アジア太平洋研究所資料
１５―０９-- Japanese agriculture: towards a sustainable, trade-oriented future --Fiscal 2014

James Brady
APIR Research Fellow

June 2015
Asia Pacific Institute of ResearchJapanese agriculture: towards a sustainable, trade-oriented future
Copyright ⓒ 2015 by Asia Pacific Institute of Research
All rights reserved. Published by Asia Pacific Institute of Research, June 2015
ISBN 978-4-87769-668-9

Abstract
Despite its image as a sector in chronic decline, there have been several positive developments inJapan’s agriculture sector recently, such as the growing activities of firms on the farm, fromconventional production to IT-based services and plant factories. With a particular focus on the
Kansai region, this report analyses recent innovations in Japanese agriculture, including theestablishment of an agricultural special zone in Yabu City in Hyogo prefecture, intended as a model
to revive semi-mountainous districts across the country. We also present preliminary results of asurvey of consumer attitudes towards agriculture and protection, and begin to chart a course
towards policy proposals aimed at creating a competitive, profitable agricultural sector than can be
more open to trade and sustainable in the long-term without ongoing government assistance.

Keywords
Agriculture, innovation, corporations, plant factories, Yabu, consumer attitudes

Research Leader

James BRADYAPIR Research Fellow

Project Officer

Hideo MURAKAMIAPIR Chief Program Officer

Executive Summary
This interim report details the findings of the first two stages of the APIR research project“Japanese agriculture: towards a sustainable, trade-oriented future”, covering four substantive areas:
recent developments in agriculture, the increased activities of corporations in agriculture, theNational Strategic Special Zone for agriculture in Yabu City in Hyogo prefecture, and an online
survey of consumer attitudes towards agriculture and protectionism. The main findings of thepreliminary research are as follows.
In terms of recent developments in agriculture, there are some positive trends emerging inthe sector, led by the activities of firms, which contrast to the pessimistic view of agriculture
frequently observed in the domestic and international media and at trade negotiations. The sector
still has a long list of structural problems, as well as the factor endowment “meta-problem” ofagricultural policy being long focused on crops in which Japan lacks comparative advantage.
However, if Japanese food products characterized by quality and safety can be successfully
marketed to high-income consumers in rapidly developing Asian nations, it may be possible toboost Japan’s food exports and “normalize” the lop-sided structure of Japan’s agricultural tradebalance.
Regarding corporations and agriculture, there has been a noticeable increase in the activities
of firms on the farm since the 2009, following the easing of restrictions on corporate involvement inagriculture in place since the 1950s. Some firms have begun production of rice and vegetables onlarger-scale farms, while a number of IT firms have developed data-responsive “agricultural cloud”
services to monitor field conditions and permit remote farm management via computers and tablets.
The number of “plant factories” producing leaf vegetables and other vegetables and fruits incontrolled environments has grown fourfold in three years, and this development offers the prospect

of stable production close to consumption centres, immune to weather events, and less reliant onenvironmentally harmful pesticides.
Looking at the National Strategic Special Zone, Yabu City in Hyogo prefecture can be seen
as a microcosm for the problems of rural Japan, with depopulation, a rapidly growing senior
population, abandoned farmland, and a farm successor shortage among the major problems themunicipality is facing. Led by a business-friendly mayor and a business-experienced deputy mayor,
some initial regulation easing has already taken place in relation to board members of agricultural
production companies, with further decisions due soon in relation to corporate decision-making by
non-farming board members and the requirement that companies involved in agriculture makefarming their main business. More than a dozen companies have already established or announced
operations in Yabu, including several large firms. The speed of progress remains modest, but thenational and international attention the zone is attracting, as well as the enthusiasm of the municipal
leadership and the cooperation of large firms, may contribute to a successful outcome.
The results of an online survey we conducted suggest that the general public in Japan clearly
see agriculture as a “sector apart”, and two-thirds of respondents desired that it be given special
protection in trade negotiations. There is strong support for all five “holy ground” (seiiki) categories
of agricultural products (rice, wheat, beef and pork, dairy, sugar), while traditional rural village
scenery is treasured almost as highly as rice production. The most commonly cited reasons forsupporting agricultural protection are concerns about health, national security (including food selfsufficiency), and food safety, implying that firms interested in entering the agriculture market
should focus on producing healthy products that consumers can trust.
In conclusion, the preliminary stages of the research have provided a solid basis for the threeremaining stages of the research project, to be undertaken in fiscal 2015. Stage 3 will examine“Lessons for exports”, by looking at the successful reforms of the Common Agricultural Policy,

which have turned the European Union’s agriculture sector into a net exporter. Stage 4 will study“Lessons for imports”, to see whether the manufacturing production networks models developed by
Japanese MNCs in Asia could provide lessons for developing stable food trade relations withneighbouring countries. Finally, Stage 5 will draw together the findings of all previous stages of theresearch to develop agricultural policy proposals that balance the complex interplay of interests inthe sector, and voter and consumer sentiment towards agriculture, with the need to development
more efficient and profitable farming in order to ensure a sustainable future as an independent
sector not reliant on endless government handouts. These proposals will be presented in the final
report of the research project, due in March 2016.

Table of contents

Chapter 1: Introduction and outline of research project1

1.1 Introduction

1

1.2 Structure of the research project2

1.3 Structure of the interim report

3

Chapter 2: Recent developments in agriculture

4

2.1 Emerging innovation

4

2.2 Problems and potential — balancing agricultural trade5

2.3 Background: Kansai agriculture

7

2.4 Challenges for the agriculture sector

8

Chapter 3: Corporations and agriculture

10

3.1 Easing historical restrictions

10

3.2 Firms on the farm11

3.3 Plant factories

12

Chapter 4: The National Strategic Special Zone in Yabu

14

4.1 A model for rural Japan14

4.2 Yabu: a microcosm of Japan’s rural problems

14

4.3 Establishment of the National Strategic Special Zone

16

4.4 Initial developments: regulation easing and new business operations

18

4.5 First research trip

20

Chapter 5: Online survey of attitudes to agriculture—preliminary analysis

22

5.1 The importance of voters and consumers

22

5.2 Survey results

23

5.3 Preliminary analysis

25

Chapter 6: Preliminary conclusions and next stages of research

28

6.1 Summary of first stages of research project28

6.2 Next stages of the research project

29

Appendix I: major research activities

31

Chapter 1: Introduction and outline of research project1.1 Introduction
The agricultural sector in Japan faces many internal problems, including small scale size, anageing workforce, and a shortage of successors. In addition, it faces a challenging external
environment, including a domestic food market that is declining as population falls, very low export
levels, and foreign pressure for reform at free trade agreement negotiations. So far, attempts at
policy reform have failed to revitalize the sector, and it continues to rely heavily on tariff protection
measures and subsidies.
At the same time, Japan’s agricultural products have great inherent potential. These include
high quality, taste, and safety and traceability. Such factors make Japanese food products desirable
not just in the domestic market but also to high-income consumers in other parts of Asia andbeyond. Recently, there have been a number of potentially positive developments in the internal andexternal environments. These include IT-based innovations in farming, growing businessinvolvement in the sector following regulation easing, and growth in the world food market, and inparticular, in the number of high-income consumers in Asia.
The aim of this research project is two-fold. First, this research will explore the potential fora more trade-oriented agricultural sector in Japan that is integrated into the Asia Pacific in mutually
beneficial ways. Second, the research will seek to find pathways to a reformed and more sustainablesector, which can survive without government subsidies and become a net contributor to thenational finances.
The project began in July 2014, and will run until March 2016. Stages (1) and (2) were
implemented during fiscal 2014, and the provisional findings are presented in this interim report.
Stages (3), (4), and (5) will be implemented in fiscal 2015, and a final report is scheduled for March2016.
1

1.2 Structure of the research project
The research project is structured in five stages, as follows.

(1) Current situation and recent trends in agriculture: this stage will focus on establishing thecurrent situation and recent trends in the domestic agriculture, with particular focus on
innovations. The aim is to gather data and information as a basis for further stages ofresearch. Research activities will include field trips to agriculture-related businesses in
Kansai (such as plant factories), to the National Strategic Special Zone (tokku) for
agriculture in Yabu City in Hyogo prefecture, and interviews with agriculture policy
specialists in Kansai and Tokyo.
(2) Consumer attitudes online survey: this stage of the research will further examine the current
situation in agriculture by undertaking a survey of consumer attitudes to agriculture, toinvestigate attitudes towards farming, protectionism, liberalization, and trade agreements.
The aim is to create a “map” of the “reform space” of what consumers/voters are willing toaccept, in terms of the future shape of the agriculture sector.
(3) Lessons for exports: taking as a background the successful policy reforms to the European
Union’s “Common Agricultural Policy” (CAP), which have transformed the EU into a net
agricultural exporter since 2010, this stage will investigate the current policy regime inEurope. The aim is to uncover which reforms were most successful and why, and to see if
lessons may be applied to Japan’s case. Research activities will include interviews with EU
officials and data analysis.
(4) Lessons for imports: taking as a background consumer preferences regarding food safety
and supply stability, this stage will investigate whether the structure of imports may bechanged in a way that increases stability in light of uncertainties in the global food market.
2

Specifically, the activities of Japanese MNCs in establishing manufacturing production
networks in Asia will be examined, to consider whether there may be lessons forestablishing “agricultural production networks” overseas for export to Japan. Research
activities will include site visits to Kansai firms with experience of production networks.
(5) Trade-oriented pathways: this stage will draw together the data and information gathered inStages (1) to (4), in order to create policy proposals for establishing a more trade-oriented
agriculture sector that will be financially independent of government assistance, and hence
sustainable in the long-term. Particular attention will be paid to the complex set of interestsand preferences that exist in the agriculture sector, the underlying structural problems, andissues arising in relation to external pressure (gaiatsu) at the Trans Pacific Partnershipnegotiations.

1.3 Structure of the interim report
This interim report is structured as follows. Chapter 2 discusses recent developments inagriculture, including problems and potential, provides an overview of Kansai agriculture, andconsiders the challenges facing the sector. Chapter 3 investigates one area of innovation in detail:the National Strategic Special Zone for agriculture in Yabu. Chapter 4 examines the growing
activities of corporations in agriculture, including plant factories. Chapter 5 offers preliminary
analysis of findings from an online survey of consumer attitudes. Chapter 6 offers a summary of thepreliminary research findings and outlines the next stages of the project.

3

Chapter 2: Recent developments in agriculture

2.1 Emerging innovation
The standard account of Japanese agriculture abroad is typically bleak, painting a picture ofa sector beset by structural problems, with elderly, part-farmers on tiny plots, producing high-costrice and other produce for a captive domestic market, benefitting from tariff barriers andgovernment subsidies, with the agricultural cooperative conglomerate JA lobbying intensely topreserve a privileged position for farmers and itself, irrespective of consumer costs or lost growthpotential through investment diversion or foregone trade agreements.
Within Japan, however, some positive trends are emerging that offer a different vision ofagriculture. One of these is the increasingly active role of firms in various aspects of agricultural
production and related services. While operational scale remains small for now, such activities aredeveloping forms of agricultural production that better suit Japan’s factor endowments, thus
offering potential for competitive advantage in global food markets. With domestic population andfood demand expected to shrink, many new entrants to the sector are also motivated by the prospectof exporting products, technology, and management know-how to a global food market that theagriculture ministry forecasts will double in size to USD 7.2 trillion between 2009 and 2020.
Within this national trend, the Kansai region is a leading player. Somewhat uniquely among
Japanese regions, Kansai has a concentration of major firms in the Osaka-Kyoto-Kobe conurbation,
extensive agricultural hinterlands with diverse production, and a large local consumer market ofover 20 million people. Companies from fields including manufacturing, IT, real estate,transportation, and general trading have entered the local agricultural sector recently, and somehave already begun operations overseas, with the aim of taking advantage of Kansai’s Asia-oriented
trade posture and the expected growth in the high-value segment of the Asian food market.

42.2 Problems and potential — balancing agricultural trade
Japanese agriculture has many structural problems, such as farm scale, an average age of
farmers of almost 70, lack of full-time farmers, a successor shortage, and increasing levels ofabandoned land have each contributed to a long-term decline in employment and production levelsin the sector. More problematically, there is the ‘meta-problem’ of relative land scarcity, set against
abundance in capital and skilled labour. These factor endowments give rise to a lac of comparativeadvantage in land-intensive (i.e. crop-extensive) production. Thus, even if the various structuralproblems were solved, Japan would remain at a disadvantage to other countries in terms of relative
production cost for land-intensive agricultural goods, such as rice, wheat, and soybeans. Even so,
agricultural policy has long been and remains largely focused on such crops, in part out of concern
for “food self-sufficiency” (calculated to be 39% by the agricultural ministry), as well as for reasonsof history, culture, and public sentiment favouring rice.
One problem that arises from prioritising land-intensive agriculture in a land-scarce country
is the impact on the agricultural trade balance, which sums the value of food imports and exports.
Japan has run a large agricultural trade deficit for decades, and though this may be politicallyproblematic, it is an entirely normal state of affairs in economic terms, given factor endowments.
Figure 2-1 shows Japan’s food imports and exports from 2004 until 2013. During this period,
exports grew at average rate of 6.1% per year, from USD 2.62 billion in 2004 to USD 4.48 billion
in 2013, according to JETRO 1 . In relative terms, exports performed better than imports, which
averaged a 3.3% annual increase in the same period, but in absolute terms, imports rose from 50.0
billion USD in 2004 to 66.8 billion in 2013. Food exports accounted for 0.6% of all exports in
2013, while food imports represented 8.0% of all exports in the same year.

1

JETRO, “Japan’s International Trade in Goods, Yearly”.
http://www.jetro.go.jp/en/reports/statistics/.
5

Seen in international comparison in Figure 2-2, Japan is by no means the largest importer ingross terms, but its very low level of food exports means that it is the largest importer in grossterms.

Figure 2-1 Japan’s agricultural trade balance, 2004-2013 (Source: JETRO website)

Figure 2-2 Agricultural trade balances in international comparison (Source: FAOSTAT
website)6

2.3 Background: Kansai agriculture
Agriculture in Kansai is characterised by production diversity and high-value output, with afocus on fruit. Kansai has 295,000 agricultural households, which represents 11.7% of the national
total, and has 6.1% of total cultivated land. In value terms, agriculture in Kansai is above thenational average, with agricultural output worth 578.3 billion yen (USD 4.82 billion) in 2012, or
6.9% of the national total.
Considering output by category (Figure 2-3), rice and vegetables each account for around
one quarter of output. The share of fruit in Kansai’s output (18%) is double the national level, while
the share of livestock is below the national level. By prefecture, major production items include
rice, livestock, and rice in Hyogo, rice in Shiga and Fukui, and vegetables in Osaka and Kyoto, andfruits in Wakayama (Figure 2-4).

Figure 2-3 Agricultural output by category for Kansai and Japan (Source: MAFF)

7

Figure 2-4 Main agricultural products by prefecture (Source: MAFF2)

2.4 Challenges for the agriculture sector
The agriculture sector must find solutions to the structural problems outlines above, such as
small scale and an elderly workforce. However, solving these problems are only stepping stones
towards making the sector sufficiently profitable that it can survive in the long-term without
ongoing government assistance. To do so, it will be necessary to pay greater attention to the nation’s
factor endowment levels, which imply that capital-intensive farming, rather than land-intensive
farming, is better suited to the contemporary economy.
To be sure, production of rice and certain other goods is almost certain to be continued
because of their cultural and historical importance, and because of their role in environmental
preservation (see also Chapter 5 of this report). In these areas, it may not be possible to “break2

Source: MAFF (2013), Heisei 24 nendo nōgyō seisangaku oyobi seisan nōgyō shotoku(todoufukenbetsu)
8even”, particularly in semi-mountainous rural areas where production costs are higher, but there canstill be some opportunities for improvements in scale and management practices, to assist for-profit
producers and reduce the levels of government support needed for producers in less favourable
areas.
At the same time, there is room to cultivate agricultural enterprises that employ information
technology and advanced production techniques to produce more output using less land than
traditional techniques. Just as IT-based “driverless cars” could fundamentally transform the natureof personal travel, so too may IT-based agriculture fundamentally transform aspects of agricultural
production, to allow standardized production of food close to urban centres of consumption, using
few or no environmentally-harmful chemicals.
The challenge for the agricultural sector and policymakers, then, is to secure the livelihoodsof existing farmers as much as possible, while utilizing the prospects for a new agricultural
revolution promising by technological advance. In this context, corporations may be able to make apositive contribution to the sector, in a way that they have not been permitted to previously.

9

Chapter 3: Corporations and agriculture

3.1 Easing historical restrictions
The trend towards a more endowment-appropriate form of agriculture has been led bycorporations, who have until recently been largely absent from the agriculture sector. Due in part tothe legacy of the politically powerful landlord class and frequent tenant disputes in the prewar
decades, the postwar agricultural system was organised around a “cultivator principle” (kōsakusha
shugi). Postwar land reforms facilitated the transfer of land ownership to former tenants at low
prices, restricted land ownership rights to those who worked the land themselves, and also set limits
on maximum holdings. While undoubtedly beneficial in improving the situation of millions of poor
tenant farming families, the reforms also had the effect of obstructing large-scale production andcorporate involvement.
The failure of policy to create a prosperous sector in the subsequent decades provided thecontext for the first move to permit joint-stock companies to enter agriculture in the late 1990s. The
1999 Food, Agriculture, and Rural Areas Basic Law allowed joint-stock firms to invest up to 25%
of capital in farmer-led ‘agricultural production companies’ (nōgyō seisan hōjin), while the revised
Agricultural Land Law of 2009 permitted private firms to rent (but not own) farmland. Since then,
the number of agricultural production corporations has risen by 29.5%, reaching 14,333 in 2014.
Most recently, as one aspect of the so-called ‘third-arrow’ regulatory reforms, the current
Abe administration is raising the capital investment limit to about 50%, and reducing the minimum
number of farmers required to sit on an agricultural production company board, from 50% to one
member. In February 2015, the administration announced significant reforms to JA-Zenchū, a peak
body in the JA structure, to increase the financial and management autonomy of local cooperatives,allowing them to pursue their own business strategies. If implemented, such reforms may also add
to the increasing business orientation and farm-firm linkages in the sector.

103.2 Firms on the farm
Paradoxically, despite being the oldest sector in one of the world’s most advanced
economies, agriculture in Japan is sometimes spoken of today as a “blue ocean” by businesspeople.
Barriers still remain, but regulatory easing towards firms, together with the JA reforms, is creating
space in the food production market into which new participants can enter. Despite expecteddemand shrinkage, the domestic market offers growth opportunities to producers who cater moreclosely to changing consumer tastes than has been the case until now, as well as producers who
utilise new technologies to raise productivity.
In addition, many new market entrants are also motivated by opportunities in growing
overseas food markets. One aspect of this is demand for safe, high-quality produce from highincome consumers in Asia, a market segment that Japanese products like wagyū beef and luxury
fruits could cater for. Another aspect will be the export of technology and operational know-how
developed in Japan in order to facilitate local production for local consumption in other countries,
as well as income from after-sales maintenance contracts, as already exists for Japanese companies
exporting machinery to Southeast Asia.
Firms from a range of business sectors have entered agriculture in recent years in two main
ways: production, and IT-based agriculture services. Concerning production, firms are using the
new regulatory framework to establish operations on larger scales, generally for sales through thefirm’s own retail channels. A farming subsidiary of the supermarket retailer AEON that wasestablished in 2009 now operates 15 fruit and vegetable farms on about 300 acres, and is scheduled
to harvest its first rice crop this autumn. Two large convenience store chains have also entered themarket. As of 2014, Lawson operated more than a dozen farms, while Seven and I Holdings
operated ten.
Within the field of IT agriculture, the concept of the “agricultural cloud” is a major area of
innovation. Cloud-based data services collect and analyse data from on-farm sensors, compare itwith an existing database, and give feedback to farmers to increase efficiency and boost production.
11

Accessing data through smartphones and tablets also allows for the possibility of remote cultivation
management. Fujitsu, NEC, Hitachi, Toshiba, NTT, and Toyota are among the companies active inthis area.
Combining technologies from various divisions including industrial systems and housing
systems, Panasonic has developed high-technology greenhouses that allow for the production of
spinach and other leaf vegetables all year round. It is also trialing a plant factory in Singapore,
which could provide a platform for selling such systems across Southeast Asia. The next section
considers plant factories in detail.

3.3 Plant factories
Plant factories are facilities for the intensive production of vegetables or flowers in acontrolled environment, using artificial light (fluorescent or LED), natural light, or both. Plants
grown this way tend to grow more quickly than normal, and can be cultivated to have higher
nutritional content, improved taste, or lower chemical content to meet dietary requirements ofpatients with certain medical conditions. Plant factories have the potential to offer environmental
and societal benefits, as well as having economic and business logic.
In terms of environmental benefits, plants are typically grown in a hydroponic solution,requiring fewer or no pesticides, and consume only 1-2% of the water required in a field or
greenhouse. Wastage of outer leaves is also much lower, with up to 95% of the weight of the plant
being consumed, compared with around 60% for standard techniques.
In societal terms, utilization of shelving allows production to take place on relatively small
areas of land, so plant farms can be situated in urban or suburban areas, adjacent to retail sites, or indisused buildings. In the Kansai region, for example, the Hanshin Dentetsu and Kintetsu railway
companies are experimenting with plant factories built under some of the raised railway lines thattraverse much of the region, while the real estate firm Orix Fudōsan is operating a plant factoryfrom a disused rural elementary school in Yabu City. The standardisation of the growth process
12makes cultivation relatively straightforward and less physically demanding, opening cultivation
work to elderly or disabled workers.
In terms of economic and business logic, as noted above, using little land and hightechnology, plant factories are well-suited to Japan’s factor endowment. Since plant factory land is(so far) not being designated as ‘agricultural land’, firms do not face land ownership constraints.
Moreover, plant factories can produce multiple crops annually, even outside the natural growing
season, allowing for increased production levels. Also, indoor production prevents crop damage
from severe weather or storms, ensuring a stable supply. On the other hand, plant factory operators
must deal with high start-up and energy costs, and the range of factory-suitable plant types remains
limited.
As seen in Figure 3-1, the total number of plant factories is growing, rising from 93 in2011 to 383 in 2014, of which 43% were artificial-only lighting, 9% mixed lighting, and 48%
sunlight-only type, according to the Japan Greenhouse Horticultural Association (JGHA) 3 . 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 ¥23 billion in 2013 to ¥150 billion by 2025.4
Figure 3-1 Plant factories by type, 2011-2014 (Source: JGHA)

3

http://www.jgha.com/shiryou.html
Source: Yano Research Institute (2014), Plant Factories Market in Japan: Key Research Findings
2013.

4

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Chapter 4: The National Strategic Special Zone in Yabu

4.1 A model for rural Japan
Although the smallest and perhaps the most surprising of the six municipalities and regions
chosen in March 2014 to host one of Prime Minister Shinzo Abe’s National Strategic Special
Zones, rural Yabu City in northern Hyogo prefecture may prove to be one of the most important. If
it can successfully develop innovative policies to help revitalise the local agricultural sector, it
could become an important model for the rest of the country’s many semi-moribund “semimountainous agricultural areas”.
As part of this research project, developments in Yabu
are being monitored. Through site visits and interviews, we will
gather insight into the actual conditions of this case study ofagricultural innovation in Kansai. This chapter examines
Yabu’s background and nomination as an SEZ, initialdevelopments, and some of the prospects and challenges that it
will face during what is expected to be at least a two-year
project.

4.2 Yabu: a microcosm of rural problems
Within Kansai agriculture, Hyogo is the leading producer,
and within Hyogo prefecture, the most noteworthy district atpresent is Yabu City. Yabu is a rural municipality with apopulation of around 26,000, situated in an area encompassing
several valleys in northern Hyogo prefecture, covering 423km2,
of which 84% is mountains and/or forest. Lying roughly
equidistant to each of Kobe, Osaka, and Kyoto, each 2 to 3 hours by road or train, Yabu is relatively
14isolated from major population centres. Topographically, Yabu is semi-mountainous, with much of
the land covered by forests, and much sloped cultivation land, characteristics it shares with around
40% of Japan’s national land. In terms of climate, annual rainfall is high, and heavy snowfalls in
winter on the northern side of the mountains of central Honshu mean that farming activities largely
cease in Yabu between December and March, while snow allows the operation of ski resorts on the
Hachibuse plateau during winter months.
Yabu was formerly a significant centre for sericulture from the nineteenth century, and fortin mining in the twentieth century in the Akenobe area until 1987. The municipality’s population
peaked at 49,000 in 1955, but has since declined steadily due to urban migration and a falling birthrate. As other employment sectors have declined, the relative importance of the agricultural sector
has increased, with rice and Tajima beef (which includes the “Kobe beef” brand) among the major
products.
Figure 4-1 : Socio-economic and agricultural trends in Yabu (Source: Yabu City Hall)

Yabu’s decline is a microcosm for the situation in much of rural Japan, with depopulation,
ageing, economic decline, abandoned farmland, and falling numbers of farm households among the
major structural problems (Figure 4-1). According to Yabu City Office data, between 2000 and2010, population fell 12% to 26,500 (with 9,600 households), while the share of the population
aged 65 or over from 29% to 33% of the total, a 13% rise. Between 2005 and 2010, the total valueof the municipal economy fell by 29%, to 67 billion yen.
15

Of Yabu’s 2673 hectares of agricultural land, 4.4% had been abandoned for cultivation in
2008, of which 93 hectares could not be returned to agricultural use. By 2012, the amount ofcultivation-abandoned land had risen to 8.5% of the total, and 141 hectares could not be returned toagricultural use. Full-time farmer numbers fell by 41% to 295 between 1995 and 2010, while parttime farmer numbers fell by 72% to 878 in the same period. Given the mountainous nature of theland, there is a relatively large share of small rice terraces, which are unsuited to large-scalecultivation and thus place natural limits on productivity.
Other problems in Yabu are also typical of the rest of rural Japan, including the highaverage age of farmers (over 70), the lack of successors willing to inherent the family farm, and an
illiquid market for farmland due to an inefficient land-salescommittee system. Depopulation has also resulted in someBox 1: Locally-grown Yabu produce
Rice-terrace rice

Yoka soybeanspublic infrastructure becoming redundant, including fiveTodoroki daikon (radish)Nectarines, winterpersimmons

disused elementary schools.

Asakura sansho pepper

SpinachTajima beef, Yoka pork

Green peppers

At the same time, farmers in Yabu produce a diverse range of products, many with “brand”
characteristics that could play a role in revitalizing the local agricultural sector (Box 1). Yabu is one
centre of production of Tajima beef, a category that includes Kobe beef as a subset. Asakura
sansho, an aromatic peppercorn, is grown there, along with local radishes, pork, soybeans, andother vegetables and fruits. Considering the popularity such local specialties in the domestic market,
these products could offer a platform for developing a Yabu food “brand”.

4.3 Establishment of the National Strategic Special Zone
Yabu’s economic decline has been gradual, and previous attempts have been made toaddress the situation, including a 5-year plan to promote a self-sustaining local economy in light ofdepopulation. With few other industries remaining, the current municipal administration has chosen
to focus on agriculture and tourism in order to improve the local economy and community. The

16

mayor of Yabu, Sakae Hirose, ran for a second term of office on slogans of “fostering a new life in
the region”5 and “cultivating industry, cultivating people”6.
Mayor Hirose has sought to encourage private companies to help with regional regeneration.
One of his first initiatives was the appointment of Deputy Mayor Mino Shoji, formerly of the travel
firm HIS, who was involved with the regeneration of the Huis ten Bosch theme park in Nagasaki
prefecture. Subsequently, the municipal government invested 6 million yen in May 2013 toestablish “Yabu Partners”, a firm with the deputy mayor as president, to help foster agriculturerelated enterprises.
Yabu City applied for consideration as a National Strategic Special Zone under plansannounced by the Abe administration in 2013. Along with Niigata, Yabu was selected as one of two
agricultural specials zones in March 2014, with Tokyo, Kansai, and Fukuoka among the other cities
and regions chosen. Yabu’s NSSZ plan was confirmed in July 2014. Within the special zone
framework, the municipal government in Yabu is permitted to undertake some of the following
reforms:(1) Reform of the agricultural committee system, to allow the mayor to oversee landtransactions, with the aim of improving the efficient use of land
(2) Easing of restrictions on agricultural businesses, to allow more diverse agricultural business
management (including greater private sector involvement)(3) Changes to regulations relating to restaurants selling agricultural goods, to promote the useof local farm produce(4) Changes to regulations relating to Small Business Credit Guarantee System, to permit
agricultural enterprises to utilize this system.
56

地域にあらたな命を育む
産業を育み、人を育む

17

Other changes included easing working time restrictions on the local “Silver Centre”, which
employs many healthy, active over-65s.
Through these reforms, the local government is seeking to promote a vision of Yabu’s future asa place in which firms participate in the agricultural economy, where farmland is utilized
efficiently, where farmers participate in “Sixth Sector Industrialisation” (by engaging in processing,
distribution and/or sales of their products to increase income), and where young people can findemployment in the district. In turn, the central government hopes that the special zones will help
promote structural reform and increased competitiveness locally, and that innovations in such zones
can be applied to the national economy as a whole. In this respect, Yabu is a model for 40% ofJapan’s cultivation land that lies in semi-mountainous areas.

4.4 Initial developments: regulation easing and new business operations
As of Spring 2015, regulations regarding board membership for agricultural production
companies had been approved. Previously, over half of board members were required to be
involved in regular production, sale, or processing of agricultural goods, and over half wererequired to grow crops. Under the reforms, a minimum of only one member must be growing crops.
Other reform measures remain under deliberation. One issue involves changing therequirement that no more than one-quarter of stockholders involved in decision-making can be nonfarmers, to allow more than half to be non-farmers. A second issue involves lifting the requirementthat companies involved in agriculture should make agriculture their main business (i.e. that over
50% of profits must be from agriculture), to remove any minimum requirement. It is expected thatdecisions will be made on these issues in the coming months.
More than 12 new agri-businesses related to the special zone have begun operations, or haveannounced plans to start business in Yabu. As seen in Table 4, they include firms involved in the18

production of rice and vegetables, food processing and sales, agri-tourism, and biomass power
generation. Companies with headquarters in the Tokyo and Nagoya regions, as well as several from
elsewhere in Kansai, are establishing operations in Yabu. It should be noted that production, for
now, remains on a small scale, although some firms have plans for operations of up to 40 hectares
in future.

Table 4 – New agri-businesses in the Yabu special zone
Firm

HQ

Business

Scale (ha)1 My Honey

Yabu

Flower cultivation and honey processing

Up to 0.5

2 Kinki Kubota

Amagasaki

1. Direct seeded rice fortified with iron
2. Local produce
3. Farm tourism and recruitment support

Up to 40 (now: 2)

3 Tōyō Energy
Farm

Fukushima
Prefecture

1. Biomass power generation
2. Plant factory
3. Processed vegetable plant3

4 Shinsengumi

Aichi
prefecture

1. Local dishes and local produce
2. Farmers’ restaurant

10

5 Nouentai

ShimanePrefecture

1. Tomatoes with high sugar content
2. Processing plants

0.5

6 AEON AgriChiba
prefecture

1. Rice, cabbage, green onion

7

2. Farmers’ restaurant
3. Processed wood products
4. Agri tourism
7 Yoshii
Construction

Hyogo
prefecture

1. Habanero peppers, beans
2. Processing vegetables

Up to 1

8 Yabu Partners / Yabu /
ORIX
Tokyo

1. Cultivating Green pepper, onion and soy 4beans
2. Processing vegetables

9 Yanmar Agri
Innovation

Osaka

Garlic cultivation

Up to 18 (now: 5)

10 Himeji Flower
Auction

Himeji

Cultivating the Japanese gentian in Coolhighlands

Up to 3

11 Sanyo Amnak

Hyogo
prefecture

Cultivating rice for sake production

10

19

Table 4 – New agri-businesses in the Yabu special zone
Firm

HQ

Business

Scale (ha)12 Yoka Tekko

Yabu

Tomatoes with high sugar content

Undecided

13 Agri Innovators

Yabu

Utilization of abandoned farmland

Up to 8

4.5 First research trip
Our first research trip to Yabu was undertaken in October 2014. During this trip, we
conducted interviews with city officials and businesspeople, made a site visit to an agriculturalbusiness operation, and spoke with local farmers about their situation and the impact of the specialzone. During the research trip, the following points were observed, some of which were in contrast
with common images of farmers in media reports about Japan’s agriculture sector:

One view of part-time farmers is as “weekend farmers”, who choose to engage in (highly
standardised and mechanised) farming as a side-business in order to make “easy money”(through subsidies etc.) to supplement their other income. However, we found that many
farmers in Yabu have no choice but to be part-time farmers, since the harsh winter climate
prevents most agricultural activity from December to March. For such farmers, off-season
employment in other sectors, such as in ski resorts, guesthouses, or snow clearing, isnecessary to provide an income during winter months.



In a similar way, elderly farmers are often seen as hanging on in order to make ‘easy
money’ from government subsidies. We observed that in Yabu, elderly farmers lacking
successors may continue working until advanced old age because the alternative is toabandon long-held paddy fields, which would become unusable within a number of years. In
practice, farming remains physically challenging, despite mechanisation.

For some farmers, the small scale of the average farm is in part a risk management strategy
against extreme weather conditions, which can sometime result in entire crops being
20

damaged or destroyed. Farmers whose workforce consists of immediate family members
can more easily reduce business and family expenditures to very low levels (using moral
suasion), whereas larger scale farmers who employ outside workers face the burden of
having to continue to pay wages even during crop failure episodes, which may not be viable.

The conclusion of the first research trip was that the topographical and meteorologicalconditions faced by farmers in Yabu were challenging, and the speed of progress for the
National Strategic Special Zone was modest. However, the enthusiasm and business focus of themayor and the business experience of the deputy mayor were noteworthy, as was theinvolvement of firms from across Japan, and the amount of domestic and international media
coverage given to Yabu. These factors, as well as others like the potential for developing Yabu“brand” food, give some reasons for optimism about the success of the special zone project.
A follow-up research trip is scheduled for early summer 2015, to assess developments
during the intervening period. In particular, we will investigate the following issues:-

Coordination efforts between municipal government and businesses investing in Yabu-

Issues relating to land reallocation, including local farmers leasing farmland tocompanies-

Response of Japan Agriculture to special zone-related developments

21

Chapter 5: Online survey of attitudes to agriculture—preliminary
analysis
5.1 The importance of voters and consumers
In terms of finding pathways to viable agricultural policy reforms, in addition to developing
forms of agriculture that are suited to Japan’s factor endowments, it is also essential to pay close
attention to the views of voters and consumers, who will ultimately determine the success ofpolicies and agricultural business ventures, at the ballot box and the supermarket check-out. For thisreason, one stage of this research project aims to create a detailed picture of the views of voters andconsumers concerning agriculture, agricultural policy, and related trade issues, such as the TPP,
using an online survey. Having a clear understanding of these views offers the prospect of creatinga “map” of the “reform space” available in regard to agriculture, so that policymakers andagricultural business-entrants alike can tailor their activities to address the concerns of voters andconsumers.
With this as a background, we conducted the online survey over two days in March 2015,
using the Internet survey company Rakuten Research, which has around 2.3 million research panel
members. The sample size was 500, half male and half female, equally divided into five age cohorts
ranging from 20s to 60s 7 . Sampling was designed so that respondents were also broadly
representative of Japanese society in terms of prefecture of residence. In addition to backgroundquestions relating to occupation, whether their job involved exports etc., respondents were asked torespond to a number of hypothetical scenarios involving economic or cultural “loss”, give theirviews on agricultural protectionism, and give reasons for their views.

7

Those aged under 24 were excluded from the survey, since several questions related torespondents’ jobs, and many under-24s are university students.
22

The preliminary results and analysis are reported in this chapter. Detailed analysis isongoing, and a full analysis will be published during fiscal 2015.

5.2 Survey results
The first question related to scenarios of “loss”, relating to the domestic production of fiveagricultural and three manufacturing goods, as well as two culturally meaningful aspects of society.
As Figure 5-1 shows, the percentage of respondents who reported that they would be very orsomewhat disappointed to see a Japan that did not produce rice was 85%. The equivalent figure forpharmaceuticals production was 83%, 82% for satoyama-no-fuukei 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.

Figure 5-1: If Japan became one of the following scenarios, what would you think?

1. Didn’t produce semi-conductors
2. Didn’t produce rice

4. Didn’t produce paper
5. Didn’t produce pharmaceuticals

11

23

55

6. Didn’t produce sugar
7. Didn’t produce wheat
8. Didn’t produce dairy products

2060

9. Didn’t have satoyama-no-fuukei

1469

10. Didn’t have the emperor system
0%

10%

29

22

30
20%

30%

40%

50%

60%

70%

2 0.8

7

2 0.4

80%

0.6

7

3 0.4

11

7

2 0.4

9

7

1 0.2

12

5

3

90%

Very disappointing

Somewhat disappointing

Neither good nor bad

Don't care

Somewhat good

Very good

23

8

3

14

24

51

2 0.4

8

17

24

47

6

7

14

69

2 0.4

10

21

61

6

6

8

77

3. Didn’t produce beef or pork

2 0.8

13

19

22

43

100%

Figure 5-2: Which Sectors, if any, do you think the Japanese government should protect in tradenegotiations?

1. Chemical industries

2.Electronics manufacturing

3. Automobile manufacturing

4. Other manufacturing (steel, textiles and apparel etc.)

5. Agriculture, forestry and fisheries

6. Construction

7. Retail and trade

8. Finance and insurance

9. Medical services

10. Government procurement

The next question dealt with protectionism in international trade negotiations. Respondents
were asked which sectors, if any, they thought that the Japanese government should protect. Figure
5-2 gives the results. Those who thought that agriculture, forestry, and fisheries should be protected
totaled 66%. The figures for other sectors were 55% for medical services, 52% for government
procurement, 43% for electronics manufacturing, and 39% for both chemical industries and retailand trade. The lowest-ranking sectors were finance and insurance, construction, othermanufacturing, and automobile manufacturing, all scoring around 36%.
24

Those who responded in favour of protecting agriculture were then asked to give the reason
for holding this view. Figure 5-3 gives their responses. The three most commonly cited reasons
were food safety at 15%, national security (including food self sufficiency) at 15%, and health at
13%. The response rates for other reasons were the “multifunctionality” of agriculture 8 (4%),
agriculture’s historical/cultural/religious importance (3%), maintaining farmers’ income (3%), andenvironmental preservation (2%).
Figure 5-3: Why do you think that agriculture should be excluded from liberalisation?

5.3 Preliminary analysis
Preliminary analysis of the results of the online survey provides evidence to support theview that agriculture is considered a “sector apart” in the minds of a majority of voters andconsumers. Concerning the “loss” scenarios, rice production received the highest response rate forboth very and somewhat disappointing, closely followed by satoyama-no-fuukei traditional village
scenery. Other agricultural products, including the seiiki (“holy ground”) products (beef and pork,
8

Referring collective to the multiple roles that agriculture performs, such as landslide prevention,water resource management, soil erosion prevention etc.
25

wheat, dairy products, and sugar) that Japan’s negotiators are attempting to exempt fromliberalization in TPP negotiations, were all ranked higher than semi-conductors, which are much
more important to Japan in economic terms. The strength of feeling for pharmaceuticals was alsosignificant, and may be linked to the perceived national security importance of a country producing
its own medicines. The lowest score of all was for the emperor system, the score for which implies
that modern Japanese citizens may be more concerned about maintaining domestic rice production
than maintaining the emperor system.
Regarding sectoral protection, it is seen again that agriculture, forestry, and fisheries enjoy
by far the highest levels of public support in favour of protection in trade negotiations, with twothirds of respondents advocating special treatment for these primary industries. Medical services,
the next-highest ranking sector (also with a ‘national security’ element) was ranked more than 10
percentage points lower.
Finally, in relation to reasons given for wishing to see agricultural protectionism, three
concerns dominated: food safety, national security (including food self-sufficiency), and health.
This is consistent with the “governmentality” idea put forward by some political scientists9 thatmodern citizens believe that it is a fundamental element of the role of modern states to provide asafe and secure supply of food to the nation.
Further analysis is ongoing, but these initial results have implications for policymakers andthose interested in agricultural business operations. First, policymakers should note that strong
sentiment towards protecting agriculture remains, and that voters are also highly concerned aboutmaintaining traditional village scenery, and, presumably, the viability of the livelihoods of rural
residents who live in such villages. Indeed, all five of the “holy ground” categories of agricultural

9

See, for example, Barclay, Kate, and Charlotte Epstein (2013) ‘Securing Fish for the Nation: foodsecurity and governmentality in Japan’, Asian Studies Review, 37 (2): 215-233.
26

products at the heart of TPP negotiations attracted strong support. Thus, policymakers must balance
popular sentiment towards the agriculture sector and maintaining rural villages against the need topromote more efficient forms of agriculture and external pressure for liberalization at tradenegotiations. For Japan’s negotiating partners in the TPP, these results underline the fact that
agriculture is not seen as just another sector in Japan, nor valued primarily in terms of its economic
contribution.
For those interested in agribusiness, the initial results are also of significance. Concerns
about food safety and health are foremost in the minds of consumers, and there is also a strong“home preference” for domestically produced goods, related to national security concerns. Thissuggests that there will be an ongoing demand for domestically produced food, and that consumer
preference is for healthy, safe, and trustworthy produce. New domestic producers that meet these
expectations are likely to find a demand for such food products. Firms that wish to engage in foodimport operations into Japan may also benefit by stressing the healthy and trustworthy nature of
their products to reassure consumers who are skeptical about foreign-sourced food.

27

Chapter 6: Preliminary conclusions and next stages of research

6.1 Summary of first stages of research projectThis interim report has detailed the findings of the first two stages of the APIR research
project “Japanese agriculture: towards a sustainable, trade-oriented future”, covering four
substantive areas: recent developments in agriculture, the increased activities of corporations inagriculture, the National Strategic Special Zone for agriculture in Yabu City in Hyogo prefecture,
and an online survey of consumer attitudes towards agriculture and protectionism. The main
findings of the preliminary research are as follows.
In terms of recent developments in agriculture, there are some positive trends emerging inthe sector, led by the activities of firms, which contrasts to the pessimistic view of agriculture
frequently observed in the domestic and international media and at trade negotiations. The sector
still has a long list of structural problems, as well as the factor endowment “meta-problem” ofagricultural policy being long focused on crops in which Japan lacks comparative advantage.
However, if Japanese food products characterized by quality and safety can be successfully
marketed to high-income consumers in rapidly developing Asian nations, it may be possible toboost Japan’s food exports and “normalize” the lop-sided structure of Japan’s agricultural tradebalance.
Regarding corporations and agriculture, there has been a noticeable increase in the activities
of firms on the farm since the 2009, following the easing of restrictions on corporate involvement inagriculture in place since the 1950s. Some firms have begun production of rice and vegetables onlarger-scale farms, while a number of IT firms have developed data-responsive “agricultural cloud”
services to monitor field conditions and permit remote farm management via computers and tablets.
The number of “plant factories” producing leaf vegetables and other vegetables and fruits incontrolled environments has grown fourfold in three years, and this development offers the prospect28

of stable production close to consumption centres, immune to weather events, and less reliant onenvironmentally harmful pesticides.
Looking at the National Strategic Special Zone, Yabu City in Hyogo prefecture can be seen
as a microcosm for the problems of rural Japan, with depopulation, a rapidly growing senior
population, abandoned farmland, and a farm successor shortage among the major problems themunicipality is facing. Led by a business-friendly mayor and a business-experienced deputy mayor,
some initial regulation easing has already taken place in relation to board members of agricultural
production companies, with further decisions due soon in relation to corporate decision-making by
non-farming board members and the requirement that companies involved in agriculture makefarming their main business. More than a dozen companies have already established or announced
operations in Yabu, including several large firms. The speed of progress remains modest, but thenational and international attention the zone is attracting, as well as the enthusiasm of the municipal
leadership and the cooperation of large firms, may contribute to a successful outcome.
The preliminary results of an online survey we conducted suggest that the general public in
Japan clearly see agriculture as a “sector apart”, and two-thirds of respondents desired that it begiven special protection in trade negotiations. There is strong support for all five “holy ground”(seiiki) categories of agricultural products (rice, wheat, beef and pork, dairy, sugar), while
traditional rural village scenery is treasured almost as highly as rice production. The mostcommonly cited reasons for supporting agricultural protection are concerns about health, national
security (including food self-sufficiency), and food safety, implying that firms interested in entering
the agriculture market should focus on producing healthy products that consumers can trust.

6.2 Next stages of the research projectAs outlined in Chapter 1, three more stages of the research project will be implemented infiscal 2015. Stage 3 will consider “Lessons for exports”, examining the successful reforms of the29

European Union’s Common Agricultural Policy for lessons as to how Japanese agriculture may bemade more export-competitive. Stage 4 will examine “Lessons for imports”, studying the
manufacturing production network models of Japanese MNCs in Asia to see whether there arelessons for improving the stability and standards of food imports to Japan from neighbouring
countries. Finally, Stage 5 will draw together the data and analysis from all four stages of theresearch project to develop agricultural policy proposals that balance the complex interplay ofinterests in the sector and voter and consumer sentiment towards agriculture with the need todevelopment more efficient and profitable farming, in order to ensure a sustainable future for
agriculture as an independent sector not reliant on endless government handouts. These proposals
will be presented in the final report of this research project, due in March 2016.

30

Appendix I: major research activities
October 9-10, 2014: Research trip to Yabu City, Hyogo prefecture. Interviews with city officials.
Site visit to Orix plant factory.
February 20, 2015: Site visit to SPREAD plant factory, Kameoka, Kyoto. Interview with company
president.
March 25-26, 2015: Implementation of online survey of consumer attitudes, with Rakuten
Research.

31

ISBN978-4-87769-668-9
Published by Asia Pacific Institute of Research