American-Eurasian J. Agric. & Environ. Sci., 12 (7): 943-953, 2012
ISSN 1818-6769
© IDOSI Publications, 2012
DOI: 10.5829/idosi.aejaes.2012.12.07.1759
Corresponding Author: Mohamed Esham, Faculty of Agricultural Sciences,
Sabaragamuwa University of Sri Lanka.
943
Japanese Agricultural Cooperatives at Crossroads: A Review
Mohamed Esham, Hajime Kobayashi, Ichizen Matsumura and Arif Alam 12 2 3
Faculty of Agricultural Sciences, Sabaragamuwa University of Sri Lanka 1
Faculty of Agriculture, Tottori University, Japan 2
United Graduate School of Agricultural Sciences, Tottori University, Japan 3
Abstract:Japanese agricultural cooperatives (JA) are considered as one of the best forms of farmer collective
action in a small farmer dominated agricultural sector. The JA, since its inception, has remained as the backbone
of the small farmer dominated agricultural sector. However, in the wake of trade and financial liberalization
compounded by the changes in the agricultural and political landscape, the JA is facing stiff challenges and
wider criticism undermining its role in the agricultural sector. The aims of this paper are to review the
development of the agricultural cooperative system in Japan and examine their status in the context of the
evolving economic order. The evolving economic order is exerting tremendous pressure on the JAs extensive
business and service portfolios. Analysis of the JAs performance revealed that it is losing from almost all the
agriculture-related businesses leaving a huge deficit to be bridged from the profits derived from the financial
business. Given the declining trend shown in the financial business and the stiff competition with other
financial institutions particularly due to financial deregulations, the JA cannot continue to depend on the
financial business alone for its long term survival. The JA has initiated some progressive reforms among them
mergers and consolidation are the major endeavors, however; so far only modest success has been achieved
in turning around loss-making agriculture-related business ventures. It is inevitable that the JAs position will
further erode unless steps are taken to revitalize the local agricultural sector. It is utmost important to formulate
strategies to improve the competitiveness of farming and attract young blood to farming. One rational way to
attain this is to improve the profitability of farming through consolidation of land to achieve economies of scale.
The JA needs to take steps to retain the entrepreneurial farmers within their folds, as they will hold the key to
the future of the Japanese agricultural sector.
Key words: Agricultural cooperatives Agricultural sector Economic liberalization Japan Performance
of Japanese agricultural cooperatives (JA)
INTRODUCTION welfare related needs of both the farming as well as the
Japanese Agricultural cooperatives known as Nokyo many areas including credit, mutual insurance,
or JA with a membership of 9.4 million and a net worth purchasing, processing, marketing, welfare etc.
of 5557 billion yen in 2007 is probably the largest farmer Japanese agricultural cooperatives are believed to be
based organization in the world. In terms of JAs annual one of the best forms of farmer collective action in a small
revenue of 56 billion US dollars in 2007, it could have farmer dominated agricultural sector achieved through
been placed 38th on the fortune 500 list of companies. consolidating people, land resources, producing the
Agricultural cooperatives in Japan differ in many respects needed food and providing the needed services to the
to agricultural cooperatives in other parts of the world. community. In the post war era agricultural cooperatives
One important distinction is that the majority of the were in the forefront of reviving the Japanese economy
farmers in the country belong to the agricultural through its contribution to the agricultural sector.
cooperative movement. Another important aspect is Agriculture has played a crucial role in the transformation
that the scope of the agricultural cooperatives is so of Japan's economy from a predominantly rural based to
comprehensive that they cover almost all economic and one of the world's most highly industrialized countries [1].
non-farming communities by operating simultaneously inAm-Euras. J. Agric. & Environ. Sci., 12 (7): 943-953, 2012
944
In this respect, the contribution of the agricultural cooperatives experienced rapid development.
cooperatives cannot be disputed. However, in the wake of However, since the oil shock in 1973, the growth rate of
trade and financial liberalization compounded by the the Japanese economy declined and hence, the
changes in the agriculture and political landscape, the development of the cooperative movement was curtailed
agricultural cooperatives in Japan are facing stiff [3].
challenges and wider criticism undermining its role in the
agricultural sector. Structure of Japanese Agricultural Cooperatives:
The aims of this paper are to review the development JA has a three tier hierarchical structure (Fig. 1) which
of agricultural cooperatives in Japan and examine their corresponds to the national political administrative
current status in the context of the evolving economic structure of municipal, prefectural and national
order in Japan. This study is based on desktop research government. The basic three-tier structure was
and analysis of secondary data obtained from the annual established in the mid 1950s [4]. The basic unit consists
statistics on multi-purpose agricultural co-operatives of the primary cooperatives operating at the local
published by the Ministry of Agriculture, Forestry and levels such as city and village. The primary cooperatives
Fisheries (MAFF) of Japan. are of two types; multipurpose and special cooperatives.
Historical Development of Agricultural Cooperatives: consists of the prefectural federations organized based on
The historic evolution of the JA can be traced back to the type of activity undertaken, while at the apex of the
traditional cooperative movement during the Tokugawa hierarchy are the national federations organized based
period (1603 to 1868) [2]. The traditional cooperatives once again on the type of activity undertaken. JA-Zenchu
became extinct with the abolishing of feudal rule by the or central union of agricultural cooperatives is the apex
Meiji restoration in 1868. The cooperative society law organization representing the entire system. Its main
enacted in 1900 by the Meiji government based on activities include Agricultural extension, better living
Raiffeisen cooperative model gave birth to cooperative guidance, management guidance to cooperatives,
associations encompassing credit, marketing, auditing, agriculture policy representation and public
purchasing and production associations. There was an relations. Other national level federations are Zen-noh or
unprecedented growth in number of cooperatives after the national federation of agricultural co-operative
end of Russia-Japan war (1904-1905) and during the associations which deals with marketing, purchasing and
period of the First World War (1914-1918). The processing businesses. Zenkyoren or national mutual
cooperative society law was revised as much as ten insurance federation of agricultural cooperatives deals
times to suit the contemporary needs of the time. The five with insurance, while central cooperative bank for
year development plan of the cooperative associations agriculture forestry and fisheries also known as the
(1933-1937) formulated to respond to the economic crisis Norinchukin bank handles credit services. The national
of the Great Depression augured well to revitalize the rural welfare federation deals with medical services and other
economy. During the period of World War II, in order to welfare services, while Nokyo tourist cooperation, Japan
mobilize village economies for the war, the agriculture news cooperation and ie no hikari charitable
cooperative system under went changes as Nogyokai association are other national level organizations
(Agricultural society) was setup by amalgamating the belonging to the JA system.
cooperative associations. Subsequently, Nogyokai was To reduce the duplication of activities at the
abolished and all economic activities were transferred to prefectural and the national levels and improve cost
the agricultural cooperatives set up based on the effectiveness of the JA system, initiatives have been
Agricultural Cooperative Law of 1947. This law remains as taken to restructure the JA system into a two-tier system
the basic legal framework of the agricultural cooperatives by absorbing the prefecture level federations to the
in Japan. In the background of the enactment of the national and the primary cooperatives at the local level.
Agricultural Cooperative Law and the unique socio- Due to these restructuring efforts, already the prefectural
cultural relationships and unity among members of the mutual insurance and the economic federations have been
community, the number of agricultural cooperatives merged with their national federations. Moreover, the
increased rapidly to more than 13,000 multipurpose and Norinchukin bank (central cooperative bank) through
nearly 21,000 single purpose cooperatives by 31 vertical integration has created the JA bank system which
December 1950 [2]. During the 1960s, with the significant consists of 765 primary cooperatives, 38 prefectural
growth of the Japanese economy, agricultural federations and the Norinchukin bank [6].
The second level of the hierarchy at the prefectural levelAm-Euras. J. Agric. & Environ. Sci., 12 (7): 943-953, 2012
945
Source: Esham et al. [5]
Fig. 1: Organizational structure of the JA group
Primary Cooperatives: The primary agricultural become part of the management supervisory committee
cooperatives are the basic constituents of the JA system. which is a mechanism put in place to ensure the member
It operates as a m