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No. 4 April 1998

•New NPO Law Fosters Enabling Environment

•Selected Annotated Bibliography of Literature on the Nonprofit Sector in Japan


New NPO Law Fosters Enabling Environment

The NPO Bill that the Civil Society Monitor has followed since its inaugural issue in fall 1996 finally became law on March 19, 1998, and was promulgated on March 25, 1998, as Law No. 7 of 1998. The Law is likely to take effect some time between October 1998 and January 1999. The bill's passage through the Diet can be regarded as historic both because of the legislative process and because of its having been passed unanimously by all the political parties.

Impact on Civil Society Development

The new legislation will substantially simplify the incorporation process of nonprofit and nongovernmental organizations (NPOs and NGOs). Normally, the incorporation process for NPOs under Article 34 of the Civil Code requires approval by "competent authorities," namely, government agencies with jurisdiction over the area of activities of the NPO in question. Approval is given at the discretion of the competent authorities without regard to objective criteria, and no application is accepted unless the proposed corporation has approximately 300 million yen (approximately $3 million) in assets. The cumbersome application process can easily take one year.

Under the new legislation, NPOs can be incorporated without the approval process, and the governor of the prefecture where the proposed corporations are located (or the Economic Planning Agency in the case of NPOs with offices in at least two prefectures) is required to authenticate establishment of such organizations if they conform with the provisions set forth in the new legislation. The incorporation process will be much quicker under the new legislation because the granting authorities must decide on the certification within two months immediately succeeding the two-month period of public announcement. There is no requirement in the incorporation process for the holding of assets.

It is estimated that some 10,000 NPOs will apply for incorporation under the new legislation. This will change dramatically the landscape of Japan's civil society. Many of the 26,000 "public interest corporations" incorporated under Article 34 of the Civil Code are under strict control of government agencies. The NPO Law will allow many dynamic and young NPOs to emerge as a significant social force in addressing pluralistic and serious domestic social issues and in making an international contribution to diverse global issues.

Future Challenges for Civil Society

A somber mood exists, nevertheless, among those NPO leaders who worked together for three years to engineer the passage of the bill. They are fully aware of the challenges ahead. Indeed, not all citizens' groups are ready to jump in line for the application for corporate status, because once incorporated, these groups will be required to submit all accounting documents and annual reports to the administrative bodies every year, and disclosure of financial information will become mandatory. Some groups are hesitating to commit themselves, considering this procedure a burden. Some also fear the possible loss of autonomy as a result of being put under the administrative responsibility of local governments or the Economic Planning Agency. Some NPOs with large endowments will likely opt for incorporation under the traditional Article 34 of the Civil Code, as revenue, such as interest on the endowment, is tax exempt, unlike in the case of organizations incorporated under the NPO Law. This two-tier structure of the nonprofit sector, with one group of nonprofits incorporated under Article 34 of the Civil Code and another group incorporated under the NPO Law, will have to be addressed. There may be a need to review the Civil Code, which was enacted in 1898, to make it more compatible with the new legislation.

Civil society in Japan will have to face several challenges in the coming months and years. An immediate challenge is to develop a constructive relationship with the prefectural governments, which have significant authority in implementing the new law. Officers of civil society organizations such as the Japan NPO Center will be busy briefing prefectural government officials on the spirit and substance of the NPO Law, and supporting civil society leaders in each prefecture in their efforts to encourage the authorities to establish appropriate administrative procedures for the incorporation of NPOs. Another challenge is the tax treatment of donations given to nonprofits. The NPO Law fails to mention tax incentives for contributions to NPOs. A resolution added to the law stipulates that the tax system is to be reviewed within two years of enactment of the law.

NPOs themselves are challenged to improve their performance. Improved professionalism, accountability, and transparency are fundamental to NPOs being given credibility, which is tied to their claim for tax privileges for donations. Most of the NPOs newly incorporated under the NPO Law will be very small, underfunded, and understaffed. To many NPO leaders, the promulgation of the law ushers in a new phase in the long-term battle for the full-�edged development of civil society in Japan.

Emergence of an Enabling Environment

Despite all the challenges ahead, promulgation of the NPO Law is seen as a clear sign of the changing environment in Japan that will provide fertile ground for the further growth of civil society. Such optimism is based on the unusual process through which the bill was drafted and brought to final passage through the Diet. Politicians from several political parties and NPO leaders collaborated to draft the bill. Government bureacrats who tried to control the drafting, as is normal in Japan's legislative process, gave up within six months after the Liaison Committee for Related Government Ministries and Agencies Regarding Volunteer Activities was hastily established in response to a heightened public interest in the role of NPOs and volunteers in the wake of the tragic Great Hanshin-Awaji Earthquake of January 1995. NPO leaders lobbied effectively for the bill, coordinating strong support from the media, economic organizations such as Keidanren (Japan Federation of Economic Organizations), and the general public. The legislative process was closely monitored by a voluntary organization named "C's" (Coalition for Legislation to Support Citizens' Organizations), and hundreds of faxes were sent to civil society organizations, the media, and politicians to mobilize support at each critical juncture of the legislative process. The three years of collaborative efforts to promote the NPO bill forged a strong sense of solidarity among leaders of NPOs throughout Japan, and this solidarity led to the establishment of the Japan NPO Center. Many people in business, local government, the media, and other professions have joined this widening group supporting the efforts to strengthen civil society.

The NPO Bill was passed unanimously by all the parties, including the governing Liberal Democratic Party and the Japan Communist Party. It is extremely unusual for any bill to pass with the consent of all parties. This alone signifies the emergence of an enabling environment conducive to the growth of civil society in Japan. For the bill�s passage was the crystallization of a growing movement in Japan to reduce the in�uence of government bureaucrats and to have citizens take public interest into their own hands. This is a rare moment in Japan when civil society leaders have a sense that things can change in their society, and that there is a chance for civil society to play a major role in the society, no matter how time-consuming it may be to reach that point.


Selected Annotated Bibliography of Literature on the Nonprofit Sector in Japan

In this issue of the Civil Society Monitor, we list recently published English-language materials on the Japanese nonprofit sector and on corporate philanthropy. English-language literature on civil society in Japan is still limited, but the list below includes publications ranging from a directory of nongovernmental organizations (NGOs) in Japan and a comprehensive analysis of the legal environment to a report on international giving by Japanese corporations and a survey on civil society in Japan.

Directory of Nongovernmental Organizations in Japan 1992
This directory lists 173 Japanese NGOs in four areas: (1) international cooperation; (2) foreign workers and refugees in Japan; (3) information dissemination, development education, and policy advocacy; and (4) networking among NGOs. Each reference includes the names of NGOs in both English and Japanese; contact information; the number of staff; objectives; activities; fields, countries, and regions of activities; publications; financial information; membership; and cooperating organizations overseas.
Directory of Nongovernmental Organizations in Japan 1992. Japanese NGO Center for International Cooperation, ed. Tokyo: Japanese NGO Center for International Cooperation, 1992
Directory of Grant-Making Foundations in Japan 1996
This comprehensive reference profiles 209 Japanese grant-making foundations with international grant programs. Each profile includes contact information, background information, statement of purpose, organization data, financial data, and English publications as well as a detailed listing of all grant programs. In addition to the abundance of information within the profiles, this resource also provides data on the history, trends, chartering agencies, and assets of grant-making foundations.
Directory of Grant-making Foundations in Japan 1996. Japan Foundation Center, ed. Tokyo: Japan Foundation Center, 1996
Data Book on Japanese Local Grassroots Organizations in International Cultural Exchange
This directory lists 127 local grass-roots organizations by eight geographical districts. The grass-roots international cultural exchange organizations are chosen by the editorial staff of the World Plaza, an international cultural exchange magazine. Each listing is complete with contact information, purpose of establishment, and the organization's main areas of activity.
Data Book on Japanese Local Grassroots Organizations in International Cultural Exchange. Kondo Michio, ed. Tokyo: The Japan Forum, 1993
Emerging Civil Society in the Asia Pacific Community
This book is a compilation of reports from 15 Asia Pacific countries&#mdash;Australia, Canada, China, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Taiwan, Thailand, the United States, and Vietnam—on the focus of activities of nongovernmental institutions. The chapter by Menju Toshihiro provides an overview of NGOs in Japan and looks at the activities of Japanese NGOs in Asia Pacific. Noda Makito's chapter looks at research institutions in Japan and their involvement with Asia Pacific in terms of both the actual research and networking. Yamamoto Tadashi's chapter gives an overview of philanthropy in Japan and its interest in Asia Pacific. This book won the 1996 Masayoshi Ohira Award for Outstanding Contribution to Asia Pacific Community Building.
Emerging Civil Society in the Asia Pacific Community. Yamamoto Tadashi, ed. Tokyo: Institute of Southeast Asian Studies and Japan Center for International Exchange, 1995
"The Evolution of Japan's International Giving and Its Future Prospects"
This article, in a book that constitutes a comprehensive review of grant-making foundations in the United States, provides a history of Japan's international giving, discusses how it has developed and evolved to its current stage, and considers its future prospects.
"The Evolution of Japan's International Giving and Its Future Prospects." Yamamoto Tadashi. In International Grantmaking: A Report on U.S. Foundation Trends. The Foundation Center, ed. New York: The Foundation Center, 1997
Evolving Patterns of Asia-Pacific Philanthropy
This volume is a collection of papers that were presented at the Second Symposium on Private Philanthropy in East Asia in 1993. The chapter by Iriyama Akira provides an overview of NGOs in Japan. Beginning with statistics from a 1989 survey on NPOs, the chapter explores the negative cliché commonly used to depict the Japanese nonprofit sector—that the sector is restricted by government supervision and unfriendly tax laws—and concludes that although the clich is true, it is a fact that the role of private philanthropy in Japan is increasing. The chapter by Yamamoto Tadashi considers possibilities for developing joint activities and forming a network among NPOs and NGOs in Asia Pacific. In particular, the chapter looks at such Japanese organizations active in Asia Pacific, the regional network of organizations in Asia Pacific, and the possibility of philanthropic cooperation in Asia Pacific being be made stronger in the future.
Evolving Patterns of Asia-Pacific Philanthropy. Jung Ku-Hyun, ed. Seoul: Seoul Press, 1994
Japanese Corporate Philanthropy
This book discusses corporate philanthropy in Japan with special emphasis on the legal and tax system concerning philanthropic activities. The evolution of the current system is examined, and the challenges posed to this system are discussed. The book considers the sociocultural issues inherent in Japanese society that directly in�uence corporate philanthropic attitudes, the actual practices of corporate philanthropy, which is largely corporate giving, and the role Keidanren (Japan Federation of Economic Organizations) plays in exercising corporate philanthropy.
Japanese Corporate Philanthropy. Nancy R. London. New York: Oxford University Press, 1991
The Nonprofit Sector in Japan
This is the most recent, up-to-date, and comprehensive book on the nonprofit sector in Japan. To be published in spring 1998 as one in a series of volumes by the Johns Hopkins Comparative Nonprofit Sector Project, which looks at the nonprofit sector in the world, this book argues that the nonprofit sector in Japan is larger than it is widely perceived to be. Both qualitative and quantitative criteria are used to support this contention. The book includes in-depth analysis of the legal environment in which nonprofit organizations operate, a comprehensive chronology of the historical evolution of the nonprofit sector, and an examination of the relationship between the government and the nonprofit sector.
The Nonprofit Sector in Japan. Yamamoto Tadashi, ed. Forthcoming in April 1998. Manchester and New York: Manchester University Press
The Nonprofit Sector in the Global Community
This book is a collection of analyses on the roles, functions, and significance of nongovernmental organizations, philanthropy, and voluntarism. Country reports are included from the Americas, the Arab world, Asia, and Europe. Yamamoto Tadashi's chapter looks at private philanthropy in Japan, its evolution, and the development of international philanthropic activities by the Japanese. It also discusses some external factors, for example, the trade friction between the United States and Japan, that contributed to the growth in philanthropic activities. The chapter stresses the need to enhance international cooperation among private philanthropies. Anna Maria Thrändhardt's chapter focuses specifically on voluntarism in Japan. The chapter shows how history, traditions, and culture influenced voluntarism and how traditional voluntarism in Japan has evolved to become more organized as citizens' activities.
The Nonprofit Sector in the Global Community: Voices from Many Nations. Kathleen D. McCarthy, et al., ed. San Francisco: Jossey-Bass Publishers, 1992
Philanthropy and the Dynamics of Change in East and Southeast Asia
This volume is a collection of comparative studies on organized private philanthropy in seven Asian countries: Indonesia, Japan, the Philippines, Singapore, South Korea, Taiwan, and Thailand. The chapter by Yamamoto Tadashi first discusses the history of organized private philanthropy from the Edo period in the 1800s to the present, then examines international philanthropic activities, with detailed statistics provided in the appendices. Nancy London's chapter discusses the legal and tax environment for private philanthropy in Japan. The chapter by Iriyama Akira et al. focuses on the roles and activities of development NGOs in Japan and their relationship with the government and its ODA (official development assistance).
Philanthropy and the Dynamics of Change in East Asia. Barnett F. Baron, ed. New York: Occasional Papers of the East Asian Institute of Columbia University, 1991
The Role of Non-state Actors in International Affairs
This publication is a collection of four articles that Yamamoto Tadashi, founder and president of the Japan Center for International Exchange (JCIE), has written over the years about the growth of the nonprofit sector's role since JCIE's founding in 1970. The book also includes an article written by Funabashi Yoichi. The five articles look at changing patterns of international exchange and the role the private sector plays in it, the past growth of the nonprofit, nongovernmental sector in Japan and the rest of the world, and the challenges and opportunities that lie ahead for those working in this field.
The Role of Non-state Actors in International Affairs: A Japanese Perspective. Yamamoto Tadashi and Funabashi Yoichi. Tokyo: The Japan Center for International Exchange, 1995
White Paper on Corporate Philanthropy in Japan 1996
This mimeograph is a translated summary of the white paper published by Keidanren (Japan Federation of Economic Organizations) on philanthropy in the corporate sector in Japan. It first looks at corporate philanthropic activities in the 1990s and how they continued even after the burst of the bubble economy. Then it provides analyses and recent trends on corporate philanthropy in Japan, based on surveys that Keidanren conducted with its member corporations. The white paper also provides an in-depth introduction to the philanthropic activities of Keidanren, including the One-Percent Club and the Council for Better Corporate Citizenship.
White Paper on Corporate Philanthropy in Japan 1996. Keidanren (Japan Federation of Economic Organizations), ed. Tokyo: Keidanren, 1996