Increased Imports of U.S. Rice Likely to Have Limited Impact in Japan; Aircraft Agreement, LNG Project May Cause Issues

Yomiuri Shimbun

3 days ago

The outline of the Japan-U.S. trade and investment agreement announced Wednesday by the administration of U.S. President Donald Trump included key U.S. demands such as increased imports of U.S. rice and other agricultural products and the purchase of about 100 commercial aircraft.
Questions have been raised about the feasibility of some elements of the deal, such as a proposed joint project on Alaskan liquefied natural gas.
Imports of U.S. rice were a major focus during the bilateral negotiations. Japan annually imports 770,000 tons of rice tariff-free under a 'minimum access' framework. Tokyo and Washington have agreed the proportion of these imports allocated to U.S. rice will be expanded by 75%.
'The total rice import quota won't increase,' Agriculture, Forestry and Fisheries Minister Shinjiro Koizumi told reporters Thursday. 'During the negotiations, we achieved our goal of keeping the quota at its current level.' Koizumi insisted the impact of the deal on domestic rice farmers would be limited.Japan imported 346,000 tons of U.S.-grown rice under the minimum access framework in fiscal 2024, accounting for 45% of the quota. Boosting the U.S. share by 75% would lift the volume of tariff-free U.S. rice imports to about 600,000 tons, or almost 80% of the total. If realized, imports of rice from Thailand, Australia, China and other nations would be reduced and the framework would be heavily tilted in favor of the United States.
As things stand, 670,000 tons of the rice imported under the framework is used as animal feed or for processing. If the proportion of rice set aside for these two uses stays unchanged even after imports of U.S. tariff-free rice are increased, the impact on consumers is likely to be small.
Japan will also purchase $8 billion (about ¥1.2 trillion) in U.S. agricultural products including corn, soybeans and fertilizer. Japan's imports from the United States in 2024 included about ¥459.3 billion worth of corn and about ¥187.6 billion worth of soybeans. It may be challenging to increase the imports from the current level.
The imported corn is expected to be used for feed as well as fuels such as bioethanol, and some in the government view achieving the increase as not difficult. 'Increasing these imports won't present any problem,' a senior Agriculture, Forestry and Fisheries Ministry official told The Yomiuri Shimbun.
100 aircraft
The Trump administration also leaned on the Japanese government to purchase about 100 commercial aircraft manufactured by Boeing Co. Major Japanese airlines will be paying close attention.
Airline companies have been increasing orders for aircraft as they boost international and domestic routes due to the growth in inbound tourism and other factors. In the past two years or so, three of Japan's major airlines have announced plans to purchase a total of about 100 aircraft.
A large aircraft has a price tag of tens of billions of yen. Airlines must carefully consider aircraft purchases while taking into account the fact that some have a service life of about 20 years.
If airlines are forced to order more aircraft than they need in the years ahead to uphold the Japan-U.S. agreement, there are concerns that profits could deteriorate.
In some cases, an aircraft accident or fault can result in an airline grounding and being unable to use any of that model of aircraft while they are inspected.
To mitigate this risk, airlines also possess planes made by Europe's Airbus SE and other manufacturers. However, this balance could be upset if orders become heavily skewed toward Boeing. Some observers have also pointed out that Boeing's production capacity might not be able to keep up with a surge in orders arising from the agreement.
Alaska LNG project
The Alaska LNG project will involve building a massive new pipeline stretching about 1,300 kilometers from the state's north down to its Pacific coast in the south. Once completed, this pipeline project is forecast to export 20 million tons of LNG per year, equivalent to 30% of Japan's annual demand.
If the pipeline becomes a reality, LNG could be shipped from Alaska to Japan in about eight days, about half the time it takes LNG from the Middle East to reach Japan. This project also offers the advantage of diversifying Japan's LNG suppliers.
'The route doesn't pass through any areas with geopolitical risks,' said Yukio Kani, chair of JERA Co., Japan's largest power generation company. 'It's a fantastic concept.'
The biggest challenge facing this project is the cost. The pipeline will need to navigate three mountain ranges and 800 rivers and streams, and development is projected to cost about $44 billion (about ¥6.4 trillion). One official at a major power generation company was apprehensive about the pipeline project. 'The project will need to gain the understanding of locals concerned about its impact on the environment. The risks are too high,' the official said.