The practice of transactions in imported rice between traders and wholesalers designed to make prices of imported rice look higher than reality has been rampant despite the government's price controlling program called a "simultaneous buy and sell (SBS)" system aimed at preventing excessively cheap foreign rice from being imported into Japan, according to internal documents of a trading house and a wholesaler and other sources.
The Agriculture, Forestry and Fisheries Ministry has ignored suggestions on the issue from external sources. The ministry has been persuading farmers to accept the Trans-Pacific Partnership (TPP) free trade initiative by saying that the prices of domestic and imported rice are the same. But imported rice has in fact been traded at cheaper prices than those of domestic rice in Japan, a revelation that is likely to raise questions about the government's handling of measures in the face of an expected increase in rice imports under the TPP trade deal.
Trading houses pair up with wholesalers to take part in the SBS rice import deals, and the government releases average prices of imported rice. The import ceiling is currently set at 100,000 metric tons of rice per year, but the government has decided to create an additional import quota of up to a total of 78,400 tons of rice when the TPP deal takes effect. Because of an inflow of cheap imported rice, prices of domestic rice could come under further downward pressure.
According to internal documents of Kobe-based general trading house Kanematsu Corp. and its trading partner and wholesaler, the pair won their bids to buy 308 tons of rice in October 2013 under the terms and conditions of transactions in which Kanematsu would sell imported rice to the government for about 145 yen per kilogram and the government would in turn sell it to the wholesaler for about 194 yen per kilogram. The government released the information on the transaction without disclosing the names of the companies.
Meanwhile, Kanematsu procured the imported rice for about 105 yen per kilogram, including its profit, and gave the wholesaler the so-called "adjustment money" worth 40 yen per kilogram -- the balance between the amount paid by the government and the import value. That means that the wholesaler purchased the imported rice for about 154 yen per kilogram -- 40 yen, or the amount of the adjustment money, cheaper than the published price. Kanematsu had repeated such transaction practice at least since 2011 to 2014.
The wholesaler sent an email to the agricultural ministry to inform it of the existence of the adjustment money in October 2014 when TPP talks between Japan and the United States intensified over farm products. But a ministry official in charge did not take any action, dismissing the claim saying that it was a unique business practice adopted by some trading companies. The ministry continued to explain even thereafter that rice prices under the SBS system are on par with those of domestic rice and that the TPP will not affect domestic rice prices.
A ministry spokesperson said, "We are not aware of the existence of the adjustment money. Even if there is such a system, the government cannot get involved in private transactions." The spokesperson said the ministry has not been able to contact the official who received the email from the wholesaler because the official has been on an overseas assignment. Multiple trading houses and wholesalers have acknowledged the existence of the adjustment money, but Kanematsu refused to comment on the matter.