Japan is among the countries that experienced vigorous adjustments in agricultural structures in the economic development process and liberalization of the world trade. Paths of adjustment in agriculture that have been taken by Japan are different from other countries that are advanced like North America and Western Europe. This makes them conflict during negotiations of trade and world agricultural policy reforms. The agricultural sector in Japan has become the main talk of other nations concerning its strategy towards trade and liberalization. Many nations want to form partnerships with Japan. Policy makers have not created any sustainable policies towards agricultural trade yet Japan has attempted to put up effective reforms in agriculture in preparations to potential agreements in international trade.
Japans staple food is rice, which has a labor force that is old. However, agriculture in many parts of Japan is thriving, for example in livestock products, fruits, and vegetables. This could be attributed to the fact that the farmers are business-oriented farms, which are rarely affected by scale problems like in the rice sector. Policy makers have recently laid emphasis on reforming the land regulations and competitiveness improvement through payment programs to the sector. This will make an easy start for the farms to expand. This reforms have to be observed through lowering of competition barriers among farmers, economic sectors, and internationally. This paper will investigate the process of reforms and their evolvement in Japans agricultural sector.
The face of agriculture
Agriculture has a huge role in the culture and traditions of Japan. Rice is grown in paddy fields all over the place, which made Japan not to have space for pasture in the past. Now Japan is the giant of economics (second largest in the world) with a high living standard, brought about by improvements in technology, manufacturing industries and exports. The contribution of agriculture in the economy has declined in the recent years compared to other economy sectors but it has a rich cultural force to the people who are determined to keep the cultural, traditional, and physical aspects of it intact. Efforts to guard and preserve agriculture have led to results that are mixed in Japan. Some products in agriculture are protected by high tariffs that make them futile in exploitation of comparisons thus slowing down market opening. Resources of agriculture have been abandoned due to distorted markets and draws from other sectors of the economy. Agricultural policies in Japan have been stipulated in the basic law and plans whose main aim is to preserve income from agriculture with an assurance of food security and cultural landscape maintenance.
Japan is ranked top in the world for importing agricultural products. It imports twenty two times higher than its exportation value. Products from the agricultural sector account for 0.3% of the total export value, which has been gradually increasing in volume, and value in recent years. Self-sufficiency in production of rice is ensured by trade policies to avoid a high dependency on import products.
Evolution of agricultural policies
Meiji revolution 1860s to 1950s (agricultural policies focused on production)
Agriculture in Japan played a great role in the growth of the economy during the early stages of development. It supplied food and labor to industrial sectors during this time of development and yielded enough surpluses because of rapid growth of productivity in the sector, which was capitalized through, rent and land tax. Land Reform Law was carried out after World War II to give back the farmland to tenants. This caused a reduction in the ratio of farming land area for tenants, from 45% in 1945 to 9% in 1955. There was a significant contribution of this land reform to the sector; increasing production in agriculture, rural society stabilization and farm households’ redistribution of income. There was also pursuit of several policies to enhance production during this time. This happened as the demand for food increased, especially after Korean War. Japan increased their efforts in food production through the support of rice price and infrastructure investment increase. Rice pricing was done through parity of price in 1946 but had changed to parity of income in 1952.
Protective agricultural policies- 1960s
Rapid national economic growth in the industrial sector forced the gap in income between urban and rural areas to widen. The major objective of the policy was to guard the agricultural sector in order to try to solve the problem of income disparity. For this to work there was an enactment of the Agricultural Basic Law (1961) which introduced programs like expansion in production for selected products that looked promising, support in agricultural prices, and adjustment of agricultural structures enhancement. Parity in income changed to compensation of cost/income method. This caused a significant increase in the price of rice with domestic price doubling that of the world in 1968. Programs aimed at price support contributed a lot in narrowing the gap between incomes.
The land reform changed into laying emphasis on farm size expansion and land consolidation with an aim of improving the overall production in agriculture. Limitation to land ownership, which was previously three hectares, was abolished completely in 1970. The land reform towards expansion and consolidation of land was however not successful as per the expectations because farmers tended to stick and remain in their own lands. They chose to look for off farm jobs to supplement their incomes from the small scale farming systems they were not willing to leave.
Agricultural adjustments policies- 1970s
Policies in the 1960s, which were protective, led to budget deficits and excess supply of agricultural products. For example, rice was in excess since 1967. This excessive supply was a momentum that had been changed by the protective policy, which focused on adjustments of structures in 1970s. In 1970, the adjustment in production (cutback) for rice was introduced. This resulted into a certain percentage (29%) of rice-cultivated areas to be changed to other crops like fruits, feed grain, vegetables, wheat, and soybeans for the following twenty years. Re-examination of the land policy was done putting into consideration environmental protection, utilization of national land, lease encouragement instead of ownership transactions, in order to enhance mobility of land. Japan also designated some areas for agricultural promotion where only arable farming could take place. Programs for structural adjustment were done for the labor markets in agriculture to enhance workers mobility between sectors. This aim was to reduce labor forces in the agricultural sector. The aged were introduced to a pension program for them to retire early and on the condition that their land would be transferred to other farm managers who were more productive.
Agricultural policies oriented to market- 1980s
Japan needed a new paradigm for policies in agriculture to rhyme with negotiations of Uruguay Round and liberalization of world trade in the 1980s. The paradigm shift was reflected in the enactment of the Food, Agriculture, and Rural Community Act in 2000. This law prescribed the main policy goals as enhancing agricultural multi-functionality, rural community promotion, stable supply of food, and agricultural sustainable development. This new policy was characterized by market orientation though not outline as one of the goals. It is also characterized by restructuring of the whole system of agriculture and policy framework. The objective of the policy was expanded to cover issues of the rural community and food and agricultural problems.
Implementation of the market oriented agricultural reforms has taken course in many ways since 1980s. There has been introduction of public rice stockholding programs instead of purchasing scheme by the government, adjustment in rice production through the producers’ decision, and rice import quota being converted into tariff (tariffication). Losses in income incurred in achieving these programs are compensated for by payments made directly and stabilization programs for farm management in minimally or less market distorted methods. Introduction of income safety net programs by the government was done on barley, milk, rice, and soybeans in order to ensure a stable income for producers. In this program the loss due to falling in prices is paid. There has been an introduction of direct payments for terrace paddy field preservation on the hillside for strengthening agricultural multifunctionality from 2000. The most recent program to be introduced through the enactment of Food Safety Law was the risk management (including system of traceability) in order to address the rapidly increasing issue of food safety.
Even though there are several market-oriented policies, the policy that I give a high priority in Japan is Food security. This provided in the Food, Agriculture, and Rural Community Act. This law set the ratio of food sufficiency to forty five percent based on calories that was to be achieved by the year 2010. This target was possible through stock and import management along with domestic production as the primary tool. The domestic production required to attain the objective of food security assumes growth in production via structural adjustments. This policy therefore seems to limit the pursuance of market oriented agricultural policies in Japan.
Trade and food security policy
Food security policy
This policy has been enacted due to the high level of consumption and low production in Japan. The Basic Law says that the achievement of secure and stable supply of food should be through domestic agricultural production increment together with stockholding and imports. This law comprises guidelines to be followed in food supplying in case of emergencies and stipulates the government based on food consumption patterns and target for domestic agricultural production should set that food sufficiency target rate. Food education is given to promote consumption of domestic food, ensure the faith of consumers in domestic products, and support local food movement. Japanese have adapted western food, which is rich in fat leading to diseases, which increases the cost of health care. This led to the introduction of guidelines on well-being especially on desirable diets in 2000. This followed by a guideline on balanced food in 2005.
An elaboration of The Basic Law on Food Education was done in 2005 to help consumers make good decisions concerning food. The law mandates local governments to organize promotion plans in the region for food education. Consumption of rice, fruits and vegetables is encouraged in the food education programs to promote and retain the style of diet for Japanese, which is a culture and tradition. It is also considered more nutritious. Subsidies are provided for the promotion of rice consumption for example, rice menus in schools, which aims at reducing the daily calorie intakes per individuals. Food sufficiency is aimed to be increased through expansion of domestic agricultural production and a stable acquisition of food imports and preparation of a food supply emergency program. Japan has been working towards stabilization of food imports through giving other countries access to supplies by removal of restrictions to trade like export taxes and restriction. A secure food supply manual introduced in 2002 is reviewed annually while the stocks the government hold in store remain at one million, thirty one thousand, and nine hundred and fifty thousand tonnes for rice, soybeans and feed crop respectively.
The rate of self-sufficiency is determined by the capacity of domestic production in relation to demand. Predictions are designed in a way that demand can be adjusted to make the equilibrium level of consumption equal to the level of consumption predicted. Demand curve for domestic consumption is shifted in order to achieve this equilibrium. Adjustment of demand is done for commodities that are staple to the Japanese and whose projections for demand are available. These products are rice, milk, wheat and beef. Current trends show that decrease in domestic demand leads to decrease in the price of rice.
The importance of food security is crucial to governments who are concerned about scarcity of supplies in the country. Scarcity of supplies means that the quantity of food available is lower than the population physical requirements. These concerns show a past when there was a likelihood of conflicts between nations and when there was less development in global trade and transport. Food security risk in modern days is based on price risk rather than quantity risk thus; policies that lower the prices of domestic food would affect positively on food security. For example, in Japan there was an action plan to reduce food supply costs in five years by 20% through marketing margins and input costs reduction in 2006. This increases the amount of food afforded by consumers thus a positive impact to food security.
Improvement of food self-sufficiency through demand actions is less distorting to the trade and brings benefits to public health. Policies implemented to reduce food wastage improve food security.
Japans objectives of food security have affected the trade policy since restrictions of imports increases the consumption rate of domestic agricultural products. Trade policies are used to increase the prices domestically compared to world prices. This adds to the income of producers in a domestic setting. Border measures concentrate more on dairy products and rice because they have a high self-sufficiency rate. In 1993 after the Uruguay Round Agreement on Agriculture, tariff rate quotas replaced import quantitative restrictions in Japan except for rice, which was abolished in 1999. Current studies show that Japan imports seven hundred and sixty seven thousand tons of brown rice yearly. This is equal to 7.2% domestic consumption. General Food Policy Bureau manages Rice importations. Imported rice is sold for food aid and processing and is not allowed into the table rice domestic market. About 10% of imported rice is sold for table rice and the government allocates an equivalent amount to food aid in order to ensure domestic price rice is not affected.
Japan aimed at reducing the agricultural products tariff rates by 36% under the URAA. Japan also pursued regional and bilateral economic partnership agreements actively after 2000. Singapore was the first partner to sign an agreement with in 2002 followed by Mexico in 2004. In the Mexico agreement, agricultural products were first included. From 2005 and 2009 economic partnership, agreements were signed with Malaysia, Philippines, Brunei, Thailand, Indonesia, Switzerland, and Chile. The objective of the agreements was to reduce or eliminate tariffs, establish favorable tariff quotas for specific agricultural products. Japan is in the process of negotiating economic partnership agreements with Korea, Arab states, India, Vietnam, and Australia. The government hopes to achieve more agreements by 2015.
Agricultural export levels are low in relation to agricultural imports. Development in economics has led in Asian countries has led to export level increase in agricultural products. In 2005, there was a plan to promote export aiming at doubling of export values by 2009. In 2006, the East Asia Food Industry Union was elaborated to promote expansion in by provision of market and regulatory information to the investors, information sharing amongst stakeholders, and overseas promotion of Japanese food.
Rice policy and recent reforms
Many agricultural policies in Japan are focused on rice production. Production of rice gets the largest amount of policy support and interventions from the government influencing where and how rice is grown. For the last 50 years, the government directly controlled rice marketing. Rice control regime constituted policy measures like state trading, marketing licenses, and procedures of price setting to make consumer rice price and production stable. Government estimated the labor costs based on off farm wage rate, which led to an increase in producer rice price due to rapid development of off farm sector. Consumption of rice per capita started to decline in 1960s, which peaked in 1992 and then reduced gradually until 2006. This led to a necessary increase in land under cultivation of other crops to track the declining consumer demand. After the URAA and a preceding failure in crop production, rice market intervention was reduced gradually. The Staple Food Law reduced the government’s role in stockholding and rice marketing deregulation. Then production adjustment was put in place to demand and supply. Marketing of rice was liberalized partly with intermediaries allowed. Government was only allowed to make direct purchases for stock piling. SFL wanted rice prices to be formed through tenders to reflect the demand. This was done but with a set boundary price to prevent absurd fluctuations.
An operational rule of stockpiling rice was introduced in 1998 to control buying and selling to maintain the stock at one million tonnes at all times. In 2001, the principles of Rice Policy Reform were made public aiming to improve policy market orientations. The objective of this reform was to improve the structure of production through promotion of rice farms that are stable, efficient, more competitive, and better market signal response. Stage one of the reform was done in 2004 where there was allocation of the production quota. Stage two was in 2007 and it gave permission to farmers and their organizations to make decisions on the production quota distribution. The role of government in the coming years is seen as only giving information on supply and demand and approval of production adjustment plans.
Agricultural reforms in Japan have delayed in the past years with the challenge of implementing income subsidy that is direct for households. This is to support commercial rice farmers with a guaranteed income no matter how much the price of rice falls. Economic Partnership Agreements have helped a great deal in establishing tariff quotas and reducing restrictions in trade. This has led to an increased market for significant agricultural products like fruits and vegetables. Japan however should do away with the reduction of land under rice cultivation since this will continue to lower the production. Assistance should be given to households that engage in farming during the period of rice price drops. Trade liberalization, which is increasing in Japan, could lead to adverse impacts on rural employment. This is because there is importation of processed foods of low price. The reforms system and trade liberalization in general is aimed at securing a stable and reliable food supply for the country. Self-food sufficiency is the key to food security.
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