Farming in Japan: The challenges and potential

The number of Japan’s agriculture management entities—a broad category* from the country’s statistics—fell below 1 million in 2022. Their numbers have been declining by between 300,000 and 350,000 entities every five years, so our estimates suggest that by 2050 there may be only 180,000 of them left. This could push agricultural production levels, by value, down to ¥4.3 trillion by 2050—less than half of 2020’s ¥8.9 trillion.

Looking at domestic demand and production for staple grains, including rice and wheat, we see that demand was 14 million tonnes in 2020 and this is on track to drop by around 30% to 10 million tonnes in 2050. Production may decline at a faster rate, falling by around 40% from 8.75 million tonnes in 2020 to 3.27 million tonnes in 2050.

If our forecast comes to be, the gap between demand for staple grains and domestic production may peak in 2040 at 7.23 million tonnes, some 2 million tonnes higher than it is today (Figure).

We see minimal risk that Japan could suddenly become unable to import grains amid the current global trade climate*. However, looking 15 years into the future, the country needs to cautiously assess whether it will be able to increase imports by the 2 million tonnes it will need. Around 200 million tonnes of wheat is currently traded globally. Right now Indonesia is the biggest importer, but still buys only about 10 million tonnes. It is a graver situation for rice, which trades internationally in much smaller quantities than wheat.

Under the second Abe administration, agriculture was positioned as a growth industry and significant progress was made to scale up agricultural operations, particularly for livestock and dairy farming. Greater amounts of land have since been accumulated for rice and wheat, a mark that those products too have scaled up, and this has resulted in the emergence of large operations, some of over 100 ha.

Looking more closely at the situation on the ground around the country, we see that there is little scope for further farmland accumulation. On top of this, production costs are rising and rice prices are falling, making it harder for rice-paddy farmers working 10–30 ha in particular, to continue operating.

Today, as an extension of the Farmers and Farmland Plan that defines ideal scenarios for regional agriculture, legislation requires the development of local plans premised on accumulation of farmland, with communities tasked with developing agricultural visions for their own localities. Japan’s farmland is a patchwork of small plots, greatly encumbering accumulation toward large-scale agricultural operations. An agricultural business entity would need to accumulate at least 100 ha to be able to generate annual sales of ¥100 million, a threshold commonly used to differentiate self-employed farmers and agribusinesses based on corporate management systems. Most farmland in Japan, though, does not avail itself of accumulation that would enable the efficiencies required for farming it to make business sense.

There is, however, enough agricultural land that could be consolidated to allow family-run farms to generate sales of ¥20–30 million on 20–30 ha. Thus we think encouraging and helping develop medium-sized, independent farms should be an important part of future policies for maintaining agriculture and arable lands*.