Japanese Water Management Systems from an Economic Perspective: The Agricultural Sector - Water and Agriculture: Sustainability, Markets and Policies - page 52

Third, Nakashima analyses other important factors that would help to alleviate the
inefficiencies sometimes pointed out by theory, i.e., most farmers (i) are uniform in terms
of crop (rice) and (small) land holding, (ii) voluntarily save water as traditional
community members, and (iii) incur additional marginal costs for effective water use
required under the condition of equitable water allocation by the LID.
Therefore, we can conclude that the present scheme of area pricing contributes to
achieving economic efficiency while the financial autonomy of LIDs is also preserved.
4.3 Capital investments and average cost bearing
In years of normal precipitations, we can recognise that a kind of scarcity rent is
incorporated in the entitled water rights that originated mainly from the capital
investments enabling stable water supply, as pointed out above. However in the general
understanding, the related costs, which should be financed over a longer term anyway, are
counted in the average cost. The Japanese government has subsidised the construction of
irrigation facilities, such as dams, head gates, canals, and so forth, as would be the case in
most countries. The financial support to each project has been at around 60% and 50% in
the case of that under the central government and the prefectural government,
respectively.
The government commitments to these capital investments are based on the following
considerations (Nakashima, 1998):
The basic nature of economies of scale in the investments (the second criterion above).
Collectivity in paddy field irrigation: To exhibit the economies of scale in the
investments, many projects should be relatively large and involve all the farmers in the
territory. Financial support to some extent is essential to persuade passive farmers to
join the project (the second and fourth criteria above).
Food security concerns: The nation's support in raising agricultural production can be
legitimated to benefit consumers especially in the early stage of economic development.
Enhancement of externality: Water facilities and users' activities generate various
environmental benefits and land conservation services.
Stabilisation purpose: Irrigation water acts as a buffer to cope with the curious needs
from the municipal sector during a period of serious droughts (see the following
section).
4.4 Water shortages in the years of lower precipitations
4.4.1 Inside of the LID
The equitable allocation of irrigation water to farmers in the territory of each LID
and charging based on area pricing are kept unchanged. Major instruments carried out
collectively and traditionally by LIDs to achieve efficient water use are: (i) Bansui, strict
rotation of water sharing by intensive monitoring, (ii) enhancing repeated uses,
(iii) supplementary irrigation from groundwater or reservoirs, and (vi) sacrifice of fields
that abandon rice cultivation (Irrigation Water Use in Agriculture in Japan The Japanese