Rice is the most important staple food in Japan. The Japanese government has historically utilized price supports and trade restrictions. The pressure to liberalize the Japanese rice market will continue under WTO negotiations. The main theme of this study is to analyze the historical consumption patterns of rice, meat and related food products and to simulate a new equilibrium if Japan liberalized its rice market.
The first main objective of this research is to analyze the rice and its related food consumption patterns and to conduct an econometric analysis of food demand structure in Japan. We use the cross-sectional household data in 1997 and time-series data from 1972 to 1999. We estimated the Working-Leser model, Tobit and Heckman's two-step for single equation specification, and the almost ideal demand systems (both full and linear approximate) imposing theoretical restrictions. Empirical results show that the rice consumed in Japan is a normal good, contrary to the results from previous studies. Own-price elasticities for rice are highly elastic for all models. These high price elasticities are compared with time-series data, which shows the mixed results in terms of elaticities.
The second main objective of this research is to analyze the meat consumption patterns and to conduct cross-sectional and time-series econometric analyses. The cross-sectional empirical results show that the expenditure and price elasticities are very similar to those estimated for other Western nations. The empirical results from time-series data analysis show that a negative structural shift occurred against pork, chicken, and processed meat, but positive for fish.
The last main interest of this study is to simulate the domestic rice market under a full trade liberalization. We simulate the impact of trade liberalization utilizing a Computable General Equilibrium (CGE) model. We set the current tariff rate as three hundred per cent, which is gradually reduced to zero percent. Results show that full trade liberalization is welfare enhancing for non-farm as well as farm households at any tariff rate, primarily through lower consumer prices. The self-sufficiency rate of rice drops to 67.3%. These simulation results appear to undermine the government's argument against trade liberalization.