Charitable Giving in Japan: A Comparative Study of Japan and the United States

Transcription

1 The Nonprofit Review, Vol.4, No.1, (2004) JANPORA 2004 Charitable Giving in Japan: A Comparative Study of Japan and the United States Miki OUCHI 1) 1) Center for Strategic and International Studies Charitable giving is considered to be an important mode of civic activity indispensable to a truly sound democracy. Although the Great Hanshin Earthquake in 1995 helped raise public awareness of the important role nonprofit organizations play in social betterment, Japanese giving behavior is still less active compared to that in other developed countries. Through a comparative analysis of giving culture in Japan and the United States, this paper identifies several explanatory factors behind the weak culture of philanthropy in Japan and presents five policy and management strategies to encourage charitable giving among Japanese people. Key words: Charitable giving, Philanthropy, Japan, The United States 1. Introduction 1 $1 equals 120. The figure, 42 billion, includes only the amount applicable to preferential tax treatment (National Tax Agency, Website). The Great Hanshin Earthquake in the city of Kobe, Japan January 1995 demonstrated the important role nonprofit organizations can play in compensating for the limitations of government and businesses action in times of crises. In response to the lack of promptness and organization of the government s relief efforts, about 1.4 million volunteers spontaneously organized civic groups and offered support for the reconstruction of affected areas as well as for victims who had to abandon their homes. At the same time, this devastating disaster clearly highlighted that the legal system for nonprofit activities had not been well developed. The total amount of individual donations exceeded 172 billion ($1.43 billion), which is more than four times as much as the annual private giving of 42 billion or less ($350 million) in Japan in However, since most civic groups that received these donations were not legally recognized or eligible for preferential tax treatment, they had not been able to respond fully to the generosity and unity of the public. This led to an increasing awareness that a law granting legal status to nonprofit organizations should be introduced immediately so that their activities could be strengthened and carried out more effectively and efficiently in accordance to the needs of the people and their situations. The lessons learned from this unfortunate event constituted a major progressive step towards promoting the development of the Japanese nonprofit sector. In 1998 the Law to Promote Specified Nonprofit Activities (NPO Law) took effect, creating a legal framework for the activities of nonprofit organizations. Until then, the Japanese public tended to assume that only government and private businesses should provide public services. The overall belief was that the central government and/or private business organizations were fully capable of providing services that the public would need, although reality showed that many who needed help had been overlooked due to this divided, two-sector structure. The government provides services only to those who meet certain standards, while businesses do not offer services to those who cannot or will not pay, even if they are in need of help. In this sense, the NPO Law was a milestone event in Japanese social and political history: it not only helped encourage nonprofit activities in domestic society, but it has also fundamentally changed the traditional social structure by enabling nonprofit organizations to become a third component of Japanese society targeting those excluded by the government and businesses in times of need. Preferential tax treatment for nonprofit organizations was enforced in Up to 20 percent of annual earnings for nonprofit organizations are tax-exempt only for specified nonprofit corporations (NPO hojin) authorized by the Director-General of the National Tax Agency as meeting certain requirements. 2 As for private giving, individuals can claim as tax deductions the amount calculated by subtracting 10,000 ($83.3) from a smaller amount of either 25 percent 39

2 The Nonprofit Review Figure 1 Change in Annual Giving per Household in Japan ( ) Source: Economic Planning Agency (2000b). 1. $1 equals The average monthly amounts for January and February 1995 are three to six times as much as for May through December 1995, respectively. 3. The data are based on extrapolating monthly figures from the household expenditure survey by the Management and Coordination Agency. 4. Except for 1995 and 1999, the percentage change in the consumer price index from the previous year is between 0.2 and 3.3. of their annual income or the total donations made only to approved specified nonprofit corporations (nintei NPO hojin). 3 Recently, the number of specified nonprofit corporations has been increasing by approximately 300 or 500 new incorporated each month. According to the Cabinet Office (Website), as of May 2004, there were about 17,000 specified nonprofit corporations operating in Japan. The introduction of tax benefits has been a major achievement in terms of preparing and fostering an environment within which nonprofit activities can be conducted more effectively and efficiently. However, given that there are currently less than 25 approved specified nonprofit corporations eligible for this tax treatment, its effect is in fact far from sufficient in promoting overall private giving and nonprofit activities in Japan. 4 2 There are nine requirements including: 1) proportion of charitable donations to total revenue; 2) scope of activities; 3) population to serve; 4) organizational structure and accounting; 5) description of activities; 6) information disclosure; 7) law violation and illicit activities; 8) how much time has passed since the organization was founded; and 9) valid certificate from the prefectural government that serves as the competent authority. 3 The valid term of certification is two years. 4 The proportion of charitable donations to total revenue, one of the requirements for approved specified nonprofit corporations, changed from one third to one fifth in April Due to this relaxation of NPO tax treatment, the number of approved specified nonprofit corporations is increasing. For example, there were only 12 approved specified nonprofit corporations in February 2003, and 24 in June $1 equals Since the Great Hanshin Earthquake, the general public has realized the essential significance of nonprofit organizations in society and has thus taken efforts to develop and improve legislation for nonprofit organizations, although there is still a great need for improvement. However, giving behavior in Japan has not considerably changed compared to before 1995, further preventing the Japanese nonprofit sector from developing in a significant way. According to the 2000 White Paper on the National Lifestyle (Economic Planning Agency 2000b), the annual average giving in 1990s remained relatively constant at about 3,000 ($25.0) with the exception of 1995, when the earthquake struck. Having peaked at 5,800 ($48.3), the annual household contribution has slowly yet steadily declined. Figure 1 summarizes the change in annual giving per household in Japan from 1990 to The weak nature of philanthropy in Japan becomes even clearer when compared to other similarly developed countries. Households in the United States and the United Kingdom donated an average of $754 in 1998 and 132 ($213) in 1994, respectively (Wright 2001). 5 These figures are much higher than average annual gifts of 3,200 ($26.7) per Japanese household in This significant disparity is more evident in the percent of annual giving to average household income. Charitable giving per household accounted for 40

3 Charitable Giving in Japan: A Comparative Study of Japan and the United States percent of total income in Japan, which is in striking contrast to 1.7 percent in the United States and 0.63 percent in the United Kingdom, respectively. 6 Given that these three countries do not significantly differ in terms of the total percentage of households that give, it is obvious that the amount donated per household itself is very low in Japan. 7 The history of associational activities in Japan shows that Japan s civil society has strengthened over the past half century. Under U.S. occupation after the World War II, a variety of nonprofit activities, such as PTA activities and the community chest for public social well being, were first introduced to help Japan catch up to levels in the United States (Association of Creating Future Japan 1999). These activities before the period of rapid economic growth in the 1950s were geared towards developing good practices for democratic living. From the late 1960s until the 1970s, at the end of the high growth period, civic movements became active in relation to the excessive pace of urban development and environmental pollution. Citizens took action to pursue governmental and corporate responsibility for the issues brought about by high economic growth. In sharp contrast with the politically driven movements of the 1960s, civic activities since the 1980s have sought to address issues closely related to local and communal concerns, such as education, environment and social welfare. In other words, citizens who feel responsible for the community have increasingly strengthened voluntary social action in order to improve their own lifestyles. Alexis de Tocqueville found during his travel to the United States in the early 19th century that an active civil society was the key to American democracy. In Democracy in America published in 1835, Tocqueville (2000) expressed his observation of civic nature of American life by stating that Americans of all ages, all conditions, and all minds constantly unite and associate for the goals of public security, of commerce and industry, of morality and religion. He was further impressed by the collective power of citizens to advance their life and attributed their tendency for associations to the manner in which American democracy worked. If, as he argued, there is a direct linkage between civil society and democracy, increasing willingness to improve civic life among the Japanese public is a favorable signal of the strength of democracy in Japan. On the other hand, Tocqueville s hypothesis also poses a challenge to Japan s efforts in attaining a strong civil society: a traditionally weak giving behavior that might hamper and even frustrate citizens efforts and morale for civic action. At the present time, many nonprofit organizations even with legal status are facing discouraging financial difficulties, which is further hindering current and future development. The purpose of this paper is to suggest policy and management strategies to foster private giving in Japan. The establishment of a giving tradition must be a key to a more active and strong civil society that could lead to a truly healthy and vibrant democracy in Japan. This paper is organized in three parts. It begins with a review of past literature on philanthropy with a focus on three important questions: who gives to charities, why individuals give to charities, and what solicitation techniques are effective for donor acquisition. Then, obstacles that exist to encourage charitable giving in Japan are identified, based on a comparison to the United States. Finally, the paper concludes that Japanese philanthropy can be strengthened through a variety of social and political strategies, highlighting significant implications for Japanese policymakers and nonprofit managers. 2. Literature Review Much research on private giving has been conducted to help build profiles of donors. Both scholars and practitioners have identified the factors leading to the success of donor development and acquisition in different ways. For example, economists have focused on the tax implications of charitable donations and sociodemographic and economic characteristics of donors, while marketing researchers have examined how effective certain solicitation or market segmentation approaches are in attracting potential donors (Van Slyke and Brooks 2002). For the purpose of getting a sense of what policy and management strategies look like for promoting Japanese philanthropy, it is important to review past literature, focusing on the three questions mentioned earlier: 1) who gives to charities; 2) why people give to charities; and 3) how donors are solicited percent was found by dividing an average giving of 3,200 by an average annual salary of 5.55 million in Rates of household participation in giving are 70 percent in the US (1999); 68 percent in the UK (1999); and 77 percent in Japan (1999), respectively Who gives to charities? Table 1 shows the effects a variety of different variables have on charitable giving from the studies conducted in the United States, the United Kingdom, Canada, and Spain. For 41

4 The Nonprofit Review Table 1 Effects of Variables on Charitable Giving Variable United States United Kingdom Canada Spain Income Positive Positive Positive Positive Wealth Positive Positive 1 N/A N/A Age Positive Positive Positive Insignificant Religious practice Positive N/A Positive Positive Group affiliation 2 Positive Negative 3 Positive 4 N/A Education Positive Positive Positive Positive Gender 5 Insignificant Positive Negative Insignificant * N/A means no data available from the studies reviewed here. 1. Housing tenure is used as proxy for wealth. 2. This includes both religious and nonreligious organizations. 3. This is not based on the regression analysis. Wright (2001) argues that British people who are engaged in the form of volunteering for or giving their time to an organization are not likely to make contributions to the organization. 4. The studies on Canada examine the experience of being involved in religious and secular groups as a youth instead of the relationship between group affiliation and charitable giving. 5. Male 0, female 1. instance, the first row indicates that the level of income is positively correlated to giving behavior in all of the four countries. In the United States, people with higher income levels and wealth, who are older, are active in religious practices, belong to religious or/and civic organizations, and have a higher-level of education are more likely to give to charities. Of the variables, only gender does not seem to have a significant impact on giving behavior. A similar trend is seen in Canada with only one exception. As in the United States, income, age, religious practice, group affiliation, and education all have positive effects on charitable giving. However, gender does seem to influence private giving trends as women were found to be less likely to make charitable donations in Canada. In the United Kingdom, group affiliation tends to negatively affect giving behavior, in contrast to its positive impact in the United States and Canada. Those likely to make charitable contributions earn a higher income, are wealthy, older, and have a college education, while those less likely to give are women involved with social organizations, either religious or nonreligious. In Spain, the higher the level of income, education and degree of religiousness are, the more people are likely to give to charities. Another notable feature is that age is not a significant factor of charitable giving in Spain, even though the other three countries show a positive effect of age. These studies addressed here produce similar findings, although the data and methods are different, as Table 2 indicates. This supports the credibility of the commonly found traits of donors. There is no specific set of determinants of charitable giving. However, in particular income, religious practice, and education are regarded as key indicators to consider for policy and fundraising strategies as they all have a positive impact on charitable giving regardless of country Why do people give to charities? Table 3 summarizes what motivates individuals to make charitable donations based on studies primarily of the United States. The motivating factors for giving are largely categorized into two dimensions: economic and non-economic. Preferential tax treatment for charitable donations and government funding for nonprofit organizations are economic triggers of giving behavior. The greater the tax rate for charitable giving, the more people tend to donate. Since the government reimburses a larger portion of charitable contributions as taxes increase, the actual cost of these donations to individuals is accordingly diminished, thus encouraging giving. Nonetheless, government funding can either encourage or discourage charitable donations. 8 There are several reasons for crowding in and crowding out, respectively (Brooks 2000). In the former case, government subsidies might be regarded as proof of quality. In particular, donors might give great attention to organizations that receive government backing, which would otherwise be overlooked due to the lack of recognition. Government involvement may also help assure donors of a certain level of fiduciary responsibility and thus more efficient and effective use of charitable donations. On the other hand, government support might displace charitable giving since a nonprofit orga- 8 Brooks (2000) finds out that crowding out has no statistically significant effect in education and arts and culture. The relationship between government funding and charitable giving is dependent on the subsector. 42

5 Charitable Giving in Japan: A Comparative Study of Japan and the United States Table 2 Data and Methods Author Country Who was studied Data source Sample size Wright (2001) United States United Kingdom Various (households, individuals, etc.) United States: Giving USA (1998), etc. United Kingdom: Charitable Giving in Great Britain (1996), etc. N/A Schervish and Havens (1995) United States Households who gave $500 or more Survey of Consumer Finances (1994) 4,299 Brown (1999) United States Households Independent Sector, Giving USA (1995 or 1996) N/A White (1989) United States Those aged 18 and older YSW/RBF Charitable Study (1985) 1,151 Auten and Rudney (1989) United States Taxpayers 1 Sales of Capital Assets Panel ( ) About 11,000 Banks and Tanner (1999) United Kingdom Households aged 16 and older Family Expenditure Survey ( ) Follow-up interview 7,000 Reed and Selbee (2000) Canada Those who volunteered more than the national media number of 66 hours per year Reed and Selbee (2001) Canada Those aged 15 and older who are responsible for 2/3rd philanthropic activities 3 National Survey of Giving, Volunteering and Participating (1997) National Survey of Giving, Volunteering and Participating (2000) 2, ,270 4 Brooks (2003) Spain Adults Random Survey on Social Ethics by Centro de Investigaciones Sobre la Realidad Social (1992) 1,200 * N/A means no data available from the studies reviewed here. 1. The study covers all income brackets. Two samples, however, are especially examined: a permanent income sample that included returns with a permanent (average) income of at least $100,000 over the five years and an annual income sample that included returns with income of at least $100,000 in one or more years during the five year period. Each sample size is not specified. 2. This figure is founded by 0.31*0.5*18,301. Of 18,301 respondents about 31 percent reported having volunteered, and 50 percent of these respondents spent 66 hours or more in volunteering in the previous year. 3. The authors define philanthropic activities as three modes of civic engagement: volunteering, giving to charities, and participating in civic associations. 4. This figure is founded by 0.29*14,724. Of 14,724 respondents, the population to study comprised 29 percent of the Canadian population in nization can be regarded as a quasi-public agency due to the government s responsibility for funding. Another reason for crowding out is that government funding can make donors feel that their support is not mainstream or important. In addition, those who want to influence an organization by offering financial support may be discouraged due to government intervention. The economic status of donors is another key factor for giving behavior. The more discretionary income individuals have, the more they are likely to give. 9 Conversely, a lack of discretionary income inhibits giving. For example, in Spain the top reason for not giving is cannot afford to give (Brooks 2003). Additionally, the perception that nonprofits are more effective than public and private organizations at offering public services seems to encourage charitable giving in the United States. Similarly, in Spain, the perceived role of nonprofit organizations is likely to influence private giving: skepticism about whether charitable donations will 9 Taxes affect the disposable income of individuals. The lower tax rate, therefore, would be associated with greater levels of giving. be used for the targeted cause tends to discourage individuals from giving to charities. There are also several non-economic motivations for charitable giving. One example is a sense of duty. Teresa Odendahl (1990), the author of Charity Begins at Home, argues that a sense of duty promotes giving behavior among the wealthy. Wealthy philanthropists feel they have a special obligation to society because they are rich, which encourages them to give. Another trigger for giving is the lack of confidence in government. People with little trust in government are more likely to donate money. On the contrary, those satisfied with the public sector become less attracted by nonprofit organizations as alternative providers of public goods and thus decrease their private giving (Brooks and Lewis 2001). The social environment of donors is also a non-economic factor that promotes giving behavior. For example, philanthropy among Asian Americans is rooted in aspects of their culture such as the emphasis on the importance of relationships with families and communities and the reciprocity of gift-giving and relating (Shao1995). Another motivation behind charitable donations is religious conviction. In a 43

6 The Nonprofit Review Table 3 Motivations for Charitable Giving Table 4 Solicitation Approaches Dimension Motivational factor Approach Example Characteristic Economic Non-economic Government funding Tax incentives for charitable donations 1 Better economic situation 2 Belief that the nonprofit is a more effective provider of public services Sense of community Sense of duty Self-identification (especially among the wealthy) Lack of confidence in federal government Because of being asked Cultural context of donor Religious beliefs History of having been helped by charities Experience of volunteering with charities 3 Information 4 * The listed motivational factors are based on only the U.S. studies unless noted. 1. The tax rate in Russia has also an impact on charitable giving (Brooks 2002). 2. People in Spain are less likely to give when they cannot afford to give (Brooks 2003). 3. In Canada, active volunteers tend to be involved in nonprofit organizations in other forms: charitable giving, social activity, and civic participation (Reed and Selbee 2000). 4. The Spanish are less likely to give when they do not have information on how to donate or fundraising campaigns (Brooks 2002). study of Atlanta, Georgia, residents reported religious beliefs as the second most frequent reason for giving to charities (Brooks and Lewis 2001). In addition, an experience of working with a nonprofit organization as a volunteer positively affects giving behavior. Reed and Selbee (2001) find that, in Canada, an active volunteer is more likely to contribute to charities than others. As the studies addressed here indicate, there is no single motivation for charitable giving. This provides an important implication that careful consideration of how to combine different giving motivations for fundraising strategies may be the key to successfully maintaining and securing more donors, thus establishing a tradition of philanthropy. For example, among those who have worked as volunteers with charities or who have been helped by charities, people in the upper income range are especially likely to give since the tax rate influences their giving behavior more than others. In other words, a nonprofit organization may be more successful in fundraising by identifying who has volunteered for the organization or utilized its services, and then specifically selecting those who are in higher income brackets as the target population rather than just targeting the wealthy. One-way Direct mail Advertisement Donation box Commercial Online solicitation Two-way Relationship fundraising 1 Tele-fundraising Special events Door-to-door solicitation Information dissemination Emphasis on the immediacy of support Use of emotionally appealing words/pictures to gain attention A wide range of people targeted at the same time Communication between potential donors and nonprofits Focus on the relationship with donors Needs of donors considered Donors contacted and handled individually 1. Relationship fundraising is a variant of relationship marketing. It focuses on donor choice of the content, nature, and frequency of the communications with an organization (Sargeant 2001a) How are donors solicited? Carefully designed solicitation approaches are important for successful donor acquisition since they provide potential donors with a better understanding of a nonprofit organization and its services, helping connect these donors with the organization. Fundraising techniques are largely divided into two types of communication patterns: a one-way and twoway approach. Table 4 summarizes characteristics of each approach with examples of certain fundraising tools and methods. The one-way communication approach includes direct mail and online solicitation. These ways of raising funds do not provide potential donors with an opportunity to interact with nonprofit organizations or individual solicitors. In other words, they leave it up to these donors to read fundraising messages from an organization and to make charitable contributions based on the information provided. This solicitation approach is designed to gain the attention of people by using attractive and emotionally evocative pictures and/or words. The emphasis of the content is usually on the immediacy of each appeal, and potential donors are encouraged to give now (Sargeant 2001b). Furthermore, the one-way approach communicates the information supporting the organization s credibility and the legitimacy of its cause. The logic model of this approach is that attention to the appeal leads to attitude towards the appeal, in turn affecting attitude towards the organization (Diamond and Gooding-Williams 2002). This eventually motivates individuals to make donations. On the other hand, the two-way communication approach is characterized by being donor-oriented. Examples are rela- 44

7 Charitable Giving in Japan: A Comparative Study of Japan and the United States tionship fundraising and telephone solicitation. Potential donors receive not only messages from an organization but also an opportunity to communicate their expectations for the service provided and even to specify the relationship they prefer to have with the organization. While the one-way approach is designed to use the same information to target a relatively wide range of potential donors, including those who may not know an organization, the two-way approach deals with potential donors individually to best fit their needs. In this scenario, the initial costs of developing and establishing a connection with potential donors separately are higher due to their diverse nature. However, given that donor loyalty is established and even enhanced by improved overall satisfaction with an organization, the two-way approach may bring about more benefits to the organization in the long run. This approach depends largely on individual solicitors skills to communicate with potential donors (Dee and Henkin 1997). Therefore, the ability to create effective messages for potential donors and to understand feedback messages from targeted donors is an essential element to successful two-way donor acquisition and retention strategies. The studies of solicitation approaches addressed in this analysis focus on a single fundraising tool, for example, direct mail or telephone. This provides an understanding of how each solicitation approach or fundraising tool works independently. However, it does not show which works better in terms of costs and donor acquisition. For example, one study shows that direct mail appeals usually have 1.5 to 2.0 percent response rate and generate $10 to $35 donations. 10 This information helps estimate the amount of funds generated through direct mail fundraising. However, due to the fact that no comparison with other tools is made, it does not identify whether or not this method is effective or efficient in terms of total benefits (funds raised minus costs of sending fundraising letters). In addition, considering that nonprofits use several strategies for raising donor funds, an examination of a single solicitation tool is not sufficient or reasonable as a resource for further promoting charitable donations. In this sense, a comparison as well as a combination of different solicitation tools should be examined. Since the one-way and two-way approaches contrast with each other in terms of the target population, messages to communicate, and the way potential donors are dealt with, a study of how effective it is to combine these approaches would be helpful. 10 Handy (2000) does not specify what cause a direct mailing effort appeals to. One possible combination is direct mail solicitation and special events. Direct mail appeals help bring attention to as many potential donors as possible, increasing the visibility of the organization and its mission. On the other hand, special events help build long-lasting relationships with potential donors, which is especially effective for organizations that are lesser known. 3. Challenges of the Japanese Nonprofit Sector In the previous section, some common giving patterns and fundraising methods were identified among a set of developed countries with established philanthropic cultures. This makes us assume that policy and fundraising strategies common in these countries might be equally effective in promoting charitable giving in other countries. However, given that giving behavior among donors depends on the cultural context in which their charitable giving takes place, similar giving trends among different countries are not necessarily caused by the same factors. Wright (2001) supports this argument by comparing the United States and the United Kingdom in terms of the social meaning and practice of philanthropy and charitable giving. As the findings from the studies reviewed in this paper show, both countries have a good deal in common in traits of donors: donors in the United States and the United Kingdom tend to have higher income levels and wealth, tend to be older, be active in religious practices, and have a higher-level of education, respectively. Despite these similarities, Wright claims that each country has a different giving culture: generosity for the United States and altruism for the United Kingdom. In the former, charitable donations are made largely for particular causes in which the donor directly participates or received the direct benefits in the past such as a university. In the case of the latter on the other hand, giving is generally for universal causes which the donor might not be directly involved in or influenced by, such as international aid. The successful promotion of philanthropy depends on whether or not particular cultural contexts are reflected in local policy and fundraising strategies. This is also the case with Japan. In other words, the findings identified here on giving trends and solicitation approaches are less likely to be directly applied to Japanese society. It is, therefore, important and necessary to understand Japanese giving culture, or what has formed Japanese giving behavior, to transform these findings into policy and fundraising strategies that would foster philanthropy in Japan. 45

8 The Nonprofit Review Table 5 Factors Behind Charitable Giving in the United States and Japan Factor United States Japan Tax incentives Expectation for government Cultural values Religion Well-established Full deduction Minimal role Limited capacity Inefficiency Individualism Independence Self-interest Single religious faith Regularly practiced Recently introduced Partial deduction Major public service provider Collectivism Group harmony Exchange etiquette No single religious faith Occasionally practiced To this end, some explanatory factors behind Japanese philanthropy are examined in this section. Furthermore, a comparison of Japan and the United States in terms of these explanatory factors is conducted to illustrate the variables behind the differences in giving patterns between the two countries. 11 The studies reviewed in this paper focus primarily on the United States and thus the findings identified here heavily reflect American practices and perspectives deeply rooted in its culture. Since the United States has a strong civil society and a rich tradition of philanthropy, this comparative analysis helps better understand the challenges facing Japanese society in promoting philanthropy as well as in developing the nonprofit sector. The lack of tax incentives for charitable giving is one of the major explanatory factors that support the weak nature of giving behavior among Japanese people and thus produce a significant difference in a tradition of giving from the United States. The United States has the well-established tax system where donors who file tax returns can deduct the full charitable value of their donations from their taxable income. By contrast, in Japan the treatment of charitable giving has been introduced very recently and tax deductions are applicable only to a part of charitable donations limited to about 25 approved specified nonprofit corporations. In addition to tax incentives for giving, this section examines in detail public expectation for government, cultural values, and religion, which all are fundamental aspects of 11 Even though no specific statistics or data are available in Japan, the share of charitable giving by subsector or type of cause is greatly different between the United States and Japan. According to the Independent Sector report (2001), in 1998, in the United States the largest share of charitable contributions went to religious organizations (60.1 percent), while human services organizations received the second largest (9.0 percent). On the other hand, in Japan most of charitable donations go to neighborhood associations (chounai-kai) or the community chest (kyodo bokin). Japanese life. Table 5 summarizes a comparison of these four explanatory factors for giving in the United States and Japan Public expectation for government A section of the U.S. population believes that government should have a minimal role in their lives. This public perception of government traces back to the U.S. Constitution (Website) that reflects a concern about the public s capacity to govern themselves. The framers of the Constitution created a system that prevented government decisions from directly invading all citizens right to manage their lives and property, such as a republican form of government set forth in Section 4, Article IV of the U.S. Constitution. Moreover, the public is in general doubtful of the government s capacity and efficiency. In a Washington Post/ABC News poll (2000), about two thirds of Americans indicated that they preferred a smaller government with few services. In addition, only 14 percent of Americans showed a lot confidence in the government s capability to solve a problem (Washington Post/ABC News poll 2002). While public support has been declining in recent years, Japanese people still regard government as a major actor in the provision of public services. 12 This is evident in public attitudes towards the government. In a report by the Cabinet Office (2002), about 80 percent of respondents answered that current politics did not reflect much or any of their opinions and views. Despite this concern about the role of government, only 17 percent cited enhanced public participation as a solution to show their willingness to play an active role in the policy-making arena. On the other hand, the rest suggested that government and politicians should listen to citizens or the public should vote responsibly in an election, indicating that the public tends to rely on the government for making policy decisions that impact their life. The lower trust in the government s capacity, efficiency, and ethics, the greater faith in nongovernmental organizations as efficient and reliable solutions to create and maintain social betterment for citizens. In addition, when people as individuals are more willing to be responsible for the common good rather than just delegating responsibility to public institutions, the presence of charity or private giving is further promoted. One explanation for why the Japanese nonprofit sector is still less advanced than other similarly 12 According to TV Asahi (Website), the approval rating declined by about 30 percent from 79.4 percent in April 2001 to 48.4 percent in November

9 Charitable Giving in Japan: A Comparative Study of Japan and the United States democratic countries could be the high public expectation of the government s role in civic matters. In this respect, strong dependency on the government is one of the core challenges to promoting charitable giving in Japan Cultural values The United States was founded on the belief in the importance of the individual. The strength and initiative of the individual was essential to encouraging and ensuring overall societal progress as embodied in concepts such as rugged individualism. The virtues of self-reliance and individualism are glorified and emphasized, promoting individual achievement over group success. Americans often contribute to organizations in which they are or have been personally involved such as their churches and schools (Wright 2001). This giving pattern reflects socially approved self-interest sought among Americans: they tend to give because their financial support benefits them either directly or indirectly. The value of the individual has helped develop nonprofit activities in the United States. While a larger system of government tends to seek solutions that serve the majority in society, nonprofit organizations respect an individual s rights and work to meet his or her needs. American donors tend to expect nonprofit organizations to realize their personal achievement in society and/or self-interests by making financial contributions. In other words, in the United States charitable giving is one of the measures to maintain and advance this unique function of nonprofit organizations. On the other hand, exchange etiquette is an important element of being successful in Japanese society (Tucker 1998). Human relationships are built and natured through repaying the obligations that one assumes to the other by respect, loyalty, and obedience. Therefore, Japanese are willing to help people with whom they have a clear relationship such as families, relatives, and friends to meet reciprocal social responsibilities. Conversely, the etiquette of giving and receiving makes Japanese reluctant to contribute to unknown people beyond their sphere of obligations or in an indiscriminate manner. Collectivism is another important cultural value that is prevalent in Japanese society. Unlike Americans, Japanese are educated in ways that emphasize interdependence and place great value on group harmony. In this sense, nonprofit organizations have greater difficulty catching-on to the Japanese public because they serve the interests of a particular group or a certain community over another, often times failing to seek a harmonious solution for the overall community. This collective consciousness is one of the factors that hinder the development of nonprofit activities and shape the weak nature of philanthropy in Japan Religion A large percentage of people in the United States are active in established religious practices. According to the American Religious Identification Survey (Graduate Center of the City University of New York 2001), more than 80 percent of American respondents identified themselves with one or another religious group. In addition, a U.S. News/ PBS poll (2002) revealed that approximately 90 percent of respondents saw religion as important in their lives and more than 60 percent of them were involved in activities with their religious organizations. Religious beliefs play an important role in promoting giving behavior among American donors. As identified earlier, in the United States those likely to give to charities are active in religious practices and have strong religious faith. In addition, this strong commitment to religious traditions makes Americans rely on religious bodies for guidance, thus encouraging charitable giving to religious-based organizations as an ideal way of living. For example, the Independent Sector report (2002) showed that, in 2001, approximately 60 percent of American households gave to religious congregations. 13 Considering only giving households, this figure is much higher: about 70 percent of giving households made charitable contributions to religious groups during that year. Moreover, the report reveals that households are much more generous to religious bodies than to secular organizations. Those who gave to both religious congregations and nonreligious organizations gave about four times as much as those who gave to only nonreligious organizations ($2,247 and $623, respectively). Even households who only gave to religious groups gave nearly twice as much as households who gave to secular organizations only ($1,154 and $623, respectively). Compared to Americans, Japanese people are less committed to and conscious of a particular religion. In surveys conducted over the past few years, about 70 percent of Japanese respondents answer that they have no religious faith. 14 Furthermore, the percentage of those who regard re- 13 Religious congregations only include houses of worship such as churches and temples. Schools and other charities that are sponsored by or associated with a religious body are included in secular organizations. This finding includes givers to religious congregations only and givers to both religious congregations and secular organizations. 47

10 The Nonprofit Review ligion as not important for fulfilling their lives is increasing. 15 Judging by U.S. standards, a low degree of religious consciousness is more prominent in Japan, supported by the fact that Japanese tend not to follow a single religion. According to the Statistics Bureau of the Ministry of Public Management, Home Affairs, Posts and Telecommunications (2004), the total number of those polled who acknowledged that they adhered to the different religious bodies was roughly 215 million of a total population of 120 million in This discrepancy could be based on the fact that people chose multiple options for questions relating to faith or religion, highlighting the more complex nature of Japan s religious traditions. Although Japanese people tend to visit houses of worship less frequently on a regular basis, they are actively involved in annual events from a wide variety of religious traditions. For example, many visit a shrine or temple on New Year s Day and celebrate traditions of Christmas with their friends and families. A relatively weak sense of commitment to religious faith is one factor that can be seen to negatively influence charitable giving in Japan. As no statistics or data are available on charitable donations to religious organizations or activities in Japan, it is difficult to assume that Japanese people have no religious involvement or dedication as a function of their willingness to give to religious organizations. However, given that many tend to make contributions through offerings to donation boxes in shrines and temples only on special occasions such as a summer festival or New Year s Day, Japanese in general seem to be less interested and have lower confidence in the role of religious organizations as an effective tool to improve their everyday lives. In other words, unlike in the United States, religion or religious faith is not a great source of support to addressing public concerns in Japan. This lack of public reliance on religion produces a major difference in the outlook of charitable giving between the United States and Japan. 4. Policy and Fundraising Strategies 14 According to a Yomiuri Shimbun survey (2001), 77.3 percent indicated they did not have any religious beliefs. An opinion poll conducted by Kokugakuin University (2004) also found that 70.9 percent of those surveyed had no religious belief or faith. 15 The Yomiuri Shimbun survey (1994, 2001) showed 59.9 percent in 1994 and 61.7 percent in As previously mentioned, charitable giving is a key to a strong civil society. It helps maintain and further develop increased public willingness to address social and civic issues that would generally improve their life. Moreover, it is an essential measure that helps alleviate financial difficulties facing many nonprofit organizations to carry out their stated missions. The factors that have shaped Japanese philanthropy, as well as the findings identified here on giving behavior and fundraising techniques, provide clear implications for both policy and fundraising strategies geared towards promoting private giving among Japanese people. In this section, five key approaches to encouraging individuals to make charitable donations are proposed: two policy and three fundraising strategies Public education Public education, with a focus on the realities of nonprofits and their fundraising activities, should be implemented. One of the challenges facing the Japanese nonprofit sector is limited public understanding of how nonprofit organizations work. Lower public recognition of nonprofit organizations is evident from a survey by the Economic Planning Agency (2000a): only 3.9 percent of charitable donations went to nonprofit organizations. This figure is much lower than 55.1 percent for neighborhood associations. In addition, the reasons listed for giving support the fact that Japanese tend not to understand why nonprofit organizations raise funds and are thus less familiar with the idea of making charitable donations. A majority of people (52.5 percent) gave for the sake of good relations, followed by because they wanted to help those in need (41.4 percent) and because they were touched by those who asked for donations (21.4 percent). Clearly, the motivations for giving among Japanese people come primarily from a sense of obligation to the individuals who are directly involved in fundraising activities, not from their understanding of what the organization is dedicated to. Given this, Japanese giving behavior is likely to change depending on who solicits and how the representative asks for donations. In other words, charitable giving in Japan is characterized as being ad-hoc rather than committed and mission-driven. To change the current state of Japanese philanthropy, it is necessary to educate the public on why nonprofit organizations need public support and how they meet their financial needs. Without this understanding, even if a nonprofit organization carefully targets potential donors and designs a particular solicitation approach, it would most probably fail to attract sufficient donors. One possible way of cultivating public knowledge about the nonprofit sector is to incorpo- 48

11 Charitable Giving in Japan: A Comparative Study of Japan and the United States rate philanthropic activities in educational curricula. Through a direct experience of raising funds or volunteering with nonprofits, individuals will foster an understanding of the significance of nonprofit organizations in society and their unique financial structure as they grow up and become more active in their local communities. Furthermore, parents and teachers are also likely to learn about nonprofit activities through the students and thus expected to be involved with nonprofit organizations financially. The survey by the Economic Planning Agency indicates that the percentage of those who are motivated to give by social obligation increases, while the percent of those who give because they want to help people in need decreases with age. In other words, those who are expected to donate are less likely to be motivated to give by awareness of the need to contribute to society. Usually the older people get, the more difficult it is to change ingrained attitudes and behavior. In this sense, the bottom-up public education is effective in fostering the idea of philanthropic activities as it indirectly helps to change a certain perception of the nonprofit sector that many adults, or potential donors, already hold Cooperative relationship with nonprofit organizations The government should further support nonprofits by establishing stronger relationships with the nonprofit sector. Japanese accept and expect government to be the only and most effective actor in achieving improvements in public life. Consequently, nonprofit organizations tend to be seen as only as groups of volunteers lacking special skills and substance. Furthermore, the role and influence of nonprofits in the policy-making arena is often underestimated and hardly understood. To promote the development of giving tradition in Japan, it is important and necessary to overturn the current image and perception of the nonprofit sector. Increased government funding would be successful in making the public recognize the nonprofit sector as another effective vehicle for social betterment. Government backing might be regarded as a guarantee of the legitimacy of nonprofit organizations and their work. This would not only help assure the public of the quality of services provided by nonprofits, but also help the organizations look official or professional, thus leading to crowding in. Furthermore, the gradual decline of the public s confidence and trust in government would make this approach even more effective in encouraging charitable giving. The government is often criticized for not being open to outside voices or not taking more flexible actions according to evolving situations. In this sense, government involvement could be viewed as a sign of progress in its efforts to reform the traditional, closed way in which the government has provided services and support in the past. As a result, the nonprofit sector might be able to gain attention as another legitimate actor expected to bring about positive changes in policy making. A primary mandate of the nonprofit sector is to remain independent of government. However, given that the general public still tends to view government as the only legitimate actor in improving quality of life, a partnership between government and nonprofits is essential to heightening public awareness of private giving as well as the functions of nonprofit organizations in Japanese society Associational connection Fundraising messages should include the donor s associational connection with a nonprofit organization by which the etiquette of giving and receiving is achieved. Exchange etiquette is a firmly rooted part of life and thus is indispensable to the success of an individual in Japanese society. Human relations based on this unique custom are valued and encouraged. Therefore, Japanese are less likely to anonymously donate to unfamiliar organizations or people, as they cannot assume their favors will be adequately reciprocated. Nonprofits could use this unique quality to promote private giving to their organizations. In other words, fundraising messages could be developed to construct a direct individual-level relationship between potential donors and a nonprofit, or the population served by the organization. For example, in the case of a local environmental organization that focuses on clean water, the fundraising message could be Your contributions for clean water will improve your own and your family s health instead of Your contributions will bring clean water to the community. To adequately complete the cycle of reciprocity, it would be important to ensure that donors feel their obligations of giving are repaid. To do this, it would be effective to send thank you letters to show how much their donations are appreciated and how their giving behavior is respected and acknowledged, adding personal and individual touches. This fundraising approach could also help increase the amount of funds raised. According to the 2000 survey by the Economic Planning Agency (2000a), those who gave because they wanted to help people in need made more charitable donations ( 13,000 or $108.3) than those who gave be- 49