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Expand exports to boost agricultural profits

The Yomiuri Shimbun Chizu Hori, senior research officer at Mizuho Research Institute Ltd., spoke with The Yomiuri Shimbun about Japanese agricultural exports. The following is excerpted from the interview.

Shrinking domestic market

The Yomiuri Shimbun: How do you summarize the current situation facing Japanese agriculture?

Hori: Japanese agriculture has been fighting an uphill battle for the past few decades, and it will only get harder with a lack of successors and shrinking domestic demand. It’s becoming more important to look overseas and work on expanding our agricultural exports.

Domestic gross agricultural production has increased over the past two years, partly thanks to increased meat prices and government support for rice prices. Even so, it is still over 20 percent less than what it was at its peak of ¥11.7 trillion in 1984.

  • The Yomiuri Shimbun

One possible cause is that our farmland isn’t being used efficiently. Many people continue to own farmland even if they don’t farm it. They all have their own reasons, like “I’d like to leave a field to grow food for myself” or “I don’t want to rent the farmland out and have someone misuse it.” Because of sluggish sales of farmland, we aren’t making progress in consolidating farmland and increasing efficiency, and the number of newcomers is stagnating.

Q: What are the major concerns for Japanese agriculture?

A: Decreasing rice production is a huge concern. Rice farmers, who account for 70 percent of the farmers in this country, have been receiving more assistance compared with other crops, by taking subsides for acreage reduction in the gentan rice production adjustment program. The gentan policy may have kept rice prices from falling, but it also invited consumers to move away from rice.

The gentan policy will be eliminated starting with rice harvested in 2018, but farmers will still receive subsidies for planting crops such as rice for animal feed or soy, so rice farmers will still receive preferential treatment.

The aging population of farmers is also a concern. Sixty-six percent of Japanese farmers are 65 or older, and the group is aging at an overwhelming pace compared with other countries. The labor shortage is becoming especially serious for agricultural products like beef cattle or certain fruits and vegetables, which take more time and labor to produce.

The most pressing tasks are getting young farmers to take up the work, passing on the cultivation techniques that the older generation has developed through intuition and experience, and mechanizing production, but they are not easy tasks.

TPP: Driving force for expansion

Q: Is it possible to expand overseas?

A: For Japanese agriculture, which has structural problems, it is unavoidable that the domestic market will shrink as the country’s population falls. To ensure the growth of Japanese agriculture, the idea of advancing into overseas markets is drawing attention.

In 2017, exports of food and agricultural, forestry and fishery products rose by 7.6 percent from a year earlier to ¥807.3 billion, setting a record for the fifth year in a row. The government has set a goal of ¥1 trillion in 2019.

A: Looking at individual items, the high growth rate is conspicuous for strawberries, peaches, grapes and other fruit, in addition to popular marbled fatty beef and green tea. The top importers have been Hong Kong, the United States, China, Taiwan, and South Korea. These five countries and regions make up two-thirds of the total.

In particular, Hong Kong, the biggest importer, has a food culture similar to Japan’s. The market there is highly open, and there are many upper-class people, which helps explain high-quality Japanese food being so widespread in the region.

The growing popularity of Japanese food among discerning consumers through the world has also pushed up exports. The number of foreign visitors to Japan has been increasing rapidly, and more and more people want to enjoy Japanese food after they return to their countries. The number of Japanese restaurants overseas rose 30 percent in the past two years.

The 11-nation Trans-Pacific Partnership free trade agreement and the EU-Japan Economic Partnership Agreement will abolish tariffs for most of Japan’s agricultural products, and that is expected to help expand exports in the future.

Discovering products that sell

Q: What strategies will we need to strengthen exports?

A: When you look at agricultural products, exports account for only 2 to 3 percent of total domestic production. The main reason for this is that farmers prioritize the domestic markets and shy away from exports that require laborious procedures.

Reaching the government’s goal of ¥1 trillion by 2019 would require growth of more than 20 percent over the 2017 total, which is considerably higher than the current growth rate.

Simply increasing the production of rice and vegetables won’t work. The important thing is to carefully research the target country’s food culture, safety standards, tastes and trends to discover which products will sell.

For example, to break into Asia’s rapidly growing middle-class market, you need to offer a bigger selection of low-cost goods, not just luxury items.

Top-brand rice and fruit are not the only things that sell overseas. For rice, we should increase exports of processed foods like instant rice packs and cooked frozen onigiri rice balls, instead of focusing on selling in bulk. This would differentiate Japanese products from other products, and the hurdles to export, such as quarantines, are lower than with polished rice.

For countries and regions with strict limits on pesticide residue, such as the European Union, one idea is to grow crops in separate fields specifically for export. This could be effective with green tea, for example, which is gaining popularity in Europe and the United States.

It’s also important for domestic producers to cooperate with each other.

Right now, Japanese agricultural products from different areas are fighting for shelf space in Japanese department stores in Hong Kong and Taiwan.

To prevent such competition, one exporter in the Kyushu region is working on staggered deliveries, adjusting the export schedule for products from different parts of the region. Combining smaller shipments of products from multiple areas reduces costs, and the importers can avoid going to the trouble of negotiating with each producer individually. This is one example of a success.

There are a lot of other issues to work on to expand exports, such as creating halal products, which follow traditional Islamic law, and developing new packages to preserve freshness even in long-distance exports. Those will have to be steadily resolved.

(This interview was conducted by Yomiuri Shimbun Staff Writer Masahiro Takeishi.)

— Hori completed graduate school at Aoyama Gakuin University in 2001. Worked at Mizuho Corporate Bank (now Mizuho Bank) and took up her current position in 2010. She specializes in food and agricultural policy. She is 47.Speech

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