After suffering a rice shortage last year, Japan is now grappling with oversupply, creating a price inversion in which last year's old-crop rice is more expensive than the new harvest just beginning to reach stores. Pictured are sacks of rice stacked inside a truck. [Getty Images]
After suffering a rice shortage last year, Japan is now grappling with oversupply, creating a price inversion in which last year's old-crop rice is more expensive than the new harvest just beginning to reach stores. Pictured are sacks of rice stacked inside a truck. [Getty Images]

Japan, which endured an unprecedented rice shortage last year, has swung to the opposite extreme this year — overproducing after misjudging demand — and the result is a price inversion in which last year's old-crop rice now costs more than the freshly harvested new crop.

According to the Yomiuri Shimbun, a 5-kilogram bag of Koshihikari rice from last year's harvest retails for 3,866 yen ($25), while the same variety from this year's new crop sells for 2,786 yen. New-crop rice typically commands a premium over older stock, making the current reversal highly unusual. The manager of one supermarket branch told the Yomiuri the situation was "abnormal — new rice being cheaper than old rice."

Retailers normally discount old-crop rice slightly once the new harvest arrives. This year, however, distributors say they cannot cut prices that far because they paid so much for last year's supply. Miwa Yasufumi, a senior specialist at the Japan Research Institute, told the Yomiuri that the price inversion between new and old rice was occurring across the country. "Distributors bought last year's rice at high prices, so it is difficult for them to lower prices all at once," he said.

Last year's exceptional rice shortage drove up the advance payments that agricultural cooperatives (JA) make to producers. The JA in Niigata paid farmers 30,000 yen ($194) per 60 kilograms last year; this year that figure has fallen to 18,500 yen — roughly half. Rice prices overall have dropped sharply compared with last year.

Japan's shortage last year — dubbed the "Reiwa rice crisis" — was fueled by a surge in tourists that pushed up rice consumption in the restaurant industry. Consumers responded by cutting back on rice and switching to noodles, bread and pasta, a trend known in Japanese as "kome-banare," or rice abandonment. Producers, meanwhile, took the opposite lesson from last year's crisis and significantly ramped up output, leaving the country with a surplus this year.

Retailers are sitting on far larger inventories than usual after being unable to sell the expensive stock they bought last year. According to the Ministry of Agriculture, Forestry and Fisheries, private stockpiles stood at 2.43 million tons as of June — well above the appropriate range of 1.8 million to 2.2 million tons. "When inventory piles up, you need to lower prices and sell quickly, but there is a limit to how far we can cut given what we paid last year," said an official at one major wholesale distributor.

With rice now in surplus, the Japanese government has decided to repurchase this month some of the emergency reserves it released last year, and to add a portion of this year's new crop to its stockpile. The moves are aimed at preventing a further collapse in rice prices.


kate01@heraldcorp.com