Things to Consider when Setting up an NPO in Japan

Working with or through a non-profit organization is an excellent way to give back to the community and to help people in need in a systematic and sustainable way. While many of us can instantly think of the largest global NPOs like the Bill & Melinda Gates Foundation, the Red Cross, or the Open Society Foundations, there are tens of thousands of NPOs operating within our individual communities that directly impact our families, friends, and neighbors.

In Japan, NPOs have existed in their current state since the passage of the “Act on Promotion of Specified Non-profit Activities,” or Act No. 7 of March 25, 1998. This law established the NPO as a legally recognized corporate entity and gave them the authorization to operate throughout the country. As of March 2020, there are more than 51,000 active NPOs in Japan that cover everything from poverty reduction and environmental protection, to strengthening community connections and disaster relief.

This is a series of short articles that discuss the establishment and operation of NPOs in Japan. The articles will cover a variety of topics including the definition and a brief history of NPOs in Japan, the advantages and disadvantages of setting up an NPO in Japan, some key requirements that must be met before you can establish an NPO in Japan, and alternative non-profit structures you may want to consider that can give you many of the benefits of NPO establishment without some of the complicated procedures and processes associated with etting-up and running a Japanese NPO. In this article, we will discuss the concept of NPOs in Japan and their history.

What is an NPO in Japan?

According to the Act on Promotion of Specified Non-profit Activities (the “NPO Act”), and NPO is an organization engaging in specified non-profit activities, which are listed in the act and include a variety of activities done for the purpose of enhancing the interests of others. These activities include things like enhancing healthcare, promoting social education, international cooperation, promoting gender equality, and promoting science and technology.

A question that immediately comes to mind is “didn’t organizations that did these types of activities exist in Japan before 1998?” According to the Japan NPO Center (NJPOC), until the passage of the NPO Act, the government was thought to serve the public, and ordinary people were thought to engage only in for-profit activities that benefitted themselves. The Japanese Civil Code enacted after the Meiji Restoration in the late 19th century recognized public service corporations, which were government-controlled entities that provided services to citizens, but private organizations interested in engaging in such activities were not recognized as legal entities and their activities had to be approved by government authorities. This lack of recognition made it impossible for the groups to open bank accounts, manage assets, participate in international conferences, and an overall lack of social credibility within the communities they were trying to serve- how much can an organization be trusted if it’s not even recognized by the government?

During the 1980s, citizen groups began discussing the need to create a system that would allow them to incorporate and operate under Japanese law. After the Great Hanshin Earthquake on January 17, 1995, due to an unprecedented number of people and local associations interested in volunteering their time and resources, government officials began to consider creating an incorporation system that would allow for the creation and legal recognition of private citizens who wanted to come together to create non-profit organizations.

After consultations and several rounds of negotiations, the Diet passed the NPO Act in 1998 and the law came into force in December of the following year.

In our next article, we will provide a brief overview of the NPO Act and discuss the advantages and disadvantages of setting up an NPO in Japan. In the meantime, please visit us at www.siventh.com, consider filling out our Corporate Social Responsibility survey and follow us on Facebook and LinkedIn.

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