Focus on Japan

by Chris Lyddon
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Japan, one of the world’s most technologically advanced nations, is a small-scale agricultural producer, but a large-scale consumer, making it a major grain importer. The Japanese grain processing sector, especially its feed sector, was hard hit by the Great East Japan Earthquake of March 2011, but recovery efforts have been highly successful.
In its latest Grain Market Report, the International Grains Council (IGC) put Japan’s total grain imports for 2012-13 at 23.9 million tonnes, compared with 23.6 million the year before. The total includes 5.9 million tonnes of wheat, down from 6.2 million and 14.9 million tonnes of maize, up from 14.5 million. Imports of barley are predicted at 1.4 million tonnes, down from 1.5 million.
The IGC forecast total Japanese rice production of 7.5 million tonnes in 2012-13, down from 7.6 million the year before. It put rice imports at an unchanged 700,000 tonnes.
The attaché cited figures from the ministry of agriculture for rice production in 2012.
“Although data for upland rice production, normally only 5,000 to 8,000 tonnes, are not available, this year’s rice harvest is expected to exceed 8,520,000 tonnes, an increase of 1.4% over last year,” it said. The attaché’s figures are on a brown rice basis, while the IGC uses milled weight.
The same report, which covered the feed industry and was issued in November, put 2012-13 wheat production at 750,000 tonnes, up from 742,000 tonnes the year before.
In an annual report on the grain sector, published earlier in 2012, the attaché characterized the effects of recent events on the Japanese grains sector.
“The Great East Japan Earthquake of March 11, 2011 devastated, both physically and emotionally, a country that had already been suffering from a stagnant economy,” the report said. “The so-called “triple disaster” also challenged Japan’s food security regime.”
“During this unprecedented crisis, Japan’s food supply system demonstrated remarkable resilience and strength in its ability to secure ample, undisrupted supplies of food for people in the affected regions and feed for livestock animals,” it said. “Despite economic setbacks and infrastructural damage, which have not been overcome, the fundamentals of Japan’s food and feed industry remain sound, attesting to the robustness of Japan’s food security system which relies on both domestic production and the availability of reliable imports.”
The feed sector was particularly hard hit by the earthquake, but the attaché’s November report was positive.
“Despite serious damage to infrastructure in major northern ports and feed mills caused by the Great East Japan Earthquake and Tsunami, as well as the surge in grain prices that followed, Japan’s feed industry has demonstrated the flexibility and resilience to avert disruption in feed production, which continues to be stable,” it said.
“Japan’s feed industry speedily overcame the devastation caused by the Great East Japan Earthquake and Tsunami, and provided undisrupted supplies of feed to Japan’s livestock operators, maintaining the JFY 2011 aggregate production at the previous year’s level,” it said.
However, other factors affected the sector. “Due to the surge in grain prices, feed ingredient utilization ratios show a significant shift from corn to wheat and rice,” it said.

“As a result of a reduction in rice consumption, as well as a decline in price over the years, household expenditures on rice have been cut by more than half during the last two decades,” the attaché said. “The average Japanese household now spends slightly over 3% of food expenditures on rice.”
However, rice consumption, which went below 60 kg per person for the first time in 2008, has stabilized. It was 58.5 kg in 2009, 59.5 kg in 2010 and 59 kg in 2011. The attaché doesn’t believe this will herald a recovery.
“On the table rice side, the four-decade-long downward trend in consumption will not likely be reversed, given the demographic situation,” a report said. “Japan’s population peaked in 2005, faster than previously forecast, and is also aging rapidly (one out of four Japanese will be older than 65).”
Pasta consumption continues to grow. According to information supplied to World Grain by U.S. Wheat Associates’ office in Tokyo, pasta consumption in 2011 was 294,000 tonnes, up 7% from the previous year. About 134,000 tonnes, or 64%, comes from Italy.

The flour milling sector is dominated by four big milling companies which have a market share of around 80%. In total there are 96 companies in the flour milling sector, operating 119 mills, with a total capacity of some 8.56 million tonnes. Actual production is put at around 4.82 million tonnes.
Four milling companies share 80% of the market. The largest is Nisshin Flour Milling with a market share of around 38%, followed by Nippon at 22%, Showa at 10% and Nitto-Fuji at 8%.
Nisshin is in the process of building an international flour milling network, with bases already operating in Canada and Thailand. In December, it was announced that Nisshin had bought New Zealand Champion milling from Goodman Fielder for A$51 million. Nippon has just announced the completion of work on a new milling line and a new silo at its Kobe-Konan mill, increasing monthly production capacity of that mill from 13,700 tonnes to 24,700 tonnes (on a wheat equivalent basis).
Jiji Press reported at the end of November that Nisshin Foods Inc. has said it will raise the prices of two of its home-use flour products by 2% to 5%. The price hike will affect Nisshin Foods’ soft flour and all-purpose flour and apply to shipments from Jan. 4, the report said.
“The unit of Nisshin Seifun Group Inc. decided on the mark-up after the government raised the prices of imported wheat it sells to the private sector by an average of 3% in October,” it said. Jiji Press said that Nippon Flour Mills Co. and Showa Sangyo Co. are also considering raising their home-use flour prices.

“Soybeans, like rice, have been a staple of Japanese food culture since ancient times,” the attaché explains in an annual report on the oilseeds sector. “It is believed that soybeans came from China though the Korean peninsula about 2,000 years ago. Since their wide cultivation in the Kamakura era (1185-1333), soybeans have been an important protein source for the Japanese diet.”
The report also notes that recent research providing evidence of the health benefits of soy has further reinforced consumer demand for soy foods. “Tofu (soybean curd) is the most common end use for soy in Japan, accounting for 57% of total food soybean use,” it said. “Although there is a long history of soy production in Japan, in 2011 domestic production was merely 23% of the volume of soy food consumption.”
“Prospects for increased production through improved yields or other means remain limited by various factors including the lengthy rainy season, and the failure of Japanese agriculture to adopt higher biotech seeds with higher yield potential.”
Production in 2011 was 219,900 tonnes, down from 222,500 the previous year. The Japanese government has announced a plan to increase production to 600,000 tonnes.
“It must be noted that Japan has never reached 600,000 tonnes in production before, and the last time soybean production last exceeded 500,000 tonnes was in 1955,” the attaché commented. “As the current planted area is one-third of the 1955 area, coupled with a limited workforce, the proposed targets will be difficult to achieve.”

In a report on the adoption of biotech on the Japanese market, the attaché described the approvals process as “slow but steady.”
“Japan remains the world’s largest per capita importer of foods and feeds that have been produced using modern biotechnology,” the report said, despite an apparent reluctance on the part of Japanese consumers to adopt GMOs. “Annually, Japan imports about 15 million tonnes of corn and 3 million tonnes of soybeans, approximately 75% of which are produced through biotechnology.
Japan also imports billions of dollars worth of processed foods that contain biotech-derived oils, sugars, yeasts, enzymes and other ingredients.”
“The biotech regulations in Japan are science-based and transparent, and new events are generally reviewed and approved within acceptable time periods that mostly align with industry expectation. To date, over 160 events have been approved for food use. The government of Japan completed the review of 29 events last year, a strong indication that the regulatory system is, in fact, functioning.”
However, assuming an increase over the next decade in the number and types of biotech events released to the market, the overall approval speed in Japan may become significantly slower, the attaché said.

Key Facts

Capital: Tokyo
Population: 127,368,088 (July 2012 est.)
Religions: Shintoism 83.9%, Buddhism 71.4%, Christianity 2%, other 7.8%. Note: Total adherents exceed 100% because many people belong to both Shintoism and Buddhism (2005).
Location: Eastern Asia, island chain between the North Pacific Ocean and the Sea of Japan, east of the Korean Peninsula.
Government: A parliamentary government with a constitutional monarchy. Chief of State: Emperor Akihito (since Jan. 7, 1989); Prime Minister: Yoshihiko Noda (since Aug. 30, 2011).
Economy: In the years following World War II, government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan develop a technologically advanced economy. Japan’s industrial sector is heavily dependent on imported raw materials and fuels. A tiny agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self-sufficient in rice, Japan imports about 60% of its food on a caloric basis. For three decades, overall real economic growth had been spectacular — a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the after effects of inefficient investment and an asset price bubble in the late 1980s that required a protracted period of time for firms to reduce excess debt, capital, and labor. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, Japan in 2011 stood as the third-largest economy in the world after second-place China. A sharp downturn in business investment and global demand for Japan’s exports in late 2008 pushed Japan further into recession. Government stimulus spending helped the economy recover in late 2009 and 2010, but the economy contracted again in 2011 as the massive 9.0 magnitude earthquake in March disrupted manufacturing. Electricity supplies remain tight because Japan has temporarily shut down almost all of its nuclear power plants after the Fukushima Daiichi nuclear reactors were crippled by the earthquake and resulting tsunami. Prime Minister Yoshihiko Noda has proposed opening the agricultural and services sectors to greater foreign competition and boosting exports through membership in the U.S.-led Trans-Pacific Partnership trade talks and by pursuing free-trade agreements with the E.U. and others, but debate continues on restructuring the economy and reining in Japan’s huge government debt, which exceeds 200% of GDP.
GDP per capita: $34,700 (2011 est.); inflation: -0.3% (2011 est.); unemployment: 4.6% (2011 est.).
Currency: Yen (JPY): 86.06 yen equals 1 U.S. dollar (Dec. 27, 2012 est.).
Exports: $787 billion (2011 est.): motor vehicles 13.6%; semiconductors 6.2%; iron and steel products 5.5%; auto parts 4.6%; plastic materials 3.5%; power generating machinery 3.5%.
Imports: $807.6 billion (2011 est.): petroleum 15.5%; liquid natural gas 5.7%; clothing 3.9%; semiconductors 3.5%; coal 3.5%; audio and visual apparatus 2.7%.
Major crops/agricultural products: Rice, sugar beets, vegetables, fruit; pork, poultry, dairy products, eggs, fish.
Agriculture: 1.2% of GDP and 3.9% of the labor force.
Internet: Code: .jp; 64.453 million (2012) hosts and 99.182 million (2009) users.

Source: CIA World Factbook