Why are prices still high despite a rice surplus? What lies behind the vested interests that Politician and Bureaucrats are flocking to?

Agricultural cooperatives’ reluctance to sell prevents prices from falling

The price of a five-kilogram bag of rice has finally fallen below ¥3,500.

According to an announcement by the Ministry of Agriculture, Forestry and Fisheries on the 17th, the average price of five kilograms of rice sold at supermarkets nationwide between July 6 and 12 was ¥3,403. Branded rice, which accounts for nearly 80% of sales volume, averaged ¥3,455. This was the first time in two years that the average price of branded rice had fallen below ¥3,500.

According to estimates by the Ministry of Agriculture, Forestry and Fisheries, production of the 2025 crop is expected to reach 7.47 million tons, while projected demand is between 6.91 million and 7.04 million tons. In contrast to the “Reiwa rice crisis” of 2024, there is now a surplus of 2025-crop rice.

“If you look only at the supply-and-demand balance, rice prices should be falling further. The reason they aren’t is probably because some of the companies collecting rice are putting the brakes on sales.”

So said Hajime Oizumi, professor emeritus at Miyagi University, who specializes in agricultural management.

The Ministry of Agriculture, Forestry and Fisheries announced on the 30th of last month that private rice inventories stood at 2.23 million tons at the end of May. The amount of 2025-crop rice sold to wholesalers by rice collectors such as agricultural cooperatives by the end of May was a record-low 1.32 million tons. Sales have stagnated, leaving rice-collecting organizations holding large amounts of inventory.

What exactly does it mean that the brakes are being applied?

“Last year, under the direction of then Agriculture, Forestry and Fisheries Minister Taku Eto, 310,000 tons of government stockpiled rice were released. The stockpiled rice was sold through competitive bidding, with JA Zen-Noh (National Federation of Agricultural Cooperative Associations) winning about 90% of the contracts. The bidding was subject to a condition that the government would, in principle, buy back rice of the same quality and quantity within one year (later extended to five years).

“This means that the government may purchase the inventory currently being held by agricultural cooperatives. If that happens, the cooperatives’ inventories will shrink.

“From now on, agricultural cooperatives across Japan are likely to begin appealing to the Ministry of Agriculture, Forestry and Fisheries, saying, ‘There is too much rice and inventories are piling up. If we sell it cheaply to wholesalers, rice prices will collapse.’”

At the House of Councillors Committee on Agriculture, Forestry and Fisheries on the 7th of this month, ruling and opposition lawmakers apparently pressed Agriculture, Forestry and Fisheries Minister Norikazu Suzuki to buy back the government’s stockpiled rice early, possibly after being asked by agricultural cooperatives in their constituencies to lobby the government.

There is a reason agricultural cooperatives are urging the government to buy back the stockpiled rice.

“If agricultural cooperatives try to dispose of their inventories themselves, they have no choice but to sell to wholesalers at a loss. That would drive down the market price of 2025-crop rice. By having the government take the rice off their hands, the cooperatives want to clear their inventories without lowering prices.”

Massive loss-cutting by wholesalers left without government relief

Agricultural cooperatives that can have the government purchase their excess inventories may avoid suffering major losses. The problem, however, is the rice-collecting businesses outside the agricultural cooperative system that fall outside the government’s safety net. Once the new crop begins appearing on the market, inventories of 2025-crop rice will become old rice. Before that happens, small and medium-sized wholesalers will have no choice but to clear their inventories, even if it means taking a loss.

“Normally, from August through October, the rice sold in supermarkets gradually shifts from old rice to new rice. This year, wholesalers are expected to delay purchasing the new crop, which means the transition from old rice will be pushed back. Even once the new-rice season arrives, I think a lot of old rice will remain on the market.

“Supermarkets will have to work desperately to sell 2025-crop rice through October. Retail prices will probably continue to fall.”

The question is how far those prices will fall. Just how cheap could rice become?

“Considering the current financial situation of rice farmers and the supply-and-demand balance, I think an average price of around ¥3,000 per five kilograms would be a reasonable landing point. There is a possibility that prices could fall below ¥3,000 as September approaches. We may see five-kilogram bags of rice selling for ¥2,980.”

Prime Minister Sanae Takaichi said at the House of Councillors Budget Committee on the 17th that the timing of the buyback of government stockpiled rice would be appropriately determined by the Ministry of Agriculture, Forestry and Fisheries after assessing future supply-and-demand conditions. On the other hand, there have also been reports that Takaichi has refused to buy back the rice because doing so would run counter to measures aimed at combating rising prices.

“If the government does not buy back the stockpiled rice, there is a possibility that prices will fall even further.”

A report says that Agriculture, Forestry and Fisheries Minister Norikazu Suzuki, who wants to maintain high rice prices, approached the Prime Minister’s Office about buying back the government’s stockpiled rice, but Prime Minister Sanae Takaichi refused, saying it would run counter to measures to combat rising prices.

How government intervention manipulates rice prices

So, what will happen to the price of the new 2026-crop rice that will begin appearing on the market in autumn? Some forecasts suggest that it will be cheaper than last year (when five kilograms cost ¥4,000 or more), but it may be premature to assume prices will fall enough to provide major relief to household budgets. It appears that the government and agricultural cooperatives have already begun building a high-price maintenance framework to prevent new-rice prices from falling.

“Agriculture, Forestry and Fisheries Minister Suzuki says that prices are determined by the market, but Japan currently has no truly free rice market. Retail rice prices are determined according to the advance payment that agricultural cooperatives make to farmers when collecting rice and the negotiated prices at which agricultural cooperatives sell rice to wholesalers. In practice, JA Zen-Noh controls rice prices.

“To intervene in that process, the government introduced something called a cost indicator this spring.”

The cost indicator is calculated by adding up the various costs, from production, including fertilizer and labor expenses, through collection, wholesale, and retail. It does not include profits. The Ministry of Agriculture, Forestry and Fisheries had the Rice Stable Supply Support Organization (Rice Stockpile Management Organization) create it based on the Food System Act.

As of April, the cost index published by the organization put production costs at ¥20,535 per 60 kilograms of brown rice. Adding the expenses for collection, wholesaling, and retail brings the total cost to ¥30,412. Furthermore, assuming a milling yield of 0.9 from brown rice to milled rice, the cost indicator for five kilograms of milled rice was calculated at ¥2,816.

The government’s intentions and motives behind introducing the cost indicator are as follows.

“The Ministry of Agriculture, Forestry and Fisheries probably believes that farmers cannot remain in business unless production costs are around ¥20,535 per 60 kilograms. So, it created the cost indicator to encourage wholesalers, retailers, and consumers to accept prices that include farmers’ costs as legitimate. Its true purpose is to protect rice farmers.”

In fact, the cost indicator uses a calculation method designed to protect certain farmers.

“The cost indicator is calculated based on the extremely high production costs of small-scale farmers cultivating less than three hectares. The rice produced by these farmers accounts for 30% of total national production.

“In other words, the Ministry of Agriculture, Forestry and Fisheries is trying to maintain prices at levels that ignore the supply-and-demand balance in order to keep low-productivity small-scale farmers in business.”

Government pressure to establish a floor for new-rice prices

The Ministry of Agriculture, Forestry and Fisheries resumed purchasing government stockpiled rice for the first time in two years and, instead of beginning the purchases in January as usual, held the first bidding for 2026-crop rice on April 14. By June, it had purchased the entire planned volume of 207,521 tons.

The purchase price has not been disclosed, but it is believed to be around ¥20,500 per 60 kilograms of brown rice. Professor Emeritus Oizumi points out, “The Ministry of Agriculture, Forestry and Fisheries probably used the production cost of ¥20,535 in its own cost indicator as the benchmark for the purchase price.”

“The government has never paid more than ¥15,000 per 60 kilograms for stockpiled rice before. This time, however, it purchased it for ¥20,500. This is nothing less than a silent message to buyers that rice entering the market should be traded at a price higher than this.”

The purchase price of stockpiled rice could become a benchmark for the advance payments that agricultural cooperatives make to farmers.

“As has been the case until now, I think the advance payment will generally be set ¥2,000 to ¥3,000 higher than the price of stockpiled rice. The fact that the rice was purchased this time for ¥20,500 means the advance payment will be ¥23,000 to ¥24,000.

The Ministry of Agriculture, Forestry and Fisheries probably wanted to maintain roughly this level as the minimum price for new rice.

To achieve that, it created the cost indicator and fixed the floor by setting the purchase price of stockpiled rice at just over ¥20,000. In other words, it could be said that the government intervened through policy measures to stabilize prices at a high level.”

If the advance payment is ¥23,000 to ¥24,000, approximately how much will 2026-crop rice cost? Will this year’s new branded rice also exceed ¥4,000?

“Recently, anticipating that the arrival of new rice will be delayed, JA Zen-Noh and agricultural cooperatives across Japan have begun saying, ‘We cannot guarantee a minimum guaranteed price for the advance payment. We can’t even pay ¥20,000.’ In response, the Ministry of Agriculture, Forestry and Fisheries is using its agreement with JA Zen-Noh as leverage to strongly demand that advance payments be made in line with the cost indicator.

“Right now, a struggle is taking place within the group consisting of JA Zen-Noh, agricultural cooperatives, and the Ministry of Agriculture, Forestry and Fisheries. Caught between government-controlled prices and actual supply-and-demand conditions, agricultural cooperatives and JA Zen-Noh are facing an extremely difficult situation over where the advance payment for 2026-crop rice will ultimately settle.

If the advance payment is around ¥24,000, retail prices would theoretically fall below ¥3,500 per five kilograms. However, as long as the ¥20,500 purchase price for stockpiled rice functions as the floor, prices will not fall drastically below that level.

Even if some rice falls below ¥3,500, it will be limited to certain lower-grade varieties. Whether new branded rice falls below ¥4,000 will depend on the outcome of this struggle.”

The Ministry of Agriculture, Forestry and Fisheries announced that private rice inventories at the end of May reached a record high of 2.23 million tons. If efforts to dispose of excess inventories spread from here, rice prices could potentially fall—but will they really? (Photo for illustrative purposes)

Self-preservation and vested interests. High prices at consumers’ expense

The surge in rice prices has undoubtedly accelerated the move away from rice over the past year.

“If rice prices remain high like this, people will unquestionably continue moving away from rice. What are they going to do?

The Ministry of Agriculture, Forestry and Fisheries is currently using approximately ¥300 billion in direct payment subsidies for the utilization of paddy fields to promote a campaign encouraging farmers to reduce their production of rice for staple consumption and shift to other crops. It is holding informational meetings across the country in cooperation with the JA Group. In other words, in response to people moving away from rice, the ministry is pursuing the completely backwards policy of preventing overproduction in order to keep prices high.”

The policy of encouraging farmers to switch crops, backed by enormous amounts of public money, is intended to prevent rice prices from falling. The intentions of the Ministry of Agriculture, Forestry and Fisheries and agricultural cooperatives are by no means simply to rescue farmers.

“First of all, by keeping rice prices high, agricultural cooperatives want to retain the small-scale farmers who make up 85 percent of all farmers. There are two reasons for this.

Agricultural cooperatives are cooperatives of agricultural producers, which is precisely why they have been granted the privilege of operating financial and insurance businesses in addition to their core agricultural guidance and purchasing operations. But now, half of their members are associate members who are not farmers. If the number of farmers continues to decline, they may no longer be able to maintain the organization’s structure and could lose those privileges.

The other reason is to maintain their operating funds. Agricultural cooperatives are not sustained by selling agricultural products. They collect the enormous deposits of many farmers, including part-time farmers, at the Norinchukin Bank, Japan’s largest investment bank, and use the huge dividends generated from those investments to fund their operations. They also receive substantial revenue from JA Kyosai (National Mutual Insurance Federation of Agricultural Cooperatives).

From the agricultural cooperatives’ perspective, they absolutely need to keep part-time farmers tied to the organization. Maintaining rice prices is still an effective means of doing so.

And the politicians and bureaucrats who are closely aligned with the agricultural cooperatives’ interests are the ones supporting this. Liberal Democratic Party lawmakers specializing in agricultural policy want the farmers’ vote that agricultural cooperatives can mobilize more than anything. That is why they put on a show of protecting farmers by advocating production cuts and high rice prices. Agricultural bureaucrats, meanwhile, want to secure their own promotions and positions after retirement by coming up with policies and budgets that please politicians.

In short, what they want to protect is neither Japanese agriculture nor farmers. They are behaving in a way that suggests they are willing to let Japanese rice and food security go to ruin if that is what it takes to preserve their own organizations and positions.”

The agricultural bureaucrats today lack the ability to make sound judgments on their own, Professor Emeritus Oizumi lamented. He continued by pointing out that their inability to think independently is the result of repeatedly catering to whichever administration happens to be in power.

“After the Basic Law on Food, Agriculture and Rural Areas was enacted, Japan’s agricultural policy was supposed to shift around 2000 from a subsidy-dependent protective agricultural policy toward a growth-oriented agricultural policy that placed greater emphasis on efficiency. However, under successive administrations since then, growth-oriented and protectionist agricultural policies have repeatedly switched back and forth roughly every seven years. Last year, as soon as the Ishiba administration was replaced by the Takaichi administration, the policy shifted 180 degrees from increasing production to production in line with demand.

Each time, agricultural bureaucrats have been forced to run back and forth between contradictory rice policies. It is hardly surprising that this has caused them to lose their ability to think independently as bureaucrats.”

Politicians, agricultural bureaucrats, and agricultural cooperatives appear to be concerned only with their own interests. The lives of consumers struggling with soaring prices for rice, a staple food, seem to be completely outside their field of vision.

“The vested-interest wall created by the three parties—the politicians seeking agricultural votes, the agricultural cooperatives focused on protecting their organizations, and the agricultural bureaucrats who curry favor with them—is preventing prices from being determined by the supply and demand that should govern the market. Unless these deep-rooted vested interests are broken down, there is no bright future for ‘Japanese rice.’”

▼ Kazunuki Oizumi — Agricultural economist and professor emeritus at Miyagi University. Born in Miyagi Prefecture in 1949. Completed the master’s program in agricultural studies at the University of Tokyo Graduate School. Has served as a professor and vice president of Miyagi University. His books include “The Potential of Japanese Agriculture (Yosen-sha),” “A Theory of Hopeful Japanese Agriculture (NHK Publishing), and The Food Value Chain That Is Transforming Japanese Agriculture (Nikkei Publishing).”

Japan’s Rice Prices Stay High Despite Ample Supply—What’s Really Behind the ¥2,000 Rice Problem?

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