitations including both limited IT equipment and security systems. The quantitative analysis suggests that residents' demand will drive municipal DX, and that the maturation of DX will promote telework and develop municipal DX into digital innovation in local industries.