The Abe administration’s proposed measures to reform the farm sector in its updated strategy for economic growth have focused on the organizational problems of agricultural cooperatives. While the administration targeted the Central Union of Agricultural Co-operatives (JA-Zenchu) as an obstacle to growth of the nation’s farm industry, little headway has been made on the larger issues of reforming farmland use and ensuring that Japanese agriculture can survive the wave of farm trade liberalization.
In line with Prime Minister Shinzo Abe’s vow to tackle deregulation as a core component for growth, the government’s regulatory reform panel singled out labor, medical and farm sectors as three areas where growth has been hampered by regulations. Each sector has an organization that traditionally has wielded powerful political influence — the Japanese Trade Union Confederation (Rengo), the Japan Medical Association and JA-Zenchu.
In particular, JA-Zenchu formed what was once considered a rock-solid triangle with the farm ministry and the Liberal Democratic Party’s farm “tribe” lawmakers backed by farmers’ votes in rural constituencies. Although this triangle exerted a strong influence over the nation’s agricultural policies, it crumbled when the LDP was forced out of power by the Democratic Party of Japan in 2009, and it is not as strong as it was in the past even after the LDP’s return to the government’s helm. Still, JA-Zenchu launched a fierce lobbying effort targeting the ranks of the LDP when the regulatory reform panel’s working group in May called for the “abolition” of JA-Zenchu.
JA-Zenchu has long been criticized as an obstacle to reforming the nation’s heavily protected farm sector. Under the Agricultural Cooperative Law, JA-Zenchu guides the management of roughly 700 local farm cooperatives. Critics have charged that this structure prevents local cooperatives and individual farmers from following their own initiatives to farm more competitively. The organization has also mounted a strong resistance against the Trans-Pacific Partnership free-trade talks pursued by the Abe administration.
As a result of the organization’s lobbying, the proposal for JA-Zenchu reform was substantially watered down in the final version of Abe’s updated growth strategy. It now calls on JA-Zenchu to “voluntarily transform itself into a new system” that would allow local farm co-ops to operate with greater autonomy, and urges that intensive efforts for voluntary reform be made within five years.
While Abe hails the plan as “the first fundamental reform of the agricultural cooperative system in 60 years” and says it won’t let JA-Zenchu remain in its current form, the ultimate fate of the powerful organization has been left unclear.
Even if the JA-Zenchu reform proceeds as the administration proposes, the reform’s impact on Japan’s economic growth is likely to be limited, given the farm sector’s tiny share of the whole economy. Today, agriculture accounts for about 1 percent of Japan’s gross domestic product.
According to an estimate by SMBC Nikko Securities, a 20 percent rise in domestic farm output and a twofold increase in farm exports would push up the GDP by a mere 0.14 percent. Such a limited impact from the proposed reform raises speculation that Abe’s push for JA-Zenchu reform may be driven by a political desire to weaken the organization’s power.
Agriculture is indeed an important sector both in terms of industrial and social policies. It has the potential to become a growth sector. Efforts need to be made to develop a younger workforce and promote farm exports through the greater involvement of businesses from other sectors. But given its size, the sector can hardly be a core part of the nation’s economic growth strategy.