Agricultural Output

According to the Ministry of Agriculture, Forestry and Fisheries (MAFF), Japan’s agricultural output in 2023 was approximately JPY9.5 trillion, most of which came from livestock, vegetables, paddy rice and fruit.

Agricultural Production Income

The final e-Stat report for 2023 put the agricultural production income at approximately JPY3.29 trillion.

Core Persons Mainly Engaged in Farming

MAFF’s “Agricultural Workforce Statistics (Core persons mainly engaged in farming)” for 2024 estimated this to be approximately 1,114,000 people.

Since 2015, there has been a consistent decline in the number of people engaged in farming in Japan. The sector is ageing significantly, with 71.7% of farmers now aged 65 or older, and an average age of 69 years and two months, making workforce succession a critical issue.

Major Crops

In its final report for FY 2023, MAFF estimates that the agricultural output for the year was as follows:

• livestock – approximately JPY3.7 trillion;
• vegetables – approximately JPY2.3 trillion;
• rice – approximately JPY1.5 trillion; and
• fruit – approximately JPY1 trillion.

Supply Chain Characteristics

MAFF makes the following observations about the agribusiness supply chain in Japan:

• Production is characterised by many small-scale, multi-crop farms, with production patterns differing by region (eg, livestock-focused regions, vegetable-producing regions).
• At the distribution stage, wholesale markets function as key infrastructure for perishable foods, with more than 50% of fruit and vegetables and more than 40% of fishery products being distributed through wholesale markets. Distribution channels now range from traditional agricultural co-operatives to wholesaler to retailer flows, to EC-based direct sales.
• High value-added activities through the “sixth-industrialisation” (integration of production, processing and distribution) continue to expand.

Export Profile

Total export value

There has been an upward trend in exports over the past decade and these exceeded JPY1.5 trillion for the first time in 2024, when MAFF estimates the total export value was approximately JPY1.5073 trillion.

Breakdown by item

Exports in 2024 were divided as follows:

• agricultural products – JPY981.8 billion;
• forestry products – JPY66.7 billion;
• seafood – JPY360.9 billion; and
• small-lot cargo – JPY97.9 billion.

Major export destinations

Japan’s major export destinations in order of value for 2024 were: the USA, Hong Kong, Taiwan, China and South Korea.

The United States was Japan’s leading export destination due to strong demand for products such as sake and beef, while exports of scallops and other seafood to China and Taiwan declined sharply due to import suspension measures.

Global Trade Role

According to MAFF, high value-added processed products – such as alcoholic beverages, including Japanese sake – accounted for approximately 38% of total export value in 2024. Items strongly associated with Japanese cuisine (green tea, soy sauce, miso, etc) also saw significant year-on-year growth, supported by rising global interest in Japanese food and health.

Under the Basic Plan for Food, Agriculture and Rural Areas (Cabinet Decision, 31 March 2020), the Japanese government has set a target of JPY5 trillion in exports by 2030. Priority export items – such as beef and tea – have been identified, and Japan continues to promote its food culture internationally to expand export markets.

Legal Instruments

Laws and regulations relating to agribusiness are diverse and include the important Cropland Act and the Act on the Promotion of Improvement of the Agricultural Management Foundation, plus a number of other laws and regulations.

The Cropland Act

The Cropland Act is the most important law governing agribusiness in Japan. Its purpose is to realise efficient agriculture and stabilise agricultural management by ensuring that only those persons or entities who use cropland efficiently can acquire rights to it, and that only those who perform farmwork themselves can acquire ownership of cropland.

In order to achieve this purpose, in principle, permission from the Agricultural Commission is required to acquire cropland or to obtain the rights to use cropland under the Cropland Act. In addition, in order for a corporation to obtain permission to acquire or use cropland, it must be a “Corporation Qualified to Own Cropland” or a “Corporation Qualified to Rent Cropland” that meets specific requirements. This places major restrictions on the acquisition of cropland by a corporate entity.

Requirements to qualify as a Corporation Qualified to Own Cropland:

• Sales requirements – The main business of the corporation must be agriculture.
• Voting rights requirements – Agricultural actors must own the majority of the total voting rights. “Agricultural actors” include a “Person who Regularly Engages in Agricultural Business”, which means those who engage in agriculture (see 4.1 Definition and Scope of Agribusiness) conducted by a Corporation Qualified to Own Cropland for 150 days or more per year. Agricultural actors are assumed to be individuals, with some exceptions (such as local governments and agricultural co-operatives).
• Director requirements – The majority of directors must be Persons who Regularly Engage in Agricultural Business.
• Farmwork requirements – A person who regularly engages in agricultural business or an employee who has authority and responsibility for the agriculture undertaken by the corporation must engage in its farmwork for a certain period (in principle, 60 days or more per year).

A Corporation Qualified to Rent Cropland must have:

• A written contract that contains conditions for cancellation of the lease where it is found that the cropland is not being used properly after acquisition of the rights.
• The prospect of engaging in agricultural management continuously and in a stable manner, with an appropriate sharing of agricultural roles with other farmers in the area.
• One or more directors who carry out the business of the corporation, or employees who have authority and responsibility for the business of cultivation carried out by the corporation and are Persons who Regularly Engage in Agricultural Business.

The Act on the Promotion of Improvement of the Agricultural Management Foundation

This Act implements comprehensive measures: (i) to promote the strengthening of bases of agricultural management, such as the concentration of cropland use in those who improve agricultural management and the rationalisation of business management; and (ii) to foster efficient and stable agricultural management. Specifically, the Act establishes the following systems, and it is desirable to consider whether each of these systems can be used when implementing agribusiness in Japan.

• Certified Farmer System: A system in which municipalities –
1. approve plans for farmers to improve their management based on their own ingenuity; and
2. give priority to supporting measures for those Certified Farmers.
• Certified Newly Employed Farmers System: A system in which municipalities –
1. approve plans for young people who are attempting to engage in agricultural management as a new endeavour, to establish a foundation for agricultural management; and
2. give priority to supporting measures for those Certified Farmers, such as lending them interest-free funds.
• Certified Management Development Corporation System: A system in which the Minister of Agriculture, Forestry and Fisheries: 
1. approves plans for Corporations Qualified to Own Cropland to develop agricultural management through collaborative measures with food businesses, through investments; and
2. relaxes voting requirements for certified Corporations Qualified to Own Cropland, in order to strengthen the management base of Corporations Qualified to Own Cropland.

Other applicable laws and regulations

There are a number of other applicable laws and regulations, including:

General agriculture

The Basic Act on Food, Agriculture and Rural Areas governs not only agriculture, but also the policy goals of the national government, local governments, farmers and consumers with regard to “the stable supply of food” and the ideal state of agriculture and rural areas including “the exercise of multi-faceted functions such as flood control and environmental conservation through agricultural activities” and “the sustainable development of agriculture”.

Crops

• The Soil Fertility Enhancement Act is a law designed to optimise the labelling of the quality of soil improvement materials (peat, charcoal, zeolite, etc). The purpose of this law is to promote agricultural productivity and stabilise agricultural management by the selective use of land improvement materials with appropriate quality labelling.
• The Agricultural Improvement Promotion Act attempts to disseminate practical knowledge to farmers and to help test research projects in the agricultural field. It is designed to promote agriculture and improve rural livelihoods by spreading knowledge about efficient farming methods and agricultural management. It also provides subsidies for research.

Agricultural fund

• The Act on Financing for Agricultural Modernisation seeks to facilitate long-term, low-interest loans with the goal of modernising agriculture and improving agricultural productivity.
• The Agricultural Disaster Compensation Act provides insurance systems in the event of damage to agricultural crops, livestock products, or certain agricultural facilities due to natural disasters. Based on this law, agricultural mutual aid associations have been established nationwide, and support for damaged farms has been provided through compensation.

Agricultural facilities

The Act on the Promotion of Agricultural Mechanisation seeks to improve agricultural productivity by promoting the mechanisation of agriculture, and establishes terms for the promotion of testing and research of high-performance agricultural machinery and an inspection system for agricultural machinery, as well as establishing the duty of the national and prefectural governments to promote agricultural mechanisation.

Financial Instruments

Economic instruments consist mainly of various subsidies and long-term, low-interest loans provided through the Japan Finance Corporation (JFC). Among them, Super L Loans, which are long-term, low-interest loans handled by the JFC for Certified Farmers under the Act on the Promotion of Improvement of the Agricultural Management Foundation, play a major role in financing in this field, with actual loans amounting to approximately JPY240.1 billion (number of borrowers: 5,208) in FY 2023. For more details, see 5.1 Agribusiness Credit Instruments.

Difficulty Using Structured Finance

Japanese cropland legislation makes it difficult to use common structured finance programmes and structures, such as real estate finance and project finance. Firstly, if a special purpose company (SPC) is to acquire ownership of cropland or superficies rights therein, it needs to satisfy the requirements as a Corporation Qualified to Own Cropland. However, in order to satisfy the voting requirements for a Corporation Qualified to Own Cropland, it is difficult to ensure the remoteness of bankruptcy because individuals who are agricultural actors, such as Persons who Regularly Engage in Agricultural Business, must hold a majority of the voting rights in the SPC and account for the majority of the directors of the SPC. In addition, if an SPC is to acquire ownership of cropland or superficies rights therein, in principle, individuals who are Persons who Regularly Engage in Agricultural Business, must constitute a majority of the directors or executive officers, which means the SPC will be controlled by those individuals. As a result, sponsor corporations and asset managers only are able to force Persons who Regularly Engage in Agricultural Business to fulfil their commitments through asset management agreements and shareholder agreements, and cannot directly or indirectly control a Corporation Qualified to Own Cropland, as would be normal practice for an asset-holding SPC in general structured finance situations.

Prohibition of Trusts

Since agricultural land trusts are prohibited by the Cropland Act, it is not possible to construct a financing structure that uses trusts. In other words, since holding cropland in trust necessarily involves a transfer of ownership to a trust bank or other trustee entity, permission from the Agricultural Commission is required, but the permission will not be granted for transfer to a trust under the Cropland Act.

Creating Security Interests

When security interests are set over cropland, there are constraints that differ from those that govern security interests involving real estate other than cropland, as described in more detail in 5.5 Collateral Structures and Guarantee Models.

Investment Facilitation Act Fund

The Act on Special Measures for Facilitating Investment in Agricultural, Forestry and Fisheries Corporations (the “Investment Facilitation Act”) is a law designed to promote the capital adequacy of businesses in the agricultural, forestry and fisheries industries and the food industry, and to promote the sound growth and development of those businesses, through special measures to facilitate investment.

The Investment Facilitation Act states that when a stock company or an investment limited partnership (LPS) obtains the approval of the Minister of MAFF, the stock company or LPS may invest in agricultural, forestry and fisheries corporations, acting as an “approved company” or an “approved partnership”. Approved companies and approved partnerships can receive special investments from the JFC. Therefore, in addition to allowing investors to diversify the risks of investment, obtaining the approval of the Minister of Agriculture, Forestry and Fisheries and receiving investments from approved companies and approved partnerships will increase the creditworthiness of agricultural, forestry and fisheries corporations. Exceptions may also be granted under laws governed by MAFF.

MAFF

The Ministry of Agriculture, Forestry and Fisheries is the administrative organisation responsible for the stable supply of food, the development of the farming, forestry and fisheries industries, and the promotion of rural areas. It is the main regulator of agribusiness, and has oversight over important laws such as the Cropland Act, the Act on the Promotion of Improvement of the Agricultural Management Foundation, and the Investment Facilitation Act.

Agricultural Commission

The Agricultural Commission is an administrative commission established by municipalities to carry out affairs related to cropland, such as granting permission for transfers of rights to cropland under the Cropland Act and submitting opinions in cases involving cropland conversion. Of the 1,741 municipalities nationwide, 1,693 municipalities have Agricultural Commissions, and a total of 1,696 Agricultural Commissions exist within Japan.

Ministry of the Environment

The Ministry of the Environment is the administrative agency responsible for environmental conservation and maintenance. It is the regulator responsible for the environmental laws described in 3.3 Environmental Requirements.

Civil Law

Transfers of rights that are not permitted under the Cropland Act are null and void under civil law; therefore, the Cropland Act is not only a regulatory law, but also substantive law.

Tax Law

There are various tax exemptions for cropland, as described in 7. Taxation and Incentives in Agribusiness, and the definition of cropland to which the exemptions apply is the same as the definition in the Cropland Act.

Environmental Laws and Regulations

Environmental laws and regulations are not imposed simply because an entity engages in agribusiness or because land is classified as cropland; in that sense, agribusiness regulations and environmental laws and regulations are not specifically connected to one another.

As described in 2.1 Agricultural Policies and Planning Instruments, in principle the Cropland Act requires that permission be obtained from the Agricultural Commission prior to acquiring agricultural land or having the right to use it. In order for a corporation to obtain this permission, it must be a Corporation Qualified to Own Cropland or a Corporation Qualified to Rent Cropland.

There are no regulations directly restricting the ownership of cropland by foreign nationals or foreign corporations. However, in reality, it is difficult for foreign nationals who reside overseas, or for foreign companies, to acquire cropland because (i) in principle only Corporations Qualified to Own Cropland that are Japanese corporations can acquire or own cropland; and (ii) individuals need to be regularly engaged in farmwork on cropland in order to own the cropland. Since 2017, there has been only one instance of cropland being acquired by inheritance by a foreign resident, and that case involved only 0.1 ha of cropland.

However, it is possible for foreign nationals residing overseas, or for foreign corporations, to become a shareholder or director of a Japanese corporation that acquires cropland; for foreign nationals who reside in Japan to acquire cropland; or for foreign nationals who reside in Japan to become a shareholder or director of a Japanese corporation that acquires cropland.

That said, in recent years there has been a trend towards stricter regulations governing these issues, from the perspective of economic security. Specifically, (i) since 2023, the nationality of the person who intends to acquire cropland must be stated in the application for permission when acquiring ownership of cropland; and (ii) starting in 2025, the period of stay and the date of expiration of the period of stay of the person who intends to acquire cropland must be stated in the application for permission. It would therefore be difficult for a person with only short-term residence or a short period of stay to acquire cropland.

The environmental laws and regulations applicable to agribusiness vary by industry. The primary ones are as follows.

Food Sanitation Act (Positive List System for Residual Agricultural Chemicals)

Under the Food Sanitation Act, a Positive List System has been adopted, which prohibits the sale of foods that contain in excess of a certain amount (as of 25 November 2025, the “uniform standard” is 0.01 parts per million or ppm) of specified substances that are ingredients in pesticides, feed additives, and animal health products, for which there are no standards for food ingredients (“residue standards”). Substances designated by the Ministry of Health, Labour and Welfare, such as zinc, iron and iodine, are excluded from the target substances appearing on the Positive List. Two types of cases are subject to the Positive List System: those in which pesticides or other substances for which no established residue standards exist are left in foods, and those in which pesticides or other substances for which established residue standards exist are left in foods for which there are no established residue standards. It is necessary to comply with the residue standards for the specified product.

Agricultural Chemicals Regulation Act

In accordance with the Agricultural Chemicals Regulation Act, agribusinesses must comply with the standards of time and method of use of agricultural chemicals established by the Minister of Agriculture, Forestry and Fisheries and the Minister of the Environment.

Water Pollution Prevention Act

Pig, cattle and horse livestock farming facilities operating at levels above a certain scale qualify as “Specified Facilities” subject to the Water Pollution Prevention Act. The operator of a Specified Facility may only discharge wastewater if this complies with relevant effluent standards, and must also comply with the Standards for Controlling Total Emissions, where these apply.

Act on Waste Management and Public Cleaning

Typical industrial waste and examples of that waste that may arise in agribusiness include:

• sludge;
• waste oil (engine oil for agricultural machinery, remaining fuel, etc);
• glass bottles (empty bottles used for agricultural chemicals, etc);
• waste acid, waste alkali (waste agricultural chemicals);
• waste plastic (vinyl for houses, etc);
• solid animal waste (waste generated by the slaughtering and dismemberment of livestock at slaughterhouses and meat processing plants); and
• animal carcasses and manure (limited to livestock farming).

When personally transporting or disposing of industrial waste, a person or entity must comply with the statutory industrial waste disposal standards and store the waste in accordance with the industrial waste storage standards until the waste is transported. However, when the storage, transportation and disposal of industrial waste is entrusted to a third party, it must be entrusted to a contractor that has a licence under the Act on Waste Management and Public Cleaning to handle the relevant industrial waste. When the waste is entrusted to this third party, the contractor must execute a written entrustment contract that states relevant statutory matters.

Act on Promotion of Global Warming Countermeasures

Any person whose activities are described in the list below is regarded as a “Specified Emitter” and must report the amount of greenhouse gas emissions, etc, calculated to have been emitted by their business every fiscal year to the minister with jurisdiction over the business of the Specified Emitter. These activities are:

• “use of fertilisers on cultivated land” that emits more than 3,000 tons of carbon dioxide per year (from 1 April to 31 March of the following year);
• “feeding livestock”,“managing livestock excrement”,“rice cultivation”, “incineration of plant-based materials” and “production of compost” which releases more than 107 (3,000/28) tons of methane per year; and
• “management of livestock excrement”, “use of fertilisers in arable land or forest land”, “incineration of plant-based materials” and “production of compost” which emits over 11.3 (3,000/265) tons of nitrogen dioxide per year.

The Cropland Act identifies the following as agricultural and related businesses:

• storage, transportation, or sale of agricultural and livestock products;
• electricity obtained by converting agricultural and livestock products or forestry products, or by using agricultural and livestock products or forestry products as a heat source;
• manufacturing of materials required for agricultural production;
• entrusted agricultural work;
• establishment and management of agri-tourism facilities; and
• agricultural photovoltaic power-generation businesses.

Regulations Governing Agricultural Legislation

In Japan, MAFF, the Forestry Agency, and the Fisheries Agency have jurisdiction over various laws and ordinances governing their respective primary industries as a whole, and there are few problems with conflicts or overlapping between agricultural laws and regulations and other regulating authorities or legal fields. However, Japan’s agricultural regulations do not cover various issues in a uniform manner under one basic law. Rather, as stated in 2.1 Agricultural Policies and Planning Instruments, Japan has developed laws to govern each subject and regulatory purpose, and has also enacted a number of special laws that reflect the interests and intentions of the administration from time to time. It is therefore necessary to keep in mind that the alignment and replacement of definitions in multiple agricultural laws and regulations in Japan may not always be consistent, and that the priority and requirements for applicability of those laws and regulations are not always clear.

In primary industry sectors, there is a tendency for practical operations to be implemented via administrative guidance provided by regulatory agencies rather than by the practice of private law, and when compared with laws and regulations in other sectors, there seems to have been less progress towards refining agricultural laws and clarifying the applicability of the various provisions through public comment processes.

Lack of Consistency With Laws and Regulations Determined by Other Regulatory Authorities

Corporate legislation, financial legislation and other laws are revised frequently, in light of the social situation and the current needs, but revision of agricultural regulations tends to be less frequent. For example, while the Companies Act permits methods of corporate reorganisation such as mergers, company splits, and share exchanges, agricultural regulations often do not include provisions for corporate splits and share exchanges.

In the case of an M&A involving an enterprise that has obtained a licence based on agricultural regulations, it would be desirable for the licence to be transferred to a surviving and resulting entity after reorganisation. However, in principle, current agricultural regulations make it necessary to maintain the legal personality of the enterprise that obtained the licence, or the licence will be lost, which narrows the options for parties involved in transfers and reorganisations.

JFC and JA Bank Loans

Traditionally, the majority of funding for agribusiness has been provided through loans from Japan Agricultural Cooperatives (JA) and the JFC and through diverse subsidies. However, new means of financing, including equity financing, are being sought.

In 2023, JA Bank provided new loans to agricultural corporations totalling approximately JPY401.7 billion, mainly for short-term working capital and medium-term equipment investments, and the JFC provided new loans of approximately JPY389.1 billion, mainly for long-term and large-scale capital expenditures, to complement the loans provided by JA Bank. Loans by general financial institutions amounted to only about JPY74.9 billion. Most of the loans to agribusinesses are therefore provided by JA Bank and the JFC, with banks and other general financial institutions playing only a limited role. In particular, Super L Loans, which are long-term, low-interest loans made by the JFC to Certified Farmers under the Agricultural Management Framework Reinforcement Act, have played a significant role in financing the agribusiness sector, with loan disbursements reaching JPY240.1 billion in 2023. See 2.1 Agricultural Policies and Planning Instruments for information about the Certified Farmer system. The current status of loan transactions in the agribusiness sector is dominated by corporate financing, based on the assets and creditworthiness of the entire entity. Structured financing, which is funded by focusing on the asset values or cash flows of specific assets or projects, is not an active source of agribusiness funding.

Equity-Based Finance

In agribusiness it is often difficult to raise funds through debt, especially in the early stages, because business scale and management organisation are often insufficient. In these cases, business management is carried out using equity funds. Equity-based financing may include the issuance of shares in the case of stock companies, the issuance of partner interests in the case of membership companies, and anonymous partnership investments under the Commercial Code. When a Corporation Qualified to Own Cropland raises funds through the issuance of stock or membership, it is necessary to comply with the relevant requirements to maintain the entity’s status as a Corporation Qualified to Own Cropland, as described in 2.1 Agricultural Policies and Planning Instruments. When a Corporation Qualified to Own Cropland raises funds by issuing shares, if it is necessary for agricultural persons to hold a majority of the voting rights on the basis of the amount invested, it is necessary to provide an excessive amount of investment to shareholders who are individual farmers. On the other hand, corporate shareholders will be restricted to investing only to the extent that the shareholders who are individual farmers can invest. In order to avoid this situation, the issuance of non-voting preferred stock enables a large amount of equity investment while complying with the voting requirements. The use of the Investment Facilitation Act Fund described in2.2 Agribusiness Finance for equity investment is also expected to be beneficial.

Various subsidies are provided by national and local governments, and it is necessary to examine the requirements for each of these subsidy systems as and when appropriate.

Agricultural, forestry and fisheries operators, etc, who engage in efforts to export agricultural, forestry and fishery products or food produced in Japan may prepare a project plan to rationalise, upgrade or otherwise improve the production, processing or distribution of agricultural, forestry and fishery products or food products produced in Japan, either independently or jointly, in order to expand the export of these products or foods (an “Export Business Plan”). They may submit the Export Business Plan to the Minister of Agriculture, Forestry and Fisheries for authorisation, pursuant to the Act on Facilitating the Export of Agricultural, Forestry, and Fishery Products and Food (the “Export Facilitation Act”). On 1 October 2022, the JFC established the Fund to Strengthen the Foundations for the Export of Agriculture, Forestry and Fisheries Products and Food for those engaged in exporting agricultural, forestry and fisheries products and foods produced in Japan in accordance with an approved Export Business Plan (“Approved Export Business Operators”). The lending limit is equivalent to 80% of the amount borne by the borrower, and co-financing with private financial institutions is assumed.

The funds are to be implemented in accordance with the approved Export Business Plan under the Export Facilitation Act, and to be used for:

(i) manufacturing facilities, distribution facilities, and equipment upgrades necessary for the export business of agriculture, forestry, fishery products and foods; or

(ii) long-term working capital; or

(iii) investments in, or subleases to, overseas subsidiaries, etc (limited to the use of items (i) or (ii) for sublease).

The funds can thus be used to meet diverse needs. The loans have a maturity of 25 years or less, so the funds can accommodate large-scale investments.

In order to promote exports, the JFC has a system by which letters of credit are issued to Approved Export Business Operators to guarantee the obligations of overseas affiliated financial institutions whose overseas subsidiaries have overseas bases, in order to facilitate the smooth procurement of loans in local currencies. When an Approved Export Business Operator borrows funds from private institutions for export businesses (for example, for market development and test exports), it is also possible to obtain debt guarantees from the Organization for Improvement of Food-Marketing Structures, which facilitates the procurement of funds.

As described in 2.1 Agricultural Policies and Planning Instruments, a Corporation Qualified to Own Cropland is required to be a privately-held company. Moreover, debt financing in agribusiness is carried out primarily through loans, and corporate bonds are not used much, meaning that capital market activities in this sector are limited.

As described in 2.2 Agribusiness Finance, agricultural land trusts are prohibited under the Agricultural Land Law, and agricultural land may not be converted into beneficiary rights. The legality of converting the shares of a Corporation Qualified to Own Cropland into beneficial rights is controversial and indeed doubtful, in light of the intent and purpose of the Agricultural Land Law, which expressly prohibits trusts of agricultural land.

Agribusiness funds may include funds that use anonymous partnership investments (“TK funds”) and funds that use LPS structures based on the Law on Investment Limited Partnerships (“LPS funds”), as described below. However, at this time, these types of funds have been formed in only a limited number of cases.

TK Funds

Since anonymous partnership investment does not involve the acquisition of shares in a Corporation Qualified to Own Cropland, when structuring a TK fund, investments can be made without considering the legal requirements to be a Corporation Qualified to Own Cropland. On the other hand, the extent to which being unable to be proactively involved in the operation of a business under silent partnership agreements will have a major practical impact on investments in agribusiness is unknown, and may be an issue.

LPS Funds

When an LPS fund acquires shares in a Corporation Qualified to Own Cropland, it needs to consider the requirements of the Cropland Law. However, compared with TK funds, LPS funds have the advantage of being able to use the Investment Facilitation Act fund described in 2.2 Agribusiness Finance.

Mortgages are often placed on real estate, including on agricultural land that engages in agribusiness. If the real estate secured is agricultural land, mortgages (teitouken) and assignment security interests (joutotanpoken) may be established. The establishment of the mortgage itself does not require permission under Article 3 as mentioned in 2.1 Agricultural Policies and Planning Instruments. On the other hand, if the mortgage is exercised and the ownership of the agricultural land is transferred to the mortgagee or a third party, Article 3 permission is required, and if a corporation intends to acquire agricultural land, it is also necessary to satisfy the requirements to qualify as a Corporation Qualified to Own Cropland. If an assignment security interest is established on agricultural land, it is construed that the ownership is transferred at the time of establishment of the assignment security interest; therefore, permission under Article 3 is also required at the time of establishment of the mortgage, and if the assignee is a company, it needs to be a Corporation Qualified to Own Cropland. In addition, pledges (shichiken) are created when security is created for the leasehold on agricultural land, but the need for the approval of the Agricultural Committee at the time of establishment is not clear in terms of laws, regulations and practices.

In addition to agricultural land, security interests in agricultural equipment and machinery, security interests in aggregate chattel mortgages on agricultural products, and security interests in aggregate receivables for agricultural products are also used.

Since the Agricultural Land Law places constraints on the establishment of corporations to engage in agribusiness and the acquisition of agricultural land, it is important to consult a legal adviser to ensure an accurate understanding and examination of the applicable constraints. In addition, because it is possible to use a variety of systems based on various laws when investing in and financing agribusiness, it is expected that legal advisers will be involved in examining the financing options and decisions. The involvement of legal advisers also makes it possible to construct an appropriate amount of risk and structure for the preparation of contracts, and the involvement of legal advisers may be considered important for large-scale financing.

Currently, there is little demand for the issuance of legal opinions in agribusiness in Japan. Nevertheless, in the agribusiness field, there have been recent attempts to implement structured financing, and there may be cases in which the issuance of legal opinions is required to ensure the legality and effectiveness of contracts with regard to the Agricultural Land Law and other relevant laws and regulations.

Article 3 permission is required for ownership and leases of agricultural land, and it is necessary for a corporation to satisfy the requirements for a Corporation Qualified to Own Agricultural Land in order for it to own agricultural land. Therefore, it is necessary to confirm whether entities engaged in agribusiness have obtained Article 3 permits and whether they satisfy the relevant requirements for agricultural land ownership. In principle, the majority of the voting rights in corporations eligible to own agricultural land must be held by agricultural workers. However, this should be confirmed, because the inheritances of agricultural workers may affect fulfilment of the requirements for agricultural land ownership and the continuity of agribusiness.

Since the rights in and scope of agricultural land for agribusiness are often unclear, the history of transfers of ownership of agricultural land and the status of the determination of boundaries need to be investigated.

The presence or absence of stable off-takers with a certain potential sales volume and the content of relevant contracts should also be investigated, from the perspectives of management stability and bankability.

It is also necessary to confirm that intellectual property is protected. In the context of agribusiness, if producing agricultural products linked to local natural conditions and historical and traditional conditions, it is necessary to confirm whether the geographical indications (GI) for those products are protected under GI laws. If new plant varieties are created, it is necessary to confirm whether the variety is registered in compliance with the seed and seedling law. In addition, if the name of agricultural products is branded, trade mark registration must be confirmed, and if agricultural equipment and methods of cultivating and raising agricultural products are developed, patents must be confirmed.

When documenting a contract, fulfilment of the requirements for agricultural land ownership is considered a warranty item; the acquisition of permission and completion of registration, including Article 3 permission, is generally a prerequisite to closing; and covenants requiring lender approval are included for modification and termination of contracts that are important to agribusiness.

Farmland legislation and related regulations are complex and varied. In addition, in the conventional agricultural sector, financing has often been provided through the personal credit and relationships of the entity carrying out the business. In light of this, the lender’s position makes it difficult to analyse risks or to bear the risk of providing large-scale funding. Legal considerations governing deal structure and individual transactions related to agribusiness will enable the appropriate identification of risks, the reduction of risks through contractual arrangements, and the fair distribution of risks between lenders and borrowers. Agri-Legal can help identify and distribute risks in agribusiness, as well as contribute to raising significant funding and increasing agribusiness activities.

Under Japanese law, various taxes are levied on agricultural land and property interests therein, including ownership, use and transfer, in the course of agricultural operations. The following section provides an overview of the key tax frameworks applicable to these aspects of agricultural land management.

Actual tax treatment may vary depending on specific circumstances and any applicable special tax measures. Due to the complexity of Japan’s tax system, it is strongly recommended that businesses seek advice from qualified tax professionals when planning or engaging in agricultural operations.

Taxes on Ownership and Use of Agricultural Land

Owners of agricultural land are subject to fixed asset tax and, within designated city planning areas, city planning tax.

Individuals or corporations leasing farmland or selling agricultural products are subject to income tax, corporate income tax, and local inhabitant tax on rental income and capital gains.

Taxes on Transfer and Acquisition of Agricultural Land Rights

Individuals or corporations selling or exchanging farmland rights are subject to income tax, corporate income tax, and local inhabitant tax on capital gains and exchange gains. Acquisition of agricultural land rights triggers real estate acquisition tax, inheritance tax, or gift tax, depending on the legal form of acquisition. In addition, registration and licence tax is imposed on the registration of changes in agricultural land rights.

Special Tax Measures for Agricultural Land

In order to encourage the continuation of agricultural management, Japan provides special tax measures, including:

• Reduced appraised value – agricultural land is assessed at a lower value than residential land for fixed asset tax purposes.
• Preferential treatment for agricultural successors – when an agricultural successor inherits or receives agricultural land by gift, exemptions or tax deferral measures apply to inheritance tax and gift tax.
• Preferential rates – registration and licence tax and real estate acquisition tax are subject to reduced rates compared to taxes levied on general transactions.

For further details and other special measures, refer to 7.2 Tax Benefits and Incentives.

Exemptions for Agricultural Operations

Similar to other special measures designed to support agricultural management, the following exemptions apply under Japanese tax law:

• Individual business tax – exemption for agriculture conducted by sole proprietors. Livestock industries (excluding those incidental to agriculture) are also exempt if they are carried out primarily through an individual’s own efforts.
• Corporate business tax – exemption for qualified agricultural corporations.
• Business office tax – facilities that are directly used for agricultural production by farmers and fall under the categories listed below are excluded from the tax base for business office taxation:
1. crop rearing and management facilities;
2. sericulture rooms;
3. livestock barns;
4. livestock raising and management facilities;
5. farmhouses;
6. agricultural product drying facilities;
7. agricultural production material storage facilities;
8. fertiliser barns; and
9. silos and mushroom cultivation facilities.

The following are among the main tax incentives for agriculture.

Special Tax Treatment for Lump-Sum Gifts of Agricultural Land

Where a farmer transfers two thirds or more of farmland used for cultivation, two thirds or more of grazing land, and/or quasi-agricultural land (land certified by the municipal mayor as appropriate to be used as farmland or pasture within ten years) to a qualified successor (a presumptive heir meeting certain conditions) as a lump-sum gift, the following apply:

• Gift tax deferral and exemption – gift tax is deferred and ultimately there is an exemption from gift tax upon the death of either the donor or the successor.
• Inheritance tax treatment – if there is an exemption from gift tax due to the donor’s death, the transferred land is deemed inherited and subject to inheritance tax. In this case, if agricultural use is continued, the successor can apply for a deferral of payment of inheritance taxes.

Special Tax Treatment on Sale of Agricultural Land

Special deductions apply when farmland is transferred under certain conditions:

• Transfers for agricultural use – deductions of JPY8 million, JPY15 million, or JPY20 million are available, depending on the circumstances, for transfers of land for agricultural use under specified requirements.
• Public works projects – when land or buildings are sold for projects involving expropriation rights under the Land Expropriation Act or similar laws, a special deduction of JPY50 million is available. This system also applies to land other than farmland.

Special Tax Treatment on Acquisition of Agricultural land

To promote farmland concentration, individuals meeting specified conditions who acquire farmland under a certified consolidation plan pursuant to the Act on Promotion of Intermediate Management of Agricultural Land benefit from:

• a reduction in registration and licence tax from 2% to 1% until 31 March 2026 (this excludes land for agricultural facilities); and
• a reduction in real estate acquisition tax by one third of the taxable base until 31 March 2027.

Special Tax Treatment on Holding Agricultural Land

For fixed asset tax purposes, farmland is classified and assessed as follows:

• General farmland – valuation is based on actual sale prices for agricultural use. Burden adjustment measures are applied separately to reduce the effective tax rate.
• Farmland designated as productive green areas in urbanisation promotion areas – valuation and tax rate adjustments are applied in the same manner as for general farmland.
• Farmland in urbanisation promotion areas – valuation is calculated on a par with residential land, using the actual sale price of neighbouring residential land as a basis, minus an amount equivalent to development costs for converting farmland into residential land. Burden adjustment measures are also applied separately to reduce the effective tax rate.
• Specified urbanised farmland (located in designated cities within urbanisation promotion areas) – valuation is equivalent to residential land, and taxation is also imposed at levels equivalent to residential land.

Preferential Treatment for Fuel Oil

Diesel fuel for agricultural machinery and heavy oil for agricultural use are exempt from diesel fuel delivery tax, petroleum and coal tax, and global warming countermeasure tax, enabling farmers to purchase fuel at post-exemption prices.

Preferential Treatment for Capital Investment

Under the Smart Agricultural Technology Utilization Promotion Act, investments in smart agricultural machinery or productivity-enhancing equipment (including facilities reducing the use of chemical fertilisers and agrochemicals) may qualify for special depreciation. Additional depreciation allowances, beyond ordinary depreciation, reduce the tax burden at the time of introduction.

There are no taxes that impose an additional burden exclusively on agriculture.

As for preferential measures under the Act on Facilitating Investment, refer to 2.2 Agribusiness Finance.

In the agribusiness sector, a wide range of contracts exist, including farmland lease agreements, agricultural product sales agreements, and transportation contracts. As in other commercial fields, when a breach of contract occurs, the aggrieved party may seek performance of the contractual obligations or claim damages.

Disputes in the agribusiness sector may be resolved through civil litigation, civil mediation, and other ADR procedures, and – where international transactions are involved – international arbitration. In practice, however, most disputes are resolved through civil mediation or civil litigation.

In addition, there are sector-specific mechanisms designed to resolve disputes related to the use of farmland, including:

• intermediation for settlements by the Agricultural Commission (under the Cropland Act); and
• agricultural mediation (under the Civil Mediation Act).

Traditionally, agricultural financing was provided primarily by the JA and the JFC. However, with the increase in new entrants from other industries, the diversification of agricultural business entities, and the expansion of agricultural operations into midstream and downstream activities, private financial institutions have become increasingly active in agricultural lending.

Certain legal constraints exist on private-sector loans; for example, enforcement of mortgages on farmland requires approval under the Cropland Act. For this reason, agricultural loans were typically small scale and unsecured. In recent years, however, new financing methods such as asset-based lending (ABL) using movable property as collateral have emerged, enabling the provision of substantial working capital loans.

In Japanese agricultural transactions, it is common for contracts to be carried out without a written agreement, or based on written agreements that lack sufficient specificity. As a result, disputes frequently arise due to uncertainties unique to agricultural products – such as reduced yields due to weather conditions, quality issues, or delivery delays.

Where these disputes cannot be resolved through negotiations between the parties, they are generally handled through civil mediation or civil litigation, as described in 8.2 Litigation and Arbitration Trends in Agribusiness.

Japan significantly amended its Basic Act on Food, Agriculture and Rural Areas (the “Revised Basic Act”) in June 2024. The former Basic Act, enacted in 1999, had four pillars:

• securing a stable supply of food;
• demonstrating the multifunctional roles of agriculture;
• the sustainable development of agriculture; and
• the revitalisation of rural areas.

Approximately 25 years after its enactment, the environment surrounding agriculture had changed to a degree unforeseen at the time of the first Basic Act – as a result of heightened food security risks due to global food market volatility, increasingly serious environmental issues, and the expansion of overseas markets. The Revised Basic Act reflects these developments, and expressly incorporates “ensuring food security” as a core principle, in addition to the traditional focus on ensuring a stable supply of food. The Revised Basic Act also introduces the principle of “establishing an environmentally harmonious food system”, signalling a strong policy shift towards sustainability and environmental stewardship.

In April 2025, the government approved the Basic Plan on Food, Agriculture and Rural Areas (the “Basic Plan”), which sets out concrete policy measures under the Revised Basic Act. The Basic Plan is structured around seven pillars:

• a stable food supply;
• promotion of exports and strengthening Japan’s ability to generate income from overseas markets;
• food security and a sustainable food system for each citizen;
• an environmentally harmonised food system and enhancement of multifunctional roles;
• revitalisation of rural areas;
• public understanding and engagement; and
• responses to natural disasters.

The Basic Plan also establishes key performance indicators (KPIs) for FY 2030, including food self-sufficiency, total farmland area, and the number of core farmers aged 49 or younger.

Various initiatives are under way to address challenges underlying the Revised Basic Act – such as labour shortages due to an ageing population, the effects of climate change, and global fluctuations in food supply and demand. From the perspective of investor sentiments, investment in smart agriculture and agri-tech is increasing, and renewable-energy-related sectors, such as solar sharing, are also attracting substantial interest.

Key areas of market adaptation include:

• Deployment of smart agriculture and agri-tech – this includes labour-saving and efficiency-enhancing innovations such as drone-based fertilisation and pesticide spraying, autonomous agricultural machinery, and data-driven crop management using sensor technology.
• Export promotion – the development of premium products for overseas markets and strengthened intellectual property protection for high-value agricultural goods.
• Environmental initiatives – the expansion of decarbonised agriculture (eg, low-methane rice cultivation) and agrivoltaics, as well as adaptation to climate change, such as by transitioning to heat-tolerant crop varieties.

The MIDORI Strategy

In May 2021, MAFF formulated the MIDORI Strategy for sustainable food systems, a comprehensive policy package designed to achieve both enhanced productivity and sustainability in Japan’s food and agriculture sector through innovation.

Although the strategy does not impose mandatory obligations on private businesses, it lays out actionable initiatives across all stages of the food supply chain, and sets 14 KPIs for 2050.

For example, Japan aims to increase organic farming to 25% of all cultivated land. This is viewed as an ambitious target given that, as of 2018, the share of organic farmland was only 0.5% (23.7 thousand hectares).

Green Food System Act

As a legislative measure to implement the MIDORI Strategy, the Act on Promotion of Environmental Burden Reduction Business Activities for Establishing Environmentally Harmonized Food Systems (the “Green Food System Act”) came into force in July 2022.

Under the Green Food System Act, farmers and other operators may receive prefectural governor certification for business activities that contribute to organic farming or the reduction of greenhouse gas emissions. Certified operators become eligible for benefits such as special depreciation for equipment investments (tax incentives) and access to financing at preferential interest rates (liquidity support). Use of this structure in the agribusiness sector is increasing.