Demand for Japan's signature crop, rice, has wilted under the triple whammy of the consumption tax hike, the pandemic-induced economic downturn, and high prices due to government policies that have restrained production.
The country's demand for domestically produced rice has plunged by 220,000 tons during the agricultural year that ended in June, according to government statistics, a far steeper decrease than previously estimated.
The sharpest drop in seven years comes as Japan raised its consumption tax last fall and consumers tighten spending during an economic downturn brought about by the coronavirus pandemic. Rising prices for rice also seem to have depressed demand.
"The fact that [rice] prices have been relatively high for about three years could have impacted consumer behavior," an official at the agriculture ministry reluctantly admitted during a ministry meeting in July.
Demand for rice stood at 7.13 million tons in the 12 months through June, down 220,000 tons. The industry had anticipated demand sinking by 100,000 tons per year.
For the year ended June, the average wholesale price for rice was 15,725 yen ($148) for a 60 kg sack, rising for five straight years to its second-highest point in the past decade, industry data indicates.
The higher prices were mainly driven by generous government subsidies to farmers to diversify production implemented after the policy to reduce the amount of land under cultivation was scrapped. As a result, farmers enjoyed more income, but because they produced less rice, retail prices rose and there were shortages of cheap rice for commercial use.
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