Revitalising Japan’s rice industry means targeting export markets

Author: Yusaku Yoshikawa, JIN Corporation

Recent international incidents like the COVID-19 pandemic and the Ukraine war are forcing countries to rethink their food security. In the case of Japan, increasing rice exports will mitigate the risk of food insecurity by making better use of available agricultural resources.

The Japanese government has problematised the country’s low self-sufficiency rate in terms of food security. But the real problem for Japan’s food security is not the low food self-sufficiency rate. Japan is losing and wasting its agricultural assets, such as the labour and land resources that support domestic food production.

In Japan’s agricultural sector, the average age of workers is over 65 years old. The number of workers is decreasing by 50,000 every year and farms of over 400,000 hectares are currently being abandoned. Most farmers do not make a living through agriculture alone and maintain side jobs.

Some argue that this is not a problem because Japan, with its population steadily decreasing, can keep depending on food imports. Nonetheless, its food production capacity remains core to the country’s food security. Exploring foreign rice markets will help make full use of Japan’s food production capacity.

Rice is the country’s only self-sufficient staple food. Contrary to other food items, the Japanese government has restrained rice production to deal with a glut of rice for nearly 50 years until 2018 through ‘gentan’ — a rice acreage reduction policy.

The glut arose due to a decrease in domestic rice consumption beginning in the 1960s. After the Second World War, Japanese people began to consume more wheat-based products like bread and noodles. Rice consumption per capita declined from 118kg in fiscal year 1962 to 50.8kg in fiscal year 2020. The pandemic recently accelerated this trend by curtailing demand in the food service industry.

The gentan policy assigned a rice production limit to each prefecture every year and subsidised farmers who converted their paddy crops to low-supply items like wheat, feed and soybeans. Since its introduction in the 1970s, the policy had controlled rice production, price fluctuation and farm gate prices.

On the other hand, the gentan policy led to criticisms of the government’s generous subsidies to farmers. Subsidies of up to 1.05 million yen (US$7,250) per hectare in fiscal year 2016 disincentivised rice farmers from properly managing their fields, increasing productivity, and developing crop strategies.

Despite the abolishment of the gentan policy in 2018, the Ministry of Agriculture, Forestry and Fisheries (MAFF) continues to subsidise paddy conversion by rice farmers. But the subsidies are not sustainable — once they stop, farmers will lose their incentive to take advantage of their fields as domestic rice demand falls by approximately 100,000 tons per year.

Rather, Japan should make better use of available resources and pursue for overseas rice markets. MAFF reports that there is growing demand for Japanese rice in areas where everyday rice consumption is common, such as Hong Kong, China and Singapore.

Japan’s rice exports have recently been increasing. Exports of brown and polished rice rose from 4,515 tons in 2014 to 22,833 tons in 2021 — a fivefold increase in 7 years. A third of 2021’s exports were to Hong Kong. Still, total exports make up less than 0.5 per cent of total domestic rice production.

The biggest issue is that Japanese rice is not price-competitive because of the high production costs of small-scale farming in semi-mountainous areas. For example, mega-farms in the United States cost-effectively outsource processes like sowing and fertilisation, unlike in Japan.

The differences in farming scales directly affect the production volume too. Most Japanese rice farms are small-scale so they cannot steadily supply a large volume of rice, as preferred in export markets, and will have trouble establishing sales channels.

Another challenge is motivating farmers to export rice while the generous conversion subsidy is readily available. Although MAFF launched a subsidy scheme to provide 0.4 million yen (US$2,850) per hectare for export-oriented rice production, many farmers still choose to convert their fields.

The first step in overcoming these challenges is to create an environment conducive for farmers to export rice. The Japan External Trade Organization (JETRO) and MAFF are currently compiling basic export information such as market demand, customs clearances and regulations in foreign rice markets for farmers interested in exporting. This will help farmers prepare to scale up and shift to high-yielding varieties of rice.

A fundamental problem underlying Japan’s food security is that the country’s agricultural base is being lost and wasted. Rice exporters seeking overseas markets have great potential to mitigate the risk of food insecurity by making full use of Japan’s agricultural resources.

Yusaku Yoshikawa is an aid consultant at JIN Corporation.

The post Revitalising Japan’s rice industry means targeting export markets first appeared on East Asia Forum.

from East Asia Forum