To Ensure Abolishment of Rice Production Adjustment

* Written by PPPC Visiting Fellow

1.Circumstance of Rice Production Adjustment

 Japan’s urgent task since the 1960s has been to restrain rice

production as countermeasure to its overproduction.

 For this, the rice production adjustment started as an emergency

measure in 1971 centering on fallowing rice paddy field, and its

implementation has existed in this country for more than 40 years.

 Although this policy has been implemented without legal or

legislative ground, there have been promotional measures (carrot:

production adjustment subsidy*) as well as penalty measures (stick:

exclusion from supportive projects in case not pertaining to the

adjustment goal) in order to secure enforcement of this policy

practically.

 The penalty measure was abolished in 2010, coinciding with an

introduction of individual compensation to farmers (direct grant on

rice) under the former Democratic Party of Japan’s government.

Therefore, the implementation of the rice production adjustment

thereafter has been conducted on the combination of two kinds of

carrots since then.

*With regard to production adjustment subsidy, the amount of payment

 was initially calculated on the basis of area of irrigated field to

 be hallowed to reduce production, but the payments were later made

 for a nominal reason of promotion of transplanting other crops like

 wheat and soy beans on the redundant irrigated fallow fields aiming

 for increasing the country’s food self-sufficiency rate. Therefore,

 the subsidy has been granted under the name of promotion of rotation

 of crops, instead of production adjustment. (Kazuhito YAMASHITA,

 Research Director, The Canon Institute for Global Studies, former

 MAFF official)

2.Why abolishment of rice production adjustment?

 The government’s Industrial Competitiveness Council took up the

revision of individual compensation to farmers and other items, listed

in the Liberal Democratic Party’s election pledge, as items for

discussion. On October 24, private sector members of the Council

proposed an opinion to abolish the allocation of production numerical

target and not to implement rice production adjustment by 2016

(abolishment of overall production adjustment in three years), which

brought about a wide range of attentions in public on the review of

rice production adjustment.

 The Ministry of Agriculture, Forestry and Fisheries and LDP have

suggested the direction of agricultural policy reform as the following.

(1)Creating an environment in which farmers can produce accordingly

   with demand upon their management mindset, not restricted by the

   production target set by the public administration.

(2)With regard to individual compensation to farmers on rice (direct

   grant), the payment will be reduced to \750 apiece (by half) for

   rice produced in 2014 to rice produced in 2017 for three years

   (scheduled to be abolished in 2018).

(3)Through direct payment of subsidy to utilize irrigated fields, the

   government will promote full-scale transition from food rice to

   strategic crops such as feed rice, wheat and soy beans, and take

   additional measure on the subsidy on feed rice apiece to be

   increased from the current \80,000 per 10 are to \105,000 per 10.

 Many media focused on (1) alone and reported it loudly as

“abolishment of rice production adjustment.” However, as Mr.

Yamashita (abovementioned) says, a suspension of allocation of

production numerical target is not equivalent with an abolishment of

the production adjustment. The current production adjustment measure

could have already been meaningless, as MAFF admits, as it lacks the

old penalty measures (stick) to secure enforcement of the production

adjustment.

 On the other hand, among the carrots, while the individual

compensation to farmers on rice (direct grant) will be abolished,

“the direct payment of subsidy to divert irrigated fields for food

rice into feed rice (production adjustment subsidy) will be continuing,

in an even strengthened manner by raising the amount of grant apiece

from \80,000 per 10 are to \105,000 per 10 are.

 After all, no change has been made to the basic constitution of the

production adjustment which aimed at preventing the rice price from

decreasing. Moreover, the framework is to be sustained for another

five years while feed rice production will increase through

promotional measure. It might cause further fiscal burden if it

exceeds surplus owing to abolishment of the individual compensation to

farmers scheduled five years later. This would be rather an

enhancement of the production adjustment.

3.Integration into some form of income compensation measure

 If it really intends an abolishment of the production adjustment,

the government’s fundamental role is to create an environment in

which ambitious farmers can produce as much food rice as they want to

while at the same time having as much cost-consciousness as possible,

instead of expanding the production adjustment (promotion of rotation

of crops) subsidy to such farmers.

 In this context, it should be more desirable to reimburse the farmers

through some form of income compensation the gap caused by decrease in

rice price, rather than granting production adjustment subsidy to

prevent decrease in rice price. The expansion of production adjustment

subsidy this time must remain to be a transient measure.

 At the current point, an overall picture of the new management and

income stabilization measures or the Japanese style direct payment

system said to be launched after five years is yet to be unveiled.

Aside with these important issues, however, in order to truly abolish

the production adjustment, a key will be how to integrate the

production adjustment subsidy into a new institutional design which is

more oriented toward income compensation.