TOKYO, Feb 9 (Reuters) - Japan's politically powerful farming lobby on Monday accepted plans by the ruling Liberal Democratic Party to reform the agricultural sector, after the initial proposals were watered down.
Prime Minister Shinzo Abe has made agricultural reform a symbol of his "Third Arrow" structural changes to fuel long-term growth. Investors have been watching Abe's push closely to see if he would back down for fear of alienating the farming lobby ahead of nationwide local elections in April.
In Japan, a dwindling band of ageing farmers work tiny plots, while the Japan Agriculture (JA) lobby group controls most aspects of pricing and distribution through its network of 700 cooperatives, and supplies feed and machinery.
At a meeting on Monday, the Liberal Democratic Party (LDP) approved the reform plans, which the Abe government aims to include in a bill around March revising the agricultural cooperatives law.
"We have received a reform plan from LDP which was largely understandable. We are at a big turning point and I've made a decision (to accept it)," JA-Zenchu President Akira Banzai told reporters, according to public broadcaster NHK.
Still, the reform underlines a shift in Japan's agricultural cooperatives system which has been led by the Central Union of Agricultural Cooperatives, known as JA-Zenchu, since it was founded in 1954.
The reforms are aimed at weakening the power of JA-Zenchu and giving local cooperatives greater autonomy in their production, procurement and distribution, in a bid to increase income of farmers.
Under the reform plan, JA-Zenchu loses the power to audit local cooperatives. At the moment, JA-Zenchu's inspectors must audit local cooperatives' financial statements.
Under the reform plan, local cooperatives will need their financial statements to be audited by a certified public accountant, but it could be through a new audit organisation to be spun off from JA-Zenchu's audit section.
JA-Zenchu will also lose its current privileged status and become a general incorporated body in five years.
"This looks to be a win-win deal for both sides. But in reality, Abe seems to be a nominal winner and JA is an actual winner," an analyst at a Japanese think tank said.
The analyst, who declined to be named, highlighted the fact the LDP had postponed taking action on restricting Japan Agriculture membership by non-farming members.
"Behind those compromises was fear among some LDP members of losing farmers votes in the upcoming election," the analyst said.
The JA group, which has long had close ties to LDP, has financial clout. Its banking business had nearly 91.5 trillion yen ($77 billion) in deposits in March 2014, and a large membership, which gives it influence over lawmakers in rural constituencies.
$1 = 118.5300 yen Reporting by Yuka Obayashi; additional reporting by Ami Miyazaki, Linda Sieg; editing by David Clarke