Alcoholic beverage maker Oenon Holdings Inc. may produce ethanol from Japanese rice to mix with gasoline, a challenging plan in a country where costly farm produce has kept the usage of green fuels largely at bay. Tokyo-based Oenon said on Wednesday a five-year project to build and run an ethanol plant in Tomakomai city, located in the southern coast of the northern island of Hokkaido, is awaiting government approval.

The Ministry of Agriculture has set aside 8.5 billion yen ($69.8 million) from its annual budget to promote locally-made green fuels to supplement gasoline for auto use given hefty carbon emissions reduction targets to meet under the Kyoto protocol.

Japan also largely relies on food from abroad as cheaper imports have driven many farmers out of business and into the cities. Rice, the country's staple food, is one of the few farm products fully sufficient in Japan.