Rakuten Files Lawsuit Against Japanese Government Over Ban on Points for Furusato Nozei Donations
Tokyo, July 11, 2024 — Rakuten Group, one of Japan’s leading e-commerce and technology companies, has officially filed an administrative lawsuit against the Japanese government challenging a new Ministry of Internal Affairs and Communications directive that prohibits awarding points for donations made through "Furusato Nozei" (hometown tax donation) portal sites. The company announced on July 10 that it seeks a declaration invalidating the ministry’s notification, arguing that the decree is illegal and unjustly harms the collaborative efforts between the public and private sectors.
Background: The New Ministry Notification
The dispute arose after the Ministry of Internal Affairs and Communications publicized a revised notification on June 28, 2024, set to take effect on October 1, 2025. This notification completely bans businesses operating Furusato Nozei portals from awarding loyalty points to donors. The ministry cited concerns over "excessive competition" in points offering as a primary rationale, aiming to prevent an escalation in point-based incentives for tax donations that the government views as inappropriate for a system fundamentally designed as a form of donation rather than commercial transaction.
Rakuten’s Objections: Legal and Practical Concerns
At a press conference, Kentaro Momono, Rakuten’s Executive Vice President, criticized the ministry’s move, stating, “Changing the rules unilaterally through a ministerial notification without parliamentary debate is problematic for a nation governed by the rule of law.” Rakuten contends that the notification circumvents proper legislative procedures and infringes on freedom of business operations guaranteed under Article 22 of Japan’s Constitution.
Rakuten has been operating “Rakuten Furusato Nozei,” a portal launched in 2015, which leverages the popular Rakuten Ichiba marketplace platform. The service helps municipalities solicit donations while offering points as incentives to donors, thereby boosting user convenience and encouraging contributions toward regional revitalization. Crucially, Rakuten asserts that it has borne all the costs associated with point incentives since 2019 without imposing financial burdens on participating municipalities.
Ryo Matsumura, Executive Managing Officer at Rakuten, explained, “The points are not unique to Furusato Nozei but part of our usual Rakuten Ichiba service. The funding for points in the donation context comes entirely from Rakuten, unlike the normal shopping points which are typically borne by the merchants.”
Rakuten’s Three Main Legal Arguments
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Excessive Regulation: While the ministry claims points incentives have become overheated, Rakuten argues that setting upper limits on point percentages would be sufficient regulation instead of a blanket ban. Furthermore, they highlight regulatory inconsistencies, such as permitting points from credit card use, which they say unfairly disadvantages portal operators.
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Overstepping Legal Authority: Furusato Nozei is governed by the Local Tax Act, which delegates only the "method of soliciting donations" to the Minister of Internal Affairs and Communications. Rakuten maintains that restricting point offerings impacts citizens’ rights and financial interests beyond this delegated authority and should be legislated by parliament rather than imposed via ministerial notification.
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Abuse and Overreach of Ministerial Discretion: Rakuten argues that the ministry’s notification constitutes a misuse of its discretionary power by invalidating longstanding cooperative efforts between government and the private sector to promote local revitalization without sufficient justification or evidence.
Historical Context and Impact
Since its inception, Rakuten’s Furusato Nozei portal has helped municipalities raise significant funds by incentivizing donations with Rakuten points—a system that has fostered ten years of public-private partnership aimed at boosting regional economies without direct costs to local governments. The sudden prohibition under the new regulation threatens to disrupt this innovative model.
At the press conference, Momono expressed deep frustration: “This notification disregards over a decade of joint efforts to energize Japan’s regions and unfairly negates the ingenuity and cooperation between the government and private companies that have made these programs successful.”
Broader Reaction and Related Developments
Rakuten’s announcement follows a surge in public dissent, including petitions opposing the points ban that have garnered nearly three million signatures. The company has also submitted these signatures to prominent government officials advocating a reconsideration of the policy.
Meanwhile, Amazon has recently entered the Furusato Nozei market, offering new options to municipalities and donors alike, including next-day delivery services and co-branded products—indicating increased competition and innovation within the sector.
Outlook
The Tokyo District Court will now review Rakuten’s lawsuit, which challenges not only the substance of the points ban but the procedural legitimacy of the ministry’s directive. The case highlights the tension between governmental regulatory efforts intended to preserve the charitable nature of Furusato Nozei and private sector initiatives aimed at leveraging technology and loyalty programs to promote regional support.
As the trial unfolds, stakeholders in local governments, e-commerce, and donor communities will closely watch how Japan balances fostering regional revitalization with regulatory oversight.
For further updates on this case and issues surrounding Furusato Nozei, visit Smart Money Mindset for in-depth coverage and analysis.