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Economy

Japan eyes bigger bite of China's rice market

Tokyo looks to score points with farmers as domestic demand dwindles

Koshihikari rice from Niigata Prefecture, where the ruling Liberal Democratic Party's candidate lost last year's gubernatorial election.

TOKYO -- With Sino-Japanese relations showing signs of warming, Tokyo is working to persuade Beijing to accept more Japanese rice in hopes of giving domestic farmers greater access to a market hungry for high-quality imports.

Toshihiro Nikai, secretary-general of Japan's ruling Liberal Democratic Party, made a pitch on the sidelines of the Belt and Road Forum for International Cooperation last month. "I want [Chinese] to eat as much Japanese rice as possible," Nikai told a high-level Beijing official.

After hearing Nikai's plea, the official offered to send an inspector to Japan soon. "We want to review trade over the last 10 years and lay the groundwork" for increased exports, the official said.

The time frame was not plucked from thin air. It was a decade ago that Beijing partly reopened its doors to Japanese rice.

Japanese Prime Minister Shinzo Abe visited China on his first official overseas trip back in the autumn of 2006, during his first stint in office, meeting with officials including then-President Hu Jintao. After further negotiations between Beijing officials and Toshikatsu Matsuoka, Japan's agriculture minister at the time, China agreed in 2007 to partly lift an embargo on Japanese rice.

The results have been underwhelming, however. Japan sent just 375 tons of rice to China last year. Beijing requires that imported rice be milled and fumigated at facilities certified by the Chinese government. But Japan has only one milling plant and two fumigation warehouses with this stamp of approval. Farmers have complained that the costs involved force them to jack up prices and that the rice tastes worse.

Finding new markets

Nikai's approach to Beijing may also reflect Abe's political calculation. The Abe government has been phasing out a policy that pays farmers to scale back rice planting, with the subsidy to end entirely in 2018. With domestic consumption shrinking around 80,000 tons each year, oversupply and falling prices could send farmers' incomes plunging. A lower house election will be held before the end of next year, and Japan's roughly 1 million rice-farming households are fertile ground for votes.

Tokyo began discreet talks with Beijing in November. Japanese Chief Cabinet Secretary Yoshihide Suga called former Agriculture Minister Koya Nishikawa -- a senior figure among LDP lawmakers representing agricultural interests -- to the prime minister's residence to tell him to get the ball rolling. Suga, the eldest son of an Akita Prefecture farmer, plays a major role in the nation's agriculture policy, while Nishikawa is a high-ranking member of Nikai's LDP faction.

"If we succeed, it'll be a game-changer for Japan's farming villages," Suga said.

Agriculture is at once a keystone of the national growth strategy and an Achilles' heel for a government where Abe retains a tight grip on the reins. In the upper house election last summer, the ruling coalition suffered a string of defeats in the major rice-farming region of Tohoku. A few months later, the LDP-backed candidate lost the gubernatorial election in nearby Niigata prefecture. Some in the ruling parties blame the Trans-Pacific Partnership, which would scrap or lower import duties on farm products.

Pricier tastes

China has reason to reconsider the current arrangement as well. The country consumes roughly 144 million tons of rice a year -- some 20 times Japan's annual output. It imports about 5 million tons, mostly from Vietnam, Thailand and Pakistan. All three countries have increased production to meet Chinese demand, fattening farmers' profits. But the expansion of the Chinese middle class is fueling demand for quality over quantity.

Japanese rice is quite popular among affluent Chinese. Rice imported from Japan sells for 99 yuan ($14.48) per kilogram in Shanghai -- three to seven times the price of local equivalents. "Making Japanese rice in high-end Japanese rice cookers is a status symbol," a top official at a Chinese company said.

But an export expansion may not come without resistance. As a staple food, rice is a politically sensitive issue in both countries.

President Xi Jinping himself welcomed Nikai to China during the secretary-general's visit last month. When State Councilor Yang Jiechi, China's top diplomat, came to Japan in late May, Tokyo proposed having Abe and Xi visit each other's countries. Many in the Japanese government see friendlier bilateral ties giving exports a boost. But this strategy carries the risk that a later diplomatic chill could deal a heavier economic blow to Japan.

"This is a delicate time for Japan-China relations, ahead of China's Communist Party congress in the fall," a senior LDP official said. "With the rice negotiations, the ball is in China's court."

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