Australia and the World Past and Present

Agriculture is Japan has its own patterns and logic. Japanese agriculture can be very different from that seen in other countries.

Government support given to producers is high. In the period 2016-18 it formed 47% of gross farm receipts. While high, it is lower than it was in 1986-88 when the figure was 63%.

Subsidies to agriculture can take many different forms. In Japan the main subsidy support is through market price support (MPS).

Another form of subsidy is through ‘general services’. Within this category 86% are provided in the form of infrastructure and 11% through research and development.

There are border protections in place to shield Japanese producers. These are in the form of tariff protection for certain items. This is the case for rice, pork and milk.

Between 1969 and 2018 administratively allocated rice production quotas were in place. This ceased in 2018.

Japan is a signatory to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Other signatories include Australia, Canada, Mexico, New Zealand, Singapore and Cambodia.

The CPTPP aims for more low-barrier trade between signatories. Producers in any of these countries will be able to gain more access to markets in other countries but the trade-off is that they will have to reduce the barriers to their own market. This will expose their own agricultural sector to increased global competition.

As Japan lowers its tariffs over time, its farmers will be more exposed to prices signals from global food prices. Japanese consumers will also be impacted. They may see cheaper food at the supermarket.

There has been a move in recent times towards greater crop diversification in Japan.

In recent times a sensitivity to environmental concerns has become prominent. Agricultural policy has shifted to become ‘agri-environmental policy.

The Japanese government wants to see organic farming taking place on one quarter of all farmland by 2050.

The war in Ukraine has led to an increase in the cost of fertilizers and ‘feed grains’. the Japanese government wants to see the use of fertilizers decrease. Part of the reason is environmental and part of the reason is about food security. The more fertilizer-dependent the country is the greater the problems if there is a disruption to the supply chain.

Environmental requirements will be linked to all subsidies by 2027.

Farmers will have report on their use of fertilizer, their use of pesticides, fuel consumption, waste management and even biodiversity.

The Strategy for Sustainable Food Systems (which was introduced in 2021) seeks to reduce the use of pesticides by 50% and reduce the use of chemical fertilizer by 30% by 2050.

Japan has an aging population. This demographic change has made the government take another look at immigration. In 2018 the Diet (Japanese parliament) passed the Immigration Control Act. This was partly an attempt to address the labour supply problem in Japan by bringing more immigrants into the country. Under the Act, incoming agricultural workers can stay for up to 10 years.

There has also been a greater focus on farmer training in the areas of entrepreneurialism and digital skills.

One amazing statistic is that the average price that farmers receive is 78% above world market prices. This is positive for farmers in the sense that they receive a good price for their products. But this price only makes sense in a hermetically sealed domestic market with high walls of protectionism. With a greater liberlisation of economic barriers this pricing will come under greater pressure and will become unsustainable. Japanese farmers will have to compete on a more equitable footing with farmers in other parts of the world.

In Japan milk and grapes are also highly subsidised.

Agriculture accounts for 3.4% of employment in the Land of the Rising Sun. This is a relatively low figure.

The Meiji era ushered in a period of industrialisation and westernisation in Japan. The World War II period was an important time for Japanese manufacturing. A highly-developed electronics industry developed in the post war years. Service industries expanded and people moved to the cities and away from rural areas.

What is the breakdown of agriculture by sector?

Livestock accounts for 35.1% of the total.

Vegetables make up 26.4% and rice – 18.7%.

Fruits add another 9.1%.

The vast majority of land within Japan is not available for agriculture. Japan is very mountainous and much of this land is not suited to farming. Agriculture takes place on only 12% of Japan’s land.

Half of this land is used for rice cultivation.

Moves to give greater government support to crops other than rice leads to less land being used for rice cultivation. This may be another way of propping up the price of rice – by squeezing supply.

Rice has strong cultural associations in Japan. If there is one crop that has been protected above all others, it it rice. Japan was strongly against reducing tariffs on rice in the Uruguay Round of negotiations on the General Agreement of Tariffs and Trade (GATT) in the early 1990s.

Additionally, much of the existing agricultural land is being lost for other uses – such a residential development.

The average farm size in this east-asian nation is relatively small by global standards.

The average farm size in 1990 was 3.4 acres (1.4 hectares). This might equate to roughly 3 football fields.

There has been some farm consolidation up the present. By 2015 the average size had grown to 5.4 acres (2.2 hectares). By 2015 the proportion of farmers with more than 24.711 acres (10 hectares) was 48%. So, we can see a growing consolidation of farmland but it is still small compared to many other countries.

The average farmer is 66.88 years old. This is quite a catastrophic figure for the sustainability of the industry. Agriculture tends to be quite a physical profession. How many more years can a farmer of this age keep farming? This is another reason why farm consolidation makes sense. Even if you remove the trend of internal migration to the cities, decades of low birth rates compared to previous generations means that there will be less future farmers than current ones.

Since 1990 the number of commercial farm households has decreased by 50%.

What proportion of Japan’s exports are agricultural?

The figure is actually very low – 0.66%. This is not due to a lack of agricultural exports. Rather, many of Japan’s high-technology products have been doing very well in international markets and make up the majority of Japan’s exports.

Greenhouse gas emissions from the farm sector are only 2.6% of the total and this is the lowest in the OECD. Interestingly, most of this comes from rice cultivation.

The government will pay farmers a ‘crop diversification payment’ for producing certain crops. This is not available for rice.

There are a few income support payments available. One payment is calculated in the basis of area. Another is calculated on the basis of output.

Japan has always experienced natural disasters to some extent.

Agriculture is one economic activity that is subject to the vagaries of the weather. Some individuals (often working in other industries) argue that no subsides should be paid to farmers or perhaps no more than any other economic activity. However many farmers argue that the unpredictability of the weather or climate is a unique challenge and something that is not faced by many other industries.

In 2019 the Japanese government began its ‘Revenue Insurance Program’. This was particularly in response to the threat of natural disasters. This program can provide compensation to farmers if they are impacted. When calculating compensation, the scheme will look at a farmer’s revenue for the previous 5 years in order to create a baseline. It is interesting to note that the calculation is done at the farm level – not the local, provincial of national averages. So a farmer who has done well for the last 5 years will get more compensation than one who has not done as well. The scheme is voluntary and the government pays around half of the premium.

There is yet another subsidy – one for new, young farmers. This subsidy runs for a training period (a maximum of two years) and up to 5 years of the initial operating period.

The above presents a survey of Japan’s agricultural system. It is interesting to note that the livelihoods of farmers have been prioritised over the rights of Japanese consumers. One of the biggest challenges will be dealing with the impact of an aging society. The other will be in adjusting to a more open border and competing with farmers from all over the world.