Definition and Management of the Third Sector in Japan

While Japan has taken liberal steps in reforming its big government welfare state, there has been a significant rise in the type of civil activities geared toward problem solving within Japanese society. However, in order to envision new relationships—i.e., the demarcation of roles and cooperation—between and among the government, corporate, and third sectors as an extension of these developments, it is necessary to define the overall picture of the third sector that embraces various types of entities—public corporations, specified nonprofit organizations, cooperative associations, social enterprises, and so forth—and to understand the status of their management. Public corporations, which altogether form a very complex portfolio of organizations today, have proliferated and diverged over the years under the now-defunct shumu kancho (competent ministry) system that allowed for the formation of public corporations at the discretion of the respective competent government ministries.

This paper discusses how Japan should define its third sector, using as a reference the American approach (of defining the third sector as a nonprofit sector) and the European approach (of defining the third sector as a group of social economy organizations).

We conducted a questionnaire survey, based upon which to examine the organizational characteristics and management of third-sector organizations in Japan, and this paper presents some ideas derived from the survey findings. Key findings are as follows: (1) Japanese third-sector organizations have a fairly organized and solid management system, (2) there remain considerable problems regarding transparency, (3) the conventional image of third sector organizations as being extremely dependent on the government should be reexamined because only 29.5% of their income is generated by public funds and the breakdown of income by nature shows that voluntarily-offered funds ("voluntary income") account for only 22.3% with the remaining 77.8% coming from their operations ("earned income"), and (4) 30% to 50% of the third-sector organizations seek to grow and develop by boosting their income.