Japan hometown tax and regional revitalization reforms

Japan’s hometown tax donation system, Furusato Nozei, reached a record 1.33 trillion yen in fiscal year 2025, marking the sixth consecutive year of growth. The Ministry of Internal Affairs and Communications reported a record 59.63 million donation cases, with Izumisano City in Osaka Prefecture leading the nation in collections.

To manage the concentration of funds and the influence of portal sites, the Ministry is implementing stricter regulations. These include banning point rewards for donors in October 2025 and reducing the maximum allowable expenses for gifts and administrative costs to 40% of the donation amount by fiscal year 2029. Local governments are increasingly utilizing the system for targeted crowdfunding to support local businesses and cultural preservation.

Building on this system, new budgetary and tax reforms are being introduced to promote regional revitalization. These initiatives include integrating a new ‘hometown resident registration system’ with Furusato Nozei to support dual-residency lifestyles and increase the ‘relationship population.’ Additionally, new budget request guidelines allow for investment frameworks without upper limits for projects contributing to economic growth or crisis management.