USMEF Strategic Market Profile

Japan

Market Trends and Growth Potential

• Japan currently imports more than 60% of all of its food calories, and food self-sufficiency continues to decline.
• The number of domestic cattle farms has declined 66% since 1989 due to an aging farmer population and, more recently, decreased government subsidies for dairy production. As a result, domestic beef production has declined by 10% since 1999.
• Beef consumption began declining in 2001 with the first case of BSE in Japan. After U.S. beef was banned in December 2005, there was a 25-30% decline in beef available in the market, further diminishing consumption, and raising prices. As U.S. beef supplies increase, prices will stabilize and consumption is expected to rise.
• Decreased supply and increased demand from other countries for seafood – the principle protein for Japanese consumers – has reduced Japanese per capita seafood consumption from 40 kg in 2001 to 34 kg in 2006.   The 15% decrease presents opportunities for increased beef consumption.
• Due to recent food safety scares regarding imported foods, especially Chinese items, buyers and consumers are placing more importance on safety and traceability.
• The deli, bento and convenience food (nakashoku) sector is expanding rapidly. Many of the prepared food items sold through this channel utilize beef. 
• The Japanese government is promoting a balanced diet which recommends the consumption of leaner, grain-fed beef over highly marbled beef (Wagyu).

Domestic beef is considered the safest product by Japanese consumers, yet domestic production of Holstein and Wagyu is limited. Moreover, prices for high-quality Wagyu beef are out of reach for frequent consumption by most consumers. 

Australia is placing great importance on the multi-billion dollar Japanese market and has designated Japan and Korea as their two key strategic “battlegrounds.” They are allocating a large percent of their resources to Japan in order to retain their current market share.

During the absence of U.S. beef from the Japanese market, Australia has had the opportunity to cultivate the market by increasing production of grain-fed beef, developing new trade channels and working to position their product as the safest (BSE free) imported beef available in Japan.

Droughts and high domestic grain prices are impacting the amount, quality and price of beef imports from Australia. Current exchange rates are also making Australian products more expensive. As consumption in Japan rebounds, it is unlikely that Australia will be able to increase its shipments of beef, providing an excellent opportunity for the U.S. beef industry to recapture market share.   

Other producers, such as New Zealand and Mexico, recognize the potential of the Japanese market and are working to capture a foothold in which to expand exports in the future.

In order to recapture market share, Canada is working to reeducate the trade about the safety system of Canadian beef, however their available supply for Japan is currently very limited.  

Market Penetration

• Since the market opened to beef from cattle under 20 months of age, demand for U.S. beef has been extremely high where it has been promoted and sold.
• Current Japanese regulations are having the effect of unnaturally limiting the market share of U.S. beef. Exports to Japan are currently about 10% of pre-BSE levels. 
• Despite the age limitations, U.S. beef is being carried at more and more locations. USMEF has worked with over 7,000 establishments consisting of 190 retail chains (including four of the top five national chains) and nearly 40 HRI chains to re-introduce and promote U.S. beef. 

Product/Industry Image

• The taste of U.S. beef is considered to be superior to other imported beef.
• Perceived high prices for U.S. beef are a concern, however U.S. products are price competitive relative to similar quality Australian and domestic beef. 
• After more than three years of negative and sometimes frightening messages in the media, the image of and trust in U.S. beef has been battered. Consumer surveys still indicate concern among the target audience. 
• In an effort to rebuild trust in U.S. beef, USMEF has been conducting the “We Care” campaign to highlight the sincerity of U.S. producers in delivering safe, high quality beef to Japan. As a result, core groups of buyers and consumers understand the safety and quality of U.S. beef and are responding with steady purchases of the product. Survey results indicate that these consumers have can influence others to make positive purchasing decisions. 
• Consumer confidence in U.S. beef is being rebuilt with the assistance of many retailers who are developing “stories” or “brands” supporting the U.S. beef they sell. These stories provide background on the producers as well as information on U.S. production systems. 

Operating/Marketing Environment and Trade/Distribution Issues

• Before the market closed to U.S. beef, Japanese buyers were accustomed to purchasing virtually unlimited supplies of popular cuts. Due to the age restrictions on imports, that is not always possible now. Therefore USMEF is working with key buyers to help them understand and purchase alternative cuts in addition to the four or five popular cuts with which they are most familiar. This can improve profitability while increasing the availability of product to the market. 
• Investment by Japan in the Australian industry has improved the distribution breadth and depth of Aussie products. The presence of Australian beef in these channels poses a new challenge to U.S. market share. 
• While becoming less of a problem, occasional minor violations of the BEV program are still reported in the media, making it more difficult to build trust in U.S. beef. 

Access Conditions

• Japanese regulations currently limit imports of U.S. beef to cattle under 20 months of age or those that are graded A40 or below. Negotiations between the U.S. and Japanese governments have stalled and it is uncertain as to when any changes in age restrictions will occur. 
  
  In August 2008, the Japanese government will no longer fund the 100% testing of all cattle for BSE and has recommended that prefectures not continue this testing. The leading opposition party, the Democratic Party of Japan (DPJ), consumer groups and several prefectural governments are now pushing the federal government to continue support for 100% BSE testing. While not currently having a direct impact on U.S. imports, this difference between requirements on domestic and imported beef can potentially be used by the DPJ as a tool to resist change to the current import regulations.

Import and market share data is based on import data of Japan (from GTA), and U.S. export data is from the U.S. Department of Commerce, Trade Census Bureau.

Long Term Strategy:

• Reestablish trust in U.S. beef and the U.S. industry at both trade and consumer levels by demonstrating the steps the U.S. industry has undertaken to ensure the safety and quality of U.S. beef exported to Japan.
• Actively promote U.S. beef to facilitate the resumption of purchasing at the HRI and retail levels.
• Work with the U.S. industry to ensure compliance with Japanese requirements included in the beef export verification (BEV) program and ensure that any changes to it are fully understood and implemented by the U.S. industry.
• Provide support and information to the U.S. government and industry in working toward changes in the existing import system, such as opening the market to cattle over 20 months of age. 
• Utilize the experience and connections of USMEF to work on technical and regulatory issues to increase and smooth the flow of exports to Japan.

USMEF Export Forecasts: