Economy
Japan’s population and gross domestic product (GDP)
are both nearly half as large as U.S. levels. GDP per
person is very high, and Japan’s consumers are quite
wealthy by world standards. When Japan’s higher living
costs are taken into account, income per person is about
80 percent of the U.S. level.
There are key differences between the Japanese and U.S.
societies. Japan has a shrinking labor force. Its population
is getting older because the birth rate is very low. Strict
policies deter immigration. Japanese statistics indicate
that population growth turned negative in 2005, and population
is projected to continue to shrink. Women’s labor
force participation has been growing, but remains lower
than in the United States. In general, Japan’s workers
are working shorter hours than in the past. The paucity
of labor makes production in Japan expensive, and has
forced Japan’s firms to investigate strategies that
use less Japanese labor, including further automation
and moving production to other countries.
Current economic conditions in Japan still
reflect the impact of a growth "bubble" in the
late 1980s. After the bubble burst in 1990, industrial
firms, financial firms, and households all found that
their portfolio of speculative investments in real estate
and stocks was suddenly worth much less than during the
bubble. The value of real estate and stocks continued
to decline in the 1990s. Most households are solvent,
due to the traditionally high savings rate of Japan’s
population. However, a significant share of Japan’s
industrial and financial firms was heavily burdened by
debt, which was often incurred through the purchase of
high-priced assets during the bubble period. The assets
were worth much less after the bubble burst. The value
of the debt fell slowly, in part, because Japan has had
very little inflation in its currency and, since 1999,
has experienced deflation (falling prices). If the current
deflation continues, the cost of past borrowing will grow
even larger. For example, 1,000 yen borrowed in 1989 could
grow to the equivalent of 1,100 yen today, because the
yen is more valuable (within Japan) today.
Japan's government has tried to keep industrial and banking
companies from collapsing, with increasing success in
recent years. Banks and industrial companies, however,
were slow to invest in new projects, and economic growth
was meager through 2002. Government attempts to stimulate
growth with public-sector spending helped increase the
government's accumulated deficits, so in 2004 they amounted
to over 70 percent of the value of Japan's GDP. Since
2002, Japan’s economy has grown (although deflation
persists) and signs of increased investment have encouraged
hopes that the growth can be sustained.
The yen’s value is a key determinant of the prices
of imported foods in Japan, and thus of imports' ability
to compete in Japan's markets. The yen has been as strong
as 94 yen per U.S. dollar (in 1995) and as weak as 360
yen per U.S. dollar (the fixed rate prior to 1970). Trade
barriers are another major determinant of food prices.
Japan maintains high protection for some commodities and
has not been a forceful proponent of agricultural trade
liberalization. Even as Japan's economy rebounds from
the stagnation that began in the early 1990s, the country's
declining population means that consumption is unlikely
to grow much from current levels. Production could fall,
however, if trade barriers are lowered, leading to greater
agricultural imports in the future.
Densely populated and wealthy, Japan does not have enough
farmland to support both direct human food use and animal
feeding. As a result, Japan has been one of the world's
largest net importers of agricultural products, beginning
with raw materials (e.g., cotton and rubber) and feedstuffs
(e.g., corn and soybeans), but increasingly turning to
consumer-ready food products, such as meats, vegetables,
fruits, and processed foods.
Japan’s
Food Consumers
Food consumption patterns in Japan are distinct in some
ways but also share many characteristics with consumption
patterns in other developed countries. Japan's people
eat less than Americans: caloric consumption per person
per day is about 1,000 kilocalories less in Japan than
in the United States, according to the Food and Agriculture
Organization of the United Nations. Still, the Japanese
spend more of their income on food and beverages than
Americans. High food spending reflects higher food prices
in Japan, and also the desire among consumers for a varied,
high-quality diet. Japan’s people eat at home and
in restaurants but also depend on convenience stores.
Workdays and commute times are often long, and picking
up lunch or snacks in convenience stores is very popular.
Many convenience stores are open 24 hours a day. In addition,
vending machines offering a variety of foods and drinks
are widely available, so that consumers can find something
to eat anytime. In recent years, the government has eased
operating-hour limits and size restrictions for retail
food outlets. Partly in response to these regulatory changes,
the pace of change in Japan's supermarket industry has
picked up. Larger stores, including hypermarkets, have
proliferated. Large foreign firms, such as Wal-Mart, have
entered the supermarket/hypermarket sector, hoping to
cater to consumers with lower prices and greater variety.
The traditional Japanese diet emphasizes
rice, fish, eggs, vegetables, and soy products. Culturally,
Japan identifies a divide between west (Osaka and south)
and east (Tokyo and north), which leads to some differences
in traditional food preferences. While traditional food
preferences persist, the desire for variety is also strong,
and Japan has a reputation for embracing food fads. The
Mediterranean diet popular in the late 1990s, for example,
drove imports of wine, olive oil, cheese, and pasta to
very high levels. Although personal incomes have stagnated
along with the economy, Japan’s consumers still are
willing to pay for upscale food products, such as Wagyu
beef—heavily marbled beef from Japan’s traditional
draft animals. The average bargain sale price for Wagyu
sirloin was $34 per pound in 2003; the price for Wagyu
chuck was $16 per pound. Even with these high prices,
Japanese consumption of Wagyu beef was about 140,000 metric
tons in 2003.
Japan’s Food Producers
Japan has a high number of farms on a relatively small
area. Farmland ownership is extremely fragmented. Increasingly,
however, farm operational size is larger than ownership
patterns suggest. In 2004, Japan counted 2.2 million commercial
farms (defined as farming more than three-quarters of
an acre or with annual sales of more than 500,000 yen
[$4,621]). Over 8 million people live on these farms,
and among them, 2.4 million are engaged more in farming
than in other activities. Of these 2.4 million individuals,
one-third are over age 70 and two-thirds are over age
60. Almost half are female. Dividing Japan’s 4.7
million hectares (ha) of cultivated land by these households
gives an average farm land size of 2.18 ha (5.38 acres).
About 380,000 men under age 60 engage mainly in farming.
Since the number of farms operated by a woman alone is
small, it is possible to look at this number—male
core farmers under age 60 —as an indicator of the
number of farm operations in Japan with farming as the
main focus of labor in the household and which expect
to be in operation in the coming decades. These households
likely have major parts of Japan’s 4.7 million ha
of farmland at their disposal, either as owned or rented
farmland or as farmland on which they perform contract
farming. Assuming that they farm all cultivated land in
Japan, each farm household would farm about 13 ha (33
acres). As elderly and part-time farmers, noncommercial
operations, and female core farmers also cultivate some
of the available land, 13 ha is an overestimate of average
farm size. The actual average farm operation in Japan
is likely to farm an area between 2 and 13 ha (5-33 acres).
Households farming rice, wheat, barley, or forage crops
have often found it advantageous to contract out some
or all farm operations. It is a financial burden to own
equipment to prepare, cultivate, and harvest small fields.
Elderly farm households or households in which the adults
have full-time jobs outside farming may find the labor
demands of farming to be particularly onerous. A variety
of arrangements exist for these farm households. Farmers
can contract with specialists to perform individual tasks,
such as planting, or to carry out all tasks. Cooperative
farm ventures, in which one farmer is designated to carry
out the operations for a group or in which a specialist
is hired, are common but have met with varying degrees
of success. The sale of farmland is uncommon.
Farms are dispersed throughout Japan, which has most
of its land base on four major islands: Honshu, Kyushu,
Shikoku, and Hokkaido. Japan stretches as far from north
to south as does the U.S. East Coast and has similar climatic
variations. Farming in the northern island of Hokkaido
is larger scale than in the rest of Japan and reflects
the influence of government planning in the late 19th
century, which included assistance from U.S. farm specialists.
Crops and Livestock
Rice is Japan's largest crop, and rice paddies account
for 55 percent of Japan’s farmland. However, rice
is only about one-fourth of total agricultural output
value, and in 2004, about 40 percent of the paddy area
was diverted away from the production of rice for food
use. Wheat, barley, and soybeans (all for food use) are
grown both in upland fields and in diverted rice paddies.
Corn is widely grown for use as fodder but almost never
for harvested grain. Other field crops include sugar beets
and peanuts. The important vegetable sector occupies upland
fields, diverted paddies, and greenhouses. Fruit orchards—apples
and pears in the north, citrus in the south, as well as
other fruits throughout the country—are also major
crops. Sugarcane production (in Okinawa and nearby small
islands), a large floriculture sector, and tea production
are also significant components of Japan's agriculture.
Livestock production is over one-fourth of the gross
value of Japan's agricultural output. In value terms,
dairy is number one, followed by hogs, beef cattle, layers,
and broilers. Except for egg production, which is more
than half as large as U.S. egg output, all the livestock
industries are much smaller in volume than U.S. industries.
Inputs
On a per hectare basis, Japan’s farmers use several
key inputs more heavily than U.S. farmers. Phosphatic
fertilizer application in 2000, for instance, was over
five times higher per hectare in Japan than in the United
States. Nitrogenous fertilizer application was 1.75 times
higher in Japan, and potassium fertilizers were applied
over three times as heavily in Japan. Fertilizer use has
been declining in Japan but is still high compared with
other parts of the world. Data show that usage of individual
insecticides, herbicides, and fungicides tends to decline
over time. However, Japan uses seven times as much pesticide
per hectare as the United States. Farmers balance the
advantages of chemical use in a humid climate against
strong consumer sentiment to minimize or eliminate chemical
use.
Use of agricultural implements is also high in Japan
relative to the United States. In 2000, the number of
tractors used in Japan per 100 ha was 42, compared with
three in the United States. Similarly, Japan had 220 harvesters/threshers
per 1,000 ha, compared with four in the United States.
While the machines in Japan are much smaller than machines
in the United States, in general, the heavy investment
in small machines represents a large financial outlay
and has helped make Japan’s agriculture more expensive
than U.S. farming. The number of agricultural implements
has been declining fast in Japan, except for the largest
sized machines. The increase in large tractor and harvester
use reflects the increased consolidation of rice farming
operations in the hands of contract specialists.
Japan has a large farm chemical and farm machinery manufacturing
sector. In farm machinery, in particular, Japan’s
firms are globally competitive in exports. Similarly,
Japan’s seed industry is a world leader, and its
animal feed milling sector is highly advanced.
Processing
Japan has very large milling and crushing sectors that
polish rice, mill wheat, crush oilseeds, refine sugar
and corn syrup, and mix feeds. These sectors have not
been exposed to much international competition because
of significant border protection for simply processed
products, such as milled rice, wheat flour, and vegetable
oil. While machinery for these processing industries is
freely importable and Japanese production of milling equipment
is extremely competitive, the processing industries have
not faced as much pressure to lower costs through increased
scale of operation as they would have without the border
protection.
Japan’s beverage industries are very large and increasingly
seek to compete in world markets. Beer and whiskey producers
rely mostly on imported ingredients, while brewers of
sake and sochu (an alcoholic beverage using fermented
grain or potatoes) often use rice and other Japanese products
as their feedstocks. The large soft drink industry is
quickly moving beyond cola drinks. Bottled cold tea and
coffee drinks and bottled waters have become very large
segments of the beverage market.
Outlook
Understanding the longer term outlook for Japan's agricultural
production, trade, and policy is critical to the development
of USDA's baseline projections for U.S. agriculture. For
more information, see the Agricultural
Baseline Projections briefing room.
For more information on the outlook for Japan's agriculture
and trade, especially reports from USDA's Foreign Agricultural
Service in Tokyo, see the references
section.
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