Political Economy of Agricultural Reform in Japan under Abe's Administration

• Date: 01 January 2018
• DOI: http://doi.org/10.1111/aepr.12208
• Author: Aurelia George Mulgan,Masayoshi Honma
• Published date: 01 January 2018

Political Economy of Agricultural Reform in

Japan under Abe’s Administration

Masayoshi HONMA

1

†and Aurelia GEORGE MULGAN

2

1

Seinan Gakuin University and

2

University of New South Wales

As a symbol of regulations as “solid as bedrock,”Japanese agriculture is a key target for struc-

tural reform under the Abe administration’s“Abenomics”growth strategy. Its reform proposals

have encompassed long-standing rice production regulations, agricultural organizations, includ-

ing the agricultural cooperatives (JA), and the controlled system of milk distribution. The gov-

ernment also seeks to promote agricultural exports and farmers’participation in processing and

distributing agricultural products. Led by the Prime Minister’sOffice, and taking advantage of

changes in the political environment of agriculture that have weakened the political power of

farmers and JA, the government has launched a reform offensive with variable impact: progress

has been made in some areas (e.g. JA reform) but little change in others (such as rice production

adjustment). The most significant challenge lies ahead in reforming the farmland system, which

is yet to be tackled.

Key words: Abenomics, agricultural politics, agricultural reform, JA reform, Japan

JEL codes: Q13, Q18, P16

Accepted: 8 July 2017

1. Introduction

The Abe administration has positioned agriculture as a key area for structural reform

in its growth strategy, the third arrow of Abenomics, with the aim of turning the farm

sector into a profitable industry and “engine”of growth. The government has

embarked on a process of agricultural reform led by the Prime Minister’sOffice, estab-

lishing a number of policy councils to propose measures to encourage growth in the

sector. The prime minister’s political strategy has been to destroy the “iron triangle”of

vested interests linking the Ministry of Agriculture, Forestry and Fisheries (MAFF), the

Liberal Democratic Party (LDP) and the agricultural cooperative organization (Nokyo

or JA),

1

which is widely regarded as resistant to change and a symbol of regulations as

“solid as bedrock.”

This article critically evaluates a range of agricultural reforms currently being pro-

posed and implemented by the Abe administration, including those in areas long

regarded as taboo by the LDP, and the potential of these reforms to revive the farm

†Correspondence: Masayoshi Honma, Department of Economics, Seinan Gakuin University,

Fukuoka 814-8511, Japan. Email: m-honma@seinan-gu.ac.jp

128 © 2018 Japan Center for Economic Research

doi: 10.1111/aepr.12208 Asian Economic Policy Review (2018) 13, 128–144

sector. The analysis also examines institutional changes promoting the reform process

as well as relevant developments in agricultural politics, identifying factors that are

both facilitating and hindering the agricultural reform process.

Section 2 discusses the development of agricultural policy under the Abe adminis-

tration, while Section 3 briefly touches on the Trans-Pacific Partnership (TPP). The

focus of Section 4 is reform of the JA, while Section 5 highlights the changing political

environment for agricultural reform. Leadership from the Prime Minister’sOffice in

promoting agricultural reform is evaluated in Section 6, and Section 7 discusses the

challenges ahead.

2. The Development of Agricultural Policy under the Abe Administration

Japan’s Revitalization Strategy of June 2014 clearly lays out the policy directions for

agriculture under Abenomics. It lists four main items in terms of “developing agricul-

tural, forestry and fishery industries on the offensive”: (i) revision to rice production

adjustment; (ii) integrated reform of agricultural committees, agricultural production

corporations and agricultural cooperatives; (iii) diversifying distribution channels for

dairy products; and (iv) building domestic and international value chains (promoting

primary producers’diversification into processing and distribution, and expanding

agricultural exports) (Prime Minister’sOffice, 2014).

The first point –revision to rice production adjustment –has been an issue for

Japan’s agriculture for many years. The scheme is basically a policy that maintains the

price of rice based on a production cartel that restricts the total amount of domestic

staple food rice for sale in the market. Switching from rice as a staple food to other

crops has been encouraged by government allocation of rice production volumes and

subsidies (Figure 1 shows recent trends in staple rice demand, production, and distri-

bution stocks).

Rice policy under the Abe administration is different from the past given its decla-

ration that the central government would stop allocating production volumes from FY

2018. Therefore, in order to continue to restrict production, agricultural organizations

such as JA will have to allocate production volumes voluntarily. This means, however,

that “the system will still be premised on controlling the total production volume at

the grass roots to prevent excess production of rice”(Yoshida, 2017). Moreover, the

government has combined this policy with one restricting the supply of rice as a staple

food by granting subsidies for cultivating rice as a feed crop and for flour making

“abolition of acreage reduction…an empty slogan”(Nihon Keizai Shinbun, 2016).

The transaction price of rice as a staple food is approximately ¥200/kg, but for rice

for livestock feed it is only about ¥15 yen/kg. Generous subsidies were introduced to

fill the gap. While the subsidy to encourage crop conversion from rice as a staple food

to crops such as wheat and soybeans was only ¥35,000/10a (ares), the maximum sub-

sidy to switch to rice for livestock feed (or for rice flour) was ¥105,000. The unit price

of the subsidy changed depending on the unit crop in order to encourage a shift to rice

with a high yield.

Masayoshi Honma and Aurelia George Mulgan Agricultural Reform under Abenomics

© 2018 Japan Center for Economic Research 129