In an LDP meeting held on July 25, the Ministry of Agriculture, Forestry, and Fisheries (MAFF) proposed to request 53.1 million yen for the next fiscal year to establish a new farmers’ income insurance to compensate for natural disasters and falling produce prices to relieve farmers’ concerns by ensuring them of a stable income in response to next year’s abolition of the production adjustment system (acreage reduction) that sets and allocates nationwide production targets.
The total MAFF-related budget request is 2.6525 trillion yen, which is a 15% increase compared with this fiscal year’s initial budget, and will be submitted to the Ministry of Finance by the end of August.
The income insurance system is slated to be introduced in January of 2019, and a portion of it, such as premiums and reserves, will be financed from the national treasury. Designed to secure some 80% of farmers’ average incomes when incomes drop due to causes like disasters, the system is one of the main features of the larger business stabilization measures to counter the repeal of acreage reduction that the government and the ruling parties are working to finalize by this fall.
Consumption of rice, which makes up around 90% of production, is decreasing by 80,000 ton increments each year due to the dwindling birthrate, aging population, and diversified diet. MAFF introduced the acreage reduction policy in 1970 to adjust the balance between supply and demand to prevent rice prices from dropping too far. The ministry has been setting the following year’s cultivation acreage targets every November to be allocated among the prefectures.
However, the current system that subsidizes farmers that meet government targets has discouraged farmers from innovating and prevented an increase in the production of cheap commercial-use rice.
MAFF believes that the competitiveness of domestic agriculture will improve when the government stops promoting supply and demand adjustments, as it will encourage farmer’s creative ingenuity in management, leading to consolidation of farmland. The ministry also hopes that it will accelerate conversion to crops for which there is increasing demand, such as professional-use rice, soy, and wheat.
Domestic rice paddies need to be protected to ensure stable food supplies and prevent floods. Whether the government will be able to smoothly end the acreage reduction policy that has continued for half a century will be one indicator for determining if agriculture can become Japan’s future growth industry.