JAPANESE Prime Minister Shinzo Abe's government has approved a plan to end a four-decade long policy that has helped to sustain the nation's 1.2 million rice farms.
The gentan system, which has paid landowners to reduce crops since 1970, will be dismantled by the end of the fiscal year through March 31, 2019, Agriculture Minister Yoshimasa Hayashi told reporters in Tokyo on Tuesday.
The change may spur consolidation of small paddies into larger fields as Mr Abe seeks to increase agricultural efficiency and remove hurdles to his pursuit of free-trade pacts including the Trans-Pacific Partnership. The subsidies support a typical Japanese farmer, who is a 70-year-old man living off pension payments, part-time work and sales of the grain, data from the Norinchukin Research Institute shows.
"I expect more deregulation to follow that is consistent with changing agriculture into an industry," said Economy Minister Akira Amari, who is spearheading Abe's plans for economic revitalisation.
The changes announced on Tuesday would see agricultural resources shift to "capable producers", Mr Amari said.
The government didn't announce any changes to import tariffs, which are as high as 778 per cent for rice.
Sugar has a 328 per cent duty while tariffs for beef and pork are 38.5 per cent and 4.3 per cent. The agriculture ministry said some subsidies for rice used as animal feed will increase.
Manufacturers from Toshiba to Toyota would benefit from Mr Abe's push to reach a TPP agreement. A government estimate in March found joining the pact and cutting tariffs would boost Japan's gross domestic product by 3200 billion yen ($34 billion), even as farm and fisheries production was forecast to drop by 3000 billion yen. As many as 72 per cent of Japanese rice farmers work on one hectare or less, with 42 per cent on half of that, according to Norinchukin.
The average US rice farm is 180 hectares and yields more than 50 per cent as much grain per hectare as Japanese paddies, based on calculations using data from Norinchukin, Japan's agriculture ministry and the United States department of agriculture.
Japan and 11 other nations including the US, Australia and Vietnam are in TPP talks. The US and Australia are ranked first and seventh for coarse-grain exports while Vietnam is the second-largest rice shipper, US department of agriculture data shows.
The agriculture ministry will halve gentan subsidies starting in the fiscal year from April 1, 2014, and end all payments by March 31, 2019, said Takashi Amou, a director of the policy planning division. Farmers who grow rice for livestock feed will receive subsidies that increase by as much as 31 per cent under the changes, he said.
"Ending the gentan policy is a first step in making Japanese rice farming efficient," said Takaki Shigemoto, a commodity analyst at research company JSC Corp in Tokyo.
"The government has more to do if it wants Japanese farmers to be competitive against agricultural exporting countries."
The gentan system was originally devised to support prices by setting annual output targets that matched demand estimates.As Japan grew richer and people ate less rice, the targets shrank and the state paid subsidies to farmers who agreed to sow less grain.