I was invited to speak, last week, to the 43rd joint council meeting of the Australia-Japan Business Councils on the vexed topic of the inclusion of agricultural trade in any future Australia-Japan free trade agreement
My argument is, in brief, that the evidence of 40 years of Japanese economic growth and development shows that moving resources out of low-value activities like agriculture (where 60% of incomes are derived from regulatory supports, according to the OECD) to higher-value activities such as services and manufacturing means stronger growth and greater food security for Japan.
Recent modeling of a potential FTA between Australia and Japan merely confirms that Japan’s astronomical protection of farming means that there is still some way to go down that track. There are still significant gains to be made by Japan.
In other times, this opportunity would probably cut little ice with Japanese policy-makers. But the inertia of Japanese economic policy is being disturbed by the evidence of a coming demographic squeeze (a large, rapidly-aging population), by the increased fiscal pressure on a government with domestically-held debts approaching 170% of GDP, a potentially bitter challenge from China for economic and strategic superiority, and the boost to confidence that the recent escape from recession brings.
One product of this (for Japan) restlessness has been PM Koizumi’s victory in his plans to rationalize a major financial institution: the Japan postal savings bank. There is speculation that other economic rationalization may follow: Koizumi—whom the Economist calls a ‘master of gesture’—isn’t saying. But there is inevitably a suspicion that other sacred cows, perhaps including the institutions of protected agriculture, are facing the same treatment.