Is agricultural self-sufficiency effective to protect local markets from global markets? Empirical evidence from the beef sector in Japan

Although for decades, the Ministry of Agriculture, Forestry, and Fishery of Japan has formed agricultural policies based on food self-sufficiency as a vital factor in securing the domestic food supply, the impacts of agricultural self-sufficiency on the relationship between international and domestic markets are not well understood. Most previous literature on agricultural price transmissions applies conventional error correction and vector autoregression models. However, we employ the state-of-the-art technique, namely the time-varying parameter vector autoregression (TVP-VAR) connectedness model, as well as the dynamic conditional correlations based on the asymmetric Baba – Engle–Kraft – Kroner method to investigate the effectiveness of beef self-sufficiency and its inventory in stabilizing local beef prices in Japan. Our primary results indicate that the global beef price is the net transmitter of shocks, while the home-grown beef price in Japan is the net receiver of shocks. Furthermore, we find that high self-sufficiency in beef does not significantly protect local beef markets from global beef markets, but the imported beef inventory effectively alleviates the wholesale price volatility of imported beef. One policy implication is that the government should not take protectionist policies to enhance beef self-sufficiency, and import beef stocks could be accumulated to stabilize imported beef markets.