Boston, MA -- (ReleaseWire) -- 05/26/2014 -- Since announcing the scrapping of the four-decade long 'gentan' subsidy programme for rice farmers, we are increasingly optimistic that the shift from protecting the Japanese agriculture industry at all costs to a more open and competitive one is happening sooner than we had anticipated. In particular for the rice sector, this new policy should lead to more industry consolidation and reap economies of scale in the longer term. While this should invigorate the ailing industry, we still view the hold on the 300 over percent in import tariff as a barrier to a true liberalising of the sector.
- Rice production growth to 2017/18: 0.3% on the 2013 level to 9.0mn tonnes. The gradual consolidation of the industry should increase economies of scale and output of the industry.
- Beef production growth to 2017/18: 0.6% on the 2013 level to 507,800 tonnes. Production of beef should grow alongside increased wages.
- Soybean consumption growth to 2018: 10.2% on the 2013 level to 3.3mn tonnes (with growth mainly due to base effects). Not counting its use as an important ingredient in animal feed, tofu (soybean curd), is the most common end use for soy in Japan, accounting for 57% of total food soybean use.
- 2014f real GDP growth: 1.3% (down from 2.4% in 2013, forecast to average 1.3% out to 2018).
- 2014f consumer price inflation: 1.0% average (up from 0.8% in 2013, forecast to average 1.6% to 2018).
- BMI universe agribusiness market value: USD98.5bn in 2014 (down from USD102.0bn in 2012; forecast to decline annually by 0.6% on average to 2018)
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The government's step towards removing all rice subsidies, which effectively encourage farmers to reduce rice crops, or 'gentan', by March 31 2019 is a move in the right direction towards modernising the rice sector and increasing productivity and efficiency. However, we believe that significantly more can be done to improve the competitiveness of the sector. At present, more than 70% of rice farmers in Japan work on less than a hectare of land, with an estimated 42% on half a hectare, according to the agriculture ministry.
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