/

Japan’s ailing rural towns push free beer, other perks to urbanites in tax-sharing drive

Bloomberg

Faced with the danger of elimination, hundreds of rural districts in Japan are plying gifts that include craft beer and balloon rides to entice their mini-diasporas to send tax payments back home.

Offerings of choice cuts of beef and appeals based on emotional attachment also are among the tactics applied by villages, towns and small cities to encourage participation in a program known as “furusato nozei.” The initiative allows tax deductions for people who donate money to their hometowns, or any other adoptive location. Among Japan’s almost 1,800 local authorities, half are pitching gifts to get donors.

Prime Minister Shinzo Abe’s administration is considering an expansion of the program as it seeks to invigorate rural economies before local elections next year. Some 900 population centers will disappear within a generation as the nation ages, according to a report submitted to the government.

“Stopping towns and villages from falling into decline is an increasing challenge,” said Takaaki Hoda, who teaches business at Showa Women’s University in Tokyo and diverts some of his tax to Hokkaido. “Even 10 or 20 supporters can have a considerable impact on a small town.”

Hisako Yoshida, a Tokyo-based tax accountant, started donating last year after many clients asked her about the system. She’s made gifts to six municipalities, including the town of Aya in Miyazaki Prefecture, which sends donors 5 kg of Hyuganatsu citrus fruit for a tax-deductible payment of ¥10,000 ($98).

The number of benefactors has more than tripled since the program was introduced in 2008, with the amount of donations reaching a record ¥65 billion in 2011 when taxpayers directed funds to areas of the northeast devastated by the earthquake and tsunami. Tokyoites are the biggest contributors, according to data from the internal affairs ministry.

The system originated from an idea by Issei Nishikawa, governor of Fukui, and was created when current Chief Cabinet Secretary Yoshihide Suga was minister in charge of local government policies.

“Suga is the birth parent of the program,” said Nishikawa, who lobbied him last week on regional growth. “Now we want him to become the nurturing parent.”

The central government would consider expanding the system and simplifying payment procedures, Suga said in July.

It also plans to set aside ¥4 trillion next fiscal year to boost regional economies with a fund for projects including road and railway construction, the Nikkei newspaper reported Wednesday.

An Abe-backed candidate lost the gubernatorial race in July in Shiga. Crucial votes will be held in Fukushima and Okinawa later this year ahead of unified local elections in April 2015.

Abe increased attention on addressing the decline and aging of the population after a report in May from former internal affairs minister Hiroya Masuda predicting the proliferation of ghost towns. The number of women aged 20 to 39 will shrink by more than 50 percent in about half of the 1,800 municipalities across Japan by 2040, making their recovery virtually impossible, according to Masuda.

Almost half of Japan’s municipal districts have vanished in the past 15 years through mergers to cut administrative costs, as the number of residents dwindles.

The furusato nozei program will have a significant impact in some cases but “doesn’t provide a fundamental solution” to regional decline in Japan, said Hiroyuki Kishi, a professor at Keio University in Tokyo and a former trade ministry official.

“We didn’t start this program for financial benefits and are instead focusing on increasing the nonresident population,” said Noriharu Yoshihara, a financial planning official at Higashikawa in Hokkaido, the town where Hoda of Showa Women’s University sends donations. “The system is effective in making people in big cities more interested in the countryside.”

The number of visitors to the town rose to more than 1 million in the fiscal year that ended in March, up 18 percent from five years earlier, the municipality’s data show. The population increased by more than 100 in the four years through 2012 as some visitors moved permanently to the town.

Hiroyoshi Kawana is another Tokyo resident who directs tax money to Higashikawa and feels at home among its rice paddies and snow-capped mountains.

“I feel nostalgic every time I see the landscape,” said Kawana, a 64-year-old freelance photographer. The former Canon Inc. worker has visited Higashikawa more than 20 times in the past three decades and uses the tax initiative to support the town’s photography events.

The Hokkaido town of Kamishihoro offers hot-air balloon rides to large donors, while the city of Awaji in Hyogo Prefecture gives a six-pack of namesake beer to donors of ¥10,000 or more.

Donations to the city of Tendo, Yamagata Prefecture, have jumped 1,000-fold after it started dishing out local produce in April, such as cherries, peaches, beef and Japanese sake.

The gift-giving is a good advertisement for local products and an incentive for donors, said Yoshida, the Tokyo-based accountant. “It’s a win-win system.”