Photo/Illutration Stockpiled rice stacked in a warehouse in Saitama Prefecture on Feb. 12 (Asahi Shimbun file photo)

The government has revised its regulations governing stockpiled rice, opting to release portions of its reserves into the market. This decision is an exceptional measure aimed at mitigating the sharp increase in prices of this essential Japanese staple.

Although the price of goods should generally be left to market forces, there is a compelling argument for intervention when sudden fluctuations in supply, demand and pricing arise due to distribution bottlenecks.

It is imperative that the government thoroughly investigates and addresses the underlying factors that precipitated these surging rice prices and necessitated this emergency response.

The rice shortages were first felt last summer, leading to a spike in prices. Although the shortage was resolved with the arrival of the new harvest in the fall, prices have continued to remain elevated.

The Ministry of Agriculture, Forestry and Fisheries attributes the persistent high prices primarily to a distribution bottleneck. Additionally, the ministry notes that speculative purchasing by small businesses and some farmers’ reluctance to sell--driven by expectations of further price increases--have also contributed to keeping rice prices high.

Previously, the release of emergency rice stocks was restricted to periods of poor harvests or disasters.

However, the criteria have now been expanded to include scenarios where “smooth distribution is hindered.” Under this new policy, the same quantity of rice must be repurchased within a year. This stockpiled rice is then sold through a bidding process to collectors--entities like agricultural cooperatives that acquire rice from producers and distribute it to wholesalers and end-users.

The sharp increase in prices of this staple food strains national living standards and disproportionately affects low-income families. If the aim of the government’s new rice policy is to discourage speculative activities that drive up prices and to ensure efficient distribution, the temporary augmentation of market supply through this measure is justifiable.

Government intervention in the market, however, should be limited and executed transparently, guided by clear criteria and with good reason. The effects of this rice release on retail sales volumes and prices remain uncertain.

There has been criticism about the ministry’s handling of the situation over the past year. Initially, as shortages became widespread, the ministry failed to anticipate the decrease in polished rice volumes due to quality issues, along with increased rice demand driven by rising prices for bread and noodles and the resurgence of foreign tourists in Japan. In an attempt to reassure the public, the ministry prematurely described the surge in prices as a temporary issue.

In recent years, distribution channels have diversified as more transactions bypass traditional agricultural cooperatives and major wholesalers, complicating the ministry’s ability to monitor stock levels accurately. This diversification should be welcomed and the government should, under the assumption that the market functions properly, develop a system capable of rapidly detecting price fluctuations through the expanded and enhanced use of price indices and stock surveys.

Additionally, recent price increases are viewed as a correction of excessively low prices in the past. Rising production costs and labor shortages certainly justify the need for appropriate price adjustments to reflect these economic realities.

The instability in the supply-demand balance and price volatility can also be attributed to a longstanding flaw in agricultural policy, where production has been reduced in response to decreased demand to prevent price declines.

Rather than merely implementing temporary fixes, the government should seize this as an opportunity to thoroughly review and improve its overall rice policy. This reform should aim to bolster productivity and ensure sustainability, addressing the root causes of the current challenges.

--The Asahi Shimbun, Feb. 15

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