Japan has a well-developed food retail market that demands high-quality, high-value
agricultural and food products. Despite reduced economic activity during the COVID-19
pandemic, trade data show that agricultural imports have remained resilient. As Japan’s top
supplier of agricultural products, the United States is a stable and reliable partner with a long-
standing relationship. Although competition in Japan has intensified in recent years, US
suppliers can find many opportunities to market consumer-oriented products that follow
Japanese retail trends. The US Department of Agriculture’s (USDA) Foreign Agricultural Service
(FAS) maintains a website to help US food and beverage exporters to navigate the Japanese
market: USDAJapan.org.
Macroeconomic Perspective
Japan is a high-income country with a population of 125.7 million people. It is one of the most
highly urbanized countries in the world with more than 90 per cent of the population living in
urban areas. With the third-largest economy in the world, behind only the United States and
China, Japan has a highly diversified manufacturing and service economy. According to
household data from IHS Markit, 95 per cent of Japanese households, approximately 51.6
million households, have incomes higher than US$20,000 at purchasing power parity. In 2021,
Japan had a gross domestic product (GDP) per capita at purchasing power parity of US$42,940.
According to the latest International Monetary Fund forecast, real GDP growth is projected at
1.6 per cent in 2023 and 1.3 per cent in 2024.
Since the initial response to the COVID-19 outbreak in 2020, the Government of Japan’s
containment measures and consumers’ risk-averse behaviors limited economic activity.
However, in the third quarter of 2022, Japan loosened border controls, boosting economic
activity and seeking to reconnect with the world. Since October 2022, visa-free tourism
resumed for US citizens (see GAIN report JA2022-0112 for more information on Japan’s
reopening). While Japan’s economic recovery continues, challenges remain. Japan’s lack of
natural resources, including agricultural land, makes the country susceptible to external
pressures such as food and energy prices. For example, price shocks from Russia’s war in
Ukraine and supply chain disruptions have impacted domestic purchasing power. Increased
prices have subdued household confidence and real income. Also, from a demographic
perspective, Japan not only has an aging population but also a declining population. This trend
continues to limit economic growth and presents fiscal policy challenges.
Japan and Agricultural Trade
Despite various challenges and an uncertain global economic environment, Japan’s agricultural
trade, particularly agricultural imports, has been resilient because these imports play a crucial
role in Japan’s domestic food supply. According to Japan’s Ministry of Agriculture, Forestry and
Fisheries annual report, Japan’s food self-sufficiency ratio on a caloric basis was 37 per cent in
2020, suggesting that many food items depend on imports to boost food availability. In
particular, imported livestock products and animal feed supplement Japan’s limited domestic
agricultural production.
In 2022, Japan imported US$70.2 billion of agricultural products, a 16.4-per cent increase from
pre-COVID 2019 and also surpassing record-level agricultural imports of 2011 and 2012.
Although rising food prices contribute to higher unit prices, putting downward pressure on real
income and purchasing power, Japan is an advanced economy where demand for high-quality
food is relatively stable compared to emerging economies.
The United States is a dependable agricultural trading partner of Japan. Despite supply chain
disruptions and economic shocks from the COVID-19 pandemic, the United States has
continued to supply safe, high-quality agricultural products. With the implementation of the
2020 US-Japan Trade Agreement (USJTA), US agricultural exporters remain competitive, from a
tariff perspective, with Comprehensive and Progressive Agreement for Trans-Pacific Partnership
(CPTPP) member countries. However, macroeconomic conditions, including Japan’s economic
recovery and exchange rate dynamics, affect US export competitiveness. As the US dollar
strengthened during 2021 and 2022, US exports to Japan became more expensive. However,
since October 2022, the Japanese yen has rebounded somewhat, increasing purchasing power
for Japanese importers.
As Japan’s top agricultural supplier, the United States exported US$14.6 billion of agricultural
products in 2022, with consumer-oriented products making up almost half (US$6.8 billion) of
the agricultural exports. Japan was the fourth-largest market for US consumer-oriented
products.
Exports Opportunities for Consumer-Oriented Products
Japan’s highly developed food retail market allows consumers to have several options to meet
their food needs, whether it is dining at a restaurant, shopping at supermarkets and
convenience stores, or retailing via e-commerce, where customers have quality groceries and
food delivered to their doorsteps. Customers continue to seek out high-quality food,
emphasizing convenience and accessibility, such as ready-to-eat meals and on-the-go packaged
food. Also, Japan’s demographic shift has opened the door for increased demand for health
food. Japan’s older population generally has more spending power and influence regarding
household consumption patterns, and the health-conscious population are willing to pay more
for high-quality, nutritious foods (see US Japan Organic Equivalence Arrangement for more
information regarding shipping organic products to Japan). Food products that consumers
believe support health and dietary and functional needs are promising for the foreseeable
future.
In October 2019, the United States and Japan signed the USJTA, which provides for limited tariff
reductions and quota expansions to improve market access. Japan agreed to reduce or
eliminate tariffs on about 600 agricultural tariff lines (e.g., beef, pork, and cheese), and expand
preferential tariff-rate quotas for a limited number of US products (e.g., wheat). Opening
Japan’s highly protected agriculture market and reaching parity with exporters from Japan’s
free trade agreement partners was a major priority for the US agriculture sector.
Consumer-oriented goods with strong prospects for growth include the following:
Beef and Beef Products: Despite higher beef retail prices, beef shipments to Japan in value and
shipment volumes have remained steady. Higher prices may shift consumer preferences from
fresh or chilled beef to frozen beef, or from beef products to pork and poultry products.
However, beef consumption is expected to increase in 2023 as Japan’s reopening to foreign
visitors further supports the hotel, restaurant, and institutional (HRI) sector’s recovery. As a
result of the recently revised agreement with Japan regarding the beef safeguard mechanism,
US beef exports are less likely to trigger safeguard tariffs in the coming years even with
increased shipments. In 2022, the United States exported US$2.3 billion of beef and beef
products to Japan, nearly matching the previous year’s record of US$2.4 billion.
Cheese: The United States exported US$231.8 million of cheese products to Japan in 2022, a
23.4-per cent increase from a year ago. Prior to the COVID-19 pandemic, cheese products were
generally marketed and consumed in dining options outside of the home. However, consumers
taking advantage of expanded retail options in supermarkets during the pandemic have
continued to consume cheese products beyond the stay-at-home period. According to cheese
consumption data from the Agricultural Trade Office at the US Embassy in Tokyo, Japan’s per
capita cheese consumption is significantly lower than other advanced economies. From a
marketing perspective, elevating the cheese consumption experience with cheese pairing
guides will be important. Although the European Union (EU) suppliers enjoy a degree of
marketing advantage (product differentiation) by promoting their geographical indications,
import demand for most cheese products continues to rise.
Tree Nuts: In 2022, Japan imported US$826.5 million of tree nuts, of which 51.0 per cent
(approximately US$421.1 million) were from the United States. Elevated unit prices in 2022 did
not negatively impact shipment volumes, suggesting that demand for tree nuts is stable. The
United States almost exclusively supplies almonds and walnuts, the top two imported tree nuts
(not including mixed or prepared tree nuts). Another positive development is shelled pistachios,
which had a higher import value than in-shell pistachios. Japan imported US$28.3 million of
shelled pistachios in 2022, a 35.9-per cent increase from 2021’s record-breaking imports
(US$20.8 million). Combined with in-shell pistachios, Japan imported US$50.9 million worth of
pistachios, and the United States supplies almost 90 per cent of shelled and in-shell pistachios.
With an image of “guilt-free” snacking, tree nuts have great potential as a stand-alone product
as well as ingredients for other prepared food.
Processed Fruit: Processed (frozen, prepared, or preserved) fruits are essential ingredients in
bakery products and snack foods. Although consumers have generally regarded fresh fruit as a
premium product, consumers are shifting from fresh fruit to processed fruit. The link between
processed fruit’s longer shelf life and perceived “freshness,” or the lack thereof, is less
significant, especially among the younger generation. Also, processed fruit allows consumers to
enjoy seasonal products year-round and to take advantage of many more fruit options that
aren’t available from domestic production. While the United States has a strong presence in the
dried fruit market (raisin and dried prune products), frozen fruit competition continues to
intensify.
Distilled Spirits: After record-high imports in 2019 (US$817.1 million), the premium drink
market experienced decreased sales with disruptions to the HRI food service industry in 2020
and 2021. During this slump, however, distilled spirits observed a consumption trend shift,
where the COVID-19-induced trend of at-home drinking made distilled spirits more accessible.
As consumers seek a premium experience, whether at home or from a bar, spirits-based, ready-
to-drink beverages have growth potential. Imports from the United Kingdom, for example
Scotch whiskey, make up more than 60 percent of the whiskey market share, but name
recognition for American whiskeys, namely bourbon and Tennessee whiskey, is growing. In
2022, US whiskey exports were up 7.2 per cent in value during the past year.
Looking Ahead
Japan’s declining agricultural production and evolving consumption trends indicate that
agricultural imports will continue to play an integral role in meeting Japan’s food demands.
Japan has emphasized import diversification and stabilization to secure food supplies, including
through trade liberalization. Accordingly, Japan signed significant trade agreements with major
US competitors in recent years, notably the CPTPP and the Japan-EU Economic Partnership
Agreement. As more economies in Asia and South America continue to join the CPTPP, Japan
will continue to diversify trade partners for its food supply. Nevertheless, given US agriculture’s
reputation for safety and reliability, the United States is well-positioned to continue as the
leading agricultural product supplier.
As competition intensifies in the food retail market, crafting a marketing strategy to cater to
Japan’s consumer preferences will be essential for US suppliers to remain competitive in a
Japanese market that seeks quality, value, and convenience.
Editor’s Note: Follow the link below to read the charts in the original article:
www.fas.usda.gov/data/japans-reopening-signals-export-opportunities
https://www.fas.usda.gov
