Japan to discontinue rice subsidies as it overhauls agriculture

November 28, 2013

Japanese government is considering phasing out its over four decades old rice subsidy scheme–“gentan” production adjustment system by March 2019. The system was designed to reduce excess crops as part of government’s programme to bring reforms in agriculture sector.

What is the rice subsidy programme in Japan?

The government of Japan provides subsidies to its farmers in exchange for reducing rice output to adjust supply and protect prices through “gentan” production adjustment system. Under this programme, initiated in 1970, farmers who reduce sowing to government-set limits get about 150,000 yen ($1,500) for each hectare (2.5 acres) under cultivation.

Why this measure is being considered?

Japan intends to end the gentan system as part of its agriculture sector reform which has been most protected domain for a long time. The step is unlikely to have an immediate impact on rice trade due to Japan’s high import duties and cost of production, but it will help competitiveness of the farming sector as the government negotiates to join the Trans-Pacific Partnership (TPP), a US-led free trade area. It may also help the country ward off pressure from the US, Australia and others to remove tariffs and other barriers to trade in protected areas such as agriculture.
However, some people believe that due to Japan’s ageing and shrinking farming population coupled with high cost of production will not allow exports to rise even if the government stops the subsidy to farmers. On the contrary, they say, it will lead to inundation of Japan’s agri market with foreign produce.
Some facts:

Japan exports very little of its rice, with overseas sales totalling just 16,403 tonnes valued at 1.3 billion yen in the first nine months of this year.
In 2012, Japan harvested 8.5 million tonnes.
In contrast, India, the biggest rice exporter in 2012, shipped about 10.5 million tonnes, while Vietnam exported 7.2 million and Thailand 7 million.

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