CODE IN TOKYO

What Happened to Market Forces? The Distorted Structure Behind Japan's Soaring Rice Prices—and the Growing Shift Away from Rice

I bought rice at a supermarket yesterday.

When I saw the price tag on a five-kilogram bag, I froze for a moment. It was expensive—very expensive.

I had assumed prices would eventually settle down. Instead, they have remained elevated for nearly two years.

Rice was harvested as usual last year and the year before. Yet once prices took off, they behaved like a rocket: the launch was successful, but there has been no sign of a landing.

In a normal market, prices fall when supply recovers. That is how market forces are supposed to work.

Rice, however, seems to be different.

Prices have come down slightly compared with last year. Television reports describe this as a decline, but rice cost about half as much three years ago.

It is still expensive.

Rice Sitting in Warehouses

One explanation often discussed recently is that not enough rice is reaching the market at the distribution stage.

Rice is reportedly accumulating in warehouses. In one interview, a rice wholesaler said the company was struggling because rice was not selling. Predictably, the comment caused an uproar online.

Consumers had an obvious response: We cannot buy it because it is too expensive.

If wholesalers purchased rice at high prices, selling it now could mean taking a loss. Waiting may therefore make sense as a business decision.

But the visible result is a market that appears to receive too little supply while high prices remain in place.

This strategy also has an expiration date.

The new rice harvest will arrive in a few months. Warehouse space is limited, and storing old rice leaves less room for the new crop.

Businesses may be free to withhold rice from the market, but they do not have unlimited warehouse capacity.

Will the Government Come to the Rescue?

At the peak of the price surge, the Japanese government released rice from its reserves in an attempt to stabilize prices.

The policy was intended to increase market supply and calm prices. It was a rare success for a government that has had no shortage of policy failures. Without that intervention, the situation might have turned into a panic.

However, some people say that rice businesses expect the government eventually to buy their excess stock for its reserves, even if rice remains unsold in their warehouses.

Perhaps they believe that because the government intervened when prices were soaring, it should intervene again now.

But emergency action to prevent panic during a price surge is entirely different from using public money to rescue private companies from losses on unsold inventory.

The former is an attempt to stabilize a disrupted market. If the latter is also treated as an entitlement, market forces never existed in the first place.

The profits remain private, while taxpayers absorb the losses.

That is not a market economy. It is a game in which the government rescues you whenever you appear likely to lose.

Anyone would be willing to take risks under those rules.

Consumers Are the Angriest Participants

The people who must not be forgotten are consumers.

When rice becomes too expensive, they eat bread. They eat pasta. They eat udon noodles.

Reports already indicate that higher prices are pushing consumers toward imported rice and other staple foods. One report described a six-percent year-on-year decline in rice consumption.

Once eating habits change, they do not easily change back.

Businesses may believe they have protected their profits by keeping prices high, only to discover that they have reduced the number of customers themselves.

That is not an attractive outcome for any business.

Short-Term Profit or a Sustainable Market?

Protecting Japanese agriculture matters. Farmers also deserve a fair return for their work.

But that is a separate issue from prices remaining high indefinitely at the distribution stage.

If businesses invoke market principles, they should be prepared to follow them. Those who keep the profits when conditions are favorable should also accept losses when conditions turn against them.

It makes little sense to call for free competition and then seek government assistance the moment it becomes inconvenient.

If such a convenient form of capitalism exists, I would very much like someone to explain it to me.

Contact

I provide system development and technical consulting using AI, AWS, and Claude Code.

Contact form: https://holly-money-e94.notion.site/390ff30cf18c8086a676fe630d171873