Trends & Trendsetters

On the Brink: How Local Nonprofits Are Fighting to Survive and Thrive Across Japan and the U.S.

When Makoto Oshima stepped into leadership at the Japan NPO Center—a key support organization for nonprofits across the country—he found the group facing financial pressures. “The financial situation remains difficult,” he reflects, as they go into a year of “a year of reviewing projects and groping for new initiatives.”

Similarly, when board president Tina Tousignant took the helm at Nashville Pride, she was met with a sudden $270,000 funding shortfall after major corporate sponsors—including Nissan—pulled out. Bad weather further reduced attendance, compounding the financial blow and forcing organizers to launch an emergency fundraising campaign to raise $250,000 just to keep the festival—and its community programs—alive. “Pride is about survival, not just celebration,” she said, as the organization faced one of the most challenging years in its history.

Both leaders represent thousands of nonprofit executives caught in an escalating crisis that threatens the very fabric of civil society in Japan and the United States. These aren't isolated struggles—they're symptoms of a sector-wide emergency. Local and regional nonprofits, the organizations closest to the communities they serve, are reaching a breaking point. Economic pressures, shrinking donor bases, and mounting community needs are pushing these essential institutions to the edge. Yet amid the strain, some organizations are rewriting the rules of survival, offering blueprints for a more resilient future.

Japan's Nonprofit Paradox

fumiaki-hayashi-7TfsC_hfrAY-unsplash Japan's nonprofit landscape tells a story of unrealized potential. With 49,431 registered Specified Nonprofit Corporations (NPOs) as of April 2025, the sector appears robust on paper. Dig deeper, however, and the challenges become stark. Only around 1,300 organizations hold “nintei” or the "approved" status—a designation that grants partial tax benefits and boosts donor confidence.

The numbers reveal the scale of the struggle. About 80% of Japanese NPOs operate on annual budgets below ¥50 million (approximately $333,000), making long-term planning and professional staffing nearly impossible. These organizations survive on volunteer labor and sheer determination, but both resources are finite.

Legal barriers compound the financial challenges. Gaining or maintaining nonprofit status involves labyrinthine procedures that discourage new entrants and hamper organizational flexibility. The philanthropic ecosystem remains underdeveloped, with high-net-worth individuals and corporations facing limited channels to vet, support, and build long-term relationships with nonprofits.

For local and regional organizations—those working in small cities, rural communities, and specialized sectors—these systemic issues hit hardest. They lack the resources to navigate complex bureaucracy while simultaneously delivering critical services to their communities.

America's Nonprofit Strain

rosy-ko-mFFDfg60IJw-unsplash The United States presents a different but equally concerning picture. With over 1.8 million nonprofit organizations, the sector's sheer size masks widespread fragility. More than half report budget shortfalls and growing sustainability concerns. The distribution of resources is revealing: only 3% of U.S. nonprofits have annual budgets exceeding $5 million, while nearly 60% operate with less than $50,000 annually.

These organizations increasingly shoulder responsibilities once handled by public institutions—delivering essential services in education, housing, and healthcare—while facing declining federal support and heightened economic volatility. The human cost is devastating: 22% of nonprofit workers can't afford basic necessities.

The funding landscape has become a minefield of uncertainty. Individual giving is declining even as foundations and some local governments have increased their support. Payment delays and shifting funder priorities make financial planning nearly impossible for smaller organizations. In 2025, widespread budget cuts and reductions in funding have forced many nonprofits to reconsider their very survival. According to the 2025 survey by Nonprofit Finance Fund (NFF), 36% of organizations ended 2024 with operating deficits—the highest in a decade—and 85% expect demand for their services to increase this year. More than half of these nonprofits have only three months or less cash on hand, and over 80% with government funding anticipate cuts to these crucial resources. An anonymous respondent to the NFF survey wrote, “We are in a perpetual state of crisis response. There is never enough time, staff, or money to meet the need—and no relief in sight.”

Shared Struggles, Common Ground

Despite operating in vastly different contexts, nonprofits in both countries face remarkably similar challenges.

Funding Instability: In the U.S., uncertainty around individual giving and shrinking federal budgets threatens organizational stability. In Japan, giving rates remain low and tax incentives are limited, leaving nonprofits vulnerable to donor fatigue and one-off fundraising campaigns.
Workforce Pressures: Nonprofits in both countries report difficulty recruiting and retaining staff. In the U.S., underpaid professionals face burnout; in Japan, many organizations depend on aging volunteers and lack the human capital to scale.
Regulatory Hurdles: While U.S. nonprofits contend with varied state-level requirements, Japan’s regulatory environment is far more restrictive, stifling innovation and legal flexibility.
Uneven Ecosystems: In both countries, support networks for nonprofits—such as philanthropic advisors, capacity-building hubs, and data platforms—are inconsistent or inaccessible, especially outside major urban centers.

Models of Resilience

Despite these challenges, innovative organizations are charting new paths forward.

U.S.: United Way Worldwide

United Way Worldwide continues to lead by example, balancing scale with local responsiveness. The organization has strengthened community-level operations by cultivating diverse donor streams and making workforce support a priority, investing in staff development and retention programs to address widespread sector burnout.

U.S.: Narayan Seva Sansthan USA

Narayan Seva Sansthan USA offers another compelling model, combining storytelling, transparency, and measurable outcomes to build sustainable donor relationships. Through active online engagement and impact reporting, the organization has proven that trust and clear communication are critical assets in a competitive fundraising environment.

Japan: Nippon Foundation

The Nippon Foundation has evolved from a traditional donor into a catalyst for systemic change, supporting intermediaries like the Social Innovation and Investment Foundation (SIIF) that provide tools, guidance, and credibility for smaller nonprofits. This approach helps build the connective tissue between funders and grassroots organizations, expanding Japan's philanthropic ecosystem.

Japan: Friends of the Earth Japan

Friends of the Earth Japan demonstrates how grassroots power can overcome regulatory constraints. Founded in 1980, the organization has built lasting influence through sustained volunteer mobilization, diversified fundraising strategies, and a blend of advocacy and direct action. Their model proves that even under strict regulatory and funding constraints, Japanese nonprofits can carve out significant impact.

Key Takeaways for Nonprofits

Support Local Ecosystems

Strengthening local ecosystems through support for intermediary organizations and community foundations is essential to help small nonprofits access funding, mentorship, and operational tools.

Diversify and Stabilize Funding

Flexible, multi-year grants—rather than restrictive program-based funding—create more resilient organizations that can adapt and plan for the long term.

Invest in Human Capital

Staff retention, leadership development, and fair compensation aren't just personnel issues—they're strategic imperatives for nonprofit effectiveness and sustainability.

Simplify Legal Frameworks

Especially in Japan, simplifying nonprofit registration and legal classifications could lower entry barriers and encourage broader sector growth.

Foster Cross-Sector Collaboration

Partnerships between nonprofits, governments, and the private sector can unlock new resources and innovations, particularly at the regional level.

The Moment of Choice

The nonprofit sector in Japan and the United States stands at a critical juncture. Local and regional organizations—those closest to the communities they serve—face unprecedented challenges. The warning signs are unmistakable: overburdened staff, unstable funding, and growing community need. Yet the stories of resilient organizations offer hope and practical guidance.

For policymakers and funders, the message is clear: invest in infrastructure, not just programs. This means simplifying legal pathways in Japan, expanding unrestricted funding in the U.S., and building support networks that strengthen local organizations' ability to adapt, innovate, and lead.

The nonprofit sector doesn't just reflect society—it shapes it. Whether that work continues will depend on whether we respond to the urgency of the moment with bold, sustained action. Organizations like the U.S.-Japan Foundation stand ready to bridge these two critical nonprofit ecosystems, fostering collaboration and knowledge exchange that can strengthen both. The time for partnership is now.

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