Policy impact and spatial heterogeneity of direct payment for environmentally friendly agriculture in Japan

Abstract

The Japanese government has set a goal of increasing the area of organic farming to 25% of all farmland by 2050. To achieve this goal, the government implemented a policy called the Direct Payment for Environmentally Friendly Agriculture (DPEFA), which is a type of payment for environmental/ecological services. This study uses latest data and a spatial econometric model to examine the effect of the DPEFA on the expansion of organic farming in Japan. The analysis reveals spatial heterogeneity (dependency) in the distribution of participation in the DPEFA policy and the rate of organic farming across regions. After addressing this heterogeneity, we find that the policy impact is positive and significant. However, the magnitude of this impact is insufficient to achieve the government's 2050 goal. The result suggests that for the policy to be even more effective, its impact of the policy needs to be boosted by expanding the targeted technology options and restructuring the system to accommodate the differences in regional characteristics.