Japan's government will change the criteria for subsidies given to farmers who grow crops like wheat and soybeans instead of rice in paddy fields, shifting from area cultivated to actual yield. Previously, farmers received a fixed amount based on the area planted, regardless of yield. Under the new system, farmers producing higher yields from the same area will receive more subsidies. This marks a shift towards a performance-based approach in agricultural support, coinciding with a turning point in Japan's production adjustment policy aimed at curbing rice overproduction.
The Nihon Keizai Shimbun reported on July 7 that starting in the 2027 fiscal year, the government plans to revise the 'Direct Payment for Paddy Field Utilization' program to provide differentiated support based on crop yields rather than cultivated area. The basic economic and fiscal policy framework released by the government last month also includes plans to support farmers based on yield, regardless of whether they are growing rice or other crops, with the goal of enhancing agricultural productivity.
The existing subsidy system was introduced in 2013 to prevent oversupply due to declining rice consumption. Farmers who grow wheat, soybeans, or rice for feed and processing receive subsidies from the government. The aim is to reduce the area planted with rice while maintaining income for farmers who switch to other crops.
Under the current system, farmers receive 35,000 yen (approximately $330) for cultivating wheat or soybeans on 10 ares (0.1 hectares) of paddy land, and 20,000 yen for growing rice used in snacks or miso. Farmers receive the same subsidy regardless of actual yield as long as they meet a minimum shipment requirement. This has allowed farmers to secure subsidies without significantly increasing their yields, as they weigh the subsidy amount against rice market prices when deciding what to plant each year.
According to Japan's Ministry of Agriculture, Forestry and Fisheries, the area planted with rice for consumption last year was 1.367 million hectares, while the area for other crops like wheat and soybeans was 388,000 hectares. In terms of area, rice production capacity has been suppressed to about 80%. However, the current structure, which bases subsidies on area, has allowed farmers to secure funding without needing to significantly increase yields, the Nikkei noted.
Once the new system is implemented, farmers who improve crop varieties or cultivation methods to increase yields will receive higher subsidies. Conversely, those with lower yields will see their payments decrease. There is also a proposal to eliminate subsidies entirely for those whose yields fall significantly below average. The support will extend beyond paddy fields to include upland fields. Currently, subsidies for rice grown for feed are already based on yield, and in this case, farmers typically choose high-yield varieties. The new system will also enhance support for practices aimed at increasing productivity, such as harvesting rice for food service and then cultivating new shoots from the remaining plants for a second harvest.
The primary motivation for this reform is the tight financial situation. The Nikkei reported that the Ministry of Agriculture, Forestry and Fisheries plans to encourage rationalization in agriculture by emphasizing performance in the new system, as it is difficult to verify the effectiveness of financial inputs under the current structure, which provides the same amount regardless of yield. With an aging population of farmers, there is also a need to maintain domestic supply with fewer people.
Furthermore, the Japanese government appears to be aiming to change the very nature of subsidies with this reform. While the existing system compensated farmers for reducing rice production by planting other crops, the new system will focus on rewarding the successful cultivation of wheat and soybeans. Kunio Nishikawa, a professor of agricultural economics at Nihon University, told the Nikkei, "The change in the system will effectively eliminate the role of subsidies as a means of adjusting rice production."
Farmers are concerned that uncontrollable factors, such as weather, will directly impact the amount of subsidies they receive. A farmer cultivating 30 hectares in Omihachiman City, Shiga Prefecture, expressed to the Nikkei, "Crops are most affected by the weather. Even if we work hard, we cannot increase production if the weather does not cooperate." A farmer in his 30s from Tsuruoka City, Yamagata Prefecture, added, "If the area is the standard, it is easy to plan production, but if yield becomes the standard, it makes management decisions difficult due to uncertainty about what will happen."
The new system is still in its early stages, with specific payment rates and calculation methods for each crop yet to be determined. The Ministry of Agriculture, Forestry and Fisheries plans to finalize the details by the end of this year. However, directly linking yield to subsidies could lead to income disparities among farmers due to poor harvests or regional differences. Katsumi Arahatta, a professor of agricultural economics at Nihon Kokusai Gakuin University, emphasized to the Nikkei, "It is important to create a balanced system to prevent unfairness, considering not only the level of payments but also the varying production environments for each farmer."
* This article has been translated by AI.
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