Japan's rice has gone from shortage to glut: stock bought out of fear is paid for twice

29 September 2026, 09:29

In the summer of 2024 the rice held in Japan's private warehouses had fallen to 1.56 million tonnes, the lowest level ever recorded. It was missing from supermarket shelves, and the price of a five-kilo bag had almost doubled. On 30 June this year the same stocks stood at 2.43 million tonnes: the opposite record, more than 400,000 tonnes above the level considered adequate.

In mid-September the five-kilo bag fell below ¥3,000 in supermarkets, for the first time in two years. In Niigata, the prefecture that produces the most rice in Japan, the farmers' cooperative will pay about 40 per cent less for this year's harvest than for last year's, below the cost of production. And the government, which last year released 590,000 tonnes of its reserves onto the market to bring prices down, is now buying back 210,000 tonnes to rebuild them, while rice keeps getting cheaper.

In a shortage everyone buys more, and everyone at the same moment

The scorching summer of 2023 ruined the harvest, demand from restaurants and tourists grew, and after the authorities warned of a possible major earthquake, households filled their larders. Growers, seeing the prices, planted more. The rice from the public reserves and from the new harvests arrived when the fear had already passed.

In Italy anyone who went food shopping in March 2020 remembers the same scene: flour and brewer's yeast vanished from the shelves within a few days. Yeast is a living organism, and there was no way to produce more of it in a hurry. And the extra fresh yeast people bought, if it was not used within a few weeks, ended up in the bin, paid for at the price of fear.

In business the mechanism is the same, with bigger figures. When a supplier stretches its delivery times, buyers order earlier and order more, so as not to stop production. Their competitors do the same, in the same weeks. The supplier sees orders rising, mistakes them for real demand and produces more. When deliveries return to normal, everything arrives at once: the goods ordered just in case, the goods requested from two different suppliers so as not to run short, and the goods the suppliers produced on the strength of inflated orders. It is reordering done with fear in place of data.

Stock built up out of fear is paid for once in cash and once in the accounts

The first bill arrives straight away. The goods are paid for when the supplier's invoice falls due, and from that day the money sits idle on the shelves until those goods leave as products sold and paid for. It pays no wages, earns no interest, and often, in the meantime, it is the bank overdraft that covers the gap. The warehouse is the company's bank, but without an IBAN: money goes in and cannot be withdrawn.

The second bill arrives at year end, with the financial statements. Article 2426 of the Italian Civil Code, at point 9, states that inventories are recorded at purchase or production cost, or «at the realisable value inferable from market trends, if lower». In plain terms: if at year end those goods, once processed and sold, would bring in less than they cost, they must be recorded at the lower value in the accounts, and the difference becomes a cost for the year. Stock bought at shortage prices, when the shortage ends, carries with it a loss that nobody had put in the quotation.

So the same decision weighs twice: first on cash, then on profit. And it weighs most on precisely the companies that felt most prudent.

Inventory is measured in money, not in a sense of security

A company's stock holds two things that look the same at a glance: the goods needed to work and the goods bought so as not to run short. The first moves, the second waits. The way to tell them apart is not to count the pallets, but to ask three questions about each material: how many months of consumption are on hand, what price was paid for them, and what they would cost to buy today.

The useful question is not «what is missing», but how much cash could be freed up without selling a single extra item. Read this way, inventory is not a place: it is a financial indicator, and like every indicator it has to be watched before the market turns, not after. Minimum and maximum stock levels set on measured consumption and delivery times serve exactly this purpose: to decide how much to hold while the fear has not yet arrived.

In Japan the government had to sell its reserves when rice was scarce and buy them back when it was in surplus. In a shortage, stock looks like prudence. When the shortage ends, you find out what it cost.

This article was prompted by a news item published in Bloomberg.