17. Japan
Despite notable reductions, support to producers in Japan remains among the highest in OECD countries. The Producer Support Estimate (PSE) equalled 38% of gross farm receipts in 2020-22, down from 54% 20 years earlier but still twice the OECD average.
Market Price Support (MPS) remains the main element of Japan’s agricultural support. It is largely sustained by border measures, particularly for rice, pork, and milk. MPS fell from 2021 to 2022, mainly due to a narrowing gap between domestic and border prices, particularly for rice and pork. Slightly lower domestic prices and rising border prices, together with a depreciation of the Japanese yen (JPY) have contributed to this evolution. Still, producer prices for many commodities remain well above world prices, and the resulting MPS generally represents the main part of single-commodity transfers (SCT).
Budgetary support to producers consists mostly of payments based on area, income, or output. Payments based on variable input use increased drastically in 2022 due to introduction of support schemes to alleviate the effects of price surges for raw materials. The share of potentially most-distorting support (i.e. MPS, support based on output and variable input use without input constraint) declined but still accounted for 81% of PSE in 2020-22.
Expenditures for general services (General Service Support Estimate, GSSE) account for 23% of Japan’s total support to the sector (2020-22). GSSE corresponds to almost 12% of the value of agricultural production, higher than the OECD average but lower than in the 2000s. About 80% of the GSSE goes to developing and maintaining agricultural infrastructure (particularly irrigation), while 11% goes to financing the agricultural knowledge and innovation system. The Total Support Estimate (TSE) for the agricultural sector represented 0.9% of Japan’s Gross Domestic Product (GDP) in 2020-22, most of which was directed to individual producers.
The Act to Promote Low Environmental Impact Business Activities for the Establishment of Environmentally Harmonized Food Systems (the MIDORI Act) was passed in April 2022 to facilitate the implementation of the strategy MIDORI. The act requires that prefectural and municipal governments jointly develop a “Basic Plan” that includes the introduction and implementation of environmental measures (focused on improving soil health, reducing use of chemical pesticides and fertilisers, and reducing greenhouse-gas (GHG) emissions) suited to the natural, economic, and social conditions of their regions. The act establishes a certification system to encourage the adoption of environmentally-friendly practices and technologies. Producers can have their environmentally-friendly activities certified if they develop an activity plan in co-ordination with the “Basic Plan” of their region. Business operators who offer innovative technologies to reduce the environmental impact of agriculture are also eligible for certification. Certified producers and business operators can enjoy several tax and financial benefits as well as other services such as simplified administrative procedures to facilitate their business development.
The Japanese Cabinet approved a cross-sector emergency relief package of JPY 6.2 trillion (USD 47 billion) in April 2022 to cushion the economic blow from rising raw-material costs. Within this package, JPY 75.1 billion (USD 571 million) was allocated to the Ministry of Agriculture, Forestry and Fisheries (MAFF) for several measures to alleviate the effects of price surges for food and raw materials. MAFF provided payments to compensate livestock farmers for higher feed costs and subsidised the costs of food producers to aid in development, manufacturing, and material sourcing of new food products. MAFF also subsidised transportation and storage costs for fertiliser manufacturers to compensate for costs associated with changing suppliers.
MAFF allocated JPY 164.2 billion (USD 1.25 billion) in December 2022 to strengthen food security, with an emphasis on reducing import dependence by increasing domestic production of agricultural products and inputs. The main measures include support payments to facilitate organic fertiliser production, increased support for forage crop production, and the establishment of domestic supply chains. The Japanese Government also released the Food Security Reinforcement Policy Framework, which presents a roadmap to ensure a stable food supply and sets several 2030 targets, such as doubling manure compost and sewage sludge use for fertiliser, increasing production areas of wheat, soybeans and feed crops, and halving food loss and waste in the food industry businesses.
Japan’s agricultural sector is particularly vulnerable to climate change and has already experienced its negative effects on production and product quality. Japan’s approach – of promoting development and dissemination of suitable production technologies and varieties, and improving preparedness and response to disasters caused by extreme weather events – is promising. Due to its diverse climatic conditions and farming systems, these adaptation measures should be tailored locally and implemented through co-operation between national and local governments.
Japan has made progress in reforming agricultural support policies since the early 2000s but support to producers remains twice the OECD average and continues to be dominated by MPS, which distorts markets and contributes to high food prices. Moreover, MPS and other commodity-specific support can create barriers to changing production systems, limiting its ability to adapt to climate change. Further improvements should be envisaged to reduce MPS and eliminate measures impeding climate-change adaptation.
The annual value of agriculture, food, forestry, and fishery exports continued to increase. While this signals a move towards a more competitive agricultural sector, the exclusion of key products from trade agreements limits the economic gains of opening the country to international trade. A gradual reduction of trade barriers on agricultural products would contribute to structural change and productivity growth in the Japanese agro-food sector.
Japan’s food system policy, the strategy MIDORI, is a promising sector-wide initiative to increase the sustainability and productivity of its food systems. In particular, the new certification system under the MIDORI Act could facilitate the adoption of environmentally-friendly practices and technologies by farmers and other stakeholders. This initiative should be complemented by further efforts in promoting R&D, networking, capacity-building, strategic advice, and multi-actor partnerships.
Japan’s agricultural sector is facing major challenges, with surging raw-material and ingredient costs. The policy response should be proportionate and targeted in order not to hamper Japan’s other food-system objectives, including environmental sustainability.
Overview of policy trends
Agricultural land reform was implemented immediately after World War II, transferring farmland ownership from landlords to previously tenanted farmers in order to improve their economic and social position. It restricted sales of farmland to non-farmers and strongly protected farmers’ rights. This policy applied until 2009, when the Agricultural Land Act was revised to allow non-agricultural companies to lease farmland. Japan also invested in agricultural research, extension services, and land infrastructure to recover from the devastation of the war. At the same time, the government kept controls on rice procurement – from production to distribution to consumers – under the Food Management Law in order to secure food supply.
To address the rising disparity in living standards and productivity between agriculture and other sectors, Japan implemented the Agricultural Basic Act in 1961 to increase farmers’ incomes by promoting the modernisation of agriculture. From the mid-1950s to the mid-1990s, agricultural policies focused on price and marketing control, including tariffs for key products, particularly rice, to ensure affordable food prices for consumers while increasing farm income in rural areas.
In 1993, at the conclusion of the Uruguay Round trade negotiations, Japan agreed to a preferential quota on rice imports. The Food Management Law was repealed in 1995, introducing market mechanisms for rice distribution. Following the replacement of the GATT with the WTO in1995, Japan converted non-tariff border measures to tariff rate quotas (TRQs) for major commodities, including rice.
Rapid globalisation of the economy, together with the continued decline in farming population and farmland area adversely impacted Japanese farming communities. In response, the Agricultural Basic Act was replaced by the Food, Agriculture and Rural Areas Basic Act in 1999 to establish four basic principles: 1) a stable food supply; 2) the desired multifunctional roles of agriculture; 3) sustainable development of agriculture; and 4) development of rural areas. Under the act, ten-year agricultural policy plans, named the Basic Plan for Food, Agriculture and Rural Areas, have been formulated since 2000.
Recent agricultural policy reforms have been aimed at helping the sector become more competitive and resilient. The government-administered rice production quota system was abolished in 2018, and other pro-competitiveness reforms have encouraged farmland consolidation and re-organising agricultural co-operatives. In 2019, non-product specific revenue insurance was introduced to diversify farmers’ risk-management tools. The strategy “MIDORI” was introduced in 2021; this is a sector-wide initiative to improve environmental, social, and economic outcomes throughout supply chains by 2050.1
Promoting agricultural and food exports has also become a key policy goal, as demand for Japanese food products increases. Japan improved market access through large-scale trade agreements in recent years, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2018, the Japan-EU Economic Partnership Agreement (Japan-EU EPA) in 2019, the Japan-US Trade Agreement in 2020, and the Regional Comprehensive Economic Partnership (RCEP) in 2022.
Support to farmers declined from close to 57% of gross farm receipts in the mid-1980s to less than 32% in 2022. The share of market price support also declined but, while Japan provides a range of budgetary forms of producer support, higher domestic prices continue to provide the majority of transfers to producers, accounting for close to 80% of PSE in 2020-22 (Figure 17.4).
Main policy instruments
The Basic Plan for Food, Agriculture and Rural Areas revised in 2020 (hereafter the 2020 Basic Plan) sets Japan’s agricultural policy direction for the next decade. The 2020 Basic Plan aims to ensure a stable food supply and improved food self-sufficiency and continues necessary agricultural policy reforms both to make the sector competitive and manage issues facing the sector, while putting an increased emphasis on rural communities, smart agriculture and digitalisation, and risk management (e.g. with respect to natural disasters.
The 2021 strategy MIDORI defines the path to transform Japan’s food systems and increase the agriculture and food systems’ sustainability and productivity potential until 2050. This strategy involves: 1) enhancing engagement of stakeholders all along the food supply chain; and 2) promoting innovation to reduce environmental pressures. It defines 14 Key Performance Indicators (KPI) and a roadmap for developing and implementing innovative technologies and production methods by 2050. More specifically, the agriculture-related KPIs include:
Zero CO2 emission from fossil fuel combustion in agriculture, forestry and fisheries
50% reduction in risk-weighted use of chemical pesticides2 by increased use of Integrated Pest Management and newly-developed alternatives that will be available by 2040
Increase of land under organic farming to 1 million ha (equivalent to 25% of farmland)
At least 30% enhancement in productivity of food manufacturers (by 2030)
In June 2022, the 14 KPIs for 2050 were complemented by an additional nine intermediate KPIs with a 2030 time horizon. The new agriculture-related KPIs for 2030 include:
Increase of land under organic farming from 25 000 hectares in 2020 to 63 000 hectares in 2030
50% of horticultural facilities (by heated area) use hybrid heating system with heat pumps and fossil fuel heaters.
Japan maintains a system of high border protection and domestic price support for key agricultural products. Average tariffs on agricultural products were 14.9% in 2021, compared to 2.5% for non-agricultural products. However, agricultural tariffs vary considerably. More than 35% of tariff lines are duty-free, but 2.9% of them are above 100% (ad valorem equivalent), while 13.3% of agricultural tariff lines have non-ad valorem tariffs (WTO, 2022[1]). Tariff rate quotas with high out-of-quota tariffs apply to some commodities, like starch and dairy products.
Rice imports are managed by a state trading enterprise, fulfilling Japan’s minimum-access commitment under the WTO Agreement on Agriculture. A TRQ of 682 200 tonnes (milled) applies. The maximum mark-up (collected by the government when importing and selling on domestic markets) for rice imports is set at JPY 292 (USD 2.2) per kg, and the out-of-quota tariff-rate is JPY 341 (USD 2.6) per kg.
A revenue-based payment is available for farmers meeting certain requirements who produce rice, wheat, barley, soybean, sugar beet and starch potato. The payment covers 90% of the difference between current revenue and a benchmark based on the previous five years’ revenues, with the cost shared between the government (75%) and the farmers’ reserve fund (25%).
The direct support payment for upland crops (wheat, barley, soybean, sugar beet, starch potato, buckwheat and rapeseed) is based on both area and output. The area-based payments are based on current planting, and output-based payments according to the volume of sales and the quality.
A crop diversification payment goes to farmers who switch their use of paddy fields from table rice production to other crops (wheat, soybeans, or rice for feed and processing). This payment is area-based, but output is also taken into account for rice for feed and flour. Within this crop diversification programme, a payment is also provided to municipal governments if the production area employs high-yield rice variety for feed and processing, or cultivates buckwheat or rapeseed.
The Livestock Stabilisation Programme, known as Marukin, provides support payments to beef cattle and hog producers when the standard sales price falls below the standard production cost. Ninety per cent of the difference between costs and sales prices are paid to producers, to which the government contributes 75% and the rest are provided by the producers’ reserve fund. Apart from the Marukin, output-based compensation goes to producers of raw milk used for dairy processing.
Agricultural mutual aid is a form of commodity insurance that is voluntary and available for a range of commodities (rice, wheat, barley, livestock, fruit, and other field crops) and horticultural facilities. It covers yield losses, damage to facilities from pests and natural disasters, losses caused by death or culling of livestock and veterinary expenses. Crop quality losses are also insured for some agricultural products including rice, wheat, barley, and fruit. Government support covers around 50% of the insurance premium.
In 2019, Japan launched the non-product specific revenue insurance programme. The programme compensates the loss of farm revenue stemming from both market and natural causes, relative to a benchmark based on the previous five years’ revenues. The government supports 50% of the insurance premium and 75% of the reserve fund. Farmers must choose between participating in the agricultural mutual aid programme or revenue insurance programme to avoid duplicate payments.
Japan provides financial support to young farmers (under 50 years old) during a training period and initial operation period. Annual subsidies are also available for agricultural management entities to employ and train young farmers.
The Agricultural Land Act establishes Agricultural Committees in municipalities to manage agricultural land use. Purchasing, selling and leasing of agricultural land need to be approved by the Committee. In 2014, Farmland Banks were established in all prefectures to reinforce the intermediary role of the government in land transactions.3 The banks improve farmland conditions and infrastructure (e.g. enlarging plot size and investment in drainage facilities) if necessary and then lease the consolidated farmland to business farmers. Subsidies are provided to landowners and regional authorities that lease farmland to the banks.
Public investment in rural and agricultural infrastructure is a core agricultural policy, including agricultural roads, dams and irrigation, and drainage facilities. The government also invests natural disaster preparedness and restoring farm infrastructure, as well as constructing public health and recreational facilities associated with agriculture.
About 40% of both total agricultural land and total agricultural output take place in hilly and mountainous areas. Area-based direct payments go to farmers in these areas to compensate for the physical disadvantages of these locations for agricultural production in order to avoid the abandonment of agricultural land. Other payments are available to support collective engagement of local stakeholders in maintaining the multifunctional roles of agriculture.
In line with the strategy MIDORI, Japan has defined an agricultural greenhouse gas (GHG) emissions reduction target of 49.5 MtCO2eq by 2030. GHG mitigation efforts in agriculture are conducted mostly via support payments, grants, credits or non-financial services. For instance, direct payments for environmentally-friendly agriculture are provided to farmers who conduct GHG mitigation activities, such as applying compost and extending midseason drainage in paddy field. These activities must be in conjunction with synthetic fertilisers and pesticides use that less than half of that of conventional farming practices in the region. The government provides investment support for farmers using climate-smart technologies such as renewable energy and biomass-based greenhouse heating systems in horticulture. In addition, the government is setting up a labelling system of agricultural products that visualises farmers’ efforts of GHG reduction to effectively appeal to consumers.
Japan currently has 20 Economic Partnership Agreements (EPAs) and other trade agreements with Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, Brunei Darussalam, the Association of Southeast Asian Nations (ASEAN), the Philippines, Switzerland, Viet Nam, India, Peru, Australia, Mongolia, CPTPP, the European Union, the United States, the United Kingdom and RCEP. In addition, Japan is engaged in EPA negotiations with Colombia, with Türkiye, and with the People’s Republic of China and Korea for the plurilateral free trade agreement.
Climate change adaptation policies in agriculture
Japan’s agricultural sector is vulnerable to climate change and is already experiencing its negative effects on production and product quality. The scale of recent typhoons and heavy rains has been unprecedented, causing major damage to the economy and to the agricultural sector specifically (Shigemitsu and Gray, 2021[2]). High temperatures have resulted in less quality and yields of rice. They also affect fruit production, such as by discolouring apples and grapes, increasing mandarin sunburn, and causing flowering disorders among Japanese pears.
The 2018 Climate Change Adaptation Act is Japan’s legal foundation for adaptation measures. It mandates the establishment of Japan’s Climate Change Adaptation Plan, with monitoring and updates every five years. The National Climate Adaptation Plan was last revised in October 2021. In parallel, Japan submitted its adaptation communication to the UNFCCC, outlining the latest impacts of climate change and expanding its adaptation intentions to areas such as agriculture, disaster-risk reduction, and health.
The 2021 Plan includes strategies to co-ordinate and collaborate on adaptation policies across relevant ministries; develop climate research and an information infrastructure; disseminate climate information; implement local adaptation measures; improve public awareness; promote adaptation actions in the business sector; and provide aid for climate-change adaptation in developing countries.
MAFF formulated its first Climate Change Adaptation Plan for the agriculture, forestry, and fisheries sector in August 2015. The Agriculture Adaptation Plan deals with managing climate risks, such as by developing and utilising new plant varieties and natural-disaster-resilient infrastructure, and envisions taking advantage of opportunities that could arise. Due to the long, narrow north-south orientation of the country and consequently diverse climatic conditions and farming systems, the plan emphasises that adaptation measures should be tailored locally and implemented through co-operation between national and local governments.
The subsequent 2021 Agricultural Adaptation Plan was developed to respond to the 2020 Assessment Report on Climate Change Impacts in Japan and designed to be coherent with the strategy MIDORI. The Plan comprises six strategies: (1) developing plans to respond accurately and effectively to the impacts of climate change in the next 10 years; (2) promoting development and dissemination of stable production technologies and varieties adapted to climate change; (3) maintaining and improving prevention of and response to disasters caused by extreme weather events; (4) exploiting opportunities such as the northward shift of some horticultural products to favourable temperature zones; (5) facilitating collaboration and sharing information among stakeholders; and (6) promoting initiatives by continuously reviewing and optimising the plan.
Adaptation measures for agricultural production are being undertaken under MAFF’s guidance. These include research into ongoing climate-change impacts and facilitating knowledge transfer, such as demonstration projects and reports that make producers aware of new adaptive technologies and heat-tolerant varieties. MAFF published an “innovative technology catalogue” in November 2022 to collect and promote 167 available technologies and 81 to be developed by 2030, which can contribute to achieving the strategy MIDORI’s KPI.
In co-operation with all 47 prefectural governments, MAFF monitors the impacts of global warming on crops and livestock production. The results of this exercise, together with adoption rates of adaptive technologies and heat-tolerant varieties, are disseminated in the annual "Global Warming Impact Survey” and via the MAFF website.
The 2021 Agricultural Adaptation Plan focuses on adaptive actions for paddy rice, fruit production, and crops damaged due to pests and diseases, identified as “facing particularly significant climate change impacts” and “requiring high urgency of response” in the 2020 Assessment Report on Climate Change Impacts in Japan, published by the Ministry of the Environment. These actions include:
Promoting high-temperature-resistant varieties of rice to farmers and advising them to plant rice varieties with various ripening periods. High-temperature-resistant varieties were used in 35 out of 47 prefectures and covered 12.4% of total paddy rice production area in 2021. This will limit the impact of high temperatures during the rice grain ripening period.
Promoting the introduction of superior-coloured cultivars, or yellow-green cultivars for apples and grapes, and encouraging growers to switch from satsuma mandarin to medium-late maturing citrus to limit the impact of climate change on fruit. MAFF also distributes guidance documents for apple, grapes, and mandarin growers. At the same time, MAFF promotes opportunities created by climate change for agriculture, notably the expansion of suitable areas for fruit production. Peaches, blood oranges, and tropical fruits (e.g. avocado and atemoya) are some of the high-value crops that can now be grown in new areas of Japan.
Promoting a pest-forecasting service to control pests within appropriate time periods, and early-detection and control systems for invasive pests and diseases.
Agricultural infrastructure in rural areas faced unprecedented levels of damage and loss due to typhoons and heavy rain events in recent years. Following the 2018 Fundamental Plan for National Resilience and the Basic Plan for Food, Agriculture and Rural Areas, MAFF manages agricultural infrastructure using different types of measures. They include extending the service life of agricultural irrigation facilities; renovating high-risk agricultural reservoirs; and creating hazard maps and contingency plans for agriculture-related facilities (Shigemitsu and Gray, 2021[2]).
Two types of subsidised insurance programmes are available for farmers to mitigate climate risks (Shigemitsu and Gray, 2021[2]). The agricultural mutual-aid programme and the non-product specific revenue insurance programme (described above) provide risk protection for natural hazards.
To achieve greater resilience in rural areas, MAFF’s rural development policy supports economic diversification and innovation. For instance, Support for Innovations from Rural Areas is a scheme launched in 2022 to create new businesses and added value by using local resources. The scheme supports those who seek diversification by facilitating investment and building platforms among entrepreneurs. Having multiple sources of income can stabilise incomes and provide new opportunities. Income sources could include farm tourism, food processing, and renewable-energy production. Inter-sectoral collaboration is key for these to succeed.
Domestic policy developments in 2022-23
Food systems sustainability
In April 2022, the Diet (the Japanese parliament) enacted the “Act to Promote Low Environmental Impact Business Activities for the Establishment of Environmentally Harmonized Food Systems” (hereinafter the MIDORI Act) to facilitate the implementation of the strategy MIDORI. The act entered into force on 1 July 2022. The MIDORI Act sets out principles for the environmentally sustainability of Japan’s food system, in which producers, consumers, and other stakeholders work in partnership to reduce the environmental impact of food production and supply chains.
The MIDORI Act stipulates that local governments are responsible for setting and implementing environmental measures (improving soil health, reducing use of chemical pesticides and fertilisers, and reducing GHG emissions) suitable to the natural, economic, and social conditions of their regions. MAFF promotes prefectural and municipal governments to develop a “Basic Plan” to set targets for improving environmental outcomes in their respective regions.
The MIDORI Act establishes a certification system for environmentally-friendly practices and technologies. Producers (including farmers, fishers, or foresters) can have their environmentally-friendly activities certified if they develop an activity plan in co-ordination with the “Basic Plan” of their region. Business operators, including food manufacturers, processors, distributors, input manufacturers, machinery manufacturers, seed developers, plant breeders, and extension service providers who offer innovative technologies to reduce the environmental impact of agriculture are also eligible for certification. Certified producers and business operators can enjoy several tax and financial benefits as well as other services such as simplified administrative procedures to facilitate their business development. In particular, the Japan Finance Corporation offers certified producers an extension of two years for their interest-free loans. It also offers low-interest and long-term loans for certified machinery, input, and materials manufacturers.
In application of the MIDORI Act, MAFF allocated a total of JPY 11.7 billion (USD 89 million) to the Green Food System Strategy and Environment Program in 2022. About JPY 8.4 billion (USD 64 million) was invested to support R&D and demonstration programmes for “Smart Agriculture”, pelletised composted-manure application, and data-based soil management.4 The remaining JPY 3.3 billion (USD 25 million) was spent to facilitate the reduced use of chemical fertilisers and pesticides on farms and organic farming. As of November 2022, a total of 318 projects were initiated. To accelerate the progress, MAFF plans to allocate JPY 12.3 billion (USD 93.6 million) to the same programme in 2023.
The strategy MIDORI also puts high priority on organic farming. In addition to direct payments for environmentally-friendly agriculture, MAFF also supports organic agriculture through the establishment of model areas for organic farming clusters, and marketing promotion and sales channel expansion for organic products including their use in school lunch programmes.
To reach the 2030 strategy MIDORI’s target of a 10% reduction in risk-weighted use of chemical pesticides, MAFF encourages the adoption of Integrated Pest Management (IPM) systems and the application of advanced pest control technologies, such as precision pesticide spraying by drone and early detection technology for pests and diseases using Artificial Intelligence.
Innovation and digitalisation
Accelerating the implementation of Smart Agriculture and digitalisation is one of the key objectives of the 2020 Basic Plan. In June 2022, MAFF published an updated version of the 2020 Smart Agriculture Promotion Comprehensive Package. The document identifies specific measures necessary to reach the digital agriculture target of having “most of principal farmers in Japan practice data-driven agriculture by 2025.” These measures include conducting pilot studies and providing training opportunities. The revisions are aligned with the strategy MIDORI and clarify the roles of smart agriculture for stable and sustainable domestic food production.
In December 2022, the “Digital Garden City Nation Initiative” was established to promote regional development. It focusses on digitalisation in rural areas as a way to eliminate the digital divide between urban and rural regions. MAFF also provides financial support to Region Management Organization for rural areas (RMO) that work to support communities and preserve rural areas. The goal of these actions is to increase the number of people moving from the Tokyo area to rural regions to 10 000 per year by Japanese fiscal year (JFY) 2027, and to increase the number of municipalities engaging in digitisation to 1 500 nationwide.
Risk management
A series of torrential rains hit Japan in July and August 2022. They triggered severe flooding especially in northeast Japan, leaving extensive damage to agriculture, forestry and fisheries. Total estimated damages were JPY 118.3 billion (USD 826 million). In September, typhoons Nanmadol and Talas caused JPY 75.2 billion (USD 554.7 million) in damage to agriculture. The record snowstorm in 2022-23 also caused damage costing JPY 65.3 billion (USD 401.7 billion) to the sector. The government earmarked a total budget of JPY 72.1 billion (USD 549.3 billion) for restoration efforts in the sector, mostly intended to support the recovery of farmland and agricultural facilities.
Domestic policy responses to Russia’s war of aggression in Ukraine
On 26 April 2022, the Japanese Cabinet approved an emergency relief package to cushion the economic blow from rising raw material costs. The JPY 6.2 trillion (USD 47 billion) relief package, funded mostly by the Supplementary Budget for the JFY2022 and reserves set aside under the JFY2022 budget, included subsidies to gasoline wholesalers and support payments to low-income households with children, among others. Within this package, JPY 75.1 billion (USD 571 million) was allocated to MAFF to alleviate the effects of price surges for food and raw materials through several measures as discussed in this section.
To address high fertiliser prices, JPY 10 billion (USD 76.1 million) was allocated to help fertiliser manufacturers to diversify suppliers of raw materials, by covering additional transportation and storage costs of fertiliser raw materials associated with changes in supplying countries. The support payments were available to cover fertiliser materials imported until autumn 2022.
MAFF also helped livestock farmers with feed costs. JPY 43.5 billion (USD 331 million) was allocated to compensate the additional payments of the compound feed price stabilisation funds to livestock farmers. The compensation is activated when the average import price in a given quarter exceeds 115% of the average import price for the previous 12 months.
About JPY 10 billion (USD 76.1 million) was provided to food producers facing high raw materials costs. This support was available to cover the cost of developing and manufacturing new food products and sourcing costs when alternative raw materials were required for new food products.
MAFF distributed JPY 2.5 billion (USD 19 million) to incentivise farmers to increase wheat production. Financial supports were available to wheat producers who increased wheat planting or who purchased or adopted new machinery and practices. MAFF also supported groups of local producers seeking to enlarge wheat production on a collective basis. Investment supports were offered to flour mills and distributors to build storage facilities for domestic wheat.
To help low-income households confront surging food prices, MAFF allocated JPY 123 million (USD 0.9 million) to urgently promote the dispatch of experts to help food banks secure food supply sources and to strengthen their activities. Upon requests from food banks all over the country, the experts support in expanding the amount of food that food banks can handle, matching food providing companies with e.g. children's dining rooms, and providing the necessary know-how for formulating activity plans.
On 9 September 2022, the government announced an additional relief package to alleviate rising food and energy costs, funded through the JFY2022 reserve fund. The package includes measures to keep the import wheat selling price from rising, payments to livestock farmers to compensate for the increased cost of compound feed, support to mitigate rising fertilisers costs, and grants to localities to support local inflation countermeasures.
In line with MIDORI strategic objectives, MAFF also encouraged the reduction in mineral fertiliser use, by covering 70% of the increased fertiliser costs compared to the previous year to farmers who adopt measures to reduce chemical fertiliser use at least 20%. Approved measures include use of livestock manure and sewage sludge compost, cover crops, and fertiliser application based on soil analysis. The support payments are applicable to fertiliser applications in autumn 2022 and in spring 2023.
On 2 December 2022, MAFF allocated JPY 164.2 billion (USD 1.25 billion) from the JFY2022 supplementary budget to strengthen food security, with an emphasis on reducing import dependence, by increasing domestic production of agricultural products and inputs. The main measures include support payments to livestock farmers and compost manufacturers to partially cover costs for building facilities for the manufacture and pelletisation of compost. MAFF also provided support to cover the costs of pilot projects for the use of domestic materials such as sewage sludge in fertiliser. Support payments were also increased for forage crop production and the establishment of domestic supply chains for domestic forage. Some of the programmes will continue to be funded under the JFY2023 annual budget.
On 27 December 2022, the Japanese Government released the “Food Security Reinforcement Policy Framework” which presents a roadmap to ensure a stable food supply. The Policy Framework sets several targets to facilitate the structural transformation by increasing production and utilisation of domestic resources, such as:
Doubling manure compost and sewage sludge use for fertiliser and increasing the ratio of domestic materials (e.g. nitrogen from livestock manure and phosphorus from sewage sludge) in fertiliser use (on a phosphorus basis) from 25% in 2021 to 40% by 2030.
Increasing production areas by 9% for wheat, 16% for soybeans, and 32% for feed crops compared to 2021 levels by 2030.
Halving food loss and waste in the food industry businesses to 2.7 million tonnes by 2030 from 2000 levels.
Trade policy developments in 2022-23
Japan’s agriculture, food, forestry and fishery exports reached a new record of JPY 1.4 trillion (USD 10.7 billion) in 2022. To build on this trend and reach the objectives of JPY 2 trillion by 2025 and JPY 5 trillion by 2030, Japan renewed the 2020 Strategy of Export Expansion of Agricultural, Forestry, Fishery Products and Food in December 2022.
In May 2022, MAFF revised the Act on Facilitating the Export of Agricultural, Forestry and Fishery Products and Food to incorporate the certification system for export promotion associations covering major commodities. The export promotion associations bring together stakeholders within a marketing chain to develop overseas markets. Certified export promotion associations are expected to create standards, set quality standards and production methods and unify sales strategies for specific Japan-made products. These groups can seek advice from Japan External Trade Organization (JETRO) and Food and Agricultural Materials Inspection Centre (FAMIC). By the end of December 2022, MAFF certified seven associations, including “All Japan Trade Association of Confectionery Manufactures”, “Japan Sake and Shochu Makers Association”, “Japan Rice and Rice Industry Export Promotion Association” and “Japan Fruit and Vegetables Export Promotion Council”.
Japan is the world’s third largest economy after the United States and China with relatively small land area and high population density (Table 17.3). Agriculture constitutes 1% of GDP and 3% of employment in 2021, but the agriculture and agro-food sector as a whole accounts for 9% of GDP if all food-related industries are considered (MAFF, 2023[3]). Livestock accounted for more than one-third of the total agricultural production value in 2021, followed by vegetables (24%), rice (16%) and fruits (10%) (MAFF, 2023[4]).
Two-thirds of the country area is covered by mountains, leaving only 12% of the total land area for agriculture, more than half of which are rice paddy fields. Total agricultural land has decreased from 4.8 million hectares in 2000 to 4.3 million hectares in 2021 (MAFF, 2021[5]) due to the abandonment and conversion of farmland to non-farm uses (e.g. residential, industrial, or commercial uses). The agricultural workforce declined by more than half since 1980 to 1.9 million in 2021, and the pace of this decline has accelerated in the last decade (SBJ, 2022[6]). The average farm size increased from 1.4 hectares to 3.2 hectares between 1990 and 2021 (MAFF, 2021[7]), but still remains small compared to other OECD countries. The average age of farmers was 67.9 years in 2021 and about 70% of farmers in Japan are over 65 years old (MAFF, 2022[8]; MAFF, 2021[9]).
The country has experienced slow economic growth and deflation for most of the past two decades, but has one of the lowest unemployment rates among OECD countries (Figure 17.5). Since the Russian aggression against Ukraine, the energy shock has pushed up inflation, hurting economic growth around the world, as well as Japan. Energy and food prices remain the biggest driver of headline consumer price inflation in Japan, which reached 3% in August and September 2022 (OECD, 2023[10]).
Japan is one of the world’s largest importers of agro-food products, and the United States is the biggest source of agricultural imports. The food self-sufficiency rate was 38% in 2021 on a calorie basis, meaning that more than 60% of Japanese calorie supply depended on imports. Agro-food exports are much smaller than imports, but the export value in 2021 increased by 22.7% from 2020, reaching its highest level at JPY 804 billion (USD 6.1 billion). It is about five times higher than that of 2000 (MAFF, 2021[11]). Most of Japan’s agro-food exports are directed at final consumers (Figure 17.6). Processed food products such as alcohol and beverages, sauces and seasonings, and snacks account for the majority of Japan’s agro-food exports. Among unprocessed products, apples, beef and green tea are the most exported.
Japan’s agricultural Total Factor Productivity (TFP) growth averaged 1.4% a year between 2011 and 2020, which is slightly above the global average and twice the growth estimated for 1993-2002 (Figure 17.7, Table 17.4). Recent TFP growth in Japan’s primary agriculture has allowed some modest output growth, offsetting reductions in the use of primary production factors, in particular labour, and intermediate inputs.
Japan’s nitrogen and phosphorus balance remain among the highest in OECD countries (Table 17.4). The high and increasing nitrogen balance is due to a combination of high fertiliser use and livestock production on limited pasture land. The high phosphorus balance, in contrast, is partly a result of soil characteristics (OECD, 2019[12]; Shindo, 2012[13]). Agriculture’s share of total energy use is below the OECD average, as is its share in GHG emissions – partly a consequence of the sector’s below-average contribution to the national GDP. The volume of agricultural water use has remained stable for the past few decades. In 2019, the Japanese agricultural sector used 67.9% of water of which over 90% was directed for paddy field irrigation (MLIT, 2022[14]). While average water stress in Japan has fallen somewhat, it remains much higher than the OECD average.
References
[3] MAFF (2023), GDP calculation for agriculture and food related sector (in Japanese), https://www.maff.go.jp/j/tokei/kouhyou/keizai_keisan/attach/pdf/index-3.pdf.
[4] MAFF (2023), Total agricultural output (national estimate) (in Japanese), https://www.maff.go.jp/j/tokei/kouhyou/nougyou_sansyutu/.
[8] MAFF (2022), Agricultural structure statistics 2021 (in Japanese), https://www.maff.go.jp/j/tokei/sihyo/data/07.html.
[7] MAFF (2021), Agricultural structure statistics 2021 (in Japanese), https://www.maff.go.jp/j/tokei/kouhyou/noukou/attach/pdf/index-1.pdf.
[9] MAFF (2021), Agriculture and Forestry Census 2020 (in Japanese), https://www.maff.go.jp/j/tokei/kekka_gaiyou/noucen/2020/index.html.
[11] MAFF (2021), Agriculture, Forestry and Fisheries Import and Export Statistics (in Japanese), https://www.maff.go.jp/j/tokei/kouhyou/kokusai/.
[5] MAFF (2021), Arable land area as of 15 July 2021 (in Japanese), https://www.maff.go.jp/j/tokei/kouhyou/sakumotu/menseki/.
[14] MLIT (2022), Water resources in Japan (in Japanese), https://www.mlit.go.jp/mizukokudo/mizsei/mizukokudo_mizsei_tk2_000014.html.
[10] OECD (2023), Measuring Progress towards Inclusive and Sustainable Growth in Japan, OECD Publishing, https://doi.org/10.1787/3ced6c79-en.
[12] OECD (2019), Innovation, Agricultural Productivity and Sustainability in Japan, OECD Food and Agricultural Reviews, OECD Publishing, Paris, https://doi.org/10.1787/92b8dff7-en.
[6] SBJ (2022), Labour Force Survey, Statistics Bureau of Japan (in Japanese), https://www.e-stat.go.jp/dbview?sid=0003007108.
[2] Shigemitsu, M. and E. Gray (2021), “Building the resilience of Japan’s agricultural sector to typhoons and heavy rain”, OECD Food, Agriculture and Fisheries Papers, No. 159, OECD Publishing, Paris, https://doi.org/10.1787/4ed1ee2c-en.
[13] Shindo, J. (2012), “Changes in the nitrogen balance in agricultural land in Japan and 12 other Asian Countries based on a nitrogen-flow model”, Nutrient Cycling in Agroecosystems, Vol. 94/1, pp. 47-61.
Notes
← 1. Originally named the MeaDRI Strategy, based on an abbreviation of “Measures for Achievement of Decarbonisation and Resilience with Innovation”. “MIDORI” means “Green” in Japanese.
← 2. The risk-weighted use of chemical pesticides is estimated on the Acceptable Daily Intake (ADI) level of a chemical in humans.
← 3. Officially called the Public Corporations for Farmland Consolidation to Core Farmers through Renting and Subleasing.
← 4. According to MAFF, Smart Agriculture uses robot technology and ICT to achieve ultra-labour-saving and high-quality production.