Market Information
Asia Pacific

Agri-Food Sector Profile
Agricultural Commodities - Japan

May 2005

Canadian Embassy in Japan
7-3-38 Akasaka, Minato-ku
Tokyo, Japan 107-8503
Contact: Tsuneto Sasaki, Trade Commissioner
Tel.: (81-3) 5412-6200
Fax: (81-3) 5412-6247
E-mail: jpn.commerce@international.gc.ca
Internet: www.infoexport.gc.ca/jp

MARKET OVERVIEW

Japan's mountainous landscape renders only 13% of its land suitable for agriculture. The limited arable land and a large population make Japan highly dependent on imported food crops and animal feed.

Canada is a significant player in the Japanese market as the fourth-largest supplier of agri-food behind the United States, China, and Australia. In 2004, Japan imported approximately $4.2 billion(2) worth of Canadian agri-food and seafood--a 10% increase over 2003. Canadian imports accounted for close to 6% of Japan's total $71 billion of agri-food imports in 2004. (Japan is Canada's second largest export market for food products accounting for nearly 10% of Canada's exports in 2004.)

With its heavy reliance on imported agri-food, Japan has consistently been a major importing country for Canadian high-quality grains, oil seeds, animal feed and related products. If seafood is excluded from the food imports from Canada, food crops and animal feed account for nearly half of the total agri-food imports. Canada provides Japan with a constant supply of canola seeds, wheat, and an increasing amount of food-grade soybeans. This profile focuses on trends in Japanese imports of selected agricultural commodities.

Market Trends

Canola (Rapeseed)

In 2004, total Japanese imports of canola seeds for crushing were valued at $1.1 billion--an increase of 14.0% over 2003. Canada continues to be Japan's largest import source and accounts for roughly 70-80% of the total market. Imports from Canada increased to $788 million (up 4.0% from 2003) and 1.68 million metric tons (MT), an increase of 1.4% over 2003. Australia has become a steady supplier with a market share reaching 27.2% of Japanese imports by volume in 2004. Meanwhile, Japan imported over 50 000 MT of canola from France in 2003; however, there were no such imports recorded in 2004.

For the past several years, annual demand for canola seed in Japan has been stable at around two million tons. However, crushers were required to import over 2.3 million MT in 2004 to make up for a shortage of soybeans. Approximately 60% of the canola oil produced from seed is used as household cooking oil, while 40% is used for food processing in products such as margarine, mayonnaise and salad dressing. Most canola seeds are crushed and processed into canola oil and its bi-product meals, which are used exclusively for feed and fertilizer production. Total meal production is declining over the long term due to a downturn in feed demand from the livestock sector.

There are no tariffs on the importation of canola seeds. However, tariffs for canola oil are set at 13.2 yen per kilogram or 10.9 yen if the acid value exceeds 0.6. Tariffs will remain in place until, at the least, the completion of the next round of WTO agricultural negotiations.

Soybeans

In 2004, Japanese imports of soybeans decreased slightly to 4.4 million MT from 5.2 million MT in 2003, due to a world supply shortage. However, total import value increased from $2.1 to $2.3 billion. The US is Japan's largest supplier of soybeans with a 72.1% market share at 3.18 million MT, followed by Brazil with 17.7% at 0.78 million MT and by Canada with 5.9% at 0.26 million MT. In 2004, imports from Canada increased 37.5% by volume and 62.9% by value due to better supply conditions compared with the other countries. Canada has emerged as the third largest import source for Japan since 1999. Most Canadian soybeans imported into Japan were non-genetically modified (GM) and were utilized mainly for tofu (soybean curd) and miso (soybean paste). Small quantities of soybeans are also used for natto (fermented whole beans), while soybeans for soymilk have increased significantly due to the growing popularity of soymilk.

Japanese total utilization of soybeans in 2004 was about 4.7 million MT, with domestic production accounting for 280 000 MT and imports for the remainder. Japanese consumption of soybeans is currently divided as follows: Approximately 77% of the total demand is for use as oil, 21% for use as food, and the remaining 2% for use as feed. Nearly one million MT of food grade soybeans are used for fresh, frozen, and fried tofu, miso, natto, soy milk, boiled soybeans and soy sauce. Consumption of food soybeans in 2005 is expected to be flat.

Wheat

In 2004, annual imports of wheat increased by 4.7% to 5.5 million MT (approximately $1.66 billion). The United States continues to be the largest import source for Japan with 53.4% of the market by value at $889 million and 55.9% share by volume, followed by Canada and Australia. Canada supplied 23.6% share by value at $393 million and 21.2% by volume at 1.16 million MT during 2004.

Wheat, barley and rice production, sales and procurement are under the jurisdiction of the Japanese government, and there have been no major changes in import levels for decades. Wheat consumption has gradually increased over the past several years due to a shift from rice to processed wheat products such as bread and pasta. It should be noted that domestic production is also rising as some rice farmers are switching to wheat production. In 2004, domestic wheat production increased 0.5% over the previous year to 859 900 MT.

OPPORTUNITIES

The Japanese food processing industry (e.g. vegetable oil processing and flour milling industry) is highly oriented to the import market. Canada is the largest exporter of canola, flax, mustard seed and malt to Japan and the second largest exporter for wheat, barley and food-grade soybeans. Japan is expected to remain as a major market for Canadian agricultural commodities.

Image and reputation of Canadian agricultural products (e.g. wheat, barley and the others) are very high for both consumers and the Japanese food processing industry.

Japanese vegetable oil crushers produced nearly 950 000 MT of canola oil in 2004. Canola oil is the most consumed edible oil in Japan followed by soybean oil. As production of canola in Japan is very limited, Japanese demand is dependent entirely on imports.

On April 1, 2001, Japan instituted mandatory labelling requirements on foods derived from biotechnology, such as food grade soybeans. As a result, many food processors shifted their sources from the US to other countries that promote non-GM soybeans--primarily Canada and Brazil.

There has been new demand for oilseed meals as a substitute for animal-origin meals since the discovery of bovine spongiform encephalopathy (BSE) infected cattle in Japan in September 2001.

The quality of Japanese domestic wheat is generally evaluated as lower than that of imported wheat and so its use is limited primarily to noodle production and as filler. (Since domestic wheat is low in protein, flour millers mix it with higher protein imported varieties.)

Canada is Japan's only import source for durum wheat with nearly 100% market share at $70 million in value and around 198 000 MT by volume.

Canada is now the single largest exporter of barley malt, flax and mustard seed to Japan.

Japan maintains an overall agricultural self-sufficiency rating of about 40% (calorie basis) and as a result, relies extensively on imported foodstuffs. Rice, vegetables and eggs are a few of the products in which Japan is self-sufficient to a rating of over 80%. In early 2005, the Ministry of Agriculture, Forestry and Fisheries (MAFF) re-announced a self-sufficiency target of 45% on a caloric basis for 2015. Japan's self-sufficiency consistently declined for many years but has remained steady at 40% since 1998. It is doubtful that Japan will be able to increase its self-sufficiency significantly for a variety of reasons, including the high cost of production and the aging of the farm sector. Canada is well positioned to cover the gap by supplying high quality agricultural commodity products to Japan.

With the Japanese government's implementation of the Food Hygiene Law & Feed Security Legislation, effective July 1, 2003, there has been strong demand for products that meet both the high standards of identity preservation and food and feed safety requirements.

KEY PARTICIPANTS

As a net importer of agricultural commodities products, Japan relies on foreign suppliers to ensure the provision of important food crops. Canada's main competitors in key export markets are principally the United States and Australia.

The United States is the largest supplier with over 60% market share in terms of grains & oilseeds. As a major provider of wheat as well as canola, Australia is also a key competitor being the third largest supplier of food crops (behind Canada) with around 11% market share. These three countries combine to account for 94% of Japan's total grain and oilseed imports. Competitors gain an advantage through better harvesting weather (only in certain years), freight efficiencies (especially for the US) and by the ability to offer products during Canada's off-season (Australia).

The Japanese food industry, including the grain and oilseed processing industry, is currently going through a major consolidation and efficiency improvement process. For example, as of December 2001, there were 53 domestic oil-crushing factories in Japan with a total crushing capacity of 8.9 million MT. Due to shrinking profitability, the number of crushers has declined gradually over the years as companies consolidate. There were 117 crushing factories in 1990. The Japanese government began to provide crushing capacity data biannually from 1999. In a realignment that started in 2001 and continued through 2004, Japan's top seven edible oil companies were consolidated into two. Nisshin Oillio Group Ltd., which became the world's third-largest firm in terms of oil expression volume, and J-Oil Mills Inc., which ranks sixth. Major companies in Japan that use Canadian wheat are Nisshin Flour Milling Inc., Nippon Flour Milling Co., Ltd., Showa Sangyo Co., Ltd. and Nitto Flour Milling Co., Ltd. On Dec. 6, 2004, Nisshin Flour Milling Inc., the core company of Nisshin Seifun Group Inc., opened its second North American manufacturing base. Rodgers Foods Inc., a Canadian flour-milling firm in which the Nisshin Flour Milling group holds a 90% stake, built the factory.

Canadian Position

Canada continues to be Japan's leading supplier of canola, wheat, soybeans, forage, malt, and barley. Japan has a steady annual demand of between 1.6 and 1.8 million MT of canola and over 1 million MT of wheat from Canada. Canada is Japan's sole supplier of durum wheat. Canada is well positioned to export food grade soybeans for the Japanese food soybean market. Canadian suppliers have also been successful in the export of cereals and cereal products for many years. As the Japanese food processing industries are highly concerned with food safety, Canadian companies may benefit from references to Canada's Agricultural Policy Framework, which clearly addresses food safety as a priority. Japan is one of the most reliable markets for food crops and has consistently provided high returns to Canadian grain producers and exporters.

Canadian wheat, canola, soybeans and the other commodity products enjoy a reputation for high quality in Japan. However, there is intense competition from US producers for wheat and soybeans, and Australia for canola and wheat. Quality factors that can distinguish the Canadian crop from its competitors are extremely valuable for promoting the crop to buyers.

PRIVATE- AND PUBLIC-SECTOR CUSTOMERS

Although the Japanese agri-food market is open for competition, Canadian exporters should be aware of the high tariffs applied to most imports of raw materials and value-added processed foods.

The Japanese food distribution system is characterized by multiple layers of distributors and wholesalers--many of whom specialize in certain products--who have developed close relationships with manufacturers, retailers, importers and other wholesalers. Specialized distributors typically handle competing product lines and some or all related promotional activities. Depending on the specific agreement, distributors and wholesalers may also oversee customer support. The agricultural commodities trade in Japan is traditionally handled by large general trading companies that have tremendous influence in the Japanese food industry, even though some specialized trading companies are involved in specific sectors, such as food soybeans and organic grain products. Each commodity sector has trade and industry associations unified to lobby their internal and external activities to governmental agencies. For example, Japan Oilseed Processors Association is the vegetable oil crushers' organization and the Japan Flour Millers Association is the wheat flour millers' organization. These organizations work closely with their respective trader associations, such as the Japan Oils & Fats Importers Association and the Japan Grain Importers Association.

Nevertheless, choosing the appropriate distributor is still a crucial step in accessing the Japanese market. It is important to work closely with a Japanese partner to ensure that products meet all regulations, standards and quality conditions that are essential to operating successfully in Japan. Producers are expected to communicate frequently with their distributor or wholesaler, which includes, generally, making one or more trips to Japan each year. A lack of correspondence is generally interpreted as evidence of a lack of commitment and inevitably leads to mis-communication and a loss of interest by the client. Good communication from the supplier often determines how much effort a distributor or wholesaler will put towards promoting that supplier's products.

KEY CONTACTS

Canadian Government Contacts

Canadian Embassy in Japan
7-3-38 Akasaka, Minato-ku
Tokyo, Japan 107-8503
Contact: Agri-Food Division
Tel.: (81-3) 5412-6200
Fax: (81-3) 5412-6247
E-mail: jpn.commerce@international.gc.ca
Internet: www.infoexport.gc.ca/jp

International Trade Canada (ITCan)
125 Sussex Dr.
Ottawa, ON K1A 0G2
Internet: www.itcan-cican.gc.ca

The Japan Division (PJP)
Contact: John Burbridge, Deputy Director
Tel: (613) 996-2458
Fax: (613) 994-2397
E-mail: john.burbridge@international.gc.ca

Market Research Centre (TMR)
Contact: Sean McLean, Trade Commissioner and Senior Market Analyst
Tel.: (613) 996-0688
Fax: (613) 943-1103
E-mail: sean.mclean@international.gc.ca

Market Support Division (TMM)
Contact: Clément Côte, Trade Commissioner
Tel.: (613) 995-1773
Fax: (613) 943-1103
E-mail: clement.cote@international.gc.ca

Agriculture and Agri-Food Canada
International Markets Bureau
930 Carling Ave. , 10th Floor
Ottawa , ON K1A 0C5
Contact: Amit Dutt, International Market
Development Officer
Tel.: (613) 759-7523
Fax: (613) 759-7506
E-mail: dutta@agr.gc.ca
Internet: ats.agr.ca

Canadian Food Inspection Agency (CFIA)
59 Camelot Dr.
Nepean, ON K1A 0Y9
Tel.: (613) 225-2342
Fax: (613) 228-6653
E-mail: cfiamaster@em.agr.ca
Internet: www.cfia-acia.agr.ca

Canadian Commercial Corporation (CCC)
50 O'Connor St., 11th Floor
Ottawa, ON K1A 0S6
Tel.: (800) 748-8191 or (613) 996-0034
Fax: (613) 995-2121
E-mail: info@ccc.ca
Internet: www.ccc.ca

Export Development Corporation (EDC)
151 O'Connor St.
Ottawa, ON K1A 1K3
Tel.: (613) 598-2500
Fax: (613) 237-2690
E-mail: export@edc4.edc.ca
Internet: www.edc.ca

Japanese Government Contacts

Embassy of Japan in Canada
255 Sussex Dr.
Ottawa, ON K1N 9E6
Tel: (613) 241-8541
Fax: (613) 241-2232
E-mail: consul@embjapan.ca
Internet: www.ca.emb-japan.go.jp

Japan External Trade Organization (JETRO)
JETRO Headquarters
2-5 Toranomon 2-chome
Minato-ku, Tokyo 105-8466
Tel: (81-3) 3582-5511
Fax: (81-3) 3587-0219
Internet: www.jetro.go.jp/

Japanese Ministry of Agriculture, Forestry and Fisheries
1-2-1 Kasumigaseki, Chiyoda-ku
Tokyo , Japan 100-8950
Tel: (81-3) 3591-2874
Fax: (81-3) 3501-3720
Internet: www.maff.go.jp

Ministry of Health, Labour and Welfare
1-2-2 Kasumigaseki Chiyoda-ku
Tokyo , 100-8916 Japan
Tel: (81-3) 5253-1111
E-mail: admin@mhlw.go.jp
Internet: www.mhlw.go.jp

BIBLIOGRAPHY

Agriculture and Agri-Food Canada. "Japan Agri-Food Country Profile," February 2003. Downloaded from atn-riae.agr.ca/asia/e2982.htm

Japan Grain and Feed Annual - United States Foreign Agricultural Service: www.fas.usda.gov/gainfiles/200503/146119077.pdf on March 2005

Japan Oilseeds and Products Annual - United States Foreign Agricultural Service: www.fas.usda.gov/gainfiles/200405/146106304.pdf on May 2004

JETRO (Japan External Trade Organization) Market Report "FEED" 2003: www.jetro.go.jp/en/market/reports/mgb/data_e/7/04.pdf

World Trade Atlas: Japan agri-food imports from the world (HS Codes 01-24) December, 2004

Useful Internet Sites

Agriculture and Agri-Food On-line: www.agr.gc.ca

Agri-Food Trade Service: atn-riae.agr.ca/

Agri-Food Trade Service Links: atn-riae.agr.ca/general/link-e.htm

ExportSource - Team Canada Inc.: exportsource.ca/

Strategies: www.strategis.gc.ca

Food Industry Japan: www.foodindustryjapan.com/

Department of Foreign Affairs and International Trade: www.dfait-maeci.gc.ca

InfoExport: www.infoexport.gc.ca

Ministry of Agriculture, Forestry and Fisheries: www.maff.go.jp

Ministry of Health, Labour and Welfare: www.mhlw.go.jp

Japan External Trade Organization (JETRO): www.jetro.go.jp/

JETRO Standards and Regulation: www.jetro.go.jp/se/e/standards_regulation/index.html

Japan Information Network Statistics: www.jinjapan.org/stat/

Japan Ministry of Foreign Affairs: www.mofa.go.jp

Ministry of Economy, Trade and Industry: www.meti.go.jp

1. The Government of Canada has prepared this report based on primary and secondary sources of information. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations listed herein. Readers should independently verify the accuracy and reliability of the information.

2. All monetary amounts are expressed in Canadian dollars, unless otherwise indicated. The conversion rate to Canadian dollars is based on Bank of Canada, February 2005.