Some of the festivals that are based on Japanese Folk Tales are:
The Festival of Tanabata is based on the Japanese Folk Tale of 'The Princess and the Herdboy'. The name 'Tanabata' is the old word for the weaving machines with shelves that were used around the Edo period (1603-1868), the word 'Tanabata' was also the word used for female weavers in those times. The story is originally of Chinese origin, but the Japanese have made it their own by mixing it with a local custom 'Tanabatatsume'. It became widely popular throughout Japan only at the beginning of the Edo period (1603-1868).
The festivals for 'Tanabata' are held on the 7th of July under the solar calendar and on the original date, about one month later (August 7th). It is held according to the position of the constellations, in which the star Altair (who in the folk tale is the herdboy) and the star Vega (who is the princess/weaver) meet across the Milky Way on one night a year.
The Japanese people celebrate 'Tanabata' by placing lengths of bamboo in places such as houses, kindergartens and schools, and covering the bamboo with origami (folded paper) decorations and brightly colored cards that contain wishes. In different cities in Japan there are also parades, firework displays, stage performances and decorations throughout the towns.
The story of 'The Princess and the Herdboy' information can be found on my favorite stories page.
The festival of 'O-tsukimi' is the moon viewing festival based on the Japanese Folk Tale of 'The rabbit in the Moon'. From this Folk Tale the Japanese people have believed since long ago, that rabbits lived on the moon. Even today in Japan, the moon is pictured with the scene of a rabbit or rabbits making mochi (pounded rice cakes).
During this time the moon has a special name 'Chuushuu-no-meigetsu' which in English means 'the picturesque moon of mid-autumn'. This moon occurs during July, August and September in Japan on the lunar calendar. During the months of September and October, the weather in Japan is clear with few clouds and the moon is all the more beautiful, perfect for 'Otsukimi'.
The Japanese people celebrate 'O-tsukimi' by making 'Moon viewing rice balls' and collecting 'Aki-no-nan' which are the typical flowering grasses of autumn. These are bush clover, pampas grass, arrowroot, fringed pink, patrinia palmata, agueweed and Chinese bellflower. After the rice balls are made, and the 'Aki-no-nan' collected, they are offered to the gods to pray for a good harvest on their crops for a year.
The story of 'The rabbit in the Moon' is a story about the Old-Man-of-the-Moon who one day looked down into a big forest on Earth and saw three friends sitting together around a fire. These three were a rabbit, a monkey and a fox. On deciding to find out which of the three is the kindest, he goes down to Earth and changes himself into a beggar. He asks the three friends to help him and that he is very hungry, on hearing this they all run of to find him some food. The monkey brought back a lot of fruit to the man and the fox brought back a big fish. However, the rabbit is unable to find any food for the man, and so asks the monkey to gather some firewood and the fox to build a big fire with the wood. Once the fire was burning very brightly, the rabbit explained to the beggar that he didn't have anything to give him, so he will put himself in the fire and when he is cooked the beggar could eat him. Just before the rabbit jumped into the fire the beggar turned back into the Old-Man-of-the-Moon and told the rabbit that he was very kind, and that he shouldn't do anything to harm himself. Because he decides that the rabbit is the kindest of the three, he takes him back to the moon to live with him.
That is why the Japanese people believe that if they look carefully at the moon when it is shining brightly, they can see the rabbit there, where the old man put him so very long ago.