Is agricultural self-sufficiency effective to protect local markets from global markets? Empirical evidence from the beef sector in Japan

ABSTRACT

Although for decades, the Ministry of Agriculture, Forestry, and Fishery of Japan has formed agricultural policies based on food self-sufficiency as a vital factor in securing the domestic food supply, the impacts of agricultural self-sufficiency on the relationship between international and domestic markets are not well understood. Most previous literature on agricultural price transmissions applies conventional error correction and vector autoregression models. However, we employ the state-of-the-art technique, namely the time-varying parameter vector autoregression (TVP-VAR) connectedness model, as well as the dynamic conditional correlations based on the asymmetric Baba – Engle–Kraft – Kroner method to investigate the effectiveness of beef self-sufficiency and its inventory in stabilizing local beef prices in Japan. Our primary results indicate that the global beef price is the net transmitter of shocks, while the home-grown beef price in Japan is the net receiver of shocks. Furthermore, we find that high self-sufficiency in beef does not significantly protect local beef markets from global beef markets, but the imported beef inventory effectively alleviates the wholesale price volatility of imported beef. One policy implication is that the government should not take protectionist policies to enhance beef self-sufficiency, and import beef stocks could be accumulated to stabilize imported beef markets.

KEYWORDS:

• Volatility transmission
• Japan’s beef market
• beef self-sufficiency
• beef inventory
• food security policy

JEL CLASSIFICATION:

• Q11
• Q18

Data availability statement

The data that support the findings of this study are openly available in GIEWS and Agriculture & Livestock Industries Corporation at https://www.fao.org/giews/data-tools/en/and https://www.alic.go.jp/english/, respectively.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The results are presented in Appendix B.

² To save space, we do not present the results of static connectedness, but these are available upon request..

³ The diagnostic tests generally support the adequacy of our model specifications. For the sake of brevity, we do not report the results of the coefficient estimates, but the results are available upon request.

⁴ To save space, we do not report the summary statistics and unit root test for all the variables, but these are available upon request..

⁵ The LB test statistic shows the absence of serial correlation in the Tobit model.

Additional information

Funding

The research is, in part, supported by a Grant-in-Aid from the Japan Society for the Promotion of Science (Grant Number (A) 20K15613)