Japan's Rice Shortage Eases: How Will New Rice Impact Consumer Market?

After rice prices in July rose by 17% compared to the same period last year, the latest data from the Japanese government shows that rice prices in the Japanese market are still on an upward trajectory.

Recently, data cited by the Ministry of Agriculture, Forestry, and Fisheries of Japan shows that the average price for a 5-kilogram bag of rice sold in domestic supermarkets in August was 2,266 yen (approximately 114 RMB), compared to 1,839 yen (93 RMB) in the same period last year, an increase of about 23%.

This is also the largest monthly increase since the Ministry of Agriculture, Forestry, and Fisheries began tracking the aforementioned price data in 2006.

This significant increase has sparked market concerns about the future trend of rice prices and supply situation in Japan.

However, fortunately, the new rice crop of 2024 has been gradually hitting the shelves of major supermarkets in Japan, and there are signs of relief from the "rice shortage" in August.

Globally, according to the latest global cereal supply and demand brief released by the Food and Agriculture Organization of the United Nations, the global rice production for the 2024/25 season is expected to be 535.1 million tons, with trade volume at 53.1 million tons, and ending stocks at 204.9 million tons, with a stock-to-use ratio of 38.2%.

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In addition, the latest rice outlook report released by the United States Department of Agriculture on August 14 estimates that global rice production for the 2024/25 season will reach 527.7 million tons, still a historical high, with global ending stocks at 177.4 million tons.

Multiple factors have led to supply tension.

Looking back at the situation of rice supply and demand in the Japanese market in August, the impact of climate change on agricultural production cannot be ignored.

The scorching heat of the summer of 2023 has affected several rice-producing areas in Japan, leading to a reduction in the amount of rice on the market, and the supply-demand tension has caused prices to rise.

Secondly, while production has declined, the consumption of rice in Japan has unexpectedly increased this year, which is also seen as one of the reasons for the recent shortage of rice supply in the market.

Due to the long-term aging and low birth rate, the demand for rice in Japan has been decreasing by about 100,000 tons per year in recent years.

However, in the 12 months ending in June of this year, the demand for rice increased by 110,000 tons to 7.02 million tons, the first increase in 10 years.

Eiichi Aikawa, Executive Director of the Japan Rice Millers Association, believes that the prices of bread and other food items are rising, and although the price of rice is also rising, the average increase is only about 10%, so people may prefer to choose rice.

In addition, the record number of overseas tourists since last year has also increased the consumption of rice.

According to the Ministry of Agriculture, Forestry, and Fisheries' estimate, from July 2023 to June 2024, assuming each tourist consumes 78 grams of rice per meal, twice a day, the demand for rice from tourists will reach 51,000 tons, an increase of 31,000 tons compared to the previous year (July 2022 to June 2023).

Behind these factors, Kazuhito Yamashita, former official of the Ministry of Agriculture, Forestry, and Fisheries and Director of Research at Canon Global Strategic Institute, believes that the root cause of this "rice shortage" is the Japanese government's long-term "rice reduction policy," which is the regulation of rice production.

"For a long time, rice has been the staple food of the Japanese, and the self-sufficiency rate of Japanese rice is almost 100%.

However, with the decrease in population and the gradual shift in consumption habits towards bread and other staple foods, the demand for rice in Japan has decreased."

Yamashita said, "To ensure the stability of rice prices, the Japanese government has been implementing policies to control the area of rice cultivation for more than 50 years, providing subsidies to rice farmers who switch to other crops such as wheat or soybeans.

Under the influence of this policy, the production of rice in Japan has been decreasing year by year, and the breeding plan for rice varieties with high per-unit-area yield has also stagnated.

Therefore, under the strict control of the government, once there is a slight increase in demand, such as the current influx of overseas tourists, a shortage will occur."

The supply of new rice will reach a peak.

At the end of August and the beginning of September, Yoshihiro Yodogawa, Governor of Osaka Prefecture, called on the Japanese central government to release reserved rice as soon as possible to alleviate supply tension, but did not receive a response from the Japanese central government.

Reserved rice refers to the rice purchased and stored by the Japanese government every year, with a total reserve of about 1 million tons.

Japan has also had precedents for using reserved rice in the past.

During the Great East Japan Earthquake in 2011 and the Kumamoto Earthquake in 2016, Japan released reserved rice.

On August 30, Agriculture, Forestry, and Fisheries Minister Tetsushi Sakamoto said at a press conference that new rice is about to hit the market, and the Ministry of Agriculture, Forestry, and Fisheries will not release reserved rice to avoid affecting the circulation of rice.

Sakamoto explained that releasing reserved grain requires a bidding process, and by the time the process is completed, the rice shortage problem may have been alleviated.

The Ministry of Agriculture, Forestry, and Fisheries judged that the new rice produced in Chiba Prefecture and Ibaraki Prefecture has already hit the market, and the rice in Niigata Prefecture and the Tohoku region will also be harvested soon, so the supply of new rice will reach a peak soon.

However, although the arrival of new rice will alleviate the "rice shortage" that appeared in the Japanese market before, the price seems difficult to return to the past.

At present, the rice from Ibaraki Prefecture that has been on the market has increased in price by 30% to 90% compared to the same period last year due to different sub-varieties.

Niigata Prefecture, also a major rice-producing area in Japan, has seen a price increase of about 60% for new rice.

The Hokkaido and Akita Prefectural Agricultural Cooperatives (JA) have also decided to purchase rice from farmers at high prices.

Sakamoto said on September 17 that once a large amount of new rice enters the market and the circulation channels remain unobstructed, the supply will return to balance, and the price will also tend to stabilize.

At the same time, to cope with the increasingly frequent extreme weather, information on the Japan Agricultural Cooperatives website shows that the Japanese government is actively promoting the planting of rice varieties that are resistant to high temperatures.