Media  Global Economy  2022.11.09

What is behind the moves to revise the Food, Agriculture and Rural Areas Basic Act?

A historical look at what exactly is behind the latest swing back of the pendulum of Japan’s agricultural policy, which has been subject to the vagaries of politics

The article was originally posted on RONZA on October 11th, 2022

Agricultural Policy/Genome

It has transpired that the government will revise the Food, Agriculture and Rural Areas Basic Act, citing the need to strengthen Japan’s food security and turn primary industries into a growth sector. The country’s agricultural policy has been swayed by politics and pressure groups. It has also been substantially influenced by factors other than domestic politics. This article reviews the record of Japan’s post-war agricultural policy – which has been buffeted by politics – and explains what lies behind the moves to revise the Basic Act, in an attempt to elucidate in what direction the Ministry of Agriculture, Forestry and Fisheries (MAFF) intends to revise the legislation. The Minister of Agriculture, Forestry and Fisheries says he will listen to people from all walks of life. I am convinced, however, that the direction of the revision has already been determined.

The farmland reform and the establishment of the JA have dictated Japan’s post-war agricultural policy

The farmland reform was the product of tenacious efforts that were made by officials at the Ministry of Agriculture and Forestry (MAF) – the predecessor to the MAFF – since before World War II in their pursuit of liberating tenant farmers. Yet the reform rather worked to consolidate the prewar agricultural structure in which small farmers dominated as it gave rise to a huge number of land-owning farmers, i.e., small landowners.

The General Headquarters (GHQ) of the Supreme Commander for the Allied Powers, led by Douglas MacArthur, showed little interest in the farmland reform at first, but gradually became aware of its political relevance. Immediately after the end of WWII, the socialist movement that called for the liberation of tenant farmers spread like wildfire across farming communities. It rapidly lost steam, however, as the farmland reform progressed. With newly-acquired landownership, tenant farmers turned into small landowners and became conservative. Having seen this development, the GHQ wanted to use such conservative farming communities as a buffer against communism. It thus ordered the MAF to work to establish an Agricultural Land Act aimed at consolidating land-owning farmers, a major outcome of the farmland reform. The act was enacted in 1952.

The agricultural bureaucracy was trying to implement agricultural reform following the farmland reform in order to rectify the agricultural structure dominated by small farmers. The MAF’s agricultural policy charter of 1948 states: “Japan’s agricultural sector will fall into a hopeless predicament if the country fails to develop basic conditions that are necessary to improve its productivity in order to survive international competition in the future.” It is noteworthy that international competition was already in the minds of agricultural bureaucrats back then. They were opposed to the enactment of the Agricultural Land Act, which would serve to cement the status quo. Opposition also came from the ruling Liberal Party, which represented the interests of the land-owning class, although their standpoint is opposite to that of the agricultural bureaucracy.

Farming communities became a conservative constituency

Hayato Ikeda – who later became prime minister – was, along with the GHQ, one of the first to become aware of the political implication of the farmland reform and an Agricultural Land Act that they would help turn farming communities into a conservative constituency. Ikeda ironed out differences within the Liberal Party to work toward the enactment of an Agricultural Land Act. The enacted Agricultural Land Act was more than just an agricultural law. In post-war Japan, it was a strong policy to deter communism by solidifying the class of small owner-farmers. In fact, it helped build a conservative constituency.

As MacArthur and Ikeda hoped for, the owner-farmer principle that was rooted in the Agricultural Land Act impeded agricultural structural reform. This principle, which states that farmers should own the land they cultivate, denies the existence of leasehold farmers (tenant farmers). Yet if small land-owning farmers cultivate only the land they own, all they can do is to manage only a small farm. If they lease, if not buy, land from other owners, they can manage a large farm. Seiichi Tobata (1899–1983), professor at the University of Tokyo, once said, “the owner-farmer principle does not make for a Marunouchi Building.” The Marunouchi Building, one of the tallest buildings in prewar Japan back then, was built on a tract of land leased from many landowners. However, farmland owners became reluctant to lease their land for fear that it may not be returned. This was because the Act was designed to protect tenant rights by such means as restricting the termination of the right of lease. The Agricultural Land Act proved to be a law for putting the small farmer-dominated structure firmly in place.

In this way, farming communities became a conservative constituency. It was the Japan Agricultural Cooperatives (JA), which was established after WWII, that organized such conservative farming communities and supported the Liberal Democratic Party (LDP).

During the postwar period of food scarcity, farmers tended to sell rice on the lucrative black market. The government thus had a hard time collecting rice in a desperate effort to implement the rationing system designed to distribute rice evenly among the public, including the poor. The MAF wanted to use Nogyokai, a government-controlled wartime association of farmers and others, as a food collecting mechanism. In 1948, the MAF reorganized Nogyokai into the Japan Agricultural Cooperatives (JA). Back then, the JA was vilified as a “Nogyokai with a different shingle.”

Emergence of the JA, the biggest pressure group in postwar Japan

The JA emerged with the appearance of a democratic organization. Yet it took over the top-down and controlling nature of Nogyokai, which was organized in three tiers – at the national, prefectural, and municipal levels – so as to enable the agenda at the top to permeate all the way down to the bottom. On top of that, the JA was allowed to engage in banking and other operations as well, something that other corporations were not allowed to do. This set the stage for its future development. This is not the end of the story. Nogyokai was a union between agricultural associations, which were engaged in political activity, and industrial cooperatives, which were engaged in economic activity. The JA was established as an organization that engages in all-round economic activity as well as in political activity. Here emerged the largest pressure group that defined post-war politics in Japan.

The Japan Medical Association (JMA) is also a pressure group, but it does not by itself engage in economic activity. This holds true for political organizations of farmers in the West. But the JA is different. The JA’s political movements tend to prioritize the benefits of its own organization rather than those of member farmers. Part-time rice farmers who remained in the industry because of high rice prices deposited their income from non-farming work at the JA Bank, which is now one of the largest megabanks in Japan, with total deposits of more than 100 trillion yen. This is why the JA pushes for high rice prices and the rice acreage reduction program.

The ill-fated Agricultural Basic Act

The Agricultural Basic Act was established in 1961. Political motives behind it included the protection of agriculture and the securing of budgets. The background was that Japan suffered a severe food shortage on the heels of WWII. Subsequently, however, the production of food, especially rice, grew substantially. (Rice production increased from 5.87 million tonnes in 1945 to 9.21 million tonnes in 1946 and further to 12.86 million tonnes in 1960.) Lawmakers from rural areas became increasingly fearful that the agricultural budget would be reduced. Lawmakers of the Socialist Party of Japan argued for a basic act for agriculture by drawing on a German example where the establishment of such a law led to increases in the agricultural budget. Lawmakers representing the agricultural interests from both governing and opposition parties agreed and urged the MAF to work toward the enactment of such a basic act.

In response, the government and the MAF established the act for establishment of the commission on basic issues in agriculture, forestry and fisheries in 1959. Under the act, the government set up the commission as an advisory body to the Prime Minster. It was chaired by Seiichi Tobata, who was one of the best pupils of the renowned economist Joseph Schumpeter. The commission’s secretariat was headed by Takekazu Ogura (1910–2002), who later chaired the Government Tax Commission for 16 years and was nicknamed “Mr. Tax Commission.” Tobata and Ogura, two of the most talented people representing the then academic and bureaucratic circles, worked on an Agricultural Basic Act. Ogura, who had just resigned as Director-General of the Food Agency, stayed long in Paris to study France’s basic agricultural law. The MAF was at its height of eagerness since the time of farmland reform.

Back then, agricultural production recovered, but as economic reconstruction progressed, the income of factory workers came to outstrip agricultural income. Thus, the Agricultural Basic Act had an objective of closing the income gap between agriculture and industry. Agricultural income is calculated by subtracting costs from sales – the product of the prices of farm products and their amounts. A higher price, more production, or a lower cost results in higher income. Yet a higher price would affect consumer finances. So the Basic Act opted for the approach of increasing the farm size to reduce costs. Of the two major agricultural issues in prewar Japan, the liberation of tenant farmers was achieved by the farmland reform. Agricultural policymakers tried to solve the remaining issue: rectifying the agricultural structure in which small farmers dominated.

Both politicians and the JA left the Agricultural Basic Act in the lurch

Lawmakers had different ideas, however. They were more interested in securing and boosting the protection of agriculture than in the development of the sector. The Socialist Party, in particular, was opposed to a Basic Act, making an ideological case that such an act would disregard poor farmers. In Diet deliberations, the ruling and opposition parties clashed over the Basic Act bill. The bill barely passed the Diet, but none of the other bills designed to implement the Basic Act passed. In effect, the Basic Act failed to win full support of the Diet. Wishing to win full support of its members, the JA opted not to cooperate, branding structural reforms envisioned in the Basic Act as being discriminatory. Instead, the JA advocated its own initiative called the agro-park vision.

Despite having been enacted, the Agricultural Basic Act was not implemented in earnest. In the face of a strong political movement by the JA, the largest LDP-supporting organization, the LDP government substantially raised the government’s rice purchase price (producer rice price) under the Food Control Act to increase farm household income. Citing the income-doubling plan by Hayato Ikeda’ cabinet (1960–64), proponents made the case that the price of rice should be doubled to double farmers’ income.

Back then, the income gap was widening not only between agriculture and industry but also between cities and the provinces. Thus, much effort was made to lure factories to the provinces. As a result, people in rural areas became able to work at factories; earlier, those who wanted to do so had to leave their home communities for Tokyo or Osaka. A higher price of rice enabled high-cost, small-scale farmers to continue their rice production. The increasing mechanization of farming substantially reduced the total hours of labor needed to produce a unit of rice. This allowed salaried workers working at factories and the like to produce rice by working as farmers only on weekends. As a result of all this, small-scale, part-time farmers remained in large numbers in farming communities, thus preventing business farm households from expanding their farm size. Since 1965, farm household income, a sum of salaried income and agricultural income, has been greater than industrial workers’ household income. The income gap between agriculture and industry was closed by farm households’ shift toward part-time farming (salaried income), not by agricultural structural reform.

The MAF came to disregard the need to improve the agricultural structure

Land-intensive farming such as rice and wheat cultivation is different from labor-intensive farming such as vegetable and fruit cultivation, a sector suffering from a labor shortage. In the former, the fewer farm households there are and the larger the average farm is, the lower the cost and the larger the income. The Agricultural Basic Act was predicated on the prospect or assumption that rectifying the small farmer-dominated structure would lead to fewer farm households. However, farm households did not leave farming communities that had been industrialized.

In addition, the price of farmland increased in line with the price of land for housing and factories in Japan in the absence of strict land use regulations (zoning) as seen in France. As a result, the price of farmland came to significantly surpass its capitalized value, thus making it difficult to increase the farm scale through farmland transactions. Seiichi Tobata was so ashamed of the fact that the commission on basic issues in agriculture, forestry and fisheries never discussed land prices that he refrained from engaging in agricultural policymaking any more.

Even the MAF came to disregard the Agricultural Basic Act in less than ten years after its enactment. The MAF thought that rectifying the small farmer-dominated structure to increase the farm scale required reducing the number of farm households. It also thought that the result would be lesser political power of the agricultural interests and smaller budget allocations for agriculture. This was how the MAF gave up the ideals of agricultural policy that the ministry had embraced since Kunio Yanagita (1875–1962) joined the then Ministry of Agriculture and Commerce in 1900.

From the Agricultural Basic Act to the Food, Agriculture and Rural Areas Basic Act

A higher price proved to be counterproductive. From the second half of the 1960s onward, there was a glut of rice. The government spent no less than three trillion yen on disposing of the excess stock of rice as livestock feed and foreign food aid. In 1970, it put the rice acreage reduction program into full swing. The program was aimed at reducing the amount of rice the government purchased under the Food Control System by providing subsidies to farmers who agreed to curtail their rice production. It was a passive, stopgap measure to maintain the Food Control System. After the system was abolished later, the acreage reduction program became the only policy instrument to maintain the price of rice.

Reducing rice acreage while maintaining increases in the rice price will not discourage farmers from producing rice, which in turn will maintain a glut of rice. From 1960 onward, the price of rice was raised regardless of the supply-demand situation but according to what is called the Production Cost and Income Compensation Formula, which factored in wages at large companies. The result was that the rice acreage reduction program continued unabated.

Responding to this state of affairs and prompted by some MAF officials, some LDP lawmakers representing agricultural interests raised doubts about the superficial knowledge of raising rice prices. Their group, including Ichiro Nakagawa and Michio Watanabe, was called the comprehensive agricultural policy faction. Watanabe criticized the policy of raising rice prices and reducing acreage, likening it to the act of running the heater and the air cooler simultaneously.

These lawmakers embraced the voluntary marketed rice system, which was launched in 1969 to allow for an alternative distribution channel other than the option of selling it to the government in an effort to reduce the growing deficit under the food control system. This system, which was a brainchild of the MAF, met with opposition from the JA. The JA was also opposed to the rice acreage reduction (crop switching) program, which was introduced in 1970. It argued that the government should buy up all the rice they produced. The comprehensive agricultural policy faction maintained that subsidies for crop switching from rice should be introduced to rein in excessive rice production and increase Japan’s self-sufficiency in food. However, switching to wheat and soybeans required new machines and skills. Part-time farmers who worked on their farm only on weekends could not afford such an option. To qualify for crop switching subsidies, farmers switched crops in form by sowing the seeds of alternative crops like wheat and refrained from harvesting the crops in a practice known as sutezukuri (cultivation for disposal). No harvest meant that they did not help increase Japan’s self-sufficiency in food.

Structural reform prompted by external pressure, i.e., the liberalization of trade in agricultural products

Apart from the rice issue, Japan’s huge trade surplus in the 1980s was seen as a problem by the United States among other countries. The US stepped up calls for Japan to open its market to agricultural products. For Japan’s agriculture to survive fewer import restrictions and lower tariffs and to boost its international competitiveness, it is necessary to implement structural reform that involves farm size expansion. From the second half of the 1980s, the administered prices of rice and other farm products remained unchanged or were lowered.

In a sense, this development represented the move to make Japan’s agricultural policy more aligned with the Agricultural Basic Act. The year 1993, when the GATT Uruguay Round negotiations came to a conclusion, saw the establishment of the certified farmer system whereby municipal mayors focus on farmers they certify in taking measures to establish an agricultural structure in which efficient and stable farm enterprises play a leading role in production.

Such a major shift in Japan’s agricultural policy itself came with a number of changes surrounding the agriculture policy. They included the partial liberalization of Japan’s rice market following the conclusion of the GATT Uruguay Round, the repeal of the Food Control Act, the business community’s demand that stock companies be allowed to acquire farmland, and the degradation of hilly and mountainous areas. Some MAFF officials came to argue that a new basic act should be enacted in place of the Agricultural Basic Act, which was effectively in a dormant state. The new act, which was eventually established, was named the Food, Agriculture and Rural Areas Basic Act based on the idea that the scope of agricultural policy should be expanded to include non-agricultural aspects as well.

Seeking to enhance food security and multifunctionality in agriculture

The new basic act sought to enhance food security and multifunctionality in agriculture rather than increasing farm household income. Regarding the agricultural structure, the act states: “In order to develop efficient and stable agricultural management and to establish agricultural structures in which agricultural management plays a major role in agricultural production, the State is to [...] expand the scale of agricultural management, and implement other necessary measures to promote the enhancement of the agricultural management infrastructure [...]” (Article 21). This provision reflected the heightened awareness of the need to cope with the liberalization of trade in agricultural products. This is because the World Trade Organization (WTO) Agreement on Agriculture envisaged negotiations for further reductions in protection (Article 20).

Major policy pillars included (1) higher food self-sufficiency, (2) the acquisition of farmland by stock companies, and (3) direct payment to farmers in the hilly and mountainous areas. Agricultural policymakers feared that unless some progress was made to pave the way to the second pillar, it may have been difficult to win the business community’s understanding of the agricultural policy. Naturally, however, the conservatives in agricultural circles were opposed. In fact, the first and third pillars were carrots for the agricultural interests to accept the second pillar.

Unlike in the case of the Agricultural Basic Act, the process of preparing the new legislation took place largely in the subcommittee on basic agricultural policy of the LDP Policy Affairs Research Council. The subcommittee was chaired by Toshikatsu Matsuoka, then Minister of Agriculture, Forestry and Fisheries, and a member of the House of Representatives. The bill for the Agricultural Basic Act was prepared with the central role played by Seiichi Tobata, who chaired the commission on basic issues in agriculture, forestry and fisheries and Takekazu Ogura, who headed the commissioned secretariat. In the case of the Food, Agriculture and Rural Areas Basic Act, the draft was prepared by the MAFF and debated in earnest at the Matsuoka-chaired subcommittee. Back then, I was director in charge of direct payments to farmers in the hilly and mountainous areas. I was responsible for planning and ironing out differences within the government with regard to the direct payment system. I informed and tried to influence Matsuoka and other LDP lawmakers representing agriculture interests. Yet I never gave explanations to any of the members of the Agricultural Policy Council, which corresponded to the commission on basic issues in agriculture, forestry and fisheries. As far as the bill preparation process was concerned, everything was opposite to the Agricultural Basic Act.

Yet another swing back of the policy pendulum is behind recent moves to revise the new basic act

The new Basic Plan for Food, Agriculture and Rural Areas, which was drawn up in 2020 based on the new basic act states: “the MAFF will work to cultivate and secure agricultural actors regardless of differences in scale and type (household or corporate) of their operations.” The agricultural interests, including the JA and the conservative agricultural economists, appreciated the 2020 plan, describing it as representing a major shift from the agricultural policy that revolved around large farms (in other words, from the philosophy behind the Agricultural Basic Act).

The new plan also states the following: “It is necessary to ensure that diverse farm operators such as small and medium-sized operators and family-based operators cooperate and collaborate with one another in each production area and implement a unified marketing strategy and joint sales for sustainable agricultural production. It is also necessary to ensure that farm operations are sustained in light of the important roles played by these farms, along with business farmers, in maintaining local communities.” (“Basic Plan for Food, Agriculture and Rural Areas” [in Japanese], p. 39) “Diverse farm operators such as small and medium-sized operators and family-based operators cooperate and collaborate in each production area in such forums as item-specific subcommittees of agricultural cooperatives and corporations. They are engaged in agricultural production through a unified marketing strategy and joint sales, thus playing important roles in maintaining local communities.” (op. cit., p. 42) These descriptions represent nothing but the agro-park vision that the JA used to advocate to challenge the Agricultural Basic Act.

The Basic Plan of 2020 revived small-farmer protectionism

The farmland reform spawned many small landowners and rendered farming communities conservative. Farming communities comprising small landowners with an equal size of land were organized by the JA with the one-member-one-vote principle. They supported the conservative parties, which reciprocated by raising the price of rice.

The Basic Plan of 2020 revived small-farmer protectionism. The WTO was dysfunctional. Negotiations for the Trans-Pacific Partnership (TPP), which raised the fear that Japan was forced to lift tariffs, came to a conclusion without a major hitch. The liberalization of agricultural trade is now a remote possibility. There seems to be no need to worry about international competitiveness in agriculture. The Ukraine invasion has raised concerns about a global food crisis. Japan’s agricultural circles may regard such concerns a good opportunity to strengthen the protection of agriculture.

The Basic Plan of 2020 goes against the Food, Agriculture and Rural Areas Basic Act, which provides its very basis. Apparently, the government will revise the Food, Agriculture and Rural Areas Basic Act in line with the new Basic Plan. Yet the government seems to be unaware of the fact that Japan cannot boost exports of farm products unless they are internationally competitive.

“Persistent existence of agricultural fundamentalism in the minds of politicians”

Seiichi Tobata once said: “The economic solution to rural problems in Japan lies in reducing the relative number of people who depend on farming for a living. The persistent existence of agricultural fundamentalism in the minds of politicians is the very reason why agriculture cannot constitute the basis of the state in an economic sense.” Takekazu Ogura added to this statement, saying: “Agricultural fundamentalism dies hard. This is because the farming class does not constitute the basis of the state; rather, it is the very basis of agricultural cooperative organizations and the constituencies of rural lawmakers.”

Unfortunately, there is no Seiichi Tobata or Takekazu Ogura in the Foundation of Agricultural Sciences of Japan or the MAFF today.