Hosokawa Pleads for Patience on Rice Dispute : Japan: Emergency imports have instead led to an artificial shortage as panicky shoppers strip store shelves.

Prime Minister Morihiro Hosokawa Tuesday pleaded for the nation’s patience amid a growing uproar over imported rice that may threaten the government’s ability to keep control of Japan’s highly regulated rice market.

Emergency imports of rice to make up for a poor domestic harvest last year have instead prompted an artificial shortage, provoking chaos both in distribution and at the policy level. There has been panic buying and hoarding of domestic varieties since full-scale sales of foreign-domestic blends began last week.

On the surface, the controversy reflects consumer unwillingness to buy foreign rice, which until now was banned from Japan.

But at a deeper level, the uproar is exposing the irrationality of Japan’s rice distribution system, which is primarily designed to support rice farmers. In the long run, the brouhaha could bode well for imports, especially of California rice, a short-grained variety that fits Japanese tastes. Consumer dissatisfaction has been aimed mainly at long-grained rice from Thailand, which differs in texture and taste from Japanese varieties.

But consumers who may prefer one foreign variety over another cannot pick and choose, because the government is making the foreign rice available only in blends to avoid having to sell the imported varieties at lower prices that would reflect lower consumer demand.

Also, consumers had assumed that even though imported rice came onto the market, domestic rice would still be readily available. But the government is insisting that most domestic rice must be blended with foreign varieties.

As it attempts to preserve what looks more and more like an unworkable system, the government thus finds itself caught in the awkward position of forcing consumers to buy foreign rice--but only at huge markups in price.

Hosokawa, under sharp questioning in Parliament Tuesday, replied with a plea for the public’s “understanding that until the new crop is in, it is necessary to consume a balance of imported rice together with the limited amount of domestic rice.”

But this is fostering further growth of an already out-of-control black market in rice.

Black market prices for domestic varieties and California rice are running 40% or more above the official price at approved shops, while Thai rice has been selling at about half the government price.

The Ministry of Agriculture’s Food Agency, which theoretically controls all rice distribution in Japan, maintains prices at about eight to 10 times the world level as a means of supporting rice farmers. Allowing imports to be freely priced would destroy this system. So when the government decided it had to allow in foreign rice to make up for last year’s poor harvest, it also decided to take windfall profits on its monopoly imports by setting prices close to the level of domestic varieties, which sell for up to $3 a pound.

With most of the price incentive to buy foreign rice eliminated, the government and officially licensed retail outlets now have little choice but to search for ways to force consumers to buy it.

Last week, many markets with some supply of domestic rice began selling it only if customers also bought a bag of imported rice. Outraged citizens brought the practice to the attention of the government’s Fair Trade Commission, which condemned it as a violation of consumers’ freedom of choice.

By Monday, however, the Food Agency was taking nearly the opposite position, saying that domestic rice could be sold only if it either was mixed with imported rice or sold in double packs containing bags of domestic and imported rice.

But these rules apply only to the 70,000 licensed retailers who sell most of Japan’s rice. Estimates are that this year up to a third of the country’s rice supply will be distributed through another 200,000 technically illegal outlets, ranging from gasoline stations to convenience stores.

If the rice black market--which participants often refer to as a “free market”--gets even bigger, that may do more than just undermine the Food Agency’s control of rice distribution. A freer sales system could boost pressures to offer imported rice to Japanese consumers at prices much closer to low world levels. It is no longer clear that the government would have the strength or determination to stop such a trend.