Economy
Japan’s population, a little less than half that of the United States, generates a gross domestic product (GDP) that is about half as large as the U.S. GDP. 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. The Japanese government projects that population growth will turn negative before 2010, and that population will continue to shrink thereafter. 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 is heavily burdened by debt, which was often incurred through the purchase of high-priced assets during the bubble period. Now, the assets are worth much less. The value of the debt, however, has not fallen, because Japan has had very little inflation in its currency, and, in 1999-2002, 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. Banks and industrial companies with huge debts, however, are unlikely to invest in new projects, and economic growth was meager until 2004. 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.

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 if Japan's economy rebounds from the stagnation that began in the early 1990s, the country's flagging population growth 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, rubber) and feedstuffs (e.g., corn, 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 heavily 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 wide 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 Carrefour and 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 $31 per pound in 2001; the price for Wagyu chuck was almost $15 per pound. Even with these high prices, Japanese consumption of Wagyu beef was about 150,000 metric tons in 2001.

Japan’s food producers
Japan has a high number of farms on a relatively small area. In 2001, 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 [$4,134]). 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, almost one-third are over age 70 and two-thirds are over age 60. Almost half (47 percent) are female. Dividing Japan’s 4.6 million hectares (ha) of cultivated land by these households gives an average farm land size of 1.75 ha (4.32 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 4.6 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 12 ha (30 acres). As elderly and part-time farmers, noncommercial operations, and female core farmers also cultivate some of the available land, 12 ha is an overestimate of average farm size. The actual average farm operation in Japan is likely to farm an area between 1.75 and 12 ha (4-30 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 2003, about 40 percent of the paddy area is 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 sugarbeets 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 3 in the United States. Similarly, Japan had 220 harvesters/threshers per 1,000 ha, compared with 4 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) 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. In particular, the U.S. Agricultural Baseline Projections to 2012 has a chapter on Agricultural Trade that contains details about the projections for Japan.

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.

for more information, contact: John Dyck
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page updated: September 27, 2004