By Michael Newman

There is a reason why Japan has more Michelin-starred restaurants than anywhere else in the world. It is the attention to detail and the monozukuri culture that seeks perfection.

A former colleague of French extraction once said to me that the patisseries around his home in Mejiro (northern Tokyo) were better than those in his home country. How could this be? He reasoned that the Japanese bakers were artisans who got up at 4 a.m. to make them from scratch, rather than load the ovens and set timers the night before.

Rational economics suggests that US President Donald Trump is right to question the current import quota. Japan allows 770,000 tonnes of tariff-free rice annually under WTO rules. Only 100,000 tonnes is available for human consumption. Above that, Japanese tariffs of JPY341 (A$3.65) per kilogram apply. While 770,000 tonnes of rice (including animal feed) are tariff-free, only 742,000 tonnes were imported in 2024. When rice yields were good, imported rice hovered in the mid-600,000 range.

Trump is stonewalling on relaxing tariffs which mainly affect Japan’s number one export—automobiles—to leverage the Japanese to let in more American rice imports to alleviate the present supply shortage.

Yet, Japan is not a rational market. Having lived in Japan for 25 years, I can say Japanese rice is different—in taste and texture, not to mention preparation. Still, Japan faces very little downside by offering Trump what he wants. Put simply, the Japanese are rice snobs. As am I. They eat it every day, often for breakfast, lunch, and dinner. As a staple, it is an area most Japanese households are unlikely to compromise on.

To put that in perspective, more financially constrained Japanese are buying bichikumai (which is essentially rice grains that have been in storage for up to four years) to cope with the high prices of newer harvests, which cost around A$50 for a 5-kilogram bag. Bichikumai has usually been reserved for animal feed.

However, Japan has been in the midst of a rice shortage. In 2023, a severe heatwave caused the lowest harvest in decades. On top of that, since the 1970s the Japanese government has paid subsidies to reduce rice production to keep prices high. Japan now faces another, larger problem.

Seventy percent of farmers in Japan are aged over 65. Fifty years ago, Japan had 4.7 million farming households. Today there are fewer than 700,000. The land available for cropping has also slumped from almost 5 million hectares to less than 1.8 million today. Within that, rice fields have fallen by two-thirds since the 1970s to 1.2 million hectares today. Rice farming has the lowest number of new entrants, with only eight people in 10,000 choosing it as a profession.

By value, 50 years ago Japan produced 11.6 million metric tonnes of rice valued at JPY2.5 trillion (currency-adjusted A$6.25 billion). Today, 7.8 million tonnes are produced, with a value of around JPY1.5 trillion (A$16 billion).

Butter shortages are a regular occurrence in Japan. The government pays dairy producers a higher subsidy for milk production. Excess dairy production is diverted to butter and cheese, which attract a lower subsidy. When demand for milk sometimes equalises with supply, butter shortages ensue.

Still, the Americans must look to the car industry as a yardstick for assessing the Japanese agricultural market.

Japan exported around 1.5 million vehicles to the US last year with a value of over US$41 billion (A$62 billion), or 25 percent of total US-bound exports. Japanese auto market share is around 38 percent—or around US$200 billion (A$300 billion) in value. Toyota alone sold 2.3 million vehicles in a market of 16 million passenger car sales in 2024. Trump has lifted tariffs to 25 percent on imported Japanese cars.

Conversely, in 2024, only 16,000 American-built cars were sold in Japan. Jeep sold just shy of 9,700 vehicles, thanks to its compact offerings like the Renegade. Chevrolet did not crack 600. Cadillac didn’t make 450 sales. Ford pulled out of Japan a decade ago, even after a failed collaboration with Volkswagen on the dealer distribution side. If you have ever visited Japan, the narrow roads and crowded cities are simply not suited to oversized American cars. European brands are seen as status symbols. BMW and Mercedes-Benz shifted over 50,000 units each last year. Even Porsche, Ferrari, and Lamborghini moved 9,292, 1,445, and 821 sports cars respectively in 2024.

It is a perfect example of why the Japanese authorities need not worry that households will flock to a cheaper US alternative just because it is available. While US or Thai rice is being mixed with 80 percent domestic rice in order to maintain the taste, prices are only 10 percent cheaper.

The Japanese government should welcome President Trump’s demands to further open the rice market to protect its number one dominant sector—automobiles. Just like cars, the reality is that when the harvests return and the supply side is restored to a level of normality, the Japanese will instinctively buy the home product. For no other reason than it is better, even in a free market.

Instinctively, Trump knows that the Japanese are already pouring tens of billions of dollars into LNG production in Alaska, Louisiana, and Texas. No amount of American rice exports to Japan will put a dent in the value and job creation that the inbound fossil fuel investment will provide. Still, the Japanese should let America experience the consumption choices of its citizens. Experience is a hard teacher. You get the test first and the lesson afterwards.

Michael Newman has four decades of business experience in North Asia and served as NSW’s Senior Trade and Investment Commissioner to the region.

https://jp.linkedin.com/in/mike-newman-3896b810

Let Them Eat Rice