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

1. March 14-15, 2008
IFPRI, Washington DC
IFPRI Shadow Notifications
Project: Japan
Yoshihisa Godo
Meiji Gakuin University

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Rice distribution system:1995-2003
Farmer
JA
MAFF
Administered Wholesaler
price
Retailor
Consumer
Government Rice Voluntary Rice Freed Rice

20. Rice distribution system:2004-
Farmer
JA
MAFF Rice market
Wholesaler
Retailor
Consumer

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. 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. 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. • 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Traditional Farming Community as
a Voting Group
• Stable
• Large in number
• Observe each other
• Conservative

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. 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. 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. “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