Farmers set to give reforming Japanese PM his stiffest challenge
After December's landslide re-election, Japanese Prime Minister Shinzo Abe's programme to revive the nation's economy is set to meet perhaps its stiffest challenge, the nation's sclerotic farming industry.
He will soon submit legislation to reform agriculture, a sector where a dwindling band of aging farmers work tiny plots, while conducting gruelling negotiations to sign up for the Trans-Pacific Partnership (TPP), which would cut towering import tariffs that shield domestic farmers.
Standing in his way is Japan Agriculture (JA), a lobby group that controls most aspects of pricing and distribution through its network of about 700 farming cooperatives.
The JA, which has long had close ties to Mr Abe's Liberal Democratic Party (LDP), has financial clout - its banking business had nearly $780bn (€687bn) in deposits in March 2014 - and a large membership, which give it influence over lawmakers in rural constituencies.
In January its members campaigned against and helped defeat the LDP's candidate for governor of Saga, a prefecture in farm-heavy southwestern Japan.
Though agriculture is only about 1pc of Japan's economy, that defeat worries those who fear the government could temper what Koichi Kurose, chief economist at Resona Bank, calls "a symbolic part of Abe's structural reforms" ahead of nationwide local elections in April.
"If they pull back from that to win elections, they can pull back from the whole Abenomics reforms," he said.
"Foreign investors are also watching closely whether or not Abe can carry out agricultural reforms, which will affect their evaluations of Abenomics," said Chizu Hori, senior research officer at Mizuho Research Institute.
At home, farmers hurt by another plank of Abenomics - loose money and a weaker yen - are also watching closely.
Hiroyasu Sugiura (67), whose dairy lies in the shadow of Toyota factories, says he is desperate.
The tumbling yen helps exporters like Toyota but has led to a sharp rise in feed costs, which now swallow nearly 80pc of Mr Sugiura's dairy revenue.
"The weaker yen . . . may have given Toyota Motor trillions of yen in profit, but we are getting squeezed by the same national policy. . . we want the government to protect us," Mr Sugiura said.
For the consumer, however, high prices and a recent butter shortage are the pitfalls of a closed market for milk and dairy products, where output volume and sales prices are set by the state and a few designated groups under the JA, while imports are under effective state control.
Japan imposes a 360pc tariff on butter imports to protect domestic farmers while maintaining an import quota as a condition for such high tariffs under international rules of trade.
Mr Abe wants to break that system to give local farmers or cooperatives autonomy so they become more productive and profitable.