On Japan's farms, a weakening yen adds to slow-burning discontent



By Daniel Leussink

YAMAGATA, Japan, June 27 (Reuters) - Japanese farmer Kiyoharu Hirao has started to add more rice to the mix he gives his cattle in order to stretch his money further as a plunging yen drives up the cost of imported corn used in animal feed.

That makes him worried about the quality of his prized wagyu beef and, along with some other farmers facing similar hardship across the country, angry at the ruling Liberal Democratic Party (LDP) that once held an almost unshakable grip on rural Japan.

"I don't know how much more people can take, myself included, since the price of feed and other products keeps going up," the 73-year-old Hirao told Reuters at his farm on the outskirts of Yamagata city, strains of classical music rising from speakers inside his barn. For years he has used music to calm the cows and ensure tender beef. Now he fears the rice will harm their gut bacteria.

The yen's slide to a more than two-decade low this year has hit Japan's farmers hard, making the already high cost of imported feed, fuel and fertiliser even more difficult to afford. Some, like Hirao, are cutting costs or taking loans. Some are talking of giving up farming altogether.

The situation has added to the quiet discontent in Hirao's prefecture of Yamagata, a primarily agricultural region known for its rice, beef and cherries some 400km (250 miles) north of Tokyo.

Reuters spoke to two dozen farmers, officials and policy experts across Japan, including a dozen farmers in Yamagata, at least 10 of whom described discontent there or in other agricultural regions, exposing fissures in the LDP's rural base.

Polls show Prime Minister Fumio Kishida is expected to lead the LDP to victory in an upper house election on July 10, but the combined effects of inflation and the weaker yen could cost him critical rural votes and weaken his grip on the fractious party.

Once a solid LDP supporter, Hirao said he started to drift from the party because he felt it did not do enough for farmers. His opposition hardened under former prime minister Shinzo Abe, who advocated for free trade and unleashed monetary stimulus in an attempt to end deflation and boost wages. In the coming election, he said he is leaning more towards the incumbent candidate, who is from the opposition.

Prices are now rising but wages still have not budged in decades. Japan's central bank, run by an Abe appointee, has stuck to ultra-low interest rates even though raising rates tends to increase the value of a country's currency.

"It's just low interest rates and more low interest rates and somehow we get by, but eventually the younger generations get stuck with the burden," Hirao said. "I hate all the people Abe appointed. None of them are any good."

About 1.3 million people, less than 2% of the labour force, work primarily in agriculture in Japan. Yet farmers are a potent political force because the electoral system disproportionately favours rural voters and because agriculture cooperatives, collectively known as the JA Group, form a powerful lobby.

Some farmers in Yamagata told Reuters they feel betrayed by the LDP because it picked free trade over farmers in the last decade, paring back support measures and opening the Japanese market up more to foreign competition. They want to return to the days of strong government support and a more protectionist stance, which was a pillar of LDP policy for decades but has now been partly dismantled.

To win back such disaffected rural voters, the LDP will be forced to deliver more for farmers, said Kazuhito Yamashita, a former agriculture ministry bureaucrat and now research director at the Canon Institute for Global Studies think tank.

"As prices of fertiliser, pesticides and fuel increase, farmers will earn less and grow increasingly dissatisfied. Their support for the LDP will gradually weaken," he said. "The LDP doesn't want to make an enemy of the farm lobby so in terms of elections, they will have no choice but to back policies the farm lobby wants."

In response to Reuters questions, a spokesperson for the LDP did not directly address the issue of the party's support among farmers. The spokesperson said the LDP was striving to ensure all citizens understand its policies, not only those involved in agriculture, and referred Reuters to its election manifesto, which includes a pledge to ease the impact of higher fuel, feed and fertiliser prices, without providing further details.

"The surge in energy and commodity prices are a worry," Toshiaki Endo, the chair of the LDP's election strategy committee and a lower-house representative from Yamagata, told party supporters in April. "We're in for an extremely tough fight."

Public support for Kishida recently fell to a four-month low of 48.7% and more than 54% disapprove of his handling of inflation, a Jiji Press poll showed this month.

'GREATEST RESPONSIBILITY'

Abe's embrace of a landmark trans-Pacific trade deal in 2013, which Japan formally signed five years later, damaged the LDP's support in the rice-growing north, farmers and analysts said. Yamagata is one of a handful of prefectures that does not have LDP lawmakers in the upper house, although all three of its representatives in the lower house are from the party.

"Farmers and agriculture groups were traditionally strong supporters of the ruling party. But over the last 10 years, there are more people who think it's not good to rely only on the LDP," said Toshihiro Ooyama, a 12th generation farmer who heads the agricultural cooperative in Yamagata city.

The cooperatives lobby on behalf of their members and invest farmers' savings through the Norinchukin Bank, which has $756 billion in assets and is a major player in global financial markets.

JA Group declined to comment on farmers' support for the LDP. It said that rising costs of fuel, raw materials and animal feed were causing "widening concern" among agricultural producers. It referred Reuters to a seven-page policy proposal issued last month, which called for measures to ease the strain on farmers, including government support to expand domestic production of crops used for feed.

Japan has reduced support for agriculture in recent decades, but even so, 41% of farmers' revenue still comes from government subsidies, more than double the average of the OECD group of wealthy nations. Japanese farmers charged 60% more than international market levels for their produce in 2018 to 2020, according to the OECD.

Some economists say ageing Japan can no longer afford to give big support to farmers. Yet without that support, the LDP may lose its grip on a key group of voters.

"The LDP will just hit a wall," in Yamagata if it does not extend more help to farmers, said 57-year-old Kazuharu Igarashi.

At his hog shed in Tsuruoka, near the Sea of Japan, he too adds rice to animal feed and is concerned his pork will be drier. So far, he said customers have not noticed. About 80% of his monthly revenue of 10 million yen ($75,000) now goes on animal feed, above his break-even of around 60%. He said he took a loan from a prefectural emergency fund, but is concerned that other farmers will not survive financially.

Like Hirao, he said he is leaning in the coming election toward the incumbent candidate, Yasue Funayama of the centrist Democratic Party for the People. A former farm ministry bureaucrat, she favours European-style guaranteed minimum incomes for rice farmers.

"The government says rice is at the heart of our culture and the people's staple food, but production has been liberalised," Funayama told Reuters in an interview at her office in Tokyo. "The government has abandoned its greatest responsibility."

Given Funayama's popularity, the LDP considered not fielding a candidate against her, a person familiar with the party's thinking told Reuters. It only named one with some six weeks left before the July 10 vote. The LDP declined to comment on whether it had considered not running a candidate in Yamagata in the upcoming election.

To be sure, there can be many issues impacting how farmers vote, especially as 70% of them are aged 65 or older.

"There is such a wide variation among the farming population," said Kay Shimizu, a research assistant professor of political science at the University of Pittsburgh who co-authored a book about Japanese farming and the JA cooperatives.

"On the one hand, they have an interest in their well-being, in their livelihood, which is farming, but they also have other interests. Many of them are a lot older, they have social welfare concerns."

Kazuyuki Oshino, a rice farmer in central Yamagata, said he was asked by three different farmers to take over managing their paddies because of rising costs.

"If conditions continue as they are, things will be hard," he said. "So they quit."
Reporting by Daniel Leussink in Yamagata Additional reporting by Sakura Murakami and Yoshifumi Takemoto in Tokyo Editing by David Dolan and Bill Rigby

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