アジア太平洋研究所資料
１６－０９-- Japanese agriculture: towards a sustainable, trade-oriented future --Fiscal 2015 Research Project Report

James Brady, Ph.D.
Asia Pacific Institute of Research
Osaka

September 2016

Executive Summary
In recent years, negative views of Japanese agriculture have predominated, arising fromthe domestic problems of structural and demographic decline and the international challengesof trade liberalisation through the TPP and other frameworks. This research report adopts amore positive approach towards agriculture in Japan, and explores ways in which it is reorientating towards a more sustainable, trade-oriented future. Technological, organizational
and policy innovations are being made at home and an export market of middle-classconsumers is growing in Asia. In this context, the report examines areas which may helptransform Japanese agriculture into a more stable and profitable sector.
Part 1 of the report highlights changing ideas about agriculture and agricultural policy inJapan and internationally. The postwar era was characterised by a view of agriculture as an
exceptional sector of the economy, and most countries adopted a policy paradigm of stateassistance to aid and protect farmers. Since the 1980s and 1990s, a view of agriculture as anormal sector of the economy spread, with the United States, the European Union and othergovernments shifting agricultural policies towards a market liberal paradigm focused on
business principles like competition and profit. Japan’s policy approach has been slow tochange, but since 2012-13 the administration of Prime Minister Shinzō Abe has increasingly
advocated policies to advance the role of joint-stock corporations in the sector and liberalize
agricultural trade through the TPP. This over-arching paradigm shift helps explain many of
the individual policy reforms and trends evident in Japanese agriculture today.
Part 2 presents the results of an original national survey conducted by APIR examining
public opinion towards aspects of agriculture and agricultural trade. The results reveal strong
public sentiment in favour of protecting the farming sector. Domestic agriculture was valued
primarily for the non-economic public goods it contributes to society, particularly in relation
to health, food safety and food self-sufficiency. Respondents had low expectations and2relatively high levels of uncertainty about the economic effects of trade liberalisation, andshowed low levels of trust in most sources of information about trade negotiations. Thesefindings help explain the low levels of support for agricultural trade liberalisation among
Japanese citizens, which goes against the predictions of mainstream economic theory. They
also provide information for mapping a ‘policy reform space’, indicating the goals thatshould guide future agricultural policy.
Part 3 provides a case study of one of the most important examples of policy innovation incontemporary Japanese agriculture, that of the National Strategic Special Zone (or tokku) for
the revitalization of semi-mountainous regions in Yabu City in Hyogo prefecture. Yabu is a
microcosm of many of the problems affecting traditional agriculture in Japan, including
ageing, depopulation, a farm successor shortage and farmland abandonment. The central
government chose Yabu to host a special zone for the purpose of providing a model for theregeneration of rural areas in other parts of Japan. Led by enthusiastic mayor Sakae Hirose
and supported by local bureaucrats and staff from the Mitsui & Co. general trading company,
the municipality is implementing a plan to revitalise the local economy, society andagricultural sector. Rather than yet more public spending, the program is based on policy
reforms, regulatory easing and attempts to involve joint-stock corporations in local
agriculture. Through site visits and interviews, we find that the Yabu tokku has achieved
modest early success in implementing regulatory reforms and attracting a diverse range offirms from across Kansai and Japan to establish new businesses in the Yabu district. The roleof the leaders of this project appears to be important to its progress. Perhaps the greatest
success for the tokku so far is that it has attracted national and even international attention tothis small municipality. If the project can continue to stimulate investment and interest, it
may well offer a new model for sustaining agriculture in rural Japan.

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Part 4 examines the growing role of joint-stock corporations in agriculture in Japan, withparticular focus on vertical farms (shokubutsu kōjō, or ‘plant factories’). The postwar
agrarian reforms that successfully resolved the problem of absentee landlords also served
effectively to exclude private firms from the sector. Legislative changes in 1999 and 2009
have opened the door to corporate agriculture, and since taking office in 2012 the Abegovernment is actively encouraging businesses to engage in agriculture. Many firms entering
the sector are pioneering high-technology farming, an area in which capital- and technologyabundant Japan has a potential comparative advantage. This section includes a case study of
Kyoto prefecture-based SPREAD, the leading vertical farm producer of lettuce in Japan.
Increased production levels, reduced usage of pesticides and water, and a more stable supply
are among the benefits of vertical farming. Start-up, energy and labour costs remain high, but
growing domestic demand for vertical farm produce and the export market for licensing thesesystems overseas suggest that this segment of the agricultural sector will become increasingly
important for businesses in the medium-term. IT-based agriculture is already introducing agreater focus on business and profit to the sector, and if costs are further reduced, such hightech farming could become an important element of sustainable and trade-oriented agriculture
in Japan.
Part 5 offers recommendations based on the findings of this research. It notes that thechanging policy paradigm and the pro-business orientation of the Abe administration meanthat the current agricultural environment is more open than ever to firms entering farming.
The results of the national opinion survey on agriculture and trade liberalisation suggest that
consumers value health, food safety and food self-security. This implies that these goals
should be prioritized by new agricultural producers as well as by policymakers determining
future policy reforms. And just as Yabu has demonstrated that reforms are possible without
further expenditure, policymakers should aim at using financial support in more efficient4

ways, such as through direct decoupled payments, without necessarily increasing the levels offinancial support. The advent of the TPP will undoubtedly bring new challenges, but policy
reforms, a diversifying producer base and the development of new technologies may go some
way to making the future of Japan’s agricultural sector more stable, more sustainable more
and trade-oriented.

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Table of Contents
Executive Summary ............................................................................................................ 2
Figures and Tables ..................................................................................................................... 7

Introduction: Agriculture in Japan and Kansai .................................................................... 8
Agricultural production in Japan and Kansai ............................................................................ 10
Japan’s agricultural trade in context ........................................................................................ 11
Understanding Japan’s comparative advantage in agriculture .................................................. 13

Chapter 1: Changing Ideas about Agriculture in Japan and the EU .................................... 15
1.1 Competing agricultural policy paradigms: Exceptionalism vs Normalism ............................ 15
1.2 Paradigm shifts in international and domestic agricultural policy ....................................... 18
1.3 Reforming the CAP towards net exports ............................................................................. 21
1.4 Concluding remarks............................................................................................................ 23

Chapter 2: Consumer Attitudes to Agriculture, Trade and Liberalisation .......................... 25
2.1 Aims of the survey ............................................................................................................. 25
2.2 Prior literature ................................................................................................................... 26
2.3 Design of the survey ........................................................................................................... 29
2.4 Results ............................................................................................................................... 30
2.5 Conclusions from online survey .......................................................................................... 35

Chapter 3: Sustaining Rural Communities–the Yabu Special Zone for Semi‐Mountainous
Agriculture ....................................................................................................................... 37
3.1 Yabu background: Semi‐mountainous agriculture in miniature .......................................... 37
3.2 The goals of the special zone .............................................................................................. 40
3.3 Developments so far .......................................................................................................... 41
3.4 Interpreting the significance of the Yabu special zone ........................................................ 42

Chapter 4: Firms on the Farm—the Growing Role of Corporations in Japanese Agriculture......................................................................................................................................... 44
4.1 Background: postwar agrarian reforms .............................................................................. 44
4.2 Growing corporate involvement in agriculture ................................................................... 45
4.3 Plant factories: Benefits and drawbacks ............................................................................. 46
4.4 Case study: SPREAD ........................................................................................................... 49
4.5 Concluding remarks............................................................................................................ 51

Chapter 5: Towards a Sustainable, Trade‐Oriented Future ............................................... 53
5.1 Summary of the research findings ...................................................................................... 53
5.2 Assessing the changing policy paradigm in Japan ............................................................... 55

References........................................................................................................................ 59

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Figures and Tables
Figures
A: Structure of agricultural production in Japan and Kansai................................................10
B: Agricultural production in Kansai prefectures by value (100 m'n yen)...........................11
C: Agricultural trade balance for selected countries.............................................................12
1-1: Degree of decoupling, 1986-2010.................................................................................22
2-1: "How would you feel if Japan...?".................................................................................30
2-2: Expected changes due to trade agreement participation...............................................32
2-3: Image of agriculture in relation to selected concepts....................................................33
4-1: Number and type of plant factories in Japan.................................................................49

Tables1-1: Agricultural exceptionalism and agricultural normalism..............................................18
2-1: Extracts from Cabinet Office surveys, 1975-2014........................................................28
2-2: Selected comments about respondents’ image of agriculture........................................34
4-1: Comparison of cultivation of field and plant factory lettuce.........................................51

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Introduction: Agriculture in Japan and Kansai
Japan’s agriculture sector continues to have political significance that far exceeds its shareof GDP and employment. During the negotiations for the Trans-Pacific Partnershipagreement, Japan’s representatives spent much time and political capital on securing
exemptions for several categories of agricultural products, including the so-called ‘sanctuary’
items (seiiki) of rice, wheat, beef and pork, sugar and starch, and dairy products.
The high levels of government support and trade protection afforded to agriculture
underlines its unique position in the political economy of Japan. Economists like Kym
Anderson and Yujiro Hayami have explained this in terms of farmers’ pursuit of material
self-interest, while political scientists like Aurelia George Mulgan focus on the broader
pursuit of self-interest by politicians, agricultural bureaucrats and Japan Agriculture (JA), thecooperative-cum-keiretsu that plays a major role in input supply, distribution, sales andfinancing of farming activities nationwide. Despite higher cost, Japan’s consumers exhibit astrong preference for domestic food produce and even urban voters continue to electprotectionist-oriented parties, suggesting broad backing for the policies of agricultural
support and protection.
While there are various views on the desirability of agricultural protectionism, one clear
point is that the current policy regime is inefficient and unnecessarily expensive, given that it
includes tariff-barriers and low levels of decoupled support, which economic theory has
shown to be inefficient policy tools. Yet it is possible to make a more fundamental criticism
of the current policy regime—namely that is has failed to prevent the gradual descent of the
agricultural sector into a state of near-crisis. Among the many structural problems faced by
the sector, the high average age of farmers, lack of farm successors, small average farm sizeand large and rising area of abandoned farmland are some of the most important. In addition,

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as the national population declines, the domestic food market will shrink, adding a further
problem for a sector with very low levels of exports.
In order for Japanese agriculture to survive, two elements will be essential. First, it needs
to become more sustainable, structurally as well as environmentally. Producers must improve
efficiency, lower costs and become more competitive in the international market, since there
can be no guarantee that future governments will provide high levels of support. Second,
given domestic market shrinkage and the rapidly growing market of middle-class consumers
elsewhere in Asia, Japanese agriculture needs to become more export-oriented.
There is cause for optimism in both these areas. In recent years, Japanese agriculture has
become more oriented towards business and profit. This has arisen in part through thegrowing involvement of joint-stock corporations in farming, including both Small andMedium Enterprises (SMEs) focusing on niche markets and large multinationals developing
new technologies or repurposing existing technologies to address needs in the farming sector.
Another factor has been the steady increase (albeit from a low base) of agricultural, fisheries
and forestry exports, particularly to other Asian countries. The Abe administration has also
been slowly reorienting agricultural policy in a more business-focused direction, making
reforms related to its economic policy programme and in response to external pressure arisingfrom the TPP.
This report examines these positive developments in Japanese agriculture, based on
original research through site visits, interviews with agricultural producers and policy experts,
and data analysis. In particular, it examines these trends with reference to the Kansai regionof central Japan, incorporating the six prefectures of Osaka, Kyoto, Hyogo, Nara, Shiga andWakayama. Kansai agriculture is worthy of attention for several reasons, including its diverse
agricultural hinterlands, large regional market of 20 million consumers, the number of small,9medium and large Kansai firms becoming active in agriculture, and the region’s strong
orientation towards exports, and particularly exports to Asia.1

Agricultural production in Japan and Kansai
According to the Ministry of Agriculture, Forestry and Fisheries (MAFF), in 2014
Japan’s total agricultural, forestry and fisheries production by value was JPY 8.36 trillion(USD 81 billion2), down from a historical peak of JPY 11.72 trillion (USD 113 billion) in
1984. Figure A shows the structure of agricultural production (excluding forestry andfisheries) by value for Japan and the six Kansai prefectures in 2014. Nationally, the mostimportant categories were livestock (including meat and dairy), accounting for 35.5% of total
production value, and vegetables, accounting for 26.6%. Rice represented 17.1% by value,
fruits 9.1%, and other items 11.8%.

Fig A: Structure of agricultural production in Japanand Kansai
100%
80%
60%
40%
20%
0%
Japan

Shiga

Kyoto

Osaka

Rice

Vegetables

Fruit

Hyogo
Livestock

1

Nara

Wakayama

Other

Kansai accounts for about 16.3% of Japan’s population, 15.6% of GDP, 21.3% of its exports and 26.7% of its
exports to Asia.
2
Rate: USD 1= JPY103.836 (July 2016 average, X-Rates website [http://www.xrates.com/average/?from=USD&to=JPY&amount=1&year=2016, accessed August 1, 2016])

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Figure B ranks Kansai prefectures in terms of agricultural sales. The largest is Hyogo(JPY 141.9 billion [USD 1.4 billion]), for which livestock and vegetables are the mostimportant products; due to its similar output structure, Hyogo is sometimes called ‘Japanese
agriculture in miniature’. Second is Wakayama (JPY 95.2 billion [USD 916 million]), forwhich 61% of sales are fruits, followed by vegetables. Kyoto is third (JPY 66.3 billion [USD
639 million]), with vegetables, rice and livestock the other major items. In Shiga (JPY 55.4
billion [USD 534 million]), rice accounts for over half of agricultural sales by value,
followed by livestock. In Nara (JPY 40.2 billion [USD 387 million]), vegetables, rice andfruits are the major items. In Osaka (JPY 32.0 billion [USD 308 million]), vegetables and rice
are most important. As these statistics show, agricultural production in Kansai is diverse,
including both major and minor prefectures in terms of production scale, and prefectures thatspecialise in one or several categories of products.

Fig B: Agricultural production in Kansai prefecturesby value (100 m'n yen)
1600
1400
1200
1000
800
600
400
200
0
Shiga

Kyoto
Rice

Osaka

Vegetables

Fruit

Hyogo

Nara

Livestock

Other

Wakayama

Japan’s agricultural trade in context
A common view about food production is that Japan is heavily dependent on food imports,
and that this undermines the country’s food self-sufficiency and food security. In this view,11the low food self-sufficiency rate leaves Japan vulnerable to international events that may
disrupt supplies of food imports. The appeal of this view in an island nation situated in aregion with several political risk factors is easy to understand.
However, it can be argued that this view is mistaken in at least three ways. First, Japanese
agriculture is highly dependent on imports of oil and other production inputs. In a situation
where food imports stopped, other imports would also stop, making agricultural productiondifficult. Without access to imports of any kind during a crisis, Japan’s real food selfsufficiency rate would be very low in the short-term, but this is also true for most countries.
Second, given that the goal in an emergency is to maximize calorie production to ensure
survival, a country’s food and calorie production and consumption in normal times is not an
accurate indicator of production potential in emergency periods (Honma, 2015: 110). During
a crisis, a range of resources may be diverted from other uses to food production. For
example, foods that were being produced for export could be consumed domestically, andnon-agricultural grassland such as parks and golf-courses could be planted with crops.

Fig C: Agricultural trade balance for selected
countries
USD,
Billions

200

Exports

Imports

Balance

150
100
50
0
‐50
‐100
‐150
‐200

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Third, while Japan is among the largest food importing nations in terms of value, its
import value levels are not dissimilar to other major economies. As Figure C shows, Japan’s
imports are similar to France and the Netherlands, and much less than Germany, three
countries with smaller populations than Japan. Indeed, when considered in terms of imports
per capita (in value terms), Japan (USD 483) is behind the Netherlands (USD 3469),
Germany (USD 1155), the United Kingdom (USD 971), Canada (USD 936), France (USD865) and Australia (USD 516)3.
Where Japan is an outlier is in terms of food exports. Japan’s low levels of exports meanthat it is a large net importer, second behind only China in the major economies shown above.
Boosting Japan’s agricultural exports would help normalize its agricultural trade profile, andincrease its production potential in emergency situations, which could alleviate fears of afuture crisis. However, to boost international competitiveness and increase exports, it isnecessary to understand where Japan’s comparative advantage lies in agricultural production.

Understanding Japan’s comparative advantage in agriculture
The fundamental problem faced by Japanese agriculture is one of factor endowment.
Japan is relatively scarce in land and low-cost labour, and relatively abundant in capital andhigh-skilled labour. Traditional agricultural production relied on land and low-cost labour,
but modern agricultural production as practiced in major exporting countries like the UnitedStates and Australia uses land and capital (i.e. technology). For this reason, Japanese
agriculture will always lack competitiveness against countries that are land-abundant.
Conversely, Japan would have an advantage in types of agricultural production that utilizes
capital and high-skilled labour. Recently, the number of firms developing such agricultural
production methods is increasing.

3

Based on author’s own calculations, using data from FAO and World Bank.

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The report is structured as follows. Chapter 1 examines the changing paradigm for
agricultural policy internationally and in Japan, which provides the context for shifts in theorientation of agriculture in recent years. Chapter 2 provides insight into popular support forprotecting domestic agriculture, as evidenced through the results of an original online
national opinion survey conducted by APIR in March 2015. Chapter 3 looks at one attempt torevitalise agriculture through policy innovation rather than further government expenditure,
the National Special Strategic Zone for semi-mountainous regions in Yabu, a ruralmunicipality in northern Hyogo prefecture.
Chapter 4 considers the growing role of joint-stock corporations in the agriculture sector,
with reference to IT-based agriculture and vertical farming, known as ‘plant factories’ inJapan. Finally, Chapter 5 summarizes the findings of the report, and considers the future of
the agricultural sector in light of the changing policy paradigm.

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Chapter 1: Changing Ideas about Agriculture in Japan and the EU

Both internationally and domestically within Japan, debates over agriculture and agricultural
policies tend to be particularly intense. Internationally, agriculture has been a major
stumbling block in negotiations for liberalizing trade agreements at the bilateral, regional and
WTO levels. Domestically, agricultural policy has been one of the most contested policy
areas throughout the postwar period, and intermittent international pressure (gaiatsu) sincethe 1980s has influenced the national discourse, most recently in relation to the TPP.
The international policy framework concerning agriculture has undergone a fundamental
reorientation in recent decades. An analysis of the changes in agricultural policy and the ideasthat shape it provides important context for the current situation in the sector, recent trends
and the possible future course of agriculture both as a sector of the economy and as a field of
business. This chapter outlines the two competing ‘policy paradigms’ in agriculture, andsurveys the paradigm shift that has been taking place globally and in Japan. It then examines
the case of the European Union’s Common Agricultural Policy, which has been progressively
reformed since 1992, such that the EU has become a net food exporter since 2010.

1.1 Competing agricultural policy paradigms: Exceptionalism vs Normalism
The intensity of debates around agricultural policy may be explained in part by thedifferent philosophical viewpoints that are often held by participants, and the policy
paradigms to which these give rise. At one end of the spectrum is agricultural exceptionalism,
the view that agriculture is an exceptional sector of the economy with distinct features thatmake it different from other sectors. At the other lies agricultural normalism, the view that
agriculture is a normal sector of the economy, comparable to other sectors. Each of these15

views gives rise to particular preferences for agricultural policies. Daugbjerg and Swinbank(2009: 5-14) provide useful explanations of these two positions, summarized in the following
paragraphs and in Table 1-1.
Agricultural exceptionalism describes the view that agriculture is an exceptional sector of theeconomy with inherent features that make it fundamentally different from other sectors likeindustry and services. These include (i) features of production such as vulnerability toweather events; (ii) variable and potentially unstable demand conditions in the domestic andglobal markets; (iii) its role of providing a stable and secure supply of food to a state’s
population; (iv) its contribution to maintaining the natural environment, biodiversity and rurallandscape; (v) its socio-economic role in sustaining rural communities and local cultural
heritage. These latter factors are often referred to as the multifunctionality of agriculture.
Agricultural exceptionalism usually gives rise to preferences for government intervention
to support farmers through a range of measures. These include tariffs, non-tariff barriers,
price supports, direct producer payments, input subsidies, export subsidies, credit andinsurance subsidies, rural public works investment and other measures. Typically, advocatesof these measures adopt what Coleman et al. (1997) term a state-assisted paradigm.
The state-assisted paradigm in agricultural policy has two tenets: (1) that “the agricultural
sector contributes to national policy goals and therefore merits special attention”, and (2) that“the price mechanism is a sub-optimal means of achieving an efficient and productive
agricultural sector… [i]mperfect markets combine with unmanageable natural risks andconcern for food security to give governments a large role in subsidizing agricultural
production” (Coleman et. al, 1997: 275).
In turn, these principles gave rise to three key agricultural policy goals in OECD
countries: (1) that farmers should receive sufficient farming income to ensure an adequate
living standard; (2) that increased efficiency should be pursued by the adoption of new16

technology to allow intensive production; (3) that marginal farmers should receive assistanceto become efficient, commercially viable agricultural producers. Coleman et al. suggest that
all countries have subscribed to some degree to these goals (at least in the past), and thatsome countries organise their agricultural sectors almost entirely around them. However, by
the 1990s, this paradigm started to give way to an alternative.
Agricultural normalism refers to the view that agriculture is a normal sector of theeconomy, not inherently different from the industrial and service sectors. In this perspective,
markets are seen as tolerably stable, and market-based approaches as the most efficient way
to meet society’s needs for agricultural produce.
Agricultural normalism usually gives rise to a laissez-faire approach to agricultural policy.
Government interventions in domestic agricultural are seen as distorting both domestic
markets and the world market. Since such policies assist farmers with the greatest politicaladvantage rather than those with the greatest comparative advantage, agricultural support andprotection are believed to reduce national and global welfare and result in the inefficient use
of finite natural resources.
Advocates of this view tend towards what Coleman et al. (1997) call a market-liberalpolicy paradigm. The market liberal paradigm focuses on market allocation and efficiency
over state intervention and equity. There are four tenets of this view: (1) that agriculture
should be seen as being like any other economic sector and not connected to serving otherpolicy goals; (2) that competitive markets based only on supply and demand should
determine producers’ incomes; (3) that only market-competitive producers should remain
active in the market; and (4) that individual producers should be responsible for insuring
themselves against income loss due to natural disasters (Coleman et. al, 1997: 275-6).
In this paradigm, the policy goals are: (1) to give precedent to efficiency in agricultural
production over equity; (2) to lower food costs and provide greater choice of products for17

consumers; (3) to encourage international competition between agricultural producers in
difference countries.

Table 1-1: Agricultural exceptionalism and agricultural normalism
Agricultural exceptionalism
Agricultural normalism
todisruptionof None—markets are tolerably stable,
Exceptional features 1. Vulnerability
production
and the market mechanism bringsof agriculture as a
2. Variable/unstable demand
efficient outcomes
sector
3. Role in providing food to a nation’s
people4. Contribution
tonatureandenvironment
5. Socio-economic role relating to ruralcommunities
RelatedpolicyState-assisted paradigm
Market-liberal paradigm
paradigm
1. Agriculture contributes to national 1. Agriculture is comparable to other
Tenetsofpolicypolicy goals and so merits special
sectors, and not connected to otherparadigm
attention
policy goals
2. Market price mechanism is sub- 2. Competitivemarkets
shouldoptimal for achieving an efficient,
determine producers’ income
productive sector
3. Only market-competitive producers
should produce
4. Individuals
shouldinsurethemselves against losses
1. Farmers should have sufficient 1. Efficient agricultural production
Key policy goals
income for adequate living standard
2. Lower food costs and greater
2. Increase efficiency through new
choice for consumers
technology and intensive production
3. International competition between
3. Assist marginal farmers to become
producers
viableSources: Coleman et al. (1997), and the author.

1.2 Paradigm shifts in international and domestic agricultural policy
Following the creation of the General Agreement on Tariffs and Trade (GATT) in 194748, the idea of agricultural exceptionalism became dominant, and countries adopted
protectionist policies towards their domestic agricultural sectors. During negotiations for the
Dillon Round (1960-62), Kennedy Round (1964-67) and Tokyo Round (1973-79), the UnitedStates increasingly pushed for the liberalisation of agricultural trade, but the European
Economic Community (EEC) resisted. Disruptions in world food markets in the 1970s and18

1980s and the development of methodologies for measuring the economic costs ofagricultural protection (such as the OECD’s ‘Producer Support Estimates’ in 1987) helped
change the policy environment (Daugbjerg and Swinbank, 2009: Chapter 4). The Uruguay
Round agreement in 1994, including the Agreement on Agriculture (URAA), marked a shift
towards a view of agricultural normalism and a market-liberal paradigm in global agricultural
trade. In the European Economic Community/European Union4, the Common Agricultural
Policy underwent a series of reorientations beginning in 1992, as detailed below in Section
1.3.
In Japan, the orientation of agricultural policy has also shifted, albeit more slowly. The
evolution is evident when comparing the two agricultural basic laws of 1961 and 1999, which
may be considered as the ‘constitutions’ that set the framework and direction for subsequent
agricultural policy. The 1961 Agricultural Basic Law (Nōgyō Kihon Hō) was premised on
addressing both the productivity gap and the income gap between agriculture and industry,
goals which were arguably contradictory, and subsequent policies focused more on the latterby seeking to raise farmers’ income rather than their competitiveness. The government
retained a major role through such policies as setting the rice price for producers each year
and the gentan programme of rice production and set-aside, while the war-era Food Control
Act remained effective until 1995, mainly regulating the rice market. The 1999 basic law,termed the Food, Agriculture and Rural Areas Basic Law (Shokuryō Nōgyō Nōson Kihon Hō),was premised once again on two potentially contradictory goals: the introduction of themarket principle and the development of sustainable agriculture. It was intended to address
the growing problems of ageing farmers and rural depopulation, and the challenges posed by
the tariffication of non-tariff barriers for all items (including rice, eventually) in the URAA.

4The European Economic Community was one of the original communities established by the 1957 Treaty ofRome. It became part of a reorganized European Community (EC) in 1992 Maastricht Treaty, and was
subsequently absorbed into the European Union (EU) from 2009.

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Thus, while scope for interventionism remained, the new basic law created space for a moremarket-liberal paradigm.
The shifting paradigm in domestic agricultural policy has been most evident under thecurrent Abe administration, which took office in December 2012. As part of its economic
policy agenda, the administration set a number of reform goals relating to JA, agricultural
production companies (nōgyō seisan hōjin) and the promotion of farm producers’
involvement in multiple stages of the food value chains, termed ‘Sixth Sector
Industrialization’ (dairokuji sangyōka). The revised ‘Japan Revitalization Strategy’ publishedin June 2014 gave a series of numerical targets. These included consolidating 80% of
farmland under the management of ‘leading farmers’, increasing the numbers of agricultural
production companies from 14,600 to 50,000 and increasing the market for sixth sector
industrialisation from JPY 1 trillion to JPY 10 trillion. In relation to agricultural trade, theadministration announced an aim to double the ‘value of exports of agricultural, forestry andfisheries products, and food items’ (nōrinsuisanbutsu shokuhin no yūshutsu gaku) from JPY
450 billion in 2012 to JPY 1 trillion by 2020.
On the international level, Japan’s undertakings in the URAA in 1994 marked an earlystep towards a more market-liberal paradigm. After the turn of the millennium, Japan’s trade
policy pivoted from a WTO focus to the pursuit of trade liberalisation through bilateral free
trade agreements (FTAs). However, the agricultural lobby successfully resisted importliberalisation until the 2014 Japan-Australia Economic Partnership Agreement (JAEPA),
when tariffs on beef and certain other items were cut. In the TPP agreement of October 2015,
Japan committed to eliminate tariffs on 81% of 2328 agricultural products. Fifty-one percent
of tariffs will be removed immediately, and the remainder phased out over the next two
decades. Seventy percent of the 586 products in the five key categories of ‘sanctuary’ (seiiki)
products of rice, wheat, beef and pork, sugar and dairy will continue to receive some20

protection. However, on the whole, the TPP does seem to represent a further movement in theoverarching policy paradigm towards a greater market-liberal orientation.

1.3 Reforming the CAP towards net exports
Among other major economies, the European Union and its Common Agricultural Policy(CAP) provides arguably the most relevant comparative case study for agriculture andagricultural policy in Japan. For decades after the creation of a “common policy in the sphereof agriculture” by the EU’s foundational Treaty of Rome in 1957, the CAP provided
generous levels of support and protection to European farmers. The effect of this was often tocause over-supply in EU markets and export subsidy-induced distortions in global foodmarkets during the 1970s and 1980s. However, a series of reforms made since the 1990s havetransformed the CAP into a policy with a greater market orientation. Since 2010, theEuropean Union has been a net exporter of agri-food items.
As in Japan, the dominant strand in EEC/EU agricultural policy from the 1960s until the
1990s was that of market price support, and the belief that maintaining high prices for
agricultural goods would increase farm incomes and the living standards of agriculturalcommunities (Swinbank, 2015: 2). As in Japan, the EEC/EU policies restricted imports,
caused domestic oversupply and imposed costs on both taxpayers and consumers. Yet
EEC/EU policy went further by providing export subsidies that disrupted world markets andhurt overseas producers. The CAP also encouraged intensive farming to the extent that byaround 1990 agriculture was viewed in Europe as a sector which damaged the environment.
The 1992 MacSharry Reforms reoriented the CAP away from price supports and towards
various direct payments for arable land and livestock, thus maintaining farm income but
shifting the burden from consumers to taxpayers (Swinbank, 2015: 4). It marked the
beginning of the process of decoupling support payments from production levels, which

21

economic theory shows is a more efficient way to deliver support. Figure 1-1 illustrates thischange (where higher levels indicate more efficient support). The Agenda 2000 reforms of1999 continued this reorientation and introduced rural development as a policy goal. The
2003 Fischler Reforms increased the decoupling of payments from production levels. The
main feature was the introduction of a decoupled ‘Single Payment Scheme’ that wasconditional on ‘cross compliance’ with environmental, food safety and animal welfare
standards (Anania and Pupo D’Andrea, 2015: 33). The Health Check reforms of 2008
extended decoupling further, with the result that almost 70% of the CAP budget was
decoupled by the period 2008-10.
Fig 1-1: Degree of decoupling, 1986-2010
80
70
60
50
40
30
20
10
0
European Union
27

Japan
1986‐88

Korea

Switzerland

1997‐99

United States

2008‐10The most recent round of reforms was implemented as part of budget planning for the
CAP during the period 2014-2020, with policymakers making greater reference toenvironmental and climate change dimensions during negotiations. The Single Payment
Scheme was replaced by a basic payment scheme and a so-called greening component thatwill account for 30% of direct aid. As Swinbank (2015: 12) explains, larger farmers will haveto undertake some crop diversification and use at least 5% of their arable land as ‘Ecological
Focus Areas’ (EFA), or risk losing the greening component or part of the basic payment.

22However, since smaller farmers will be excluded from the EFAs by an ‘area threshold’, it
may be that up to 88% of farms and 48% of arable land falls outside the environmental
scheme (Pe’er et al, 2014). As such, the efficacy of the environment-related measures has
been questioned. Analysing the discourse of the reform negotiations, Erjavec et al. (2015:238) argue that ‘greening’ was important as a political strategy, but that in reality ‘greening’
is in fact a “greenwash”. Pe’er et al. (2014: 1090) consider the new environmental measures“so diluted that they are unlikely to benefit biodiversity”.
A detailed assessment of the efficacy of CAP reforms since 1992 is difficult, due to thevery complex nature of the policies, the reforms and the extremely diverse structure of
agricultural production across the EU’s 28 member states. However, it can be said that the
cumulative effect of the four stages of reform outlined above has been to shift the sector
towards a market orientation, reduce distortions in the domestic and world food markets,
reduce the impact of agriculture on the environment and increase the efficiency of farmincome support (Anania and Pupo D’Andrea, 2015: 34).

1.4 Concluding remarks
The changing policy paradigms in both domestic and international agriculture provides
valuable context for the recent trends towards a more business-focused orientation among
agricultural producers in Japan, and gives an indication of the future direction of the sector.
For several decades after the establishment of the GATT/WTO, a view of agricultural
exceptionalism dominated, giving rise to a paradigm of state assistance in which governments
provided support and protection to farmers, who were perceived to contribute to wider
national policy goals. From the 1980s and 1990s, a view of agricultural normalism spread,giving rise to a market-liberal paradigm which considered the market as the most suitableprinciple on which to organize the agricultural sector. The paradigm shift took place at23different paces in different countries, but became evident in Japan by the late 1990s and2000s. Most recently, the Abe administration has demonstrated a stronger pro-businessorientation in relation to agriculture, as evidenced by the agricultural trade liberalisationcommitments agreed in the TPP.
The reforms of the Common Agricultural Policy of the European Union undertaken instages since 1992 may provide a partial model for future policy in Japan. The reforms haveended surplus production, reduced the share of the EU budget spent on agriculture and seemto have contributed to the EU becoming a net exporter of agricultural products (although thisis hard to verify conclusively). At the same time, while policy reforms have contributed toEuropean agriculture becoming greener, it appears that the most recent recalibrations of the
CAP have been more about greenwashing the policy discourse in the language ofenvironmental stewardship rather than implementing policies with meaningful positive
impacts on the environment. In this regard, the CAP represents a cautionary tale rather than amodel for Japan.

24Chapter 2:

Consumer Attitudes

toAgriculture,

Trade

and

Liberalisation

2.1 Aims of the survey
Agricultural policy in Japan has received considerable academic and media attention, bothwithin Japan and overseas. Studies have considered the protectionist policy measures, fiscal
costs (e.g. Harada, 2012) and opportunity costs (e.g. Lee and Itakura, 2014) incurred by thecurrent policy regime, and the roles of politicians, bureaucrats and JA (e.g. Mulgan, 2014).
One aspect that has received less attention in existing accounts of the political economy ofJapanese agriculture is the roles of individual citizens as taxpayers, voters and consumers.
Taxpayers consent explicitly to protection for farmers in their role as voters by electing into
office the Liberal Democratic Party (LDP), the party which has done most to implement
protectionist agricultural policies. Consumers implicitly consent to such policies bypurchasing domestic produce at high retail prices.
One reason that the role of citizens has not been examined deeply is the difficulty ofaccurately measuring popular opinion, both at a given moment and over time. However,historical longitudinal data in the form of public opinion surveys do exist, and the internet
now offers greater possibility for conducting research in this area. Government-administeredsurveys conducted by the Cabinet Office since the 1970s and by the (state-owned) Japan
Finance Corporation (Nihon Seisaku Kinyū Kōko) since 2008 have repeatedly found strong
public support for domestically-produced food and policies of support and trade protectionthat facilitate it. At the same time, such surveys must be interpreted with some degree ofcaution, given that they were conducted by a government department and a semigovernmental agency.

25

In order to provide independent evidence of consumer attitudes to agriculture, agricultural
trade and liberalisation, APIR has conducted an original national public opinion survey of
attitudes to agriculture, the results of which are presented in this chapter.5 Our survey goesbeyond previous surveys to explore in greater depth the nature of public sentiment towards
agriculture, the factors shaping public attitudes, and attitudes towards the possible
liberalisation of agricultural trade. It also examines commonly-held images about agriculture,
which may provide deeper insight into attitudes and opinions. The results reveal the nature of
public concerns about agriculture, which can provide guidance for future policy and business.

2.2 Prior literature
The attitudes and influence of consumers have received comparatively little treatment in
the two main accounts of the political economy of agriculture in Japan. The account ofagriculture during periods of economic growth and structural change (Anderson and Hayami
1987, Hayami 1988) assumed that rational individuals pursued their own material interests.
For farmers, this meant lobbying for agricultural protection after manufacturing had grown tobecome the major sector of the economy. For consumers, the logic of rational choice theory
implies favouring material interests in the form of lower food prices, but in practice acollective action problem may have prevented consumers organizing to realize these interests.
More recent studies have sought to explain the fact that Japanese consumers haverepeatedly expressed preference for domestic food, even if the price was higher than forimports. For example, Naoi and Kume (2011) suggested that public support for agriculturalprotection was due to individuals seeing themselves in terms of their roles as producers rather
than consumers and projecting their own job insecurities onto farmers, whose livelihoods

5

A preliminary analysis of the results of this survey was reported presented in the Fiscal 2014 report of thisresearch project, published in June 2015. The following sections contain some areas which appeared in thatreport.

26

were threatened by international competition. Naoi and Urata (2013) suggested that
uncertainty over the outcome and effects of TPP negotiations and the effectiveness oflobbying by JA helped explain protectionist public attitudes. Similarly, Mulgan has suggested
that it is due to JA successfully identifying farmers’ interests with the national interest(Mulgan, 2014).
An alternative hypothesis is that the primary concerns of Japan’s food consumers relate toissues other than the market price of food. For example, Vogel (1999) has argued that
consumers value quality and safety above all, and are prepared to accept higher prices in
return. Past survey data from the Cabinet Office offers evidence that supports this view.
As shown in Table 2-1, home preference for domestically produced food has consistently
been strong. For example, concern with low levels of food self-sufficiency and high importsrose from 67% in 1975 to 79% in 2009 (Row 2), while respondents who supported policies
favouring Japan producing basic foods like rice even if the price was higher than for imports
was steady at round 40% between 1987 and 2014 (Row 3). Freshness, quality and especiallysafety were cited as reasons for the home preference (Row 4), and these factors off-set thehigh cost of domestic food for around half of respondents, with another fifth considering
domestic food as being not so expensive (Row 5).
Rice, which is the most important agricultural product in Japan, was considered the mostappropriate (fusawashii) food for Japanese by around 90% of respondents between 1978 and1996 (Row 6). Major views of the role of rural areas ranged from ‘food production’,‘providing livelihoods’, ‘protecting the environment’ to ‘providing fresh food’ (Row 7),
while clear majorities in the most recent surveys thought that in agricultural areas in future,functions like land and environmental protection were most important, while efforts should
be made to improve economic efficiency (Row 8).

27

Table 2-1: Extracts from Cabinet Office surveys, 1975-2014

1

Sample size

2

Concern with:low FSS / high imports

1975

1978

1980

1984

1987

1990

1993

1996

2000

2007

2009

2014

4211

4075

2494

4087

2323

2292

2219

3567

3750

1727

3144

1880

62.8

71.0

70.5

70.1

79.1

78.4

76.7

93.5

66.7

56.7

future food supply
3

4

Imports vs. domestic production:
imports when cheaper

20.1

16.4

14.1

19.9

17.0

17.4

10.8

10.5

7.8

3.1

as much as possible foods in which Japanis self‐sufficient

67.1

74.5

75.0

domestic food, while reducing pro‐ duction
price, even if price is higher

31.9

32.7

32.4

45.9

43.6

44.5

51.5

domestic basics like rice, while reducing
production price, even if price is higher

39.6

40.5

44.7

37.5

40.6

42.3

42.4

66.6

57.3

51.6

70.6

69.4

quality

57.8

42.3

56.7

safety

71.7

82.0

89.1

Reason for home preference:
freshness

5

Domestic agriculture is relatively:
expensive but provides fresh, safe food

51.1

44.3

53.6

expensive but doesn’t provide fresh, safe
food

13.0

10.7

8.4

not so expensive and provides fresh, safe
food

12.5

22.4

19.0

94.2

94.1

93.3

food production

63.4

73.2

74.9

65.8

83.4

providing livelihoods

30.0

36.0

29.7

46.1

48.7

23.6

48.9

49.8

6

Rice is most appropriate food forJapanese people:

7

Role of rural areas:

environmental protection or nature

8

87.0

89.4

91.8

56.6

95.4

*70.9

reduce pesticides, provide stable food

54.2

address consumer needs

22.4

maintain culture, festivals, tradition

23.8

*11.4

provide fresh food

50.8

*32.1

On
decline in agricultural
economic role and future:

12.6

areas,

economic efficiency is most important as
agriculture is one part of economy

30.6

26.8

9.3

13.7

functions like land and environmental
protection
mostimportant,while
improving economic efficiency

42.4

42.2

68.2

63.1

functions like land and environmental
protection more important than economic
efficiency

13.1

14.0

17.4

16.8

Source: Cabinet Offices website (see Appendix I for details). All figures are percentages. All questions were multiple choice with fixed response. Some questions
permitted multiple selections, so the sum of responses may exceed 100. Some responses reported in the same time series are collated from similar but
differently‐worded questions from different years. Numbers marked with an asterisk (*) indicate responses from urban residents only; in most surveys, answers
from both urban and rural residents were reported together.

28

2.3 Design of the survey
Our original national opinion survey of attitudes to agriculture, trade and liberalisation
was conducted online in March 2015 using the Rakuten Research company6. The sample size
was five hundred, of which half were female and half male. Sampling was representative ofprefectural population shares. There were one hundred respondents from each of five age
cohorts: 24-29, 30-39, 40-49, 50-59 and 60-69. Those aged under 24 (of university age) were
excluded since several questions concerned anticipated effects on the respondent’s own job
or sector of employment.
The questions aimed to explore more deeply several of the issues covered in priorliterature or past surveys. A first set of questions asked general questions, including level of
education and income, employment status and sector of employment, involvement in exportrelated work, feeling of job security, marriage status and children. Other questions asked
whether respondents had personal or family links to farming or JA.
A second set of questions concerned the hypothetical loss of domestic production ofcertain products or culturally-significant items. Other questions concerned the expected
effects of trade liberalisation and of protecting sectors in trade negotiations, and thetrustworthiness of sources of information about trade agreements and their effects. A third setof questions focused on ideas about agriculture, whether and why it should be excluded fromliberalisation, and keywords respondents associated with it. Finally, a free response question
allowed respondents to input the words or phrases that described their image of ‘Japanese
agriculture’. A selection of the answers is reported below.

6

Rakuten Research is a leading internet survey company in Japan with over 2.3 million panel members. For
details, see http://research.rakuten.co.jp/download/Rakuten_Research_Company_Profile.pdf

29

2.4 Results(1) Comparing the potential loss of agricultural and other items
The first question related to ten hypothetical scenarios of loss, concerning the domestic
production of five agricultural and three manufacturing products, as well as two culturally
meaningful aspects of society. While it is to be expected that respondents would be lossaverse, the question offers the chance to examine relative strength of sentiment. As seen in
Figure 2-1, the percentage of respondents who reported that they would be very or somewhat
disappointed to see a Japan that did not produce rice was 85%. The equivalent figure forpharmaceuticals production was 83%, 82% for satoyama no fūkei (traditional village scenery
typically involving rice paddies and hills), 81% for beef or pork production, 80% for dairy
production, 78% for paper production, 75% for wheat production, 71% for sugar production,
65% for semiconductor production and 52% for the emperor system.

Fig 2-1: "How would you feel if Japan...?"
877

1. Didn't produce rice

24

51
60
61
47
55
69
43
69

2. Didn't produce wheat
3. Didn't produce dairy products
4. Didn't produce beef or pork
5. Didn't produce sugar
6. Didn't produce paper
7. Didn't produce pharmaceuticals
8. Didn’t produce semi‐conductors
9. Didn't have satoyama‐no‐fūkei

30

10. Didn't have the emperor system

0%

20%

20
21
24
23
14
22
14
22

40%

60%

80%

Very disappointing

Somewhat disappointing

Neither good nor bad

Don't care

Somewhat good

Very good

30

100%

When asked which sectors, if any, the Japanese government should protect in tradenegotiations, the highest response was for agriculture, forestry and fisheries (66%). Medical
services (55%) and government procurement (52%) were also chosen by a majority, whileelectronics manufacturing was chosen by 43%. The other categories (chemical industries,
retail and trade, automobile manufacturing, other manufacturing [steel, textiles, apparel etc.],
construction, and finance and insurance) received between 39% and 36%.

(2) Trade liberalisation: expected effects and information sources
The next series of questions asked about the expected effects of trade liberalisation. First,
with regard to respondents’ living standards, expectations for trade liberalisation were low.
As shown in Figure 2-2, a majority (52%) expected it to be about the same after liberalisation,
19% expected it to become somewhat or significantly better, while 14% expected it tobecome somewhat or much worse, and 15% said they did not know. Second, with regard tojob security, similar results were observed. Here, 57% expected it to be about the same, 10%
significantly or somewhat better, 13% somewhat or much worse, and 20% said they did not
know. Third, regarding the economy as a whole, the spread was greater. Here, 28% thought itwould be about the same, 27% somewhat or significantly better, 29% significantly orsomewhat worse, and 16% did not know.
Taken together, these results suggest low expectations and a relatively high degree of
uncertainty about the economic effects of trade liberalisation. This is in contrast witheconomic studies that invariably predict that the Japanese economy will grow byparticipating in agreements such as the TPP.

31

Fig 2-2: Expected changes due to trade agreement
participation
70
60

52

Own living standard

57

Own job security

50

Economy as a whole

40

28

30
20
10

2 2

8

22

19

17

11 9

8

15

20

16

7
3 3

0
Becomesignificantly
better / Verygood

Becomesomewhatbetter /Somewhat
good

About thesame /Neither goodnor badBecomeBecome much Don't know
somewhat worse / Veryworse /
bad
Somewhatbad

The survey also asked about sources for information regarding liberalisation. Respondents
were asked to rate sources as either ‘very reliable’ (taihen shinrai dekiru) or ‘not reallyreliable’ (yōjin suru wa kōshita koto nai). The most trusted source of information was‘researchers and academics’ (23.6%), followed by the Japanese government (18.4%). JA(15.0%) was more trusted than zaikai business circles (12.6%), and the internet (12.0%) was
more trusted than the mass media (9.8%). Bureaucrats (7.6%) were more trusted than the U.S
government (7.0%), and politicians (4.8%) were the least-trusted sources.
The next questions focused on trade protection. When asked, “Do you think that Japan’s
government should protect any sector or item in trade negotiations?”, 73.6% responded ‘yes’
and 26.4% responded ‘no’. In terms of specific industries, 66% of the total sample responded
that agriculture, forestry and fisheries should be protected by the government, while amajority also felt that medical services (55%) and government procurement (52%) should beprotected. Electronics manufacturing (43%) was next, followed by retail and trade (39%),
chemical industries (39%) and automobile manufacturing, other manufacturing, construction,and finance and insurance (each 36%).

32

Regarding agriculture in trade agreements, when asked, “Do you agree or disagree that
agriculture should be excluded from liberalisation in trade agreements?”, 43.6% agreed and56.4% disagreed. Those who agreed were asked why they thought agriculture should be
excluded from liberalisation. Three reasons predominated. Given as a percentage of total
respondents, 15.2% cited food safety, 14.8% cited national security/food self-sufficiency and13.2% cited health. Other responses were multifunctionality (4.4%), the historical, cultural or
religious importance of agriculture (3.4%), farmers’ incomes (2.8%) and environmental
preservation (1.6%).
Those who disagreed were asked why they thought agriculture should not be excluded
from liberalisation. Again, three reasons predominated. Given as a percentage of total
respondents, 8.8% cited ‘food is expensive’ and ‘excessive agricultural protectionism’
respectively, while 8.2% cited ‘increase consumer choice’. Other responses were ‘extend themarket principle’ (5.0%), ‘boost agriculture’s competitiveness and efficiency’ (4.0%),‘protectionism benefits politically influential groups’ (3.8%), ‘in order to participate in FTAs
boost trade, and help competitive industries’ (3.4%).

(3) Images of agriculture
Fig 2-3: Image of agriculture in relation to selected concepts
1. Normal industrial sector
2. Income equality problem
3. Environmental protection
4. National security (e.g. FSS)
5. Culture & tradition
6. Health & Food safety
7. Multifunctional industry
8. Trade protection needed
9. Trade liberalisation needed
10. Trade problem

9
36
19
30
6
6
41
19
30
4
12
46
17
23
2
22
43
14
18 2
22
46
12
18 2
32
42
12 12 2
11
37
17
31
4
14
35
16
27
7
7
26
18
37
13
10
38
20
29
4
0%

Strongly related
Not very related

20%

40%

Somewhat related
Not at all related

33

60%

80%

Don't know

100%The next set of questions focused on images of agriculture. First, respondents were asked
to rate ten categories relating to images of agriculture as being ‘strongly or somewhat related’,‘not very or not at all related’ or ‘don’t know’. As shown in Figure 2-3, the highest scoring
response for ‘strongly’ or ‘somewhat’ related was ‘health & food safety’ (74%), followed by‘culture & tradition’ (68%) and ‘national security/food self-sufficiency’ (65%). Other
responses were ‘environmental protection’ (59%), ‘trade protection is needed’ (49%), ‘trade
problem’ (48%), ‘multifunctional industry’ (48%), ‘income inequality problem’ (46%),‘normal industrial sector’ (45%) and ‘trade liberalisation is needed’ (33%).
A further question asked respondents to choose the one image that they associated moststrongly with agriculture. Again, three answers dominated. Health & food safety was chosenby 28%, national security/food self-sufficiency by 18%, and culture & tradition by 12%.
The final question was a free-answer question, in which respondents could enter a few
words or sentences about their image of agriculture in Japan. Table 2-2 gives a selection ofsome of the answers provided.

Table 2-2: Selected comments about respondents’ image of agriculture
No.

GenderAge

Prefecture

Comment

F

60

Fukuoka

2

F

38

Hyogo

3

M

55

Nagano

4

F

50

Tokyo

5
6

M
F

60
65

Iwate
Osaka

7

F

60

Chiba

Japanese agriculture is better quality than other countries but I think the gap between farmers
and regular people is widening. I think they should hold workshops on exporting overseas etc.
and set about ending this disparity.
I think it’s important that Japan is self‐sufficient, and so I think that it is the government’s duty
to protect farmers.
For example, agriculture needs to be commercialised and split into a sector that works hard on
productivity and a sector that preserves, stores and utilises water in rice fields.
Agriculture is very important. On the off chance a war breaks out and food stops coming into
Japan, we will be in trouble if there are no people, places or industries in our country that can
produce foods.
I don’t agree with allowing foods that contain preservatives or pests, or GM foods from foreigncountries into Japan.
GM foods and prepared foods with even the smallest amount of GM ingredients should havelabels informing consumers of such. Foods from overseas have lax standards in that regard, so
I’m against promoting the import of those foods.
The decreasing number of young people entering the industry is a serious problem. I can’t thinkof a way of preventing this, but we need to do something.
Farmland plays an important role in protecting Japan’s natural environment.
We need to maintain our food self‐sufficiency rate
Management of farms by individuals has reached its limit, we have to corporatize to improvelabour conditions
We need to liberalise the sector to improve labour conditions. We aren’t completely self‐
sufficient, but there would be problems if there were no agricultural sector in Japan.
I think Japanese agriculture is one of the better agricultural industries around the world interms of food safety.

1

34

8

F

61

Aichi

9
10

F
M

28
60

Yamanashi
Fukuoka

11

F

29

Osaka

12

F

39

Hokkaido

13

F

29

Aichi

14

M

51

Tokyo

15

F

25

Hiroshima

16

F

39

Osaka

I think Japan is the only country in the world with good rice, and I want Japanese people to beable to eat safe fruit and vegetables
Safe and sound. Small scale. Overprotection. Low profitability. High quality produce.
We have excellent technical capacity, but there is still work to be done in shifting to large scaleintensive agriculture, and there are many small scale farming operations run by individuals.
Also, there are only a few dedicated farmers and farms have weak management bases.
I see food made domestically as having strict standards and as being safe.
Some domestic produce is more expensive than foreign produce, but for the sake of our self‐
sufficiency rate and food safety, I want domestic produce to stay and production levels to staythe same.
Safe and sound food.
Japanese agriculture will continue to produce research that improves the quality of produce,
and will deliver safe and delicious food to consumers.
I see Japanese produce as being safer and tastier than foreign produce, but more expensive. I
want to buy Japanese produce in spite of its price, and I am trying to choose Japan‐madeproduce whenever I can to help our agriculture industry. There is a perception that ‘agriculture= old people’, so I think we should make it easier for younger people to work in the industry.
I think the government should stop buying rice and reselling it, and allow people to buy and sellmore independently.
We should not ruin farmers and eliminate dependable local produce by increasing imports ofcheap foreign foods. Doing so would threaten our food safety.
I want local goods to be protected so that shops will always be able to stock safe and soundagricultural goods.
Our agricultural sector’s technology is world class, but its ability to sell itself is poor. If it had
better sales potential, I think it could be competitive on a global level.

2.5 Conclusions from online survey
The results of our national survey of public opinion towards agriculture, trade andliberalization suggests at least four important conclusions that are relevant to policymakers
and agricultural producers, both domestically and internationally. First, agriculture,
agricultural products and even agriculture-related scenery are very highly valued incontemporary Japan. Comparatively, they are valued more than items which have muchgreater economic importance, and those considered to have high social importance. Second,
respondents show low expectation about trade liberalisation having a positive impact upon
their own lives in terms of living standards and job security, or on the national economy as awhole. There is also a lack of trusted sources for information regarding trade liberalization.
Third, there is a strong desire to see agriculture partially or fully excluded fromliberalization. In this regard, food safety, national security/food self-sufficiency and healthare considered as reasons why agriculture should be protected. Fourth, in terms of
respondents’ images of agriculture, agriculture was considered to be particularly related to35the concepts of health and food safety, culture and tradition, and national security/food selfsufficiency. These results highlight issues of concern for consumers that should be taken into
account by policymakers, current agricultural producers and those considering entering themarket.

36

Chapter 3: Sustaining Rural Communities–the Yabu Special Zone for
Semi‐Mountainous Agriculture

Next to Tokyo, Kansai and the other major regions selected by Prime Minister Abe in
March 2014 to be National Strategic Special Zones (or tokku), one choice stood out—that ofYabu, a small rural municipality in northern Hyogo prefecture, chosen as a model for therevitalization of semi-mountainous regions, with a focus on agriculture. This chapter presents
the main findings so far from our ongoing study of Yabu as an important example of policy
innovation in agriculture. It seeks to answer three questions: Why was Yabu selected as a
special zone? What progress has been made so far? And what is the broader significance ofYabu for agricultural reform and rural revitalization?

Rice terrace in Yabu City, Hyogo prefecture. Photo: APIR.

3.1 Yabu background: Semi‐mountainous agriculture in miniature
The municipal district of Yabu, situated about 2.5 hours by road or rail from the majorurban centres of Kobe, Osaka and Kyoto, covers an area of 423 km2 in northern Hyogo
prefecture. As shown in the map below, the city has two main population centres and several
remote, sparsely populated valleys. Eighty-four percent of the municipality consists of37

mountains and forests, while only 4.5% is agricultural land. Historically, Yabu was a centreof silk production until the 1930s, tin mining until the 1980s, and agriculture. Besides rice,other notable local products include Tajima beef (a category which includes Kobe beef) andsanshō, a spicy peppercorn. Tourism is an important part of the economy, and Yabu has anumber of ski slopes that operate during the heavy snowfalls in winter, when agricultural
production is suspended.

Source: Yabu City Office

Many of the socio-economic problems in Yabu are typical of the semi-mountainous rural
regions that account for around 40% of all farmland in Japan, although they are notnecessarily more severe than in other regions. Problems include an ageing population, urban
migration, low birth-rates (and few women of childbearing age), a shrinking local economy
and the costs of providing healthcare to a large and growing elderly population.

38

According to Yabu City Hall data, Yabu’s population fell 12% from 2000 until 2010, andstood at around 26,000 in 2015-16. The proportion of seniors rose by 13.4% in the same
period, with one-third of residents now in this cohort. In the agricultural sector, the amount ofabandoned farmland rose from 119 hectares to 226 hectares, while the amount of
unrecoverable abandoned farmland rose from 26 hectares to 86 hectares. The number of fulltime farmers fell 41% from 499 to 295 between 1995 and 2010. In the same period, thenumber of part-time farmers fell 72%, from 3142 to 878. Together, these trends contributed
to the municipal economy shrinking by 29% between 2005 and 2010.
The decline of rural Japan has caused great concern among policymakers at all levels. The
central government responded to regional demise (chihō no shōmetsu) by creating a newministry for ‘overcoming population decline and vitalizing local economy’ in September
2014. Until August 2016, the new ministry was led by Shigeru Ishiba, who was also ministerof state for the National Strategic Special Zones and a former agriculture minister.7 Within
the MAFF, agricultural policy is mainly split into business-focused industrial policy (sangyō
seisaku) and rural revitalization-focused regional policy (chiiki seisaku), with a third policy
strand aiming at preserving rice paddies and traditional scenery.
At the local level in Yabu, the municipal administration under Mayor Sakae Hirose has
attempted a number of revitalization projects. A 2013 ‘Economic Revitalization Plan’focused on tourism and agriculture, including promoting Agriculture-Industry-Commercecooperation and ‘Sixth Sector Industrialisation’, in which farmers participate in theprocessing, distribution and/or sales of their products in order to increase profit margins. The
city hall also established a private corporation, Yabu Partners, aimed at fostering agriculturalbusinesses. Yabu Partners is led by the Deputy Mayor Shoji Mino, who was previously
involved in the revival of the Huis Ten Bosch Dutch theme park in Nagasaki prefecture.

7

In August 2016, Ishiba was replaced by Kozo Yamamoto.

39

Yabu’s application for tokku status in August 2013 was thus the third revitalizationoriented project attempted by the current city administration. Mayor Hirose has adopted theslogan, “Yabu has nothing to lose, so Yabu continues to try”8. It seems that the mayor’s
personal initiative was instrumental in the municipality being selected by the central
government for special zone status.

3.2 The goals of the special zone
In seeking special zone status, the local government had five main goals: (1) to revitalise
the local economy and society; (2) to revitalise agriculture; (3) to re-utilise abandoned land;(4) to create a more liquid land market; and (5) to increase the involvement of business inagriculture. For the central government, at least three aims were evident: (1) to create a modelof successful revitalization of semi-mountainous rural communities; (2) to achieve thisthrough regulatory change rather than public expenditure; and (3) to foster an increased rolefor business in the agricultural sector.
Five main measures are being pursued as part of the tokku. First, the land sales system isbeing reformed by transferring responsibility for approving sales from the local agriculturalcommittee to the mayor’s office. Second, management restrictions on agricultural businesses
are being eased. Third, regulations on farm restaurants are being relaxed to encourage thesale of locally grown produce. Fourth, agricultural businesses will be permitted to access the
Small Business Credit Guarantee system. Fifth, exceptions to the ryokan regulations law will
be provided to allow the conversion of large old family homes into guest houses. This lastmeasure is possible since the terms of the tokku allow the local government to pursue reforms
outside the primary focus of the zone.

8

In Japanese, “Yabu-shi wa nanimo ushinau mono mo nai, dakara Yabu-shi wa chōsen shitsuzukeru”.

40

3.3 Developments so far
Since the tokku was decided, some initiatives have been implemented already and others
are under deliberation. Transferring the land sales process to the mayor’s office has resulted
in decision times being reduced by two weeks. A proposal to reform regulations ofagricultural production companies was passed, reducing the stipulation that 50% of members
be farm-involved down to one person being farm-involved. The requirement for agricultural
production companies (nōgyō seisan hōjin) to have agriculture as their main business (that is,accounting for over 50% of profits) has been eased, making Yabu the first area in Japan toimplement this policy proposal by the Abe administration. Another measure would allow
non-farmers to make up more than the current limit of one-quarter of shareholders inagricultural production companies.
An important element of the tokku project is the number and diversity of private firms
who have become involved in the agricultural sector in Yabu. At the time of our most recent
research visit, sixteen firms had established operations or announced business plans since the
tokku was announced, up from four in the previous ten years. Production scales range fromunder 0.5 to 10 hectares, with plans for up to 40 hectares. Involved firms come frombackgrounds in agricultural machinery, energy, supermarkets, construction, real estate, andagricultural production and processing. Many have headquarters elsewhere in Hyogo andKansai, and several are from more distant prefectures like Chiba, Aichi, Fukushima andShimane. Operations include flower cultivation and honey processing, seeds, biomass power
generation, farm restaurants, cultivation of tomatoes, peppers and other vegetables, and thecultivation of rice for sake production.
The municipal government has also received assistance from the business community.
Mitsui & Co., a general trading company, seconded a deputy head of division to act as tokku
coordinator and contact point for investors, and established a tokku support team. MB

41

Agribusiness, part of the Mitsui group, also established contract cultivation and distributionof local specialty produce, offering new access routes to major urban centres. For example,
Yabu farmers now sell hozuki (Chinese lantern plant), a high-value speciality fruit, throughthe new sales routes.
In terms of recent developments, the municipal government has received permission fromthe central government to permit the sale of agricultural land to joint-stock corporations. Thisis potentially a very significant development with national implications, since private firms
have been prohibited from owning agricultural land throughout the postwar period. In thecase of Yabu, the land will first be purchased by the local government, then sold to speciallyestablished ‘Designated Agricultural Land-Owning Corporations’ (Tokutei Nōchi Shoyū
Hōjin). Sales contracts will include various conditions, including allowing the local
government to buy back land if it falls into disuse. In another initiative, the City Hall is also
seeking to introduce a ‘ride-share’ service similar to Uber in order to improve the local public
transportation infrastructure.

3.4 Interpreting the significance of the Yabu special zone
As a source of innovation in agricultural policy, a small rural municipality like Yabu
would seem an unlikely location. The plans being implemented in the national strategic
special zone there represent a small but noteworthy step on the path toward agriculturalreform. Many measures are still in the process of being implemented, but Yabu is alreadysignificant for at least three reasons. First, in national terms, Yabu represents an attempt bycentral government to deal with long-standing rural problems by new means—regulatory
easing and business cooperation rather than further public spending. Japan’s trade partners
can also take this as evidence of Prime Minister Abe’s belief in the power of business activity
and deregulation. Second, at the local level, Yabu demonstrates the impact of an enthusiastic

42

municipal leadership in driving reforms. This has included a mayor with a strong
commitment to revitalizing the community, supported by a team with business experience intourism and general trading. Third and perhaps most surprising has been Yabu’s ability to
attract business interest from across the country to this remote rural locality without
providing financial incentives.
On this basis, Yabu may be judged a success so far. Since the policies undertaken havebeen driven by policy innovations under local leadership rather than by government
expenditure, Yabu could indeed fulfil the goal of becoming a model for other semimountainous districts attempting to revitalise their economies. The policy tools being utilizedin Yabu could be made available to other municipalities seeking rural revitalization.

43

Chapter 4: Firms on the Farm—the Growing Role of Corporations inJapanese Agriculture

The involvement of corporations in agriculture is a recent development with potentiallysignificant implications for the competitiveness of the sector. This chapter examines thegrowing role of firms on Japanese farms. In particular, it focuses on vertical farms, which arecalled ‘plant factories’ (shokubutsu kōjō) in Japanese.

4.1 Background: postwar agrarian reforms
Pre-war agriculture had been dominated by a small number of large-scale landlords whowielded strong political influence, while small tenant farmers struggled and often engaged inrebellions to improve their situations. The agrarian reforms of 1946-49 implemented by the
MacArthur administration had a very positive effect for small farmers, who were granted theright to purchase the land they cultivated on extremely favourable terms, since the sums
involved were soon reduced in value by hyperinflation. At the same time, the restrictions
aimed at preventing a recurrence of the landlord system also had the effect of excluding
corporations from agriculture for over fifty years. In these circumstances and without any
business competitors, the agricultural cooperative Nōkyō (now known in English as Japan
Agriculture, or JA) subsequently grew to become a monopolistic conglomerate in the
agricultural sector as well as a powerful lobby group.
In the years since the Agreement on Agriculture in the 1994 Uruguay Round agreement at
the GATT/WTO, the role of corporations in agriculture has been changing incrementally.
The 1999 Agricultural Basic Law permitted joint-stock companies to have a stake of up to44

25% in farmer-led agricultural production corporations (nōgyō seisan hōjin), while therevised Agricultural Land Law of 2009 allowed firms to rent (but not own) farmland.
Recently, the Abe government has sought to further relax restrictions on joint-stockcompanies in agriculture by permitting investment of up to 50% by non-agricultural investors
and reducing the number of farmers required to sit on the boards of agricultural production
corporations. The number of agricultural production companies rose by 29.5% between 2009
and 2014 to 14,333. Potentially one of the most significant changed was enacted in the May
2016 revision of the National Strategic Special Zone Law, when regular firms were finallypermitted to own agricultural land in Yabu City.

4.2 Growing corporate involvement in agriculture
Firms are now involved in a number of sectors of the agriculture industry, including
traditional farming, and the development and implementation of IT agriculture. The AEON
supermarket chain and the Lawson and Seven and I Holdings convenience store chains areamong those engaged in farm production of rice and vegetables. In terms of applying IT toagricultural production, Fujitsu was one of the first major firms to enter the field in 2012
when it launched Akisai, a cloud-based data management service that is now used by
AEON’s farming division and others. NEC, Hitachi, Toshiba and Toyota are among the otherlarge firms active in this area.
In Kansai, Panasonic has developed ‘passive house’ greenhouses that utilise technologies
developed by its industrial systems and housing systems divisions, such as sensors that allow
for automatic adjustments to light, heat and moisture levels. Similarly, Sharp, recently
acquired by Hon Hai, has begun selling strawberry-producing plant factory installations in
the United Arab Emirates. The units use Sharp’s LED and air-cleaning technologies, and may
also incorporate its solar panels in future.

45

The agricultural machinery manufacturer Kubota recently announced a ‘Kubota Farm’
strategy to increase its direct farming operations, which it operates for research anddevelopment purposes. By 2019, Kubota plans to increase its number of farms from 4 to 15,
and the coverage of its farms to around 1000 hectares. It plans to establish one of these farms
in Yabu City. Kubota is also partnering with NTT, a telecommunications firm, to develop
farm machinery that uses information technology, such as GPS, sensors and drones. It plans
to start selling self-driving farm equipment by 2018. The firm hopes to sell such machinery to
young operators who lack experience in farming. Softbank, another telecommunications firm,
recently established a partnership with MyFarm, a start-up in Kyoto prefecture. Together, thefirms will develop a database of national farmland available for sale or rent. Users will beable to search the database and receive information on the technical condition of the land fora fee.
Finally, other Kansai firms have been implementing agriculture using IT. These include
Orix Fudosan, a real estate firm, and the Kintetsu and Hanshin railway companies, each
operating vegetable factories for testing or commercial purposes. Obayashi Group, a
construction firm, is also building a large plant factory to serve the Tokyo market incooperation with SPREAD.

4.3 Plant factories: Benefits and drawbacks
The idea of vertical farms has spread internationally in recent years, popularized in part by
the publication in 2010 of The Vertical Farm: Feeding the World in the 21st Century by
Dickson Despommier, emeritus professor of microbiology and public health at Columbia
University. While Despommier’s vision was one of tall urban towers for growing vegetables,
the term ‘vertical farm’ has come to mean any kind of indoor agriculture using advanced46

technology, since production units are generally stacked vertically. In Japan, such facilities
are known as shokubutsu kōjō, or ‘plant factories’.
Plant factories may be defined as sites which use advanced technologies and industrial
methods to produce agricultural items. Typically, plant factories have controlled air
environments and plants are grown using hydroponic solutions rather than soil. Lighting may
be artificial, natural, or a combination of both. Particularly when artificial lighting is used,plants are grown on stacked shelves and moved around during the production process. Plant
factories offer benefits over traditional production methods, but also have a number ofdrawbacks.
In terms of benefits, first, plant factories require only small amounts of land and use
technology intensively, making them well-suited to Japan’s factor endowments. Indeed,
agricultural land can easily be ‘created’ by stacking upwards on shelves, and sincehydroponics are used, there is no soil erosion effect. Second, multiple crops can be produced
annually and growing seasons are shorter, meaning that production levels are many times
higher than traditional production. Third, indoor production prevents crop damage fromsevere weather events or insects, allowing for a stable supply to consumers. Fourth,
production uses few or no pesticides and less water than traditional farming methods. Since
heavy farming machinery is not necessary, fossil fuels are not needed for plowing, fertilizing,
seeing, weeding and harvesting (Despommier, 2010: 5). And since factories can be locatedclose to consumption centres, transportation costs are lower and fresh produce can bedelivered to consumers more easily. In these specific respects, plant factory production is lesspolluting than field production.
On the other hand, a number of criticisms are frequently made9. First, set-up costs andproduction costs are much higher than for traditional production methods. Second, rather than9

See, for example, Kozai et al. (2016: 21-29) for a list of common critiques and responses.

47

clean and free sunlight, plant factories use electrical energy, which is both financially costlyand (when produced by fossil fuels) environmentally polluting. Energy is also lost at every
stage of the transformation process, putting an efficiency limit on production even whenusing renewable photovoltaic energy sources. Third, labour costs per unit are much higher inplant factories. Fourth, the range of vegetables which can be produced in these facilities islimited mainly to leafy vegetables, herbs and some fruits like strawberries. Moreover, sincevegetables account for only a small share of farmland use, increased productivity in thissegment will have little effect on overall farmland use. Fifth, the technology-intensive natureof vertical farms means that the demand for labour is relatively weak, so the construction offacilities may have little impact on local employment.10
As Robert Laing of farm.one, a New York-based vertical farm company, notes, vertical
farming is not a panacea, but it does address specific problems in agriculture like crop failure
and pesticide use, and will likely play an important part in the “produce landscape” in future
cities (Laing, 2016). Since Japan has some of the largest and most densely populated cities in
the world, the potential for plant factories is perhaps higher here than in any other country.
And given the growth of major cities with significant middle-class populations elsewhere in
Asia, technologies developed in Japan could be more easily exported to other countries in theregion than those developed in North America or Europe, where environmental and otherconditions are more dissimilar.
In Japan, plant factories may have another benefit, relating to land use. Japanese cities
have large numbers of raised railway lines and raised highways, the spaces beneath which areoften vacant due to noise, pollution and lack of sunlight. Plant factories could utilise thisspace in or close to consumer markets and utilise the adjacent transportation networks for

10

See Cox (2016) for a spirited critique of the concept and practice of vertical farming.

48

distribution. In the Kansai region, the Kintetsu and Hanshin railway companies have alreadyconstructed test facilities for this purpose.
As seen in Figure 4-1, the total number of plant factories in Japan is growing steadily,rising from 93 in 2011 to 383 in 2014. Forty-three percent of these used wholly artificial
lighting, 9% mixed lighting and 48% sunlight only, according to the Japan Greenhouse
Horticultural Association (JGHA).

Fig 4-1: Number and type of plant factories in Japan
Source: Japan Green house Association

500
400

Artificial lighting

Mixed lighting

Sunlight

300
200
100
0
2011

2012

2013

2014

The value of the consumer market for plant factory produce is also expected to grow, with
one market research firm forecasting that the total value of the domestic market for artificial
and mixed (artificial and natural) lighting would rise from JPY 23 billion (USD 222 million)
in 2013 to JPY 150 billion (USD 1.45 billion) by 2025.

4.4 Case study: SPREAD
Japan’s largest plant factory by output, and one of the largest in the world, is operated in
Kansai by SPREAD. SPREAD is one of five firms in the TRADE Group, each of which is
involved in aspects of the supply chain. SPREAD was established in 2006 to grow vegetables
for sale through the parent company’s existing retail sales channels. According to company

49

president Shinji Inada, SPREAD aims todevelop “a system that will provide asustainable supply of safe vegetables for the
next generation”.11
In 2007, SPREAD constructed a large-scale
plant factory in Kameoka City in Kyoto
prefecture, situated about 30 km from central
Kyoto and 40 km from central Osaka. The
four-floor factory contains 16 rows ofcultivation shelves, in which four kinds of lettuce are grown using hydroponic solutions.
Plants are grown using artificial lighting only.

Company president Shinji INADA explains the growing processduring a site visit to the SPREAD factory. Photo: APIR.

The production capacity of the factory is
21,000 heads of lettuce per day and 760 tons per year, more than double the capacity of the
Number 2 firm in the market at the time of our visit. Around 90% of the produce is soldthrough local supermarkets, with the remainder sold through other outlets including asandwich firm and a convenience store chain. In 2013, sales reached JPY 760 million (USD
7.32 million).
Table 4-1 shows a comparison of outputs and inputs for field-cultivated lettuce versus
plant-factory cultivated lettuce. Stacked shelving and multiple annual crops mean that
productivity per 1000m2 of land is around 80 times higher in plant factories, a verysignificant advantage in a land-scarce country like Japan. Water usage is also much lower inplant factory production, at around 8% of levels used in field cultivation. On the other hand,plant factories face three costs that are less significant for field cultivation: electricity usage,
labour costs and depreciation expenses.

11

In Japanese, “tsugi no sedai ni jizoku kanō de anzen na yasai wo teikyō suru shisutemu wo tsukuritai”.

50

Table 4‐1: Cultivation of Field and Plant Factory Lettuce
Field cultivation

Plant factory

ANNUAL OUTPUT PER 1000M2

3,560 heads

289,683

CULTIVATION PERIOD

60 days (1 crop per year)

42 days (8 crops per year)

ELECTRICITY COST

N/A

1.75kw/head

LABOUR COST

N/A

19 yen/head

WATER USAGE

10.725 litres/head

0.825 litres/head

SOURCE: SPREAD

In terms of labour, the Kameoka site employs 120 workers, of whom 20 are full-time and100 are part-time staff. Kameoka is a semi-rural area. The part-time workers include many
local housewives, including those of local farmers. In this sense, SPREAD contributes to thecontinuation of agriculture-related employment in the district.
However, labour also represents a major cost for the firm. In order to reduce these costs,
SPREAD is currently constructing a new facility in Kameoka that will be almost entirely
automated. After the initial seeding stage, subsequent stages of cultivation and harvesting
will be done by robots. The firm expects the new facility to reduce labour costs by 50%,
reduce energy usage by almost 1/3 and recycle 98% of water used in production (TechInsider, 2016). While some production-related jobs will be lost, it is anticipated that new jobs
in R&D will be created.

4.5 Concluding remarks
This chapter has examined the growing role of firms on the farm in Japan. Corporations
were effectively excluded from agriculture by the postwar agrarian reforms, but restrictions
have been gradually reduced in recent years and the current Abe administration’s orientation
has been strongly pro-business, including in relation to agriculture. As such, corporate
involvement in agriculture represents a genuinely new trend in Japan’s agricultural sector,
and one which may increase competition and drive efficiency gains in future.

51

Large multinational firms and SMEs have been entering the sector in a number of ways,
such as by conducting traditional farming operations, developing IT-based agriculture or
doing a combination of the two. The development of production methods and technologies
that rely on capital and technology rather than land or labour is of particular interest in Japan,
since this fits better with the country’s factor endowments.
This chapter has examined the costs and benefits of plant factories in some detail,including through a case study of the SPREAD company, a market leader. While it is clearthat plant factories are not a panacea to the problems of the agricultural sector, it seems likelythat they can contribute to a growing niche in the market, catering for safe, sustainableproduction with a supply independent from extreme weather events.
However, it seems that the government could do more in policy terms to support such
ventures. For example, in the case of SPREAD, when setting up its first factory the company
had to wait six months for approval from the local Agricultural Committee to change theland-use of the site from agricultural land to factory land. The government decided in
December 2015 that plant factories in future would not have to apply for permission tochange land usage, a decision that should help future investment in the sector. As in the caseof the Yabu tokku, policymakers can take actions that encourage agriculture-related businesswithout resorting to further fiscal expenditure.

52

Chapter 5: Towards a Sustainable, Trade‐Oriented Future

5.1 Summary of the research findings
This report has examined some recent trends in Japanese agriculture and considered themin the context of achieving a more sustainable and trade-oriented future for the sector. With
particular attention to the Kansai region, it has focused on four areas that will influence thefuture direction of the sector: changes in the agricultural policy paradigm, the concerns oftaxpayers and consumers, efforts to revitalize agriculture and communities in semimountainous areas, and the growing involvement of corporations in agriculture.
First, there is evidence that the agricultural policy paradigm in Japan has been undergoinga fundamental shift towards a greater market orientation, as has already happened in the
United States, the European Union and elsewhere. The former view of agriculture as an
exceptional sector has been challenged by a view that agriculture is a normal sector of theeconomy, similar to industry and services. As a result, policy has moved from a strongly
state-assisted focus to a more market-liberal focus and the policy goals have also changed.
This trend is visible in both the long view, by comparing the two agricultural basic laws of1961 and 1999, and also by examining the changes that have occurred in the last decade or so.
Under the current Abe administration, the pace of change seems to be increasing, as seen
most recently in the liberalization commitments agreed in the TPP outline agreement.
The European Union offers a useful case study for agricultural reform. The EU’s Common
Agricultural Policy has become more market-oriented since 1993, including high levels of
decoupled support, and this has seemingly contributed to the EU becoming a net agricultural
exporter since 2010. Given Japan’s very low level of agricultural exports, the EU could
provide a model for shifting to a more globally competitive, export-oriented agricultural53

sector. However, the environmental dimensions of the CAP in recent years appear to belacking in real substance, which offers a cautionary tale for Japanese agricultural reforms.
Second, the report provided original independent opinion survey data that revealed thepreferences and concerns of food consumers in Japan. Our findings, which concur withprevious surveys conducted by the government, are that agriculture has had and maintains a
special position in the minds of a majority of taxpayers and consumers. Agricultural products
like rice and the scenery of agricultural villages are valued more highly than items with great
economic importance like semi-conductors or items with perceived social importance, likethe emperor system. Two-thirds of respondents wanted some degree of protection fordomestic agriculture in trade agreements, with over half wanting it protected completely.
Three issues were uppermost in the minds of respondents: health and food safety, national
security/food self-sufficiency, and culture and tradition. Price factors appear to be a low
concern, while issues relating to health and safety receive greater support. The findings
suggest that policymakers, agricultural producers and new market entrants should bear thesefactors in mind when making future decisions.
Third, the National Strategic Special Zone in Yabu City in Hyogo prefecture provides aninteresting case study of policy innovation for the revitalization of agriculture andcommunities in semi-mountainous areas. The local municipal administration has
implemented measures to improve bureaucratic processes, reduce regulatory burdens on
producers and encourage firms from around the country to invest in agriculture in the district.
Since it is driven by local leadership and based on policy innovation rather than government
spending, we expect that Yabu could provide a useful model for other municipalities seeking
to revitalize local agriculture and communities. The project is on-going and we at APIR willcontinue to monitory developments.

54

Fourth, the growing role of joint-stock corporations marks a significant new development
in Japanese agriculture. The current Abe administration has been actively encouraging firms
to participate in the sector, and corporations are now operating farms and developing andimplementing new technologies including data monitoring systems that allow for more
efficient food production. Large Kansai-based MNCs including Panasonic, Sharp and Kubota
are among the firms active in farming. The Kyoto-based SME SPREAD has developed astrong market position in the vertical farm/plant factory market for lettuce, and is building a
new facility that will automate almost every step in the production process. The growing roleof firms on the farm is important because it introduces greater competition into theagricultural sector, and because firms are focusing on capital-intensive production methods
that better suit Japan’s factor endowment. New technologies and production methods are
already being exported to other Asian countries, and this trend is expected to continue in
future.

5.2 Assessing the changing policy paradigm in Japan
Policy environments are like natural environments––dramatic change tends to be rare,
while gradual evolutionary change is more common. It is not always clear when one
dispensation has been replaced by a new order. For individuals situated in the midst of aslowly changing policy environment, the task of identifying the direction and progress ofchange is necessarily more difficult than in retrospect.
Agricultural sectors in most advanced economies have experienced such policy changes
during the last three decades. In the case of the European Union, for example, the dates ofsuccessive reform packages beginning with the 1992 MacSharry reforms are known, and dataon producer support estimates, decoupled payments and the agricultural trade balance stand55

as evidence of the movement towards a greater market-orientation of agricultural policy andof the sector itself.
In Japan during the same period, several areas of the economy have shifted to a moremarket- and trade-oriented direction, and integration with the global economy has increased.
The manufacturing sector has become deeply integrated with the Asia-Pacific region throughproduction networks, the financial and postal savings sectors have been reformed, and eventhe university sector has undergone a degree of corporatization. Yet through all of this,Japanese agriculture has been slow to change domestically and integrate internationally.
In retrospect, the 1990s saw the first steps in the reorientation of agricultural policy, froma basis of agricultural exceptionalism and a state-assisted paradigm towards one of
agricultural normalism and a market-liberal paradigm. This was evident in the 1994 Uruguay
Round Agreement on Agriculture and the 1999 revision of the agricultural basic law. In the
2000s, slow changed continued, including the growth of agricultural production companies
and the 2009 Agricultural Land Law permitting joint-stock firms to rent agricultural land.
During the 2010s, the pace of change has increased noticeably. The business-friendly
administration of Shinzō Abe since December 2012 has encouraged corporate involvement inagriculture and facilitated deregulation and policy innovation, including in Yabu. The
commitment to liberalise agricultural imports in the TPP was a noteworthy change, even if it
was offset by countermeasures to mitigate the impact on farmers.
As has been the case previously in the political economy of Japan, the countervailingforces have been strong and the reforms delivered have amounted to less than the reforms
promised. The direction of travel has been towards more market-oriented policies with agreater role for corporations and a reduced role for JA, but many measures of state assistanceremain in place, and recently-announced subsidies for industrial or feed-use rice production

56

show that the tendency towards state-assistance remains strong. At present, the policy
paradigm is no longer state-assisted and not yet market-liberal, but is somewhere in-between.
The desire to protect domestic agricultural production continues to be strong among thegeneral public, as it is among farmers themselves and JA members. As this report has shown,concerns about health, food safety and food self-security are major considerations for
consumers, and these concerns over-ride economic considerations like price.
This same set of factors could contribute to the transformation of Japanese agriculture intoa more sustainable and profitable sector with a greater trade orientation. Firms entering
agriculture are bringing technological innovation and operational know-how, and developing
new products and processes that can be profitable domestically and also exported to thegrowing consumer markets in the Asia-Pacific region and beyond. Some firms, like those in
Yabu and SPREAD in Kameoka, are employing members of local agricultural households in
new forms of agriculture. In plant factories like SPREAD, the demand for manual labour may
decrease but the need for research and design is creating new kinds of agriculture-related
employment that previously did not exist.
The business focus is also evident among policymakers, as the case of Yabu shows. In
Yabu, individuals with business experience are partnering with the municipal government tofoster new links with the wider business community and bring new kinds of investment into
the local agricultural sector and wider community. Finally, consumers’ strong preference forhigh-quality, healthy, safe domestic produce is shaping the direction of these new agriculturalbusinesses. Produce grown for the Japanese market will also appeal to the growing number of
middle-class consumers elsewhere in Asia, particularly if consumers are persuaded thatJapanese food products are high quality and trustworthy.
Thus, there are good reasons to adopt a more positive view of the future of Japanese
agriculture. Serious structural problems do remain, but the domestic and international

57

contexts offer good prospects for future growth. If the innovative capacity evident in the
sector can be fostered further, and if policymakers can find a balance between achieving
greater productivity and maintaining the broader contributions of agriculture that are valuedby citizens, Japanese agriculture could indeed achieve a sustainable, trade-oriented future.

58

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Japanese agriculture: towards a sustainable, trade-oriented future(日本における持続可能性な貿易志向型農業の展望) 研究報告書

発

行

日

2016（平成 28）年 9 月

発

行

所

〒530-0011
大阪市北区大深町３番１号
グランフロント大阪
ナレッジキャピタル タワーＣ ７階
一般財団法人 アジア太平洋研究所
Asia Pacific Institute of Research (APIR)

発

行

者

TEL（06）6485-7690（代表）FAX（06）6485-7689
榎 原 則 之ISBN978-4-87769-117-2