Market Information
Asia Pacific

The Nutraceuticals Market in Japan

May 2003

Prepared by the
Market Research Centre
and the
Canadian Trade Commissioner Service

© Department of Foreign Affairs and International Trade
(FaxLink no. 1100003)

Report prepared by the Market Research Centre

Market Support Division (TCM)
Department of Foreign Affairs and International Trade
125 Sussex Drive, Ottawa K1A 0G2
Fax: (613) 943-1103
E-mail: mrc@dfait-maeci.gc.ca

The Market Research Centre produces a wide range of market reports by region and sector for Canadian exporters. These reports are available from:

— DFAIT's InfoExport Internet site ( http://www.infoexport.gc.ca).

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.

EXECUTIVE SUMMARY

Japan is the largest producer and consumer of nutraceutical products in the Asia-Pacific region. The Japanese nutraceuticals market is now entering a stage of further expansion due to the ageing of the population and the growth in the number of Japanese consumers who are health conscious. Moreover, Japan’s government has initiated a campaign to aid in improving the overall health of their citizens; promotions of healthy living and preventative medicines are at the forefront of the campaign. Since their introduction, sales of vitamins, minerals and dietary supplements have grown significantly. The market is worth an estimated $12.7 billion1 and is expected to increase annually by 9% expected through 2012.

There are numerous health concerns in Japan which will result in a growing market for combative and preventative nutraceuticals. Dietary supplements, tonics and vitamins, both single and multivitamins, are forecast to have the strongest growth potential. Products that lower cholesterol and blood pressure levels, aid digestion, prevent osteoporosis and improve vision are notable growing market areas. Weight-control and anti-stress products are also in demand.

Nearly all products and services within this health-care market can be provided by domestic businesses. However, Canadian producers of improved versions of existing products and niche items that offer good value for money have a good chance of establishing themselves within this market.

Deregulation of the over-the-counter (OTC) market, instituted in 1999, has made a wide variety of nutraceutical products available for sale in retail outlets other than drug stores and pharmacies. Sales of nutraceuticals through pharmacies decreased since this time, while sales in retail outlets such as supermarkets and health food stores have risen dramatically.

MARKET OVERVIEW

Japan is the second-largest pharmaceutical market in the world, behind the United States. With a per-capita expenditure on pharmaceuticals estimated at $839, it is one of the highest in the world. High per-capita spending can be attributed to high-priced prescriptions. Doctors in Japan not only prescribe pharmaceuticals but also dispense them, so there is great financial incentive for patients to receive costly drugs. The government is currently promoting bungyo, the separation of prescribing and dispensing functions, which is expected to reduce the high prescription rates. Moreover, there is also a movement toward the use of nutraceuticals as both preventative and treatment methods of attaining better health.

The Japanese nutritional supplement market is currently worth an estimated $12.7 billion. The market has demonstrated a steady growth for the last 10 years, averaging increases of 16% annually, with the growth rate accelerating since 2000 to more than 20% a year. This trend is expected to continue at an average rate of 9% annually through to 2012. The growth comes largely as a result of eased regulatory restrictions, the popularity of Western herbal and non-herbal products, a rise in the number of older citizens and the prevention of lifestyle diseases. Interest in maintaining health, in addition to curing existing ailments, has also driven sales of vitamins and dietary supplements in Japan. Products such as calcium supplements, ginkgo biloba and prune extract have done exceptionally well in the market.

Source: Euromonitor. "Herbal Remedies," July 2001

Herbal and Non-Herbal Extracts

The Kampo herbal medicine market represents a unique portion of the nutraceutical market in Japan. Kampo, which means "medicine from China," is based on traditional Chinese herbal remedies and modern Japanese science and technology. Annual sales of Kampo herbal remedies are estimated to exceed $2.2 billion.

Kampo is widely recognized and accepted by Japanese consumers and doctors alike. Approximately 80% of the general population is believed to be using this form ofc treatment for various ailments. Currently, more than three quarters of all physicians prescribe Kampo medicines and more than 85% of all Kampo products are bought on prescription—a higher percentage for traditional medicines being prescribed than almost anywhere else in the world. This is, perhaps, due to the fact that they are covered under the national health insurance system.

Presently, there are around 150 Kampo products available for a variety of treatments. The most common ailments for which doctors prescribe Kampo products are liver problems, colds and respiratory tract infections, and menopausal symptoms. This traditional form of treatment has also been prescribed to treat more significant problems such as cardiovascular disease and cancer. Nonetheless, the use of herbal products—including Kampo—remains relatively low compared to consumption of standard analgesics. From 1996 to 2000, sales of herbal remedies represented only 3% of the total market; standard medicines captured the remaining 97% of sales. However, health-food and drug manufacturers, increasingly aware of the benefits of herbs, are beginning to add herb-based supplements to their products.

Tsumura is the dominant company in the prescription Kampo market, accounting for70% of total sales. The OTC segment, which has sales of $445 million annually, is led by Kanebo, which accounts for 30% of sales. Other major players in this market include JPS Seiyaku and Kotaro.

Demand for herbal and non-herbal extracts is expected to increase favourably in the coming years, with annual growth estimated at 7.3% to $296.9 million by 2006. Products with the best growth potential include ginkgo biloba, glucosamine and saw palmetto.

Source: Freedonia. "World Nutraceuticals to 2006," June 2002

To date, Japan’s young female population has been the driving force in herbal product consumption. However, the country’s elderly population is forecast to be the largest consumer group of herbs in the future. Increased use of herbs in functional foods as alternative health care is expected in the coming years, accompanying the increase in the country’s senior population.

Nutrients and Minerals

As home to the several major multinationals, including Ajinomoto, Chugai Pharmaceutical, Sankyo Company and Tanabe Seiyaku, Japan is the world’s leading producer of nutrients and minerals.

Demand for bulk nutrients and minerals are forecast to reach $725.9 million by 2006 through 3.6% annual increases from 2001.

Source: Freedonia. "World Nutraceuticals to 2006," June 2002

Vitamins and Dietary Supplements

Unhealthy lifestyles have prompted a growth in dietary supplements and vitamins. Consumers aged 18-25 are more apt than older consumers to purchase less-expensive brands of vitamins from grocery stores and other mainstream retail outlets; older consumers tend to trust OTC products recommended by pharmacists. The market in Japan had an estimated value of $188 per person in 2001.

In an attempt to cut down on medical spending, the Japanese Ministry of Health, Labour and Welfare (MHLW)2 reduced the price of 81% of drugs that were covered by the insurance system (9096 out of 11 191 drugs) in 1999. Of the remainder, 1997 types of drugs retained their price while 98 types of drugs saw price increases. The prices of vitamins A and D were reduced by 12.3% through this cost-cutting measure; vitamin B products (excluding B1) were reduced by 6.3%.

The government’s most recent campaign, the National Health Promotion Movement in the 21st Century (Healthy Japan 21), focuses on primary prevention through better eating, more exercise and the reduction of stress, smoking and drinking. Sales of vitamins and dietary supplements showed an increase of 5.7% in 2001, the first year of the program.

Source: Euromonitor. "OTC Healthcare Japan," July 2001

The multivitamins market achieved a 1.2% increase in 2001. Consumer loyalty and trust has made Kowa’s QP Gold the leading brand in this category for several years running; Kowa commanded a 22.3% market share in 2001. Other leading companies include Sankyo Co. Ltd., Nu Skin Japan Co. Ltd., Shionogi & Co. Ltd. and Fancl Corp.

Single vitamins are more popular with Japanese consumers than multivitamins and are slated for even further growth as consumers become more knowledgeable about vitamin products and their specific benefits. Pleasant-tasting chewable vitamins are also highly preferred and are expected to drive future sales. Vitamin C is the best-selling vitamin both as a chewable vitamin and as a food supplement.

Source: Freedonia. "World Nutraceuticals to 2006," June 2002

Although Japan is one of the largest producers of vitamins in the world, the country is a significant importer. Imports of vitamins reached 9893 tonnes in 2001, a 20.2% increase from 2000 import totals. Vitamin C, which is in high demand as a food additive, particularly by the soft drink industry, accounted for 56.6% of total vitamin imports by volume in 2001. Vitamin E had the second-largest share as a single vitamin, with 12.5%, while "other vitamins" accounted for 13.3%. Imported vitamins are currently duty free. Strong growth forecasts for fortified food and beverages and dietary supplements will result in a 3.6% annual increase for bulk vitamins until at least 2006.

Sports and Energy Drinks

Government deregulations in 2000 had a major impact on nutraceutical sales, particularly for nutritive beverages. Sales of nutritive drinks and tonics have been assisted by their broad availability throughout the country in convenience stores, supermarkets, vending machines and kiosks. Taisho Pharmaceutical, a leading manufacturer of these drinks began to sell drinks in cases as well as individually, which has helped them gain an edge over competitors.

According to the Japan Soft Drinks Association, sports drinks accounted for 9.5% of the country's non-alcoholic beverage market in 2001—up from 0.6% in 2000. Although all brands promote an image of combating poor health and exhaustion by replenishing minerals or rehydrating the body, products with calcium, amino acids or vegetable fibre as key ingredients are the top sellers in this category. Per-capita consumption, estimated at 15 litres, is the highest in the world.

Japan’s Otsuka holds more than 10% of the global sports drink market, second only to PepsiCo-owned Gatorade. Otsuka’s Pocari Sweat drink is the leading sports drink in Asia. Dynamic growth for both sports and energy drinks is expected. However, energy drinks are currently slated for larger growth since they appeal to all age groups, whereas the leading consumer group for sports drinks tends to be young active people.

Fish Oils

Prospects for the Japanese fish oils market appear favourable. Sales in 2001 totalled $226.9 million, a 35% increase from 2000 totals, and were forecast to reach an estimated $275 million in 2002. Continued growth is expected until at least 2005 as the ability of fish oil to combat osteoporosis becomes more recognized.

Key Factors Shaping Market Growth

Over the last decade, consumer interest in self-health management has steadily increased. This interest is due to the rising costs of health care in Japan and the increasing percentage that consumers are having to pay toward total health-care costs. In addition, the health-care industry has suffered a decline in credibility due to reports of over-prescription of pharmaceuticals. As a result, the demand for additives and ingredients that are believed to provide some kind of health benefit has increased substantially. The Japanese government has also supported this trend toward selfhealth management, as self-health reduces financial strains on the medical system.

Closely related to the demand for healthier products is the fact that the Japanese population is steadily ageing. Although Japan has the longest life expectancy in the world, it also has the most rapidly ageing population of any industrialized nation. By 2007, it is estimated that Japan will have 26 million people over the age of 65. A comparatively low birth rate (9.5 per 1000) and a low level of immigration will also contribute to a steadily ageing population. As a result, many elderly consumers are searching for products that may help avoid or reduce the risk of contracting various ailments.

Under Japan’s Nutrition Improvement Law, five categories of foods are classified as Special Health Use. One category deals specifically with functional foods: Foods for Specific Health Use (FOSHU). FOSHU is the only system in the world that aims to regulate functional foods. The law permits/approves nationwide marketing and labelling of such food products, such as carrying a statement of approved health claims and the FOSHU seal on packaging.

In April 2001, the government added the subgroup Nutritional Functional Foods. This group comprises vitamins A, D, E, B1, B2, B6 and C, niacin, folic acid, calcium, iron and pantothenic acid. Companies are permitted to make health claims provided the vitamins and minerals contain a certain dosage.

Opportunities

The best prospects for Canadian companies lie in the export of products that cater to the needs of a life stage, particularly children and the elderly population; lifestyle products that address specific concerns like stress relief; sports health products to combat sports fatigue; and symptom-specific products that target particular ailments. Supplements to improve the appearance and condition of nails, skin and hair performed well in 2001 and are slated for continuous growth over the next three to five years.

Source: Euromonitor. "OTC Healthcare Japan," July 2001

There are numerous health concerns in Japan that are forecast to result in a growing market for combative and preventative nutraceuticals, including:

• obesity. Although by North American standards obesity levels in Japan are low, levels have doubled over the last two decades. Currently, 1.8% of men and 2.6% of women in Japan are obese and the number of overweight children is becoming a significant problem. Weight-control products are therefore in great demand;
• stress. Escalated levels of stress among Japanese workers has created excellent opportunities for products that help the body relax. Sales of stresscombating herbs and teas have increased substantially in recent years; this is not particularly surprising in a country claiming to have 10 000 people die annually due to overwork. Time constraints and a rise in the number of working women have also led to the growth in popularity of self-medication, which minimizes the amount of work or school time missed. Japanese workers and school children are extremely concerned with excelling and therefore wish to miss as little time as possible. This work ethic often creates a great deal of stress, which can lead to illness. Consumption of vitamins or dietary supplements can help to reduce the amount of work or school missed due to illness;
• osteoporosis. Approximately 10 million people in Japan suffer from osteoporosis. Due to increasing awareness of the condition, calcium supplements and food products enriched with calcium are in great demand; and high cholesterol. Changes in consumption patterns and a greater awareness of nutritional deficiencies have also contributed to increased consumption of these products. Over the last three decades, the Japanese diet has become increasingly westernized, with higher levels of meat consumption and lower levels of fish consumption. In turn, iron levels have risen, while calcium, protein and salt levels have decreased. Vitamins and supplements stressing high levels of these nutrients have experienced strong growth in recent years, as Japanese consumers attempt to maintain a healthy, balanced diet.

Products that lower blood pressure levels, aid digestion and improve vision are notable growing market areas. Weight-control, anti-allergy and dental-care products are also in demand.

Consumption of natural flavour products that have healthy benefits has increased and will continue to provide good opportunities for foreign suppliers as the Japanese population accepts the medicinal benefits of non-traditional products. Flavour compounds such as vanillin, thymol and eugenol are proven to be good antioxidants. Other natural flavours with medicinal properties in demand include aloe, angelica, lavender, orange peel and garlic. Export opportunities for bulk vitamins identified as FOSHU are also expected to expand as domestic food processors and OTC drug makers and food manufacturers focus on the growing functional food market.

COMPETITIVE ENVIRONMENT

Local Capabilities

With over 2000 companies operating in the country, Japan is among the leading global producers of nutraceutical compounds in Asia. The nutraceutical industry is highly fragmented, with no dominant supplier. Leading domestic manufacturers include Ajinomoto, Amano Pharmaceutical, Banyu Pharmaceutical, Chugai Pharmaceutical, Daiichi Pharmaceutical, Eisia, Fujisawa Pharmaceutical, Kaken Pharmaceutical, Kirin Brewery, Kyowa Hakko Kogyo, Mochida Pharmaceutical, Ono Pharmaceutical, Otsuka Pharmaceutical, Sankyo, Shionogi & Company, Taisho Pharmaceutical, Takeda Chemicals, Tanabe Seiyaku, Teijin, Tojo Pharmaceutical, Toyama Chemical, Yamanouchi Pharmaceutical, and Mitsubishi Welpharma. Yakult.

International Competition

Major foreign companies operating in the Japanese nutraceuticals market include Aventis (France), Merck & Company (U.S.), Novartis (Switzerland), Pfizer (U.S.), AstraZeneca (U.K.), Bristol-Myers Squibb (U.S.), GlaxoSmithKline (U.K.), Lilly (U.S.), Pharmacia (U.S.) and Roche (Switzerland).

The United Kingdom (with 26.2% of Japan’s total vitamin imports), Germany (24.3%), China (22.1%), Switzerland (9.3%) and France (4.8%) were the leading foreign suppliers of vitamins to Japan in 2001 (see Table 7). The United Kingdom and Germany were also the top exporters of Vitamin C to Japan, capturing 44.4% and 28.5% of total volume share, respectively, that year. Germany was the leading supplier of B1 (80.5%) and B6 (93.5%).

Source: JETRO. JETRO Marketing Guidebook for Major Imported Products. "Vitamins," 2002. Downloaded from http://www.jetro.go.jp/ec/e/market/mgb/6-07.pdf on November 27, 2002

Although no statistics are available, industry experts agree that Japan is almost 100% reliant on imports for dried herbs, herbal products and essential oils and extracts. France, Germany and the United States are the primary suppliers of herbal products, while Poland, Turkey, Bulgaria, Morocco, Egypt and Pakistan are the leading exporters of raw-material herbs to the Japanese market. According to the Japan External Trade Organization, there are only 55 domestic herb farms.

Canadian Position

Canada does not have a strong presence in Japan's vitamin and nutritional supplements market compared to many foreign competitors. Canada exported $2.6- million worth of vitamins to Japan from January to August 2002 (HS Code 3004.5), showing a 53% increase over the same period in 2001. Canada ranked 19th in terms of countries exporting vitamins to Japan; the United States, U.K., China and Germany are the top exporters in this subsector.

Competitive Advantage through Canadian Government Policies and Initiatives

Export Development Canada

Export Development Canada (EDC) offers export financing and insurance to Canadian exporters. Additionally, insurance can be provided for larger transactions that are subject to the terms and conditions established by the buyer. EDC prefers to work through letters of credit, bank credits or bank guarantees. Approval for financing is considered on a case-by-case basis.

International Business Opportunities Centre (IBOC)

The International Business Opportunities Centre is a partnership between the Department of Foreign Affairs and International Trade (DFAIT) and Industry Canada (IC). The Centre matches business opportunities provided by Trade Commissioners abroad with capable Canadian firms - particularly small and medium sized enterprises (SME’s). Opportunities are handled on a case-by-case basis, spanning all markets and all sectors. The Centre uses electronic databases, such as WIN Exports and Strategis, and a broad range of contacts in federal and provincial governments and industry associations to identify potential Canadian suppliers of products and services.

In order to position companies to receive business opportunities, the Centre offers a free service for Canadian companies, called E-Leads. By subscribing to E-Leads, relevant business opportunities matched to individual export interests are delivered in a timely and efficient manner directly to Canadian companies’ e-mail accounts. To subscribe, visit the Centre’s website at: http://www.iboc.gc.ca.

Program for Export Market Development

The Program for Export Market Development (PEMD) helps Canadian companies enter new markets by sharing the costs of activities that companies normally could not or would not undertake alone, thereby reducing risks involved in entering a foreign market. Eligible costs and activities include market visits, trade fair participation abroad, incoming buyers, product testing for market certification, legal fees for international marketing agreements, air transportation costs of offshore company trainees, product demonstration costs and other costs necessary to execute a market development plan. Activity costs are shared on a pre-approved, 50/50 basis.

The PEMD refundable contribution ranges from $5000 to a maximum of $50 000. Preference is given to companies with fewer than 100 employees for a firm in the manufacturing sector and 50 in the service industry, or with annual sales between $250 000 and $10 million. Other components of the program include international bid preparation (Capital Projects Bidding) and, for trade associations, developing international marketing activities for their membership. For additional information visit http://www.dfait-maeci.gc.ca/pemd or call 1-888-811-1119.

Virtual Trade Commissioner

The Virtual Trade Commissioner (vTC) is a new on-line service offered by Canada's Trade Commissioner Service of the Department of Foreign Affairs and International Trade. Through a personalized and password-protected Web page, vTC-registered Canadian exporters will receive timely and relevant information on contacts and business opportunities in targeted foreign markets. The vTC offers registered users direct on-line access to market information, including market reports, business news, events and business leads related to the companies' industry sectors and markets of interest. Users can request services on line from a trade commissioner responsible for their industry sector in their target markets. They will also automatically receive new information as it becomes available. Canadian exporters can register for a Virtual Trade Commissioner at http://www.infoexport.gc.ca.

PRIVATE-SECTOR CUSTOMERS

A Japan Health Food & Nutrition Food Association (JHNFA) survey found that Japanese consumers are already aware of their benefits of vitamins and dietary fibres. Indeed, of the 5502 consumers surveyed in 2002, 85.6% had purchased supplements at least once. (See Appendix A for a summary of survey results).

Consumer preferences in nutraceuticals are largely a function of age. Japanese teenagers and people in their 20s are more interested in products perceived to enhance their own attractiveness; that is to say products that are seen as dietary or beauty aids. For example, vitamin C or collagen-enriched foods are considered to be good for the skin and are therefore popular with this consumer demographic. Conversely, consumers over thirty tend to prefer vitamins and dietary supplements that promote their physical well-being.

Marketing campaigns, through television, the Internet and print as well as in-store promotions, will play an important role in influencing consumers in the future. Publicity—good and bad—can affect sales of nutraceuticals. Favorable press about a nutraceutical can affect sales in a positive way; however, health scares, such as those that link the intake of certain vitamins and minerals with specific diseases, can have an opposite effect on the market and have, in the past, prompted dramatic decreases in sales.

MARKET LOGISTICS

Channels of Distribution

There are approximately 70 000 pharmacies and drugstores in Japan, most of which are independent outlets. Matsumotokiyoshi, claiming 2% of total pharmaceutical sales in the country, is the leading drug store chain with over 150 stores, followed by Hac Kimisawa, Hankyu Kyoei Bussen and Sundrug.

Since 1998, Japan has relaxed its retail environment so that many OTC products, including vitamins and supplements, could be sold outside pharmacies. Through this deregulation, approximately 17 000 OTC products are now sold in retail outlets including grocery stores, convenience stores, railway kiosks and health-food shops. Since deregulation has taken effect, sales of nutraceutical products in pharmacies and drug stores have declined.

Source: Euromonitor. "Herbal Remedies," July 2001

The top domestic supermarket/hypermarket chains include Daiei Inc., Justco Co. Ltd., Ito-Yokado Co. Ltd., Seiyu Ltd., Uny Co. Ltd. and MYCAL Corporation.

Direct Sales

Due to the increasingly competitive nature of the Japanese market, a growing number of retailers are initiating direct sales agreements with manufacturers. This form of distribution not only reduces costs to the retailer, whose savings are passed on to the consumer, but is also more efficient than shipping products through distributors or wholesalers. Although some Japanese retailers have shown some resistance to this change, preferring to maintain long-standing relationships with wholesalers/distributors, the arrival of foreign-owned retailers (most of which prefer direct sales relationships) has provided the impetus for domestic companies to at least examine the possibility of purchasing products directly from the manufacturer.

U.S. mail-order companies including Herbalife, Amway and Nu Skin dominated direct sales to consumers from 1997 to 2001. However, Internet sales have seen steady growth over the past five years and have surpassed mail-order as the direct-tocustomer distribution channel. Fancl, Suntory, Kirin and Kobayashi are among the leading domestic nutraceutical companies to find success through this channel. U.S.- based Nu Skin has found a strong consumer base through Internet sales. Local supermarkets and drug stores have also begun to offer shopping on their Web sites.

Distributors and Wholesalers

The Japanese distribution system is characterized by multiple layers of distributors and wholesalers, many of whom specialize in certain products and have developed close relationships with manufacturers, retailers, importers and other wholesalers. Distributors who specialize typically handle competing product lines and some or all promotional activities. Depending on the specific agreement, distributors and wholesalers may also oversee customer support.

Choosing the appropriate wholesaler or distributor is a crucial step in accessing the Japanese market. Working closely with a Japanese partner helps to ensure that a product meets all regulations, standards and quality marks, which are essential to operating successfully in Japan. Producers are expected to communicate frequently with their distributor or wholesaler; this generally includes taking one or more trips a year to Japan. A lack of correspondence is generally interpreted as of a lack of commitment. Good communication often determines the efforts that distributors and wholesalers make to promote a producer's products.

When seeking the services of a distributor or wholesaler, exporters should consider the relationship that these individuals have with local governments, buyers and banks; the condition of their facilities; and their willingness and ability to keep inventory. Canadian producers are advised to review the provisions of Japanese law with a qualified lawyer before entering into an agreement with a prospective partner.

Agents and Sales Representatives

Agents are excellent channels through whom to introduce new products into the Japanese market. While agents solicit business and enter into agreements on behalf of the exporter they are representing, they do not take ownership over the products they sell.

An exporter must weigh a number of factors when selecting an agent, including the agent’s:

• region(s) covered;
• reputation;
• product knowledge;
• experience in handling the exported product;
• commission to be paid;
• ability to provide after-sales service, if required;
• track record; and
• staff size and quality.

These attributes can best be assessed during a visit to Japan. Manufacturers should also ensure that responsibilities are clearly defined before entering into a long-term relationship.

Market-entry Considerations

Suggested Business Practices

Japanese companies are extremely efficient and expect their foreign business associates to operate in the same way. Late arrival for meetings is deemed to be unacceptable and can taint an otherwise positive relationship.

Another important factor for Canadian exporters to remember is that most Japanese business initiatives start at the bottom of a company and "work their way up". Foreign companies often bypass lower levels of administration in an attempt to appeal to senior personnel. More often than not, alienation of key decision makers is the only result of this type of approach.

Many Japanese companies view a permanent market presence as a necessity to doing business with foreign companies. Regardless of the quality of the product, a supplier who does not have a local presence to deal—in Japanese—with any problem or enquiry that may arise, will have difficulties establishing business ties with Japanese companies. Although this need can usually be fulfilled by the appointment of a competent agent or distributor, this does not excuse producers from making relatively frequent trips to Japan. Exporters are expected to make at least one or two trips a year to Japan for meetings.

The use of interpreters is strongly recommended for business meetings. Interpreters allow Japanese business associates, even those who speak English, to feel more relaxed and perhaps provide more details than they could while speaking English. Interpreters should be briefed, before the meeting, about both companies involved, specific products and the objectives of the meeting. Following the meeting, Canadians should be debriefed by the interpreters about the tone and any non-verbal exchange that may have taken place among the Japanese business associates.

Participation in some of Japan's many specialized trade shows and exhibitions is an excellent method for potential exporters to both assess the market and make contacts. Due to the extensive preparatory requirements of these events, combined with the need to communicate in Japanese, selection of an agent or distributor before attending the show is usually a prerequisite to effective participation.

Import Regulations

Regulations for imported vitamins differ depending on the purpose and form. If vitamins are imported for use as a food additive, they are subject to regulations of the Food Sanitation Law3. Vitamins imported as pharmaceuticals or as a raw material for pharmaceuticals are subject to the Pharmaceutical Affairs Law ( http://www.jetro.go.jp/ec/e/market/mgb/6-07.pdf).

Health scares in Japan in the summer of 2002, resulting from the consumption of dieting aids imported from China, have prompted Japan’s MHLW to institute strict safety measures for imports including random sampling of ingredients. Officials now screen ingredients from random on-line purchases of diet products.

Canadian exporters (especially those exporting herbal products) should closely examine Japanese regulations to determine how their products are classified. Some products are considered to be pharmaceuticals, while others are categorized as foods. Herbal products are classified based on both the history of the ingredient as well as safety and efficacy information. As a result, products classified as herbs or drugs in Canada may be viewed as foods in Japan and vice versa.

Since April 1, 2001, manufacturers have been required to list any product containing genetically modified (GM) material on product labels. As many consumers fear that GM products may pose unknown health risks, manufacturers are looking for healthy alternatives to existing ingredients and additives. In order to increase or maintain their market share, many Japanese producers have made public statements that they will no longer use GM products.

Local Standards, Certificates or Registrations

All products exported to Japan must be accompanied by a set of shipping documents. It is recommended that Canadian exporters use the services of a Japanese customs broker, importer, agent or distributor to ensure that all essential documentation is prepared correctly and arrives with the shipment. All documents should be completed in both English and Japanese in order to avoid any unnecessary delay. Among the required documents are:

• a commercial invoice, which serves as a bill to the buyer from the exporter and must accompany every shipment to Japan. Invoices must be signed by the exporter. The invoice should be thoroughly checked, since any error or omission can result in delays, fines or even confiscation. The invoice must include the place and date of issue, names and addresses of importer and exporter, detailed description of the merchandise (including identifying marks, quantities, numbers and varieties; method of shipment), signature of responsible officer, along with name and title, all insurance and freight charges, and the shipper's invoice number and customer's order number. Exporters should consult their customs broker to determine how many copies of the commercial invoice should be sent with each shipment, since the number of copies required depends on the product being shipped. Any promotional information should also be included with the commercial invoice;
• the Export Declaration Form (Form B-13), completed by exporters whose shipments have a value of $2000 or greater. Although exporters are technically responsible, agents, brokers or carriers typically complete the form and submit it on behalf of the exporter;
• a packing list, which is necessary when multiple packages are shipped, unless the commercial invoice provides the required information. The list should include the number of packages within one case; the net, gross and legal weights of each case and of the total shipment; and the volume of individual packages, as well as of the shipment as a whole. Between four and seven copies of the packing list should be included in any shipment;
• the Bill of Lading, which is the shipper's recognition of receipt of the shipment. Each shipment may contain a set of bills of lading, one copy of which should be kept on file, while other copies are sent to the importer and customs broker. The bill of lading should include a description of the product(s), weights and measurements of the packages and their types, ports of origin and destination, names and addresses of the shipper, importer and customs broker, any freight or other charges incurred, number of bills of lading in the full set, and the carrier's acknowledgment of receipt on board of the goods for shipment; and
• the Certificate of Origin, which verifies that the goods originate in Canada and are therefore subject to all duties or taxes that apply to Canadian products.

Exporters are encouraged to contact the Embassy in Japan prior to shipping to ensure all necessary documents have been completed.

Packaging and Labelling

Nutraceutical products must adhere to the labelling regulations set out by Japan’s MHLW. The following information must appear in Japanese on labels and package inserts:

• name of product;
• name and address of manufacturer/distributor;
• production number;
• weight and volume (in metric)
• name and volume of active ingredients;
• ingestion method and dosage; and
• expiry period (in numeric values).

The following information must appear also on the outer wrapper or container4:

• who must not use/take this medicine;
• where the product should not be applied;
• items related to operations that might lead to serious accidents if adverse reactions should occur;
• items concerning the necessity of reading the package insert; and
• statement that the product is a medical product.

New guidelines established in March 2002 indicate that information on package inserts must appear in a specific order:

• date of revision;
• items concerning necessity of reading and retaining package inserts;
• brand name and therapeutic group;
• product features;
• precautions for use;
• indication of effects;
• dosage and administration;
• ingredients and quantities;
• storage and handling;
• consumer consultation contacts; and
• names and addresses of manufacturers or importer and distributor.

Authentication of Documents

Documents that need to be authenticated, such as certificates of sale and letters authorizing an exporter's local agent or importer to act on their behalf, must first be notarized in Canada. Exporters can have the notarized documents authenticated, at no cost, by sending them to the Authentication and Service of Documents (JLAC) division at the Department of Foreign Affairs and International Trade.

Export Credit Risks, Restrictions on Letters of Credit, Currency Controls

Japan currently implements no restrictions on letters of credit or currency controls. Generally, the method of payment is a matter for negotiation between the individual supplier and importer. The usual practice is for payment to be made by terms of a letter of credit for 30-60 days. In cases where distribution arrangements are concluded, exporters are advised to prepare a contract detailing all major points of agreement, including the rights and responsibilities of all signatories.

PROMOTIONAL EVENTS

Event:
Natural Products Expo Asia 2003
June 18-20, 2003 (Annual)
Hong Kong Convention and Exhibition Centre
Hong Kong, SAR China

• Organizer:
  Penton Media Inc.
  20/F, Yu Fung Commercial Centre
  289 Hennessy Road, Wanchai, Hong Kong
  Tel.: (303) 331-8929
  Fax: (303) 320-0207
  E-mail: npexpo@qwest.net
  Internet: http://www.expoeast.com

Event:
Health Ingredients Japan 2003
October 7-9, 2003 (Annual)
Tokyo Big Sight Exhibition Centre
Tokyo, Japan
Trade show for ingredients for health, functional and organic foods.

• Organizer:
  CMP Japan Co Ltd.
  Asahi Building 4F
  7-17 Nihonbashi-Kodenmacho Chuo-ku
  Tokyo 103-0001 Japan
  Tel.: (81-3) 3669-5811
  Fax: (81-3) 3669-5830
  E-mail: sales@cmpjapan.com
  Internet: http://www.hijapan.info

Event:
Asian Nutraceuticals Conference 2004
January 2004 (Annual)
Oriental Hotel
Singapore

• Organizer:
  Japanscan Ltd.
  Anville, Upper Quinton
  Stratford-on-Avon, UK CV37 8SX
  Tel.: (44-17) 8972-0395
  Fax: (44-17) 8972-1808
  E-mail: japanscan@aol.com

KEY CONTACTS AND SUPPORT SERVICES

Canadian Government Contacts

Canadian Embassy in Japan
7-3-38 Akasaka, Minato-ku
Tokyo, Japan
Contact: Deborah Lyons, Counsellor
(Commercial), Trade Commissioner, Health Industries
Tel.: (81-3) 5412-6200
Fax: (81-3) 5412-6247
E-mail: tokyo-td@dfait-maeci.gc.ca
Internet: http://www.dfait-maeci.gc.ca/ni-ka

Contact: Greg Giokas, Trade Commissioner, Agriculture
Tel.: (81-3) 5412-6200
Fax: (81-3) 5412-6247
E-mail: tokyo-td@dfait-maeci.gc.ca

Consulate General of Canada in Osaka
Chuo-ku 2-2-3 Nishi-Shinsaibashi
Osaka Minami, Japan
Contact: Kiyoji Hanasaki, Commercial Officer, Health Industries
Tel.: (81-6) 6212-4910
Fax: (81-6) 6212-4914
E-mail: osaka-td@dfait-maeci.gc.ca
Contact: Toshihisa Seki, Commercial Officer, Agriculture
Tel.: (81-6) 6212-4910
Fax: (81-6) 6212-4914
E-mail: osaka-td@dfait-maeci.gc.ca

Consulate of Canada in Fukuoka
FT Bldg., 9F, 4-8-28 Watanabe-Dori, Chuo-ku
Fukuoka-ken
Chuo-ku, Fukuoka, Japan
Tel.: (81-92) 752-6055
Fax: (81-92) 752-6077
E-mail: fkoka@dfait-maeci.gc.ca

Consulate of Canada in Nagoya
3-17-6 Marunouchi, Naka-Ku Nakato Marunouchi
Building, 6F
Nagoya, Japan
Contact: Naoki Makino, Commercial Officer
Tel.: (81-52) 972-0450
Fax: (81-52) 972-0453
E-mail: naoki.makino@dfait-maeci.gc.ca

Office of the Honorary Consul in
Hiroshima–Trade Section
#709, 5-44 Motomachi, Naka-ku
Hiroshima City, Japan
Tel.: (81-82) 211-0505
Fax: (81-82) 211-0505
E-mail: ctohiroshima@gol.com

Office of the Honorary Consul in
Sapporo–Trade Section
20, Kita-7, Nishi-2 Tokyo Tatemono Sapporo
Bldg. 2F
Kita-ku, Sapporo Japan
Tel.: (011-81-11) 708-8702
Fax: (011-81-11) 708-8702
E-mail: ctosapporo@gol.com

Agriculture and Agri-Food Canada
Market and Industry Services Branch
Sir John Carling Building
930 Carling Ave.
Ottawa, ON K1A 0C5
Tel.: (613) 759-7744
Fax: (613) 759-7499
Internet: http://www.agr.gc.ca

Canadian Food Inspection Agency
Office of Biotechnology
59 Camelot Dr.
Nepean, ON K1A 0Y9
Tel.: (613) 225-2342
Fax: (613) 228-6653
E-mail: cfiamaster@agr.gc.ca
Internet: http://www.inspection.gc.ca

Department of Foreign Affairs and International Trade (DFAIT)
125 Sussex Dr.
Ottawa, ON K1A 0G2
Internet: http://www.dfait-maeci.gc.ca

Authentication and Service of Documents (JLAC)
Tel.: (613) 992-6602
Fax: (613) 992-2467

Japan Division (PJP)
Contact: Jean-Pierre Petit, Trade Commissioner
Tel.: (613) 996-2467
Fax: (613) 943-8286
E-mail: jeanpierre.petit@dfait-maeci.gc.ca

Market Research Centre (TCM)
Contact: Michelle Morris, International Market Analyst
Tel.: (613) 996-2462
Fax: (613) 943-1103
E-mail: michelle.morris@dfait-maeci.gc.ca
Internet: http://www.infoexport.gc.ca

Market Support Division (TCM)
Contact: Christopher Duggan, Trade Commissioner
Tel.: (613) 996-1431
Fax: (613) 944-0050
E-mail: christopher.duggan@dfait-maeci.gc.ca
Internet: http://www.infoexport.gc.ca

Export Development Canada (EDC)
151 O’Connor St.
Ottawa, ON K1A 1K3
Tel.: 1-888-332-3320 or (613) 598-2500
Fax: (613) 237-2690
E-mail: export@edc-see.ca
Internet: http://www.edc-see.ca

Health Canada
International Affairs Directorate
Brooke Claxton Building, Room 814A
Postal Locator 0908A
Tunney’s Pasture
Ottawa, ON K1A 0K9
Tel.: (613) 941-3136
Fax: (613) 952-7417
Internet: http://www.hc-sc.gc.ca

Industry Canada
Life Sciences Branch
PO Box 940, Station M
1505 Barrington St.
Halifax, NS B3J 2V9
Contact: Mark Craig, Sector Officer
Tel.: (902) 426-9958
Fax: (902) 426-2624
E-mail: craig.mark@ic.gc.ca
Internet: http://strategis.ic.gc.ca

Canadian Industry Associations
BC Herb Growers Association (BCHGA)
4607 23rd St.
Vernon, BC V1T 4K7
E-mail: membership@bcherbgrowers.com
Internet: http://www.bcherbgrowers.com

British Columbia Functional Food and Nutraceutical Network (BCFN)
c/o Faculty of Agricultural Sciences
University of British Columbia
Room 218 - Food, Nutrition, and Health Bldg
2205 East Mall
Vancouver, BC V6T 1Z4
Tel.: (604) 822-6920
Fax: (604) 822-5143
E-mail: info@bcfn2.com
Internet: http://www.bcfn2.com

Canada’s Research-Based Pharmaceutical Companies
302-1111 Prince of Wales Dr.
Ottawa, ON K2C 3T2
Tel.: (613) 727-1380
Fax: (613) 727-1407
Internet: http://www.canadapharma.org

Canadian Association of Importers and Exporters
438 University Ave., Suite 1618
Toronto, ON M5G 2K8
Tel.: (416) 595-5333
Fax: (416) 595-8226
E-mail: info@caie.ca
Internet: http://www.importers.ca

Canadian Food Exporters Association
885 Don Mills Rd., Suite 301
Don Mills, ON M3C 1V9
Tel.: 1-888-227-8848 or (416) 445-3747
Fax: (416) 510-8044
E-mail: info@cfea.com
Internet: http://www.cfea.com

Canadian Health Food Association
550 Alden Rd., Suite 205
Markham, ON L3R 6A8
Tel.: (905) 479-6939
Fax: (905) 479-1516
E-mail: mdawood@chfa.ca
Internet: http://www.chfa.ca

Food Institute of Canada (FIC)
1600 Scott St., Suite 415
Ottawa, ON K1Y 4N7
Tel.: (613) 722-1000
Fax: (613) 722-1404

Quebec Agri-Food Export Club
668, Montée Montarville
PO Box 10
Saint-Bruno, QC J3V 6B1
Tel.: (450) 461-6266
Fax: (450) 461-6255
E-mail: clubexport@clubexport.ca
Internet: http://www.clubexport.ca/public/index.htm

Saskatchewan Nutraceutical Network
105 North Rd.
Saskatoon, SK S7N 4L5
Tel.: (306) 652-2783
Fax: (306) 933-7208
E-mail: info@nutranet.org
Internet: http://www.nutranet.org

Japanese Government Contacts

Japan Extermal Trade Organization (JETRO)
2-5, Toranomon 2-chome
Minato-ku, Tokyo 105-8466, Japan
Tel.: (81-03) 3582-5511
Fax: (81-03) 3587-0219
Internet: http://www.jetro.go.jp/top/index.html

Japan Standards Association
4-1-24 Akasaka, Minato-ku
Tokyo 107, Japan
Tel.: (81-3) 3583-8003
Fax: (81-3) 3586-2029

Ministry of Agriculture, Forestry and Fisheries of Japan
1-2-1 Kasumigaseki, Chiyoda-ku
Tokyo 100-8950, Japan
Tel.: (81-3) 3591-2874
Fax: (81-3) 3597-8722
E-mail: koho_kaigai@nm.maff.go.jp
Internet: http://www.maff.go.jp/eindex.html

Ministry of Economy, Trade and Industry (MITI)
1-3-1, Kasumigaseki, Chiyoda-ku
Tokyo 100-8901 Japan
Tel : (81-3)3501-1511
Fax: (81-3)3501-6942
E-mail: webmail@meti.go.jp
Internet: http://www.meti.go.jp/english

Ministry of Health, Labour and Welfare
Health Service Bureau-Food Sanitation Law
1-2-2 Kasumigaseki
Chiyoda-ku, Tokyo 100-8045, Japan
Tel.: (81-03) 5253-8111
Internet: http://www.mhlw.go.jp/english/index.html

Pharmaceutical and Medical Safety Bureau-Pharmaceutical Affairs Law
1-2-2 Kasumigaseki
Chiyoda-ku, Tokyo 100-8045, Japan
Tel.: (81-03) 5253-8111
Internet: http://www.mhlw.go.jp/english/index.html

Japanese Industry Associations

Federation of Pharmaceutical Manufacturers Association of Japan (FPMAJ)
2-1-5 Nihonbashi-Honcho
Chuo-ku, Tokyo 103, Japan
Tel.: (03) 3270-0581
Fax: (03) 3241-2090
Internet: http://www.fpmaj.gr.jp (In Japanese)

Japan Chemical Importers Association Head Office
c/o Souma-Nishi-Shinbashi Building
6-14 Nishi-Shinbashi 1-chome, Minato-Ku
Tokyo, Japan
Tel.: (81-3) 3504-1801
Fax:(81-3) 3595-3344
Internet: https://www.cheminfo.jp/jcta

Japan Health Food and Nutrition Food Association
2-7-27 Ichigaya Sadohara-cho
Shinjuku-ku, Tokyo 162-0842, Japan
Tel.: (03) 3268-3131
Fax: (03) 3268-3135
E-mail: jhnfa@mx1.alpha-web.ne.jp
Internet: http://www.health-station.com/jhnfa (In Japanese)

Japan Herb Association
Uchida Bldg
1-24-16 Takadanobaba
Shinjuku-ku, Tokyo 169-0075, Japan
Tel.: (03) 3200-8207
Fax: (03) 3200-7605

Japan Pharmaceutical Manufacturers Association (JPMA)
3-4-1 Nihonbashi-honcho
Chuo-ku, Tokyo 103, Japan
Tel.: (03) 3241-0326
Fax: (03) 3242-1767
Internet: http://www.jpma.or.jp

Proprietary Association of Japan (PAJ)
Kyodo Bldg.
13-4 Nihombashi-kodenmmacho Chuo-ku
Tokyo 103-0001, Japan
Tel.: (81-03) 3667-9481
Fax: (81-03) 3667-9483
E-mail: info@otc.gr.jp
Internet: http://www.otc.gr.jp/english/index.html

APPENDIX:

Summary of Internet Consumer Survey Conducted by Japan Health Food & Nutrition Food Association, August 2001

Total number of consumers surveyed: 5502

Female: 60%

Male: 39%

Age:

• 20-29 - 21%
• 30-39 - 37%
• 40-49 - 24%
• 50+ - 11%

How often do you take health supplements (dietary supplements)?

Often/sometimes: 4835 (88%)

Never: 495 (9%)

Do you have an interest in nutritional foods?

Very much: 4268 (78%)

No: 1234 (22%)

BIBLIOGRAPHY

Print

Espicom. World Pharmaceutical Market. "Japan," March 2002.

Euromonitor. "Herbal Remedies," July 2001.

———. "OTC Healthcare Japan," July 2002.

Freedonia Group. World Nutraceuticals to 2006, June 2002.

Japan Chemical Week. "Health Oil Market Grows 35% in Fiscal 2001 to v19 Bn," March 28, 2002.

Marketletter. "Japan to Cut NHI Drug Prices 6.3% on Average, Boost Generic Rxing/.Dispensing," March 11, 2002.

Nikkei Net Interactive. "Japan to Cut Health Insurance Drug Prices 6.3% for FY02," March 12, 2002.

Electronic

Agriculture and Agri-Food Canada. "Ingredients and Additives Market in Japan," January 2001. Downloaded from http://ats.agr.ca/info/asia/e3210.htm on November 27, 2001.

Department of Foreign Affairs and International Trade. "The Japanese Health Food Market," November 21, 2002. Downloaded from http://www.infoexport.gc.ca/ie-en/DisplayDocument.jsp?did=6865 on November 26, 2002.

FoodProductionDaily.com. "Sports and Energy Drinks: Tapping in on Asia," December 5, 2002. Downloaded from http://www.foodproductiondaily.com/news/printnews.asp?id=1817 on December 5, 2002.

Japan External Trade Organization. "JETRO Japanese Market Report: Herbal Products," March 2001. Downloaded from http://www.jetro.go.jp/ec/e/market/jmr/051/051.pdf on November 27, 2002.

———. JETRO Marketing Guidebook for Major Imported Products. "Vitamins," 2002. Downloaded from http://www.jetro.go.jp/ec/e/market/mgb/6-07.pdf on November 27, 2002.

Just Food.com. "Functional Food: Meeting the Marketing Challenge," January 15, 2001. Downloaded from http://just-food.com/features_detail.asp?art=347 on November 27, 2002.

Manitoba Agriculture and Food. "Herb and Spice Industry Overview," June 2001. Downloaded from http://www.gov.mb.ca/agriculture/financial/agribus/ccg02s05.html on November 26, 2002.

Nutraceuticals World. "Look What’s Coming to Our Shores," January 2002. Downloaded from http://www.nutraceuticalsworld.com/janfeb002.htm on November 26, 2002.

NutraIngredients.com. "Japan Cracks Down on Import of Chinese Supplements," August 29, 2002. Downloaded from http://www.nutraingredients.com/news/news.asp?id=5242# on November 26, 2002.

———. "Japan’s Growing Taste for Amino Acid Sports Drinks," September 10, 2002. Downloaded from http://www.nutraingredients.com/news/news.asp?id=5363 on November 26, 2002.

———. "Japan’s Functional Food Market Upbeat for Future," October 24, 2002. Downloaded from http://www.nutraingredients.com/news/news.asp?id=5743 on November 26, 2002.

———. "High Value, Low Volume: Sports and Energy Drinks," December 4, 2002. Downloaded from http://www.nutraingredients.com/news/news.asp?id=6007 on December 4, 2002.

OTHER REFERENCE MATERIAL

Useful Internet Sites

Agriculture and Agri-Food Canada. Functional Foods and Nutraceuticals: http://www.agr.gc.ca/food/nff/enutrace.html

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

ExportSource: http://exportsource.gc.ca

InfoExport: http://www.infoexport.gc.ca

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

Japan Food Additives Association: http://www.jafa.gr.jp (In Japanese)

Japanese Ministry of Economy, Trade and Industry (MITI): http://www.meti.go.jp/english

Japanscan: http://www.japanscan.com

1 All monetary amounts are expressed in Canadian dollars, unless otherwise indicated. The conversion rate to Canadian dollars is based on IDD Information Services, Tradeline, December 2002.

2 For contact information regarding key organizations mentioned in this report, see Key Contacts and Support Services.

3 Companies with products that fall under the Food Sanitation Law must provide a list of ingredients to customs officials. Details of the proportion of ingredients may also be requested. Additional information on this topic is available from JETRO’s website ( http://www.jetro.go.jp).

4 From Euromonitor. "OTC Healthcare Japan," July 2002.