Japanese rural savings, which were mainly mobilized through deposits in financial cooperatives, developed rapidly from 1900 to 1930. There are two possible reasons for this development: one is a non-market factor and the other is a market factor. As there are very few studies on the latter, this paper analyzed the market factor.
　The market factor is broken down into three points: 1) an increase in farmers' income; 2) the spread of financial markets and modern financial institutions; 3) the government passed laws which permitted flexible financial business in such institutions. As for the first point, regression analyses revealed a close relationship between the deposits in cooperatives and farmers' income. On the second point, the cooperatives absorbed their deposits in competition with rural banks and post offices. The third point was made clear in another paper by the author.
　The previous researches on Japanese rural finance has mainly concentrated on non-market factors such as the government's role, experience of informal finance up to that point, or tight relationships within village communities. This study concluded, however, that the development of modern financial institutions and some kinds of market factors were indispensable for rural savings mobilization in prewar Japan.

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　A drastic reform in the price determination and the set-aside program is currently being implemented in the Japanese rice sector. The Agricultural Policy Council made a decisive proposal to the government in August 1994 that the Food Control Law enacted in 1942 should be abolished and that the food control system should be deregulated. One of the remarkable characteristics of the new Law is the introduction of the "selective" set-aside program.
　The purpose of this paper is to discuss the mechanism design of the newly intruduced policy and to analyze its economic consequences. This paper assumes that the governor offers rice-growers two alternatives: to accept set-aside or not. In response to this, each farmer makes his own decision. The main problem in this situation is asymmetric information, that is, the governor is at an informational disadvantage in that he does not know farmers' type based on their choice. This is a case to which an orthodox contract theory or principal-agent model can be applied.
　The conclusions of this paper are summarized as follows.
　 (1) The selective set-aside system cannot decrease the social cost while the farmer's payoff from ricegrowing remains unchanged. This holds true even if the desirable separating equilibrium in which outperforming farmers select full-scale cultivation and vice versa is attained, resulting in improvement of the aggregate productivity of the rice sector.
　(2) It is within the governor's discretion to distribute the social cost to the consumer's defrayment (the deadweight loss arising from the rice price disparity) and the taxpayer's incidence (the set-aside subsidy). When the governor offers a high set-aside rate, the rice price disparity decreases very slightly and as a result the consumer's benefit from this policy reform remains inconsequential. On the other hand, when a low set-aside rate is offered, the set-aside subsidy swells and as a result the taxpayer's incidence increases.

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