Participants in Japan's hometown tax program, which allows people to "donate" some of their tax payments to a municipality of their choice in return for gifts or services, may need to increase their contributions or face reductions in gift sizes after the central government tightened regulations on Sunday.

Last month, ahead of the changes, competition intensified among the numerous intermediary websites for furusato nōzei, as the program is called in Japanese, while some people scrambled to make donations to take advantage of benefits under the previous system.

The Ministry of Internal Affairs and Communications has tightened rules for calculating expenses from October, as under the program local authorities must keep the total value of gifts — which are often locally produced culinary items or other specialty products — and other costs including shipping fees below 50% of the donations they receive.