About 40 percent of Japan's food supply is domestically produced
by an agricultural sector that receives substantial support from
the government. Japan's support—at about $23,000 per full-time
farmer and almost $10,000 per hectare of farmland—is among
the highest of any country. The Japanese government argues that
this support is necessary for the economic, environmental, and cultural
well-being of rural areas and for the nation's food security. Critics
argue that such support deters other countries from entering Japan's
agricultural markets, weakening domestic and international competition
and raising prices for Japanese consumers.
Imposing tariffs (taxes) on foreign agricultural products is Japan's
major form of support. Removal of these "border barriers"
would significantly reduce consumer food prices in Japan. Measured
by the difference between domestic and import prices, border barriers
provide as much as $42 billion a year of support to agriculture.
Not surprisingly, products that are subject to negligible tariffs
comprise a large share of imports. More surprising is that a significant
portion of imports arrives despite high tariffs. Production of some
commodities is so expensive that imports are profitable even with
high tariffs.
Internal policies, such as agricultural subsidies, are the other
major form of support. In 1999, Japan's government spent almost
$26 billion in taxpayer funds on agriculture. Japan has been abandoning
old policies that propped up market prices in favor of policies
that compensate farmers when market prices decline and policies
that improve marketing channels and farmland. Consumer prices for
rice and other foods have been drifting down as government interventions
in retail and wholesale marketing have ended. The government also
wants to target payments to larger scale, specialized farms to lower
costs. Progress in lowering farm costs and consumer prices, however,
has been slow.
Reforms in internal farm policies have marginal impact as long
as border barriers are high. Current World Trade Organization negotiations
on agricultural trade may impose lower limits on border measures
and similar policies. Lower limits mean that Japan's agriculture
would face more import competition, which would press its farm sector
to lower costs by quickly restructuring itself. In theory, the government
could compensate farmers for lost farm income by providing income
support not linked to farming; however, Japan's high government
deficits would make increasing domestic spending difficult. Japan's
consumers, and its economy as a whole, stand to benefit from lower
food prices—perhaps more so than consumers in any other country.
Nevertheless, Japan's resistance to strong trade liberalization
in agriculture is based on the realization that its current agricultural
structure is not compatible with sharply reduced barriers against
imports.
