Twenty-five years ago, Japan was a very competitive manufacturing country, and much of its economic policy since then has been in response to trade friction with the United States, which demanded greater access to Japanese markets for American agricultural products in order to offset Japan's trade surplus. However, Japan's farm sector was considered the prime constituency of the Liberal Democratic Party, which had controlled the government since 1955, so any concession to foreign agricultural interests was seen as a betrayal of that base. It was a political problem, not an economic one.
The main sticking point was rice. The LDP caved on oranges and beef, but rice, a "sacred" commodity, was off limits. Every so often the government would limit car exports in order to appease the growling functionaries in Washington, but it didn't matter. Japanese people weren't buying enough American products, and finally, in 1993, when the LDP was briefly out of power, the government joined the Uruguay Round of the General Agreement on Tariffs and Trade, and has since allowed 770,000 tons of foreign rice to enter Japan every year, most of which is used as animal feed, re-exported as food aid, or socked away in warehouses. As a "countermeasure" the government pledged ¥6 trillion for rice-related matters, half of which would be spent on public works to provide jobs in farming areas.
Since ousting the LDP from power in 2009, the Democratic Party of Japan has maintained the status quo by subsidizing rice farmers who lose money, which seems to be quite a few of them. While output was down 4 percent in 2010, rice consumption was down 6.4 percent; and it is estimated that by June there will be 3.24 million tons of rice in storage, a 2.5 percent increase over 2010. Consumption will only decrease more, since the population is shrinking and dietary habits are changing.