Japanese Water Management Systems from an Economic Perspective: The Agricultural Sector - Water and Agriculture: Sustainability, Markets and Policies - page 53

Institute of Irrigation and Drainage, 2004). The numbering reflects the priority of the
application. The last instruments have seldom been adopted because of the difficulty in
controlling water by individual patch of paddy field. The LIDs and farmers in conclusion
incur extensive costs for these operations.
The economic theory suggests that there might be ex ante deals to make farmers
better off. However, water shortages take place in July/August after the paddy is already
planted. The marginal productivity of water, or equivalently the marginal cost of missing
water is very high for every farmer on such occasions (the third criterion above). In
conclusion, few water exchanges occur among farmers regardless of the emphasis on
equity.
4.4.2 Among LIDs
Water exchange, normally without monetary payment, has traditionally been carried
out among communal irrigation units. Similar customs remain informally in the present
day. Programmes have been provided under the transfer scheme of agricultural water,
though the primary purpose is aiming at intersectoral transfers between non-agricultural
sectors as explained in the next part. Transfer or exchange of agricultural water among
LIDs has not been officially registered up to the present date. The reason why such
transfers hardly occur may be the same as the above-mentioned accounts inside each LID.
4.5 Intersectoral transfers of water, and water rights in quasi-markets
Although droughts have not taken place very often recently, water shortage should
invariably be taken into consideration as the social (opportunity) cost of water. Because
drought generally hit the municipal sector more seriously, transfers of water from the
agricultural and industrial sectors to the municipal sector will be significantly
appreciated. According to the economic theory, the perfect property rights regime could
naturally lead to an efficient allocation of water through trading in a manner to equilibrate
the marginal benefits of water in every place and for every stakeholder (the third criterion
above). But the other measures work in reality.
Explicit trading of water rights is prohibited by the River Law in Japan, but the
government has established compensatory measures to realise temporary and permanent
water transfers, which in conclusion help to raise economic efficiency in terms of the
third criterion above, the marginal benefit equalisation. The systems could be called
quasi-markets in water, and in water rights in cases of permanent ones, which work as the
following:
Facing occasional cases of serious droughts, which take place unexpectedly in some
regions during the July-August normally, the Water Utilisation Adjustment Councils,
under the recommendation of the government, are summoned in the concerned regions.
A total of 186 Councils have been established according to the 1991 survey by the
MAFF. Chaired by the river administrative agencies, negotiations are carried out among
representatives of user groups, and the target of water-saving rate from the entitled water
rights in each sector and some intersectoral water transfers in conclusion at the same time
are to be agreed upon. Although the agencies are responsible for making the final
decisions, a consensus has been achieved in every case without any compensatory
payments.