The Dormant Deposit Initiative and the Hometown Tax System as Complementary Social Security Functions in Japan

Abstract

In Japan, the legal framework for donations has been taking shape over time in step with the steady growth of donations. Dormant bank accounts partially fund private-sector activities serving the public interest. The “hometown tax” system offers donors tax credits, while local governments as recipients use the contributions to supplement funding and promote regional development. Both initiatives help address social welfare shortfalls that local governments cannot cover with their official budgets alone. However, the downside of both is that they often fail to reflect donors’ specific intentions regarding how their contributions should be used. To ensure that donations effectively complement social welfare as intended, continuous improvements to these systems are necessary. Such improvements are likely to occur together with increasing public awareness of the limitations of official social welfare.