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ECONOMY > Agriculture

Japanese farming reforms take aim at co-ops’ shortcomings

  • November 26, 2016
  • , Nikkei Asian Review , 6:40 am
  • English Press

Japan’s agricultural sector faces intense pressure from the government to overhaul the way it does business to make itself more competitive internationally and boost the earning power of producers.

 

An agriculture committee for the ruling Liberal Democratic Party approved a plan Friday calling on the National Federation of Agricultural Cooperative Associations, or Zen-Noh, to restructure key commercial operations. “The path we must take has become clear,” said Shinjiro Koizumi, director of the party’s Agriculture and Forestry Division, in a news conference. A government panel on revitalizing agriculture and regional economies will give the final stamp of approval Tuesday.

 

The government will first call on Zen-Noh to cut back on the number of such items as agricultural chemicals and fertilizers it buys up and sells to farmers. This will “create more room for private companies” in the agrochemical market, potentially leading to lower prices, said Kazunuki Ohizumi, professor emeritus at Miyagi University.

 

Zen-Noh is also urged to change how it sells farm products. The organization will now buy produce from farmers outright before reselling it instead of holding items on consignment as it currently does. This will allow agricultural products to be sold without having to go through wholesalers, leading to lower prices, as well as insulate individual farmers against the risk of products expiring before they can be sold.

 

Reforms to other parts of the agricultural system are also in play. Independent dairy farmers will have access to raw-milk subsidies now available only to producers distributing their goods through designated cooperative networks. Labeling of ingredient origins for all processed foods is also being eyed. Legislation to provide a safety net for rice farmers once production restrictions are abolished in 2018 will be introduced to the Diet next year.

 

Getting things done

 

Agricultural reform is a key part of plans by Prime Minister Shinzo Abe’s government to boost Japanese economic growth. The government had been particularly eager to shore up the sector before the Trans-Pacific Partnership trade agreement took effect. Donald Trump’s recent election as U.S. president has all but killed the TPP. But overhauling Zen-Noh, Japan’s leading agricultural distributor, remains critical in making the sector more competitive globally.

 

The trick now is ensuring follow-through on reform. The government cannot compel Zen-Noh, a private organization, to make changes but will push the group to craft and publicize annual improvement plans, including numerical targets. The Ministry of Agriculture, Forestry and Fisheries will check in periodically on progress. Zen-Noh Chairman Yoshimi Nakano said at Friday’s LDP meeting that the group “takes the reform proposals seriously and will work to implement them.”

 

But questions remain as to the timeline for reform. The government in June 2014 set aside the next five years as a period of intense reform. Zen-Noh will be required to create its reform plans with that schedule in mind, though mid-2019 is not made explicit in the reform proposals. A government panel on regulatory reform has proposed that the organizational changes be made within a year. But this, too, was left out of the latest plan.

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