As part of an effort to reinvigorate Japan’s struggling agriculture sector, the government of Prime Minister Shinzo Abe is waging a war against what is largely seen as a hotbed of vested interests that has long dominated the industry.
Based on proposals compiled by the ruling Liberal Democratic Party and a government body on regulatory reforms, Abe on Tuesday approved a watered-down plan to shake up the National Federation of Agricultural Cooperative Associations, better known as Zen-Noh, a juggernaut that boasts ¥6 trillion in annual operating revenues.
While the original reform proposal by the Council for Regulatory Reform set a one-year deadline for Zen-Noh’s withdrawal from its procurement and sales operations, Tuesday’s version did not specify such a time frame, merely urging the group to make “voluntary” efforts toward the goal.
In another major compromise, the latest version also omitted calls by the council that Zen-Noh scale down by half its credit business within three years, a structural reform that — if implemented — would have allowed its regional cooperatives to better focus on sales operations.
The group, the latest proposal said, is instead expected to unveil annual blueprints and numerical targets in order to forge ahead with its reforms.
The government considers a drastic scale-down of the group essential to jump-starting the long-stalled competitiveness of Japan’s farming business. A shift to what is dubbed more “aggressive agriculture” constitutes a vital pillar of Abe’s growth strategy to “resurrect” Japan from decades of economic malaise.
“Zen-Noh’s reform will be a catalyst for a major shake-up of Japan’s agricultural industry as a whole,” Abe told a Tuesday session of the regulatory council, an advisory body to the prime minister. “I want the organization to turn over a new leaf and press ahead with fundamental reforms.”
In a related move, the government also approved a separate plan to expand the scope of dairy farmers eligible for government subsidies.
Such a comprehensive set of agricultural reforms will be the first of their kind in 50 years, Chief Cabinet Secretary Yoshihide Suga said Tuesday, adding they are designed to boost farmers’ incomes and competitiveness.
Abe’s calls for a structural overhaul of Japan’s agriculture reflect his dismay at the severity of a demographic crisis gnawing at the industry.
The nation’s farming population has steadily decreased over the years, reaching an all-time low of 2.09 million people in 2015, compared with 3.89 million in 2000, according to the latest census by the Agriculture, Forestry and Fisheries Ministry. The average age of farmers edged up to 66.4 years old, underlining the shortage of young successors.
Critics call Zen-Noh the bane of Japan’s agricultural sector, saying it has put the needs of farmers on the back burner in favor of its own interests.
“Over the years, Zen-Noh has prioritized expanding itself, oblivious to the interests of co-op farmers nationwide,” said Kazunuki Oizumi, an agricultural economics professor emeritus at Miyagi University.
Exempt from the anti-monopoly law, Zen-Noh wields significant clout in the agricultural industry, reportedly controlling a 70 percent, 60 percent and 50 percent sales share of fertilizers, pesticides and farming machinery, respectively.
It rakes in profits by selling to domestic farmers the fertilizers, pesticides and a variety of other materials procured from manufacturers.
Its tendency to purchase materials at a relatively high price — seen as a sign of its cozy ties with manufacturers — then leads to higher costs passed on to farmers. A September probe by the agricultural ministry showed that fertilizers and pesticides purchased by Japan’s farmers in 2013 were 20 to 30 percent more expensive than those by their South Korean counterparts, despite the climate similarity between the two nations.
At the same time, Oizumi said, the overwhelming dominance of Zen-Noh has resulted in farmers becoming so reliant on the organization for everything from buying materials to selling their own products that they find little incentive to question its legitimacy. Such complacency has stymied their competitiveness, he said.
But whether Tuesday’s plan approved by the government will change this status quo remains to be seen.
While calling for the streamlining of Zen-Noh’s procurement methods and its transformation into a slimmer organization, the plan eviscerated some of the most root-and-branch reforms suggested by the regulatory reform council earlier this month.
Responsible for the water-down is the LDP, which assessed the council’s suggestions and unveiled its own, more benign, proposal Friday. The council then tweaked its own proposal so that it would hew to the LDP version.
The turn of events shed renewed light on the LDP’s reluctance to antagonize Zen-Noh, with some of its lawmakers strongly beholden to its influence.
The LDP may have also felt it couldn’t afford to risk further backlash from Zen-Noh after losing five of the six seats in the Tohoku region in July’s Upper House election, due partly to its push for the Trans-Pacific Partnership free trade deal. Tohoku is known for its farming industry.
Shinjiro Koizumi, a 35-year-old rising star of the LDP who was tasked with compiling the party’s proposal, told reporters last Friday he had a “hard time” striking a balance between living up to government expectations and keeping Zen-Noh happy. He is a son of former Prime Minister Junichiro Koizumi.
The government has no legally-binding power over Zen-Noh, a private organization.
“Whether the reforms will really be implemented is unclear,” Oizumi said.
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