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.
• Japan is the world’s largest importer of pork, and is expected to remain the largest importer over the next 10 years, accounting for about 25% of total global pork imports.
• The number of hog farms has declined by 84% since 1989 due to the aging of the farm population.   Despite this, the industry has consolidated and domestic production has showed a slight downward trend, dropping 4% from its 10 year high in 1998.
• 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 growing pork consumption.
• Pork is the fastest growing source of animal protein in the Japanese diet. This growth is attributed to reasonable pork prices (relative to increasing seafood prices), the lack of pork safety scares, and Japanese taste and culinary preferences.
• American value-added and processed products are becoming more popular in the market. 
• 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 pork. 

• Domestic pork production is limited and the industry receives government funds to run marketing campaigns to promote domestic pork over imported pork. This resonates well with Japanese consumers as they believe domestic product to be the safest and highest quality.
• The size and profitability of the Japanese market has made it a target for most countries producing pork. China, Mexico, Chile and others view Japan as a key target market and are conducting more promotional campaigns and becoming much more aggressive in the market. 
• Historically, Danish pork has been the primary imported pork competitor, with most Danish product used for processing. As Danish pork prices rise and the competition stiffens for frozen pork destined for processing, the amount reaching Japan will decline. This will provide opportunities for U.S. pork but will also spur competition from other countries.
• Japanese companies are investing in plants in China to take advantage of lower production costs as well as lower duty rates for imported processed products – 10% duty for sausage and 21.3% for other pre-cooked frozen items with pork like gyoza (pot stickers), spring rolls and shumai dumplings. 
• The U.S. dollar is weak, making U.S. pork competitive with Canadian and Danish pork. 
• Free Trade Agreements between Japan and Mexico and Chile provide a tariff advantage for specific amounts of pork, making their products much more competitive.   

Market Penetration

• Frozen U.S. and other imported pork are often used as commodity items and viewed as easily substitutable with lower priced products. As the price of frozen product increases, USMEF is working closely with leading importers and processors to use more chilled U.S. pork.  
• Many major restaurant chains are finding U.S. pork to be a viable alternative to domestic product and are becoming loyal users of U.S. pork. Leading restaurant chains, such as Royal Host, Jonathan’s and Inaba Wako, consistently feature U.S. pork as a main menu item.  
• Retail chains are also becoming loyal users of U.S. pork and are beginning to offer a greater variety of products and cuts that were not traditionally used in Japan. 
• U.S. pork is gaining a foothold in the lucrative nakashoku (convenience) market. Several bento chains and retailers are working with USMEF to develop tonkatsu and other prepared pork dishes.
• USMEF introduced U.S. pork processed items at several events and conducted a sausage sales competition to expand sales of these products.

Product/Industry Image

• Despite the commodity image of U.S./imported pork, processors tend to view U.S. pork as having the highest quality and favor it over other competitive products.
• The image of U.S. chilled pork has been steadily rising. The U.S. industry has made great strides over the years and the appearance and taste of U.S. chilled pork, including marbling and fat color, are often very similar to domestic product. Once consumers have tasted the product, they compare it favorably with domestic pork, which is considered to be the “best quality.”
• USMEF is striving to raise awareness and improve the image of U.S. processed and value-added pork products. 

Operating/Marketing Environment and Trade/Distribution Issues

• The increasing price of imported frozen pork has forced processors to increase the price of their processed pork products, creating a better environment for directly importing processed pork such as sausage and ground seasoned pork which benefit from more transparent tariff treatment.
• U.S. chilled pork is receiving increased attention as a substitute for Japanese domestic pork and increasingly is seen by buyers to have comparable quality/safety and lower prices.
• Safety considerations are becoming more important decision factors with the trade, as well as consumers. With the increased level of concern, especially toward products from China and some other Asian countries, the U.S. is now viewed as a safer country for imports. This creates an opportunity to compete with sausage imports from China.

Access Conditions

• The current import system is complex, non-transparent, and subject to abuse; however, the Japanese government has tied any revision of this gate price system to the WTO talks. 
• Investigations into violations of the pork import system have affected trade and made import supplies erratic.

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:

• Communicate the quality attributes of U.S. pork, its potential for long-term profitability and the availability of a wide range of cuts and value-added products to the trade and downstream customers.
• Enhance the image of U.S. pork among consumers by positioning it as a nutritious, tasty, fresh and safe product, and differentiate U.S. pork’s high-quality attributes from other pork in the market place.
• Expand the volume and range of processed U.S. pork products used by the HRI and retail sectors by communicating the taste preferences and cut specifications of Japanese buyers to U.S. manufacturers and exporters.
• Provide assistance and support to the U.S. government for any trade negotiations related to the pork gate price system or other pork related access issues.

USMEF Export Forecasts: