Entrepreneurial spirit | Some say Japan’s agricultural co-operative system designed to protect farmers is outdated
CHIBA CITY, Japan (Reuters) — When it comes to trade policy, Japanese prime minister Shinzo Abe faces a choice between the fears of Japan’s aging farm lobby and the hopes of suburban families lined up here at a nearly 20-metre long meat counter in a mall showcasing Australian beef.
It is a struggle between the country’s traditionally protectionist market versus the pressure for freer trade with the rest of the world, such as through the Trans-Pacific Partnership trade group, which includes Canada.
When Aeon Co. set out to open a flagship shopping mall just outside Tokyo, it wanted the scale to dazzle urban shoppers. The three-month-old Makuhari New City mall in Chiba is almost four times larger than the Tokyo Dome, a 55,000 seat stadium in the heart of the capital.
Daily specials at the supermarket inside the mall include beef shipped direct from the retail giant’s feedlot in Tasmania, which reduces prices for consumers and skirts Japan’s politically strong agricultural co-operative system that many see as an outdated relic of the country’s revival after the Second World War.
Japan is rebuffing international pressure to scrap import tariffs on food items, including beef, but some Japanese farmers are already stepping outside the heavily protected co-operative system, worried that the biggest threat is not trade liberalization but Japan’s rapidly aging population and its changing tastes.
“I don’t think Japanese agriculture will collapse because of the participation in TPP,” said Toru Wakui, a northern Japanese rice farmer.
“If it happens, it will be from an internal collapse.”
This quiet but significant shift suggests Japan’s tough TPP stance aimed at protecting the country’s farmers is losing some of its foundation as more commercial pressures come to bear in Japan and farmers and their buyers work around an inflexible traditional system.
The average Japanese farmer is 66 years old, the amount of farmland has dropped by a quarter over 30 years and Japan’s food self-sufficiency ratio — the share of consumed calories made at home — has dropped to 39 percent, the lowest among developed economies.
Tastes are also changing and moving away from polished rice, which is protected by an import tariff of up to 778 percent. For example, the amount of money that the average Japanese family spends on bread surpassed rice for the first time in 2010.
Meanwhile, the average Japanese farm is just five acres. In Canada it is 778 acres, according to the 2011 Census of Agriculture.
The amount of Japanese farmland that has gone uncultivated is now as large as the cities of Tokyo and Osaka combined.
Government subsidies account for more than half of farm incomes, which is the third highest ratio in the Organization for Economic Co-operation and Development behind Norway and Switzerland.
Japan’s agriculture ministry estimates that joining TPP could cut the value of agricultural production by another $30 billion, although the economy would receive a net boost of $30 billion, mostly through lower prices for consumers.
However, Japan’s agricultural lobby, known as JA Zenchu, has presented more than 11 million signatures from voters opposed to Japan’s participation in the TPP talks, which involve 12 countries.
The lobby’s ads denounce the talks as a threat to food safety, farm in-comes, rural medical care and Japan’s ability to keep more than 400 far-flung islands populated and under Tokyo’s economic control.
Fears over the sustainability of Japan’s network of individual farms, which originate from the end of Second World War, was partly why Aeon set up its own farming unit in 2009.
The operation now includes 14 farms in Japan and slightly more than 500 acres. The company, which runs Japan’s top supermarket chain, aims to have 1,200 acres under cultivation by 2015. It has also set a goal of self-sourcing 40 percent of its vegetables, up from less than one percent now.
The move makes commercial sense, said Yasuaki Fukunaga, head of Aeon’s farming unit.
“When products are sold directly to merchants … farmers and producers can use the responses of consumers and build on that information,” Fukunaga said.
Enlarging corporate involvement in agriculture is one of Abe’s goals, along with lifting farm income and increasing food exports.
In June, the government is set to consider reforms intended to reduce barriers to winning local approvals for transfers of farmland, which would make it easier for entrants such as Aeon.
“Against the backdrop of a decrease in the number of agricultural workers, an increase in their ages and with the amount of abandoned farmland increasing, whatever happens with TPP negotiations, it is extremely important to revitalize domestic farming,” agricultural minister, Yoshimasa Hayashi recently told parliament.
In November, Abe’s government surprised many by announcing it would phase out a 40-year-old policy known as gentan, under which the government paid farmers, mostly individuals with small plots, to re-duce rice output to protect prices.
Industry observers say that many of Abe’s goals to make Japanese agriculture more competitive are not new and that ending the gentan program coincided with an increase in subsidies for a rice-to-feed program. However, some experts say the winds are changing.
“With Japan’s big financial deficit, there is certainly thinking that down the road that subsidies could be lowered,” Hiroyuki Kawashima, an associate professor in the University of Tokyo’s global agriculture department, said about the rice-for-feed program.
Against that backdrop, some of Japan’s small farmers are looking for a market niche rather than a government subsidy as their best hope for the future.
That includes Noboru Tsukahara, who has farms in northern Hokkaido and Ibararki, northeast of Tokyo. He believes he is the world’s only commercial provider of the purebred meishan breed of pork, which is considered a premium delicacy.
When JA quoted Tsukahara a low price for his pork because it was classified outside of its grading system, he opted out to win distribution contracts on his own with high-end department stores such as those run by Isetan Mitsukoshi Holdings and Michelin-rated restaurants.
“It is no longer the era of mass production and mass consumption,” he said.
“With Japan’s population falling, it’s the reverse, so I feel unique products that are not found everywhere will be what appeal to consumers.”