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Sunday, Feb. 20, 2011
The sticky subject of Japan's rice protection
Twenty-five years ago, Japan was a very competitive manufacturing country, and much of its economic policy since then has been in response to trade friction with the United States, which demanded greater access to Japanese markets for American agricultural products in order to offset Japan's trade surplus. However, Japan's farm sector was considered the prime constituency of the Liberal Democratic Party, which had controlled the government since 1955, so any concession to foreign agricultural interests was seen as a betrayal of that base. It was a political problem, not an economic one.
The main sticking point was rice. The LDP caved on oranges and beef, but rice, a "sacred" commodity, was off limits. Every so often the government would limit car exports in order to appease the growling functionaries in Washington, but it didn't matter. Japanese people weren't buying enough American products, and finally, in 1993, when the LDP was briefly out of power, the government joined the Uruguay Round of the General Agreement on Tariffs and Trade, and has since allowed 770,000 tons of foreign rice to enter Japan every year, most of which is used as animal feed, re-exported as food aid, or socked away in warehouses. As a "countermeasure" the government pledged ¥6 trillion for rice-related matters, half of which would be spent on public works to provide jobs in farming areas.
Since ousting the LDP from power in 2009, the Democratic Party of Japan has maintained the status quo by subsidizing rice farmers who lose money, which seems to be quite a few of them. While output was down 4 percent in 2010, rice consumption was down 6.4 percent; and it is estimated that by June there will be 3.24 million tons of rice in storage, a 2.5 percent increase over 2010. Consumption will only decrease more, since the population is shrinking and dietary habits are changing.
Farmers have to do something fast, since the DPJ is considering participation in the Trans-Pacific Partnership (TPP) free trade agreement, which would likely eliminate the 788 percent tariff on foreign rice imports. Last week, the Central Union of Agricultural Cooperatives pledged that it would come up with a "vision" for Japan's future in farming, specifically rice farming, which is notoriously inefficient. The Japanese financial magazine Shukan Economist (not the British newsweekly) points out that in 2009 70 percent of rice farmers worked plots of 3 hectares or less, and more than half of this group worked plots of one hectare or less. The average income from rice for a rice farmer was ¥310,000 a year, or 10 percent of overall income. Livestock, dairy and vegetable farmers earn about 70 percent of their income from agriculture, fruit farmers 30 percent. Only 1 percent of all rice farmers make at least half their income from rice.
This means the majority of rice farmers are, in effect, part-time farmers, and contrary to their image of being slaves to the land, Economist says that new technology and methods have reduced the amount of labor needed to cultivate rice. In 2009, one-tenth of a hectare of rice required 26 man-hours to grow — one-seventh the amount of labor required 50 years ago. Other crops are more labor-intensive.
The obvious solution would be to consolidate farms, but whatever their feelings of cultural solidarity, rice farmers are notoriously stubborn individualists, an attitude formed when farmland was redistributed after the war and then reinforced by LDP policies. In addition, Japan's complex land laws make it difficult to change property designated for rice cultivation to some other purpose.
Rice farmers and the Agricultural Cooperative Association (JA) have to count on public support to advance their cause, since they no longer wield the political clout they once did. Maybe because of his roots in the LDP, DPJ honcho Ichiro Ozawa, who is responsible for the current subsidy, is opposed to the administration's support of TPP. He marshalled the farm vote for the DPJ in the last general election and isn't about to squander that kind of political capital.
In fact, it's Ozawa's rejection of TPP that some suspect is behind the mass media's support of it. The financial writer in Aera magazine who goes by the pseudonym Gucci has pointed out that both the Nihon Keizai Shimbun and Asahi Shimbun, which are known to be "anti-Ozawa," have come out "abnormally strong" in promoting Japan's participation in TPP. In the weekly Kinyobi, economist Shoji Otsuka writes that the media is suddenly filled with profiles of farmers who have succeeded in exporting rice and fruit as luxury brands to China and Europe, thus spreading the "illusion" that Japanese agriculture can compete on the world stage with the U.S. and Australia.
Much of the PR Otsuka mentions has a nationalist cast. Recently, TV Tokyo's World Business Satellite, which is connected to Nihon Keizai Shimbun, compared Japanese rice to high-grade rice from China and California, and "confirmed" that it tastes better, implying that Japanese rice would not only hold its own against the onslaught of foreign imports, but also sell well overseas. In the past few weeks I've seen two separate TV reports on Beisist Shonai, a collective of eight farmers who are successfully selling their unique strain of rice in Europe and Australia despite its higher price.
This boosterism isn't limited to rice. Apples and other "added value" farm products that could have snob appeal overseas are being covered as proof of native ingenuity in the face of a daunting challenge, but by definition these products have a limited appeal, so they hardly seem like an answer to that challenge. Opening Japan's rice market is inevitable given the aging demographic of the farm sector. The average age of a rice farmer is 66, and not enough young people have expressed interest in becoming farmers. Even if Japan doesn't join TPP, America and other exporters just have to wait five years or so. By then, there may not be any rice farmers left to protect.
Philip Brasor blogs at philipbrasor.com.