Updating the analysis of rice import liberalization in Japan: a dynamic-stochastic CGE modelling approach

Abstract

ABSTRACT Food self-sufficiency is a central pillar of agricultural policy in Japan, and a high import tariff strictly protects the domestic rice market. Most existing studies investigate the deterministic impacts of the rice trade liberalization policy in the country; one, in particular, developed a static-stochastic computable general equilibrium (CGE) model to estimate how risky the policy would be in securing the food supply, which fails to account for the long-term effects of a free trade policy. We analyse the impacts of rice trade liberalization in Japan, constructing the first global-scale dynamic-stochastic CGE model. We update the policy analysis of the previous study by extending the static-stochastic model to a dynamic-stochastic framework that allows us to analyse the long-term impacts of the policy in a probabilistic manner. The primary findings are that household welfare converges at a higher level in the long term than in the short term. Second, the shocks to household welfare from abroad persistently become more significant over time. Finally, we have determined that the optimal level for government strategic rice reserves is 300 thousand tons. Therefore, it is apparent that the current stock level of 1000 thousand tons is not cost-effective.