BMI View: The ageing Japanese agriculture sector i s see ing some green shoots in the form of technological innovations. The use of robots in primary industries of agriculture and fisheries and utilis ation of data in dairy farming is proof that the agriculture industry is making changes in the way it operates - a long awaited development for the traditionally old-fashioned and less progressive industry. The Japanese government has launched a series of initiatives to support advancements in the indu stry, including investing in USD 10mn in robots aimed at reducing farming workloads and investments into cloud-based agriculture technologies such as wearable devices and peripherals for monitoring livestock .
On the political front, the government's plan to diminish the influence of the once-powerful Central Union Agricultural Cooperative (JA-Zenchu) is a strong indication to us that much-needed structural reform of the agriculture industry is underway. By 2019, the JA Zenchu is expected to become a general incorporated association with co-ops having the option of engaging independent auditors instead of working with those associated to the JA Zenchu. By reducing the power of the Union, the government is sending out a clear sign that it is serious about the reforms, as further reflected in the increased openness towards a compromise for the Trans-Pacific Partnership.
Rice production growth to 2018/2019 : 5.5 % to 8.9 mn tonnes. With the latest policy to do away with the four decade-long gentan policy, which restricts output of the grain to prevent overproduction, we believe this will herald a new season for the backward and ageing industry, as consolidation will begin to take place.
Beef production growth to 2018/19: 3 .0 % to 517,000 tonnes. Livestock production is expected to be stable on the back of changes in the animal feed compensation programme for farmers, as well as muted consumption growth.
Soybean production growth to 2018/19: 16.2% to 230,000 tonnes. Despite its double-digit growth, soybean production still remains a fraction of total consumption. It is mainly used for animal feed.
2015 real GDP growth: 1.2 % (up from 0.0% in 2014, forecast to average 0.8% out to 2019).
2015 consumer price inflation: 2. 8 % average (up from 2.4% in 2013, forecast to average 3.0% to 2019).
BMI universe agribusiness market value: USD73.3bn in 2015 (same as USD73.4bn in 2014; forecast to grow annually by 0.6% on average from 2015 to 2019).
Non-tariff rice quotas from the US and Australia have been proposed at 70,000 tonnes and 80,000 tonnes respectively in return for maintaining a high tariff on the country's staple. For rice from the US, a 50,000 tonne quota has been suggested; however this could be increased progressively up to 70,000 tonnes over a period of 10 years or more. Given that the 70,000 tonnes is significantly lower than the 175,000 tonnes originally necessitated by the US, this will continue to be a sensitive area of negotiation between the countries. At present, Japan is required to import 770,000 tonnes of rice, just 7% of total Japanese rice consumption.
Japan's Minister of Agriculture, Forestry and Fisheries Yoshimasa Hayashi in a recent interview has stated that discussions on the signing and implementation of the Trans-Pacific Partnership (TPP) are drawing to a close. The TPP has been cited as one the largest trade deals in history, encompassing 12 countries that when combined add up to 40% of the world's GDP. Passing the bill has proven even more crucial over time, and five additional countries have expressed further interest in the partnership agreement. New Zealand is poised to benefit considering it allocates USD94mn per year for red meat export tariffs alone to the negotiating countries, with most of this (USD77mn) paid to Japan. Japanese tariffs on beef imports start at 38.5% and can under certain conditions rise even up to 50%.
Japan has recently begun a strong campaign directed at intensifying relations with Vietnam. Japanese investment in Vietnam has totalled USD2.05bn covering 298 projects in 2014 alone. This has included mostly agriculture as the main point of interest, but other sectors have also been discussed at the recent meetings of Vietnam's President Truong Tang Sen and Japan's Minister of Agriculture, Forestry and Fisheries. Should it prove successful, the current partnership agreements will be used as a model for further regional cooperation with other members of the Association of Southeast Asian Nations. Talks are also leading to requests for further liberalisation of trade; specifically, Japan has been calling for further relaxation of tariffs on apple exports while offering to import mangoes from Vietnam. Japanese businesses have additionally expressed interest in recently adopted Vietnamese regulations on livestock farming, fishing and of course agriculture.