International Agriculture News

Japan’s price-conscious consumers turn to foreign rice

Prices for domestic rice are rising in Japan, driving consumers to cheaper foreign-grown varieties, the imports of which are still strictly regulated. But as more supermarkets and restaurants offer low-cost foreign rice, straining import caps, foreign rice producers are expected to call on the country to open its rice market wider.

In late March, supermarket operator Seiyu began selling Australian rice for the first time in five years, touting its low price. A 4kg-bag goes for 1,180 yen ($10.79), 20% cheaper than Japan’s popular Nanatsuboshi variety. Seiyu is offering the Australian grain at all of its 144 stores in the Kanto region and other parts of the country.

Japan has long protected its rice farmers by restricting imports. But after policies that reduced rice acreage for nearly 50 years through 2017 and encouraged the growing of feed rice, annual production of domestic rice for direct consumption has dropped 11% over the past five years to 7.3 million tons. This has pushed up prices for the third straight year, with retail prices about 10% higher than last year.

Seiyu worked with trading house Sumitomo Corp. and rice wholesaler Yamatane on pricing for the Australian import. “There were no brands of Japanese rice for 300 yen or less per kilogram, and Australian rice satisfied Seiyu’s demand,” said Yamatane President Motohiro Yamazaki.

Foreign rice producers view the price surge as an opening to lobby Japan to accept more imports. In early April, Australia’s ambassador to Japan, Richard Court talked to Japanese rice distributors, outlining the history of Australian rice and saying some of it is similar in taste to Japanese varieties.

The Trans-Pacific Partnership signed in March allows Australia to export up to 8,400 tons of rice to Japan annually. The imported rice is expected to go directly to market.

Meanwhile, the U.S. decision to withdraw from the TPP under the administration of U.S. President Donald Trump disappointed American rice farmers. The trade pact would have allowed them to export up to 70,000 tons to Japan. In 2016, the U.S. Trade Representative said that TPP benefits to the U.S. grain market would come mainly from Japan.

In 1993, Japan was forced to open its rice market and now imports up to 770,000 tons annually under a minimum-access quota system, with rice for direct consumption limited to 100,000 tons. The remaining imports are earmarked for processed foods or animal feed.

Overall, 60% of imported table rice comes from the U.S., 30% from Australia and the remainder from other countries.

Imported rice for direct consumption accounts for only about 1% of Japan’s total consumption. But the recent price hikes caused demand for imports to hit the 100,000-ton limit for the first time in five years during the fiscal 2017 rice auction.

Fast-food operator Yoshinoya Holdings started using U.S. rice at its beef-bowl restaurants about a year ago. Restaurant chains Kourakuen Holdings and Saint Marc Holdings have also begun serving U.S. rice, and the USA Rice Federation is trying to have sushi restaurant operators do the same.

“Japan should not be content growing brand-name rice alone,” said Makoto Hirayama, president of rice wholesaler Kitoku Shinryo. Several types of high-grade rice costing about 3,000 yen per 5kg have been on the market for years, but with real wages in Japan marking their first on-year decline in two years in 2017, consumers are becoming more price-conscious. Many households apparently prefer to spend less than 2,000 yen for the same amount.

Prices for domestic rice are also rising as more production is diverted to feed markets, and the amount available for direct consumption is falling. The production of feed rice now nearly equals 10% of that for table rice. With increasing amounts of domestic rice destined for the high-grade and feed sectors, the low-price category is opening up to foreign rice growers.