Japan PM Eyes Agricultural Reforms, TPP Early Conclusion

19 February 2015

Japanese Prime Minister Shinzo Abe urged his country’s legislators last week to approve the “most drastic reforms since the end of World War II,” in a major policy speech featuring renewed pledges to continue efforts at overhauling key sectors, particularly agriculture, along with promises to help bring ongoing Pacific Rim trade talks to a prompt conclusion.

The speech was his first to the Diet, as the Japanese legislature is known, since Abe inaugurated his third cabinet this past December, following a snap poll that cemented the premier’s hold on his position for at least four more years. (See Bridges Weekly, 18 December 2014)

The result of the end-2014 polls have been touted by Abe as signs of public approval of his Abenomics suite of policies aimed at jumpstarting the national economy. The “three arrows” of the scheme include monetary stimulus, increased fiscal spending, and structural reforms.

While the first two arrows have been in the process of implementation since Abe took office just over two years ago, the launch of the third one was deemed lacklustre by critics, particularly after data late last year indicating that Japan had slipped into recession. Though the country has since rebounded, growth data released this week was still lower than expected.

Among the various structural reforms that are meant to be part of the Abenomics plan’s third arrow are those of the farm sector and trade policies, as part of the broader effort to ensure the island nation remains competitive in a changing economic landscape.

“Press forward ever more dynamically along this path, under stable political conditions. This is the message the people of Japan sent me in the recent general election,” Abe told lawmakers last Thursday.

“Together with the members of the ruling Liberal Democratic Party and New Komeito in this chamber, I pledge to the people that we will fully apply ourselves in both mind and body in responding to the mandate we have been granted,” he continued.

Aiming for TPP “early conclusion”

Increased trade liberalisation, through participation in initiatives of the Trans-Pacific Partnership (TPP) negotiations, has been one of Abe’s key goals since taking office. His immediate predecessor, Yoshihiko Noda, had already expressed interest in joining the trade talks before losing to Abe in the 2012 elections. (See Bridges Weekly, 14 November 2012)

Tokyo ultimately was invited to join the TPP talks in April 2013, and first took part in the negotiations in July of that same year under Abe’s government. (See Bridges Weekly, 25 April 2013 and 25 July 2013)

Since then, one of the key issues in the TPP talks has been securing improved market access to Japan’s heavily protected agricultural sector, with the US having spent the past several months engaged in complex bilateral talks with its Asian trading partner on the subject.

However, recent reports have indicated that Washington and Tokyo may be close to resolution in both this area and on separate bilateral talks on automobile trade, which could help pave the way to resolving the overall TPP negotiations.

On Thursday, the Japanese premier also told lawmakers that the end of the 12-country TPP talks is now “coming into focus,” pledging that his government, in cooperation with the US, would aim to bring the negotiations to “an early conclusion,” without specifying a set timeframe.

Along with the US and Japan, the TPP also includes Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam – a group that together encompasses 40 percent of global GDP.

Several officials have indicated in recent weeks that such a deal, which is touted as a “21st century agreement” that incorporates both traditional trade issues such as tariffs and newer areas, could be finalised within a matter of months. (See Bridges Weekly, 5 February 2015)

Sweeping agricultural reforms

The influence of the Japanese farm lobby has largely been raised as one of the main reasons why negotiating reductions in import tariffs on sensitive agricultural products such as beef, pork, rice, dairy, and sugar has been so difficult in international trade negotiations.

In his speech last week, Abe made a strong call for reforming Japan’s system of agricultural cooperatives, particularly given that only two million people are employed in the country’s agriculture sector – compared with a post-World War II total of 16 million.

“Sweeping reforms of agricultural policy can wait no longer,” he said, adding that his government’s goal would be to establish a strong agricultural sector while boosting farmer incomes.

Among the most drastic changes outlined by Abe are plans to turn the country’s main agricultural lobby – the Central Union of Agricultural Co-operatives, known more commonly as JA-Zenchu – into a general incorporated association, thus depriving it of its current privileged status.

The Japanese premier has also said that the 700-odd agricultural cooperatives covered by JA-Zenchu’s current network will now need to undergo audits by a certified public accountant, a function that had previously fallen to that union, whose own auditing branch will be spun off as a separate entity.

Analysts say that these changes would allow farmers to have greater influence in determining their own actions, such as in their production and distribution practices, thus helping them boost their own productivity – particularly given the potential market opening that could come from a TPP deal.

The series of changes unveiled by Abe would essentially curtail JA-Zenchu’s political influence and revenues, analysts say, as the group currently controls most of the distribution of Japanese produce. The network was established by law six decades ago, and has long opposed domestic agricultural policy reforms.

In a surprise announcement last week, JA-Zenchu confirmed that it would be backing Abe’s plans, following meetings held with leaders of the Liberal Democratic Party (LDP), with which it has close ties. The changes still need formal approval by lawmakers, with the Abe government expected to submit the relevant legislation next month.

“We should not be afraid of change in the face of tradition,” Abe said last week, adding that his aim was to make his country’s agricultural sector play a greater role in global markets. “Agriculture is the very backbone of the nation. It has protected our beautiful Japanese homes and communities. It is precisely because of this that we must implement change at this very moment.”

ICTSD reporting; “JA-Zenchu accepts drastic farm cooperative reforms,” THE JAPAN TIMES, 9 February 2015; “Abe’s Third Arrow Finds Its Mark,” THE WALL STREET JOURNAL, 11 February 2015; “Agricultural Reforms in Japan Pave the Way for TPP,” THE DIPLOMAT, 12 February 2015; “Japan’s farming lobby accepts cooperatives reform plan,” REUTERS, 9 February 2015; “Japan emerges from recession but growth subdued,” REUTERS, 16 February 2015.

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