Japan’s Change in Rice Policy Could Hurt State’s Exports

In a move that could worsen trade tensions and affect tens of millions of dollars in California exports, Japan on Thursday announced a sudden change in its rice policy aimed at further shielding inefficient farmers from outside competition.

Midway through a seven-year global trade agreement, Japanese bureaucrats decided to switch to a tariff system that will effectively lower its rice imports by as much as 10% annually while setting the stage for a tax as high as 1,000%.

About half of Japan’s foreign rice comes from California, with the market accounting for about 20% of the state’s annual harvest.

“This is the only way we can protect rice farmers,” said Matsutami Harada, head of Japan’s Central Union of Agricultural Cooperatives, at a packed news conference Thursday to announce the change.

Under the new system, Japan still must import more than 700,000 metric tons in each of the next two years, but the requirement is, on average, 64,000 tons a year less than it was.

In the meantime, a tariff of $1.34 per pound--which analysts estimate could mean as much as 10 times the world price--would apply to any imports exceeding the quota. Then, when the trade agreement is renegotiated in 2001 and the quota is lifted, that steep tariff rate would be the starting point for bargainers.

As word of the change spread this week, foreign trading partners cried foul.

The shift is allowed under world trade rules--in fact, Washington originally pushed Japan to adopt a tariff-based system--and could eventually help liberalize the market. But U.S. government officials say Japan has made some very questionable assumptions in calculating the enormous tariff.

“Any developed nation that has a tariff rate of that sort ought to think again,” said U.S. Trade Representative Charlene Barshefsky in Washington. Another trade official said Washington will challenge Japan.

Although farm policies in many countries tend to be politically charged, Japanese rice issues are particularly sensitive.

After vowing for years not to let a single foreign grain of rice enter the country, Japan agreed in late 1993 to a quota system in which it would import increasing amounts of rice, up to a peak in 2001 of 8% of the 10 million tons it consumes annually.

Over the last few years, however, even this modest competition has started to bite, forcing the government to warehouse mountains of surplus rice and pressure aging farmers to transfer rice farms to other crops.

Meanwhile, foreign growers complain that Japan’s import system is stacked against them at every turn. Government buffers separate buyers and sellers, irregular auctions tarnish foreign reliability, and bureaucrats often channel foreign rice into crackers or foreign aid shipments where Japanese consumers can’t appreciate its quality.

The United States sent almost half of the 640,000 tons of rice Japan imported in fiscal 1997, with almost all of that coming from California.

Ann Veneman, secretary of the California Department of Food and Agriculture, said the state’s farmers have worked hard to boost sales to Japan. “If they’re starting to play games with the whole concept under the WTO, obviously that’s the loss of an important market,” she said.

Virtually all the rice produced on the state’s 2,500 rice farms--located between Chico and the northern reaches of Sacramento--is the high-grade japonica variety favored by Japanese consumers, said Tim Johnson, manager of the California Rice Promotion Board. Japan now buys some 20% of the state’s 1.8-million ton annual harvest.

California farmers also produce japonica far more efficiently and at a fraction of the cost of their Japanese counterparts. The state’s average rice farm is about 300 acres, compared with just a few acres for farms in mountainous Japan. The larger U.S. farms increase economies of scale and encourage mechanization. California farmers, for example, use airplanes to drop pre-germinated seed on flooded fields even as many Japanese farmers still perform this laborious and back-breaking task by hand.

Rice policies in Japan are never far removed from the ruling Liberal Democratic Party’s power base, Japan’s skewed land-use policies and deep-seated insecurities about food and resources.

The LDP has traditionally garnered a disproportionate share of its support from farmers and other rural voters. This latest bid to shield Japanese farmers, combined with the recent hard-line position by Japan against more open fish and forestry markets, suggests the ruling party is reverting to protectionist policies benefiting its core supporters, said John Neuffer, analyst with Mitsui Marine Research Institute.

“We’re entering an era of complacency,” he said. “It’s backslide city.”

Japan’s urban voters may eventually flex their muscles and stop supporting policies that subsidize farmers, prevent inefficient farmland from being converted to much-needed housing and leave consumers with huge grocery bills.

But many Japanese city dwellers still harbor close emotional ties to the farm in the same way many Americans sometimes feel a cultural tie to pioneers and cowboys.

Tomoko Hanzaki, a 34-year-old pharmacist in Tokyo, says she doesn’t mind paying high prices for Japanese rice. Nor does Japan have any obligation to open its market to inferior products, no matter how many cars it sells abroad, she adds.

“Foreign rice tastes bad and Japanese rice is the best. As long as Japan has a rice surplus, there’s no need to import any.”

Although it’s been on the decline, Japan’s per-capita rice consumption in 1995 was 149.1 pounds, compared with 25 pounds for the United States.

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Etsuko Kawase in The Times’ Tokyo bureau contributed to this report.