Japan: Agricultural reforms

Proposal – TPP and JA reform

The Japanese agricultural sector is experiencing pressure to undertake liberalization and structural reform – this is particularly driven by the context in which there is a desire amongst policymakers to adopt and implement the Trans-Pacific Partnership (TPP).  TPP is currently set to be ratified by each signatory country that has agreed to the deal, which consists of 30 chapters, and was agreed in October 2015 (Guardian 5 October 2015).

Domestic efforts to implement agricultural reform have also intensified under the Abe administration, which included as part of its proposed policies a plan to reform agriculture – with the aim of creating a future growth industry (Honma 2015:94)[1]. This includes: ‘improving the added value of the agricultural, forestry and fishery industries … , consolidating farmland, … ,revising rice production adjustment and promoting exports’ (Honma 2015:95).

Further, in July 2014, the government announced its ten-year plan for revitalizing agriculture and regional areas by reforming the agricultural cooperative organization (JA). Agricultural reform makes up part of the third arrow of Abenomics (Financial Times, September 21, 2015). After Abe declared his intention to conduct regulatory reform in 2013, agriculture became one of the key deregulatory targets with a strong focus on JA reform (Honma 2015:110). The reform of JA is seen as a key process of liberalization. The proposal that was announced aimed to abolish the Central Union of Agricultural Cooperatives (JA-Zenchu)’s role in supervising and auditing agricultural cooperatives in order to reduce the power of JA and enable primary JAs to run their own businesses with a freer hand (Honma 2015:110). The hierarchical structure of JA-Zenchu is viewed as a cause of stagnation and lack of innovation in Japan’s agricultural sector (Pollmaan, February 12, 2015). Up until the proposed reforms, the JA was exempt from the anti-monopoly act (Honma 2015:105). The proposed reform therefore aims to enable a broader range of private companies to enter into Japanese agriculture in order to prevent the domination of the monopolistic Zenchu which controls 694 local JAs, allowing private companies to own farmland (Asahi Shinbun, September 4, 2014, p.9, The Economist, March 13, 2015). The reform therefore seeks to increase the level of competitiveness of Japan’s agricultural sector (Asahi Shinbun, January 21, 2015, p.3) and undermine the hierarchical structure of Japan’s agricultural sector, liberalize agricultural markets, and reduce production costs. The Government also claims that the change of the Zenchu-centered structure would increase income in Japan’s agricultural sector (Asahi Shinbun, January 21, 2015, p.3).

This reform, which aims to weaken Zenchu, is also considered necessary in order to  facilitate the progress of negotiations of the recently agreed trade pact (October 5, 2015), Trans-Pacific Partnership (TPP). JA has been the main body resisting the TPP as JA Zenchu proved one of the organisations most able to mobilize politically in order to stop Japan’s participation in the TPP negotiations and prevent the government from reaching agreement with the US to facilitate a wider TPP agreement (Honma 2015:111). JA Zenchu has been well known for its anti-free trade movement and farmers’ organization opposed to the TPP (Honma 2015:111). Therefore, for PM Abe, who has been keen on making progress in negotiations of the TPP, reform of JA Zenchu has been viewed as essential to implement agricultural reform.

The TPP was originally proposed in 2005, seeking an elimination of trade barriers over Japan’s agricultural products (beef, port, rice, dairy products, and barley), which maintain high tariffs (Honma 2015: 96).  The introduction of the TPP was keenly negotiated by the Noda administration (2011-12) and the current Abe administration (2012-) in order to advance structural reform of the Japanese economy and make progress in the TPP negotiations. In particular, PM Abe views the TPP as ‘an external catalyst to implement bold deregulatory reforms’ (Mulgan 2015:25). Therefore, agricultural reform and the TPP have been closely linked.

However, TPP has a potential to undermine income distribution and welfare in rural areas in Japan (Mulgan 2015:25-6). Restricting foreign access by maintaining high tariffs has avoided a significant absolute reduction in the real income of farmers in rural regions (Mulgan 2015:25). Furthermore, the exposure of domestic agricultural producers (farmers) to international competition also has a significant implication in terms of welfare concerns for preserving employment in an industry with a high proportion of workers over 60 years of age in rural areas where there are few alternative employment opportunities (Mulgan 2015:25-6).

Severity of austerity proposal: the reform measures will create indirect pressure for marketisation and undermine collective protection against market competition. They do not, however, represent a direct reduction in living standards. Hence, we consider these to be a moderate proposal for austerity.

Severity: moderate

Target: The target of the reforms is the agricultural sector, and especially the traditionally protected farmers of Japan, who also traditionally have good links with the governing party, LDP. For this reason, we consider the reform to be targeted at insiders.

Target: insiders

Refusal

Imperceptible resistance.  Public opinion regarding TPP has been largely negative, suggesting a high level of underlying opposition to the initiative. For instance,  independent research carried out by Edelman found that public awareness of the initiative was very high in Japan (95% of consumers), but support was lower than average (45% of consumers felt it would benefit the Japanese economy – compared with a global average of 67%); businesses also felt that Japan was unready for TPP (23% felt it was ready, compared with 52% global average); 36% of businesses felt TPP will have a negative effect (compared with 32% average); and only 17% of businesses believed it would benefit their company (compared with 47%, with Japanese businesses being most skeptical).

Whilst  public opinion was relatively skeptical about the initiative, therefore, it remained the case that there are little signs of such in terms of visible effects of imperceptible forms of dissent.

imperceptible resistance
(underlying concern, but no visible signs of effects)

 

Public opposition. Some of the most visible forms of opposition to the agricultural reforms have been mobilised by the key groups affected by the proposals (especially JA, other organisations linked to farmers, and labour unions). For instance, in June 2012, a group called the ‘Stop TPP!! Civil Action’ which consists of 40 organizations, including labor unions, consumers’ cooperatives and citizens’ groups, implemented a street campaign in front of a Tokyo railway station. This group, together with agricultural cooperatives and citizens’ groups, had contributed to a situation that prevented the Noda administration from announcing Japan’s participation in the TPP negotiations (Mulgan 2015:151).

JA-Zenchu sponsored several large-scale protest rallies against the TPP together with other primary industry groups and consumer and other organisations (Mulgan 2015:148). ‘These gatherings were attended by thousands of interest group members. For example, the National Representatives’ Assembly that Demands the “Protection of Food, Livelihoods and Lives” from the TPP and the “Realisation of Diet Resolutions” in September 2013 was hosted by an executive committee consisting of the JA Group, the National Chamber of Agriculture (Zenkoku Nogyo Kaigisho), the National Federation of Fisheries Cooperative Associations (JF Zengyoren), the National Federation of Forest Owners’ Cooperative Associations (Zenshinren/JForest), the Livelihood Club Consumers’ Cooperative Union, the Association that Protects the Earth (Daichi o Mamoru Kai), the Pal System Consumers Cooperative Union, the Japan Dairy Council (Chuo Rakuno Kaigi) and the Japan Housewives Association (Shufu Rengokai) (Mulgan 2015:148). ‘Approximately 3,500 people took part in the rally, which raised concerns about the fact that the TPP negotiations could deliver a blow to food and medical services. The participants demanded that the government not abolish tariffs on sensitive products and adherence to the LDP’s and Diet’s resolutions. It declared that the LDP’s resolution was ‘a promise that the ruling party made to the people’ and the Diet resolutions were ‘an expression of the Diet’s intention as the supreme governing body’ (Nosei Undo Janaru, October 2013, 4, cited in Mulgan 2015:148).

There have been numerous protest events implemented by local groups, which are attached to the JA. For instance, in April 2014, in Miyazaki, 2,600 people joined in a rally, protesting against TPP (Yomiuri Shinbun, April, 20, 2014, p.35). In January 2015, 400 people in Ken Nouseiren, a political pressure group in Kumamoto joined in a rally where they reached an agreement of sending a formal letter to MPs from Kumamoto asking to protect 5 sacred areas of agricultural production and not to impose undemocratic reform on Japan Agriculture (JA) (Asahi Shinbun, January 28, 2015, p.32). In early 2015, JA mobilized some 10 million people to sign a petition arguing that Japan should not sacrifice the interests of its rice farmers during the TPP talk (Financial Times, September 21, 2015).

In July 2015, JA Fukuoka held a rally where 66 groups formed “Anti-TPP Fukuoka Network” and protested against the abolition of import tax over the sacred 5 products. They send a formal demand letter to MPs who represent Fukuoka (Asahi Shinbun, July 22, 2015). In July 2015, 20 groups in agricultural sector in Ibaraki gathered for a rally opposing TPP and conducted street protest in Mito city, claiming for safe food and safe life (July 21, 2015, p.27). In Miyagi, 900 people in the agricultural and sector joined a rally and conducted street protest shouting for “stop TPP” (June 16, 2015, p.25). Similar types of rallies occurred across Japan including in Yamagata, Koch, Saga, Niigata, Shimane, Yamagata, and Fukushima in July 2015, and Akita and Fukuoka in May 2015.

JA Tochigi decided that they would oppose the abolition of import tax over rice, barley, beef, pork and dairy product. There were 300 people who joined the protest rally (Asahi Shinbun July 26, 2015, p.29).

A large scale protest was conducted as a part of May Day 2015 protest events in Kyoto, where 12,000 people who belong to the second largest trade union association, Zenroren in Kyoto joined May Day protest event whereby the organizers criticized Abenomics for its preference of large corporations (Asahi Shinbun, May 2, 2015, p.28).

The JA-Zenchu also sought to lobby officials and made ‘policy representations beyond agriculture as a strategy to build alliances with those who had reservations about issues such as the ISDS, food safety standards, public health insurance policy and insurance services’ (JA-Zenchyu 2013, cited in Mulgan 2015:147). ‘The JA-Zenchu provided an office for the Network that Protects Japan’s Food, Livelihoods and Lives from the TPP, which was established by agriculture, forestry and fisheries organisations and by consumer groups such as the Livelihood Club Consumers’ Cooperative Union and Pal System Consumers Cooperative Union’ (Mulgan 2015:147). As an indication of the balance of support amongst civil society organisations, according to Mulgan (2015: 129), there were 124 organisations (NGOs, lobby groups, interest groups, and so on) that submitted a response to the government’s consultation – with 26 in favour, 35 against and 63 cautious on the TPP.

PM Abe also faced a civil action over the negotiations of TPP from the former Minister of Agriculture, Forestry and Fishery (under the prior DPJ administration), Yamada Masahiko, and a group of lawyers. They claim that TPP negotiations go against the right to know what is defined in the Article 21 in Japan’s Constitution (Asahi Shinbun, September 25, 2014, p.7). TPP negotiations are based on confidentiality agreement among participant countries, and hence the details of negotiations have not been clarified and conducted secretly.

Refusal: As documented, there was consistent and substantial public opposition of a non-disruptive nature, that continued throughout the period during which the reforms were proposed.

Refusal: substantial public opposition (non-disruptive)
Frequent public protest
(ongoing well-attended protests, lobbying and legal actions)

Obstacles

Some political elites have raised concerns about the progress of TPP and agricultural reform due especially to the impact upon their constituency. The project team for JA reform (Noukyou Kaikaku tou Houan Kentou Project Team) highlighted 130 MPs (who form a pro-agricultural sector in Japan, largely based on their representation of agricultural constituencies) and who oppose the liberalization of JA. JA’s political power is significant, moreover, since it can have an influence upon millions of small rice farmers – due to their membership of JA – and there is concern that their votes that can swing elections (Financial Time September 21, 2015). These 130 MPs oppose structural reform in the agricultural sector, which is viewed as one of the key areas in the deregulation specified in the third arrow of Abenomics (Asahi Shinbun, January 21, 2015, p.3). JA-Zenchu and the MPs who have been representing agricultural sector in the LDP have therefore been fighting against the bill (Asahi Shinbun, January 21, 2015, p.3) (Yomiuri Shinbun April 4, 2015, p.4).

Opinions were therefore divided within the LDP over TPP negotiations (Yomiuri Shinbun, July 26, 2013).

Further, in November 2014, PM Abe gave up reaching on an agreement on the TPP by the end of 2014, and had to postpone the deadline of this agreement. This was the second postponing since Japan joined in the negotiations on TPP (November 30, 2014, p.3).

Obstacles: The main obstacle faced by the Abe administration was therefore fear of a reprisal from its supporters – most likely in the form of declining support from its core electoral supporters (with rural farmers representing an important part of the LDP power base, and with a core group of LDP MPs concerned over the effect of this). This created a reluctance amongst the administration to force through unpopular reforms, thereby slowing implementation of the reforms and creating obstacles for the agreement of the TPP negotiations.

Obstacles:
indirect (inter-elite divisions), significant;
 and
governing problems (institutional inertia), moderate

 

Response

In the US-Japan bilateral negotiations that took place before Japan began formal negotiations for the TPP, PM Abe sought a compromise over the tariff reduction of Japan’s high tariff products. In February 2014, Japan and the US agreed a number of tariff-related issues, on a commodity-by-commodity basis. For instance, Japan and the US agreed on both the implementation period and the degree of tariff reduction with regard to beef and pork (Honma 2015:98). This suggested that heightening social tension expressed in the form of ‘Stop TPP!! Civil Action’ in 2012, and a series of events in 2013 against the TPP sponsored by the JA Zenchu, had led to the Abe administration seeking to gain concessions over some of the more sensitive agricultural products.

The Abe administration also sought to emphasize its support for rural areas in Japan, by advocating “Local Abenomics” in its growth strategy, which was announced June 2014 (Asahi Shinbun, July 10, 2014, p.4). The Immediate Economic Measures for Extending Virtuous Cycles to Local Economies 2014 further pursued this strategy (Cabinet Office 2014). This aims to provide economic measures, which target vulnerable areas of the economy and aim to ‘secure the realization of a virtuous economic cycle and deliver the benefits of Abenomics to local economies’ (Cabinet Office 2015). This may imply a compromise provided the Abenomics aims to provide with local economies due to the potential damage from liberalization of agricultural sector. The Abe administration further selected a “Special Zone for Agriculture” whereby sales and purchases of farmland are encouraged by deregulation and enhancing corporations to participate agricultural businesses (Asahi Shinbun, July 10, 2014, p.4).

In sum, in terms of concessions, the government sought to provide economic stimulus packages to local economies – i.e. those especially at risk as a result of the agricultural reforms proposed. According to the report of the Cabinet Office, the Abe administration provided about 2.1 trillion yen for the new actions to boost regional economies and about 250 billion yen for gift certificates or travel tickets to stimulate consumption in regional areas in Japan (Cabinet Office, November 4, 2015). The economic measures set in “Immediate Economic Measures for Extending Virtuous Cycle to Local Economies” also provides ‘support for those engaged in the agriculture, forestry and fisheries industry, including measures to cope with the falling rice price’ and provides fund for ‘readjustment of farmland into larger plots, and introduction and application of robots in the agriculture, forestry and fisheries industry’ (Cabinet Office 2014:4, 8-9). These measures for regional economies are provided under the name of Abenomics with an intention to provide a compromise for its potentially harmful effects upon local economies.

Response: whilst the concessions adopted by the Abe Government did not represent a direct amendment to the proposed agricultural reforms, they did represent a significant attempt to compensate rural areas, including through increased spending. As such, we consider the concessions to be moderate.

Response: concessions, moderate

Outcome

JA reform

  1. Went ahead? Yes. It was specified in the growth strategy, June 2015, the agricultural reform bill has been approved in LDP, and this reform bill will be submitted to the Diet 2015 session.
  2. Consequences? The government encountered various opposition from JA branches based in local regions, thus undermining one of its core sources of electoral support. However, this has thus far not translated into a clear or visible threat to the electoral position of the Abe administration; we therefore consider the consequence to be moderate.

 

The TPP negotiations

  1. Went ahead? Yes (accompanied by moderate concesssions). The Japanese government entered negotiations towards the achievement of abolition of import taxes on five sacred areas and the TPP was agreed on October 5 2015 with 12 member countries. However, it has not been ratified yet.
  2. Consequences? The government is still facing numerous protests against the TPP, which have been conducted across the country. Given that this continues to represent a significant part of the LDP electoral support, we consider this consequence to be moderate.

Outcome – summary

obstacles/consequences (both moderate) + moderate concessions = partial, patchy and problematic adoption (1+1+2=4) 

[1] Honma, (2015) The TPP and Agricultural Reform in Japan, in Mulgan and Honma (ed.)(2015) The Political Economy of Japanese Trade Policy:  (London: Palgrave Macmillan).