Chapter 8. Japan. Evaluation of policy developments

Transcription

1 Chapter 8 Japan Evaluation of policy developments Overall, there has been some progress in reducing the level of producer support since , but support is still high, almost twice the OECD average. Most support continues to be provided through market price support with little narrowing of the gap between domestic and world price. Several new payments were introduced in 2007 with the aim of moving away from individual commodity based policy to a flexible commodity policy and to concentrate support on more efficient and stable farmers. These policies have potential to move to less production and trade distorting payments and also provide flexibility in a shift from single commodity support to group commodity support. The government is gradually reducing its involvement in the price formation of agricultural products. The administered prices for rice were abolished in 2004 and administered prices for wheat and barley in However, there are still high levels of border protection with the result that the actual effect on the level of the producer support estimate will be limited. Although there are some signs of a move toward less distorting forms of support, the level of support and the proportion of support accounted for by the most distorting forms are still high. Further efforts are needed to reduce the high level of support and reduce market protection, and move toward more decoupled policies that are clearly targeted to the farm income, rural development, environmental or other objectives pursued. Figure 8.1. Japan: Producer Support Estimate by country, Per cent of value of gross farm receipts % Support based on output or on input use Payments based on A/An/R/I, production required Payments based on A/An/R/I, production not required Payments based on non-commodity criteria 0 New Zealand Australia Mexico United States Canada Turkey OECD 2 European Union 1 Japan Korea Switzerland Norway Iceland A (area planted), An (animal numbers), R (receipts) or I (income). 1. EU The OECD total does not include the six non-oecd EU member states. Source: OECD PSE/CSE database,

2 Summary of policy developments In March 2005, the new Basic Plan for Food, Agriculture and Rural Areas was announced. One of its most important elements is a transition towards a flexible commodity policy. In the past, policies targeted individual commodities through price policy and border measures. The Plan also stresses the importance of concentrating support on more efficient and stable farms. Three new direct payments have been introduced in 2007 in order to promote those aims stipulated in the plan. Support to producers, as measured by the %PSE, declined from 64% in to 55% in However it remains almost twice the OECD average. The combined share of most distorting payments (commodity output and variable input based payments) in PSE remained unchanged at around 95% in and The share of least distorting payments (payments which place no requirement to produce) also remained unchanged at 3% in and Prices received by farmers in were around 2.6 times higher than those in world markets and 2.1 times higher in Farm receipts were 2.2 times higher than they would have been on the world market in , compared to 2.7 times higher in Rice continues to be the most heavily supported commodity measured by producer SCT and accounted for 34% of the total SCT in The share of total producer SCT in total PSE remain unchanged at 93% from to The cost imposed on consumers, as measured by the %CSE, fell from 62% in to 48% in Support for general services provided to agriculture increased between and , from 15% to 17% of total support. Total support to agriculture has declined from 2.4% of GDP in to 1.2% in Figure 8.2. Japan: PSE level and composition by support categories, Commodity outputs Current A/An/R/I, production required Non-current A/An/R/I, production not required Miscellaneous Input use Non-current A/An/R/I, production required Non-commodity criteria % of gross farm receipts Figure 8.3. Japan: Producer SCT by commodity, MPS Payments based on output Other SCT SCT as % of PSE Wheat Other grains Soybeans Rapeseed Rice Milk Beef and veal Pigmeat Poultry Eggs Other commodities SCT as % of PSE % of commodity gross farm receipts

3 Table 8.1. Japan: Estimates of support to agriculture JPY billion p Total value of production (at farm gate) Of which share of MPS commodities (%) Total value of consumption (at farm gate) Producer Support Estimate (PSE) Support based on commodity output Market Price Support Payments based on output Payments based on input use Variable input use Fixed capital formation On-farm services Payments based on current A/An/R/I 1 production required Of a single commodity Of a group of commodities Of all commodities Payments based on non-current A/An/R/I 1 production required Payments based on non-current A/An/R/I 1 production not required Variable rates Fixed rates Payments based on non-commodity criteria: Long-term resource retirement Specific non-commodity output Other non-commodity criteria Miscellaneous payments Percentage PSE Producer NPC Producer NAC General Services Support Estimate (GSSE) Research and development Agricultural schools Inspection services Infrastructure Marketing and promotion Public stockholding Miscellaneous GSSE as a share of TSE (%) Consumer Support Estimate (CSE) Transfers to producers from consumers Other transfers from consumers Transfers to consumers from taxpayers Excess feed cost Percentage CSE Consumer NPC Consumer NAC Total Support Estimate (TSE) Transfers from consumers Transfers from taxpayers Budget revenues Percentage TSE (expressed as share of GDP) GDP deflator = p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. 1. A (area planted), An (animal numbers), R (receipts) or I (income). MPS commodities for Japan are: wheat, other grains, rice, sugar, milk, beef and veal, pigmeat, poultry, eggs, apples, cabbage, cucumbers, grapes, mandarins, pears, spinach, strawberries and Welsh onions. Market price support is net of producer levies and excess feed costs. Source: OECD, PSE/CSE database,

4 Box 8.1. Japan: Commodity-Specificity of Support In Japan, Single Commodity Transfers (SCT) made up 93% of the PSE in no change from Group Commodity Transfers (GCT), where producers have the option to produce one of a specified group of commodities as part of programme eligibility, made up less than 1% of the PSE in , also unchanged from Transfers provided under the headings All Commodity Transfers (ACT) and Other Transfers to Producers (OTP) place no restriction on commodities that farmers choose to produce or do not require any commodity production at all. 1 Together these transfers comprised around 7% of PSE from to Figure 8.4. Japan: PSE level and commodity specificity, SCT GCT ACT OTP % of gross farm receipts Source: OECD PSE/CSE database, The definition of the categories SCT, GCT, ACT and OTP are provided in the Chapter I.3 of this report including an annex with the list of groups used in specific countries in the period

5 Description of policy developments Main policy instruments Market price support provided through tariffs and tariff rate quotas (TRQs), and payments based on output serve as the basis of agricultural policies in Japan. Tariff-rate quota systems are applied to major commodities such as rice, wheat, barley and dairy products. The Food Department within the Ministry of Agriculture, Forestry and Fisheries (MAFF) is responsible for importing rice under Japan s WTO URAA minimum-access commitment. Government is reducing its involvement in price formation of agricultural products. The administered price for rice was abolished in 2004 and administered prices for wheat and barley in However, there are still several commodities for which administered prices are set, such as sugar beet, sugar cane and pigmeat. As for beef and pigmeat, the Agriculture and Livestock Industries Corporation (ALIC) operates price stabilisation systems. Budgetary support is provided mainly towards infrastructure needs, such as irrigation and drainage facilities and the readjustment of agricultural land. Prefecture and local governments provide infrastructure and extension services. Agri-environment programmes include measures to encourage farmers to adopt sustainable agricultural practices that reduce fertiliser and pesticide usage as well as to improve the quality of soil through composting. Direct payments to farmers in hilly and mountainous areas aim to prevent the abandonment of agricultural land and to maintain the multifunctional character of agriculture. Domestic policy Purchasing prices for wheat and barley declined, while selling prices remained unchanged in The minimum producer prices for sugar beet and sugar cane were reduced slightly in 2006 (Table 8.1). The floor level of the pigmeat price stabilization band has remained unchanged since The government set a ceiling of 2 million tonnes on manufacturing milk to be covered by direct payments in 2006, the same level as in All administered prices for calves have remained constant since 2001, with the exception of dairy breeds for which prices were reduced by 1.5% in 2006 (Table 8.2). In March 2005, the new Basic Plan for Food, Agriculture and Rural Areas was announced. A number of new directions in agricultural policy were proposed. One of the most important elements was a transition towards a flexible commodity support policy. In the past, policies provided support to individual commodities through price policy and border measures, but this had the effect of delaying necessary structural adjustment. The Plan also stresses the importance of concentrating support on more efficient and stable farms. Another important element of the Basic Plan is the proposed revision of the agricultural land ownership and land use system so that farmland is used effectively. This is consequent to the yearly reduction in the total area of land used for agricultural purposes that results largely from an increase in farmland abandonment and conversion to other purposes. The Outline of the Farm Management Stabilization Programme was elaborated in October 2005 with the objective of implementing the Basic Plan. This programme lays out 177

6 the details of the commodity flexible, efficient and stable farm concentration policy, including the criterion to receive payments and the commodities covered. It also recommends the introduction of a rural development programme in order to conserve the quality of farm resources. This programme would also have the benefit of underlining the importance of promoting rice policy reform. The law on farm income stabilization came into effect on 1 April 2007 and three new direct payments were introduced as part of the commodity flexibility policy. The first payment is based on historical area planted in a defined and fixed base period; wheat, barley, soybeans, sugar beet and starch potatoes are eligible for this payment. The aim of this payment is to correct disadvantages in domestic agriculture caused by geographical handicaps as compared to other countries. The second payment seeks to encourage quality improvement of domestic products by farmers producing any of the above five crops. The third payment is to compensate for part of the loss of income compared with the average income of the preceding years in order to mitigate income instabilities caused by price and yield fluctuations. Six crops are eligible for this payment: rice, wheat, barley, soybeans, sugar beet and starch potatoes. These new direct payments are targeted to individual farmers who manage at least 4 ha of land (in the Hokkaido area where relatively larger farms exist, the minimum is set at 10 ha) and to local community units that manage more than 20 ha along with other conditions. Eligible farmers should also respect certain environment related conditions established by the government to promote environment friendly agriculture. With the introduction of these new payments, relevant commodity specific payments which were payments base on output were abolished. A new rural development programme was introduced in 2007 to encourage community initiatives aimed at conserving the quality of rural resources such as land and water, as well as to improve the environment with a view to sustainable rural development. As depopulation, ageing population and other problems increase in rural areas, maintaining the quality of rural resources has become more difficult. In addition, increasing public concern over environmental problems has made clear the need to place more emphasis on environmental conservation. This led to the introduction of the new rural development programme. Rice policy reform is also under way, based on the Principle and Outline of Rice Policy Reform established in The basic concept of this reform, which is to be completed by 2012, is to produce rice that meets market demand, especially from a quality point of view. One of the most important reforms in rice policy implemented in 2007 was the reform of the production adjustment system. In the past, it was mainly the government which decided how much would be produced in consultation with the farmers organization. As of 2007, production adjustment policies will be decided by the farmers themselves and farmers organizations. The second important element of the Basic Plan, the reform of the agricultural land ownership and land use system, was completed in The number of retirees in the agricultural sector is increasing as ageing of the farmer population progress. Not enough younger farmers are taking over the management of their farms and the total area of abandoned farmland has increased. The new law allows companies to rent and manage agricultural land. Whereas in the past only individuals or agricultural production legal persons (a corporation owned by farmers) could rent and manage agricultural land, now companies can use these abandoned lands for agricultural purposes. 178

7 There are a growing number of problems with dietary habits currently amongst the Japanese people today. These include a growing nutritional imbalance with an excessive intake of fat, irregular eating habits, and a growing tendency to skip meals. As a result, the number of obese people and lifestyle-related diseases are increasing. The government has started to promote Shokuiku which is a new concept, encouraging people to increase awareness about food and nutrition in order to help them in choosing a healthy diet and thereby enhancing quality of life. The basic law on Shokuiku came into effect in July As this policy covers a broad range of issues, various government agencies collaborate under the leadership of the Cabinet Office, with the Ministry of Agriculture Forestry and Fisheries focusing on the food chain itself. A new system of pesticide restrictions was implemented in May 2006 and a positive list system for the inspection of pesticides residues in foods was introduced. In the past, a negative list system listing the names of prohibited pesticides was in force. However, it was found that many imported fruits and vegetables contained pesticides that are not authorized as safe in Japan. In response to public concerns, the government introduced a positive list system of pesticides that could be used. It also set out the maximum residue limits in foods of all pesticides, as opposed to only certain number of pesticides as was the case in the past. Table 8.2. Japan: Administered prices Product 2004/ / /07 1 Change in JPY price 04/05-05/06 05/06-06/07 JPY/t USD/t JPY/t USD/t JPY/t USD/t % Wheat Wheat Barley Barley Sugar beet Sugar cane Pigmeat Years are July to June for wheat and barley, October to September for sugar beet and sugar cane and April to March for pigmeat. 2. Government purchase price for domestic production. 3. Government selling price for domestic production, application of these prices are different from July to June. 4. Minimum producer price. 5. Floor price in the price stabilization band. Source: Ministry of Agriculture, Forestry and Fisheries, Japan. Table 8.3. Japan: Guaranteed prices for calves per head 2004/ / /07 Change in JPY price Breed (April to March) (April to March) (April to March) 04/05-05/06 05/06-06/07 JPY/head USD/head JPY/head USD/head JPY/head USD/head % Black Wagyu Brown Wagyu Other beef breeds Dairy breeds Source: Ministry of Agriculture, Forestry and Fisheries, Japan. 179

8 As a result of the steep rise in oil prices, the development of bioenergy has been promoted in recent years in Japan. The Japanese government has set a target for using bioenergy of million liters by As Japan has only a limited capacity to produce agricultural products such as maize and sugar cane, which are widely used for producing bioenergy in other countries, it is seeking new methods, such as the chemical processing of waste food oil, or the use of methane gas fermented from livestock waste. Trade policy The quantitative restriction on rice imports was abolished and replaced by a tariffquota system in In 2006, the over-quota tariff-rate was JPY (USD 2 928) per tonne, the tariff-quota for rice was tonnes (brown rice basis) and the maximum mark-up for rice imports was set at JPY (USD 2 507) per tonne. Food aid to developing countries, which includes both domestically produced rice as well as imported rice, was approximately tonnes in Japan s tariff-rate-quotas continue to be underfilled in 2006 for some products, including skimmed milk powder for school lunches and for feed, mineral concentrated whey, whey for infant formula and for feed, butter and butter oil for specific uses, and ground nuts. Japan used special safeguard measures in 2005 and 2006 in accordance with the WTO Agricultural Agreement on several products including milk powder and maize (corn) starch. Up to the beginning of 2000, Japan was not active in concluding Free Trade Agreements (FTA). The first FTA was signed with Singapore in 2002 and the second with Mexico in 2004; the latter was the first FTA in which agricultural products were actually included. In 2005 and 2006, Japan signed FTAs with several countries, mainly in South-East Asia. These FTAs require Japan to eliminate or reduce tariffs, or to introduce preferential tariff-quotas for several sensitive agricultural products such as poultrymeat and several fruits. Japan is now negotiating FTAs with Korea, ASEAN, Co-operation council for the Arab states of the Gulf, Viet Nam, and India. Japan will also start FTA negotiations with Australia and Switzerland. In May 2003, a case of BSE infection was confirmed in Canada for the first time. Japan immediately suspended imports of Canadian beef and related products. In December 2003, BSE was also confirmed in the US, the largest beef exporter to Japan, and imports of US beef and related products were suspended. After a two-year suspension, and following scientifically based risk assessments by the Food Safety Commission, imports of US beef and beef products were resumed in December 2005 on condition of compliance with the Export Program agreed between the US and Japan. Imports from Canada were also resumed in 2005 under similar conditions. However, imports from the US were suspended in January 2006 because specified risk materials (SRMs) were found in US beef. Japan requested that the US explain the causes and that it take measures to prevent any recurrences; imports were resumed in July