[8th ILO SSE Academy]: SSE in Japan - legal framework and NPO system

SSE Organisation
Governance / Eco-system
Public Policy / Legal Framework

Presented at: 8th ILO SSE Academy

Organisation: Seoul National University

Date: June 28, 2017

Presenter: Mr. Miura Hiroki (Researcher)

Contacts: sugeun@msn.com


The following presentation displays an overview of Japanese SSE. In Japan, the term “SSE” is not a popularized term. Instead, other buzzwords such as “social business,” “community business,” “not-for-profits,” and so on replace the term. The history of SSE in Japan is still a relatively new concept. Some aspects of it are legalized and proper frameworks exist that give a legal entity to these system. At the same time, many other aspects of SSE do not have a legal framework, but indirect support methods are still present for a variety of social businesses. The presentation questions the notion of an ideal institutional model of SSE for Japan and clarifies some important elements that are key in identifying institutional characteristics that makeup the backbones of a plausible legal framework. The NPO system, therefore, is brought up as a possible paragon that the institutional model of SSE can build upon. 

Presentation details 

Miura Hiroki explained the legal frameworks for SSE and NPOs and its support system in Japan.

In Japan, since 1950, various democratic institutions had been introduced, and reforms have begun to take place. In this trend, there have been consensus-building process on the co-operations, labor welfare systems, and until now, has exist. (In this trend, consensus formation has been made on cooperation and labor welfare system, and so far it has existed on Legal framework and public procurement, social finance, south-south and triangular cooperation, SSE and the sustainable development (SDGs), networks and fair trade, social innovation through social and solidarity economy, SSE and youth) and it has played a major role in shaping Japan's social welfare system

Among these, the cooperative is actively promoting the rights of the residents through the cooperatives, and actively participates in the community revitalisation project. The third sector in Japan can be regarded as government-invested corporations operated by the private sector.

In Japan, "social business", "community business", "non-profit activities", and "public collaboration" are widely used in the legal area instead of "social and solidarity economy", "social economy" and "solidarity economy". In general, “social businesses” and “community businesses” have been understood taking social issues as business mission, while implementing innovative solutions for them as a sustainable business, however, there is no special legal status for them. (Not even for “social enterprise”.)

However, social businesses are being done in a wide variety of fields. For example, there are customized care services for children or the elderly, creating new communities in the region through local currency or business models, or creating new jobs for young people.

In order to understand the legal environment and public support system in Japan, we need to understand the evolution of institutions.

From 1998 to 2007, Japan carried out a major reform of the corporate system. Currently, there are three types of corporations (non-profit, hybrid, and for-profit) under the tax law, and 'specified non-profit corporations' and 'approved non-profit corporations' are recognized as a hybrid type.

The government's role for social business is mostly indirect support. There was no direct support from the beginning, and there is still little discussion about direct support. However, the central government has divided the nation into 8 regions and created a "promotion council" so that the social business can spread voluntarily. Moreover, they created a system to help the activities of 'NPO Support Center' under the Promotion Council, consists of experts' collaboration system.

In the case of direct support, there is an organization called 'Japan Finance Corporation (Bank)', which has a business that lends funds to social business organizations. There is also a system that allows various groups to borrow by forming regional funds. At the local level, there are direct subsidy schemes and policies that provide various opportunities. In addition, local governments and enterprises collaborate through contracting-out system, and organizations supporting NPOs.

The characteristic of Japan is that NPOs (nonprofit) and businesses coexist, and there is a question about whether it can be regarded as an ideal SSE model. ‘Law to Promote Specified Non-profit Activities’ plays an important role in promoting Japanese style SSE by implementing institutional coexistence between civil society and social community business.

This law has three characteristics. The first is 'simplified certification system', and anyone can make a corporation if more than 10 people are gathered by a simple procedure. The second  characteristic is the distinction between non-profit and public interest activities. The last feature is that NPO corporations belong to the hybrid business entities.

The number of NPO corporations has been steadily increasing since the enactment of the law. By 2015, there are about 50,000 NPOs in Japan, usually about 1,000 in one region and the largest number of NPOs are in the area of health, medical care or welfare. (About 30,000).

In terms of profit structure, it can be seen that the profits are coming from participation in public-private partnership projects and execution of public services commission accounts for about 70%. Therefore, it is understood that the integrated effect of small scale, business execution, partnership with local government, and legal features affect the sustainability and robust operation of NPOs in Japan.

If you click on the image, you can enter full-screen