WASHINGTON, D.C., U.S. — Several factors could lead to increased market competition for U.S. wheat product exports to Japan, according to a Dec. 28, 2018, Global Agricultural Information Network (GAIN)reportfrom the Foreign Agricultural Service of the U.S. Department of Agriculture (USDA).

Two of the major factors that could impact trade are a free trade agreement between Japan and the European Union and the pending Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).

“The two agreements are likely to contain similar tariff concessions for a wide range of wheat products, including food wheat, pasta and flour,” the USDA said. “The Japan-E.U. agreement could enter into force as early as 2019 while Japan continues to advocate for a CPTPP without the United States. Meanwhile, the government of Japan is strengthening opportunities for domestically produced wheat and wheat products through countermeasures.”

Japan produces only about 10% of the food wheat that it consumes, and imports the remaining 90%, the USDA said. The imports primarily come from the United States, Canada and Australia, the agency noted. According to the USDA, Japan imported $1.4 billion of wheat from the United States in 2016.

The USDA noted that Japan uses its imports to produce approximately 4.7 million tonnes of wheat flour, 40% of which is used for making bread, 34% for noodles, 11% for confectionery products, and 3% for retail sales.

“Wheat flour production has been stable at around 4.7 million tonnes per year while production of bread and noodles has been increasing in recent years as a result of increasing consumption,” the USDA said. “Production of biscuits, cookies and crackers had been stable at around 240,000 tonnes, but increased to 260,000 tonnes in 2015 and 2016 due to decreased imports as a result of a weaker Japanese Yen.”

Meanwhile, wheat flour accounts for most of Japan’s exports. But according to the USDA, exports have been on the decline as milling technologies have improved in neighboring countries and more flour mills have been built in exporting countries.

“Nevertheless, when Japan imports wheat, processes it, and exports wheat flour, macaroni and spaghetti, biscuits and other items, the wheat imported for the manufacture of these products enters Japan duty free (to facilitate its eventual exports),” the USDA said. “This policy is expected to remain in effect after the effectuation of the Japan-E.U. EPA and the CPTPP agreement.”

As part of its Economic Effects Analysis filed on Dec. 21, 2017, regarding the Japan-E.U. EPA and CPTPP agreement, Japan indicated it is not forecasting a decrease in domestic wheat production. However, the nation does expect that tariff reductions for wheat products may impact domestic wheat millers and processors who use domestic wheat, the USDA noted in its report.