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Economy & Business

While Demand For Rice In Japan Is Down, Prices Are Going Up


Now a story about rice in Japan with an unexpected turn. A few years ago, the size of Japan's overall rice market was about 12 billion U.S. dollars. That number may sound really big, but it's a little bit deceptive. To tell us why, here's Stacey Vanek Smith and Sally Herships from the Planet Money team.

SALLY HERSHIPS, BYLINE: The Japanese are eating less rice.

KAY SHIMIZU: A recent survey done by the Ministry of Agriculture - 7 percent of Japanese people said they haven't eaten a single grain of rice in the last month.

HERSHIPS: Kay Shimizu is writing a book about the changing nature of Japanese agriculture. She says the Japanese are eating about half as much rice as they did in the 1960s.

STACEY VANEK SMITH, BYLINE: This decline has been happening for a while. But at the same time, the price of rice has been going up. And this seems like a reversal of the key economic law of supply and demand. So how is this happening? First, Japan's population is declining, so there are fewer people eating rice.

HERSHIPS: Next, Japan's population is aging, and older people eat fewer calories. And after World War II, Japan's economy got much stronger. So as people had more money, they ate more protein and less rice. Finally, tastes began to change. Bread and pasta became more popular. And this is where the lunch ladies come in.

SHIMIZU: The lunch ladies got together and used their union to protest having to deal with sticky rice on plates when there was the bread and pasta option. And so when school menus were being discussed - and lunch lady unions have a voice in this - many of them decided that they prefer cleaning bread and pasta over rice. And there you go.

HERSHIPS: Now, you might think that when demand falls, we would see a drastic decline in supply. But no.

SHIMIZU: Even to this day, I can say 90-plus percent of farmers grow some amount of rice.

VANEK SMITH: There are a couple of major reasons for this reason. Reason No. 1, rice is relatively easy to farm. So there are actually a lot of part-time rice farmers in Japan.

HERSHIPS: Reason No. 2, after World War II, Japan wasn't able to grow enough rice. So Japan decided to pay its farmers subsidies to grow rice so there would always be enough. Then in 1999, it also slapped a tariff on imports of foreign rice of more than 700 percent.

VANEK SMITH: But if demand is falling, why wouldn't these subsidies and tariffs be killed off? Well, rural voters, like farmers, represent a big voting bloc. And politicians want to keep them happy. But demand for rice has fallen off a cliff. So if you are the Japanese government, what do you do?

HERSHIPS: The Japanese are eating more meat like beef. And the country's cattle farmers have become heavily dependent on corn and soybean imports. So the government came up with an idea.

SHIMIZU: So why not, the government thought, subsidize farmers to grow rice that can be eaten by cow?

VANEK SMITH: Cows. This is one of the reasons for the seeming supply and demand mismatch. In 2015, the amount of rice grown for cattle feed doubled over the year before. And here's the thing about rice for cows.

HERSHIPS: (Laughter) Yes.

VANEK SMITH: So to grow it, a farmer does not have to put in as much time. In fact, 20 percent less time to grow rice for cows than people rice.

SHIMIZU: A farmer that grows cattle feed rice gets twice as much income for the same amount of rice or same acreage of rice as a farmer who grows rice for human consumption.

VANEK SMITH: Which explains why there is less rice being produced for humans, so much less rice that prices of human rice have gone up by 30 percent. Somehow, I feel like the cows are behind this. Stacey Vanek Smith.

HERSHIPS: Sally Herships, NPR News. Transcript provided by NPR, Copyright NPR.