Chapter 5. Agricultural innovation systems in Japan

National innovation policy framework

The Council for Science, Technology and Innovation (CSTI) in the Cabinet Office leads science, technology and innovation policies in Japan. It overlooks and co-ordinates all of the nation’s science, technologies and innovation (STI) policies, with specific measures formulated by the relevant national ministries and agencies. CSTI is chaired by the Prime Minister and composed of the Chief Cabinet Secretary, the Minister of State for Science and Technology Policy, and other relevant ministers including from the Ministry of Internal Affairs and Communications (MIC), the Ministry of Education, Culture, Sports, Science and Technology (MEXT), and the Ministry of Economy, Trade and Industry (METI). The president of the Science Council of Japan and other experts from academia and industry also constitute members of CSTI. One of CSTI’s principal duties is to formulate the Science and Technology (S&T) Basic Plan every five years based on the Basic Act on Science and Technology.

Since 2013, CSTI has prepared a Comprehensive Strategy on Science, Technology and Innovation every year, which specifies and prioritises measures based on the direction of the S&T Basic Plan but tailored to annual changes in conditions. Based on this strategy, the government allocates its overall science and technology budget. In 2018 – the mid-year of the fifth S&T Basic Plan – CSTI formulated the Integrated Innovation Strategy to evaluate the progress of various measures contemplated in the Comprehensive Strategy, to examine the wide range of STI-related policies and socio-economic systems, and to ensure implementation of the policies. In this Integrated Innovation Strategy, CSTI focuses on agriculture as one of the major strategic fields of innovation.

The government’s overall budget for STI policies was JPY 3.84 trillion (USD 34.2 billion) in FY2018, of which MEXT accounts for more than half. MEXT supports R&D in life sciences, materials and nanotechnology, disaster prevention, space, oceans, and nuclear energy through pubic research institutions such as RIKEN (Japan’s largest research institution), and the Japan Aerospace Exploration Agency. MEXT also supports basic research by funding agencies such as the Japan Society for the Promotion of Science (JSPS) and the Japan Science & Technology Agency (JST). JSPS and JST also provide competitive research funds in agricultural science.

The Japanese government promotes industry-academia-government collaboration in R&D under CSTI’s leadership. This includes, for example, implementation of the Cross-Ministerial Strategic Innovation Promotion Program (SIP) started in 2014 and the Public/Private R&D Investment Strategic Program created in 2018. CSTI allocates the budget beyond ministerial boundaries and policy areas, and oversees the entire R&D flow from basic research to application and commercialisation of STI. By taking a top-down approach, CSTI prioritises R&D agendas – including agriculture – that are expected to solve social issues, strengthen industrial competitiveness, and revitalise the economy.1

The country’s regional innovation policies have long been characterised by cluster initiatives. Specifically, various programmes support industrial and knowledge clusters depending on the sectors and supporting ministries. MEXT promotes large-scale research collaboration among universities and companies for innovation. In addition, METI has extensive programmes to revitalise SMEs through innovation. Although initiatives by different ministries are gradually being integrated and co-ordinated, they remain rather fragmented and complex (OECD, 2016[6]).The new Program for an Open Innovation Platform with Enterprises, Research Institutes and Academia encourages industry-university partnerships, involving SMEs at the pre-competitive stage of development, and the SME Training Institute offers seminars for owners and managers of SMEs.

The role of AIS actors in Japan

Governance of AIS in Japan

Monitoring and evaluation

Agricultural R&D projects with public funding or in government research organisations are evaluated at four stages in accordance with the General Guidelines for R&D Evaluation: 1) preliminary evaluation at the planning and proposal stage; 2) interim evaluation at the middle stage for improvement or revision; 3) final evaluation of the extent to which the project was achieved, the significance of the outcome obtained, the outcome’s practical application and commercialisation, and the efforts required for such purposes; and 4) follow-up evaluation after completion of the project to see what has been achieved. An external evaluation committee composed of farmers, members of the private sector, and other relevant actors is in charge of the evaluation.3

Follow-up investigations on how farmers adopted new agricultural technologies, their impact, and feedback to developers are important to the process of innovation. Since 2007, AFFRC conducts an annual selection of new technologies and crop varieties among the research outcomes achieved, as well as follow-up surveys after two or five years of development through prefectural extension services.

In addition to the evaluation of R&D projects, national research and development agencies such as NARO are evaluated as an institution by the ministers in charge (Figure 5.2). NARO introduced a new evaluation system to reinforce the Plan-Do-Check-Act cycle since the latest medium- to long-term objective period (FY2016-FY2020). NARO set up the Office of Evaluation to handle performance evaluations and organise the evaluation committee by research pillar. More specifically, NARO set up an evaluation strategy council and an evaluation committee that includes external members to evaluate NARO’s operation from diverse, multiple viewpoints. NARO modifies research subjects, research budget allocations, and human resource allocations based on the result of its evaluation. Additionally, overseas experts review the research subjects that involve international aspects. However, there is a potential risk that such strict research management may impede creation of knowledge from a long-term perspective.

Figure 5.2. Evaluation system for national R&D agencies in Japan

Source: MIC (2018[11]), Evaluation System of Independent Administrative Corporations, http://www.soumu.go.jp/main_sosiki/hyouka/dokuritu_n/index.html.

Trends in public and private R&D investment

Japan maintains a relatively high level of R&D investment, with the ratio of Gross Domestic Expenditure on R&D (GERD) to GDP staying in the upper 3% in 2007-16. While GERD is the sum of public and private R&D investments, private investment accounts for around 70% of GERD during the last ten years, followed by universities (20%) and public institutions (7%). Around 70% of private R&D investment is concentrated on large enterprises with capital of JPY 10 billion (USD 82.6 million) or more, and 98.3% of private R&D expenditure was self-financed in 2015.

In comparison, the public sector accounts for the majority of agricultural R&D investment in Japan. The intensity of public R&D investment is higher than that of other sectors, but private investment was only 0.03% of agricultural value added, much lower than for most OECD countries (Figure 5.3). In the food and beverage industry, while the intensity of private R&D investment is lower than other sectors, it is higher than in other OECD countries (Figure 5.4). The ratio of government appropriations or outlays for agricultural R&D to gross agricultural output peaked in 2009 at 2.54%, and then continued to decline until 2013. The intensity of public investment in agricultural R&D nevertheless remains higher than in most other OECD countries.

To date, agricultural R&D is mainly conducted by public research organisations such as NARO. Researchers in agriculture tend to be less conscious of commercialising their research outcomes than other sectors. A limited collaboration of universities and public research organisations with industry results in the situation that a majority of agricultural R&D projects targets improvement or modification of existing technologies and the extension of outcomes to producers.

Figure 5.3. Intensity of public agricultural R&D investment

Government budget appropriations or outlays for R&D as a share of value-added

Note: * or latest available year

Source: OECD (2016[12]), OECD Science, Technology and R&D Statistics (database), https://doi.org/10.1787/48768e54-en; OECD (2017[13]), OECD.Stat (database), https://stats.oecd.org; ASTI (2017[14]), Agricultural Science and Technology Indicators 2017 (database), https://www.asti.cgiar.org/data.

 StatLink https://doi.org/10.1787/888933957857

Figure 5.4. Business Expenditures on R&D (BERD) in the agriculture and food and beverage sectors

Note: The figures are based on data for the latest available year for each country: 2013 and 2014 for the agriculture sector (panel A), except 2010 for Canada; 2010 for the food and beverage sector (panel B), except 2009 for Korea and 2006 for Australia.

Source: OECD (2016[12]), OECD Science, Technology and R&D Statistics (database), https://doi.org/10.1787/48768e54-en; OECD (2017[13]), OECD.Stat (database), https://stats.oecd.org.

 StatLink https://doi.org/10.1787/888933957876

R&D outcomes

The outcome and impact of innovation can be examined via proxy data such as the number of patents issued, and the number of scientific papers published and cited (OECD, 2015[15]). The number of patents in the agri-food sector in Japan is the second highest, after the United States (Table 5.2). However, the number of patents issued is not necessarily a comprehensive indicator of the performance of innovation systems (OECD, 2018[16]) because not all technological components of innovation systems hold patents, and those that do are not always used effectively.

The number of scientific papers on agricultural subjects published by research institutions in Japan has decreased in the last decade, while it increased in the People’s Republic of China (hereafter “China”) and Korea over the same period. However, Japan’s share in global publications on agriculture remains higher than the average of OECD and EU15 countries.

Clarivate Analytics, a data analysis firm, defines Essential Science Indicators (ESI) as the number of outstanding papers ranked among the top 1% internationally based on the number of citations in pertinent fields. The ESI database classifies the entire field of science into 22 categories. Japan ranks eighth worldwide in the fields of botany and zoology, which are closely related to agriculture (2007-17). Within Japan, public research organisations (i.e. national research and development agencies) rank high in botany and zoology compared with other fields. NARO and JIRCAS ranked third and seventh respectively among institutions in Japan.

Public-private collaboration in agricultural R&D

Innovation in agriculture today is more dependent on the technologies developed outside agriculture such as genetics and digital technologies, requiring collaboration between public and private actors across the sectors. OECD countries apply a variety of institutional and funding mechanisms: public funding to foundations, institutions, and research projects requiring public and private participation and co-funding.

For example, USDA’s Agricultural Research Service engages in R&D partnerships to address major challenges in agriculture. An agriculture-specific institution, the Foundation for Food and Agricultural Research, was created in 2014 as an independent, board-driven, non-profit organisation, to foster collaboration between government, university, industry, and non-profit researchers (OECD, 2016[18]). Public-private partnerships (PPPs) are based on Co-operative Research and Development Agreements, which allow both parties to keep research results confidential for up to five years under the Freedom of Information Act, shared patents, patent licenses and permits where one partner can retain exclusive rights to a patent or patent license. The Netherlands goes furthest in placing PPPs at the heart of R&D strategy. However, by giving industry a leading role in setting innovation agendas, this approach risks focusing public funds on low-risk and short-term R&D activities, away from research with more fundamental public goods aspects that need to be addressed for long-term challenges.

There is significant room to strengthen the links between public and private AIS actors in Japan. In 2016, MAFF launched the Council of Industry-Academia-Government Collaboration in the Field for Knowledge Integration and Innovation (FKII). The Council consists of private companies, universities, and research institutions from non-agricultural sectors, and it serves as a platform for exchanging information (Box 5.2). The seminars and workshops organised in different regions assist Council members with shared challenges to form a cross-sectoral R&D platform and conduct joint research.

In 2018, MAFF introduced a new competitive research grant to give preference to research proposed by the Research Consortium formed by FKII (Figure 5.5). To promote collaboration of R&D across sectors, research groups eligible for this competitive grant must comprise organisations from at least two of the following categories of actors in case they conduct research at either the applied or adaptive research stage:

• Category I: Prefectures, municipalities, prefectural research organisations, independent regional administrative agencies.

• Category II: Universities, Inter-University Research Institute Corporations.

• Category III: Incorporated administrative agencies, government-affiliated special corporations, government-authorised corporations.

• Category IV: Private companies, non-profit organisations, co-operatives, farmers, fishermen and foresters.

Proposals from the Research Consortium of FKII have advantages, such as higher upper grant limits, extension of research periods, and additional consideration given during selection. Furthermore, to encourage private-sector investment and promote the commercialisation of research outcomes, a matching funds scheme is used in the adaptive research stage, in which private business finances at least half the research expense.

Figure 5.5. Scheme for new competitive research grants in Japan

Source: MAFF (2016[19]), Field for Knowledge Integration and Innovation: Organization and Evolution Since Fiscal Year 2016.

Intellectual property protection

Because of the fragmented structure of agricultural production, comprising relatively small operations producing multiple, homogeneous products, few farms are willing to invest in private R&D. Furthermore, because of the biological nature of agriculture, improved crop seed and animal breeds are self-replicating. This complicates the ability of innovators to protect intellectual property. In addition, many agricultural technologies tend to be geographically specific, meaning they do not transfer easily to other locations with different soil types, weather patterns, or topography. These features imply that unique policies to foster innovation in agriculture are required (OECD, 2016[18]).

Japan maintains a high level of intellectual property protection (Figure 5.6, Panel C). Patent protection increased rapidly in the 1980-90s, leading to a level of protection equivalent to that in the Netherlands or France from around the 1990s to 2000s (Figure 5.6, Panel A). According to the Plant Variety Protection Index created by Campi and Nuvolari (2013[20]), Japan’s score now stands at the same level as France, though lower than that of the Netherlands or the United States (Figure 5.6, Panel B).

Japan developed a comprehensive framework of Intellectual Property Rights (IPRs), including patent, trademark, plant variety, and GI protection systems (Table 5.3). While MAFF is in charge of plant variety and GI protection systems for agricultural goods, the National Tax Agency protects GI for Japanese liquor. Japan’s Patent Office administers patents, trademarks, designs and utility models, and the Agency of Cultural Affairs protects copyrights.

In 1999, Japan introduced the Bayh-Dole system to its Industrial Technology Enhancement Act, drawing on the US Bayh-Dole Act, to allow private companies which receive project funding to own 100% of the intellectual property rights. The application of this measure is conditional on: 1) notifying the government when the research outcome is achieved; 2) licensing such IPR to the government for free in case when the latter needs it for public interest; and 3) licensing the IPR to a third party at the request of the government if the contractor has not used it within a reasonable time.

In 2007, MAFF announced an integrated Intellectual Property Strategy with the aim to prevent technology outflow, promote brand management, and accelerate the use of intellectual property. The strategy was renewed in 2010 and 2015. The current strategy adds a new element to promote intellectual property management in ICT-related businesses, and in the seed and seedling industry.

While NARO and other public agricultural R&D institutions under MAFF hold a number of IPRs, these have not necessarily been well utilised by private companies or local governments. AFFRC recently strengthened IPR management within NARO by appointing full-time co-ordinators at regional agricultural research centres. They are expected to engage in: 1) promoting the use of intellectual property, including license grants; 2) collaboration with external experts in technology, business models and intellectual property management; and 3) promoting joint research with the private sector, including venture capital firms that undertake commercialisation of intellectual property.

Japan is a member of major international treaties on intellectual property. These include the Paris Convention for the Protection of Industrial Property (1899), the Berne Convention for the Protection of Literary and Artistic Works (1899), the Patent Co-operation Treaty (1978), the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (2000), the Patent Law Treaty (2016), and the Agreement on Trade-related Aspects of Intellectual Property Rights (1995).

The International Convention for the Protection of New Varieties of Plants (UPOV Convention) was adopted in 1961 and amended in 1978 and 1991. The 1991 Act took effect in April 1998. Japan acceded the 1979 Act in 1982 and the 1991 Act in 1998. The International Union for the Protection of New Varieties of Plants (UPOV) aims to promote an effective system of plant variety protection with a view to encourage the development of new plant varieties. The UPOV Convention provides basis for member countries to encourage plant breeding by granting breeders an intellectual property right for the new plant varieties.

Japan provides plant variety protection system based on the Plant Variety Protection and Seed Act. Plant breeding is encouraged under the Act as it contributes to the development of agriculture. Around 800 new plant varieties are registered per year in Japan – the fifth largest number among UPOV members after the European Union, China, the United States and Ukraine in 2017 (UPOV, 2018[22]). Of those who hold plant breeder’s right, 50% is seed companies, 25% is individuals and 15% is public sectors. This shows that various sectors engage in breeding activities in Japan.

Japan took the initiative to establish the East Asia Plant Variety Protection Forum (EAPVP Forum) in 2007. It is composed of ASEAN Member States, China, Korea, and Japan. Japan has been supporting EAPVP Forum activities in collaboration with the UPOV and UPOV members. The 11^th EAPVP Forum Annual Meeting in August 2018 adopted the Common Direction of the 10-Year Strategic Plan; it aims to achieve that all Forum members which are also members of UPOV will serve as the basis for further harmonization and co-operation of plant variety protection in the region.

Figure 5.6. Intellectual property protection indicators

1. Overall index is the sum of indices for duration, enforcement, loss of rights, membership and coverage.

2. OECD top 5 refers to the average of the scores for the top 5 performers among OECD countries in 2017-18 (Switzerland, Finland, Luxembourg, New Zealand and Netherlands).

3. Indices for EU28 and OECD are the simple average of member-country indices.

Source: (Panel A) Adapted from Park (2008[23]), “International Patent Protection: 1960-2005”, Research Policy, No. 37. (Panel B) Campi and Nuvolari (2013[20]), IP Protection in Plant Varieties: A New Worldwide Index (1961-2011), http://hdl.handle.net/10419/89567. (Panel C) WEF (2017[24]), The Global Competitiveness Report 2017-2018: Full-data Edition, http://reports.weforum.org/global-competitiveness-index-2017-2018/.

 StatLink https://doi.org/10.1787/888933957895

Preferential taxation and R&D

Japan has developed a tax credit system to allow enterprises to deduct certain R&D-related expenditures, and thus reduce the amount of corporate taxes. The total tax credit, when all available tax credits are applied, is capped at 40% of applicable corporate income taxes. As of April 2017, in addition to R&D in manufacturing, ICT-related service development became eligible for tax credit. Developing agriculture support services using ICTs, such as agricultural data collection and analysis, is one form of R&D eligible for tax credit. Overall, indirect support through preferential taxes accounts for most government support to private R&D in Japan (Figure 5.7).

Figure 5.7. Direct government funding and tax support for business R&D, 2015

As a percentage of GDP

Note: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

Source: OECD (2017[25]), Innovation in Firms, https://doi.org/10.1787/sti_scoreboard-2017-graph135-en.

 StatLink https://doi.org/10.1787/888933957914

R&D tax credits apply to all companies irrespective of its size, but grant higher tax incentives, such as a higher percentage of R&D expenditure deduction, to SMEs with a capital of JPY 100 million (USD 891 000) or less. Moreover, the R&D tax system provides additional incentives to increase R&D expenditure, or to maintain high levels of R&D expenditure in addition to performing collaborative R&D. For example, 30% of collaborative R&D expenditure with national research institutions and universities (20% in the case of other research partners) is deductible from taxable corporate income.

Besides preferential tax treatment, the Small Business Innovation Research programme supports R&D and the commercialisation of its outcomes by SMEs. An SME that receives certain grants from the government is eligible for preferential loans from JFC to cover capital spending or the working capital required to commercialise the technology developed; they are also eligible for reduced patent fees.

Promoting international joint research

Despite a higher number of patents in the agri-food sector, the share of patents jointly owned with foreign researchers is only 5.2% of the total Japanese-owned patents. Similarly, the share of internationally co-authored papers in the field of agriculture and food in Japan is lower than the OECD average (Table 5.4). Low levels of international co-operation in R&D are not limited to the agri-food sector. Japan ranked 16^th out of 24 OECD countries in a 2008-10 study on the share of external knowledge sources for innovation (OECD, 2013[4]). Only 0.5% of the R&D carried out in Japan in 2013 was financed from abroad.

To accelerate international co-operation in agricultural research, MAFF has been assisting Japanese research agencies since 2014 in signing Memorandums of Understanding (MoUs) with foreign or international research organisations. As a result, JIRCAS and NARO have so far concluded 121 MoUs and 72 MoUs, respectively, with more than 40 countries. In 2017, AFFRC entered into a Memorandum of Cooperation on joint research with the Russian Science Foundation and the Ministry of Agriculture and Rural Development of Israel. In 2018, NARO dispatched a liaison scientist to Wageningen University and Research in the Netherlands in an effort to develop networks with the university as well as other EU research institutions.

Technology in developing countries and responses to global issues

To achieve the Sustainable Development Goals set by the United Nations General Assembly, MAFF makes financial contributions to international research organisations as well as research projects by domestic research organisations that address global issues such as climate change.

JIRCAS is the only Japanese national research organisation explicitly mandated by law to engage in technological experiments and research related to agriculture, forestry and fisheries in tropical, subtropical or other developing regions overseas. At present, JIRCAS engages in 14 international joint research projects in four programmes. These cover the development of agricultural technologies for sustainable environment and natural resource management in developing regions, technology development for stable production of agricultural products in the tropics and other adverse environments, the development of high-value adding technologies and utilisation of local resources in developing regions, and the collection, analysis and dissemination of information to grasp international trends in agriculture, forestry and fisheries.

NARO also focuses on the resolution of environmental issues and the sustainable use of local resources in developing countries. For instance, in co-operation with the International Rice Research Institute and other Philippine, Thai, Vietnamese and Indonesian research institutions, NARO engages in research on water-saving cultivation technology to reduce greenhouse gas emissions from paddy fields in various parts of Asia (Greenhouse Gas Mitigation in Irrigated Rice Paddies in Southeast Asia). NARO also contributes to the development of agricultural technology and capacity development in developing countries by sending experts and researchers.

In addition to the activities mentioned above, the Science and Technology Research Partnership for Sustainable Development programme has promoted since 2008 a large-scale programme to promote joint research between Japan and developing countries. This is co-managed by JST and the Japan International Co-operation Agency (JICA). The budget is approximately JPY 100 million (USD 891 000) per project per year. To date, 133 projects have been implemented in 50 countries.

Participation in international frameworks for agricultural research

Participation in international frameworks for agricultural research will help Japan develop an international network of researchers and to introduce outside expertise in domestic agricultural research. The country’s participation in the G20 Meeting(s) of Agricultural Chief Scientists (MACS) is one such initiative. Chief scientists and high-level research administrative officials of G20 countries and international research organisations discuss research priorities, thereby strengthening collaboration between countries and international research organisations. Representatives from AFFRC and JIRCAS participate in all MACS meetings, and Japan hosted the eighth meeting held in Tokyo in April 2019. Japan also participates in the OECD Co-operative Research Programme to promote personnel exchanges between Japanese and overseas researchers by supporting conferences held in Japan, as well as dispatching Japanese researchers overseas and accepting foreign researchers to Japanese research organisations.

In 2017-18, Japan chaired the Global Research Alliance on agricultural greenhouse gases, an international network of 50 countries focused on reducing greenhouse gas emissions in agriculture. Japan assigned funded projects to the Consultative Group on International Agricultural Research (CGIAR) to promote international research in agriculture, forestry and fisheries to resolve global issues. JIRCAS engages in joint research with the International Rice Research Institute (IRRI), the International Maize and Wheat Improvement Center, the International Center for Tropical Agriculture (CIAT), the International Institute of Tropical Agriculture (IITA), World Agroforestry Centre and the Africa Rice Center, all of which are research organisations of CGIAR. One JIRCAS researcher is part of the CGIAR System Management Office.

Japan and CGIAR actively collaborate in Public-Private Partnerships (PPPs) in an effort to link private-sector capabilities to the development, extension and improvement of technology. For example, the Nutrition Japan Public Private Platform is a government and private-sector collaboration that promotes food supply businesses and improves nutrition in developing and emerging countries by taking advantage of Japanese technologies and knowledge. Other examples of PPPs include: collaboration between Bioversity International’s Kenya office and Nissin Food Products Co. Ltd. for the development of instant noodles; IITA and Taiyo-Industry Co. Ltd. for the development of technology to produce fishing feed; IITA and Honda Motor Co. Ltd. for the introduction of small agricultural machinery; and CIAT and Ajinomoto Co. Inc. for the supply of disease-resistant cassava.

As a member of the executive committee of the Coalition for African Rice Development and the Initiative for Food and Nutrition Security in Africa, JIRCAS has built international research networks for rice blast and soybean rust diseases, and collaborates with international organisations and African countries to solve food and nutritional problems in Africa. NARO also participates in the Global Strategic Alliances for the Co-ordination of Research on the Major Infectious Diseases of Animals and Zoonoses International Research Consortium.

The Japan Intellectual Support Network in Agricultural Sciences (JISNAS) was created in 2009 to promote collaboration among young researchers at universities that participate in international co-operation in the field of agronomy and to increase their partnerships with JIRCAS and JICA. Currently, JISNAS has 49 members composed of domestic universities and associations. MEXT and MAFF also participate in JISNAS as observers.