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Initiatives for Agriculture (CSR Highlight 2012)

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Helping Make Japan's Agriculture, Forestry, and Fisheries New Growth Industries

Revitalization through Collaboration with Secondary and tertiary Sector Enterprises

As the need grows for high–quality food supplies due to world population growth and rising incomes in emerging countries, it is predicted that demand for food will increase globally in the future. In light of these trends, as well as the low level of food self–sufficiency in Japan, it is clear that agriculture, forestry, and fisheries (the three industries) form promising future growth industries, as the base of the food supply chain.

However, in Japan, these sectors are beset by problems. The scale of operations is small, practitioners are often part–time, with second jobs, and the rising old–age dependency ratio and lack of successors are becoming serious issues. As things stand, Japanese farming, forestry, and fishing are not sufficiently competitive as independent industries, despite Japan’s bountiful climate and other natural assets, its highly sophisticated technologies, and its wealth of machinery and material inputs.

In recent years, various measures have been undertaken to regenerate and reinvigorate these three industries under the "Sixth Industry" initiative. This is a drive to promote stable growth and development of the three sectors and revival of the regions, by increasing added value in agriculture, forestry, and fisheries through the integration of their production, processing, and logistical operations under a model in which their practitioners (primary sector workers) not only supply the raw materials, but also take a core, comprehensive role in secondary sector (manufacturing and processing) and tertiary sector (wholesale, retail, and tourism) activities.

A range of initiatives has already been launched, including capital and operational alliances linking agriculture, forestry, and fisheries professionals with food processors and local logistics companies, as well as the establishment of businesses for direct marketing and home delivery of local produce in both its original and processed states, and of directly operated restaurants. Measures are also under way to encourage the entry of secondary and tertiary sector companies into these primary industries, and to promote their alliance and collaboration with enterprises in these three industries, to spur the development of local business and the creation of new industries.

Green Light for JPY 10 Billion Fund to Help Create New Growth Industry

In a measure to promote the "Sixth Industry" initiative, the government in December 2010 promulgated the Law Concerning Creation of New Businesses through Local Resource Use by the Agriculture, Forestry, and Fisheries Sectors, etc., and the Promotion of Local Use of Products of Agriculture, Forestry, and Fisheries ("Sixth Industry" and local production for local consumption legislation), and began to provide support through such measures as grants and deregulation. Furthermore, in August 2011, the Law for Establishment of the Agriculture, Forestry, and Fisheries Fund Corporation for Innovation, Value–chain and Expansion Japan (A–FIVE–J Foundation) was enacted. It was decided to establish a JPY 10 billion "Fund for the Conversion of Agriculture, Forestry, and Fisheries into Growth Industries," with the aim of supporting businesses engaged in the "Sixth Industry" initiative for these three sectors.

Investors in this fund include the A–FIVE–J Foundation, financial institutions, and local government bodies. The fund comprises multiple sub–funds created for specific regions and themes, and for each sub–fund, project proposals under the "Sixth Industry" initiative are solicited and identified, based on specific regional characteristics and themes. After a review of the project plans by the A–FIVE–J Foundation, subordinated loan capital is provided as necessary to businesses that have received approval from the Ministry of Agriculture, Forestry and Fisheries, with investment and management support lasting up to 15 years.

How the "Fund for the Conversion of Agriculture, Forestry, and Fisheries into Growth Industries" Works
Image:How the "Fund for the Conversion of Agriculture, Forestry, and Fisheries into Growth Industries" Works

Using investment and subordinated loan capital from the fund, businesses can launch new ventures without needing large amounts of equity capital, and can also more easily access financing from financial institutions due to the bolstering of their financial position. Another advantage is that workers in the three sectors can become involved in pricing, by leveraging partner companies’ know–how and marketing channel networks.

Moreover, collaboration with workers in the three sectors gives partners from the secondary and tertiary sectors opportunities to improve food product quality and so better differentiate their own food products and menus, and to develop export businesses by harnessing the quality and brand strength of Japanese agriculture, forestry, and fisheries products.

Furthermore, the regional financial institutions and local government bodies participating in the fund benefit from increased business opportunities, on the back of the growth of local enterprises in the three industries, and expanded tax revenues from local economic development and increased employment creation.

Support for the "Sixth Industry" Initiative Based on a Wealth of Investment Experience and a Nationwide Network

At Mizuho, we see the revitalization and industrialized development of agriculture, forestry, and fisheries as not only improving Japan's food self–sufficiency ratio, but also being key to resolving major issues, such as expansion of internal domestic demand, creation of employment, recovery in the earthquake–hit Tohoku (northeastern) region, and regional economic revival across Japan. Based on this belief, in February 2013, we announced the launch of a preparatory framework ahead of the creation of the "Fund for the Conversion of Agriculture, Forestry, and Fisheries into Growth Industries," and in April 2013 invested JPY 250 million in the "'Sixth Industry' regional fund for Fukushima Prefecture." In addition to providing risk money through alliances with regional financial institutions and local government bodies, Mizuho has partnered with Mizuho Capital Co., Ltd., which has a wealth of experience in funding and management support for venture enterprises, to support the "Sixth Industry" initiative in agriculture, forestry, and fisheries, through involvement in the establishment of funds in all parts of the country.

While regional financial institutions and government bodies with strong local roots take the lead in the project, regarding the identification of targets for sub–funds and business–matching services, Mizuho, with its nationwide and global networks, will focus on bringing to bear its industrial expertise and broad customer base to identify potential producer–partner pairings.

As part of preparatory measures, a "Sixth Industry Initiative Support Desk" is being set up at MHBK. Mizuho is committed to contributing to the conversion of agriculture, forestry, and fisheries in Japan into growth industries and the revitalization of regional economies, by providing broad–based support, including in the formation and operation of the funds and in fund procurement and business–matching.

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