Aug. 31 (Bloomberg) -- Japan plans to cut food imports that make up more than half its total supply, helping local farmers at the expense of growers in the U.S., under a 1 trillion yen ($10.8 billion) policy by the nation’s new government.

The country, which sources about 60 percent of its wheat shipments and 74 percent of its soybean imports from the U.S., may boost its food self-sufficiency rate to 50 percent by 2019 under the plan, according to Nobutaka Tsutui, a Democratic Party of Japan lawmaker in charge of agriculture policy. That would compare to a 41 percent rate in the year ended March 31.

The DPJ will take power for the first time after winning yesterday’s election with promises including paying farmers when prices drop below production costs and achieving self- sufficiency in “important grains.” Japan depended on imports for 59 percent of its food in the year ended March 31, the highest rate among developed countries, according to the Ministry of Agriculture, Forestry and Fisheries.

“A DPJ-led government will try to revive agriculture in Japan by supporting every farm with cash payments,” said Nobuyuki Chino, the president of Tokyo-based Unipac Grain Ltd. “The policy will help boost domestic production, although the self-sufficiency target is hard to achieve immediately.”

Japan, self-sufficient in rice, wants to reduce dependency on overseas grain supplies to protect against volatile global prices that soared to records last year and to ensure long-term food security. The 1 trillion-yen-a-year allocation, equivalent to 40 percent of this fiscal year’s agriculture budget, would start from April 2011.

Developed Countries

The DPJ plans to promote rice production as an alternative to foreign wheat in flour milling, replacing 5 million tons of annual imports with domestic output.

“It’s not a realistic idea,” said Charlie Utsunomiya, director at the Tokyo office of U.S. Wheat Associates. “Japanese farmers cannot produce crops that satisfy needs from local flour millers in terms of quality and quantity.”

Japan should ensure supply security by maintaining relationships with traditional trading partners because the country’s weather and soil were unsuitable for high-quality wheat production, Utsunomiya said.

Japan imported 4.86 million tons of milling wheat in the year ended March 31, 2009, according to the agriculture ministry, including 2.94 million tons from the U.S. Canada was the second- largest supplier with 1.12 million tons and Australia third with 799,000 tons. Overseas purchases and domestic sales are controlled by the ministry.

The DPJ also plans to require country-of-origin labeling on processed food and to ban beef imports from any country that ships supplies breaching mad cow disease safeguards.

Mad Cow

Subsidies to test all domestic cattle for mad cow disease, a measure consumer groups are demanding to ensure food safety, would be revived under the party’s policies.

“They may tighten mad cow-related regulations,” said Susumu Harada, senior director at the Tokyo office of the U.S. Meat Export Federation. “We don’t want stricter rules to be applied to imported beef.”

The cattle brain-wasting mad cow disease, officially known as bovine spongiform encephalopathy, has been linked to more than 150 human deaths worldwide.

Japan imposed a ban on U.S. beef imports in December 2003 after a case of the disease was discovered in Washington State. Imports resumed in 2005 from cattle aged up to 20 months on the condition that risk materials were removed. Imports from individual plants are suspended if the conditions are breached.

The U.S. cattle industry wants Japan to raise the age limit to 30 months as part of an incremental approach to easing restrictions, Harada said.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net

Last Updated: August 30, 2009 23:44 EDT