Japan Furusato Nozei tax donation system evolution

Japanese municipalities have been utilizing the ‘Furusato Nozei’ tax donation system to promote regional revitalization and decarbonization. Some regions, such as Miyazaki Prefecture and Watarai Town in Mie Prefecture, have expanded the program to offer renewable energy as a return gift, allowing donors to apply a portion of their donations directly to electricity bills.

However, the system is facing significant regulatory changes. The government is tightening ‘local product standards,’ requiring municipalities to provide clearer proof that gift items are unique to their specific regions. Additionally, new rules reduce the cap on administrative expenses—covering procurement, shipping, and promotion—from 50% to 47.5%, with further reductions planned through 2029.

As of late September 2026, the impact of these revisions is becoming evident, with over 15,000 popular gift items scheduled to expire and become unavailable by the end of the month. These expirations are driven by the Ministry of Internal Affairs and Communications’ stricter criteria for local specialties and the reduced allowable cost ratio for gifts.

Despite these systemic restrictions, some areas continue to see growth. Miyazaki City reported record-breaking success, with donations reaching approximately 14.3 billion yen last fiscal year—an 11 billion yen increase from the previous year. Mayor Tomonori Kiyoyama attributed this growth to increasing gift variety and expanding portal site presence. The city is utilizing these funds for public projects, including a 1.2 billion yen construction fund and subsidies for children’s medical expenses.