The government plans to stop controlling rice prices by halving subsidies to farmers who voluntarily reduce their harvests, informed sources said Sunday.
The move, promoted by the ruling Liberal Democratic Party, is part of a major shift in agricultural policy toward more competition and less protection. If it works, the long-held policy of reducing rice acreage would be terminated in five years.
Japan has been shoring up rice prices since the 1970s by paying farmers to grow less of the staple crop so the government can adjust supply to meet demand amid the national downtrend in rice consumption.
In response to calls from the ruling coalition to cushion the impact of the cut, a proposal has been made to use the savings from the subsidy reduction to help all farmers, the sources said.
The subsidies consist of two parts — fixed benefits, which are based on the reduction in arable paddies, and income support to make up for losses caused by falling rice prices.
The government and the LDP are discussing plans to cut fixed benefits, which are paid at a rate of ¥15,000 per 10 ares (an are is 0.1 hectare), to ¥7,500 per 10 ares in fiscal 2014. The benefits would then be scrapped completely within five years, the sources said.
Before that time, it has also been proposed that the subsidy savings be used to aid farmers who are actively expanding cultivation, in addition to the idea of spreading the money out to all farmers.
The income support portion, which is paid if rice prices fall below average, is scheduled to be scrapped sooner, in fiscal 2014.
That portion of the rice subsidy was introduced by the government led by the Democratic Party of Japan. It has been criticized as an easy handout that benefits uncompetitive farmers, including small-scale farmers and part-timers.
Based on discussions with the ruling coalition, the government will come up with a reform plan for the farm sector later this month, the sources said.