DURING Japan’s Edo period, feudal lords were warned that peasant revolts start with rice. Prime Minister Shigeru Ishiba is finding political survival can still hinge on the price of the staple food.
The cost of rice has more than doubled over the past year, straining household budgets and forcing people to find alternatives. It’s gotten so bad that some schools are cutting back on rice-based school lunches, a drastic move in a country where the meals are seen as key to raising healthy children.
Food inflation had already become a major headache for the ruling Liberal Democratic Party ahead of July’s national election. Then, the agricultural minister bragged that he personally never bought rice because his supporters gave him so much that he could sell it if he wanted to. Three days later, he was out of a job. Ishiba is trying desperately to avoid the same fate.
Support for Ishiba’s cabinet has fallen to the lowest levels since he took office last October, according to surveys published by major Japanese news organizations. The cost of food has fueled a fight over whether it should be curbed by cutting the sales tax. This has emboldened opposition parties, who excoriated the former agricultural minister for being out of touch with the hardships ordinary people face amid soaring prices.
“Rice policy will have a major impact on the upper house election,” said Kazunuki Ohizumi, professor emeritus at Miyagi University, who specializes in agricultural policy. “The continued high prices are largely due to missteps by the ministry of agriculture, and the minister’s gaffe only made things worse.”
The government has sought to cut prices by releasing some of the country’s emergency reserves, kept in warehouses in case of natural disasters. That has failed. Despite selling over 200,000 tons of the grain to distributors in March, only about 11% of the amount actually found its way into stores. The rest has been held up in the supply chain.
The government released another 100,000 tons last month, but prices hit a record on May 5th. Fear of a shortfall in this year’s harvest is helping prop up prices, according to Katsuhito Fuyuki, a professor at Tohoku University who specializes in agricultural economics.
“In March, trade prices among dealers dropped temporarily, but the market judged the release as ineffective, and prices went up again in April,” said Fuyuki. “Unless the government clearly signals that new rice will be properly supplied, prices probably won’t come down significantly.”
The price surge has been caused by a broken supply chain. Despite an increase in last year’s harvest, the collection agents who buy from farmers reported a drop off in the amount they were able to purchase. While the cost of rice in Japan keeps rising, the Asian benchmark has fallen 13% this year.
The new agricultural minister, Shinjiro Koizumi, said he told his staff to rethink the system from scratch and would be willing to release rice from reserves without limits if necessary.
“Our top priority is rice,” he said at a press conference on Wednesday night. “We will do everything in our power to provide rice to consumers at a stable price.”
However, imports are a politically sensitive topic. In contrast to many other types of food, the country has high tariffs on rice to protect domestic farmers, who are a key voting bloc for the ruling party. Still, in response to US President Donald Trump’s repeated criticism, Ishiba said earlier this month that increasing imports could be one possible concession Japan might offer.
Despite the tariffs, high domestic prices offer an opportunity for some importers. Supermarket chain Aeon Co Ltd. plans to begin selling California rice for about 15% less than the average price of domestically produced rice.
“This launch couldn’t come at a better time for consumers,” said US Ambassador to Japan George Glass at a promotional event for Calrose rice last week.
With persistent inflation damping consumer sentiment, opposition parties are redoubling calls for a cut in the consumption tax, a proposal that could potentially bolster their public support. Ishiba has pushed back against the idea, citing Japan’s precarious fiscal situation, which he claimed is even worse than that of Greece.
Lowering the consumption tax to 5%, as proposed by the Democratic Party for the People, would reduce the average household’s annual financial burden by about ¥141,000, according to estimates by Toshihiro Nagahama, chief economist at the Dai-Ichi Life Research Institute. The measure could also lift real GDP by around 1.1 percentage points, while it would lead to a significant decline in tax revenue, the economist said. Another proposal is to eliminate the tax for food, while keeping it for other items.
“People want to see rice prices fall,” said Miyagi University’s Ohizumi. “To make that happen, we need emergency, short-term and long-term measures. For now, even taking just the emergency steps would help.” –BLOOMBERG
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