(Nikkei: January 8, 2015 – p. 2)

By Tsukasa Hatano

The farmland bank is a system for taking over dispersed or abandoned farmland, using tax money to improve it, and leasing the land to producers. It is a project that started out with great fanfare in the spring of 2014 under the Abe administration, which had decided to end the rice acreage reduction policy. Yet this project is not making much progress. While there is great demand for land from companies and other producers, the supply of farmland is not expanding. The government’s goal to lease out 140,000 hectares of land during the current fiscal year may prove difficult to meet.

The farmland bank officer of Miyagi Prefecture, a major rice-producing area, is distressed by the fact that while there were applications to lease over 20,000 hectares of land, his office was only able to acquire 750 hectares as of early December 2014. The goal to lease out 1,700 hectares this fiscal year is beginning to appear unattainable.

Gunma’s situation is even worse. The prefecture has been able to secure only 90 hectares of land against a goal of 1,700 hectares. The farmland bank officer points to the delay in efforts to encourage landowners and promises to make efforts in this fiscal year.

The government is taking the initiative to end the rice production adjustment (acreage reduction) system by 2018 and put in place a system for producers to plant crops freely. The goal is to aggregate a total of 1.4 million hectares of land in 10 years for use by big producers. While the farmland bank is the flip side of the abolition of acreage reduction, supply has not been able to match demand.

At the national level, a total of 30,000 producers had applied to lease 230,000 hectares of land as of the end of September 2014. The government has set a goal of leasing out 140,000 hectares of farmland this fiscal year, but it is estimated that latent demand is way above this figure. Some 500 companies have also applied to lease 10,000 hectares.

Yet the total area of farmland leased out as of the end of August last year was only 552 hectares. While the Ministry of Agriculture, Forestry and Fisheries stresses that leasing of farmland usually increases in winter and that evaluation of this project should be made by the end of March 2015, it remains unclear how the goal can be met.

There had been concerns about the difficulty of securing farmland for lease from the beginning. Local farmers are still worried that their land may not be returned and are reluctant to lease to strangers.

There had also been concerns about tapping non-farming landowners who are either working in the city after inheriting farmland or who have simply stopped farming. There are 1.37 million such landowners owning some 200,000 hectares of land in Japan. Some landowners may live outside their home prefecture or in other parts of the country.

The government is planning to spend more than 120 billion yen in tax money as an incentive to landowners initially.

It is also planning to publish regularly the ranking of prefectures by usage rate of farmland banks to encourage competition between local governments in order to expand the supply of farmland.

The case of Kumamoto Prefecture is a good example.

A major campaign to support the farmland bank project consisting of a front-page advertisement in the local newspaper on Dec. 2, 2014 and involving the governor and the prefecture’s mascot Kumamon was waged. The prefectural government also devoted 50 officials to this project because there is a strong sense that the deterioration of agriculture will lead to the degeneration of the region.

These efforts have produced results. An agricultural production corporation farming more than 200 hectares of land was founded in Kumamoto City in November 2014. This is the second corporation in the prefecture tilling over 200 hectares of land. It is aiming at low-cost production of rice, wheat, and soybean by using the farmland bank to expand.

The government is lifting the maximum capital ratio of companies in agricultural production corporations from the current 25% to 50%. It is also considering raising this ratio further after five years. This is meant to improve agricultural productivity to enhance competitiveness, but the whole project will come to nothing if it fails to acquire the necessary farmland. (Slightly abridged)