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Rising Rice Prices

Ichiro Suzuki

 

Retail rice prices are rising in Japan. Through the final week of March, they are reportedly 108% higher on average than they were a year ago. Since the end of 2024, they have been rising every week, up approximately 40% cumulatively. Rising prices have nothing to do with geopolitical developments or the Japanese yen’s relentless fall. 


Rice has been ‘the’ staple in Japan. Its price hikes acutely affect everyone. In the old days when rice accounted for a dominant portion of calories consumed among the population, rice shortages led to a riot. The last major riot in 1918 literally paralyzed the Japanese economy and the society. It was in the final months of WWI, when Spanish Flu was beginning to rage. After WWII, dependence on rice has declined markedly as Japan’s eating habits became diversified. Japanese consumers in the 21st century, therefore, don’t resort to a riot since rice shortages don’t immediately starve them. Absence of violence nonetheless doesn’t mean they are not facing difficulties in their life.


After WWII, dinner tables in Japan became westernized. U.S. Occupation had no small influence in eating habits in Japan. Calories consumption rose materially with a greater amount of meat came to be eaten as opposed to fish. The trend took down rice consumption with it. Amid ever-declining demand for rice, the Ministry of Agriculture, Forestry and Fisheries for decades spent time and financial resources on persuading farmers to grow less rice, encouraging them to convert their land for growing vegetables and other agricultural products. In 1970 Japanese farmers grew 14 million tons of rice, but the production has fallen to 7 million tons today.


 The Ministry’s another obsession has been maintaining rice prices artificially. The MAFF has poured huge amount of financial resources to keep rice prices from falling. Subsidies have always kept rice prices higher than what they otherwise would have been in the market. ‘Stable prices’ have pleased the industry that the ministry looks after, and have kept small farmers in agriculture. Subsidies have discouraged small farmers from leaving agriculture, keeping the industry very fragmented.


The industry that has been kept afloat by taxpayers money is anything but efficient. To begin with, the industry is loaded with farmers who hopelessly lack size. In fact, the vast majority of farmers do it on a part time basis. Many of the farmers are salaried workers who till a tiny lot of land only on weekends. In reality today, part-time farmers may no longer be half salaried workers as their average age is approaching seventy. They are more like half pensioners. In most cases their children are not interested in succeeding their father to work on small land for modest income. 


There have been some new entrants in the agricultural industry and they do it on a far greater scale than part-timers. These people are motivated farmers engaged on a full time basis, bringing in efficiency to the industry but the scale of their operations still isn’t comparable to farmers outside of East Asia. As a result, productivity in the industry remains low. 


Farmers have immense political power, especially on the Liberal Democratic Party that has run the government most of the time in the last 70 years. Their power resides in Agricultural Cooperatives, which is casually called JA (Japan Agriculture). JA once monopolized distribution of rice. Deregulation in the recent decades has allowed large scale farmers to market their products on their own but a vast number of small part-time farmers rely on JA on distributing and selling their agricultural products as well as financing equipment purchases. JA has been a great providers of rural votes, materially contributing to keeping the LDP in power. Decline of rural population has reduced the number of seats allocated to such areas over the decades but JA continues to wield disproportionate power over the LDP. Not surprisingly, they have great aversion to changes while the world that surrounds them has been changing. They resist deregulation to the extent it is possible. They are fiercely vocal against entry of large capital into agriculture, on the ground that capitalists do it only for profits and hence are unreliable food suppliers. Agriculture epitomizes how political power is structured in Japan. Politicians tend to listen to vocal producers rather than silent consumers who represent the majority. 


Rice prices began to rise in the late summer of 2025, as rice bags started to disappear from supermarket shelves. Initially it was believed that consumers’ responses to an alert of a mega earthquake that had been expected to take place sometime in the next few decades. A tiny amount of excess inventory could make a profound impact if such inventory was built at every house. The MAFF then issued a statement that there would be abundant supply once new crops hit the stores in autumn. Arrival of new crops did fill the shelves but had zero effect on prices. Then, after a few months of stabilization, prices began to rise again at the end of 2024. 


The government has emergency stockpiles of rice in order to deal with shortages. JA not surprisingly always opposes releasing the government inventory because of its negative impact on prices. The government still pressed for releasing this time, persuading JA to nod to it grudgingly. A condition was attached that the government refills the emergency stockpiles out of 2025 crops. Anyone who is familiar with market mechanism doesn’t think that this action leads to lower prices. Buyback pledges are added to regular annual demand. With production volume constant at best, prices would be higher. Today, it is believed that JA stood in the way of releasing emergency stockpiles last summer, and the LDP gave in to their pressure. The MAFF and JA would be kinds of institutions that would come under fierce attacks by Elon Musk’s DOGE. 


Having experienced rice shortages, the MAFF is reversing the policy of limiting rice production. However, it is easier said than done to change the structure that has been in place for well over half a century. The mechanism for lower rice production appears to have its own momentum, and would take immense energy to reverse it. In this regard Japan’s rice production policy shares an odd similarity with China’s one child policy. The People’s Republic is facing great difficulties to recover from the hole it had created with the policy.


About the author: Mr. Suzuki is a retired banker based in Tokyo, Japan.



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