An economic analysis of the farmland market and farmland abandonment in Japan

Abstract

With the advent of globalisation, Japanese agriculture is under strong pressure to reform. Despite highly protectionist policies, Japanese agriculture has declined significantly and now faces problems relating to sustainability and the livelihood of rural communities. The failure of Japan to develop its agricultural structure, especially the enlargement of fanning units, has been a key factor. This thesis analyses the farmland market in Japan, testing its efficiency against theoretical models and examining farmland policy and structural change. Using time series data, test results support the theoretical model, with the possibility of structural breaks also recognised in some regions in 1967 and 1980, when the regulation of farmland market changed drastically. Results also indicate that the market is not as efficient as in the UK or US. The thesis also examines the recent increase of abandoned farmland in Japan. A theoretical model is developed to include the effect of ageing of the agricultural population. The results imply that farmland abandonment is mainly caused by the rapid increase of farmland supply and ageing of the agricultural population, but that the level of cash rent (i.e., profitability of land) is of little or no importance. The protective agricultural policy and strong regulations on agricultural land transactions helped small-scale fanners to remain in agriculture until the 1980s. However, these farmers face difficulty in surviving due to the serious fall in producers' prices (especially rice) and the high rate of ageing in the agricultural population. Moreover, in these circumstances, fanners are not motivated to extend their scale. Small-scale family fanning system played a major role in Japanese agriculture after post-war period, but the recent increase of farmland abandonment shows the limit of this type of fanning system. Farmland policy needs to be reformed in order to achieve an agricultural structure that is more competitive. In the past this has failed due to the strong regulations on farmland transactions. However, the development of an agricultural policy framework is necessary to support agriculture's multifunctionality. Finally, farmland abandonment is also a problem in other parts of the world, for example the mountainous areas of Europe, and the Japanese experience may provide an interesting insight for other countries.