【Background】Today’s Japan faces a huge financial deficit and many social challenges including a decreasing birth rate and aging population. Many Japanese are beginning to think that we can no longer totally rely on governmental social services, and that we should find another way to fulfil our increasing social needs. Not only we find ourselves in the position of a ‘developed’ country economically but also in terms of seriousness and extent of social problems. If we address these pressing issues with innovative way, we may help other countries solve similar problems in the future.
Given this situation, expectations to the roles of the nonprofit sector have been growing. Furthermore, since the late 1990s, the introduction of a new business model ‘the social enterprise model , (also known as the ‘social business model’) -has drawn considerable attention and created a new breed of social entrepreneur eager to launch such businesses. The interest this trend has generated among talented men and women of all ages, but especially among the young, is a cause for genuine hope for the future. Given this situation, expectations to the roles of the nonprofit sector have been growing. Furthermore, since the late 1990s, the introduction of a new business model ‘the social enterprise model , (also known as the ‘social business model’) -has drawn considerable attention and created a new breed of social entrepreneur eager to launch such businesses. The interest this trend has generated among talented men and women of all ages, but especially among the young, is a cause for genuine hope for the future.
Chart 1 Aging Society 1980 and 2030
Social entrepreneurs have made great progress in creating innovative solutions in various fields over the last 20 years. Their innovative solutions are attracting the interest of political and business leaders, and are stimulating increased collaboration with NPOs and social businesses to solve these social problems.
【The Growing Social Sector: Key Facts and Statistics】The Improving Legal Framework
While the Japanese people have actively engaged in mutual support and private and community based philanthropic activities throughout their history, this, for the most part has been done in the absence of an adequate legal environment. However, this situation has dramatically changed over the last 20 years. The Great Hanshin-Awaji Earthquake of 1995, which directly impact Kobe-City, a major urban center, was the catalyst for renewed awareness among both politicians and ordinary people of the importance played by volunteer and civic action groups. The Japan NPO Law came into force in 1998. This allowed civil society organizations to acquire nonprofit corporation status. The Law, together with the 2008 reform of public interest corporation laws, acknowledged the pivotal role ‘citizen engagement’ had in supporting public interest.
There are many types of nonprofit corporate status, such as: “Specified Nonprofit(NPO) Corporation(Tokutei Hieiri Katudo Hojin); “Public Interest Corporation (Koeki Hojin)” made up of Public Interest Foundations and Public Interest Associations. Public Interest Corporations are approved by public interest approval councils (charity commissions) that make public interest approval judgments based on whether an organization fulfills certain criteria; Social Welfare Corporation (Shakai Fukushi Hojin); Religious Organization (Syukyo Hojin); Incorporated Educational Institution (Gakko Hojin); and Medical Corporation (Iryo Hojin).
Donors to “Certified “Specified Nonprofit Corporations and “Certified”Public Interest Corporations receive income tax deductions under the tax system. Other types of nonprofit organizations also receive preferential treatment under the tax system. The Great Eastern Japan Earthquakes of 2011 compelled 76 percent of the Japanese people to give for disaster relief. As a result of this event, the tax incentives for making donations improved significantly in 2011.
However, there are still very few Certified Specified Nonprofit Corporations (less than two percent from nearly 50,000 NPO Corporations in Japan). As of now, there is no certification system for social enterprises. Social businesses are widely recognized as an important vehicle for making social change, but tax incentives are still under discussion.
Scale of the Sector
According to the survey conducted by the Cabinet Secretariat Office,
【III. Philanthropy and Other Support】a) Individuals
The Giving Japan 2010 estimated the total amount of individual donations during 2009 was 545.5 billion yen (6.8 billion US dollars), which was equivalent to 0.12% of the national real GDP. In Japan, supporting NONPROFITs as a member is also a common way. In 2009, the total estimated amount collected through membership fees was 375.5 billion yen(4.7 billion US dollars).
The total number of individuals who donated was estimated as 37.66 million people, equivalent to approximately 34% of the total Japanese population aged 15 or over.The total number of individuals who donated was estimated as 37.66 million people, equivalent to approximately 34% of the total Japanese population aged 15 or over.
The amount of donatons to religious organizations accounted for the highest percentage (44.2%), followed by donations to international cooperation activities (12.1%), government (9.6%), education(7.8%), emergency assistance and disaster relief (4.3%) and to the Community Chest (3.4%).In Japan, donors sometimes give to local government.
Although there are no accurate statistical data on the number of grant-making foundations, the total number of incorporated foundations and incorporated associations that are engaged in grant programs is estimated to be about 4,000 organizations. The "Josei Zaidan Yoran" (directory of grant-making foundations) published annually by Japan Foundation Center, contains information on around 1,000 organizations, including grant policies and details of grants made. After the boom in establishing corporate foundations in the late 1980s and the affect of low-interest rates, the number of newly-established grant-making foundations has been decreasing since around the 1990s According to a survey conducted by the Japan Foundation Center, 483 foundations of the 1,657 surveyed were engaged in educational grant programs. Other fields of grant programs included health and medical field (264 organizations), social welfare (165 organizations) and culture and art (143 organizations). According to a survey conducted by Japan Foundation Center in 2011, the total grant-in-aid amount of 754 organizations that responded the survey was 60 billion yen ($750 million US dollars).
In 2009, the total amount of corporate donations was 494 billion yen (6.2 billion US dollars), equivalent to 1.4% of the total amount of corporate annual income. The ratio of total individual donations to total corporate donations is close to fifty-fifty. Although corporate profits have drastically decreased due to the worldwide economic depression, their donations have slightly increased.
9.8% (256,000 corporations), of all corporations made contributions. The breakdown of donations is as follows: education (30.5%), culture and entertainment(sports club, recreation facilities, arts etc) (24%) and environmental protection (13.5%). By Industry, corporations in construction, chemical, financial insurance, transport and communications utilities are the most generous.
Although complete statistics on government subsidies for NONPROFITs are not available, outsourcing to NONPROFITs, subsidies and support programs by the government have been increasing under the influence of the government budget deficit and the development of NONPROFITs in recent years. This is especially the case for the designated manager system (system where NONPROFITs and corporations are entrusted with the operation and management of the government facilities by open tendering, such as government-owned sports clubs, community centers, and libraries, started in 2003, which has rapidly increased the government subsidyto Japanese NONPROFITs.
Key Features and New TrendThere are several key infrastructures in Japan to advance the sector. For example, ETIC (Entrepreneurial Training for Innovative Communities) has been playing a key role over the last 20 years in training social entrepreneurs and assisting them in the development of new business models. Over 500 social entrepreneurs were born with ETIC. See an article introducing ETIC. https://avpn.asia/case-study/capacity-building-etic/
In 2016 leading social entrepreneurs established Japan New Public Association as a platform for NPOs, social businesses, and profit purpose corporations to work together to achieve social innovation. The membership grew to around 100 in 2017.
Another significant event was the enactment of the Dormant Account Utilizing Law in December 2016. Because of this law, it will be possible to utilize over US$500 million annually to invest in efforts and activities to solve social issues. In order to utilize the financial resources made available by these changes as efficiently as possible, the frameworks to identify and select appropriate grantees are urgently needed.
In addition, impact measurement is getting high attention among leading NPOs and social businesses. Japan’s first Social Impact Measurement Initiatives have been established. In 2016, over 150 organizations including corporations, government, nonprofits and universities, announced the ‘Roadmap to 2020.’ The roadmap’s three main themes outline the necessary approaches to achieve the vision. They are ‘cultivation of social impact measurement culture,’ ‘developing an enabling environment of social impact measurement,’ and ‘social impact measurement best practices collection and application.’
Writing: Certified Specified Nonprofit Corporation Japan Fundraising Association Representative Director Masataka Uo