Economy, No.7  Aug. 4, 2011


The Great East Japan Earthquake has renewed our awareness of the importance of food and energy, in addition to revealing the multitude of problems in Japan’s conventional policies. With respect to food, the myth about the safety of domestic agricultural products has collapsed, and there is now growing concern about the capacity of food supply. A large portion of the afflicted area comprises villages subsisting on agriculture and fisheries. While there is strong demand for rehabilitation centering on the agriculture, forestry and fishery businesses, doubts exist as to the viability of simply restoring the traditional form of agriculture with a poor production base and supply capacity. Now is the time to build a competitive and efficient agricultural framework.

Following the examples of small European countries advanced in transitioning agriculture to an integrated industry is recommended. The Netherlands, Denmark and other small, mature European states suggest that agriculture has the potential to evolve into an industry that can drive the local economy. In these countries, modern agriculture is an industry of information, intellect, service and even export. It is no longer just a primary industry. Seen through the lens of post-industrialism proposed by Daniel Bell, agriculture is transforming into a post-primary or integrated industry.

This is not confined to agriculture outside Japan. The transition is seen in Japan’s major agricultural zones. The table compares prefectures in agricultural production, land productivity and labor productivity. Leading prefectures in agriculture, found on all three top-10 lists, are: Ibaraki, Chiba, Kagoshima, Miyazaki and Aichi. None of the Tohoku prefectures are on all three lists since the region depends heavily on rice production.

The leading agricultural prefectures have three characteristics. The first is the capacity to respond to the market. Chiba, Ibaraki and Aichi are examples. The second is a high level of industrial accumulation with advanced transition to integrated industry. This is true of Aichi and Shizuoka. And the third is the consciousness of productivity, as seen in Miyazaki and Kagoshima.

To increase agricultural competitiveness, it is vital to introduce a customer-oriented stance and expertise in other industries to develop a highly productive business model. Japan’s rural agriculture completely lacked the management capabilities and capital needed to run it. The biggest problem lies in the absence of management in post-war agriculture.

New Agriculture Entries for Boosting Managerial Strength.JPG

Japan’s agricultural villages had no managers. In the modern age, there were a large number of independent business managers. In the Edo period, farmers called hakusei or hyakusho were independent businesspeople who engaged in agriculture as a basis for running various other businesses including shipping agencies, fishing, cotton production and processing of agricultural products such as mulberries, tea, safflower and plants for making washi paper, called kozo (Broussonetia x B. papyrifera) and mitsumata (Edgeworthia papyrifera).

Agriculture did not simply mean cultivation. It was an integrated industry in which different businesses were operated. It was maintained in the Meiji period, when there were numerous farmers called tokunoka (agricultural enthusiasts) and rono (highly skilled farmers) across the country while landowners and some farmers ran liquor distilleries as well as financial and other businesses. These businesspeople in agricultural villages did not see agriculture as a special or isolated business.

However, after a series of post-war reforms including farmland reform and enactment of the Agricultural Land Act, which confined agriculture to production, such businesspeople disappeared. As the ties between industries weakened, farmers became forced to sustain themselves by cultivation alone. This has made their business operations difficult and created a fragile regional economic structure. Only recently has the argument begun that in post-war agricultural administration, management is essential.

Enacted in 1999, the Food, Agriculture and Rural Areas Basic Act is the first legislation relating to this issue. Partly due to political motives, there is still confusion about to whom the term “agricultural manager” refers. A small sign of hope is that there have recently been calls for managers from inside and outside the agricultural world through collaboration between the agricultural, commercial and industrial sectors.

In the context of reviving agriculture into a solid regional industry, as it was in the past, attention needs to be paid to the upward trend in the number of farmers with sales of 50 million yen or more. In 2010, there were 14,800 such farmers. Though this shows a slight increase, it is significant given that the total number of farmers is declining. If this figure is increased nearly tenfold to 137,000 farmers, agricultural production is estimated as being maintained. This is not necessarily an unrealistic assumption.

In fact, there are a large number of livestock and vegetable farming households with sales upward of 100 million yen. Japan’s vegetable and livestock production is supported by small-sized agricultural management. Vegetable production exceeding 2.1 trillion yen was made by 430,000 farming households and livestock production of less than 2.6 trillion yen by far fewer households: 116,000. There are only some 5,500 farming households raising chickens, 6,700 raising pigs, 20,000 in dairy farming and 74,000 raising beef cattle.

In contrast, the proportion of farmers with high sales is limited in paddy farming. This is the biggest problem in Japan’s agriculture. The only solution would be to increase the scale of farming. Combined operations of large-sized paddies should be introduced to the Tohoku plains.

Paddy farming households with planted areas of less than one hectare make losses while those with 15 or more hectares achieve sales upward of 20 million yen. It is also necessary to establish a profitable business model in combined operations of large-sized paddies. While maintaining the advantage of large-scale farming, this programs the crop rotation in grouped paddies and combines intensive production of commercial crops as revenue earners with production of rice for livestock feed and other lower-labor crops in order to achieve profits in an integrated manner.

Combined operations of large-sized paddies are in place in a town in the Tokai region. There, lettuce, sweet corn and rice are cultivated in the paddies. Rice production is defined as a measure of preventing continuous cropping hazards and restoring soil productivity. Sales of just below 100 million yen are made from the planted area of 30 hectares. If this area is expanded to 50-100 hectares, the business scale will reach 200-400 million yen. A group of 30-40 farmers independently cultivating around one hectare each would make a combined loss. If their farmlands are collectivized and left to a manager, they will earn sales of around 100-200 million yen and create 10-20 jobs.
Competitive management needs to be intentionally built for the purpose of solidifying agriculture. Japan’s agricultural operations have a structure that allows it to be easily expanded if conditions permit. The key lies in institutional reforms for introduction of management approaches, such as development of collectivized large-scale farmlands.

Positive benefits can be gained from this trend in an effort to recover agriculture from devastation caused by the great earthquake. The agricultural zone afflicted by the quake is roughly divided into two areas: the plains to the south of Sendai Bay and the Sanriku rias coast area in the northern part. Naturally, the regions’ approaches to agriculture, forestry and fisheries differ. Nuclear-hit Fukushima and Miyagi may have different orientations even though they are both located on plains.

In the plains area, agricultural management should be oriented toward combined operations of large-sized paddies with a high level of productivity and profitability. Production of 100-200 million yen or more is expected from farmland of 30-50 hectares. If crops are limited to rice, around 200 hectares can be cultivated. Prospective domains for collectivization and integration include horticulture, vegetable production, dairy farming and livestock production.

On the other hand, in the Sanriku zone, where each farmland area is small, it is better for farmers to run a range of businesses rather than specialize in any single one. In other words, the hyakusho farmers need to be revived. Agriculture also benefits more greatly from not being confined to farmers but being open to fishermen, fishery processors, commercial and industrial business operators, and tourist business operators; likewise, farmers should participate in fishing, fishery processing and other businesses. It is vital to create a system that assures connection with local resources in many different ways for mutual linkage and integration.

For meeting these challenges, the Agricultural Land Act, Food Act, Agricultural Cooperatives Act and other institutions for rural development, which were adverse to new entries into agriculture, should be drastically revised in order to provide a mechanism that lets abundant wisdom and capital enter into agriculture. Agricultural managers should also be invited from all business sectors in all regions regardless of whether they are farmers or corporations. Farmland development should be studied under the overall land use plan in parallel with city concepts including “compact cities” and “smart cities.”

To achieve these objectives, a new system is needed that capitalizes on special zones for rehabilitation of agriculture, forestry and fisheries. For restoring farmland, action needs to be taken to anticipate how it will look in five to 10 years. Many different recovery efforts will be needed, including clearing debris, restoration of irrigation and drainage channels, desalination of farmland and flood control measures following ground subsidence. The damage is too great for individual farmers to cope with. These efforts should be fully subsidized by the state government, though restrictions on use would apply until the paddies are restored. In the meantime, the national government can either purchase the farmland or pay rent. Income compensation for individual farmers should finance the rents.

Farmers can be trained for seeking to recover cultivation of intensive crops or be provided with full government support to help them live on horticulture. Beyond the special zones for rehabilitation, there must be a society with both competitive agriculture and beautiful rural residential areas.

Translated from “sekai ni tsuyosuru nogyo e (part 2),” Nihon Keizai Shimbun, June 9 2011, p. 23. (Courtesy of Nihon Keizai Shimbunsha)