Policy analysis of the liberalisation of the rice market in Japan

Abstract

The Japanese rice market is an extreme example of national market protection in an industrialised country. As a consequence of these protectionist policies, domestic prices average almost 4 times the world market price for comparable rice qualities. This paper discusses the obstacles on the way to political reform and to more openness of the rice trade. With the framework of a partial equilibrium model we quantify the benefits that can be expected by extensive trade liberalisation and show that the Japanese consumer and rice producers in developing countries largely carry the burden of the current system that only conserves the highly inefficient Japanese rice farming structure. Our analysis shows that the current policies are economically not the best means to address the objectives targeted by the "new agricultural policy" of Japan that promotes mainly food security, multifunctional aspects of agriculture and the parity of rural- urban income distribution. On the contrary, the Japanese rice policy appears to use these arguments only as pretence to justify its protectionist interventions. As an alternative, we develop an example for the conversion to a direct payment system that targets the political objectives directly and improves the competitiveness of rice production in Japan.