Furusato Tax Points Ban: A Six-Month Review of System Purpose and Return-Gift Competition

On October 1, 2025, the awarding of points in Japan's furusato (hometown) tax donation system was banned. A revision of the ministerial announcement made it a violation of the appropriate-solicitation standard for any party offering economic benefits to donors (including through third parties) to be used to solicit donations. Proprietary points awarded by major portals such as Rakuten Furusato Nozei, Satofull, and Furunavi were prohibited across the board, while points from credit cards and other payment platforms were left explicitly outside the scope.

Eight months on, by June 2026, the operational picture is clearer. The RIETI survey conducted in January 2026 with n=10,850 donors reports that 41.1% of 2025 donations were placed in September and 29.1% in December, inverting the conventional year-end concentration (50.6% in December the previous year) for the first time. The rush before the points ban shifted the shape of the donation calendar by more than twelve points.

The rush is corroborated by several micro-level datasets. At Satofull, by September the number of donations using "choose-later return gifts" had grown more than 20-fold year-on-year, while donations above one million yen rose more than 7.4-fold. Impress Watch's industry aggregate also recorded August 2025 donations at more than 1.8 times the previous year, climbing to 3.1 times in the final week of August. The displacement of the previous year's December share of 50.6% by a September peak of 41.1% reflects a quantitative trace of how strongly the rule change shaped user behavior in the run-up to enforcement.

As a symbolic measure timed for enforcement day, the Ministry de-designated four municipalities on September 30, 2025. Soja City in Okayama (return-gift procurement ratio 46.4%), Miyaki Town in Saga (solicitation cost ratio 59.8%), Unzen City in Nagasaki (56.4%), and Yamato Town in Kumamoto (56.1%) were all found to have breached the 50% expense rule. The then-minister Seiichiro Murakami noted at his September 26 press conference that "successive de-designations risk undermining public trust in the furusato tax system." Pairing the points ban and the de-designations on the same day reads as a signal that expense-structure discipline is being tightened in both the design layer and the operational layer simultaneously.

Previous year (2024): Year-end concentration

Jan–Apr

8%

May–Jul

9%

Aug

5%

Sep

9%

Oct

8%

Nov

10%

Dec

50.6%

2025 (pre-abolition rush): September concentration

Jan–Apr

6%

May–Jul

8%

Aug

11%

Sep

41.1%

Oct

3%

Nov

4%

Dec

29.1%

Collapse of year-end concentration

December share: 50.6% → 29.1% (-21.5 pp)

September pre-abolition peak

September share: 9% → 41.1% (+32.1 pp), concentrated just before Oct 1 enforcement

* Sources: RIETI 'Quick Report: 2025 Furusato Tax' (Jan 2026, n=10,850); MIC notice revision on furusato tax designation standards (Jun 2024). Previous-year figures are retrospective estimates from the same survey. The September 2025 spike reflects user behavior shifting in anticipation of the October 1 point-abolition enforcement.

The Logic of the Announcement Revision

The Ministry's stated rationale for the revision is broadly fourfold. First, portal-to-portal competition over points had overheated, with rising award rates inflating expenses. Second, the practice ran counter to the principle that "taxpayers donate to their hometowns or to localities to which they feel grateful, of their own will." Third, the funding source for portal points was, in effect, raised intermediary fees—ultimately borne by municipalities. Fourth, upward fee pressure was squeezing municipal use of funds within the limits of the 50% expense rule.

If the logic is taken on its own terms, the primary thrust of the ban is aimed at "replacing the competitive axis among portals" and "tightening discipline on expense structure." Shifting donor motivation away from return-gift hunting, or repairing the redistribution function, lies outside the direct reach of the announcement.

Rakuten's Administrative Lawsuit

On July 10, 2025, Rakuten Group filed an administrative lawsuit in the Tokyo District Court against the national government and the Ministry, seeking confirmation that the announcement is null. Rakuten's argument runs: the rule constitutes excessive regulation of portal operators that exceeds the Minister's discretionary authority, and a cap on awarded points would suffice without a wholesale ban. The first oral hearing was held on September 16, 2025. The government has responded with a standing-to-sue argument, contending that "the interests protected by the system are limited to donors and local governments, and Rakuten lacks standing."

As of June 2026, no verdict has been handed down. The issues stack across layers: the relationship between announcement and statute (the scope of administrative discretion), the operator's standing, and the boundary between market mechanisms and public-interest regulation. Depending on the eventual reach of the verdict, the degrees of freedom for portal regulation remain in flux.

The Migration of Portal Strategy

Before the ban, competition among portals turned on points-return rates. Levels as high as 32% existed, and gains in share moved in tandem with increases in points-return. After the ban, the competitive axis has clearly shifted. Amazon entered the furusato tax intermediary business on December 19, 2024 and differentiated on logistics and UX—next-day delivery, time-window specification, and Prime membership funnels. Reports indicate it set special fee plans below the prevailing portal level of roughly 10% for some municipalities.

Satofull has signaled a turn toward "proprietary return gifts" (developing Satofull-exclusive items). Industry media including Impress Watch have continued reporting on this since October 2025 under headlines such as "Furusato tax after the points ban — Satofull finds an opening in proprietary return gifts." The competitive axis has been displaced structurally from points-return rates to service quality, delivery speed, proprietary return gifts, and the fee levels charged to municipalities.

Donation Trends on the Municipality Side

According to the Ministry's "Furusato Tax Survey Results (FY2025 Edition)," FY2024—the year immediately before enforcement—saw donations received reaching 1.2728 trillion yen (a fifth consecutive record high), with 10.797 million people taking the deduction (up 7.8% year-on-year) and an expense ratio of 46.4% (590.1 billion yen)—of which intermediary portal commissions came to 165.6 billion yen, or about 13% of expenses. These are the pre-enforcement baselines.

The pre-and-post rush kept the 2025 total volume expanding, while outflows on the receiving end also set new records. The aggregate residence-tax deduction across Kanagawa Prefecture reached 90.177 billion yen (an all-time high); Yokohama's outflow stood at 34.34 billion yen, the largest among Japan's cities and wards (up 13% year-on-year). Given Yokohama's 2.89 billion yen in receipts, its net balance is roughly minus 31.4 billion yen. Yokohama is a recipient of the local allocation tax, but Kawasaki, with a fiscal capacity index above 1.0, is a non-grant municipality absorbing 13.5 billion yen in outflows with zero subsidy.

The Structure of User Dissatisfaction

The dissatisfaction items in RIETI's 2025 survey (n=8,311 respondents) point to where users locate the system's main problems. "Hard to figure out my donation cap" at 40.1%, "Reduced sense of value after reforms" at 33.3%, "Too many portal sites" at 28.6%, and "Frequent rule changes" at 24.9%.

What stands out is that user discontent centers on the system's "complexification and frequency of revisions" more than on its "unfairness." Stability of design itself has surfaced as a factor degrading the user experience. Retention intentions stay high—83.4% plan to keep using the same site and only 2.4% plan to stop—but these figures carry an experienced-user bias. In a pre-enforcement survey by 400F's "Okanèco", only 38.2% said they planned to keep using the system after the ban, while the uncertain band—"will not use," "still considering," or "still don't know"—made up about 60% (61.8%) combined.

What the Points Ban Did (or Is Claimed to Have) Resolved

Measured against the announcement's stated logic, the ban has produced several effects. First, overheated points competition among portals subsided, and the competitive axis migrated to service quality, logistics, and proprietary return gifts. Second, the upward pressure on intermediary fees softened relative to the pre-ban trajectory (the FY2025 figures will become observable in the next survey). Third, the parallel de-designations of four municipalities tightened operational discipline around the 50% expense rule. Fourth, as a symbolic gesture pulling donor motivation back toward the system's original purpose, the measure functioned as a political signal.

These effects are all directed at a limited domain: "expense-structure discipline" and "replacement of the competitive axis among portals." Within the reform's own reach, a measure of progress is observable.

What the Points Ban Does Not Resolve

A number of structural problems remain that the ban does not touch. Listing them in turn makes the limits of the reform visible.

The flat self-burden of 2,000 yen applies regardless of income, while the deduction ceiling rises in proportion to income. This structure itself contains a regressive allocation of benefits: higher-income earners obtain larger return-gift benefits. Whether or not points exist, this structure is preserved.

On the outflow side, Yokohama's 34.3 billion yen and the combined roughly 93 billion yen from Tokyo's 23 wards in FY2024 continue to flow out unchanged. Grant-receiving municipalities recover 75% of outflows through the local allocation tax, while non-grant municipalities such as Kawasaki and the Tokyo wards absorb outflows with zero subsidy—an asymmetric structure built on the fiscal capacity index. The reform leaves this asymmetry untouched.

The 46.4% expense ratio may not shift dramatically after the ban, because the funding source for points came largely from the portals' own books. Migration of portal commissions onto the municipality side could occur, leaving the headline expense ratio close to its present level (worth watching as the next survey lands).

Donor motivation may also evolve only slowly. In RIETI's earlier 2025 survey, "good local policies" remained at just 0.5% of selection reasons, while return-gift orientation (47.3% "attractive return gifts" plus 14.9% "good value for money," totaling 62.2%) dominated. The ban suppresses "point-chasing," but is not designed to change "return-gift chasing" itself.

Tension with the benefit principle is also not eased. Residence tax is, by design, a levy paid for services received from one's own municipality, and furusato tax frontally contradicts that principle. The Institute of Local Government has organized the matter in terms of either abolishing the special residence-tax deduction or unifying it into income-tax deductions to resolve the contradiction; the reform does not go that far.

The Limits of the 2027 High-Earner Deduction Cap

The FY2026 Tax Reform Outline (released December 19, 2025) introduces a cap of 1.93 million yen on residence-tax deductions for donors earning over 100 million yen. It applies to donations made from 2027 onward. While the measure carries symbolic weight as a step toward addressing regressivity, it covers only those earning above 100 million yen. Donors in the 20 to 50 million yen range continue to benefit from the regressive structure, so the practical mitigation of regressivity is limited.

Economic critiques of furusato tax converge on three lines: disruption of inter-regional fiscal adjustment, reversal of interpersonal redistribution (regressivity), and reduced efficiency of tax-revenue use. The points ban partly addresses the third (expense efficiency), but does not touch the first or the second (distortions of the redistribution function). The 2027 high-earner cap, given its narrow scope, is also not a sufficient response to the second.

The Relative Position of Government Crowd Funding

Government Crowd Funding (GCF), in which municipalities present project objectives and solicit donations, is the design closest to the system's original purpose: policy-empathy-based giving rather than return-gift dependence. GCF received 16.712 billion yen in donations in FY2024, across 369 participating municipalities. Yet its share of the overall 1.2728 trillion yen is only around 1.3%.

So long as the ban does not bring return-gift competition to a halt, motivation may shift toward GCF only slowly. The 0.5% figure for "good local policies" suggests that the market for policy-empathy-based giving is at present extremely small. Repositioning GCF as a route to "rebuilding furusato tax's redistribution function" would require coordinated action on the portal side (priority display), the municipality side (project design), and the national side (regulatory inducement). The reform has not yet stepped onto that track.

The operational picture at eight months gives a limited answer to the question: "How far can an announcement, on its own, restore a system's ethics?" Expense-structure discipline and the migration of the competitive axis have moved forward. The structural problems—regressivity, the asymmetric outflow structure, the conflict with the benefit principle, and the constrained share of GCF—remain unaddressed beyond the reform's reach.

The reach of the Rakuten verdict adds another layer to the question. A Rakuten win opens the door both to a return of points and to a reconfigured announcement. A Rakuten loss locks in the ban and consolidates the new competitive axis at the level of system design. Even if the litigation drags on, operators are likely to continue building new business models (proprietary return gifts, delivery UX, lower fees to municipalities) in an environment of regulatory uncertainty. Whichever direction the verdict goes, the structural problems outside the reform's reach persist as a separate ledger.

Scheduled for October 2026 are the tightening of local-product rules and the mandatory disclosure of intermediary fees, and from 2027 donations the new high-earner deduction cap. Each tightens system discipline along an axis distinct from the points ban. Yet all of them belong to the series of "credibility restoration," not to the series of "redistribution repair." The diagnosis—the reforms treat symptoms but do not write a prescription for the causes—holds up under the operational picture at eight months after the ban as well.

The sharpest framing of the question is whether points were the "result" of the system's distortions or the "cause." If a result, abolishing them will resurface the distortions through other routes (proprietary return gifts, logistics quality, exclusive items). If a cause, abolition will narrow the distortions. The dissatisfaction structure surfaced by RIETI's 2025 survey—with "complexification" and "frequent revisions" at the top—suggests that users experience the reforms as amplifiers of distortion rather than as treatments. At the eight-month mark, the weight lies on reading points as a result rather than a cause.

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Related Columns

• Four Furusato Tax Reforms: Who Is the Redistribution Engine Really For? (an overview of the four reforms from the points ban to the high-earner cap)
• Where Did Japan's 1.3 Trillion Yen in Furusato Tax Go? (the bigger picture of the 46.4% expense ratio, 165.6 billion yen in intermediary fees, and urban outflows)
• Skepticism Toward the One-Million Relationship-Population Target (an EBPM critique of Regional Revitalization 2.0's target-setting)

Related Guides

• How to Build a Logic Model (a practical method for visualizing the causal structure of policies and projects)

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Further Reading

For a deeper engagement with the structural problems of the furusato tax system, the following books are recommended.

本当は恐ろしい「ふるさと納税」 : 地方交付税が奪われる (The Real Dangers of "Furusato Tax": How Local Allocation Tax Is Being Drained) (Toshiyasu Ito, Tokyo Tosho Shuppan, 2023) sets out the mechanism by which the system effectively "drains" local allocation tax and offers a critical analysis of how its intended support for local areas falls short in practice. Its detailed treatment of the 75% subsidy structure provides essential background for the asymmetric outflow problem this column traces.

ふるさと納税と地域経営 (Furusato Tax and Regional Management) (Toshikazu Takamatsu, Graduate School of Project Design Press) introduces cases of municipalities using the system as part of regional management strategy, distinct from return-gift competition. It serves as a counterpoint that complements this column's argument on the structure of donor motivation that the ban does not resolve.

変わるふるさと納税の価値 (The Changing Value of Furusato Tax: Building the Future of the Regional Economy) (Change Holdings and Trustbank, Fusosha Shinsho) is a future-looking discussion by Trustbank, the operator of Furusato Choice. Its treatment of experience-based return gifts and GCF offers a useful reference point for relativizing the GCF discussion in this column from the perspective of the system's proponents.

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References

Revision of Furusato Tax Designation Criteria — Ministry of Internal Affairs and Communications. MIC Press Release

Furusato Tax Survey Results (FY2025 Edition) — MIC, Local Tax Bureau. Ministry of Internal Affairs and Communications

2025 Furusato Tax Update: Return-Gift Selection, the Impact of Reforms, and Retention Intentions — Yoko Konishi, Yukiko Saito. Research Institute of Economy, Trade and Industry (RIETI)

Rakuten Sues the National Government Over the Furusato Tax Points Ban — Rakuten Group, Inc.. Rakuten Group Press Release

Furusato Tax Net-Loss Municipality Ranking — Yokohama's 34.3 Billion Yen Outflow — Toyo Keizai Online Editorial. Toyo Keizai Online

Four Municipalities De-Designated for Violating Furusato Tax Standards — Nichizei Journal Online Editorial. Nichizei Journal Online

Where Is Furusato Tax Going? — Institute of Local Government. Institute of Local Government

Furusato Tax: New 1.93 Million Yen Deduction Cap Under the FY2026 Tax Reform Outline — Jiji Press. Jiji.com