TPPA to rejuvenate Japanese agriculture in short term

One of the interesting aspects about Japan is the irony of the place. I say this for a number of reasons, among them:

1. A nation that pays its farmers not to plant crops
2. A nation, long famed for the most expensive real estate in the world, that perplexingly has the cheapest property, in the most convenient locations that Westerners could imagine
3. A proud nation lacking in constituents with self esteem
4. A considerate nation lacking in empathy for others

On this note, I draw attention to another prospective opportunity for adventurers that might gain traction, if only because it is 'counter-cyclical'. Japan is one of a number of Asian Pacific nations that is reforming its trade laws. Japan has long been open to trade reforms, however the nation has oft resisted these changes because:

• Change was considered electoral suicide in Japan - particularly the topic of farm support
• Food security was considered a key consideration

Today, priorities seem to have shifted, and so there is good reason to believe that Japan might in fact support agricultural and trade reform. The reasons to suspect this are:

• The prospect of importing cheap food from abroad
• The high cost of living in Japan due to high food costs, and its corresponding impact on low income families, who are growing in number
• The declining importance of farming due to the aging population
• The appeal of opening up trade opportunities for Japanese industry, even if that means corresponding closure to a long history of mercantilism on agriculture
• The spiraling Japanese public debt, and thus the corresponding need for Japan to end its subsidies on agriculture

We might then wonder whether Japan is seeing the writing on the wall, and thus dropping its previously mercantilist strategy, for what might be construed as a far more enlightened and fairer posture to all concerned. Paradoxically, it appears this strategy is having the opposite affect. The Japanese government has increased support for Japanese farmers to stop rice farming. i.e. This funding could be construed as:

1. A payoff to ease the burden on farmers entering retirement, i.e. The bulk of Japanese farmers are over 65yo, working small land plots compared to their competitors, with modest farm equipment.
2. A capital incentive for Japanese farmers, where they remain committed and their farmlands prove suitable, to opt for a different type of agricultural product, that is more sustainable in a post-reform era.

The implication is clear. There will be several changes in the post-reform period:

1. More commercial acumen as committed younger farmers and corporate farmers have positive incentives to shift to more marketable, higher margin crops. Clearly in the past, the guarantees of farm support only gave Japanese older farmers the incentive to persist in what they were doing, so they just became more 'entrenched' in protectionism. 
2. Higher economies of scale in the new era. There will need to be a great deal of consolidation of existing farms. Most likely we might expect farmers, not to sell their land, but instead to lease lands for a modest retirement 'farmland' income. 
3. Greater land availability. It is inevitable that some of this land will become available to 'new farmers'. The question is whether it will be quality land, and whether the 'shards of land' offered will be desirable in the new era. After all, corporate farmers will want to consolidate their interests, and not have their interests scattered across the country. There is every reason to think that they are already identifying the farms with the greatest appeal in terms of access to markets, fertility, and centrality to their existing interests. Notwithstanding the appeal of 'proximate land', the corporate farmer has a trump card up his sleeve. Japanese agricultural land is zoned for agriculture, so corporate farmers will know that, even in 'growth areas' close to cities, there will be land that retiring farmers will have no choice but to accept a 'low-price' deal in order to secure use of land. 

The opportunity of course to buy farm land in Japan is not restricted to Japanese nationals, however there is a need for any investor to pay membership dues to the Japan Agriculture Association (JA). The appeal of farming in Japan is strong for a number of reasons:

1. Low yield, low margin rice farming lands are going to give way to higher yielding, higher margin crop selection
2. Asian crop competitiveness is destined to fall as farms in Asia's emerging markets prefer to work in factories rather than on farms. This of course will take time. 
3. Higher farm equipment utilization rates can be expected to cut farming costs. Historically farmers in Japan, whilst cooperative, have not been particularly engaging when in came to sharing farm equipment. This, and the smaller plot sizes, resulted in small scale farm machinery, which is an approach mirrored in Asia, and otherwise a boon for Japanese farm equipment manufacturers.

The other appealing factor is the possibility of buying cheap and moribund 'scrap' infrastructure at auction. A great number of Japanese farmers have gone broke, and retain shards of Japanese farm lands and infrastructure as a result of poor business and lifestyle decisions. Some have become alcoholics. In any case, a substantial number of properties have ended up in the courts as foreclosed properties. Given the prevailing attitudes to farming in Japan, this does offer a counter-cyclical opportunity for others. Consider that:

1. Japan is reforming the sector
2. Japan's hinterland has amongst the best rural infrastructure in the world, with great connectivity to the main Japanese cities, i.e. Rarely is an isolated rural hinterland more than 90 minutes train from a major city, or three hours from a mega-tropolis like Tokyo, Osaka, Fukuoka, or arguably not Sapporo (Hokkaido). Yes Sapporo is substantial centre, but the cold north is not well suited to agriculture anyway, given the cold climate, or short seasons. 

If you are more interested in Japan's farm sector, and the opportunities to buy farm land in Japan, consider our Japan Foreclosed Property guide. Most of the buyers are 'small scale' Westerner farmers married to Japanese spouses, however there is scope for those with greater capital resources to seek a business visa for the purpose of pursuing a farming business. This obviously requires vetting by the Ministry of Foreign Affairs of your business proposal.

The strategic opportunity in Japan could be considered to lie in the future of Japan. Consider that Japan is struggling to kick-start its economy. There is every reason to think that objections to immigration will be swept away by economic imperatives, and that more Indians, Chinese, Filipinos and Koreans, will mean the introduction of more restaurants with 'peculiar' or exotic food supply needs, and the expectation that this produce will be supplied locally in Japan. This is therefore an opportunity to anticipate if one sees Japan moving in the same direction as other Western countries.
It seems however that it is the Trans-Pacific Partnership Agreement (TPPA) that is to kickstart Japanese agriculture. It is probable that the opportunities to buy foreclosed Japanese rural property will be in this early stage, and that latter-day entrants will be left to fight over infertile, remote land in the 'full priced' private property market.


Asian property markets  Japan Foreclosed Property Guide Philippines Property Guide
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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com