16. Japan
Japan reduced its support to agriculture over the past decades, but agricultural support levels have stabilised more recently. Support to agricultural producers (PSE) remains high as a share of gross farm receipts at 41.1% in 2018-20, more than twice the OECD average.
The share of market price support (MPS) decreased only moderately and remains the main element of agricultural support, accounting for about 80% of PSE in 2018-20. It is largely sustained by border measures, in particular for rice, pork and milk. Protection for producer prices also decreased but, overall, farmers received prices on average about 60% above international market levels in 2018-20. Payments to producers increased between 2019 and 2020 due to direct payments for beef and support for crop farms to cushion the impact of COVID-19. Most remaining budgetary support to producers was mostly delivered as payments based on area and income.
The share of expenditures for general services provided to agriculture (GSSE) relative to total support estimate to agriculture (TSE) was 20.7% in 2018-20, higher than the OECD average but less than in the 1990s. Relative to the size of the sector, GSSE declined from 19% of agricultural gross value-added in 2000-02 to 16% in 2018-20, but remains well above the OECD average. The majority of GSSE financed the development and maintenance of agricultural infrastructure, predominantly of off-farm irrigation systems, representing 85.9% of GSSE in 2018-20. TSE represented 1% of Japan’s GDP in 2018-20, most of which went to PSE.
The Basic Plan for Food, Agriculture and Rural Areas, which sets Japan’s overall agricultural policy direction for the next 10 years, was revised in March 2020. The Basic Plan envisions continuous sectoral reforms but also increased support to rural communities. It also revised Japan’s food self-sufficiency goals and by-commodity production targets to account for projected domestic consumption. The 2030 production targets for all commodities except rice are higher than current levels.
To alleviate economic losses and damage associated with the COVID-19 pandemic, Japan implemented an economic support package of JPY 234 trillion (USD 2.1 trillion) for fiscal year (FY) 2020. Equivalent to more than 40% of GDP, this is the largest supplementary budget ever implemented. The package supports both the agricultural sector and consumers through various activities, such as finding alternative sales channels, securing agricultural labour and disseminating information.
Promotion of agricultural products and food exports continues to drive Japanese agricultural policy. In April 2020, Japan introduced the Act on Facilitating the Export of Agricultural, Forestry and Fishery Products and Food, which streamlines export policies for these products. Japan also set targets for agricultural and food products exports to reach JPY 1.3 trillion (USD 11.2 billion) by 2025 and JPY 3.3 trillion (USD 30.9 billion) by 2030. The Strategy to Realize Export Expansion of Agricultural, Forestry, Fishery Products and Food designates key products to prioritise resources and actions for agricultural export expansion.
Developments related to agri-environmental policies include an October 2020 pledge to achieve economy-wide carbon neutrality by 2050. The Green Growth Strategy published in December 2020 establishes greenhouse gas (GHG) emission mitigation targets while pursuing economic growth. Further, the sustainable food system strategy formulated in May 2021 calls for the greening of agricultural policies, including a shift of measures towards supporting decarbonisation in agriculture, forestry and fisheries, and an increased proportion of subsidies linked to cross-compliance in order to reduce environmental impact.
In November 2020, Japan signed the Regional Comprehensive Economic Partnership (RCEP) with 14 countries in the Asia-Pacific region. Japan’s sensitive agricultural products such as rice, wheat, beef, pork, dairy products, and sugar and starch are exempted from tariff reduction. At the same time, the RCEP provides trade facilitation frameworks for non-tariff measures such as Sanitary and Phytosanitary Measures, Standards, Technical Regulations and Conformity Assessment Procedures and Intellectual Property. The Japan-United Kingdom Comprehensive Economic Partnership Agreement (Japan-UK CEPA) entered into force on 1 January 2021. Japan-UK CEPA replicates most of the market access and tariff commitments for agricultural products provided under the Japan-EU Economic Partnership Agreement.
Japan made efforts to reform agricultural support policies since the early 2000s. But support to agricultural producers as a percentage of gross farm receipts remains more than twice the OECD average and continues to be dominated by MPS, among the potentially most-distorting forms of support. The new Basic Plan envisions increased food self-sufficiency and production, but these should not translate into additional distorting support to production, or reverse agricultural reforms. The government should develop a transparent and reliable pathway to reduce MPS and eventually eliminate measures that impede market signals.
One of the main payments, the continued support provided for the crop diversification payment programme is likely to help reduce abandonment of paddy fields. However, other policies should be aligned with the ambition to reallocate rice area to other crops, implying in particular a reduction of high market price support for rice.
Increased competition in the domestic market may contribute to structural change and further productivity growth in Japanese agriculture, but the exclusion of key products from trade agreement including RCEP limits the economic gains of opening international trade, both for consumers and for agriculture.
There is significant room to improve the environmental performance of agriculture. Japan is among the OECD countries with the highest nitrogen and phosphorus surpluses. Even though agriculture accounts for a small share of Japan’s GHG emissions, it produces 78% of methane emissions. Recent policy developments in agriculture and environment, including increased cross-compliance and decarbonising supports, are expected to incentivise farmers to adopt more sustainable production practices and improve agricultural environmental performance.
Although the share of expenditures for general services provided to agriculture relative to total support is higher than the OECD average, the level decreased since the 1990s. Moreover, these were programmed mostly for irrigation-related infrastructure development and maintenance, which includes restoring damaged infrastructure from large-scale natural disasters. Climate-related hazards, often detrimental to infrastructure, are expected to become more frequent and intense. More attention should be paid to making infrastructure more hazard-resilient. Progress is also needed to support agricultural knowledge and innovation in order to enhance the sector’s productivity, sustainability and resilience.
Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
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 and extension, 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 increasing farm size, improving farmland, adopting agricultural machinery and technology, and shifting from rice and wheat-based production to livestock, vegetables and fruits. 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 Act was repealed in 1995, introducing market mechanisms to rice distribution. Following the replacement of the GATT with the WTO in 1999, Japan converted non-tariff border measures to tariff rate quotas (TRQs) for 28 commodities, including rice.1
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 Basic Plan for Food, Agriculture and Rural Areas, have been formulated since 2000 (Box 16.1).
Agricultural policy reforms took place in recent years to help the sector become more competitive. These packages2 aim to increase farm productivity through farmland consolidation and organisational restructuring of agricultural co-operatives, which play a central role in the Japanese agro-food system. Japan also introduced the revenue insurance programme to diversify farmers’ risk-management tools. Moreover, Japan abolished the government-administered rice production quota system in 2018. Further, to capture increasing demand for Japanese food products overseas, agricultural and food exports became a key policy goal.
In parallel, 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, and the Japan-US Trade Agreement in 2020.
Support to farmers declined from close to 57% of gross farm receipts in the mid-1980s to less than 38% in 2015, but stabilised around 41% in recent years. 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 2018-20 (Figure 16.4).
Note: A/An/R/I: Area planted/Animal numbers/Receipts/Income.
Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Main policy instruments
Japan maintains a system of high border protection and domestic price support for key agricultural products. In general, Japanese tariffs on agricultural products are higher than those on non-agricultural products. On average, tariffs on agricultural products amounted to 15.5% in 2019,3 compared to 2.5% for non-agricultural products. However, agricultural tariffs vary considerably, with over 35.8% of tariff lines duty-free and 3% of them above 100% (ad valorem equivalent), while 13.2% of agricultural tariff lines have non-ad valorem tariffs (WTO, 2020[1]). Tariff rate quotas with high out-of-quota tariffs apply to some commodities, like starch and dairy products.
Rice import happens through state trading, 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 2.7) per kg, and the out-of-quota tariff-rate is JPY 341 (USD 3.0) per kg.
A revenue-based payment is available for farmers meeting certain requirements, in particular certified farmers,4 producing rice, wheat, barley, soybean, sugar beet and starch potato if revenues from these crops drop below historic average revenues. Ninety per cent of the difference between current revenue and the past average is compensated by 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 the combination of area and output. The government provides area payments 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 for beef and hog, known as Marukin, provides support payments to beef cattle and hog producers when the average sales price falls below the average production cost, which for beef cattle is calculated at regional level. 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. Output-based compensation also goes to producers of raw milk used for dairy processing.
Commodity insurance covers yield losses and damage to production facilities from pests and natural disasters. Degradation of crop quality is also insured for certain commodities (rice, wheat, barley and fruit). Commodity insurance is voluntary and available for a range of commodities (rice, wheat, barley, livestock, fruit and field crops)5 and horticultural facilities. Government support covers around 50% of the insurance premium.
The revenue insurance programme launched in January 2019 provides a safety net for farmers in case of revenue loss. 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 can participate in either revenue insurance programme or commodity insurance to avoid duplicate payments by these government programmes.
Japan offers three types of support programmes to encourage young farmers (under 50 years old) to enter the agricultural sector. First, a maximum of JPY 1.5 million (USD 14 050) per year is available to new young farmers during a training period (maximum of two years). Second, JPY 1.5 million (USD 14 050) is granted annually to eligible young farmers during the initial operation period (maximum of five years). Third, funding for a maximum of JPY 1.2 million (USD 11 240) is available annually to subsidise agricultural co-operation for the training cost of young farmers (maximum of two years).
A certified farmer programme exists since 1993 to foster farmers (both individuals and corporations) who actively engage to improve farm management. The programme grants certified status to these farmers with a management plan approved by national or local municipal authorities. Certified farmers receive several benefits, including income support payments, tax breaks and support for pension premiums.
The Agricultural Land Act establishes Agricultural Committees in municipalities to manage agricultural land use in Japan. Purchasing, selling and leasing of agricultural land need to be approved by the Committee. Based on the Act on Establishment of Agricultural Promotion Regions, municipalities can prohibit conversion of agricultural land to other uses. Farmland Banks6 were established in 2014 to facilitate consolidation of farmland. These intermediary institutions exist in each prefecture. The banks improve the conditions and infrastructure of farmland if necessary, and lease the consolidated farmland to business farmers (e.g. corporations, large-scale family farmers, new farmers). Subsidies are provided to landowners and regional authorities that lease farmland to the Farmland Banks.
Public investment in rural and agricultural infrastructure is a core agricultural policy, including farmland (e.g. enlargement of land plots), roads, dams and irrigation, and drainage facilities. The government also invests in the prevention of natural disaster and restoration of farm infrastructure, and in construction of public health and recreational facilities associated with agriculture.
Hilly and mountainous areas represent about 40% of both total agricultural land and total agricultural output in Japan. Area-based direct payments go to farmers in these areas to compensate for the production disadvantage (e.g. steep slopes and smaller cultivation plots), to avert the abandonment of agricultural land, and to contribute to environmental protection, landscape preservation and community engagement.
Direct payments for environmentally friendly agriculture are provided to farmers who conduct activities effective in preventing global warming or conserving biodiversity, in conjunction with reducing the use of synthetic fertilisers and pesticides by more than half relative to conventional farming practices in the region. Examples of supported activities include cover-crop planting, compost application and organic farming. Farmers must comply with Good Agricultural Practices to receive these payments. Other payments are available to support community engagement to manage and maintain agricultural land and related resources (agricultural roads, water courses, reservoirs etc.) that help the performance of agricultural multi-functionality.
Having ratified the Paris Agreement on Climate Change, the agricultural mitigation plan of 2017 addresses carbon dioxide (CO2) emissions reduction through decreasing fuel consumption for horticultural facilities and agricultural machinery. It also describes measured for adjusting agricultural land use, such as disseminating water management methods for paddy fields to lower methane emissions and improving fertiliser use efficiency to reduce N2O. The agricultural adaptation plan established in 2015 and revised in 2017 and 2018, with a road map until 2025, looks at managing climate risk (e.g. development and utilisation of new plant varieties and natural disaster resilient infrastructure) and envisions taking advantage of opportunities that may arise.
Japan currently has 20 Economic Partnership Agreements (EPA) and other trade agreements in force or signed with Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, Brunei Darussalam, the Association of Southeast Asian Nations (ASEAN), Philippines, Switzerland, Viet Nam, India, Peru, Australia, Mongolia, CPTPP, the European Union, the United States, the United Kingdom and RCEP.7 These EPAs accelerated structural reforms and increased necessary support for the agricultural sector to counter market competition. Such efforts include the implementation of the Comprehensive TPP-related Policy Framework, which provides programmes to increase productivity in the sector. In addition, Japan is engaged in EPA negotiations with Colombia and Turkey, and the People’s Republic of China (hereafter “China”) and Korea for the plurilateral free trade agreement.
Domestic policy developments in 2020-21
Japan revised its Basic Plan for Food, Agriculture and Rural Areas (hereafter the Basic Plan) in March 2020, which sets the next decade’s agricultural policy directions. The new Basic Plan aims to continue necessary agricultural policy reforms both to make the sector competitive and manage the challenging environment, including the decline of farming population. The Basic Plan, however, now puts an increased emphasis on rural communities, for instance by strengthening the agricultural production base regardless of farm size (including small-scale family farms). The Basic Plan also aims at ensuring a stable food supply and improving food self-sufficiency (Box 16.1).
The Basic Plan is updated every five years and this is the fifth revision since it was first published in 2000. The previous 2015 Basic Plan prioritised agricultural sector reforms in order to make the sector competitive and withstanding to the expected new trade environment (e.g. implementations of large-scale EPAs). These reform initiatives resulted in some positive outcomes, including an increase in average net farm income from JPY 2.8 trillion (USD 26 billion) in 2014 to JPY 3.5 trillion (USD 33 billion) in 2018.
However, rapid decline of farming population and farmland area have raised concerns over further weakening of the agricultural production and rural agricultural communities. In addition, the surge of large-scale natural disasters due to climate change and livestock disease infections, such as classical swine fever, are increasing the vulnerability of the sector. The 2020 Basic Plan thus offers eight key visions to respond to these challenges:
The Basic Plan also sets several quantitative policy targets for 2030 including several self-sufficiency rates defined for agricultural production overall and subsets of it, as well as production targets for individual commodities. All these targets are set at levels higher than current ones, with the exception of the production target for rice, and serve as guides for the next decade’s policy formulation.1
← 1. These include three targets related to self-sufficiency rates for:
(a) all agricultural production, called food self-sufficiency, set to increase from 38% and 66% in 2019 when expressed on a calorie and value base, to 45% and 75% in 2030, respectively.
(b) feed production, called feed self-sufficiency, set to increase from 25% in 2019 to 34% in 2030.
(c) food (i.e. agriculture net of feed) production, called national food production, set to 47% and 69% in 2019 when expressed on a calorie and value base, to 53% and 79% in 2030, respectively.
(d) Production targets are also set for individual commodities.
In addition, a simulated projection of the potential domestic food production capacity is included, dubbed food self-sufficiency production potential, which considers land and labour availability and technological advancement in production and is used in stakeholder dialogues.
Source: (MAFF, 2020[2]).
In October 2020, MAFF published a new policy document, the Smart Agriculture Comprehensive Policy Package, to advance the development and the implementation of emerging technologies for the agricultural sector. In particular, the document identifies necessary measures over the next five years achieve smart agriculture in particular to reach the goal of having “most of key agricultural producers in Japan practice data-driven agriculture by 2025”. In March 2021, , a new policy blueprint for the use of digital technologies in the agricultural sector named the Conception and Projects for DX of Agriculture was set up. It addresses corresponding to the needs and providing new values to consumers through data-driven agriculture, which are called FaaS (Farming as a Service).
A number of plant varieties bred in Japan have been transferred abroad without authorisation. To enhance the plant breeders’ rights, (PBR) the Plant Variety Protection and Seed Act was amended in December 2020 and came into force in April 2021. Under the amended act, the holder of PBR can restrict their protected varieties from being brought to foreign countries without authorisation. The Act also requires, from April 2022, that farmers receive authorisation from right holders for propagating protected varieties on their own farm. The amended act makes it possible for the holders of PBR to take appropriate action against unauthorised or unintentional use of their protected varieties.
An amended Act on Improvement and Increased Production of Livestock was enacted in April 2020 and became effective in October 2020. It defines “designated semen and embryo”8 of livestock and aims to prevent fraudulent transaction and unauthorised distribution of these genetic materials by ensuring traceability.9 “Designated semen and embryo”, for which the scope of users and the purpose of use are limited based on contract, are protected as intellectual property by the Act on Prevention of Unfair Competition on Genetic Resources of Livestock which was also enacted in April 2020 and came into force in October 2020. The act defines “unfair competition” and authorises civil remedies such as seeking injunctions and damage. For acts deemed to represent “unfair competition”, it imposes criminal penalties including imprisonment, fines or both.
The first case of classical swine fever (CSF) was confirmed in Japan in September 2018, 26 years after the last known case, while the African Swine Fever (ASF) continued to spread outside Japan. As a response, Japan amended the Act on Domestic Animal Infectious Diseases Control in April 2020 offering the means to take effective preventative measures in case of disease outbreak in Japan. The amended act added ASF to the list of targeted diseases, which allows preventative culls of healthy livestock if outbreak occurs. The act also established stricter farm sanitation standards and clarified roles and responsibilities for each actor involved (national and local governments, farmers). The amendment also gives legal authority to animal quarantine officers to question inbound passengers and inspect their belongings for illegal animal products.
Organic food production and labelling is regulated under the Japanese Agricultural Standard (JAS) system. JAS for organic livestock products (e.g. beef, eggs) and organic processed food products containing livestock ingredients sold (e.g. hams, cheese, chocolate) changed from a voluntary standard to a mandatory standard from 16 July 2020. All these products need to be certified and labelled with the JAS organic logo if they are to be sold as organic in Japan.
Japan has actively pursued the inclusion of disabled people in the agricultural sector. MAFF’s initiative on disability-inclusive agricultural development, named Nou-Fuku Renkei – a collaboration (Renkei) with agriculture (Nou) and social welfare (Fuku), was accelerated in March 2020 with the establishment of a consortium with participation from the business sector. One activity launched by MAFF and the consortium is the disability-inclusive agricultural development award, to exhibit best practices of inclusivity in the agricultural sector. Also, the JAS system allows special labelling for agricultural products produced by those with disabilities and ten entities have been approved for the use of labelling as of March 2020. Further, in 2020, MAFF created guidelines and provided subsidies as well as training to form specialists to support the employment and participation of the disabled in the agricultural sector. Additionally, Japan published a policy vision for promoting agricultural and welfare co-operation in 2019 and aims for an additional 3 000 entities to undertake the collaboration of the agriculture and welfare sector by 2024.
A series of large-scale natural disasters hit Japan in 2020. In July, a week of torrential rain triggered severe flooding and landslides especially in the Kumamoto prefecture in southern Japan, with rivers breaking banks and washing away bridges, forests, and homes. Floods and landslides caused extensive damage to agriculture, forestry and fisheries (e.g. orchards, paddy fields and tobacco farms, greenhouse facilities and machinery). Total estimated damages amounted to JPY 221 billion (USD 2 billion). In September, typhoon Haishen led to JPY 12.5 billion (USD 117 million) of agricultural damage. The record snowstorm in 2020-21 also caused damage worth JPY 11.9 billion (USD 111 million) to the sector.10 The government earmarked supplementary budgets of JPY 105.4 billion (USD 1 billion) for the restoration efforts in the sector, mostly intended to support the recovery of farmland and agricultural facilities and to conduct work to rehabilitate damaged roads and land subject to landslides.
Japan established all-sector the Progressive Innovative Environmental Strategy in January 2020 to accelerate the achievement of national greenhouse gas (GHG) reduction target through the use of technology. Employment of farmland carbon sequestration using cutting-edge biotechnology, reduction of fuel consumption through smart agriculture (e.g. using robotics and information and communication technologies (ICT)) and the development of farm and livestock management tools and plant variety to reduce methane emissions from agriculture are addressed in the strategy.
In October 2020, Japan strengthened its GHG reduction target to achieve economy-wide carbon neutrality by 2050. Along with this decision, the country published the Green Growth Strategy in December 2020, an all-sector action plan for achieving net zero GHG emissions by 2050 while projecting economic annual growth of JPY 90 trillion (USD 843 billion) by 2030 and JPY 190 trillion (USD 1.8 trillion) by 2050 through greening efforts. The strategy specifies 14 priority sectors that are considered to have high GHG reduction potential which include agriculture. To achieve net zero CO2 emissions, a reduction of fossil fuel use in the agricultural, forestry and fishery sector by 2050 is envisaged, including via a shift of horticulture to fossil fuel free facilities.
In March 2020, MAFF published its Environmental Policy Basic Directions, a document that outlines basic principles for planning and implementing agriculture and environment policies. The principles envisages (1) implementing policies that improve both environmental and economic performance, (2) greening policies throughout the whole supply chains and promoting research and development to support the greening, and (3) reducing its own environmental impact. To advance these efforts, in October 2020, MAFF and the Ministry of Environment agreed to strengthen co-operation in 14 policy areas.
Based on policy discussions with multiple agricultural actors and stakeholders, MAFF formulated the Strategy for Sustainable Food System in May 2021 (officially called the Measures for Achievement of Decarbonisation and Resilience with Innovation (MeaDRI) Strategy). The Strategy embodies the principles described in the above Green Growth Strategy and the Environmental Policy Basic Directions and aims for building a sustainable food value chain with innovations. The strategy addresses several agriculture-related objectives to be achieved by 2050: (1) zero CO2 emissions from agriculture, forestry and fisheries sectors, (2) 50% reduction in overall use of chemical pesticides by disseminating the Integrated Pest Management and newly-developed alternatives, (3) 30% reduction in chemical fertilisers use, (4) increasing the area of organic farming to 1 million hectares, which is equivalent to 25% of total cultivated land area, (5) enhancing by at least 30% the productivity of the food manufacturing industry by 2030, and (6) sustainable sourcing for imported materials by 2030.11 In parallel, the strategy also mentions an approach to greening agricultural policies which would require major policy shifts via: (1) decarbonising support measures for agriculture, forestry and fisheries, (2) subsidies with cross-compliance, and (3) disclosing information on companies engaged in environment-related activities and promoting Environmental, Social and Governance investment.
Domestic policy responses to the COVID-19 pandemic
In April 2020, Japan announced an economic support package totalling JPY 117.2 trillion (USD 1.1 trillion). To scale up measures aimed at mitigating the economic and social impacts, in June 2020, the second supplementary budget for FY202012 was enacted, the largest supplementary budget ever implemented. Combined, it totalled JPY 234 trillion (USD 2.1 trillion), equivalent to more than 40% of its GDP. In December 2020, an additional economic support package of JPY 73.6 trillion (USD 675 billion) was announced, of which JPY 57.7 trillion (USD 529 billion) was directed to prevent the spread of the coronavirus as well as shifting towards building a post-coronavirus. Due to these measures, the national government expenditure budget has grown to a record high of JPY 175.7 trillion (USD 1.6 trillion) in FY2020, relying on government bonds for 64.1% of revenue (MOF, 2020[3]).
In February 2021, the government enforced the revised Act on Special Measures for Pandemic Influenza and New Infectious Diseases Preparedness and Response to allow the Prime Minister to announce the target area for intensive measures against the spread of pandemics. Local governments in the target area can request business operators to change their business hours with enforcement measures such as on-site inspections and non-criminal fines against businesses that do not comply. The act also states that the government takes the necessary financial measures to support the affected businesses.
MAFF received a total of JPY 610 billion (USD 5.7 billion) as of March 2021 to fund a variety of programmes for the agro-food sector as well as consumers, such as business continuity programmes. Additionally, general policy directions for COVID-19 were also addressed in the 2020 Basic Plan such as securing agricultural labour and providing relevant information to consumers on food supply. Specific support measures were implemented to tackle different consequences of the pandemic.
A range of support measures aimed to compensate farmers for finding alternative sales channels, where product inventories have accumulated due to reduced demand as a consequence of the pandemic and related restrictions. In particular, these measures supported sales for school lunches, through internet, through take-out and delivery services, through regional and local sales promotion activities and events, through other new or re-developed domestic and international sales channels, or, when other markets could not be served, donations to food banks, the recycling of food for feed or fertilisation. Support compensated costs for transportation, packaging, in certain cases the food value was compensated as well. Finally, beef wholesalers with a sales promotion plan could receive grants and storage cost compensation.
Support was also provided to ensure continued agricultural production. Payments were provided to vegetable farmers to mitigate the impact of price declines. Other supported activities by farmers of vegetables, fruits, tea and flowers included the purchase of seedlings, rental of agricultural machinery, use of new plant varieties. Lastly, conversion of production or sales methods and sales channel, facilitation of consensus building in producer groups, and preparation of measures to prevent COVID-19 infections by producers, all of which aim to make farmers more resilient, were also supported.
Livestock and dairy producers were also supported in order to continue their operation. In particular, beef cattle and calf producers received support for adjusting shipment schedules and improving livestock production management. When monthly average price of calves fell below the designated standard threshold, grants were provided to calf producers to support business improvement activities such as barn condition improvement, business operation analysis, disease prevention, or nutritional improvement of breeding cows and calves. Producers’ contributions for the Livestock Stabilization Programme for Beef were practically exempted. Support was also provided for the diversion of excess milk to further processing (skim milk powder, butter) and non-fat dry milk used for other purposes such as animal feed.
In the case livestock operators were infected by the COVID-19, the government provided support for additional expenses such as costs for hiring substitute labour.
To secure and maintain labour in the agricultural sector in light of, among others, international travel restrictions, additional childcare requirements, support covered expenses for recruiting and hiring alternative on-farm labour, the provision of training for those who wished to work in the farming sector, and the implementation of artificial intelligence and other new technologies by farmers, local governments and agricultural high school. The government also supported employers in the agro-food sector who were forced to reduce their business but wished to maintain their employees, or who granted special paid leave to their employees when these needed to care for their children whose school or childcare provider was temporarily closed due to COVID-19.
In order to stabilise incomes and secure cash flow, agricultural producers having difficulties to continue their operation due to pandemic benefitted from access to unsecured loans, and loans which are essentially interest-free for the first five years of lending, provided by the government owned Japan Finance Corporation and private financial institutions. Similarly, restaurant owners and small to medium scale food distributors also gained access to unsecured loans with a maximum five years of deferment, and loans which are essentially interest-free for the first three years. For private loans, the guarantee fee to the Agricultural Credit Fund Associations was exempted for the first five years. Besides, MAFF extended the premium payment deadlines for commodity insurance and revenue insurance programme.
As a part of an economy wide stimulus (Go-To-Campaign) designed to boost consumer spending, the Go-To-Eat-Campaign was launched in October 2020. The programme supported restaurants with proper sanitary protocols by encouraging people to start eating at restaurants again. The campaign has two components: (1) meal discount vouchers and (2) point-based rewards. The vouchers issued by prefectures offer discounts (or savings) of up to 25% at specified restaurants. By making online reservations for specific restaurants, point-based rewards allow earning points that can be used for meal payments.
Different public information measures aimed to enhance transparency and public trust in the food system. Basic operation guidelines for farmers and food business operators in the case of COVID-19 infection were made available online. In order to recover falling demand for agricultural products (e.g. beef, dairy, vegetables, flowers), MAFF promoted the purchase of fresh domestic products via press conferences, websites and social media. The government also monitored food supply chains for any food shortages, provided information of food supply and availability online to the public, and ensured that staple food (rice and wheat) was stocked. Citizens were asked to avoid panic buying, and simple guidelines for grocery shopping and eating out were provided.
Trade policy developments in 2020-21
Japan’s tariff rate-quotas continued to be under-filled in FY2020 for some products, including butter and butter oil, prepared whey for infant formula, and skimmed milk powder for school lunches. Japan issued special safeguard measures in FY2020 for some products, including cream and corn starch. Japan decided to import up to 14 000 tonnes of butter under state trading in FY2020 in order to meet domestic demand (MAFF, 2020[4]).
The Japan-United Kingdom Comprehensive Economic Partnership Agreement (Japan-UK CEPA) entered into force on 1 January 2021. For agricultural products, Japan-UK CEPA replicates most of the market access and tariff commitments provided under the Japan-EU EPA, which entered into force on 1 February 2019. As in the Japan-EU EPA, Geographical Indication products of both countries are listed for protection in the CEPA.
Japan signed the Regional Comprehensive Economic Partnership (RCEP) on 15 November 2020 with 14 countries in the Asia-Pacific region. RCEP is the first EPA that Japan has with China and South Korea. The agreement will take effect 60 days after it has been ratified by at least six countries of the Association of Southeast Asian Nations (ASEAN) and three non-ASEAN signatories. Overall, the Agreement will reduce tariffs on goods among the 15 participating economies by 90% over 20 years from entry into force, in accordance with each party’s Schedule of Tariff Commitments. On agricultural goods, Japan will eliminate tariffs on 56% of imports from China, 49% from Korea, and 61% from ASEAN, Australia and New Zealand respectively (MAFF, 2021[5]). Japan’s sensitive agricultural products such as rice, wheat, beef, pork, dairy products and sugar and starch are exempted from tariff reduction. On non-tariff measures however, RCEP provides trade facilitation frameworks for non-tariff measures such as Sanitary and Phytosanitary Measures, Standards, Technical Regulations, Conformity Assessment Procedures and Intellectual Property.
A number of policies to promote exports of agricultural products and food were implemented. The revised Basic Plan mentioned the export target for agricultural and food products for the first time since the first Basic Plan, at JPY3.3 trillion (USD 30.9 billion by 2030.13 In its July 2020 annual economic policy plan (the Basic Policies for Economic and Fiscal Management and Structural Reform 2020), Japan set an intermediate export value goal of JPY 1.3 trillion (USD 11.2 billion)14 by 2025, which represents twice the current level of agricultural products and food exports.
In April 2020, the Act on Facilitating the Export of Agricultural, Forestry and Fishery Products and Food came into force. The new act streamlines and centralises the management of operations related to the export of agriculture, forestry and fishery products and food, and created the headquarters (the Export Headquarters) within MAFF for the facilitation of the exports of these products. The newly established Export Headquarters provides export procedure guidance to producers and exporters, and conducts negotiations of food safety requirements set by importing countries. The act also provides a legal basis to develop an annual action plan relating to certifying export facilities as well as market access negotiation schedules with foreign governments. Furthermore, it allows the government-owned Japan Finance Corporation to extend long-term, low interest rate loans and loan guarantees to companies whose export project plans are certified by the Minister of Agriculture, Forestry and Fisheries to install and maintain their equipments or facilities.
In December 2020, Japan established the Strategy to Realize Export Expansion of Agricultural, Forestry, Fishery Products and Food, a key component of the national economic plan. To achieve the export targets, the strategy designates twenty-seven products with export potential. The strategy addresses a course of specific action for each product designated. Specifically, steps for fostering production areas for export, improving export facilities and developing sales channels are considered. The strategy also calls for a market driven approach and greater collaboration throughout the supply chain and across the government institutions.
Japan signed Organic Livestock Equivalency Arrangements with Australia, Canada, Switzerland and the United States. Under these arrangements, Japan recognises their standards for organic livestock products as equivalent to JAS organic regulations, and certified products produced in these four countries can be imported and labelled as organic. In turn, the four countries also recognise JAS-certified organic livestock products as equivalent to their certified organic livestock products in their territories (see Domestic policy developments in 2020-21).
Trade policy responses to the COVID-19 pandemic
The government supported the installation and maintenance of agricultural equipment or facilities that produce agricultural and food products for overseas markets as well as domestic markets. Similarly, expenses associated with the development of new processed food or menu directed to both exports and domestic consumption were also supported. Online events and meeting opportunities such as online trade fairs as well as information of overseas market conditions were provided by the government-related organisations. In addition, the government improved the online database of Japanese agricultural products for overseas buyers (JETRO, 2020[6]; MAFF, 2021[7]).
Given the disruption in trade and global supply chains due to the COVID-19 pandemic, Japan continued to address the importance of open and transparent international trade through conferences such as the September G20 Agricultural and Water Ministerial meeting.
Japan is the world’s third largest economy after the United States and China with relatively small land area and high population density (Table 16.4). Agriculture constitutes 1.2% of GDP and 3.1% of employment in 2019 (Table 16.4), yet the sector accounts for 10% of GDP if all food-related industries are considered15 (MAFF, 2021[8]).
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 (MAFF, 2020[9]). The average farm size was 2.5 hectares in 2019, which is small compared to other OECD countries, but over twice the average size (1.1 hectares) in 1987 (MAFF, 2020[10]; OECD, 2019[11]). Nevertheless, total agricultural land has decreased from 6 million hectares in 1960 to 4.4 million hectares in 2020 (MAFF, 2021[12]), 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 2 million in 2019, with an accelerated pace of decline in the last decade (MAFF, 2021[12]). There are 1.03 million commercial farm households, which is less than half the number in 1990. The average age of farmers is 67.8 years in 2020 and about 70% of farmers in Japan are over 65 years old (MAFF, 2021[13]).
The country’s geography offers a variety of landscapes and climatic patterns, leading to diverse agricultural production. In 2019, livestock accounted for more than one-third of total agricultural output, followed by vegetables (24%), rice (20%) and fruits (9%) (MAFF, 2021[14]). Total agricultural output gradually increased since 2014 after declining in the years before.
The country has experienced slow economic growth and deflation for most of the past two decades. Nonetheless, the unemployment rate is one of the lowest in OECD countries. In 2020, GDP contracted by 5.3% due to the impact of COVID-19 while the unemployment rate remained below 3% (Figure 16.5).
Japan is one of the world’s largest importers of agro-food products, and the United States is the biggest source of agricultural imports (FAO, 2020[15]). Forty-six per cent of imports are processed products for consumption (Figure 16.6). The food self-sufficiency rate was 38% in 2019 on a calorie basis (MAFF, 2021[16]), meaning that more than 60% of Japanese calorie supply depended on imports.
The share of agricultural exports in total exports, on the other hand, constitutes only 0.8% in 2019 (Table 16.4). Most Japanese agricultural exports are directed at final consumers (Figure 16.6). Processed food products such as alcohol and beverages, snacks, sauces and seasonings account for the majority of Japan’s agro-food exports. Among the unprocessed products, apples and beef are the most exported products (MAFF, 2021[17]). Against the trend of falling overall exports, exports of agricultural and food products in 2020 increased by 11.6% from the previous year, reaching its highest level at JPY 656 billion (USD 6.1 billion), which is about three times higher than that of 2000 (MAFF, 2021[18]; MAFF, 2021[19]).
Sources: OECD statistical databases; World Bank, WDI; and ILO estimates and projections.
Agricultural output declined during 2007-16, due to the reduction of primary factor use (land and labour) and limited total factor productivity. Total Factor Productivity grew by only 0.4% per year during2007-16 period, half the rate estimated for the 1990s and well below the global average (Figure 16.7, Table 16.5).
Japan’s nitrogen and phosphorus balance are among the highest in OECD countries (Table 16.5). The high and increasing nitrogen balance is due to a combination of high fertiliser use, and livestock production on limited pasture land (Shindo, 2012[20]). The high phosphorus balance, in contrast, is partly a result of soil characteristics: the reaction of soil in Japan, particularly Andosols, with inorganic phosphate render the phosphate almost insoluble and unavailable for uptake by plants, requiring more intensive phosphorus use by the agricultural sector (FAO, 2015[21]).
In line with its small role in the economy, agriculture’s share in total energy use, 1.2% in 2019, is below the OECD average. GHG emissions from agriculture were 2.7% of the total emissions in Japan – the lowest among OECD countries (Table 16.5). However, the agricultural sector is responsible for 78.3% of total methane (CH4) emissions, mainly due to livestock enteric fermentation and rice cultivation and for 46.6% of the national Nitrous Oxide (N2O) emissions due to manure and fertiliser application (GIO, 2021[22]).
The volume of agricultural water use remains stable for the past few decades. In 2018, the Japanese agricultural sector used 67.6% of water of which 94% was directed for paddy field irrigation (MLIT, 2019[23]).
References
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[21] FAO (2015), World Reference Base for Soil Resources 2014, update 2015 International soil classificationn system for naming soils and creating legends for soil maps. World Soil Resources Reports No. 106, http://www.fao.org/3/i3794en/I3794en.pdf.
[22] GIO (2021), Japan’s GHG emissions data (FY1990ｰ2019 latest figures), https://www.nies.go.jp/gio/en/aboutghg/index.html.
[6] JETRO (2020), World Trade and Investment Report 2020 (in Japanese), https://www.jetro.go.jp/ext_images/world/gtir/2020/no1.pdf.
[12] MAFF (2021), Agricultural land and acreage statistics, https://www.maff.go.jp/j/tokei/kouhyou/sakumotu/menseki/index.html#r (accessed on 2021).
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[18] MAFF (2021), Cumulative export record (in Japanese), https://www.maff.go.jp/j/kokusai/kokusei/kaigai_nogyo/k_boeki_tokei/ex_ruinen.html (accessed on 2021).
[19] MAFF (2021), Export promotion of agriculture, forestry and fishery products and food (in Japanese), https://www.maff.go.jp/j/shokusan/export/e_action/attach/pdf/index-13.pdf (accessed on 13 April 2021).
[16] MAFF (2021), Food Supply and Demand Statistics, https://www.maff.go.jp/j/tokei/kouhyou/zyukyu/index.html.
[7] MAFF (2021), For farmers, foresters and fishers and food related business affected by Covid-19, January 2021 (in Japanese), https://www.maff.go.jp/j/saigai/n_coronavirus/pdf/shiensaku_n-cov.pdf.
[8] MAFF (2021), GDP calculation for agriculture and food related sector, https://www.maff.go.jp/j/tokei/kouhyou/keizai_keisan/attach/pdf/index-5.pdf.
[5] MAFF (2021), RCEP, outline of agreement on agriculture, forestry and fishery products (in Japanese), https://www.maff.go.jp/j/kokusai/renkei/fta_kanren/f_rcep/attach/pdf/index-17.pdf.
[14] MAFF (2021), Total agricultural output (national estimate) (in Japanese), https://www.maff.go.jp/j/tokei/kouhyou/nougyou_sansyutu/index.html (accessed on 2021).
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[2] MAFF (2020), The Basic Plan for Food, Agriculture and Rural Areas (in Japanese), https://www.maff.go.jp/j/keikaku/k_aratana/attach/pdf/index-13.pdf.
[4] MAFF (2020), Verification of import quota quantity of butter and skim milk powder, 2020 (in Japanese), https://www.maff.go.jp/j/press/seisan/c_gyunyu/200925.html.
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Notes
← 1. Since FY 2018, the number of commodities with TRQs has been reduced to 27.
← 2. The Vitality Creation Plan for Agriculture, Forestry, Fisheries and Rural Communities, first created in 2013, revised in 2014, 2016, 2017, 2018; the 2015 Basic Plan for Food, Agriculture and Rural Areas; the Comprehensive Policy Responses for Trans-Pacific Partnership created in 2015, revised in 2017; and the Programme for Enhancing of Agricultural Competitiveness created in 2016.
← 3. Simple average MFN applied.
← 4. The certified farmer system is based on the Agricultural Management Infrastructure Reinforcement Promotion Law. The system certifies agricultural management improvement plans created by farmers in line with a plan formulated by municipalities that includes goals for efficient and stable agricultural management based on conditions of the region.
← 5. Covers approximately 60% of agricultural output. Excludes vegetables planted several times a year (leaf vegetables, etc.) due to the difficulty of damage assessment.
← 6. The official name of Farmland Bank is the Public Corporations for Farmland Consolidation to Core Farmers through Renting and Subleasing.
← 7. Ordered according to effective date.
← 8. Japanese Black, Japanese Brown, Japanese Shorthorn, Japanese Polled, and hybrids of those four breeds.
← 9. From the production to the artificial insemination and embryo transfer.
← 10. As of February 2021.
← 11. Two other objectives relate to forestry and fishery; (7) use of superior varieties for forestry seedling to be 90% or above; (8) artificial seedling rates in aquaculture to be 100%.
← 12. 1 April 2020 to 31 March 2021.
← 13. JPY 5 trillion (USD 46.8 billion) for agriculture, food, forestry and fishery products total.
← 14. JPY 2 trillion (USD 19 billion) for agriculture, food, forestry and fishery products total.
← 15. Food related industry here includes agriculture, forestry and fisheries, agricultural material supply, food manufacturing, food related distribution and merchandising, and food service.