Public Service Reform and Third-sector Organizations: New development of general incorporated associations and foundations

Author Name USHIRO Fusao  (Faculty Fellow, RIETI)
Creation Date/NO. May 2015 15-J-023
Research Project Research on the Liberalist Reforms of the Public-Private Relationship and the Establishment of the Third Sector in Japan
Download / Links


By introducing and analyzing the results of our latest survey of third-sector organizations, this paper examines the current state of Japan's third sector and challenges in turning it into a more full-fledged sector comparable to the government market sectors. The latest survey, conducted in 2014, represents the third round following the first and second rounds conducted in 2010 and 2012 respectively.

A notable finding is a sharp increase in the number of "general incorporated associations" and "general incorporated foundations" as defined under the Act on General Incorporated Associations and General Incorporated Foundations that became effective in 2008. The number of "specified nonprofit corporations," established under a separate law, has been rising rapidly, already reaching that of not-for-profit healthcare institutions defined as "medical corporations" under the Medical Care Act. However, general incorporated associations and foundations will likely take over as the most prevalent form of incorporated not-for-profit organizations within the next two to three years, given the pace of their increase and with the majority of them opting to establish themselves as not-for-profit entities.

When we look at the financial aspect of third-sector organizations, or more specifically their revenue structure, we can see that the weight of revenue from the public sector (in the form of business income rather than subsidies) has increased rapidly especially for not-for-profit third-sector organizations in tandem with a progress in the reform of public services, whereby the management of more public services shifted from the government to the private sector. Given this development, it is all the more imperative to carry out a more thoroughgoing liberal reform of the relationship between the public and private sectors so as to enable not-for-profit third-sector organizations to secure autonomy from their supervising authority and achieve sound growth.

Lastly, in consideration of the changing nature and composition of the non-profit sector, this paper suggests how to draw a realistic path toward establishing two unified sets of regulatory rules, one for not-for-profit general incorporated associations and foundations and another for those authorized as "public interest incorporated associations" and "public interest incorporated foundations."