Agricultural Policy Reform
Research Director,
the Canon Institute for Global Studies

Kazuhito YAMASHITA

1Agricultural policy in Abenomics
 The Abe administration proposes to double farmincome (I=PXQ－C) over the next 10 years.
 Three methods have been proposed.
P. help farmers process or market farm products orprovide catering or accommodation service (agritourism) in order to raise their added value
Q. double the export of farm products
C. increase the farm size by establishingorganizations which borrow and accumulate
farmland to rent out to agricultural actors.
2Does it work?(1)Its offerings largely recycle past governmental
initiatives that have delivered little results.
 The previous DPJ administration proposed the same

policy to raise the added value of farm products. Most

farmers work part-time and do not have timeor skill to work on processing agricultural
products or managing guest houses.
 Abe's first cabinet proposed doubling exports in 2007

but exports actually fell. Unsellable oruncompetitive products cannot be sold nomatter how great the sales promotion is.
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Does it work?(2) The same kind of organizations have been active

since 1970. However, of the 4.5 million hectares offarmland across the country, these organizations haveleased only 12,000-16,000 hectares of farmland
annually since 2005, a miniscule amount.
 Little land is available for the organizations.
Farmers hang on to their land in order to make a profit
on sales for residential and other purposes due to lax
zoning regulations. Moreover, even with highproduction costs, small-scale farmers can still make aprofit on farming because of high rice prices
maintained through the rice paddy set-aside (reducing
the acreage under cultivation) program.
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What is really needed?
 Enhancing exports is the correct policy since it is

the only way to double farmers' income amidst ashrinking domestic market due to a declining andaging population.
 The only way for Japan to expand exports ofagricultural commodities is to reduce their costs
and prices and make them more competitiveinternationally.
 In the rice sector, increasing international
competitiveness will require abolition of rice paddy
set-aside program and a reduction in prices.
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Japanese rice is highly evaluatedJapanese
Koshihikari

Rice Price in Hong Kong (/kg)

380 yen

California
Koshihikari
240 yenChineseKoshihikari
150 yenChinese japonica
rice
100 yenPrice gap is narrowing（Yen）

25,000Japanese rice price(Yen/60kg)
Chinese rice price(Yen/60kg)

22,29620,00019,603
17,91917,254
17,12917,05415,00016,66016,048 15,731

15,074

14,746
12,687

14,635
10,53410,000
6,186
7,802

5,271
5,000

2,983
2,974

3,670

8,813 8,368

9,387

10,447

9,780

2008

2009 2010（production year）

4,250

01998

1999

2000

2001

2002

2003

2004

2005

200620077

The rice paddy set-aside program While paying the subsidy of 500 billion yen to

entice rice farmers to join the program, thegovernment forces consumers to pay an
additional amount of 500 billion yen for theprice artificially inflated by limiting supply
through the program.
 As a result, Japanese citizens pay about one
trillion yen to support rice farming, total
production of which amounts only to 1.8 trillion
yen.
 The high price has reduced rice consumption.
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The program increased costs
The cost of agricultural product per ton equals toproduction cost per unit area divided by tonnage ofagricultural product produced (yield) in such unit area.
 The larger the farm size, the less the production cost perunit area. But many small-size rice farmers in Japan
continue to grow rice by high rice price.
 The larger the unit rice yield, the smaller the production
cost. But the rice paddy set-aside program is designed toreduce rice yield and production. Average rice yield inJapan at the moment is about 40% smaller than that inCalifornia.
9The desirable policy reform
I have long proposed getting rid of the set-aside
program and introduce a direct payment scheme
only for the full-time farmers.
The decrease in rice price will drive inefficient
small-scale rice farmers out of the business.
They lease their farmland. Direct payment helps
full-time farmers pay rent. Thus full-time farmers
expand their farm size.
The elimination of the set-aside policy will
increase rice yields per hectare.
These will lead to lower production costs and let
rice farmers compete in the international market.
10Comparison of agricultural policies
CountryJapanUSEU

Decoupled direct payments

NoYes

YesEnvironmental direct
payments

PartialYes

Yes

Direct payments for lessfavourable regions

Yes

No

Yes

Production restriction
programme for pricemaintenance

Yes

NoNo

Tariffs* over 1000%

1 (tubers of konnyaku)

None

None

Tariffs of 500-1000%

2 (rice, peanuts)

None

None

Tariffs 300-500%

2 (butter, pork)

None

None

6 (wheat, barley, skim milk
powder, starch,beans and raw milk)

None

None

Tariffs of 200-300%* Specific tariffs are applied to tariffed products in Japan and the EU. Here, these specific tariffs are estimated as theirequivalents of ad valorem tariff rates, taking into account international prices.

11Why hasn’t the reform been realized?
 By pegging the rice price high, the mostpowerful vested interest group in Japan, JA(agricultural cooperatives) could not only gethigh commission in proportion to price but
maintain the number of part-time farmers who
have been the sources of JA’s political powerand have contributed financially to JA.
 JA is the only legal person in Japan which can makeany kind of business including sales of farm inputs andoutputs, life insurance, damage insurance andbanking. JA’s membership is not confined to farmers.
 Note that JA is the second largest bank in Japan.
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To conclude Abolishing the rice paddy set-aside program, the largest‘rocky mass’ in agriculture would reduce the price of rice,increase the farmland leases and reduce costs, andenhance export competitiveness. No import duties arenecessary and we do not need to claim an exemption ofrice from elimination of tariffs in the TPP negotiations.
 This is the only way to double farmers' income.
Remodeling ineffective past policies on the surface is noteffective
 It is not too much to say that the future of Japan's
agriculture rests on whether we can successfully destroy
the rice paddy set-aside program, the core or the central
pillar of Japan’s farm policy since World War Ⅱ.
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