Feb. 5 (Bloomberg) -- Japan, the world’s largest grain importer, may end a four-decade program to cut rice sowing as it plans to revive agricultural production and create jobs amid a deepening recession.

The nation may end compulsory rice planting cuts and instead provide income support for farmers who voluntarily curb output, said a government official, who declined to be identified as the plan is opposed by some ruling-party politicians.

Japan has been in recession since November 2007 after its longest period of postwar growth. Makers of vehicles and electronics equipment are slashing their workforce as corporate losses mount. Rising output of rice, the nation’s staple food, may help support local economies.

“Agriculture can play an important role in restoring Japan’s economy as a global recession may be protracted,” Nobuyuki Chino, president of Tokyo-based Unipac Grain Ltd., said. “Japan should boost its farm production and the government should stop requiring growers to cut rice planting.”

The changes under discussion aim to lure individuals and companies into farming to boost output and increase agricultural exports, the official said. Japan has 3.35 million farmers, according to the agriculture ministry, of a total population of about 127 million people. Agriculture accounts for less than 2 percent of gross domestic product.

Price Declines

Increased rice production would decrease prices to consumers, help stimulate new uses for the grain, mainly consumed as a staple food and in liquor and confectionery, and may drive creation of larger, more efficient farms, the official said.

Surplus rice could be exported as global grain demand rises on population gains and demand for livestock products, he said. Japan’s agricultural exports advanced 9.8 percent from a year earlier to 243.7 billion yen ($2.7 billion) in 2008, according to the Ministry of Agriculture, Forestry and Fisheries.

The government has created a team including the ministers of trade, finance and internal affairs to reform farm policy, including rice production, as agriculture is an area that may absorb fired workers. A decision on policy changes may be made by the middle of this year.

Japan will comply with a World Trade Organization agreement to import a minimum 770,000 metric tons of the grain even if it boosts output, the official said. Excess supply from overseas will be increasingly used for animal feed and biofuels, he said.

Rice planting fell as domestic consumption dropped because of a shift in tastes toward Western foods. Japanese food rice demand will fall 2.6 percent from a year earlier to 8.31 million tons in the year to June 30 while output will fall 6.4 percent to 8.15 million tons, according to the agriculture ministry.

Self-Sufficient

Demand peaked at 13.4 million tons in 1963, while output reached a high of 14.5 million tons in 1967, when Japan became self-sufficient in rice. The policy to cut sowing started in 1971 to curb stockpiling costs and was endorsed by farmer groups as a price-support measure.

Farmers planted 1.7 million hectares (4.2 million acres) of rice last year, or 60 percent of total paddies. Of the remaining area, 800,000 hectares were sown with other crops and 200,000 hectares were left idle.

“Farming in Japan has lots of problems, and our capacity to supply food may decline further unless fresh measures are taken,” Yasuo Sasaki, senior counsellor for press at the agriculture ministry, said in an interview yesterday.

About 400,000 non-regular workers will lose their jobs by March 31, the Japan Manufacturing Outsourcing Association said last week.

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

Last Updated: February 4, 2009 23:46 EST