The Issue with Protectionism: A Case Study on Japan’s protectionist agriculture policies
Tan Helena Xin Yi, Research Executive
Introduction
Around the world, intersecting challenges of climate change, geopolitical conflicts and unpredictable supply chains, are shaking the security of our food systems. Recent supply shocks such as the Covid-19 pandemic, have brought to light the fragile nature of our interconnected supply chains. Hence governments around the world are increasingly turning to protectionism measures, aiming to shield domestic agriculture sectors from external shocks. However, while these policies offer short term stability, some argue that they often fail to account for the broader long term implications.
This article explores the arguments surrounding protectionist trade policies using Japan as a case study, specifically their intervention in the agricultural rice industry.
Japan’s Agricultural Policy Framework
Japan primarily uses two tools to protect its domestic rice industry: the Acreage Reduction Policy (ARP) and a 778% tariff on rice imports. The ongoing controversy surrounding these policies, present it as a prime example of the dilemma that surrounds such actions.
These policies have especially come into contention lately with the soaring rice prices that have been occurring as a result of shocks to its domestic supply chain. In April 2025, rice saw a 92.5% increase in price from the previous year, marking a record high of rice prices (Kihara, 2025).
Acreage Reduction Policy
The ARP, or Gentan, was introduced in the 1970s as a response to combat the overproduction of rice due to the Staple Food Control Act of 1942, originally designed to address food shortage following World War II. The Staple Food Control System involved the government procuring rice at prices higher than its international price, but selling it to consumers at a subsidized price (Godo, 2020). Because of the higher price of rice procurement from farmers, this led to a market distortion. Farmers were not encouraged to respond to market signals and since farmers had no incentive to limit production, they continued to increase production of rice, this led to a rice surplus.
To address this issue, the government implemented the Gentan in the 1970s to limit production, this acted like a supply-restricting cartel which aimed to eliminate surplus rice in the market and keep prices up (Maclachlan et al., 2016). They did this through reducing land used for cultivation, subsidizing the switch to other crop alternatives like wheat, or even subsidizing farmers’ underutilisation of rice paddies. This was justified at that time because it was cheaper for the government to subsidise farmers than to buy the surplus rice, the subsidies amounted to $1.9 billion a year. This is seen as a government expenditure as seen by the blue shaded area in figure 1. below. The high subsidy was an incentive to farmers not to break the cartel by increasing production, which had to be higher than potential profit from increased production. This policy led to a 40% decrease in use of the nation's 2.55 million hectares of rice paddies with 390,000 hectares of cultivated land abandoned, thereby restricting production and reducing efficiency. Welfare loss is depicted by the area boxed in red in figure 1. Even after the Staple Food Control System was abolished, the Acreage Reduction Policy was kept to maintain the value of Japanese rice and support local farmers (Kazuhito, 2009).
Figure 1. Effects of tariff on Japanese rice market
800% Tariffs on rice
Complementing the Acreage Reduction Policy is the notorious 778% tariff on rice imports. This tariff, one of the highest in the world, was introduced to protect Japan’s domestic rice industry from foreign competition (Political Staple, 2013). The increased price of foreign rice Pw+t , reduces imports from Q2-Q1 to Q4-Q3 as shown in figure 1, ensuring the domestic market remains insulated from global competition. The extreme tariffs kept rice imports low, shielding Japanese farmers from competitive global rice prices since theirs was kept artificially high. The policy was designed to ensure that rice, a staple crop, would remain largely under domestic control. The high tariffs result in large import revenue loss for foreign producers since it reduces large amounts of imports, worsening trade relations with other countries.
Figure 1. Effects of ARP on Japanese rice market
This canonical tariff framework predicts that such a tariff would cause an increase in price, decrease in imports and a net welfare loss, as depicted by the area boxed in red in Figure 2., due to consumption and production distortions. Japan’s case conforms to such a prediction, with its inefficient domestic supply structure being preserved through continuous government intervention.
A Theoretical Assessment
Effects on consumers
According to Fukuda et al. (2003), because of Japan’s long history of preserving rural livelihood ever since the post war era, the Japanese government often prioritized protecting domestic rice producers. Harrison et al. (2022) explains how Japan’s declining and aging population has led to increased relative political weight of rural votes due to malapportionment, resulting in disproportionate influence of rural constituencies. Since rural voters are mostly farmers who benefit from agricultural protectionism, such an imbalance reinforces the pressure to maintain protectionist policies.
Unfortunately, this was not beneficial for consumers, since it has resulted in policies that lead to low production and high prices. Observing the standard partial equilibrium model of trade policy, we can see this in the form of loss of consumer surplus and the welfare loss represented by the presence of deadweight loss. The APR coupled with the tariff, created an artificial price floor that inflated the cost for consumers. It has also ensured that imports of foreign produced rice remain low, leaving consumers heavily dependent on domestic production of rice.
This is in line with the Grossman and Helpman (1994) prediction, which illustrates how organised interest groups can contribute to the persistence of protectionism by influencing the government’s choice of trade policy. The resulting effect being a redistribution of income with consumers suffering disproportionality to producers.
Effects on the Market
Such a protectionist framework introduces market frictions. In this case, rice supply is deliberately restricted and imports are blocked, buffer mechanisms do not operate because of this rigid structure. This means that Japan is producing rice nearly equal to its domestic consumption. But since this is a tight balance maintained through government policies, this makes the market highly sensitive to both demand and supply shocks. The smallest shift can easily disrupt the supply chain and send prices soaring.
Such was the case in 1993 when a weather shock was able to cause almost a 50% reduction in supply due to the conditions the agricultural policies had created for the market (Mainichi, 2024). The more recent 2023 shortage that has lasted till 2025 was triggered by a combination of supply and demand shocks, revealing how volatile and sensitive the market became to changes due to such policies because of the little capacity to stabilize the market.
Implications on food security
Without the Acreage Reduction Policy Japan is expected to produce 17 million tonnes of rice, 10 million more than it would with the policy in place (Kazuhito, 2009). Kazuhito (2024) loss of the 10 million tonnes of rice is a loss of emergency reserves and thus security benefits. These policies have also sparked debates about whether it truly benefits Japan’s farmers in the long run, as from a dynamic efficiency perspective it distorts market incentives and reduces the incentive for domestic producers to innovate and improve productivity. According to economic theory, this is because they are less exposed to competition when free trade is prevented and thus removes an environment that would have helped foster long run economic growth. Furthermore, it has been suggested that due to political pressures agricultural policies have been more focused on domestic production of high carb crops, overlooking broader implications on food security (Sasada & Ito, 2024).
Global Context
Agricultural protectionism remains a prominent feature of global trade policies, with numerous countries using a combination of various subsidies, quotas and tariffs to shield domestic agricultural sectors from international competition. Although the measures were implemented to protect local farmers and increase self sufficiency, it also creates inefficiencies and distorts market signals. Protectionism policies also often result in higher food prices, limited access to cheaper imports and retaliation from trading partners.
Global Implications
By prioritizing domestic rice production at the expense of global market integration, Japan’s policies have contributed to the fragmentation of global rice trade. This has made rice markets less efficient, resulting in higher global prices and reduced rice exports to other countries. Ultimately the effects of these market distortions have produced a net welfare loss and contributed to the larger issue of global inefficiency (Lutz & Bale, 1980). Martin and Anderson (2012) also argue how in preventing trade liberalisation, protectionist measures stand in the way of developing countries receiving significant benefits which would have included boosted exports, raised rural incomes and reduced poverty.
Common Agricultural Policy
In Europe, the Common Agricultural Policy (CAP) is a similar example of such policies. CAP was designed to prevent foreign competition by administering various levies to cover the difference between threshold price and world price. For some cases, prices are maintained through government purchases in the domestic market. Such intervention policies in wheat, maize, barely, sugar and beef have previously resulted in an estimated annual total net welfare loss of up to $337.2, $516 and $52.2 million in France, Germany and the United Kingdom respectively in 1976 (Lutz & Bale, 1980). While these policies protect farmers in the short term, they evidently result in large inefficiency and limit the ability of countries to adapt to global market changes and climate challenges, which could undermine long-term food security. These mirror the effects of the agricultural protectionist trade policies in Japan, suggesting that such a case is not merely a localised phenomenon. This reflects a broader global pattern where such policies can lead to inefficiencies and long-term vulnerabilities.
Retaliation Trade Policies
Countries with large subsidies end up maintaining low food prices domestically, while exporting countries incur high costs as a result of high tariffs and trade restrictions. Although some have argued that counter policies by the exporting country can be put into place, it has been shown that such retaliation policies, such as export subsidies or retaliatory tariffs, are often insufficient or unable to cancel out the effects of protectionist policies of the importing country (Lutz & Bale, 1980). This means that the negative effects of protectionist policies unfortunately often still persist in the face of retaliation and further reinforce inefficiency.
Conclusion
In conclusion, Japan’s protectionist agricultural policies—though well-intentioned—demonstrate the complex trade-offs involved in balancing local agricultural support with the broader goals of food security and societal welfare.
Suggested measures
As opposed to extreme protectionism stances, a more balanced approach involving a shift to support agricultural innovation and sustainability may be the better way forward. Such policies can be combined with gradual increases to trade liberalization which would result in the domestic and global economy being better off in net welfare terms. (Lutz & Bale, 1980). By learning from Japan’s experience, countries around the world can develop more nuanced policies that strike a better balance between protecting domestic interests and ensuring long-term resilience in an increasingly volatile global economic system.
References
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