Japan's rice price controls expose US trade deal hypocrisy

AllAfrica

3 days ago

While Japan was negotiating agricultural market access with the United States, Agriculture Minister Shinjiro Koizumi was busy implementing policy to abandon competitive bidding and set rice prices by government decree.
This contradiction between Japan's negotiating position and its domestic policy demonstrates a dangerous erosion of crisis standards that threatens both bilateral trade relations and the principles of market capitalism and democracy.
On July 22, US President Donald Trump announced a 'massive' trade agreement with Japan that committed Tokyo to open its market for agricultural products, including rice. Yet even as these negotiations were under way, Koizumi had already abandoned competitive market mechanisms.
Specifically, he implemented discretionary contracts to sell government stockpiled rice at predetermined prices of around 2,000 yen (US$13.60) per 5-kilogram bag.
In the short term, the Japanese government has achieved remarkable results. Stockpiled rice priced at approximately 2,000 yen per five kilograms first hit the market on May 31, 2025, with full-scale sales commencing on June 1.
This was accomplished at an exceptional pace, taking only 5-6 days from the discretionary contract announcement on May 26, 2025, to actual retail availability. However, from a longer-term perspective, Koizumi's policy represents a significant setback.
Koizumi justified the intervention by saying that because Japan's rice situation was in crisis, it was imperative for Japan to conduct immediate government intervention.
Indeed, rice prices have surged over 98% year-on-year, but this rise represents normal market fluctuation and hardly constitutes the type of genuine emergency that would justify direct government price controls in a liberal capitalist economy.
The most troubling aspect of the policy is the precedent it sets for future real crisis management.
Faced with public pressure demanding government action on soaring rice prices and the challenge of governing as a minority party, the Liberal Democratic Party-led (LDP) government ignored market mechanisms and directly intervened in price-setting, signaling that political expedience trumps economic rationality.
If rapid price increases justify emergency government intervention, virtually any market volatility could theoretically trigger state price controls. Bureaucrats who follow precedent-based approaches can be expected to utilize and apply this precedent going forward.
Real crises would involve supply chain collapse from natural disasters, military conflicts and others. Japan's rice prices remained within typical market volatility and were never at a crisis level. What Koizumi did was a redefinition of the concept of 'crisis.'
The concept of 'crisis' lacks any objective standards or criteria, allowing politicians to define it freely and arbitrarily according to their subjective and political judgments.
This approach not only fails to solve the underlying issues but also creates expectations that the government will intervene whenever market outcomes prove unpopular.
This policy shift exposes a contradiction in Japan's approach to trade liberalization. On the one hand, Japan promises market access to the United States to maintain a liberal capitalist economic system. On the other hand, Japan violates market mechanisms at home.
This contradiction reflects Japan's unique political circumstances. Although agriculture accounts for roughly 1% of Japan's gross domestic product (GDP), agricultural regions have strong political influence.
This is because of the unique electoral system advantage where rural votes carry more weight than urban votes due to vote value disparities, and the Japan Agricultural Cooperatives Group's disproportionate political power despite representing a shrinking economic sector.
This dynamic results in distorted policies that put more emphasis on electoral calculations than economic efficiency.
Koizumi's decision could also undermine Japan's leadership role in international relations, particularly in advocating for the maintenance of a free trade regime centered on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and similar agreements.
Can Japan legitimately criticize the United States for its growing protectionist tendencies or China for its state-directed economic policies when Japan itself is implementing its own form of centralized price setting?
Koizumi's political immaturity sacrificed long-term benefits for short-term gains. Indeed, television reports showed the masses rejoicing unreservedly, saying, 'We're happy that rice prices have dropped.'
The international community should view Japan's rice price policy not as an isolated agricultural issue, but as a concerning challenge to market principles within the community of developed democracies.
Since World War II, Japan has experienced rapid growth and achieved remarkable economic development under a democratic capitalist system. The government has traditionally adjusted rice prices through indirect incentive mechanisms, such as policies that reduce rice production.
However, we now live in an age where a cabinet minister publicly announces that the government will be able to purchase rice at around 2,000 yen per five kilograms even before it reaches the market.
President Trump, who has issued a succession of executive orders and implemented policies while bypassing congressional procedures, and Minister Koizumi, who released government rice stockpiles through discretionary contracts and set prices without prior Diet approval or legislative oversight, are cut from the same cloth in their disregard for democratic processes.
The stakes for Japan extend far beyond agricultural policy. In an era of rising economic nationalism and skepticism about the benefits of liberal international trade, Japan's retreat from market principles when politically convenient sends precisely the wrong signal about the durability of the global economic order.
Yoneyuki Sugita holds a PhD in US diplomatic history and has previously served as executive director of strategic relationships at Temple University Japan, a senior trade policy advisor at the UK Embassy in Tokyo and professor at Osaka University.