A Key to Open Japan? Japan's Nonprofit Sector on the Move

By Frost, Yuko Iida | Brookings Review, Fall 1993 | Go to article overview

A Key to Open Japan? Japan's Nonprofit Sector on the Move


Frost, Yuko Iida, Brookings Review


Almost 25,000 nonprofit organizations are now at work in Japan, and their numbers are increasing rapidly. Since 1988 some 2,000 new nonprofit groups have sprung up--roughly 2 new ones every day. In 1992 total spending by nonprofits accounted for $64 billion, or 2.7 percent of Japan's GDP. And the unprecedented growth of the nonprofit sector--groups devoted to education, health care, social welfare, the environment, culture, development aid, and international exchange--is generating more than money. It is awakening Japanese citizens to the possibility of new ways of relating to their government and the private sector--and eventually to the outside world.

The American Model and the Japanese Variation

In the United States, creating a tax-exempt nonprofit organization is relatively easy. Some 33,000 foundations and more than a million other nonprofit groups exist. According to Peter F. Drucker, in Managing the Non-Profit Organization: Practices and Principles, the nonprofit sector is "America's largest 'employer' . . . with every second American adult serving as a volunteer . . . and spending at least three hours a week in nonprofit work." Among the chief roles of those organizations and volunteers is to keep an eye on the government and make sure citizens' voices are heard by policymakers at both the local and federal level.

Japan's nonprofits face a more uphill existence. Most contributions to nonprofits, for example, are not tax-deductible. The only contributions Japanese citizens can deduct are those made to the local and national governments; specific organizations, such as the Japanese Red Cross, designated by the Ministry of Finance; educational institutions; public welfare institutions; and political parties and their local support groups. In 1990, only 600 groups were allowed to receive tax-deductible contributions. And even donations to these groups are deductible only up to 25 percent of a donor's income.

Corporate contributors fare slightly better. As long as a company donates to one of the designated tax-exempt organizations, it can deduct its entire gift as a loss. To other nonprofits, companies can deduct contributions up to 0.1 percent of the sum of capital, capital reserve, and income.

In addition, nonprofits can be organized only with governmental permission. A group wishing to arrange international educational exchanges, for example, must be approved by the Ministry of Foreign Affairs; one with an environmental mission, by the Japanese Environmental Agency. Groups must have a certain level of assets to qualify for nonprofit status, and, once established, are subject to governmental regulation and monitoring. In fact, the government's hand is so heavy--it approves each nonprofit's budget and its use--that many civic organizations never bother registering with the authorities despite the financial disadvantages of not having the tax-exempt status.

Indeed, most Japanese nonprofits have the look and feel of government agencies. And no wonder. Many serve as a rest stop for government ministry officials on their way to retirement through Amakudari, or "descending from heaven." Even many nonprofit employees who have not first worked for the government see themselves as de facto government workers rather than as part of an organization that challenges the government to try alternative approaches to existing problems. As yet, for the most part, nonprofits have no wish to pose a threat to or to offend the government.

Growing Community Spirit

Despite these impediments, the nonprofit sector is beginning to come into its own. Voluntarism, once regarded as the domain of women and retirees, is attracting the interest of increasing numbers of younger people, right out of college, who see nonprofits as attractive career alternatives to large corporations and the government.

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A Key to Open Japan? Japan's Nonprofit Sector on the Move
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