Peak Food and Japan Part 6: Concluding Thoughts

Recent stories

It’s been a month since I wrote Part 5 – Consequences for Japan. The following is a round-up of some of the recent stories here, coupled with some of my thoughts.

The rising food prices in Japan are continuing to make themselves felt with pasta and vinegar the latest concerns. The Japan Times/Kyodo News reported on Wednesday that:

Starting Sept. 1, Mizkan Group Corp. said it will raise the price of 37 consumer-use vinegar products by 8 percent to 10 percent… because of rising crop prices. It will be the company’s first price hikes in 18 years.

90% of Japanese are now thinking of saving money when they shop, and there are reports of troubles in the restaurant industry. The most famous such establishment in Osaka, Osaka Meibutsu Kuidaore, is due to shut down in July, partly due to falling sales.

The amount of food imported from China has continued to decrease. There has also been some voicing of concern on this topic from the government; MAFF’s 2007 white paper on agriculture was published about two weeks ago. From The Japan Times/Kyodo News:

If food imports become impossible, households will be unable to secure sufficient food, the report says, noting Japan’s food self-sufficiency rate has fallen below 40 percent on a calorie basis.

The report also reiterates the point that if there is a problem with securing imported foods then Japanese diets will have to change, becoming more rich in potatoes and rice.

Trade arguments

Tony Boys said in “Food and Energy in Japan” that trade in essentials like rice and corn can be detrimental due to international price differentials and that countries should not bank on the international grain market:

…as world food supplies become tight, imports are likely to become less and less realistic. All the more reason for Japan to take steps to ensure that food self-sufficiency is a practical option when the time comes.

His words seem very relevant in 2008 as prices of staples shoot up and Japan finds itself literally worrying about where its next meal is going to come from.

As reported in Part 5, Japan is asking the World Trade Organisation to stop food producing countries limiting their exports without notice. This is finding little support among other countries. In fact, according to Bloomberg:

Developing nations are pressing Japan to reduce subsidies and import tariffs as high as 700 percent on farm products and open its market in the Doha Round of WTO talks.

In the same article, Raj Patel commented that:

There’s a profound irony that countries like Japan that have wriggled most successfully out of WTO rules on agriculture are doing the best.

Some commentators have called this a “beggar-thy-neighbour” food policy, whereby Japan is keeping high import tariffs on rice, blocking this market from exporters, and yet demanding a steady importation of other goods.

International pressure

However, it seems to be the developed rather than the developing nations who would most like Japan to open up its markets. For example, in the recent talks that have been taking place with New Zealand, there was consensus on many points but the two countries failed to reach a free-trade agreement because of Japan’s import tariffs.

At the same time, the United States are pushing desperate countries to accept the importation of genetically modified foods and Barak Obama has been calling for increased beef imports into Japan. These calls and their heeding in South Korea have been responsible for mass demonstrations and subsequent acts of police brutality.

Japan is rich enough to withstand most of the pressure put on it in trade talks such as those with New Zealand, but seems to lack the capability to push for increased food security, despite this being a stated aim of the main political parties. Poor countries such as Honduras, however, have had their domestic agricultural industry destroyed by adopting the World Bank’s loans and advice, as Bloomberg reports:

The former breadbasket of Central America now imports 83 percent of the rice it consumes — a dependency triggered almost two decades ago when it adopted free-market policies pushed by the World Bank and other lenders.

The country was $3.6 billion in debt in 1990. In return for loans from the World Bank, Honduras became one of dozens of developing nations that abandoned policies designed to protect farmers and citizens from volatile food prices.

Rice imported and exported

In April, Akahata reported Japanese farmers’ unions stating their opposition to the importation of rice:

Pointing out that the amount of rice the Philippines needs is almost the same as rice Japan imports from abroad, Majima Yoshitaka, vice chair of Nouminren, said that there is a dearth of rice worldwide and that the rules that increase the poverty rate must not be allowed.

Meanwhile, the government was thinking along the same lines and took steps to delay any further imports. In May, the international press started to notice that Japan was stockpiling unused rice while people starved. From The Times:

Under its commitments to the WTO, Japan is forced to import about 770,000 tonnes a year from abroad (it releases only the tiniest fraction into the stores). About half is sent off in the form of food aid, but the majority is simply stashed in silos, and strict rules prevent it being re-exported.

These rules mean that Japan needs the acquiescence of the United States, as the original producer of the rice, before they can ship it on. It now looks as if the US will not be making a complaint and the rice will hopefully be exported to the Philippines.

Japan may sell them 200,000 tonnes of imported rice and a further 50,000 tonnes of domestic rice. 20,000 tonnes is also to be given away as part of an aid package to countries in Africa and Asia.

For and against reforming consumption

Boys has mentioned that the government should be asking people to eat more rice, and according to the Daily Times, they are starting to do just that:

Since many consumers would be reluctant to give up noodles or bread, the agriculture ministry is considering subsidising farmers and millers to produce flour from rice as a substitute for wheat, an agriculture ministry official said.

The media are also getting involved on this issue. The Asahi Shimbun has called on companies and consumers to change their habits:

Companies need to step up their efforts for technological breakthroughs to overcome the effects of higher costs. Greater efficiency in the use of energy and resources and progress in alternative energy and recycling technologies would help dampen red-hot international commodity markets and create new businesses.

Consumers also need to change their way of thinking. They need to change their lifestyles and daily habits to offset higher prices. This will entail avoiding driving for leisure activities and turning to domestically produced foods whose output can be increased easily, starting with rice.

However, this is not an issue on which everyone agrees. In The Japan Times, Noriko Hama, an “economist and a professor at Doshisha University Graduate School of Business”, criticises this advice to go domestic :

The closing of the food growers’ gates has prompted Japan to go in panicky pursuit of greater food self-sufficiency. Again an understandable reaction. But again, piteously defeatist.

… Is there no way in which Japan can become such a vital part of the food growers’ economies and, indeed, their minds, so that there will always be somebody willing to keep their warehouses open to sustain us in an emergency?

Foreign Investment

The U.N. Food and Agriculture Organization (FAO) feel that Japan, as chair of the G8 this year, should take the lead in implementing solutions to the food crisis by increasing the ability of developing countries to produce their own food.

Other countries are looking at the coming energy and food crunches and are arranging their own solutions. China is considering the option of leasing farmland in other countries, especially in Africa and South America, in order to guarantee a stable food supply for their population. From The Financial Times:

The move comes as oil-rich but food-poor countries in the Middle East and north Africa explore similar options. Libya is talking with Ukraine about growing wheat in the former Soviet republic, while Saudi Arabia has said it would invest in agricultural and livestock projects abroad to ensure food security and control commodity prices.

What happens when those countries targeted have their own food shortages and want to use the land that they have leased out?

Bank of Japan to monitor the situation…

If they understand the severity of the crisis, the people in charge of the economy here are not letting on. The new Bank of Japan governor, Masaaki Shirakawa, a graduate of the University of Chicago school of economics, suggested rather pre-emptively at the end of April that global commodities were near their peak. From Dow Jones Newswires:

“It’s possible that they may reach the ceiling relatively soon,” Shirakawa said at a press conference.

He also said, “It’s very important to monitor how rising commodities prices could affect the global economy,” and therefore Japan’s economy.

This was around the same time that OPEC themselves suggested that the price of oil may continue to rise to $200 in the not too distant future, a prediction which was repeated again three weeks ago by the investment firm Goldman Sachs.

The price of WTI Oil breached $135 last week, and is now trading between there and $125. As the price of oil increases then the price of all other commodities will follow, due to higher energy input costs. This of course includes food.

More recently, Shirakawa has repeated that they are continuing taking a wait-and-see attitude to the situation:

Rising commodity prices “would mean a drag on corporate profits and a decline in households’ purchasing power… it’s not appropriate for the bank to have any predetermined notion about the direction of policy.”

Financial crisis in a corporate world

There is an urgent need for the government to take action to reduce Japan’s dependence on imports. Around the world, people are starving due to the lack of cognisant future planning in the areas of agriculture, energy and transportation.

People are losing their homes in the US due to an unregulated financial market which has got short term profit as its number one priority. And unfortunately this is the crux of the situation.

Agribusinesses like Monsanto, arms dealers such as BAE, supermarkets, and in Japan road construction companies and car manufactures are pulling the strings of the world economy. Companies such as these are all faithful advocates of the doctrine of impossible constant growth.

Financial institutions such as JP Morgan can fund the campaigns of all the major runners in the US presidential race. They can also offer a 7 figure salary to Anthony Blair, while, coincidentally of course,

…heading a consortium set to make billions as Iraq’s economy recovers from the war spearheaded by Mr Blair and U.S. President George Bush.

It was chosen to run the new Trade Bank of Iraq, which has raised billions in trade guarantees by mortgaging future oil production and will make huge profits from the deals.

Breaking Article 9 for natural resources

Meanwhile a million people have died in Iraq, now widely seen as one of the first resource wars caused by the approaching end of the oil age.

The Japanese government has gone along with this war willingly, despite its clear aggressive nature and the presence of Article 9 in their constitution, which supposedly binds them to pursue a path of peace:

Aspiring sincerely to an international peace based on justice and order, the Japanese people forever renounce war as a sovereign right of the nation and the threat or use of force as means of settling international disputes…

Last month a High Court ruling found that Japan’s presence in Iraq was illegal according to Article 9 and the government has simply rejected these findings out of hand.

A collision of crises

This week the BBC reported on a UN warning that high food prices are set to continue for at least a decade:

In its annual Outlook report, the FAO predicted beef and pork prices might be 20% higher by 2017, wheat could be up to 60% more expensive and the cost of vegetable oils might rise by 80%.

Asian leaders have warned of poverty due to food prices. Farmers are struggling to recoup the cost of seeds, pesticides and fertilizer, resulting in a situation where, even in the midst of a food crisis, farmers in India can no longer afford to plant rice.

This is also an upcoming problem in Japan. The Asahi Shimbun reports on increasing fertilizer costs:

An official of Zen-Noh’s Fertilizers and Pesticides Department said if fertilizer prices continue to climb, some farmers might reduce their use of the substances, resulting in deteriorated product quality and a decline in crop production.

This reduction in outputs due to dropping chemical inputs is something that has been observed in North Korea and the reliance of these inputs on dwindling cheap energy mean that it is imperative for countries to explore more sustainable alternatives.

So what of Japan’s ability to weather combined energy and food crises? In Part 5 I reported that Japan’s trade surplus (the difference between value of exports and value of imports) was down 30% from a year ago. The new figure for April shows that it is now down 46.3%.

While this is partly caused by industrial output having “plummeted” since last year, falling 3.1% according to Kyodo News/The Japan Times, increasing import costs are having the largest effect. Wholesale prices rose 3.7% in April.

A bad time to be Japan

One of the top commentators on The Oil Drum is Jeffrey Brown, who posts as westexas. He has created the Export Land Model and was mentioned in a related article this week by the Wall Street Journal. Brown states that that this is a bad time to be Japan:

Food & energy prices are being set at the margin as importers bid against each other for the volume of food & energy that “escape” into the export market. We may begin to see a lot of world trade consisting of food & energy exporters trading with each other. It is definitely not a good time to be both a net food and a net energy importer, such as Japan.

The BBC reports that European oil protests are escalating this week:

Union leaders said Portugal’s entire coastal fleet stayed in port on Friday, while in Spain, 7,000 fishermen held protests at the agriculture ministry.

French fishermen have been protesting for weeks, with Belgian and Italian colleagues also involved.

UK and Dutch lorry drivers held similar protests earlier this week.

How long is it before we see such action among fishermen and hauliers here?

With the price of oil having again increased significantly since April, unemployment rising, spending falling and inflation increasing, these are worrying times indeed for Japan and its people.

Further information:

Food and Energy in Japan by Tony Boys – Essential reading for understanding Japan’s precarious condition*.

Final Energy Crisis – The second edition of this book will be released in September and will include two chapters by Boys: “North Korea: The Limits Of Fossil Energy-Based Agricultural Systems – What North Korea Tells Us About Our Future” and “How Will Japan Feed Itself Without Fossil Energy?”.

World Business Satellite 2 May 2008 (Japanese video) – A clip on Japan’s international food trade. They will also have a series of special reports on food in the week beginning Monday 2 June 2008 (Channel 12, 23:00-24:00).

Stuffed and Starved – Raj Patel’s blog and book on the world food situation.

Arithmetic, Population and Energy (video) – Lecture by Professor Albert Bartlett on why constant expansion and growth, the foundation of our current economic system, is impossible.

The Oil Drum – “Discussions about energy and our future”. Daily articles and useful resources on Peak Oil.

*Many thanks to Tony for his help with some points in this post.