Japan's largest rice shortage in years is exacerbated by sushi-hungry tourists, weather

Sushi, onigiri and yakitori don — Japanese rice is a key staple in many of its iconic dishes, but the country is facing its biggest shortfall in decades. 

Japan has been contending with a rice shortage in recent months due to a mix of bad weather and an increase in tourists, undergirded by the country's restrictive rice policies.

"Throughout summer 2024, Japan has been grappling with a table rice shortage resulting in empty supermarket as demand outpaced production for the last three years causing stocks to deplete to their lowest levels in over 20 years," the U.S. Department of Agriculture wrote in a report published last week. Consumers also stockpiled more rice in preparation for Japan's typhoon season and a major earthquake warning, the USDA added. 

In August, supermarkets reportedly often ran out of white rice and stores limited purchases to one bag per person. Local media NHK partly attributed the shortage to an influx in tourists pushing up demand for sushi and other rice-based dishes. Prices of rice hit 16,133 yen ($112.67) per 60kg in August, rising 3% from the previous month and 5% higher since the start of the year.

Japan's private inventories of rice stood at 1.56 million tons for June, marking the lowest in years, according to data from the Ministry of Agriculture, Forestry and Fisheries. On top of Japanese preparing for potential natural disasters, the MFAA also attributed the increase in table rice demand to an influx of tourists driving up food service demand.

It is estimated that rice consumption by tourists increased from 19,000 tons between July 2022 and June 2023, to 51,000 tons from July 2023 through June 2024, said Oscar Tjakra, senior analyst at global food and agriculture bank Rabobank.

While tourist consumption more than doubled, it's still relatively small compared to Japan's annual domestic rice consumption of over 7 million tons, Tjakra noted.

Japan received a record 17.8 million visitors in the first half of the year, well above pre-pandemic levels. That trend is still going with 3.3 million inbound tourists in July, the highest ever recorded according to Japan's tourism statistics.

Table rice production in Japan has also been falling as aging rice farmers retire and fewer young people take up the profession, said Tjakra. A series of heatwaves and drought in the second half of last year also compromised harvests, the analyst elaborated.

While smaller rice harvests and foreigners' appetite for sushi play a part, the country's rice policies remain the key underlying factor contributing to the fall in overall supply, said Joseph Glauber, senior research fellow at the International Food Policy Research Institute.

"The Japan rice economy remains largely isolated from the world market," Glauber told CNBC.

Japan imposes a 778% tariff on imported rice in order to protect its rice farmers. While Japan is committed to import a minimum of around 682,000 tons of rice a year under obligations to the World Trade Organization, the rice is largely isolated from Japanese consumers and used largely for processing and feed. 

Rice exports from Japan have also jumped sixfold from 2014 to 2022 to nearly 30,000 tons, Rabobank's Tjakra observed.

Higher rice prices pushed Japan's headline inflation higher in August, rising 2.8% year-on-year on the back of higher energy and food costs. Rice and chocolate prices were among the largest drivers in the food basket.