It was recently revealed that the system of setting prices of imported rice through state-run auctions, designed to keep the prices at certain levels, has not been working due to kickbacks. It is suspected that foreign rice is traded in the Japanese market at much lower prices than domestically-grown rice. Japan has agreed under the Trans-Pacific Partnership deal to import some 80,000 tons of rice through simultaneous buy and sell (SBS) orders, but the government’s claim that the impact of such imports on domestic rice is zero now sounds highly dubious. The government must promptly investigate the case and offer an explanation.
Japan imports 770,000 tons of rice annually under the tax-free minimum access quota. Out of that, 100,000 tons are traded under SBS tenders participated by pairs of importers and wholesalers. Such rice is sold as table rice.
Under the suspected scheme, trading firms which import rice pay kickbacks called “adjustment money” to wholesalers, which enables wholesalers to purchase rice at prices lower than the successful bid prices. The adjustment money is equivalent to the difference between the import price and the price sold to the government minus profits to importers. Such payments have been customarily made in the industry, according to a rice wholesaler.
If such a custom still exists, it can be assumed that imported rice is sold at lower prices than domestic rice in the market for retailers and restaurants. The situation is extremely serious. The agriculture ministry must question related companies on past transactions and disclose the results.
In the TPP negotiations, Japan agreed to set a special quota to import 78,400 tons of rice from the United States and Australia through SBS tenders. Based on past tender results, the government has repeatedly insisted that there is little difference between prices for rice traded through SBS tenders and domestically-grown rice marketed for industry use. The government has also said that the impact of imports on domestic rice would be zero both in terms of volume and value, as the government buys the same amount of domestic rice as imported rice, to be used for stockpiling.
However, voices of concern remain especially among rice farmers. Their distrust of the government is growing further after the kickback system came to light, because there is no doubt the inflow of low-priced foreign rice will lead to a drop in prices of domestic rice.
Japanese rice farming businesses are faced with a severe situation because of stagnant rice prices. To make things worse, a new rice import quota was created under the TPP agreement. The farmers are trying desperately to raise the prices of table rice by shifting acreage to production of rice for livestock feed and rice for industry use. The latest incident would surely infuriate them.
The SBS system virtually allows importers and dealers to trade directly. If there are any wrongdoings in the transactions, the government should take a tough stance against them. If the government had not been aware of such wrongdoings, we have to say the government bears the responsibility of being unable to properly manage the system.
The farm ministry releases the purchase prices and the sales prices of successful bids under SBS tenders. If the released prices are far from the prices set in actual transactions, the ministry should be responsible as well. They should establish an effective system to prevent uncontrolled inflow of low-priced foreign rice.
The focus of the extraordinary Diet session scheduled to start on Monday, Sept. 26, will be the deliberation of a bill to approve the TPP agreement. We should pay extra attention to the government’s estimate of the impact of the TPP pact on the domestic industry and measures to cope with it.