The Japanese government has decided to do away with a four-decade-old policy that pays farmers to grow less rice so as to support the price of the grain and to guarantee farmers a stable income.
The move is part of what will be a slew of agricultural reforms to increase efficiency and remove hurdles to Japan's negotiations on free trade pacts, including the 12-nation Trans-Pacific Partnership (TPP).
Subsidies paid to farmers under this so-called "gentan" ("gen" means reduce and "tan" is the unit of measure for rice fields) policy will be gradually phased out over the next five years.
The decision was taken at a government committee to rejuvenate the farm sector, headed by Prime Minister Shinzo Abe.
Mr Abe said at the meeting: "We want to create an environment where management-minded farmers can operate. We have to make farming a growth industry that brings farmers more income.
"We also want to promote major reforms in agriculture administration. Anything that goes against structural reforms will be swept aside," he added.
A final vision for reforming the agricultural sector, containing more deregulation, is expected to be announced by year-end.
The end of the "gentan" policy does not mean rice farmers will suffer financially. To prevent over-production of rice, the government will pay farmers for switching from planting rice for the dinner table to growing rice and other crops for animal feed.
There will also be new subsidies for farmers, for reasons such as participating in farmland maintenance, by dredging waterways, and keeping farm roads trim.
In total, the new subsidies will raise the incomes of Japanese farmers by about 13 per cent.
This scheme appears to be an attempt to appease rice farmers ahead of the next round of TPP negotiations, where Japan will likely come under strong pressure to make agricultural concessions.
Currently, it keeps the price of domestically-produced rice high by imposing a stiff 778 per cent tariff on imported rice.
The "gentan" policy was introduced in 1970 to compensate rice farmers for declining consumption due to changes in the Japanese diet as a result of growing affluence, and to maintain the price.
Rice consumption peaked at 13.4 million tonnes in 1963, and has since declined to about eight million tonnes a year.
Under the gentan policy, the government decides each November how much rice is to be produced.
After its abolishment, the government will announce only the expected demand for the crop and the amount in inventory.
Said Mr Abe: "In the new system, farmers will decide by themselves how much they want to grow."
Mr Abe had previously indicated that he wanted to introduce farm reforms that would enable the consolidation of small plots into bigger plots that can benefit from more efficient farming techniques.
But critics say using the new subsidies to pay off farmers may encourage them to hold on to their plots so as to enjoy the larger financial rewards.
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