Leave it a field, and the tax divides — the arithmetic of not selling

Few people looking at a field left standing in the middle of a residential district stop to imagine what it costs its owner in tax each year. Yet Japanese farmland taxation assigns wildly different bills to identical plots growing identical crops. Under the classification set out by the Ministry of Agriculture, ordinary farmland — in urbanisation control areas and the like — is valued and taxed as farmland, at roughly a thousand yen per tenth of a hectare a year. Inside an urbanisation promotion area the valuation switches to a building-plot basis: ordinary farmland there pays tens of thousands per tenth of a hectare even after the special measure that cuts the tax base to a third. And on designated urbanisation-area farmland in the major metropolitan cities the burden reaches the level of the low hundred-thousands. Nothing about the crop has changed; only the bill has moved by two orders of magnitude.

Designation as a productive green land district is the device for stepping down that staircase in one move. Designated farmland is returned to farmland valuation and farmland taxation even while it sits inside an urbanisation promotion area, and drops out of building-plot taxation. As the previous instalment showed, most of the land that reached thirty years of designation in 2022 chose to move into the specified productive green land category and keep that treatment. What matters here is that the choice was never only about whether the owner still wanted to farm. Let the designation lapse and the bill climbs, in stages, towards the building-plot level. Quite apart from any intention to keep cultivating, the sheer size of the gap in the tax bill was doing the deciding.

Property tax, though, is only the starter. For a family holding farmland in a city, the decisive levy is inheritance tax. It is charged in principle at market value, so inheriting urban farmland assessed at hundreds of millions of yen on the roadside land-price schedule produces a bill equal to many decades of farm income. No income the field can generate will cover it, which leaves selling part or all of the field as the only way to pay. The mechanism by which urban farmland shrinks at every succession does not begin with boredom or a missing successor; it begins here. The device built to defuse that contradiction is the deferral regime, and at its core sits a second yardstick cut loose from the market: the agricultural investment price. This article first pins down how that yardstick is built, then asks what it is secured against — and whose freedom it is secured with.

Read farmland tax relief as support for farming and the shape of the system stops making sense. If it were support for farming, the size of the break would track yields or farm income. What it actually tracks is the value the land would command as a building plot. The gap between building-plot valuation and farmland valuation; the gap between market value and the agricultural investment price — in both cases the relief that appears is the residue left when the value-if-farmed is subtracted from the value-if-sold. What the system prices, then, is not farming. It is the decision not to sell.

Read it that way and some awkward consequences follow. First, the relief is largest where land is dearest: the closer to the centre, the thicker the tax benefit, and the thinner it grows out in the countryside. Distribution is governed by the property market, not by agricultural need. Second, a large relief necessarily means a large payoff for giving it up. The exemption and the incentive to sell are two faces of a single number, and you cannot inflate one without inflating the other. Third, that number moves every year with land prices. Even if not one line of the law changes, the reward for not selling swells on its own as the ground beneath it appreciates.