India may improve trade deficit with Japan by selling quality rice

Business Standard

5 hours ago

India is the world's largest exporter of rice, with its output mainly going to countries in West Asia and Africa. Thousands of rice varieties are harvested in the country, including the glutinous rice (commonly known as sticky rice) in the northeastern states. With the Japanese government considering increasing its rice imports, there is a potential for India to harbour a new trade relationship with this eastern rice-loving friend.
Rice is more than a mere staple for Japan; it is near sacred and the country takes pride in its delicious domestic varieties (called Japonica rice) and its self-sufficiency in production. However, in the past months, Japan has been grappling with soaring rice prices: an issue that has created strong economic and political repercussions in the country. As of April-May 2025, rice prices doubled compared to last year reaching a high of 5,000JPY ($35) for 5 kg (a common selling size). As prices soared, rice started to disappear from supermarket shelves, restaurant meals and bowls at home, creating a strong undercurrent of dissatisfaction amongst the consumers.
The government undertook some measures to ease prices, like importing additional stocks from the United States, South Korea, Taiwan and releasing a third of its emergency rice stockpiles to reduce the supply pressure. The measures proved ineffective due to the inherent slow and inefficient distribution system, with Japan's powerful protection lobby JA Zen-Noh (National Federation of Agricultural Cooperatives Association) at the centre.
A slew of rare and bold measures followed after a political upheaval caused by an insensitive comment by the agriculture minister, who was immediately replaced amidst the economic and now political crisis. The extraordinary measures involved releasing more emergency stockpiled rice, but jumping the JA-led wholesale system to sell directly to retailers and at prices set by the government. This promised to bring prices down to less than half: in the range of 2000 JPY for 5 kg. The measure was executed within a week, rather expeditiously for a usually slow-moving Japan, providing much relief to the people. Buying older harvests of sticky rice is usually not preferred by Japanese households as the rice loses its moistness. This is unlike India, where drier and older rice is preferred as in the case of Basmati. The price pressure was so high, however, that Japanese people queued up outside supermarkets as early as 3 am to purchase the cheaper stockpiled rice.
The recent rice inflation was led by both demand- and supply-side factors, some of which may become more long-term constraints in the Japanese economy. Understanding these may be a base for building a new potential trade relationship with Japan in agriculture.
Historically, the rice market has been insulated from foreign competition and controlled by the government that regulated production, marketing and distribution, as well as artificially set prices to support small farmers. Japan's Gentan Policy (translated as Reduction Policy) gave monetary incentives to farmers to shift away from rice production to other crops. The policy was discontinued in 2018, but its aftereffects continue to affect production. The government subsidised production of feed rice and set high tariffs on imported rice. The cost of such measures and others is now being borne by Japanese consumers. Another significant supply-side factor is the aging and declining farmer population. The average age of a Japanese farmer is 67.8 years. The number of rice-farming households has fallen from approximately 4.5 million in 1970 to 700,000 in the 2020s. As a result, rice production has reduced steadily from 12.5 million tonnes in the 1970s to 6.7 million tonnes in 2024.
However, the present rice inflation is not a result of a sudden fall in production, which in 2024 was marginally more than the previous year. But there was a scare about possible shortages due to adverse weather with unusually harsh summers over the past two years. The earthquake in August 2024 followed by further disaster warnings led to panic buying amongst consumers. Additionally, growing tourism led to strong pressure on rice from the demand side as the island country of 126 million people received a record 36 million tourists in 2024.
While some of the above factors were temporary, some may continue to pose challenges for the Japanese market in the long run. As the market factors evolve, it is expected that Japan's need to import rice will grow in the future. The country currently imports about 770,000 tonnes of rice tariff-free under the Minimum Access System of WTO and tariffs are significantly high beyond this quota. A majority of rice imports come from the US, followed by Thailand, China and Australia. Japan's plan to boost rice imports in the coming years, a volatile geopolitical scene and ongoing tariff negotiations with the US, could lead to a reduction in rice tariffs. India's rice exports to Japan comprise mainly the Basmati variety catered to the Indian diaspora. With the ban on non-basmati rice exports lifted last year, certain varieties (such as Joha or chukuwa rice) grown in the Northeastern states can be identified and if required modified to target the taste and quality-sensitive Japanese consumers. Also, as East Asian cuisines such as Korean and Japanese are gaining more popularity, there is also a rising domestic market for sticky rice varieties. Focusing on the international and domestic markets may increase the farm income of the non-basmati growing rice belt, such as farmers in the Northeast. It may also improve India's large trade deficit with Japan.