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Japan Agribusiness Report Q2 2010
Market |
Agriculture, Farming & Raw Materials |
Report Type |
Market Research |
Country |
Japan |
Published |
10 February 2010 |
Number of Pages |
68 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Japan's agricultural sector has yet to feel any substantial changes following the end of the Liberal Democratic Party (LDP)'s decades in office. However, the Democratic Party of Japan (DPJ) government has been busy with plans to reform the way the country's farmers are supported. Starting in 2010, the government intends to replace the system of price supports and subsidies for major crops, predominantly rice, with a direct income support payments to farmers. The payments will make up for the shortfall between the market price and the cost of production for a set amount of rice. The government has budgeted JPY561.8bn (US$6.30bn) for the programme in 2010.
There are still details that need to be finalised. The Ministry of Agriculture was reportedly keen to offer the subsidy payments to all farmers, while the Ministry of Finance argued for payments to be targeted at full-time farmers and the most needy regions. This is a very important aspect of the policy given that, according to the 2005 census, about 80% of Japan's farmers only work on the farm part-time. We believe that the finance ministry's proposal to limiting payments to full-time farmers would be beneficial for Japan's agricultural sector in the long term. Generous subsidies to small-scale, part-time farmers will encourage them to keep hold of their land rather than lease or sell it to full-time producers, which will inhibit the development of more efficient, large scale rice production and leave the government with rising subsidy bills.
Another issue for the government to deal with is pressure to cut tariffs on imports of agricultural goods under Japan's WTO commitments. In a meeting with WTO director-general Pascal Lamy, the Japanese Minister for Agriculture, Hirotaka Akamatsu, asked for 'flexibility' in negotiations on key agricultural products, the Japan Times reported. Japan is keen to maintain its 778% tariff on rice imports above the minimum access quota, as well as preventing any major expansion of that quota. The development of more efficient, professional rice production in Japan would make Japanese rice more able to compete with imports and save the government from having to focus so much on maintaining tariffs. There are also changes afoot in Japan's policies toward other grains. In October 2009, the government discontinued its policy of importing and holding stockpiles of wheat. This will encourage private millers to increase the size of their stockpiles to secure supplies following the removal of the government reserve. The government will assist companies with the change by providing subsidies to mills that keep their own stockpiles. This could mean imports increase in 2010 as companies rush to build up their stocks. The government's retreat from the importing business will also free up the market for trading companies. We regard this as a positive development that will increase efficiency in Japan's grain imports.
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