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Abe’s JA reforms no salve for core problems, experts say

by and

Staff Writers

Takashi Tomita, who heads an agricultural cooperative in Echizen, Fukui Prefecture, is considered a ray of hope for a farming sector on the brink of collapse.

Tomita’s JA Echizen Takefu is a member of the Japan Agricultural Cooperatives (JA) group, the mammoth national organization that controls most of the distribution and procurement channels for the nation’s farmers.

Tomita has broken most business ties with the JA group, bypassing its distribution channels and selling all rice for human consumption directly to wholesalers and retailers.

Now his co-op, buying rice from member farmers at a far higher price than other farmers in the same prefecture, has been widely regarded as a potential reform model for about 700 regional agricultural cooperatives under the JA group.

In a recent interview with The Japan Times, Tomita was asked to comment on Prime Minister Shinzo Abe’s drive to reform the JA group, a key initiative Abe has trumpeted to transform Japan’s heavily protected agricultural sector.

“Nothing will change unless regional cooperatives change their awareness,” he said by phone.

Calling Abe’s reform initiative “just a scratch line,” Tomita said: “I consider it encouragement for regional cooperatives to play their role” to the benefit the farmers and the communities they serve, not the JA group.

Tomita’s views echoed those of many experts, and probably numerous farmers across the country agree with him.

Many welcome Abe’s move as a significant, symbolically important first step, but also say more is needed to save Japan’s rapidly declining farm sector.

Abe’s reforms only target the main lobby of the JA group, not how regional cooperatives operate, nor how the JA’s vast nonfarming services work, in particular the bloated loan and insurance business, they say.

Last week, Abe declared victory in a political battle against the Central Union of Agricultural Co-operatives, better known as JA-Zenchu, the main lobby of the JA group.

JA-Zenchu is at the apex of the JA group and is tasked with “formulating the common guideline and programs” for regional agricultural co-ops, according to JA-Zenchu’s website.

JA-Zenchu has accepted Abe’s initiative to waive its legal right to audit group cooperatives. Abe claims it will weaken its influence over how the roughly 700 co-ops operate, including Tomita’s JA Echizen Takefu, and thereby increase management flexibility.

Under the reform plan, JA-Zenchu will lose its mandate to head the JA group’s management. It will also become a general nonprofit foundation, not a special entity specified by the Agricultural Cooperatives Law.

“I rate (Abe’s reforms) highly. They will create an environment whereby each cooperative can think about how it should operate,” said Kazunuki Oizumi, a professor emeritus at Miyagi University and an expert on agricultural management.

According to Oizumi, JA-Zenchu has used its auditing power to exert influence over regional cooperatives to ensure they remain conservative and dependent on the lobby’s management control.

All JA group co-ops base any decisions they make on how the JA-Zenchu thinks, he said, adding: “If JA-Zenchu turns right, everyone turns right.”

JA-Zenchu has strongly opposed opening more of Japan’s agricultural market via participation in the Trans-Pacific Partnership free-trade agreement, and wants the government to maintain its regulations requiring farmers to reduce rice paddy cultivation to keep prices of the grain higher, instead of boosting production and lowering costs, Oizumi said.

Regional cooperatives should be encouraged to boost production based on their own judgment and compete with each other to improve productivity, he said.

The JA group’s mainstay business is now banking and insurance services for nonfarmers and part-time farmers, not agricultural business to strengthen the competitiveness of full-time farmers, Oizumi said.

The JA group’s banking business boasted ¥94.6 trillion in deposits as of December, technically making it one of the nation’s largest banks, rivaling the Tokyo-Mitsubishi, Sumitomo Mitsui and Mizuho financial groups.

“The JA group has created its business model based on nonfarmers. It doesn’t make much sense for it to attach importance to people working hard in agriculture,” Oizumi said.

Abe’s reforms targeting JA-Zenchu, however, have yet to have an impact on the core problems of the JA group, he pointed out.

“A second stage of reform will be needed,” Oizumi said.

Tomita of JA Echizen Takefu would agree with Oizumi.

Inertia from long-standing government regulations on rice production mean that few regional co-ops have the entrepreneurial spirit and most have lost sight of their original role of serving consumers, Tomita said.

The government’s strict controls on rice production and distribution started in 1942, a year after the Pacific War broke out. The rice regulation system continued until 1994, when laws compelling the government to buy all domestically produced rice were revised.From 1995, the government continued to buy rice, but in much smaller quantities.

Under the rice management system, the JA group had served as the main entity to buy up all the rice from farmers on the government’s behalf, the reason it has remained the dominant entity in the agricultural system.

The JA group controls about 47 percent of the ¥2 trillion rice market by value, buying up rice from member farmers and selling the grain through its distribution channels.

It pays a uniform price to farmers depending on the brand and condition of the rice, an outlay not based on taste.

To encourage member farmers to grow top quality rice, Tomita’s JA Echizen Takefu has started analyzing the taste and showing data on amino acid and other key components that enhance the grain’s taste.

As a result, now members of JA Echizen Takefu receive higher per-kilogram revenues than other farmers in the same prefecture.

In 2013, member rice farmers of JA Echizen Takefu received ¥1,700 more than other cooperatives in the same prefecture for every “hyo” (60 kg) of the first-class Koshihikari strain of rice sold to JA Echizen Takefu, according to the co-op.

Tomita also started procuring fertilizers from non-JA companies at a price about 20 percent lower than those sold by the group.

Abe’s reforms of the JA group do not delve into such detail to improve the management of regional cooperatives.

“We just want to put down roots among consumers. We are not rebelling against (the JA group),” Tomita said during the phone interview.

“If nothing is done, both the JA group and all (agriculture) will collapse, say, in 10 years,” he said.

Indeed, the farm sector is now in crisis, although it may seem quiet on the surface, because few young people are taking up agriculture and the average age of farmers is 66.

Most lawmakers, even those from rural areas and earnest supporters of the JA group, are deeply worried that the rice-farming industry could shrink significantly in the near future. This shared concern is an apparent reason why key ruling party lawmakers have not shown strong opposition to Abe’s drive to reform the JA group.

The reforms are “not designed to dismantle agricultural cooperatives. The average age of farmers is currently 66,” Chief Cabinet Secretary Yoshihide Suga told a news conference on Jan. 9.

He said Abe’s reforms are intended to make agriculture attractive to young people.

Yoichi Tashiro, a professor at Otsuma Women’s University and an expert on agricultural economics, believes Abe has tried to weaken JA-Zenchu in order to promote negotiations for the proposed TPP trade agreement.

Abe is also trying to play up the political battle with JA-Zenchu to highlight his administration’s efforts to raise Japan’s economic growth potential, said Tashiro, who himself opposes Abe’s reform of the JA group.

The prime minister’s “Abenomics” policies consist of a set of three “arrows” — namely ultra-aggressive monetary easing, more fiscal spending and structural reforms to encourage economic growth.

The first two policy pillars have already apparently hit a snag, and Abe has had no choice but to trumpet his strategies to raise the growth potential of domestic industries, including agriculture, education, medicine and nursing, Tashiro said.

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