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The Policies Needed to Rebuild Japanese Agriculture

Tags: Agriculture , DPJ , Election , Farming , Public Policy

Shogenji, Shinichi (-2015)

September 17, 2009

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Agricultural policy was one of the major points of contention in Japan’s recent general election. The influence of rural voters had already been clearly demonstrated in the 2007 upper house election, which the Democratic Party of Japan won convincingly. Feeling the effects of the economic malaise, voters, including those of nonfarm households, in rural regions have a strong interest in agricultural policies.

In the arguments over various agricultural policies during the general election campaign, clear differences were evident between the Liberal Democratic Party and the Democratic Party of Japan in the following three areas: first, how to provide assistance to farmers; second, the future of rice production adjustment; and third, although not mentioned explicitly in their manifestoes, how to handle relations with the agricultural cooperatives. On all of these points, the positions of the two parties were almost diametrically opposed.

The DPJ has held the upper hand in the debate over assistance to farmers ever since it proposed the establishment of an “individual household income support system” during the House of Councillors election two years ago. Individual household income support is a system in which the government pays farm households the difference between production costs and the market price for their produce, on condition that they meet the production targets set for each individual farm. At the time of the 2007 upper house election, the proposal targeted land-based farmers cultivating such crops as rice, wheat, and soybeans, but the party’s 2009 manifesto extended the proposed scheme to livestock farming and fishery.

Individual household income support is a policy developed by the DPJ to counter the LDP-led government’s policies of providing assistance to full- and semi-full-time farmers and fostering farm management organizations practicing “community-based farming.” It was a clever piece of agenda setting given the perilous state of provincial economies and growing doubts over the structural reforms implemented by Prime Minister Junichiro Koizumi’s administration. In response to this, at the time of the upper house election the LDP held the line on the government’s agricultural policies. The party came into the 2009 general election bearing the humiliating trauma of its crushing defeat, and the sense of crisis was particularly acute among candidates from rural areas.

In its general election manifesto, the LDP vowed to “offer the greatest possible support to farmers determined to work in agriculture” while at the same time making all motivated farmers eligible for assistance and abolishing acreage and age requirements. In other words, while giving the appearance of not simply scattering money around, the LDP did not mention any specific way of preventing this outcome. As a policy platform it was vague, and it was impossible to escape the impression that the LDP had been seriously swayed by the power of the DPJ’s individual household income support proposal.

As for rice production adjustment policies, despite the fact that the government at one time switched to a formula with a relatively high degree of freedom, revisions spearheaded by the LDP in 2007 led to a switch back to a more group-oriented method. This is another area in which the effects of the LDP’s traumatic defeat in the upper house election can be seen. The pattern of debate in the general election was later complicated by comments made at the end of 2008 by Minister of Agriculture, Forestry, and Fisheries Shigeru Ishiba, a member of the LDP, on the need for a fundamental revision of production adjustment policies, and the escalating split between Ishiba and LDP members with close ties to the farming industry, who wanted to maintain the existing production adjustment policies.

The party went into the general election with this rift unresolved, and in the end the LDP manifesto did not include any expressions indicating a continuation of existing production adjustment. Instead, it referred to addressing the dissatisfaction of farmers, such as by alleviating the sense of unfairness between farmers who participate in production adjustment and those who do not. Meanwhile, although the DPJ’s stance was not as clear as it might have been, the party’s proposals are regarded as indicative of a shift toward so-called elective production adjustment. That is to say, under the individual household income support system, farmers would be permitted to produce more than their set rice production target, based on the premise that they would receive only the market price for their rice.

Turning to the subject of relations with agricultural cooperatives, it is well known that the LDP has long enjoyed strong support from these groups; so much so, in fact, that the relationship among the LDP, the government, and the agricultural cooperatives has been referred to as the “iron triangle.” The recent general election saw a partial loosening of these ties, as evidenced by the shift among regional agricultural cooperatives away from endorsing a specific party, but that does not mean that the foundations of the relationship between the LDP and the agricultural cooperatives have crumbled. The distance that the DPJ maintains from the agricultural cooperatives, in stark contrast to the LDP, is one of the party’s distinguishing features.

The question, then, is to what extent the DPJ will maintain this stance. Under pressure from coordinated criticism by the agricultural cooperatives and the LDP, the DPJ was forced to change the wording in its manifesto on a potential free-trade agreement with the United States from “concluding” to “promoting.” This spoke to the low level of consensus within the DPJ on agricultural policies and exposed the party’s weakness in the face of pressure backed by votes.

One concern regarding the DPJ’s individual household income support system is that the compensation criteria for each product must be decided every year. How will the level of production costs that will serve as the baseline of the policy be calculated from statistical production costs estimated on the basis of various promises? Even this single point betrays the various vote-backed lobbying efforts to which the DPJ was subjected. We cannot forget that it is the system that fosters cozy relationships between pressure groups and politicians.

The biggest challenge Japan’s agriculture sector now faces is to rebuild the nation’s paddy farming. Many paddy farmers chose to divide their time between farming and other work during the postwar era of high economic growth, and gradually the ratio of nonfarming work increased. For the most part, expansion of paddy farming was limited to a few full-time farmers and corporations, except in such places as Hokkaido and Ogata Village in Akita Prefecture. The problem is that the aging of the postwar generation of mostly part-time paddy farmers has put the sustainability of paddy farming in real jeopardy. Never has there been a greater need for a level-headed examination of the situation and for suitable remedies to be put in place. The task of rebuilding Japanese paddy farming cannot wait.

Now that the DPJ has won an overwhelming victory in the general election, will the individual household income support that was a pillar of the party’s agricultural policy proposals become a bridge to the rebuilding of paddy farming? During the election campaign there was concern over how the DPJ would find the necessary fiscal resources and a torrent of criticism that the policy appeared to be a pork-barrel-style handout, but there was almost no detailed examination of the actual substance of the policy. The DPJ has also not explained individual household income support adequately since proposing it two years ago. It is hard to escape the conclusion that priority was given to garnering votes, at the expense of designing a robust system.

To start with, the very idea of setting targets for the production of crops such as wheat and soybeans by individual farmers and demanding that these targets be met appears unworkable. It is logical to set a maximum target for rice production, which is premised on having a surplus. Based on this, the idea of moving to a flexible system of elective production adjustment also makes sense. In the case of crops earmarked for increased production, such as wheat and soybeans, there would be minimum targets, but it is surely unrealistic to expect farmers to make management decisions according to those targets. There are many factors for farmers to consider when deciding what combination of crops to grow, including crop rotation, trials of new crops, weather conditions, changes in farmland rented, and buyers’ circumstances. Another problem is that the introduction of production targets for crops like wheat and soybeans would place a huge burden on the municipalities that would administer such procedures as target setting, notification, and compliance monitoring.

The DPJ has criticized the government’s policy focusing on full- and semi-full-time farmers and farm management organizations as abandoning small farmers, but it is inconceivable that the individual household income support system will be effective in sustaining aging part-time farmers. Evaluating the situation objectively, it is clear that many part-time small farmers have continued farming for reasons other than economic viability. Welfare policies that show respect for the elderly are important, but they should not be mixed together with agricultural policies. Of course, the DPJ is not rejecting support for farmers to increase the scale of their operations. The problem is that the substance of its policy is not clear. The party has been using the expression “extra support for expansion” since including it in its 2007 manifesto, but to date it has provided no details on this policy.

In implementing its agricultural policies, it is also important for the DPJ to selectively continue the positive achievements of the policies followed so far. For example, as a result of the LDP government’s policies, farm management organizations have spread into every prefecture of the country and production is becoming concentrated in the hands of full-time and semi-full-time farmers. Most wheat and soybean production, where the advantages of large machinery are especially significant, is now undertaken by full- and semi-full-time farmers or farm management organizations. For the sake of the farmers who have toiled long and hard in the fields, this progress must not be wiped out.

I am not taking sides with the criticism leveled at the DPJ’s policies from a simple budgetary standpoint. I believe that the government should not refrain from making necessary fiscal investments in agriculture. However, such investment should only be made on condition that it is the most effective means to achieve policy goals, and it must produce a return for the public, who are also taxpayers and consumers. What is needed now, in this sense, is an investment-style injection of fiscal resources. If we are to overcome the failings of past agricultural policies while at the same time taking advantage of their positive achievements, it appears that we will need to break down the various elements that make up the DPJ’s “individual household income support system,” which is currently heavy on image and short on substance, pick and choose the best elements, and reassemble them into a more coherent and effective whole.

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