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Advances in Social Sciences Research Journal – Vol. 8, No. 7

Publication Date: July 25, 2021

DOI:10.14738/assrj.87.10576. Yonekura, H. (2021). The Sixth Sector Industrialization of Agriculture and the Relay Shipping of Vegetables in Japan: Implications

for the Agricultural and Rural Development of Middle Income Countries. Advances in Social Sciences Research Journal, 8(7). 350-

368.

Services for Science and Education – United Kingdom

The Sixth Sector Industrialization of Agriculture and the Relay

Shipping of Vegetables in Japan: Implications for the Agricultural

and Rural Development of Middle Income Countries

Hitoshi Yonekura

Tohoku University, Sendai-city, Japan

ABSTRACT

This paper aims to extract lesson from the experiences of Japan for escaping from

the middle income trap which many countries in Asia and Africa confront. This

paper will review in detail the efforts to increase the income levels of rural and

agricultural firms by establishing a value chain under an almost zero growth

economy in the 2000s in Japan. After referring to the condition of Japan agriculture

and the framework of structural reform of agricultural policy of Japan, the core

action schemes of the Sixth Industrialization and Relay Shipping are focused on. The

mechanisms of relay shipping of vegetables and the institutions for facilitating the

scheme are reviewed in detail. It is revealed that institutional capacity for greater

inter-sector and government coordination are essential for implementing the

schemes to establish effective and efficient value chain. These are institutional

reform and capacity building efforts in Japan. Experiences in Japan reveal that

various executing agencies with good governance are required to establish the

mechanism of effective resource mobilization and implement reform of value chain.

There have been no detail studies on implementing such reform for establishing

sustainable value chain in countries where escaping middle income trap is needed.

This study should be useful lesson for countries confronting the middle income

trap.

Keywords: institutional reform executing agencies value chain middle income trap relay

shipping the Sixth Industrialization

Paper presented at the 1st International Conference on Rural Development held by the Rural

Development Research Center, Brawijaya University, Malang August 7 and 8, 2018

INTRODUCTION: ESCAPING THE MIDDLE INCOME TRAP

Recently, a condition termed the “middle income trap” has received considerable attention,

especially in Southeast Asia and Latin America (Gill and Kharas [2]), where many middle

income or close to middle income countries have experienced growth stagnation. There are two

strategies to escape this trap, as follows.

(1)On a broad level, escaping countries experience a much more rapid transition out

of agriculture and more rapid increases in manufacturing/industry.

(2)Perhaps more important is the allocation of resources across subsectors and

across firms within sectors.

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351

Yonekura, H. (2021). The Sixth Sector Industrialization of Agriculture and the Relay Shipping of Vegetables in Japan: Implications for the Agricultural

and Rural Development of Middle Income Countries. Advances in Social Sciences Research Journal, 8(7). 350-368.

URL: http://dx.doi.org/10.14738/assrj.87.10576

Because the productivity levels of firms in the same subsector can be markedly unequal, the

entry of new firms and exit of unproductive firms (creative destruction) and the extent to which

productive firms are able to gain a larger market share by reallocating inputs between firms

are important for TFP (Total Factor Productivity) growth (World Bank [12]).

The neoliberal Washington consensus of the 1990s revolved primarily around a set of policies.

The new, more pragmatic consensus of the 2000s emphasized, by contrast, institutions in

industrial policy, human capital, and governance (Doner and Schneider [1], p. 30). The

following three objectives of development concerning the middle income trap are in line with

the 2000s Washington consensus (World Bank [12], p. 160; see also Doner and Schneider [1]).

(1)Efficient resource allocation and industrial upgrading require a different set of

institutions from those that enable growth through resource accumulation.

(2)Efficient allocation requires new institutions to manage competition and creative

destruction.

(3)Industrial upgrading requires the institutional capacity for greater intersectoral

and governmental coordination, possibly through a strategic alliance between

government and business.

Increased productivity of rural firms and agricultural farms is also crucial to decreasing the

widening gap between urban and rural areas or between agriculture and other industries.

However, increased productivity is not yielded only by the technological progress of a firm or

farm. This paper aims to extract lessons from the experience of Japan and to clarify the

necessary institutional or organizational considerations for escaping the middle income trap.

The World Bank has paid a great deal of attention to the “value chain in the agricultural sector”

for low and middle income countries in the context of the sustainable development goals and

defines it as follows: “agricultural value chains, in a broad sense, are comprised of farmers,

input suppliers, traders, processors, distributors and marketers in a set of interlinked activities

that work to deliver higher quality and higher value products to meet consumer demand”

(World Bank [11], p. 7). The Sixth Industrialization Plan and the Relay Shipping Scheme

implemented in Japan can be regarded as development efforts that sought to establish a value

chain. Both were also related to small- or medium-scale enterprise

Development in local areas. One Village One Product (VOP) in Japan and OTOP in Thailand (with

T referring to “tambon,” the equivalent of “village”) were popular development schemes for

exploring potential local resources and establishing value chains to develop small- or medium- scale industries in rural areas (see, e.g., Kurokawa et al. [6]). Such efforts in Japan and some

Asian countries have nevertheless required substantial institutional reform and capacity

building of the local people and local governance. To reduce various risks and transaction costs

and to ensure repeatable and practical business activities for players’ capacity building, a

substantial amount of government support is essential.

For the World Bank, “maximizing finance for development (MFD) requires crowding-in private

resources to help achieve development goals, optimizing the use of scarce public resources,

promoting good governance, and ensuring environmental and social sustainability...... A key

consideration is whether there is a sustainable private sector solution that can substitute for

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Advances in Social Sciences Research Journal (ASSRJ) Vol. 8, Issue 7, July-2021

Services for Science and Education – United Kingdom

public expenditure and contingent liabilities, and whether there is an enabling role for the

public sector” (World Bank [11], p. 15). To establish a value chain, public expenditure in

establishing an institutional setting is crucial, particularly for establishing workable market

mechanisms at an earlier stage of effort.

This paper will review in detail the efforts to increase the income levels of rural and agricultural

firms by establishing a value chain under an almost zero growth economy in the 2000s in Japan.

After outlining agriculture and the basic policy of Japan (Section 1) and the framework of

structural reform (Section 2), an explanation of the Sixth Industrialization and Relay Shipping,

core action schemes of the reform, will be provided (Sections 3 and 4). These two schemes are

regarded as institutional reform and capacity building efforts in Japan to confront growth

stagnation. Section 4 will exemplify the players who undertake the relay shipping of vegetables

by focusing on their organizations. Section 5 will be devoted to revealing the mechanisms of

relay shipping and the institutions for facilitating the scheme. Institutional capacity for greater

inter-sector and government coordination will be regarded as essential condition. The

regulation system for executing the relay shipping scheme will be clarified to extract useful

lessons for establishing sustainable value chain and escaping from middle-income trap. Section

6 will wrap up the lessons extracted from relay shipping and the Sixth Industrialization in Japan.

OVERALL REVIEW ON ENHANCING THE COMPETITIVENESS OF JAPAN’S AGRICULTURE

Under the globalization and free trade regime, enhancing competitiveness and

maintaining/increasing farm income are critical issues in Japan and middle income countries.

This study focused on the program of “structural reform of distribution and processing” (MAFF

[7]) in Japan. How has Japan approached this issue to develop and revitalize rural areas and

agriculture?

The Ministry of Agriculture, Forestry and Fisheries (MAFF) of Japan formulated “The Policy

Package for Enhancing Competitiveness of Japan’s Agriculture,” which incorporates the

directions of 13 New agricultural administration reforms (MAFF [7]).1 The MAFF prioritizes the

implementation of the structural reform of distribution and processing. Figure 1 shows the

numbers for various types of agricultural management in 2015. Basically, there are two types

of the agricultural management, namely, family management and organized management. The

major type was non-cooperative commercial farm households with family management of

commercial farming (1,329,591 in 2015). Recently, the number of corporative types of

organized management entities (22,778) has been increasing, particularly selling purpose

cooperation management (18,857) increased 117% from 2005. This trend may imply that

individual farmers have integrated their shipping of products by establishing some sort of

corporation.

Regarding the outline of recent agriculture in Japan (in 2015), the gross agricultural output was

8.8 trillion yen (US$ 80 billion), and its income was 3.3 trillion yen (US$ 30 billion).2

Agricultural income by major farming type is shown in Table 1. Farm size was generally small,

comprising 1.72 ha of paddy framing, 0.43 ha of vegetables, and 0.99 ha of fruits. Vegetable

growing facilities were very small, but their income was relatively high. The larger the scale of

farming, the income of farm management was the higher in any farming type.