Giving in Japan Today and Tomorrow
#1 Legal Status Isn’t Just a Technicality
In the United States, nonprofit organizations that meet certain criteria can apply for 501(c)(3) status with the IRS—a designation that allows donors to claim tax deductions. The process is well-known, widely used, and fairly efficient.
Japan has no direct equivalent. Instead, charitable status is nested within a patchwork of legal categories, each with its own complex requirements. Organizations seeking tax-deductible status must be designated as Public Interest Incorporated Associations (PIIAs), Public Interest Incorporated Foundations (PIIFs), or as Approved NPOs—a select class of certified nonprofits that meet strict public support tests.
“Due to rigid and complex legal systems and procedures, the number of newly established nonprofits remains limited” (5)
As of 2023, Japan had just over 11,000 organizations with tax-privileged nonprofit status. In contrast, the United States had more than 1.5 million registered 501(c)(3)s (19)
There are some rather complicated reasons behind this striking difference, including a very low approval rate for PIIA and PIIF applications in 2020-2023, resulting in an overall authorization rate of less than 35%. The result isn’t just fewer organizations, it’s a weaker pipeline of innovation. Many Japanese nonprofits are small, volunteer-run, and unable to scale. About 80% of certified NPOs operate on annual budgets under ¥50 million (about $333,000), with limited capacity to invest in growth, measurement, or advocacy.
An Environment That Discourages Risk
The ecosystem around giving—what some call “philanthropic infrastructure”—is still underdeveloped in Japan. Donors have few trusted sources to evaluate nonprofits, and the country lacks widespread equivalents to U.S.-based platforms like Charity Navigator or Guidestar.
Similarly, while philanthropic efforts by HNWIs are gaining momentum, and several specialized services have already been launched, Japan is now only beginning to build a class of philanthropic advisors who can help high-net-worth individuals or corporations develop giving strategies. These intermediaries—commonplace in the U.S.—play a crucial role in connecting money with need. Without them, donors are left to navigate on their own.
“There is a weak ecosystem of support in terms of professional human resources and information, such as philanthropy advisors and rating agencies.” (5)
This ecosystem gap is particularly noticeable among Japan’s growing class of wealthy individuals. Many would like to give—but don’t know how to start, where to give, or whom to trust.
Furusato Nozei: A Clever Workaround—with Complications
There is, however, one major exception: Furusato Nozei, or the “hometown tax donation” system. This is a well-established system in Japan that allows individuals to direct their taxes to support their usually rural hometown or municipality, rather than paying taxes to the locality where they happen to be living at the time. Introduced in 2008, this program allows the taxpayer to receive generous tax deductions. In return, donors often receive gifts like local produce, fish, or other specialties.
The system has proven wildly popular. In fact, Furusato Nozei accounts for more than half of all individual charitable giving in Japan, with total donations surpassing ¥1 trillion ($6.8 billion) in 2023. But this success comes with a tradeoff. (61)
While tax deductions for donations to approved NPOs are limited to a maximum of about 50%, the Furusato Nozei program offers nearly a 100% tax deduction along with return gifts... potentially posing a threat to donations directed toward organizations working to address social issues at a national level. In other words, people are giving—but not necessarily to nonprofit organizations. And they're often giving in ways motivated by incentives, not social impact.
That said, some local governments have begun experimenting with channeling Furusato Nozei funds toward nonprofit organizations and social enterprises. Cities like Tokyo’s Shibuya Ward and Fukuoka City now allow donors to direct contributions toward specific NPOs. This is a small but promising step toward reorienting this tool for public benefit.
Foundations: Between Tradition and Innovation
As demonstrated in the report, the scale difference between Japan and the United States is stark. For example, while the U.S. is home to approximately 100,000 foundations, Japan has only around 3,000 grant-making foundations. According to the Japan Foundation Center, 985 Japanese foundations disbursed a total of ¥119.5 billion (approximately $0.8 billion) in 2019. In contrast, foundation giving in the U.S. totaled $75.69 billion that same year, underscoring the considerable disparity.
Many Japanese foundations were established decades ago, primarily to support academic research or scholarship programs. Even today, their engagement with nonprofit organizations in the broader social sector remains relatively limited. Regulatory constraints also hamper innovation. Foundations in Japan face strict rules on accumulating reserves and running surpluses, making long-term planning and risk-taking particularly difficult.
As a result, foundations in the U.S. have come to play a more prominent role in advancing the social sector, whereas in Japan their role has so far remained more circumscribed. This reflects broader differences in historical development, institutional mandates, and the legal environment governing philanthropic activity.
(Please note that the number of foundations shown above refers to the total number of legal entities classified as “Public Interest Incorporated Foundations” or “General Incorporated Foundations,” and thus includes operating foundations. Separately, there are approximately 3,000 grant-making foundations in Japan, but this figure encompasses various legal entity types beyond the two categories mentioned above. As such, the two figures are not exactly comparable but taken together they give the outlines of the larger situation.)
So, Why Does This Matter?
To some, these structural issues may sound like the stuff of administrative policy. But in reality, they shape how a society solves its most urgent problems—poverty, inequality, education gaps, aging, disaster response, and climate change. While in other societies, non-profit organizations are able to play an important role in addressing these issues; in Japan, they have not yet been able to fully take on such a role.
Nonprofits are inherently expected to fill in for governmental shortcomings, but they cannot achieve this goal if players in Japan’s social sector are unable to take risks, grow, and attract funding themselves.
But change is coming. In the next post in this series, we’ll look at the new tools and trends reshaping the Japanese philanthropy landscape—from dormant savings accounts and impact investing to multi-sector partnerships and a new generation of entrepreneurial foundations.
For now, it’s worth remembering that behind the numbers lies real potential.
“By strengthening the ecosystem that supports each stakeholder in the social sector, the social sector can become a core player that creates social innovation.” (5)
