The outlook for Japan's nonprofit organizations has improved in recent years due to legal support from the government, but they still face major hurdles like insufficient financial resources, Harvard University professor Susan Pharr said Wednesday.

"There are many, many obstacles, but overall the picture is great proliferation — a burst of activity from the 1990s — and I think in the long term, this is transforming the Japanese society from the economic quagmire in the last decade," she told a luncheon at the Foreign Correspondents' Club of Japan.

Pharr pointed out that the number of NPOs here has surged recently. , citing a 1999 survey that shows 57 percent of Japanese NPOs were established between 1995 and 1999, while only 7 percent were established around or before 1970.

Enactment of the NPO law in 1998 slashed the time and paperwork required for providing these groups with corporate status and the information disclosure law in 1999 gave citizens more access to the administrative information they need to play an active social role.

But the further development of NPOs is hampered financially, Pharr said.

"Despite the NPO law in 1998, nevertheless, the climate for (nonprofit) organizations is still struggling," she said.

Pharr cited an example of NPOs in the United States, where the budget for environmental lobby groups is on average 20 times that of Japanese counterparts.

A bill to exempt taxes on certain donations to NPOs was approved by the Diet in March, but activists say only a limited number of groups benefit from this.