JAPAN Law and Practice Contributed by: Eri Hirata, Takunori Kono, Naoki Matsumoto and Ikki Kawasaki, Nishimura & Asahi
tural productivity and stabilise agricultural manage- ment 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 agri- culture 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 Modernisa- tion seeks to facilitate long-term, low-interest loans. with the goal of modernising agriculture and improving agricultural productivity. • The Agricultural Disaster Compensation Act pro- vides insurance systems in the event of damage to agricultural crops, livestock products, or cer- tain agricultural facilities due to natural disasters. Based on this law, agricultural mutual aid associa- tions have been established nationwide, and sup- port for damaged farms has been provided through compensation. Agricultural facilities • The Act on the Promotion of Agricultural Mecha- nisation 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 machin- ery 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 sub- sidies 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 Agri- cultural Management Foundation, play a major role in financing in this field, with actual loans amounting to approximately JPY236.5 billion (number of borrowers:
4,677) in the financial year 2024. For more details, see 5.1 Agriculture-Sector Credit Instruments .
2.2 Agriculture-Sector Finance Difficulty Using Structured Finance
Japanese cropland legislation makes it difficult to use common structured finance programmes and struc- tures, 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 Cor - poration 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 Per- sons 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 share- holder 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 financ- ing structure that uses trusts. In other words, since holding cropland in trust necessarily involves a trans- fer of ownership to a trust bank or other trustee enti- ty, 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 secu-
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