Reforming Japan’s farming sector

The Central Union of Agricultural Cooperatives (JA Zenchu) has announced a reform plan aimed at making Japan’s farming sector more competitive. But a government panel on deregulation has dismissed the plan as inadequate. Zenchu should come up with a more drastic, effective plan that would contribute to revitalizing the nation’s agriculture business and farmland communities.

Japan’s farming population is shrinking and graying. According to the agriculture ministry, the average age of 1.74 million active farmers who engage in agriculture as their primary work reached 66.5 in 2013. The total area of abandoned agricultural fields amounted to 400,000 hectares — equivalent to the area of all of Shiga Prefecture — in 2010. These figures underline the urgency of reform efforts.

Although there are farmers who have management awareness and are making efforts to reduce production costs by increasing the scale of their operations, their voices are not fully reflected in decisions by agricultural cooperatives. This is because farmers who rely on other jobs for their main source of income as well as people who engage in farming as a side job make up a majority among full members of the cooperatives.

Zenchu’s reform plan says it will tap more full-time farmers to key positions in agricultural cooperatives, but it needs to go further and speed up the organizational reforms by setting specific targets on getting the dedicated farmers to join its decision making.

To boost the revenue of farmers, they need to engage not only in production of agricultural products but also in processing and marketing. Zenchu needs to put its words into action to expand cooperation with businesses such as food makers to use their knowhow and technologies to make up for the lack of knowledge on the part of many farmers on how to commercialize their products.

With the aging of Japan’s population and low birthrate, demand at home for agricultural products is not expected to rise in the future. Zenchu’s plan calls for increasing annual exports of Japanese farm products tenfold by 2020 to tap growing demand in overseas markets.

So far, farm exports have been pursued independently by individual agricultural cooperatives, and it would be a challenge for Zenchu to coordinate such efforts under a unified strategy. Cooperation with general trading houses, which have detailed knowledge of consumers’ needs in other countries, should be explored.

There is criticism that farm cooperatives have deviated from their original purpose of guiding and promoting farming, and are focusing increasingly on financial services. In 2009, full members of the cooperatives — those who engage in farming — were outnumbered by associate members who do not engage in farming but use the cooperatives’ financial services. With outstanding deposits totaling ¥92 trillion, they are comparable in size to a megabank.

Zenchu’s plan does not include reform of the financial services division, which now constitutes a major source of profit for the group. Zenchu leaders say financial services are an integral part of its support for member farmers.

But the group does need to improve the management and supervision of its financial business. In February, Norinchukin Bank (Central Cooperative Bank for Agriculture and Forestry) reported 861 cases of embezzlement involving its employees, with damage reaching some ¥18.7 billion.

Reform of the nation’s farm sector is also being discussed by the government’s regulation panel and the ruling Liberal Democratic Party. The national headquarters of farm cooperatives should make serious efforts not only to make Japan’s agriculture competitive but also to make it attractive to young workers while protecting the environment and landscapes by carefully listening to opinions from various quarters.