Japan: Economics in Everyday Life

20. Why Is Rice So Expensive in Japan?

20 Why Is Rice So Expensive in Japan? Susumu Hondai The Japanese written character for “rice” (gohan) is the same as for “food.” Surprisingly, this staple of the Japanese diet is far more expensive in Japan than in the rest of the world. In 1995, the producer and retail prices of rice in Japan were 9.4 and 3.4 times the respective prices in the United States. In February 1996, 10 kilograms (22 pounds) of high-quality nonglutinous rice sold at an average retail price of 5,585 yen, or, roughly 56 U.S. dollars. That price was two and a half times as expensive as the ultrapremium short-grain rice sold in Honolulu at the time. Why is rice so expensive in Japan? Historical Significance of Rice Rice is by far the most important agricultural product in Japan. Nevertheless, the share of rice in Japan’s agricultural production has declined from 60 percent at the time of the Meiji Restoration (1868) to about 30 percent today. Rice culture in Japan is suitable and profitable as a crop for part-time farmers, who cultivate small plots of land, currently averaging about 1.65 acres. Rice cultivation and its attendant rituals form the 149 base of many of the festivities and cultural artifacts that give the Japanese their sense of identity. Rice is also regarded as basic to Japan’s national security. The government has used these reasons to pursue a policy of rice self-sufficiency. This policy lies at the heart of the high price of rice in Japan. To understand this policy, it is necessary to look first at the Food Control Act of 1942 and at some of the modifications to that Act up until the 1994 Amendment. The Food Control Act of 1942 In response to the food shortages and high prices of World War II, the Food Control Act of 1942 imposed strict control over the rice market. The Japanese government took sole charge of all rice production, distribution, and sales and since then has maintained substantial control or influence over all areas. Though the Act has been modified several times since 1942, its basic premise of supplying rice to consumers at a stable price through direct government intervention remains in force today. To accomplish the objective of an adequate supply of rice at stable prices, the government controlled rice marketing by regulating both producer and consumer prices as well as rice imports . Traders had to obtain permission from the Japanese Food Agency to import or export rice. This control enabled the Agency to insulate the domestic rice market from the world market . Between 1970 and 1994, almost no rice was imported into Japan except for small quantities of rice flour and various kinds of special-purpose rice such as mochi-rice (glutinous rice used for making cakes), cracked rice, and Thai rice (which is used for making awamori, distilled rice spirits produced in Okinawa). The government did not directly control rice production, in terms of setting limits on how much land rice farmers could till, until 1971. Since then, each farmer has been allotted a quota of rice land, thereby limiting the total amount of rice produced each year. 150 Japan: Why It Works, Why It Doesn’t Setting the Price of Rice Rice is “collected” from the farmers by producer cooperatives or rice merchants. Under the Staple Food Act of 1942, all rice collectors, wholesalers, and retailers had to be licensed by the government. Until 1969, all rice produced had to be sold to the government. The Japanese Food Agency would buy rice at a predetermined price set each year after consultation with the Rice Price Advisory Council. Since 1960, this government-purchase price has been set in accordance with the cost of production and to provide the rice growers with a standard of living comparable to that of urban workers. After purchase, the Japanese Food Agency then sells the rice to wholesalers at prices set by the government . Since 1972, the government has also announced a suggested retail price for rice. Although the government now has no direct control over the retail price, in actual practice, the retail price for rice rarely deviates much from the suggested price. In 1969, the government introduced a voluntary marketing system to provide farmers with an additional market in which to sell rice. Rice marketed under the voluntary marketing system did not qualify for...