Abe Pushes Agricultural Reforms, TPP to Bolster Third Arrow of Reform Agenda

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 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.

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.

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.

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.

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.

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.