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Smarter Subsidies

Yuko Fukushima

The Japanese government says planned budgetary measures for subsidizing the agricultural sector will support local producers. But farmers have been through this before and they didn't like what happened.

The current government says things will be different this time. Former Agriculture Minister Kiuya Nishikawa said "we will not blindly use the budget this time for TPP related subsidies."

This is not the first time the government has stepped in to protect farmers from a trade deal. 20 years ago, Japan was under pressure to open up its rice market at global free trade negotiations. The government decided to spend 50 billion dollars to strengthen the farming sector. More than 1.5 million dollars of that budget went to build a hot spring resort at a village near the city of Yamanashi. That means locals can enjoy soaking in the volcanic water, but it didn't do much to protect the farmers.

One former village official says the idea was that the spa would put the city on the map. "The aim of building this was to have people living in cities come to these mountain villages," Tetsuji Yamashita says. "Then they would get to know the beauty of this place and buy farm products grown here."

The only connection between the farmers and the hot spring is a little fruit and vegetable stall in the parking lot. Most of the people who come to bathe here are locals. One of the farmers operating the stall says he's felt the energy of the area slipping away over the last 20 years. "I would say sales are less than a tenth of what they used to be," Masao Kobayashi says.

Since that deal two decades ago, the number of farmers in Yamanashi city has fallen by half. And many of those who are still farming have abandoned some of their land.

The city of Yamanashi wasn't the only place the government spent the farming subsidy on a hot spring facilities. Many more were built across Japan. "I didn't think the money would be used to build hot springs," says Former Japanese Agriculture Minister Yoshio Yatsu. "We were responsible. We are to blame."

Many farmers are still fearful of what the TPP and the liberalization of the market will do to their livelihoods. "I heard if the TPP goes into effect, tariffs on grapes will be zero and a lot of foreign grapes will be imported to Japan," one farmer says. "Some say if the quality of our grapes is good we'll be competitive, but I'm afraid the price will fall."

Yuuki Tagagi spent decades working on farm policy for Japan's agriculture ministry. He says the leaders have learned their lesson and come up with a better system for subsidies. "20 years ago, we fixed the 50 billion dollar budget before we decided what to do with it," he explains. "We didn't have a roadmap or an idea of what we wanted to achieve. This time at least the officials are discussing what to do, not how much money to spend. So I am hoping this time they will get it right."

The TPP isn't a done deal yet. But the government is hoping to smooth the path with some early handouts. Officials are planning to allocate funds from this fiscal year to subsidize the farm industry.

They set a numerical target for food-related exports, including agriculture, fisheries and food, of 1 trillion yen, or about 8.2 billion dollars. The deadline for achieving the goal has been moved up from the original date of 2020.

Government officials plan to include in the budget financial support for farmers who adopt high-performance machinery to improve work efficiency. They also plan to support those who shift to cultivating high-value-added products that are globally competitive.

Farmers trying to increase production of Wagyu beef will also be potential recipients of financial aid. The government is also expected to support the efforts of so-called "farmland banks," which borrow unused plots and rent them out to eager farmers. The government hopes to use this system to promote large-scale cultivation of land.

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