Japan’s participation in a free-trade group led by the U.S., if it agrees, could open up the country’s agriculture markets worth $48 billion to foreign exporters of rice, sugar and beef, boosting global prices.
Membership in the Trans-Pacific Partnership could lift sales for Tyson Foods Inc. and Fonterra Cooperative Group Ltd., as participants aim to eliminate import tariffs within a decade, according to Norinchukin Research Institute. Prime Minister Yoshihiko Noda, who risks splitting his party if he supports joining the trade talks, has said markets must be opened to boost the weak economy, which is struggling to recover from the March earthquake and nuclear disaster.
Tariff elimination could deepen the country’s reliance on food imports to almost 90 percent from 60 percent, the agriculture ministry has forecast. Imports could tighten global supplies and boost prices of rice, which has gained 12 percent this year, and cattle futures, which have advanced 14 percent. Noda’s Democratic Party of Japan is divided over whether to promote trade to lift economic growth or protect farmers who may be harmed by lower tariffs and increased competition.
“Rice exporters in the U.S. and beef shippers from the U.S. and Australia would benefit the most if Japan joins,” Tetsuhide Mikamo, director at Marubeni Research Institute in Tokyo, said in an interview. “The markets are the most protected as domestic growers lack price-competitiveness.”
The partnership could boost the gross domestic product of the world’s third-largest economy by ¥2.7 trillion, or 0.54 percent, the Cabinet Office has forecast.
A decision on whether to enter talks on the partnership, which would slash tariffs, including a 778 percent duty on rice, is expected this week. Noda is set to meet U.S. President Barack Obama at the Asia-Pacific Economic Cooperation forum summit this weekend in Honolulu.
The removal of import tariffs and ending of the state-trading system for rice, which restricts imports from entering the retail network, will boost rice purchases from the U.S. and Vietnam, driving most domestic growers out of business, said Nobuhiro Suzuki, a professor of global agricultural sciences at the University of Tokyo.
As much as 90 percent of domestic rice production, or 7.6 million metric tons, could be replaced by imports in the long term, he said, as the government protects growers with an import tariff of ¥341 a kilogram to maintain self-sufficiency.
“Domestic production will be phased out if tariffs are eliminated,” Suzuki said in an interview.
Under the state trading system, the agriculture ministry buys rice from overseas for sales mainly to feed makers, alcohol companies and processed food makers. Elimination of the system may expand opportunities for trading companies such as Marubeni Corp., Japan’s largest grain trader, to boost imports for sales to retailers such as its affiliate supermarket operator Daiei Inc.
The negotiations for the TPP have involved Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam, in addition to the U.S.
Still, an influx of cheap flour and dairy products from overseas could mean lost sales to Japanese food makers such as Nisshin Seifun Group Inc. and Morinaga Milk Industry Co. Non-TPP countries Canada and Thailand may also lose sales of wheat, rice and sugar if Japan becomes the 10th member. Increased imports of meat and dairy products by Japan would reduce purchases of feed grains such as corn and soybean meal.
Almost all of Japan’s sugar production, worth ¥150 billion a year, could be replaced by imports should tariffs be removed, according to Tetsuro Shimizu, vice president of basic research at Norinchukin Research Institute. For wheat, 99 percent of Japanese output worth ¥80 billion would be taken over by imports. Imports could also substitute Japanese beef, pork and chicken worth ¥1.1 trillion, he said.
Japanese farmers can survive without being protected by import duties if the government supports streamlining farm operations and supplements their incomes, as consumer tastes for domestic food will remain strong, said Kazuyuki Kinbara, director for international affairs at lobby group Keidanren. The group is Japan’s largest with 1,281 companies, including Nippon Steel and carmaker Toyota Motor Corp. Free-trade agreements will also expand opportunities for Japanese farmers to boost exports, he said.
“The TPP will have a negative influence on Japan’s agricultural production, but its overall impact on the Japanese economy should be positive,” said Kenichi Kawasaki, managing director at the economic research department of Nomura Securities Co. “If Japan opens up its markets to foreigners, overseas investors will also be lured to the country.”
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.