March 14-15, 2008
                         IFPRI, Washington DC




IFPRI Shadow Notifications
      Project: Japan
      ...
billion yen

     7000.0
                             Japan's three boxes

     6000.0

                                  ...
billion yen

3500.0

                                                                   Japan's green box
3000.0




2500....
5000

                                                  Japan's AMS
4000


                                               ...
JAPAN’s Domestic Support
• Expenditures of all the boxes are declining
• Significance of public construction and
  environ...
Plan
0. Puzzles
1.Overview of Japanese Agriculture
2. Japan’s Rice Policy
      (1)Rice Distribution System
      (2)Set-a...
Three puzzles of Japanese
              agriculture
Nasty boy for border protection
             but
Good boy (at least ap...
Double personality of Japan’s
           agriculture
• As a nasty boy
  – Stubborn opposition against rice import
    libe...
Average cost curve
(‘000 yen/60 kg)

    30

    25

    20

    15

    10

     5

     0
         0    5    10     15  ...
Distibution of the total farmland area by farm size



more than 3.0 ha

                        20.9%




               ...
1. Agriculture and Rice in Japan(1/2)

• Agriculture shares 1% of GDP, 4% of
  employment
• Engel coefficient is 15%
• Ric...
1. Agriculture and Rice in Japan(2/2)

• Farmers (in particular small-size part-time farmers)
  are wealthier than urban w...
Comparison of household income
                                                                                         (a...
Political Dynamics in Agriculture
 Ministry of Agriculture                                    Politician
                 ...
Comparison of Employment
              32                                               MAFF                              ...
Earning Capacity Value of Farmland       0.55
                                                          Farm Prices
      ...
2.Japan’s rice policy
• 1970 Set-aside Program
• -1994 Food Control Law
• 1995 Staple Food Law
       Minimum Access Rice ...
Rice distribution system: -1994

                                                F ar mer


                              ...
Rice distribution system:1995-2003
                                   Farmer


                                     JA


 ...
Rice distribution system:2004-
            Farmer


              JA


    MAFF                Rice market


           Wh...
16
Million
    ton 14                           Rice distribution by type
       12

       10
                           ...
Set-aside program and subsidies
           up until 2006
• Across-the-board set-aside program:
  Government-led rice produ...
2007 Reform
• Voluntary set-aside program
• New subsidies =direct payment for wheat, barley,
  potato sugar bet, soybean (...
• Background of 2007 Reform
  – Decline of JA’s organizing ability
  – Cutback of Agricultural budgetary

• Impacts of 200...
3. JAPAN’s Official and Shadow
          Notifications
• Expenditures of all the boxes are declining
• Significance of pub...
Three major characteristics of
        Japan’s green box
1. Significance of public construction work
  (infrastructural se...
Removal of rice from AMS in 1998
• In 1998, MAFF announced that the government rice
  procurement should be limited for th...
Change of AMS calculation for
     wheat and barley in 2000
Eligible production changed
• For 1996-1999,total production
•...
4. Transparency Problem
• MAFF seems to exclude some of MAFF’s
  expenditures from WTO notifications
  assuming that they ...
A1 Concealed Reality
       of Agri. Political Dynamics

Small-size Farmers:
     Support LDP politicians by vote
LDP Poli...
Characteristics of Japanese
          (or East Asian) Agriculture
•   Limited Flat Area
•   High Population Density
•   No...
Voting Power vs. Efficiency




Traditional Community          Large- size Farming
(20 farm households in 20ha)   (1 farm ...
Political Dynamics in Agriculture
 Ministry of Agriculture                                    Politician
                 ...
Comparison of Employment
              32                                               MAFF                              ...
Traditional Farming Community as
          a Voting Group

       •   Stable
       •   Large in number
       •   Observe...
Earning Capacity Value of Farmland       0.55
                                                          Farm Prices
      ...
Capital gain from farmland conversion
      (the author’s estimates)
                                                     ...
Small-size Farmers vs. Large-size Farmers
                                Small- size farmers      Large- size farmers
   ...
“Delicious” scenario for farmers
(as well as JA, MAFF, politicians)

   So- so level Farmland
               Land investme...
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IFPRI Shadow Notifications Project: Japan

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Yoshihisa Godo, Meiji Gakuin University
14th March-15th March 2008, International Food Policy Research Institute, Washington D.C.

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IFPRI Shadow Notifications Project: Japan

  1. 1. March 14-15, 2008 IFPRI, Washington DC IFPRI Shadow Notifications Project: Japan Yoshihisa Godo Meiji Gakuin University
  2. 2. billion yen 7000.0 Japan's three boxes 6000.0 Shadow Official 5000.0 Amber 4000.0 3000.0 2000.0 Blue 1000.0 Green 0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
  3. 3. billion yen 3500.0 Japan's green box 3000.0 2500.0 2000.0 Enmbironmental prg Retirement prg 1500.0 General expemditure except Direct payment public construction work 1000.0 500.0 Public construction works 0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
  4. 4. 5000 Japan's AMS 4000 Commitment 3000 Rice was removed from the amber box 2000 Eligible production of wheart and barley changed from Price total production to gobernment procurement support 1000 Direct payment 0 1994 1996 1998 2000 2002 2004 2006 2008
  5. 5. JAPAN’s Domestic Support • Expenditures of all the boxes are declining • Significance of public construction and environmental program in the green box • Sharp decline of the amber box in 1998 • New direction from 2007
  6. 6. Plan 0. Puzzles 1.Overview of Japanese Agriculture 2. Japan’s Rice Policy (1)Rice Distribution System (2)Set-aside Program (3)2007 Reform 3.Japan’s Official and Shadow Report (1)Green Box (2)Amber Box 4.Transparency of Notifications A1. Political Dynamics of Japanese Agriculture A2. Japan’s Rice Trade Policy
  7. 7. Three puzzles of Japanese agriculture Nasty boy for border protection but Good boy (at least apparently) for domestic support Huge protection for the agricultural sector but Decline of food self-sufficiency ratio Optimal farm-size is over-15 ha but Actual farm-size is around 1ha
  8. 8. Double personality of Japan’s agriculture • As a nasty boy – Stubborn opposition against rice import liberalization – High border protection • As a good boy – Decline of food self-sufficiency ratio – Decline of amber box expenditure – 2007 reform (from amber to green)
  9. 9. Average cost curve (‘000 yen/60 kg) 30 25 20 15 10 5 0 0 5 10 15 20 25 30 35 40 45 Farm size (ha)
  10. 10. Distibution of the total farmland area by farm size more than 3.0 ha 20.9% 50.8% less than 1.5 ha 28.3% 1.5- 3.0 ha Note. Total farmland area is 3.1million hectar Source. 1995 Agricultural Census
  11. 11. 1. Agriculture and Rice in Japan(1/2) • Agriculture shares 1% of GDP, 4% of employment • Engel coefficient is 15% • Rice shares 30% of agricultural GDP, 1% of living cost • Paddyfiled shares 50% of farmland and rice is grown at 70% of paddyfield • 80% of farmers grow rice
  12. 12. 1. Agriculture and Rice in Japan(2/2) • Farmers (in particular small-size part-time farmers) are wealthier than urban workers. Their biggest concern is ‘alchemy’ of farmland (getting easy money from manipulation of farmland-use regulations) • Rice income is not important for most of rice farmers. Growing rice is easiest way for small-size farmers to maintain farmland. • JA (nationwide system of agricultural cooperatives): giant of agribusiness, political group, de facto sub- governmental body
  13. 13. Comparison of household income (as of 2003) Percentage of farm Farm size Number of Household income income in total farm households per head household income (in thousand) (in thousand yen) (% ) Total 1911 1693 19 Below 0.5 ha 436 1763 4 Commercial 0.5- 1.0 ha 673 1786 8 a Farm household 1.0- 1.5 ha 498 1579 13 1.5- 2.0 ha 1684 22 2.0- 3.0 ha 159 1561 34 Above 3.0 ha 144 1678 54 Salaried worker ・・・・・・ ・・・・・・ 1515 ・・・・・・ household Note a. Commercial farm households is defined as farm households whose farm size is over 0.3 ha or whose agricultural revenue is over 0.5 million yen. Source: Ministry of Agriculture, Forestry and Fisheries, Statistical Survey on Farm Management and Econ Ministry of Internal Affairs and Communications, Family Income and Expenditure Survey.
  14. 14. Political Dynamics in Agriculture Ministry of Agriculture Politician (member of the Diet) Inducement of Promote the interdependency special benefits Vote between farmers and politicians JA (agricultural cooperative) Farmers
  15. 15. Comparison of Employment 32 MAFF 32 28 28 24 24 (' 000 psn) Food Agency (千人) psn) (' 000 20 20 16 16 12 MITI 12 8 8 4 4 0 0 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002
  16. 16. Earning Capacity Value of Farmland 0.55 Farm Prices land For Agricultural Purpose 1.8 Farm Conversion land for Non-agricultural Use 16.8 For Agricultural Purpose 8.4 Farm Conversion land for Non-agricultural Use 30.1 For Agricultural Purpose 46.2 Farm Conversion land 78.7 for Non-agricultural Use More 0 20 40 60 80 Populated Area Million yen per 10 a
  17. 17. 2.Japan’s rice policy • 1970 Set-aside Program • -1994 Food Control Law • 1995 Staple Food Law Minimum Access Rice Import • 1998 Removal of Rice from AMS • 1999 Rice Tarrification • 2004 Revision of Staple Food Law • 2007 Revision of Set-aside Program
  18. 18. Rice distribution system: -1994 F ar mer JA MAFF Administered price W h o lesaler Ret ailo r C o n su mer G o v er n men t Ric e V o lu n t ar y Ric e
  19. 19. Rice distribution system:1995-2003 Farmer JA MAFF Administered Wholesaler price Retailor Consumer Government Rice Voluntary Rice Freed Rice
  20. 20. Rice distribution system:2004- Farmer JA MAFF Rice market Wholesaler Retailor Consumer
  21. 21. 16 Million ton 14 Rice distribution by type 12 10 self- consumption 8 6 Freed rice 4 Voruntary rice 2 0 0 Government Rice 1965 1970 1975 1980 1985 1990 1995 2000
  22. 22. Set-aside program and subsidies up until 2006 • Across-the-board set-aside program: Government-led rice production cartel with close collaboration of JA (Nationwide System of Agricultural Cooperatives) • Subsidies for set-aside program (blue box)+ amber box support for wheat, barley, potato sugar bet, soybean • All the farmers in villages collaborated to achieve the allocated acreages under JA’s guidance and supervision.
  23. 23. 2007 Reform • Voluntary set-aside program • New subsidies =direct payment for wheat, barley, potato sugar bet, soybean (amber + green, linked to the average production of 2004-6) • Two requirements for recipients of new subsidies: (1)Join the set-aside program (2) either individual core farmers (over-4 ha individual farmers, or over-20 ha group farming organized by JA)
  24. 24. • Background of 2007 Reform – Decline of JA’s organizing ability – Cutback of Agricultural budgetary • Impacts of 2007 Reform – Rice production was stimulated – Impacts on wheat, barley, potato sugar bet, soybean productions are unclear – JA was relieved
  25. 25. 3. JAPAN’s Official and Shadow Notifications • Expenditures of all the boxes are declining • Significance of public construction and environmental program in the green box • Sharp decline of the amber box in 1998 • New direction from 2007
  26. 26. Three major characteristics of Japan’s green box 1. Significance of public construction work (infrastructural services for agricultural sector and rural area) Brings huge capital gains for farmers Used for antirecession fiscal policy 2. Environmental payment=subsidies for set- aside program 3. New Subsidies of direct payment from 2007
  27. 27. Removal of rice from AMS in 1998 • In 1998, MAFF announced that the government rice procurement should be limited for the purpose of adjustment of rice stock for food security . For 1995-97; Rice’s AMS=total production multiplied with (administered price-reference price) Is this announcement meaningful? • No revision on the Staple Food Law • Government procurement was already less than 5% of total production before 1998 • Rice is protected by 700% tariff
  28. 28. Change of AMS calculation for wheat and barley in 2000 Eligible production changed • For 1996-1999,total production • For 2000-, government procurement Import of wheat and barley are also controlled by MAFF
  29. 29. 4. Transparency Problem • MAFF seems to exclude some of MAFF’s expenditures from WTO notifications assuming that they are not related to the agricultural industry. • Treatment of agricultural subsidies from local governments is not clear (and difficult to collect data). • Classification of ‘green vs. amber’ ‘product specific vs. non specific’ are unclear
  30. 30. A1 Concealed Reality of Agri. Political Dynamics Small-size Farmers: Support LDP politicians by vote LDP Politicians: Win small-size farmers’ favor by porkbarreling MAFF’s Real Objective: Protect traditional small-size farmers by sacrificing agriculture JA’s Real Function: Block market mechanism in order to protect small-size farmers
  31. 31. Characteristics of Japanese (or East Asian) Agriculture • Limited Flat Area • High Population Density • No Continuous Cropping Hazard • Water Runs through Other Farmers’ Farmland • Environmental Externality Urban Land Use vs. Agricultural Land Use (Good for Non-agri. Use = Good for Farming ) Small-size Farming vs. Large-size Farming
  32. 32. Voting Power vs. Efficiency Traditional Community Large- size Farming (20 farm households in 20ha) (1 farm household in 20ha) Inefficient in farming Efficient in farming Strong as a voting group W eak as a voting group
  33. 33. Political Dynamics in Agriculture Ministry of Agriculture Politician (member of the Diet) Inducement of Promote the interdependency special benefits Vote between farmers and politicians JA (agricultural cooperative) Farmers
  34. 34. Comparison of Employment 32 MAFF 32 28 28 24 24 (' 000 psn) Food Agency (千人) psn) (' 000 20 20 16 16 12 MITI 12 8 8 4 4 0 0 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002
  35. 35. Traditional Farming Community as a Voting Group • Stable • Large in number • Observe each other • Conservative
  36. 36. Earning Capacity Value of Farmland 0.55 Farm Prices land For Agricultural Purpose 1.8 Farm Conversion land for Non-agricultural Use 16.8 For Agricultural Purpose 8.4 Farm Conversion land for Non-agricultural Use 30.1 For Agricultural Purpose 46.2 Farm Conversion land 78.7 for Non-agricultural Use More 0 20 40 60 80 Populated Area Million yen per 10 a
  37. 37. Capital gain from farmland conversion (the author’s estimates) Ratio between Percentage of Farmers' revenue Farmers' revenue from farmland conversion from farmland from farmland conversion in total farmland conversion and (1990 yen) total farm production (%) (billion yen) (%) ・・・・・・・・・・・・・・・・・・ Prefecture・・・・・・・・・・・・・・・・・・・・・ ・・・・・・・・・・・44 ・・・・・・・・・・・ 1975- 79 0.50 2,986 ( 4,096 ) 48 1980- 84 0.47 4,420 ( 5,046 ) 66 1985- 89 0.48 6,347 ( 6,667 ) 92 1990- 94 0.57 10,026 ( 9,594 ) 138 1995- 99 0.49 6,835 ( 6,611 ) 103 2000- 03 0.39 4,787 ( 4,884 ) 82 ・・・・・・・・・ Prefetures (out of three megalopolises)・・・・・・・・・・・・ ・・・・・・・35 ・・・・・・・・ 1975- 79 0.45 1,490 ( 2,044 ) 28 1980- 84 0.41 1,961 ( 2,239 ) 35 1985- 89 0.41 2,520 ( 2,647 ) 44 1990- 94 0.50 3,668 ( 3,510 ) 61 1995- 99 0.45 3,133 ( 3,030 ) 57 2000- 03 0.34 2,338 ( 2,385 ) 49
  38. 38. Small-size Farmers vs. Large-size Farmers Small- size farmers Large- size farmers (traditional) (innovative) Typical size 1 ha 20 ha Share in rice production Majority Minority and farmland use Productivity of rice Low High (high cost, low quality) (low cost, high quality) Major income source Off- farm income Farm income Purpose of possessing Capital gain from Farm income farmland farmland conversion for non- agri. use
  39. 39. “Delicious” scenario for farmers (as well as JA, MAFF, politicians) So- so level Farmland Land investment by MAFF Top- quality farmland better condition for agri. land use as well as for urban land use Removal of land use regulation Capital gain by farmland conversion

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