Rice Plan Signals End of Era as New World Farmers Beat Ol

Photographer: Tomohiro Ohsumi/Bloomberg

A farmer plants rice seedlings in a paddy field in Katori, Chiba Prefecture, Japan. Close

A farmer plants rice seedlings in a paddy field in Katori, Chiba Prefecture, Japan.

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Photographer: Tomohiro Ohsumi/Bloomberg

A farmer plants rice seedlings in a paddy field in Katori, Chiba Prefecture, Japan.

The patchwork of tiny rice paddies that have decorated the terraced hillsides and alluvial plains of Japan for centuries is under threat as the government presses aging farmers to consolidate holdings or switch crops.

The gentan system, which has paid landowners to reduce crops for more than four decades, should be dismantled by 2018, the agriculture ministry said in a proposal to Prime Minister Shinzo Abe’s ruling party this month. The ministry also said it plans to create land banks in every prefecture to connect small holdings into larger tracts.

Subsidies for growers and import tariffs of 778 percent sustain 1.2 million rice farms whose typical owner is a 70-year-old man living off pension payments, part-time work and sales of the grain, data from the Norinchukin Research Institute show. Abe is weighing their votes, and the nation’s cultural attachment to rice cultivation, against declining consumption and his push to expand free-trade agreements for manufacturers.

“Japan faces a turning point for agricultural policy and there is support for more aggressive and competitive farming,” said Tomoaki Iwai, a professor of politics at Nihon University in Tokyo. “Politicians see less merit in protecting agriculture in areas where the farming population is shrinking.”

Photographer: Kiyoshi Ota/Bloomberg

A man eats a bowl of rice in this arranged photograph in Tokyo. Rice consumption in Japan peaked at 13.4 million metric tons in 1963 and then began falling as postwar economic expansion boosted incomes, allowing people to eat more meat, dairy products and other grains. Close

A man eats a bowl of rice in this arranged photograph in Tokyo. Rice consumption in... Read More

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Photographer: Kiyoshi Ota/Bloomberg

A man eats a bowl of rice in this arranged photograph in Tokyo. Rice consumption in Japan peaked at 13.4 million metric tons in 1963 and then began falling as postwar economic expansion boosted incomes, allowing people to eat more meat, dairy products and other grains.

Mitsuhiro Miyakoshi, the chief strategist for rice policy in Abe’s Liberal Democratic Party, said on Oct. 30 that cutting payments under the gentan system would encourage inefficient, smaller-scale farms to shift to other crops or lease their land to bigger growers.

‘Can’t Go On’

“Production is already in danger of extinction with the average age of Japanese rice farmers at 70,” said Miyakoshi. “We can’t go on the way we have been.”

Rice consumption in Japan peaked at 13.4 million metric tons in 1963 and then began falling as postwar economic expansion boosted incomes, allowing people to eat more meat, dairy products and other grains.

The government started the gentan system in 1970 to support prices by setting annual output targets that matched demand estimates. As people ate less rice, the targets shrank and the state paid subsidies to farmers who agreed to sow less grain.

This year’s target was a record-low 7.91 million tons, compared with estimated demand of 7.86 million tons. Each farmer who plants less in line with the plan receives about 150,000 yen ($1,500) for every 1 hectare (2.5 acres) still under cultivation and becomes eligible for other benefits.

Even wholesale prices at a six-year high of 278 yen per kilogram in September last year failed to encourage farmers to consolidate paddies and produce more, said Ryo Kimura, chairman of the Japan Rice Millers and Distributors Cooperative.

Import Quotas

Japan has capped food-rice imports at 100,000 tons a year since 2001. Total inbound shipments, including feed grain for animals, were 770,000 tons in 2012.

Wholesale prices of the locally grown cereal averaged 276 yen a kilogram in the nine months through May, compared with 181 yen paid for milled short-grain rice from the U.S. and 152 yen for the same variety from Australia in import tenders last month. These prices included shipping and inspection costs.

Japan’s farm subsidies and tariffs stand in the way of its entry into the Trans-Pacific Partnership free-trade agreement with 11 other nations including the U.S., Australia and Vietnam. The U.S. and Australia are ranked first and seventh for coarse-grain exports while Vietnam is the second-largest rice shipper, U.S. Department of Agriculture data show.

Manufacturers from Toshiba Corp. to Toyota Motor Corp. would benefit from Abe’s push to reach a TPP agreement. A government estimate in March found that joining the pact and cutting tariffs would boost Japan’s gross domestic product by 3.2 trillion yen, even as farm and fisheries production was forecast to drop by 3 trillion yen.

Imperial Tradition

As many as 410 lawmakers in the prime minister’s own party, backed by the weight of the JA Group farm lobby and its 9.8 million members, have asked the government to exclude rice, wheat, sugar, beef, pork and dairy products from TPP talks. They point to the livelihood of the farmers and the security that comes from Japan’s self-sufficiency in rice.

Abe is weighing tradition along with economics as he decides on policy changes for rice, which means more to the Japanese than just food. The emperor tends a small paddy on the grounds of the imperial palace, and blesses the nation’s crop. Feudal lords used the staple to pay their samurai retainers. Families today drink sake and pound the grain into sticky rice cakes with wooden mallets when they gather to greet the New Year.

Rural Lifeblood

“Traditional farming has been the lifeblood of rural communities,” said Akio Shibata, the president of the Natural Resource Research Institute in Tokyo. “It’s worrying that this form of agriculture, our rural landscape and age-old customs are under threat.”

The agriculture ministry may consider reducing gentan payments as early as the year beginning April 1, Takashi Amou, a director in the planning division, said on Nov. 7. The department has asked for 100 billion yen to start the land banks the same month. They would pool mostly small lots from farmers ready to give up working their fields and consolidate them to lease as large tracts.

Bigger fields, improved farming methods and higher-yielding varieties could cut production costs by 40 percent, the government said in a strategy document in June.

As many as 72 percent of Japanese rice farmers work on one hectare or less, with 42 percent on half of that, according to Norinchukin, the research arm of the farm lobby.

The average U.S. rice farm is 180 hectares and yields more than 50 percent as much grain per hectare as Japanese paddies, based on calculations using data from Norinchukin, the ministry in Tokyo and the USDA.

Abe has said he wants to protect Japan’s beautiful scenery and its rural communities with their rice paddies and orchards,” said Takaki Shigemoto, a commodity analyst at research company JSC Corp. in Tokyo. “Rice may disappear from the landscape after reforms.”

To contact the reporters on this story: Aya Takada in Tokyo at atakada2@bloomberg.net; Chikako Mogi in Tokyo at cmogi@bloomberg.net

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

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