Japan Press Weekly

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2011 August 3 - 16 [AGRICULTURE]

Gov’t must withdraw permission for rice futures trading

On August 8, trade in rice futures commenced at the Tokyo Grain Exchange and the Kansai Commodities Exchange for the first time in 72 years, as the government approved of listing rice future contracts on a two-year trial basis.

The Japanese Communist Party criticized the government for allowing rice, the main staple of the Japanese population, to be traded for speculative purposes and calls for withdrawal of the approval.

JCP member of the House of Councilors Kami Tomoko took up this issue in the Diet. Following is an Akahata interview with Kami on August 8 about various problems associated with rice futures trading:

Futures are contracts for the delivery of specified amounts of a commodity, such as rice, on a certain date in the future. Most investors buy and sell contracts based on speculation whether the price of the commodity will go up or go down in the future. This shows that rice futures trading will lead to either a sharp rise or a free-fall in the price of rice.

Rice distributors, who buy rice through futures trading, may offer a low price as possible in order to avoid suffering a loss. Thus, rice farmers’ income will likely to decrease further, when even now their income is lower than production costs.

When I took up this issue in the Diet, I said to Agriculture Minister Kano Michihiko, “Why did you give permission to trade rice for speculation purposes in defiance of opposition from farmers’ organizations, including the Central Union of Agricultural Co-operatives?” He answered that there was no reason to refuse approval.

When stock brokers applied for permission to list rice futures contracts on a trial basis in 2005, the Agricultural Ministry denied the application by saying that it is contradictory to leave rice trading to market mechanisms while the ministry carries out a rice production adjustment policy.

It doesn’t make sense for the ministry to permit stock brokers to trade the contracts although the adjustment policy is still in place.

Due to soaring world crop prices, some countries have stopped exporting their agricultural products. The need now is for the government to secure a stable supply of rice.