FOCUS: Japan Reverses Rice Output Boost Policy; Prices Still High

Tokyo, Dec. 11 (Jiji Press)–The government of Prime Minister Sanae Takaichi has effectively walked back the previous administration’s policy of expanding production of rice, Japan’s staple food, under pressure from farming groups. The reversal comes only three months after her immediate predecessor, Shigeru Ishiba, announced that his government would “change course toward expanding production,” amid a sharp rise in rice prices. Since taking office in October, new agriculture minister Norikazu Suzuki has repeatedly emphasized the need for “production in line with demand,” signaling a return to a more cautious approach. At the same time, retail rice prices remain elevated. Even with a sharp increase expected for the 2025 crop year’s harvest, supermarket prices are still above 4,000 yen per 5-kilogram bag. The equilibrium between supply and demand has yet to be restored. After World War II, the Japanese government aggressively promoted rice production to address severe food shortages. By 1970, however, with an oversupply of rice, the government reversed course by introducing the “gentan” acreage reduction policy, under which production targets were set and farmers were encouraged to cut back on rice cultivation to curb excess supply. Although the policy was formally abolished in 2018, its effects persist. To restrain production and prevent a sharp drop in rice prices, the government continues to operate a de facto gentan system through subsidies that encourage farmers to shift from rice to alternative crops such as wheat and soybeans. The benchmark for adjusting rice output has long been the agriculture ministry’s supply-demand forecast for the coming year, announced each autumn. For many years, actual production closely tracked these forecasts, except in cases of abnormal weather such as unusually cool summers. In recent years, however, noticeable gaps have begun to emerge. During the surge in rice prices that began last year, for example, an error in the ministry’s forecast led to actual demand exceeding the projected level by around 400,000 tons. The production shortfall contributed to the spike in prices. At the time, then agriculture minister Shinjiro Koizumi argued that Japan “must switch to a policy framework capable of responding flexibly, so that fluctuations in supply and demand do not cause major social disruption.” He further noted that, in practice, such flexibility “means steering policy toward higher levels of production.” On the other hand, lawmakers in the ruling Liberal Democratic Party who represent agricultural interests strongly opposed the Ishiba administration’s policy of increasing rice production, warning that overproduction could drive down prices. Incumbent agriculture minister Suzuki, who enjoys strong support from such lawmakers, said, “Those on the production front are extremely bewildered,” and cautioned that “if we move quickly to increase production substantially, the stability of the supply-demand balance will be disrupted.” The agriculture ministry forecasts this year’s demand for staple rice at between 6.97 million tons and 7.11 million tons, while the 2025 harvest is expected to reach 7,468,000 tons. With supply projected to significantly outstrip demand, rice prices are likely to fall–an outcome consistent with basic market principles, but a source of growing concern among those LDP lawmakers. On the other hand, competition to secure rice from the 2025 crop intensified even before the harvest began. The provisional payments that agricultural cooperatives advance to growers have been set roughly 30 to 70 pct higher than the previous year, helping to keep retail prices elevated. Even though market mechanisms are not functioning properly, Suzuki has repeatedly insisted that rice prices are “determined by the market” and that the government “will not be committed” on setting prices. While prices for domestically produced rice continue to be high, private-sector rice imports are on the rise. Import volumes in the April-September first half of fiscal 2025 reached 86,523 tons, 208 times higher than the 415 tons recorded in the year-earlier period. At a news conference in November, Mitsuo Fujio, president of Tokyo-based major rice wholesaler Shinmei Co., disclosed that U.S.-grown rice had become the top-selling variety at major client supermarkets in September. “I feel that soaring prices may cause the market for domestically produced rice to shrink,” he warned. If the high price of domestic rice remains unaddressed, more consumers may turn away from it in favor of cheaper alternatives. Whether a price level acceptable to both consumers and producers can be achieved is still unclear. END [Copyright The Jiji Press, Ltd.]