The luminaries are set up in remembrance of the Great Hanshin Earthquake that struck Kobe in January, 1995. I do not know why the light display is held in December as opposed to January, but it is an annual event that started maybe ten years ago to mark the passing of each year since the deadly earthquake. I believe that Okaasan recently told me that the light show is second only to the Snow Festival held in Hokkaido each year in terms of popularity of seasonal events, and many people from all over Japan come to see the light show each year.
The light show uses a lot of electricity, so according to my Japanese friends, each year the show becomes smaller and smaller. In the past, the Kobe municipality has thought about discontinuing the light display, but protests from citizens across the country have stopped the municipality from ending the tradition and have kept the light show going. It's also free for the public, so it's hard on the city to fund all the electricity needed to display the lights. Therefore, the local government asks for a one hundred yen donation from each person who comes to see the lights.
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