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Japan’s agriculture sector remains protected January 22, 2007

Posted by genchan in Economics, General, Government, Japan.
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It is no secret that Japan has for decades protected its agriculture sector with significant subsidies and high tariff rates. Its not only Japan but most advanced countries like the US and EU have done the same and earned the wrath of developing nations.

And while nobody dares to bet that Japan today has fully opened its farm sector, it remains less known how much Japan has been able to open up its farm products to foreign competition compared to, say, other OECD countries.

Facing a steep battle with vested interest groups who are not only traditional supporters of the ruling party LDP but also defenders of locally produced farm goods, the government is using unconventional methods such as free trade agreements (FTAs) to put pressure on farm trade liberalization. Reducing tariffs through FTAs do help increase importation of foreign farm products but are limited in their capability since sensitive items such as rice, often excluded from FTAs, would need stronger political will to overcome than what external pressures can offer. It is also worth noting that the exclusion of certain farm items from negotiation demonstrates the constraints and pressures from domestic lobbyists.

According to The Japan Times (Jan. 18, 2007), subsidies for farmers and tariff rates for agricultural items have remained high compared to imports in other sectors.  The paper reported on a biennial trade policy review report on Japan issued by the WTO which said that “farm subsidies amounted to 1.3 percent of Japan’s gross domestic product, and the ratio of subsidies was almost equal to the share of farm product output in GDP at 1.4 percent”.

The report found that the “overall level of (Japanese) government assistance for agriculture is well above the (Organization for Economic Cooperation and Development) average” and that “tariffs on imports of agricultural products remain high in Japan, with the average coming to 18.8 percent, compared with an average of 6.9 percent for other imports”.

The report (to be made public after a meeting from Jan. 31 – Feb. 2) indicates at least three things: 

  1. FTAs have yet to make an impact on Japan’s domestic farm trade.
  2. Farmers continue to be heavily subsidized by the government.
  3. Structural and regulatory reforms in other sectors like finance, economics, government, education etc. have not been followed successfully by agriculture.