Improving competitiveness is essential to the future prosperity of Japan’s agricultural sector, according to a new OECD report. Recent attempts to focus support on the more efficient farmers can help, but progress will be limited as long as the sector is protected from competition, the reports says.

The first step of the reform process, it says, is to ensure that famers have the opportunity to compete with other farmers domestically. This should be followed by reducing trade barriers that limit competitiveness, reduce opportunities to exploit new markets abroad, and prevent the economy as a whole from benefitting from increased trade.

Evaluation of Agricultural Policy Reform in Japan notes that Japan still has a significantly higher share (90%) of producer support based on prices than the OECD average (46%), though recent reforms in Japan’s new Basic Law take a first step towards more targeted policies. The report also notes that restricting the supply or favouring the production of certain commodities prevents domestic farmers from responding to the preferences of consumers by limiting their abilty to adjust their production to meet the demands of the marketplace.

Resolving the conflict between preserving paddy land because of the important social benefits it brings and restricting rice production in order to manage the domestic market will need to be a part of any long-term policy framework. The report calls for a shift towards policies based on land that lead to less intensive production, enhance social benefits and reduce dependence on costly and environmentally harmful chemical inputs.

Currently, land owners face a confusing mix of land-use restrictions and tax incentives. The report says if land is to be used more efficiently, land markets should become more dynamic and obstacles to land transactions should be reduced.

Food security is an important policy objective for Japan. The report reminds that recent food security risks have had more to do with high prices than insufficient production. Food security will best be improved through establishing a competitive, efficient farm sector and open trade in agricultural products.

There are strong indications that agriculture in Japan can survive and thrive in a more open marketplace. The sector has great potential, both in terms of productive capacity and the potential to produce new, higher valued products.

The report concludes that the potential of competitive agriculture should be pursued by exploiting Japan’s advantages such as its highly educated labour force, its leading position in technology and sophisticated infrastructure.