How Japan Helped Ease the Rice Crisis

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Signs that India and Vietnam plan to relax curbs on rice exports also helped assuage concerns about a shortage.

A Report Makes the Rounds

But with oil prices edging toward $140 a barrel, rice prices might not stay put for long. Some experts think the U.S. and Japan should consider changing the WTO rules. "As a short-term solution the WTO program was a way to open a closed market," says Nobuyuki Chino, president of Tokyo-based Unipac Grain, which is owned by Minnesota-based CHS Inc. "But now it should be reviewed because it's an obstacle for free trade."

To tap its import reserves, Tokyo had to get Washington's imprimatur. That might not have happened if not for Tom Slayton, a former U.S. agriculture official, and Peter Timmer, a visiting Stanford University professor, who drew attention to Japan's reserves in a report on the Center for Global Development's (CGD) Web site in early May. Releasing the rice, they wrote, "would bring prices down immediately, averting hunger, malnutrition and increased mortality among poor people in Asia."

Even so, giving Japan the green light wasn't an easy decision for Washington. High rice prices had brought American farmers an unexpected windfall. What's more, the U.S. had a more pressing matter to attend to, the $300 billion farm bill working its way through Congress. But the CGD paper circulated in Washington. Two Congressional committees and a Washington Post editorial referred to the paper, and U.S. trade officials were soon reaching out to the Japanese.

Only a Short-Term Fix

Temporarily using Japan's stockpile as food aid is a stopgap measure, not a solution, says Slayton. That's because food aid has its limits. The World Food Program shipped an average of 461,000 tons of rice annually as aid from 2002 to 2006. That would feed just 2.5 million people in Cambodia or Bangladesh, a fraction of the estimated 1.6 billion people who live on less than $1 a day, Slayton says.

However, neither Washington nor Tokyo seems prepared to change its tack. The U.S. first lodged a trade complaint against Japan over rice in 1980, and since the 1990s Washington has insisted on forcing American rice on the Japanese. U.S. trade officials say the policy helps Corporate Japan. Even at current price levels, they say, imported rice costs Japanese companies half the price of domestically grown rice. Tokyo says Japanese consumers have no appetite for cheap foreign rice, though it may simply fear undermining its own farm policy. "One of the problems in the global rice market is that it's inefficient and opaque," says Nick Cashmore, CLSA's head of commodities research in Asia. "And it's also controlled and influenced by state-owned enterprises which do the buying and selling rather than letting the private sector do the job."

Hall is a reporter in BusinessWeek's Tokyo bureau. With Hiroko Tashiro in Tokyo