The neo-liberalistic restructuring policy of the coalition government of the Liberal Democratic Party and the Buddhist Komeito for paddy and rice farming for the last years, which didn't reflect actual small family farming structures, has suffered a setback by a counterattack of the political opposition.
First of all a comprehensive development of paddy farming, which contributes to stable food security for Japan, is the problem which now confronts us, and simultaneously should provide a place of work and agricultural income regardless of the amount for permanent residents. The transformation of the single crop farming of rice to diversified crop rotation in a cycle of paddy and normal fields should be the basis of changing production methods.
The direction of the policy for paddy farming should be changed to support backbone family farms. The Japanese government can take advantage of border restrictions for rice through an import-prohibiting tariff (¥341/kg). Every year before the planting season, the government should propose the target market price for rice, which covers the average cost of production, and mobilize all political measures to maintain a respectable price level, e.g. the set-aside of acreage under food-rice cultivation and the market intervention of buffer-stock and reserves. In addition, the government should establish a deficient payment system for rice and other strategic crops, namely wheat, barley and soybeans.
By this above-mentioned conversion of political course Japan could increase use of paddy resources to 130％, recover the 1975 paddy crop-production level of over 14 million tons and make an advance towards reinforcement of the basis of food supply of Japan.

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In this paper, I take up the following nine points:
1）The Japanese policy of agricultural protection should be converted from market price support to direct payment.
2）The border protection policy provided by the high tariff rate for rice should be converted per the WTO Doha round in order to decrease the quota on imported rice.
3）Production adjustment should be allowed to be made based on an individual farmer's management.
4）A market environment which reflects rice supply and demand trends should be created.
5）An environments should be maintained which allows for the creation of a competitive rice production structure sensitive to market signals.
6）We should construct a competitive business model for large-scale diversified rice farms.
7）We should construct a rural social system that values large-scale diversified farms.
8）Various suggestions have been made concerning production adjustment and the abolish of the production adjustment policy.
9）The direct payment policy of the JDP (Japan Democratic Party) is discussed.

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I was initially requested by symposium organizers to elaborate on how rural society will react to the new, alternative rice policies described by other discussants. I discuss in this paper, however, not only the social reaction to the policies, but also an introduction to rural social development policy that has rarely been elaborated on in agricultural policy. Like modern society in general, people in rural society have lost many opportunities to cooperate with each other. Rural social development policy should also aim at enriching rural human relationships.
When examining the adaptability of rural society to new policies, the desire for social stability more often than not restricts policy choices to a more conservative direction. What is needed is to transform the position that excludes rural society from agricultural policy to a more comprehensive stance. To make agricultural policy more positive, I introduce an ethical perspective, which moves rural people to change their behavior. The ethics of reciprocity is an inherited, adhered-to character in Japan's rural society. Though the ethics of reciprocity works traditionally within small communities, it might be expanded beyond the locally-bonded territory and be the base of generating new relationships with outside people, above all, consumers.
Taking rice policy and the ethics of reciprocity into account, we can discover the significance of enkomai, rice that is distributed within extended families. Rice has special meaning as a staple food and the number of farmers that have given rice to their relatives has increased during the last three decades. On the other hand, full-time rice farmers have been increasingly engaged in direct sales, because they wish to compensate for the decline of the price of rice by cutting intermediary margins. If such direct sales become a stable relationship between farmers and consumers, the ethics of reciprocity might gradually work among them as well. The new rice policy should be planned comprehensively, involving production and distribution, and be based on ethical motivation.

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In order to comments about the controversy over rice policy, we analyzed the present situation of structural change on paddy farming, profitability and cost level of rice production, and strategies on paddy field farms. The main conclusions of this survey are summarized as follows.
(1) According to the increase of rented land, some of full-time farming firms expands their farm size rapidly. The size of family farms reached 30-40ha, and agricultural firms which hire full-time employees extended to 50-70ha. In that sense, agricultural structure has been drastically changing in recent years.
(2) Large-scale farms are operating their farm-land efficiently, but after 2000 their agricultural income after deducting subsidies went into the red, and the ratio of subsidies to gross income rose to about 40 percent. This fact means that nowadays paddy field farms are sustained by political financial supports.
(3) Rice production costs, including general and administrative expenses, of large-scale rice crop farm topped 16 thousand yen per 60kg. This fact means that even for the large scale rice crop farm of 70ha, it is impracticable to deduct the production cost under 30 yen per kg; therefore, we can't foresee the Japanese rice production sector developing as an export industry.
(4) Recently many paddy field farms are trying the diversification strategy, and also promoting corporate responsibility as a supplier of food.
It is difficult to handle both price support policy and supply control on rice, and maintenance of rigid supply control might require the continuation of a lower level of rice prices. In those situations, direct income compensation is essential for paddy field farms, but considering the above facts, the subsidy will account for the greater part of farm gross income. It is a serious situation for farmers, and likely to exert a bad influence for farmers' consciousness and behavior as economic units. Therefore, a cross compliance system will be needed for direct income compensation to keep the farmers' minds on rational farming behaviors. In addition it is important to increase the productivity of dry fields crops cultivated on paddy fields through land improvement and geographically arranged accumulation of rented land.

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Following amendments to food supply legislation in 2004, the distribution of rice has become increasingly market driven due to the ability of farmers and agricultural co-operatives to sell their produce directly to the food service industry. This flexibility allows agricultural co-operatives to tailor their production to the needs of rice processors and consumers and thus deliver a better end product. Rice producing districts have embraced the changes and the resulting competition has led to the adoption of new rice varieties, improved management practices and enlarged scale farming. Along with the economic benefits, the eating quality of rice has also improved significantly.
However, these changes have not been a panacea for the problems facing rice farmers. Since the 1990s, the unit price of rice has fallen substantially, putting farmers under tremendous financial stress. This has been partly due to a glut in supply driven by farmers choosing not to participate in the Paddy Set-Aside crop rotation program. Subsidies allocated to farmers who take part in the program and rotate rice crops with soybeans, feed crops, wheat and so forth have not sufficiently compensated for the production costs for these crops and thus the number of farmers participating in the program has gradually decreased. The new income compensation policy in 2010 will not fully address these issues.

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This study shows a basic proposal of an alternative scheme of rice production control as an ‘environment-conscious' set-aside program. The scheme is designed to consist of a regular set-aside program to produce crops other than rice as well as an environmental program of extensive rice farming practice to reduce rice yield by half with few chemical applications as a cross compliance. It will be able to ensure full usage of paddy lands for agricultural production and increase multifunctional benefits from biodiversity and landscape conservation.
Whether it is actually possible to implement the new scheme is likely to depend upon field conditions and the existence of local leading farmers. The plan of the set-aside program should take into consideration both mechanical and biological conditions of local fields. Mechanical conditions such as plot formation and accessibility of field passage are significant to encourage large scale farming of both rice and the other crops efficiently. Ground water level for drainage is an important biological condition that determines the performance of raising other crops. Small farm managements under the worse biological condition of paddy fields might be likely to adopt an environmental program with direct payments.
The study constructs its own analytical database of field conditions and rice farming on a local field basis, examines an appropriate grant level to stimulate program participation, and calculates a quantitative result of expected set-aside allocation. A joint application of new extensive farming and regular set-aside programs could effectively accomplish a national rice control plan without entailing wasteland.

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