Introduction
According to Young (Reference Young2000), there are two basic types of relationship between nonprofit and statutory organisations: the supplementary model and the complementary model. In the former, nonprofit organisations fulfil the demand for social services which the state does not provide, that is to say they operate separately and individually to meet needs which are not met by statutory organisations. Consequently, any expansion by the state in its normal service provision means that ‘less needs to be raised through voluntary collective means’ (Young, Reference Young, Boris and Steuerle1999: 42). The basic premise for the existence of a supplementary model is the citizen's freedom of choice. Arguably, the state tends to provide services uniformly for everyone, which results in the creation of new needs where communities have specific preferences that fall outside of the state's range of provision. The citizen has the right to seek alternative means to have these needs satisfied (Weisbrod, Reference Weisbrod and Weisbrod1977) and nonprofit organisations in the supplementary model are normally seen as private providers that can deliver certain services in place of the state. In the complementary model, however, nonprofit organisations simply help to effect the provision of public services largely financed by government (Young, Reference Young2000; Pavolini, Reference Pavolini2003). In this model, according to Salamon (Reference Salamon1995), nonprofit organisations and governments come to be engaged primarily in a ‘contract relationship’ in which governments finance public services and nonprofit organisations deliver them.
Young provides one of the few studies that tries to explain how the relationship between nonprofit organisations and the state has developed over the years in different countries. In particular, he focuses his theoretical analysis on four countries, and, of these, he concludes that ‘Japan appears more strongly orientated toward the complementary mode, viewing nonprofits very largely as extensions of the government and with relatively little emphasis given to supplementary and adversarial activity of the nonprofit’ (Young, Reference Young2000: 165). This is in accord with the perspective of other scholars who have examined the relationship between nonprofits and the state in Japan. Indeed, Amenomori (Reference Amenomori, Salamon and Anheier1997), Schwartz (Reference Schwartz1998) and Estevez-Abe (Reference Estevez-Abe, Schwartz and Pharr2003) all strongly maintain that partnerships between the Japanese state and nonprofits have never really existed because the nonprofit sector, which is often referred to as ‘the traditional partner of the state’, consists exclusively of incorporated nonprofits, known as hojin. These organisations appear very much to be governmental agencies because of their strictly regulated status, some of them having been established at the initiative of the state and several even being staffed by retired bureaucrats (Estevez-Abe, Reference Estevez-Abe, Schwartz and Pharr2003). Scholars of this school of thought contend that the origin of the complementary relationship between state and nonprofits in Japan can be found in the 1930s and 1940s when the military government subordinated all nonprofit organisations to the state. They argue that, although many nonprofits began spontaneously during the American occupation after the Second World War, most of them arose as a result of the subordination of large numbers of incorporated nonprofit organisations through state domination. However, they note that the situation began to change with the introduction of the new Special Nonprofit Activities Promotion Law (otherwise known simply as the NPO Law) in 1998, under which many unincorporated associations were finally allowed to qualify for nonprofit status and so become potential state-contractors of social services similar to the hojin.
From this viewpoint, according to the author, it is easy to assume that the status quo lasted from the 1930s/1940s to the 1998 NPO Law, with the Japanese nonprofit organisations being continually dominated by the Leviathan-state throughout the whole period. A considerable amount of literature on new social movements in the 1980s, and not least Eastern European ‘anti-political’ literature, derives from this approach.
However, mounting levels of international interest in and approbation of the efficacy of Japan's social services provision have recently encouraged researchers to look more closely into the Japanese case, giving rise to another school of thought on Japan's state−nonprofit relations. This supports the idea that Japan offers a unique insight into the nature of interaction between state and nonprofit organisations, where formal partnerships between the two sectors not only constitute the fundamental principle of their relationship, but are also based on a culture of ‘critical co-operation’, i.e. a high level of co-operation and a high level of conflict in evidence at the same time (Hirata, Reference Hirata2002; Suda and Asakawa, Reference Suda and Asakawa2006). According to these scholars, many incorporated organisations in Japan do see themselves as the state's administrative partners, working willingly with the government, yet at the same time maintaining a discreet distance which allows them to criticise state policy. Ritu (Reference Ritu2008) also cites Japan as a paradigm in the realm of social welfare services, ahead of many European countries, on account of its close state−nonprofit sector partnership. Indeed, many scholars assert that nonprofit organisations in Europe have long seen themselves as a watchdog of the state, exerting an influence on policy from outside the sphere of government (Taylor, Reference Taylor, Harris and Rochester2001; Pavolini, Reference Pavolini2003).
In the author's opinion, the school of thought represented by Hirata (Reference Hirata2002) or Suda and Asakawa (Reference Suda and Asakawa2006) generates a tendency to glorify the Japanese nonprofit sector and ignores the fact that a vast number of unincorporated nonprofit organisations, being unregistered and without legal status till quite recently, were prohibited from entering into any kind of relationship with the state. Thus, the problem with the approach is that it fails to consider that it was the issue of nonprofit legitimacy which barred unincorporated nonprofits from participating in the delivery of welfare services. Factoring this element into the research findings would also have provided a more accurate depiction of the Japanese state, thereby possibly preventing later scholars from reaching the same conclusion as Young (Reference Young2000) and seeing the relationship between state and nonprofit in Japan only in terms of domination and subordination.
By focusing on the historical background of the welfare system in Japan and particularly on the legal framework in which the nonprofit sector has developed, this paper attempts to explain how each has influenced the other and highlights key factors which may have been underestimated or misinterpreted in the past.
The historical background of the welfare system in Japan
There is a long-standing tradition in Japan, founded on Confucian moral teachings, that the family and the local community are the proper recourse for the relief of distress. For instance, according to the philosophy of the Tokugawa era (1603–1868), when military and administrative control of the cities was in the hands of high-ranking samurais, poverty was deemed to be solely the consequence of laziness and irresponsibility by members of one's family, the solution to which was application and hard work. Thus, samurais had informers everywhere in towns to ensure that everyone made a contribution to community welfare. Once the samurai received information to the contrary about any family or family member, the transgressor(s) would be subjected to a system of corrective punishment until they mended their ways. Since that time, the state in Japan has been perceived not just as a ‘legal actor’ sui generis, but rather as a ‘moral entity’.
Following the devastation of Tokyo by the great earthquake of September 1923, the city received substantial donations from other parts of Japan and from all over the world which were soon put to use for urgent relief work. Some of these donations went straight into private philanthropic organisations, while others were used by the municipal and prefectural governments to establish permanent social work facilities. This was a time of real cooperation between local government and the philanthropic organisations. Indeed, as has been pointed out by Hastings (Reference Hastings1995):
in the 1920s, government support of private social work was more generous than ever. The total amount given annually by the Imperial Household and the Home Ministry to private philanthropies on National Foundation Day was considerably higher in the decade after 1923 than in the decade before. Beginning in 1923, the combined amount was always over two hundred thousand yen, whereas until the regular imperial grants began in 1921, the Home Ministry grants were never more than one third of that amount. The Home Ministry grants declined in amount and became secondary to the ever-increasing imperial grants. Having the grants bestowed by the Imperial Household linked private philanthropy more explicitly to the imperial state than did funds from a bureaucratic ministry. (pp. 66−7)
From this increase in interaction between philanthropic organisations and the government and from the long tradition of responsibility devolving to local residents for the physical maintenance of urban neighbourhoods and the preservation of social order, there emerged new forms of ‘neighbourhood associations’ or chonaikai. In these associations, residents in each community cooperated to plan recreational activities, such as festivals and athletic meetings, to promote friendship and to improve their environment by cleaning public toilets, baths and other community areas, and to make the city safer by controlling crime and dealing with traffic accidents, as well as by preparing for potential disasters, such as typhoons and earthquakes. To enrol in the neighbourhood association each resident had to pay the membership fee appropriate to these activities (Hastings, Reference Hastings1995). After the 1923 earthquake, neighbourhood associations became highly valued by the municipal government for their role in local self-government and for their close connection with the everyday life of the citizens. As a result, the municipal government was quick to use them to carry out certain of its policies. In the mid-1920s, a number of surveys were carried out to investigate such groups, and the majority of people who composed the chonaikai leadership were found to be landowners/lords, heads of factories or doctors within the ward (ibid.). This was an indicator of the connection between being the proprietor of a business and becoming leader of the neighbourhood association in the same ward. Indeed, holding such a position would mean attracting more customers to their business.
Around this time, municipalities began to introduce ‘district welfare committees’ or homeniin seido which, as Goodman (Reference Goodman, Goodman, White and Huck-ju1998) stated, had the main objective of investigating and improving living conditions in the area. Each district had approximately ten committee members who were chosen directly by the head of the municipal social bureau to form an assembly, with the bureau head as its chairman. As has been pointed out by Hastings (Reference Hastings1995):
The committee members recorded information about households receiving aid on cards, thus coining a new term for the poor: ‘card class’. Investigators classified the households in one of two categories of poverty. In the first class were those unable to exist without help from the public or private agencies. In the second class were those households that were just barely able to maintain economic independence. Each district had an office where the cards were kept, and one salaried employee who took responsibility for the office records, communication among the committee members, and liaison with the city social bureau. (p. 90)
Under the committee jurisdiction of 1934, the responsibilities of the district welfare committee were further expanded; they began to provide advice for households, took responsibility for the unemployed and monitored the health of children and pregnant women. However, despite the fact that the district welfare committees had been formed by the municipal social bureau, they were independent from the latter. They were, using Hastings’ (Reference Hastings1995) expression, ‘duly constituted local philanthropic bodies’. The leaders of these committees were often the same local business men who made up the leadership of the neighbourhood associations, and were therefore local residents with no direct connection to the municipal administration but who ‘were willing to join hands with the municipal social bureau to maintain social order in their own district because the existing order worked to their benefit’ (Hasting, Reference Hastings1995: 93). District welfare committees as well as neighbourhood associations soon became a training ground for many middle-class citizens who were more interested in political life, and indeed many of them were subsequently absorbed into political parties.
The immediate post-war period saw the beginning of radical changes in the social structure of Japan. Under American occupation, the Ie System (literally, house system), which was the feudalistic family system of which the Empire had been so proud, was abolished; this structure, which had dominated family hierarchy, lost its legal status and, with it, the philosophy of male supremacy. First, the Trade Union Law (1945) and Labour Standards Law (1947) were introduced to defend the rights of workers and improve conditions in the workplace and, in 1951, the Social Welfare Enterprise Law was enacted. Until then public assistance for people in need was considered to be the responsibility of families and philanthropic organisations. The state was seen simply as ‘a moral entity’ whose function was limited to ensuring that everyone made a contribution to the welfare of the community. In other words, the state was perceived more as guarantor of the public interest, making no significant contribution to the actual planning, administration or provision of social services. It was therefore the Social Welfare Enterprise Law (1951) that for the first time introduced into Japanese society the notion that public assistance for those in need was the responsibility of the state, a concept imported from America. However, as Suda and Asakawa (Reference Suda and Asakawa2006) pointed out, Japan was at that time in a state of post-war reconstruction and lacked the resources to fulfil its new legal obligation to provide social services. Accordingly, the Social Welfare Enterprise Law granted special legal status as ‘social welfare corporations’, or hojin, to the ‘neighbourhood associations’ and local philanthropic organisations who had provided welfare up until then. The government then contracted out the task of service provision to them as an exceptional measure, marking the beginning of a contract culture between the government, who fulfilled the administrative core functions, and social welfare corporations, who focused solely on the provision of services.
In the late 1970s, when the strength of the Japanese economy began attracting worldwide attention, a new era of the Japanese welfare state came about. This phase had its basis in a theory labelled the ‘Japanese Style Welfare Society’ (Miyamoto, Reference Miyamoto2003) and was formulated by scholars close to Prime-Minister Ohira, who served in office from 1978 to 1980. Ohira was very interested in developing new strategies for his Liberal Democratic Party (LDP) and was at the same time reluctant to see Japan fall into the same rut as many, arguably, inadequate welfare states in the West. Instead, he insisted that Japan's own hidden assets, such as neighbourhood and family bonds, should be more positively exploited, an idea which exerted a strong influence on the policy process in the early 1970s, materialising into government policy in the shape of the New Social and Economic Seven-Year Plan (Japan Ministry of Economic Planning Agency, 1979). This was a time of substantial pressure aimed at forging the government−voluntary sector relationship into more of a supplementary mode as the government reduced its expenditure levels. Before long, however, a coalition of parties from the Left put forward an alternative proposal which was, in effect, a negative image of the Japanese Style Welfare Society. This was labelled the ‘Japanese Style Company Society’ an approach held that the substitution of company and family welfare for state welfare would be a disaster for Japan. Japanese Style Company Society supporters contended that company and family welfare (which underpinned the Japanese Style Welfare Society theory) was flawed because it did not provide welfare as a universal right for every citizen and, in order to benefit from it, people needed to be subjugated to those holding superior positions in company structures or higher status in family hierarchies. This, they argued, would result in immobility of labour because people would be reluctant to leave their jobs and families, and furthermore would promote gender bias in the workplace. In fact, the Japanese Style Company Society theory later showed itself to be a more realistic representation of the Japanese system when the structures adopted by Prime Minister Ohira and other right-wing scholars proved inadequate to meet the growing needs of the welfare services during the post-industrialisation era (Miyamoto Reference Miyamoto2003).
The failure of the Japanese Style Welfare Society strategy emerged as a policy issue through a crisis of the medical insurance budget. Growing numbers of the frail older people had to be hospitalised owing to a dearth of public-care facilities for senior citizens, which resulted in some criticism of the public welfare authorities. Although hospitals lacking specific facilities for care of older people were hardly appropriate places for those with no medical condition, this solution was less stigmatic than overt dependence on public welfare. However, the result was a huge surge in costs for the public medical insurance fund and to offset the ensuing serious budget deficit in the medical fund, it was deemed necessary to bolster public social services thereby reducing the burden on families and limiting the number of elderly being hospitalised. The problem was how to create the financial resources to achieve the required public service provision. Some officials proposed a tax-based system as a means of funding these public services but the majority in the Ministry of Health and Welfare (MHW) concluded that its maintenance would be impractical in view of the general climate of welfare retrenchment and limited financial resources. Instead, by the late 1980s, specialists and officials in the Ministry of Health and Welfare had already begun discussing long-term care insurance. This was expected to generate a contract culture throughout Japan to replace the ‘sochi’ system which had been the prevailing principle of welfare provision up till then. Sochi is a referral placement procedure for deciding who is entitled to benefit from social services, and was considered by many to be suited only for selective welfare provision. Its critics contended that the sochi system was a major obstacle to the introduction of universal welfare and needed to be replaced by a contract culture through long-term care insurance.
In 1993, a new coalition government interrupted the LDP's 40-year grip on government and this change in administration provided favourable conditions for such an insurance plan to be put into effect. Although the new government had no clear-cut ideological stance in favour of welfare expansion, a decisive policy development was needed to demonstrate its independence from LDP policy, and the Ministry of Finance was also seeking a reason to increase the consumption tax rate. Consequently, in the same year (1993) the MHW published a report entitled A Vision for Welfare in the 21st Century (Japan Ministry of Health and Welfare, 1993), and in 1994 launched a special staff office to deal with older people's care policy and also establisted a committee to investigate a new system of care for senior citizens. The government's proposal for long-term care insurance was drawn up in the Council on Health and Welfare for the Elderly and the respective bill was eventually adopted in the 1997 Diet under a coalition government that included the LDP. Half of the funding for the new scheme came from premiums levied on 40−64 year-olds (second tier insured persons) and the over 65s (first tier insured persons) with the balance being made up by government subsidies. As Suda and Asakawa (Reference Suda and Asakawa2006) noted:
When long-term care insurance (LTCI) was introduced, the government withdrew from service provision, and any private organisation could become a service provider as long as the organisation met standards set by the central government. For the purpose of putting all service providers on an equal footing, the government subsidy to social welfare corporations was abolished and all LTCI-service providers were made to receive reimbursements for costs based on the volume of the services provided. (p. 2)
The LTCI was instituted at the will of the government but it is easy to imagine that its introduction caused some disgruntlement to social welfare corporations (i.e. hojin or the traditional partner of the state).
The legal framework of the Japanese nonprofit
Until the Social Welfare Enterprise Law was enacted in 1951, the Japanese nonprofit sector was regulated by the Meiji Civil Code of 1898. Article 34 of the Code defined ‘legal persons acting in the public interest’ (or ‘koeki hojin’) as ‘an association or foundation relating to rites, religion, charity, academic activities, arts and crafts, or otherwise relating to the public interest and not having for its object acquisition of profit may be made a legal person subject to the permission of the competent authorities’. Apart from the Article's brief reference to organisations ‘relating . . . to the public interest’ the concept of ‘public interest’ was undefined, a problem which the 1951 Social Welfare Enterprise Law also failed to resolve. A possible explanation for this is that, as stated above, the state in Japan has been traditionally conceived as moral entity and it is exactly this aspect that gives to the statutory bodies ‘a key role as the legitimator and regulator’ of public interest activities (Osborne, Reference Osborne2003: 10). Indeed, the Japanese perception of ‘okami’ which, as pointed out by Kuroda and Imata (Reference Kuroda and Imata2003), literally means ‘god’, refers in everyday usage to the government (as representative of authority). The Japanese accept okami (or the state) as supreme overlord in policy matters (Kusumi, Reference Kusumi, Watanabe and Partee2002), and if policy decisions do not come up to expectation or fail to fulfil people's needs, they will lodge a protest against it but will never deny its authority (ibid.), hence the phrase, ‘okami no osumitsuki’, meaning ‘guaranteed by the state as supreme overlord’. Thus, the authorising agency is generally perceived to be the only one which can put the stamp of legitimacy on nonprofit organisations, and only on the basis of that stamp can nonprofits gain legitimacy in the wider public domain. This, however, led to another problem with Japanese public interest law, which Pekkanen and Simon (Reference Pekkanen, Simon and Osborne2003) labelled ‘administrative discretion’. They considered that the Civil Code ‘made challenges against denial of approval of an application quite difficult’ and it ‘did not require that the reasons for rejection of the application be specified’ and also ‘set no limits within which an application must have been considered’ (p. 81). What is more, for these public interest organisations to become legal entities, they must have applied to and received the approval of the competent minister; that is, an organisation intending to involve itself in a variety of activities related to the public interest, would likely need approval from more than one minister. Yet another problem associated with the Civil Code (as it concerned public interest organisations) related to capital requirement, referred to in the Code as a ‘sound financial base’, which was again at the discretion of the minister(s) who gave the approval (ibid.)
Long after the structural devastation brought about by the Great Hanshin-Awaji Earthquake of 1995, the impact of its shock waves were still being felt by the political establishment in Japan. One result of this was the enactment in December 1998 of the NPO Law. Special Nonprofit Activities Promotion Law, otherwise known simply as the ‘NPO Law’. As clearly stated in Article 10 of the new law, its main purpose was to alleviate the legal difficulties which had previously been encountered by the koeki hojin in the process of obtaining legal status. In particular, the law aimed to rid the registration process of administrative discretion and to ensure the registration of all qualified organisations. According to Amenomori (Reference Amenomori, Salamon and Anheier1997), there were more than a million associations in Japan which, until then, had not been allowed to attain legal status. Under the new legislation, power to approve incorporation status for nonprofits, previously reserved for central government ministries, was transferred to local authorities, thereby considerably accelerating the process. Indeed, local governments were now obligated to publicly announce the opening date of applications for nonprofit incorporation at least two months in advance, and to reach a decision with regard to every applicant within two months of the closing date for submissions. Furthermore, there was no requirement in the incorporation process concerning the holding of assets. In fact, this acceleration of the incorporation process was also in the interest of local governments, who had become used to struggling against mounting debt, a burden which increased in the years following the bursting of the so-called ‘economic bubble’ (baburu keiki) in 1990. Therefore, the boost to their budgets resulting from the shift in power from central to local government came as a great relief. They quickly realised that by incorporating more local nonprofit organisations to provide and maintain public services, costs would be reduced and, at the same time, they would be able to recover the debts of previous years. A succession of reforms between 2000 and 2006 under the government of Prime Minister Koizumi were all designed specifically to further the decentralisation of power from central government to local government, along with the respective budget enhancements.
A little over two years after enactment of the NPO Law, the Japanese Diet passed a second landmark law affecting nonprofit organisations. March 2001 saw the approval of the law amending in part the Special Tax Measures Law, becoming the first legislation to address the eligibility of incorporated nonprofits to receive tax-deductible donations. This brought about a dramatic increase in the number of new nonprofit incorporations. In fact, at the end of March 2004 the nonprofits established under the 1998 Law numbered over 16 thousand and it has been estimated that between December 1998, when the incorporation process began, and 2004 nonprofits were being incorporated at the rate of approximately 500 per month (Civil Society Monitor, issues 8−9). Since April 2006, under a process called the designated administrator system, traditional non-profit corporations (social welfare corporations) have not been viewed as ward-entrusted facilities but as organisations being managed by designated administrators. Elements of both nonprofit and for-profit structures may be incorporated into these, thereby creating a sort of hybrid organisation in which the real nature of a nonprofit may be lost (Suda and Asakawa, Reference Suda and Asakawa2006). These hybrids together with the newly incorporated nonprofits and for-profits joined the care service sector under the public long-term care insurance system.
Conclusion
Through an examination of the origin and structure of the welfare system in Japan and the legal framework which fostered the development of its nonprofit sector, this paper has shown that the relationship between state and nonprofit has been one which is predominantly complementary in nature, and that attempts to bring it into a more supplementary mode have been unsuccessful. Despite this, the author argues that the state in Japan has never in fact dominated the nonprofit sector, as has often been maintained, and that those scholars who seem convinced that state−nonprofit relations in Japan have evolved in recent years into something more akin to a partnership, thereby assuming a cooperative mode, probably misinterpreted the evidence.
As already mentioned, it was the enactment of the Social Welfare Enterprise Law (1951) that marked the beginning of a contract culture between the government, who fulfilled the administrative core functions, and social welfare corporations, who focused solely on the provision of services. Thus, the author's argument is that the origin of a complementary relationship between the two sectors in Japan dates back only to the 1950s rather than the 1930s−1940s, as maintained by Young (2001) and other scholars.
This culture thrived for almost two decades, but in the 1970s there began a time of substantial pressure aimed at forging the government−voluntary sector relationship into more of a supplementary mode as a result of the government reducing its expenditure levels. However, this failed, not because of pressure exerted on nonprofits by the state, as is often argued, but through its inability to meet the growing needs of the welfare services in the post-industrialisation era. This failure led to the introduction of Long Term Care Insurance, which in many respects reset the contract culture between the two sectors which had been at the core of their relationship since 1951.
If, however, the contract culture of the 1950s was, from a policy perspective, almost indistinguishable from its counterpart which returned to favour from 1993 onwards, radical differences in welfare law in the same two periods are clearly visible. The Social Welfare Enterprise Law of 1951 did not modify the 1898 Civil Code, through which the Japanese nonprofit had been regulated. In fact, the only innovation it did impose was the granting of legal status as hojin to those voluntary organisations who had been the traditional providers of welfare services in Japan without, however, altering the authority of the state as guarantor of the public interest − a role which has been fundamental to the Japanese psyche for centuries.
The new NPO Law (1998), and a number of subsequent minor laws to enforce its principles, brought about a substantial change. Its effect was twofold: it promoted deregulation of nonprofits on one hand and devolution of power to local authorities on the other. Deregulation was aimed at alleviating the difficulties which had previously been encountered by the hojin in the process of obtaining legal status and, at the same time, power to approve incorporation status for the millions of nonprofits which had sprung up since World War II, previously reserved for central government ministries, was transferred to local governments. This also meant that central government no longer needed to concern itself with the matter of nonprofit legitimacy, a function which was transferred to local authorities together with its administrative core functions. However, far from being dismayed by this extra burden, local authorities welcomed their new responsibilities because of the increased funding that came along with them, and the additional resources in the provision and maintenance of public services which the nonprofits represented.
In the opinion of the author, the enthusiasm with which local authorities went about recruiting nonprofits for incorporation after 1998 and their subsequent reliance on them for advice and guidance on issues that pertain to the local community has probably been given too much significance in terms of a cooperative relationship between the local authorities and voluntary and community sectors in Japan. A more reasonable explanation for this is that the former were keen to create a market-place in which prices would be driven down by large numbers of nonprofits competing for state-contractor status. To this end, many hojin were also restructured as privately operated organisations without ‘entrusted’ status so that they could compete not only with the newly incorporated nonprofits but with for-profits too.
Scholars widely see these reforms in a positive light because they reflect the bottom−up development of nonprofits in a scenario in which citizens play a larger role in promoting public interest, rather than government agencies dictating nonprofit activity from the top−down (see, for example, Adachi, Reference Adachi1999; Young, Reference Young2000; Kuroda and Imata, Reference Kuroda and Imata2003). However, the question of what will happen to the legitimacy of the nonprofit sector remains. As previously mentioned, the people of Japan recognise the legitimacy of nonprofits because they are guaranteed by the state, but as statutory accountability requirements relax and experimental hybrid organisations that combine nonprofit and for-profit arrangements begin to spring up, the public will lose faith in the sector. Perceived failures of downward accountability (i.e. accountability to the community at large as tax payers) have been fuelled by well-publicised reports and government investigations about fraudulent practices, incompetent administration or nonprofits whose expenditure on resources for the public good appears not to match their income from tax benefits (Civil Society Monitor, issue 4 and 9). Under these circumstances, nonprofit organisations will face a crisis of legitimacy resulting in the public beginning to question whether they can maintain their historical image of delivering services in a trustworthy and reliable manner (Schlesinger et al., Reference Schlesinge, Mitchell and Gray2004).
