Japan’s Sumitomo Mitsui Banking Corp. (SMBC) has announced that it is launching a rice farming joint venture in Akita Prefecture, becoming the country’s first bank to enter the agriculture sector, reports the Japan Times.

SMBC’s core unit will create a joint venture this July with an established farming company in the prefecture along with Akita Bank and NEC Group, according to Nikkei Asian Review. An Ogata-based association of Akitakimachi-brand rice producers will hold a majority stake in the venture to satisfy regulations that state that farmers must control more than half of the voting rights in any Japanese agricultural corporation.

Initially, the business plans to offer rice harvesting and polishing services to the region’s aging farmers, however by next spring, the business plans to grow its own rice on land leased from local growers. It will also offer to buy rice operations from older farmers looking to exit the industry with the goal of growing rice on 1,000 hectares in Akita within ten years.  All rice grown and harvested will be marketed to hotels and other local buyers through the partnering producer association.

If the business proves to be successful, the partners plan to expand through similar companies in other key rice producing regions such as Niigata and Yamagata prefectures beginning in fiscal year 2018.

As the average age of Japan’s farmers reaches 67 and the number of the country’s producers shrinks, Japan’s government allowed for deregulation in 2009 that opened the possibility for businesses to farm on leased land. Then, this past April, the government eased requirements for ownership of farmland by corporations and businesses. Some experts foresee this new policy as being beneficial in reducing the area of abandoned agricultural land in the country, according to 4-Traders.

Over the past two decades, the high rate of Japanese farmers retiring has led to the area of uncultivated farmland in the country doubling to 420,000 hectares in 2015, according to data from Japan’s Agriculture Ministry reports Bloomberg.

In the long term, SMBC may create a holding company to oversee a range of agricultural joint ventures reports Nikkei, while also reducing costs through joint purchases of farming equipment.

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Lynda Kiernan