Motohiro Yamazaki: How to View the "Rice Shortage"—From a Distribution Perspective

2025/06/13

From last summer to last autumn, reports surfaced regarding the "Reiwa Rice Crisis." It was described in comparison to the "Heisei Rice Crisis" that caused a stir in 1993 (Heisei 5). At the beginning of the commotion, the government ended up selling off its stockpiled rice (rice kept to respond to supply shortages during poor harvests), despite having declared it would not release it. As of the end of April 2025, a third round of bidding for stockpiled rice has taken place, but the average price for a 5kg bag of polished rice at mass retailers has been rising for 16 consecutive weeks. There is still no sign of the rice crisis subsiding.

Discussions about rice often fall into a trap where various elements—boasting about gourmet quality, rice as a general food ingredient, rice as a staple food, or rice in relation to land conservation (water sources)—are suddenly brought into the same arena, making it impossible to reach a conclusion. Here, I would like to focus on the perspectives of general food products and staple food supplies.

Heisei 5 (1993) saw a poor rice harvest and a major crop failure due to cold weather damage. Nationwide, there were low temperatures and a lack of sunlight, with heavy rain in both Western and Eastern Japan, resulting in the first nationwide cool summer since 1954. No declaration of the end of the rainy season was issued, except for the Okinawa and Amami regions. The crop yield index (*1) for that year was 74 nationwide. The region with the best crop condition was Okinawa at 108. Hokkaido was 40, Aomori 28, Iwate 30, Miyagi 38, Akita 83, Niigata 89, Toyama 87... yields were significantly below average across the board.

The harvest volume was approximately 7.4 million tons. Demand at the time in Heisei 5 was about 10 million tons. Due to the rice supply shortage, rice prices began to rise gradually from early autumn. The Hosokawa Cabinet at the time reversed the previous embargo policy of "not letting in a single grain of rice" and announced in September that it would conduct emergency imports totaling 2.59 million tons from Thailand, China, the United States, and other countries.

The imported rice consisted mainly of long-grain varieties that do not work well as Japanese "gohan" (steamed rice). Because consumers avoided such imported rice, the government instructed rice distributors to sell it mixed with domestic rice, which increased consumer dissatisfaction. In June of the following year, Heisei 6 (1994), the situation gradually calmed down as the harvest of early-season rice from Okinawa Prefecture began.

That year, Heisei 6, saw a heatwave, and reports of a bumper crop nationwide turned the situation around, completely ending the rice crisis. Based on this experience, the government's rice stockpiling system was established.

*1 The crop yield index is an index showing the year's harvest volume, with the average harvest per 10 ares of paddy field set at 100. 106 or higher: Good / 102–105: Slightly Good / 99–101: Average / 95–98: Slightly Poor / 94 or lower: Poor.

In the summer of Reiwa 6 (2024), mass retailers lacking rice stock began to appear here and there. The government's explanation was that things would settle down by the time the new rice hit the market. As the harvest season for new rice arrived, the crop yield index for the Reiwa 6 crop was announced as 101, yet the distribution of new rice progressed slowly, and procurement prices for rice distributors continued to rise.

Around the end of the year, the government began explaining that while rice existed, distributors were hoarding it for speculative purposes. Entering Reiwa 7 (2025), rice prices recorded all-time highs. The government's expectation that speculators would start selling for cash proved wrong, and at the end of January, it announced the implementation of bidding for stockpiled rice, which had been stored for food supply emergencies such as major crop failures. After conducting bidding for 150,000 tons from March 10 to 12, a second round was held from March 26 to 28, and a third from April 23 to 25. In total, over 300,000 tons were successfully bid for. The government states it will release stockpiled rice until retail prices drop (estimated until July), and future bidding will target rice that is two or three years old.

On the other hand, imported rice, primarily from the U.S. and Taiwan, is already appearing on the shelves of mass retailers as well as for commercial use (restaurants and ready-made meals), and it has received a certain level of positive evaluation from consumers. Unlike the emergency imports of Heisei 5, these are short-grain or medium-grain varieties, and the quality has improved since then. They are being accepted by consumers as "gohan."

The cause of the Heisei Rice Crisis was a crop failure in a single year (the previous year was 101 = average, the following year was 109 = bumper crop). While the cause of the Reiwa Rice Crisis remains unclear, looking at the crop yield index, Reiwa 4 was 100 (average), Reiwa 5 was 101 (average), and Reiwa 6 was 101 (average), suggesting no particular problem in terms of the index. One notable event was in August of Reiwa 6, when the Japan Meteorological Agency issued the "Nankai Trough Earthquake Extra Information (Megaquake Advisory)" following an earthquake with an epicenter in the Hyuga-nada Sea that measured a lower 6 on the Japanese intensity scale in Miyazaki Prefecture. This information triggered household stockpiling as a disaster preparation. However, rice had already begun disappearing from mass retailer shelves in July.

And as mentioned earlier, the decision to release stockpiled rice was made at the end of January the following year. In contrast, during the Heisei era, the cool summer was caused by the 1991 eruption of Mount Pinatubo, and the government announced the implementation of emergency imports in September. Heisei was a crop failure; Reiwa was an average harvest. In Heisei, measures were announced during the harvest season, but in Reiwa, measures were only introduced in the following year.

Another difference is the law. The Heisei era was under the Food Control Act. Reiwa is under the "Act on Stabilization of Supply, Demand and Prices of Staple Food (Food Law)."

New rice, new tea, new buckwheat, or the first bonito of the season—we Japanese appreciate the first products of the season. Among these, rice is perhaps the ultimate example, with strong preferences for the harvest year, production area, and variety. Rice distributors generally secure their annual sales volume of the current year's rice during the autumn harvest. They enter into purchase contracts with major suppliers and procure any shortfall as needed throughout the year through collectors or inter-dealer transactions. During bumper crops, there is a "sentiment of future price declines," so they tend to limit autumn contracts and allow more room for as-needed procurement. In years when procurement seems likely to become difficult due to some factor like a poor harvest, they increase their primary contracts in early autumn.

The current rice crisis began with the Reiwa 5 crop. Although the crop yield index for the Reiwa 5 crop was 101, there were quality issues, and from the beginning of Reiwa 6, the rice distribution industry was concerned about a rice shortage during the off-season (late summer to early autumn). It became a major topic of conversation around spring, and by June, there was a conviction that rice would run out. Trading for early-season Reiwa 6 rice took on the appearance of a scramble, and the previous year's crop, which would normally be sold until October, disappeared.

By early autumn, when rice from major production areas hits the market, prices had already begun to skyrocket. The government explained to both the industry and consumers that distributors were holding onto stock for speculative purposes, but such movement could not be confirmed through the rice distribution industry's information networks. The industry's perception was simply that "there is no rice" and "the harvest isn't as good as the index suggests." Many collectors and brokers operate on a cash basis. With rice prices more than doubling, from a cash flow perspective, even if the goal were speculation, cashing out should have begun, yet rice did not appear on the market. It seems the harvest volume was indeed insufficient.

By the way, why haven't rice prices dropped despite the start of stockpiled rice sales? It is likely because there is a significant time lag between the theoretical scheme and the movement of goods on the ground. As of the end of April, over 300,000 tons have already been sold. However, less than 10% of the actual goods have reached the end-users. Commercial processes such as name changes and settlements take time, and realities such as cargo handling at warehouses and the decline in logistics functionality due to the truck driver shortage—the so-called "2024 problem"—are creating a large time lag from the theoretical plan. After this, if another 200,000 tons or so are sold, the total amount will equal one month's worth of domestic demand, and by the time those are distributed, new rice from the Year 7 crop will also begin to hit the market.

There is the "Rice Distribution 2040 Vision" published last June by the National Rice Sales Business Mutual Aid Cooperative Association (Zenmeihan), the rice wholesaler industry group where I currently serve as chairman. This vision was prepared after being inspired by data submitted to the 5th Basic Law Verification Subcommittee of the Council on Food, Agriculture and Rural Area Policies (December 9, 2022), which stated that the demand for staple rice, which was 7.04 million tons in 2020, would shrink to 4.93 million tons by 2040.

A point raised in unison by many think tanks and agricultural researchers, in addition to this vision, is that in the 2030s, domestic demand for rice will no longer be met by domestic production alone. This is a situation that the rice distribution industry cannot overlook. Furthermore, just imagining that such a situation could arrive more than 10 years ahead of schedule is enough to cause sleep deprivation.

The "Heisei Rice Crisis" occurred under the Food Control Act. The "Reiwa Rice Crisis" is under the new "Act on Stabilization of Supply, Demand and Prices of Staple Food." Even after the enactment of the new law, substantial acreage reduction policies have continued. What the government fears is a rice surplus leading to a drop in rice prices. To avoid this, substantial acreage reduction policies (production adjustment) continue.

If rice farming is based on actual demand (restaurants, ready-made meals, mass retailers, rice processing manufacturers, etc.), supply and demand will balance. However, rice farming not linked to actual demand can lead to overproduction, which consequently causes rice prices to fall. The government does not interfere with rice farming based on actual demand, but producers watching from the sidelines might turn toward rice farming for which there is no demand. Therefore, the government discourages all increases in rice production (regardless of demand). The aforementioned 2040 Vision calls for the establishment of vertical and horizontal alliances within the rice supply chain, from producers to end-users (upstream to downstream) and among industry peers.

Until now, the rice sought by end-users was rice with a so-called "story"—a focus on water quality, soil, climate, variety, and farming methods. It was a story of how delicious rice is grown. However, about five years ago, a change began to appear in the stories sought by end-users. They began to look at infrastructure such as water management and collection facilities, government support, and not just agricultural cooperatives and collectors, but also the population trends of the area. In short, they want evidence that the production area has an environment capable of maintaining rice farming 5 or 10 years into the future.

Conversely, even with excellent quality rice, if production might stop the following year, one would have to search for a new production area again. To save that effort, sustainable rice farming is starting to be viewed as the highest priority. In fact, the number of young farmers practicing farming methods that set them apart from traditional conventional methods is increasing (including a significant number of Keio University alumni).

I feel a strong need to explore new distribution methods while maintaining traditional conventional distribution. Beyond that, there should be a supply chain with farming methods that maintain stable harvest volumes, profits that allow producers to continue rice farming, and a market that can absorb fluctuations in harvest volumes.

That is the answer from a distributor to the rice shortage.